CFR 2003 Title48 Vol1
CFR 2003 Title48 Vol1
CFR 2003 Title48 Vol1
Federal Acquisition
Regulations System
As of October 1, 2003
With Ancillaries
Published by
Office of the Federal Register
National Archives and Records
Administration
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U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2003
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Table of Contents
Page
Explanation ................................................................................................ v
Title 48:
Finding Aids:
iii
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Cite this Code: CFR
iv
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Explanation
The Code of Federal Regulations is a codification of the general and permanent
rules published in the Federal Register by the Executive departments and agen-
cies of the Federal Government. The Code is divided into 50 titles which represent
broad areas subject to Federal regulation. Each title is divided into chapters
which usually bear the name of the issuing agency. Each chapter is further sub-
divided into parts covering specific regulatory areas.
Each volume of the Code is revised at least once each calendar year and issued
on a quarterly basis approximately as follows:
Title 1 through Title 16..............................................................as of January 1
Title 17 through Title 27 .................................................................as of April 1
Title 28 through Title 41 ..................................................................as of July 1
Title 42 through Title 50 .............................................................as of October 1
The appropriate revision date is printed on the cover of each volume.
LEGAL STATUS
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HOW TO USE THE CODE OF FEDERAL REGULATIONS
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EFFECTIVE AND EXPIRATION DATES
Each volume of the Code contains amendments published in the Federal Reg-
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OBSOLETE PROVISIONS
Provisions that become obsolete before the revision date stated on the cover
of each volume are not carried. Code users may find the text of provisions in
effect on a given date in the past by using the appropriate numerical list of
sections affected. For the period before January 1, 2001, consult either the List
of CFR Sections Affected, 19491963, 19641972, 19731985, or 19862000, published
in 11 separate volumes. For the period beginning January 1, 2001, a List of CFR
Sections Affected is published at the end of each CFR volume.
CFR INDEXES AND TABULAR GUIDES
A subject index to the Code of Federal Regulations is contained in a separate
volume, revised annually as of January 1, entitled CFR INDEX AND FINDING AIDS.
This volume contains the Parallel Table of Statutory Authorities and Agency
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An index to the text of Title 3The President is carried within that volume.
The Federal Register Index is issued monthly in cumulative form. This index
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ister.
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revision dates of the 50 CFR titles.
REPUBLICATION OF MATERIAL
There are no restrictions on the republication of material appearing in the
Code of Federal Regulations.
INQUIRIES
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oddnumbered pages.
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vi
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The Office of the Federal Register also offers a free service on the National
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contains links to GPO Access.
RAYMOND A. MOSLEY,
Director,
Office of the Federal Register.
October 1, 2003.
vii
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THIS TITLE
The OMB control numbers for the Federal Acquisition Regulations System ap-
pear in section 1.106 of chapter 1. For the convenience of the user section 1.106
is reprinted in the Finding Aids section of the second volume containing chapter
1 (parts 52 to 99).
ix
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x
CFRORDR.FRM</GPH>
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Title 48Federal
Acquisition Regulations
System
(This book contains chapter 1, parts 1 to 51)
Part
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CHAPTER 1FEDERAL ACQUISITION
REGULATION
SUBCHAPTER AGENERAL
Part Page
1 Federal Acquisition Regulations System ................ 5
2 Definitions of words and terms ............................... 20
3 Improper business practices and personal conflicts
of interest ............................................................. 39
4 Administrative matters .......................................... 63
SUBCHAPTER BACQUISITION PLANNING
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48 CFR Ch. 1 (10103 Edition)
Part Page
25 Foreign acquisition ................................................. 463
26 Other socioeconomic programs ............................... 486
SUBCHAPTER EGENERAL CONTRACTING REQUIREMENTS
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SUBCHAPTER AGENERAL
1.201 Maintenance of the FAR. SOURCE: 48 FR 42103, Sept. 19, 1983, unless
1.2011 The two councils. otherwise noted.
1.2012 FAR Secretariat.
1.202 Agency compliance with the FAR. 1.000 Scope of part.
This part sets forth basic policies and
Subpart 1.3Agency Acquisition general information about the Federal
Regulations Acquisition Regulations System in-
1.301 Policy. cluding purpose, authority, applica-
1.302 Limitations. bility, issuance, arrangement, num-
1.303 Publication and codification. bering, dissemination, implementation,
1.304 Agency control and compliance proce- supplementation, maintenance, admin-
dures. istration, and deviation. Subparts 1.2,
1.3, and 1.4 prescribe administrative
Subpart 1.4Deviations from the FAR procedures for maintaining the FAR
1.400 Scope of subpart. System.
1.401 Definition.
1.402 Policy. Subpart 1.1Purpose, Authority,
1.403 Individual deviations. Issuance
1.404 Class deviations.
1.405 Deviations pertaining to treaties and 1.101 Purpose.
executive agreements.
The Federal Acquisition Regulations
Subpart 1.5Agency and Public System is established for the codifica-
Participation tion and publication of uniform poli-
cies and procedures for acquisition by
1.501 Solicitation of agency and public
all executive agencies. The Federal Ac-
views.
1.5011 Definition.
quisition Regulations System consists
1.5012 Opportunity for public comments. of the Federal Acquisition Regulation
1.5013 Exceptions. (FAR), which is the primary document,
1.502 Unsolicited proposed revisions. and agency acquisition regulations
1.503 Public meetings. that implement or supplement the
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1.102 48 CFR Ch. 1 (10103 Edition)
FAR. The FAR System does not in- or procedure is a permissible exercise
clude internal agency guidance of the of authority.
type described in 1.301(a)(2).
[60 FR 34733, July 3, 1995]
[48 FR 42103, Sept. 19, 1983, as amended at 51
FR 27116, July 29, 1986] 1.1021 Discussion.
(a) Introduction. The statement of
1.102 Statement of guiding principles
for the Federal Acquisition System. Guiding Principles for the Federal Ac-
quisition System (System) represents a
(a) The vision for the Federal Acqui- concise statement designed to be user-
sition System is to deliver on a timely friendly for all participants in Govern-
basis the best value product or service ment acquisition. The following discus-
to the customer, while maintaining the sion of the principles is provided in
publics trust and fulfilling public pol- order to illuminate the meaning of the
icy objectives. Participants in the ac- terms and phrases used. The frame-
quisition process should work together work for the System includes the Guid-
as a team and should be empowered to ing Principles for the System and the
make decisions within their area of re- supporting policies and procedures in
sponsibility. the FAR.
(b) The Federal Acquisition System (b) Vision. All participants in the
will System are responsible for making ac-
(1) Satisfy the customer in terms of quisition decisions that deliver the
cost, quality, and timeliness of the de- best value product or service to the
livered product or service by, for exam- customer. Best value must be viewed
ple from a broad perspective and is
(i) Maximizing the use of commercial achieved by balancing the many com-
products and services; peting interests in the System. The re-
(ii) Using contractors who have a sult is a system which works better
track record of successful past per- and costs less.
formance or who demonstrate a cur-
rent superior ability to perform; and [60 FR 34733, July 3, 1995]
(iii) Promoting competition;
1.1022 Performance standards.
(2) Minimize administrative oper-
ating costs; (a) Satisfy the customer in terms of cost,
(3) Conduct business with integrity, quality, and timeliness of the delivered
fairness, and openness; and product or service. (1) The principal cus-
(4) Fulfill public policy objectives. tomers for the product or service pro-
(c) The Acquisition Team consists of vided by the System are the users and
all participants in Government acquisi- line managers, acting on behalf of the
tion including not only representatives American taxpayer.
of the technical, supply, and procure- (2) The System must be responsive
ment communities but also the cus- and adaptive to customer needs, con-
tomers they serve, and the contractors cerns, and feedback. Implementation of
who provide the products and services. acquisition policies and procedures, as
(d) The role of each member of the well as consideration of timeliness,
Acquisition Team is to exercise per- quality and cost throughout the proc-
sonal initiative and sound business ess, must take into account the per-
judgment in providing the best value spective of the user of the product or
product or service to meet the cus- service.
tomers needs. In exercising initiative, (3) When selecting contractors to pro-
Government members of the Acquisi- vide products or perform services the
tion Team may assume if a specific Government will use contractors who
strategy, practice, policy or procedure have a track record of successful past
is in the best interests of the Govern- performance or who demonstrate a cur-
ment and is not addressed in the FAR rent superior ability to perform.
nor prohibited by law (statute or case (4) The Government must not hesi-
law), Executive order or other regula- tate to communicate with the commer-
tion, that the strategy, practice, policy cial sector as early as possible in the
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Federal Acquisition Regulation 1.1024
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1.103 48 CFR Ch. 1 (10103 Edition)
Principles. In particular, the con- (b) The FAR is prepared, issued, and
tracting officer must have the author- maintained, and the FAR System is
ity to the maximum extent practicable prescribed, jointly by the Secretary of
and consistent with law, to determine Defense, the Administrator of General
the application of rules, regulations, Services, and the Administrator, Na-
and policies, on a specific contract. tional Aeronautics and Space Adminis-
(b) The authority to make decisions tration, under their several statutory
and the accountability for the decision authorities.
made will be delegated to the lowest [48 FR 42103, Sept. 19, 1983, as amended at 51
level within the System, consistent FR 27116, July 29, 1986. Redesignated at 60 FR
with law. 34733, July 3, 1995, as amended at 65 FR 36014,
(c) The Team must be prepared to June 6, 2000]
perform the functions and duties as-
signed. The Government is committed 1.104 Applicability.
to provide training, professional devel- The FAR applies to all acquisitions
opment, and other resources necessary as defined in part 2 of the FAR, except
for maintaining and improving the where expressly excluded.
knowledge, skills, and abilities for all
[48 FR 42103, Sept. 19, 1983. Redesignated at
Government participants on the Team,
60 FR 34733, July 3, 1995]
both with regard to their particular
area of responsibility within the Sys- 1.105 Issuance.
tem, and their respective role as a
team member. The contractor commu- 1.1051 Publication and code arrange-
nity is encouraged to do likewise. ment.
(d) The System will foster coopera- (a) The FAR is published in (1) the
tive relationships between the Govern- daily issue of the Federal Register, (2)
ment and its contractors consistent cumulated form in the Code of Federal
with its overriding responsibility to Regulations (CFR), and (3) a separate
the taxpayers. loose-leaf edition.
(e) The FAR outlines procurement (b) The FAR is issued as Chapter 1 of
policies and procedures that are used Title 48, CFR. Subsequent chapters are
by members of the Acquisition Team. reserved for agency acquisition regula-
If a policy or procedure, or a particular tions that implement or supplement
strategy or practice, is in the best in- the FAR (see subpart 1.3). The CFR
terest of the Government and is not Staff will assign chapter numbers to
specifically addressed in the FAR, nor requesting agencies.
prohibited by law (statute or case law), (c) Each numbered unit or segment
Executive order or other regulation, (e.g., part, subpart, section, etc.) of an
Government members of the Team agency acquisition regulation that is
should not assume it is prohibited. codified in the CFR shall begin with
Rather, absence of direction should be the chapter number. However, the
interpreted as permitting the Team to chapter number assigned to the FAR
innovative and use sound business will not be included in the numbered
judgment that is otherwise consistent units or segments of the FAR.
with law and within the limits of their
authority. Contracting officers should [48 FR 42103, Sept. 19, 1983. Redesignated at
60 FR 34733, July 3, 1995]
take the lead in encouraging business
process innovations and ensuring that 1.1052 Arrangement of regulations.
business decisions are sound.
(a) General. The FAR is divided into
[60 FR 34734, July 3, 1995, as amended at 62 subchapters, parts (each of which cov-
FR 44804, Aug. 22, 1997] ers a separate aspect of acquisition),
subparts, sections, and subsections.
1.103 Authority. (b) Numbering. (1) The numbering sys-
(a) The development of the FAR Sys- tem permits the discrete identification
tem is in accordance with the require- of every FAR paragraph. The digits to
ments of the Office of Federal Procure- the left of the decimal point represent
ment Policy Act of 1974 (Pub. L. 93 the part number. The numbers to the
400), as amended by Pub. L. 9683. right of the decimal point and to the
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Federal Acquisition Regulation 1.106
9
EC03AP91.000</GPH>
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1.106 48 CFR Ch. 1 (10103 Edition)
10
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Federal Acquisition Regulation 1.106
11
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1.107 48 CFR Ch. 1 (10103 Edition)
[59 FR 67065, Dec. 28, 1994. Redesignated at 60 imum quantity of supplies or services
FR 34733, 34736, July 3, 1995, as amended at 60 to be acquired or establishes a ceiling
FR 42650, 42665, Aug. 16, 1995; 60 FR 48211, price or establishes the final price to
Sept. 18, 1995; 60 FR 49710, Sept. 26, 1995; 61
be based on future events, the final an-
FR 18916, Apr. 29, 1996; 61 FR 39188, July 26,
1996; 61 FR 67410, 67430, Dec. 20, 1996; 61 FR ticipated dollar value must be the
69287, Dec. 31, 1996; 62 FR 227, 235, 271, Jan. 2, highest final priced alternative to the
1997; 62 FR 44806, 44810, Aug. 22, 1997; 62 FR Government, including the dollar value
51229, 51270, Sept. 30, 1997; 63 FR 9050, 9051, of all options.
Feb. 23, 1998; 63 FR 35720, June 30, 1998; 63 FR (d) Application of FAR changes to so-
36121, July 1, 1998; 63 FR 58602, Oct. 30, 1998; licitations and contracts. Unless other-
63 FR 70292, Dec. 18, 1998; 64 FR 10532, 10549, wise specified
Mar. 4, 1999; 64 FR 32748, June 17, 1999; 64 FR (1) FAR changes apply to solicita-
51850, Sept. 24, 1999; 64 FR 72416, 72417, Dec.
tions issued on or after the effective
27, 1999; 65 FR 16286, Mar. 27, 2000; 66 FR 53480,
Oct. 22, 2001; 67 FR 13050, Mar. 20, 2002; 68 FR
date of the change;
43856, July 24, 2003; 68 FR 56672, Oct. 1, 2003] (2) Contracting officers may, at their
discretion, include the FAR changes in
1.107 Certifications. solicitations issued before the effective
date, provided award of the resulting
In accordance with Section 29 of the
contract(s) occurs on or after the effec-
Office of Federal Procurement Policy
tive date; and
Act (41 U.S.C. 425), as amended by Sec-
(3) Contracting officers may, at their
tion 4301 of the Clinger-Cohen Act of
discretion, include the changes in any
1996 (Public Law 104106), a new re- existing contract with appropriate con-
quirement for a certification by a con- sideration.
tractor or offeror may not be included (e) Citations. When the FAR cites a
in this chapter unless statute, Executive order, Office of
(a) The certification requirement is Management and Budget circular, Of-
specifically imposed by statute; or fice of Federal Procurement Policy pol-
(b) Written justification for such cer- icy letter, or relevant portion of the
tification is provided to the Adminis- Code of Federal Regulations, the cita-
trator for Federal Procurement Policy tion includes all applicable amend-
by the Federal Acquisition Regulatory ments, unless otherwise stated.
Council, and the Administrator ap- (f) Imperative sentences. When an im-
proves in writing the inclusion of such perative sentence directs action, the
certification requirement. contracting officer is responsible for
[62 FR 44813, Aug. 22, 1997] the action, unless another party is ex-
pressly cited.
1.108 FAR conventions. [65 FR 36015, June 6, 2000]
The following conventions provide
guidance for interpreting the FAR: Subpart 1.2Administration
(a) Words and terms. Definitions in
Part 2 apply to the entire regulation 1.201 Maintenance of the FAR.
unless specifically defined in another
part, subpart, section, provision, or 1.2011 The two councils.
clause. Words or terms defined in a spe- (a) Subject to the authorities dis-
cific part, subpart, section, provision, cussed in 1.103, revisions to the FAR
or clause have that meaning when used will be prepared and issued through the
in that part, subpart, section, provi- coordinated action of two councils, the
sion, or clause. Undefined words retain Defense Acquisition Regulations Coun-
their common dictionary meaning. cil (DAR Council) and the Civilian
(b) Delegation of authority. Each au- Agency Acquisition Council (CAA
thority is delegable unless specifically Council). Members of these councils
stated otherwise (see 1.1024(b)). shall
(c) Dollar thresholds. Unless otherwise (1) Represent their agencies on a full-
specified, a specific dollar threshold for time basis;
the purpose of applicability is the final (2) Be selected for their superior
anticipated dollar value of the action, qualifications in terms of acquisition
including the dollar value of all op- experience and demonstrated profes-
tions. If the action establishes a max- sional expertise; and
12
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Federal Acquisition Regulation 1.301
13
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1.302 48 CFR Ch. 1 (10103 Edition)
14
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Federal Acquisition Regulation 1.404
15
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1.405 48 CFR Ch. 1 (10103 Edition)
16
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Federal Acquisition Regulation 1.6022
(c) A minimum of 30 days and, nor- (b) Agency heads may mutually agree
mally, at least 60 days will be given for to
the receipt of comments. (1) Assign contracting functions and
responsibilities from one agency to an-
1.5013 Exceptions. other; and
(a) Comments need not be solicited (2) Create joint or combined offices
when the proposed coverage does not to exercise acquisition functions and
constitute a significant revision. responsibilities.
(b) Advance comments need not be
solicited when urgent and compelling [60 FR 49721, Sept. 26, 1995]
circumstances make solicitation of
comments impracticable prior to the 1.602 Contracting officers.
effective date of the coverage, such as
1.6021 Authority.
when a new statute must be imple-
mented in a relatively short period of (a) Contracting officers have author-
time. In such case, the coverage shall ity to enter into, administer, or termi-
be issued on a temporary basis and nate contracts and make related deter-
shall provide for at least a 30 day pub- minations and findings. Contracting of-
lic comment period. ficers may bind the Government only
to the extent of the authority dele-
1.502 Unsolicited proposed revisions. gated to them. Contracting officers
Consideration shall also be given to shall receive from the appointing au-
unsolicited recommendations for revi- thority (see 1.6031) clear instructions
sions that have been submitted in writ- in writing regarding the limits of their
ing with sufficient data and rationale authority. Information on the limits of
to permit their evaluation. the contracting officers authority
shall be readily available to the public
1.503 Public meetings.
and agency personnel.
Public meetings may be appropriate (b) No contract shall be entered into
when a decision to adopt, amend, or de- unless the contracting officer ensures
lete coverage is likely to benefit from that all requirements of law, executive
significant additional views and discus- orders, regulations, and all other appli-
sion. cable procedures, including clearances
and approvals, have been met.
Subpart 1.6Career Develop-
ment, Contracting Authority, 1.6022 Responsibilities.
and Responsibilities Contracting officers are responsible
for ensuring performance of all nec-
1.601 General.
essary actions for effective con-
(a) Unless specifically prohibited by tracting, ensuring compliance with the
another provision of law, authority and terms of the contract, and safeguarding
responsibility to contract for author- the interests of the United States in its
ized supplies and services are vested in contractual relationships. In order to
the agency head. The agency head may perform these responsibilities, con-
establish contracting activities and tracting officers should be allowed
delegate broad authority to manage
wide latitude to exercise business judg-
the agencys contracting functions to
ment. Contracting officers shall
heads of such contracting activities.
Contracts may be entered into and (a) Ensure that the requirements of
signed on behalf of the Government 1.6021(b) have been met, and that suffi-
only by contracting officers. In some cient funds are available for obligation;
agencies, a relatively small number of (b) Ensure that contractors receive
high level officials are designated con- impartial, fair, and equitable treat-
tracting officers solely by virtue of ment; and
their positions. Contracting officers (c) Request and consider the advice of
below the level of a head of a con- specialists in audit, law, engineering,
tracting activity shall be selected and transportation, and other fields, as ap-
appointed under 1.603. propriate.
17
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1.6023 48 CFR Ch. 1 (10103 Edition)
1.6023 Ratification of unauthorized (2) The ratifying official has the au-
commitments. thority to enter into a contractual
(a) Definitions. commitment;
Ratification, as used in this sub- (3) The resulting contract would oth-
section, means the act of approving an erwise have been proper if made by an
unauthorized commitment by an offi- appropriate contracting officer;
cial who has the authority to do so. (4) The contracting officer reviewing
Unauthorized commitment, as used in the unauthorized commitment deter-
this subsection, means an agreement mines the price to be fair and reason-
that is not binding solely because the able;
Government representative who made (5) The contracting officer rec-
it lacked the authority to enter into ommends payment and legal counsel
that agreement on behalf of the Gov- concurs in the recommendation, unless
ernment. agency procedures expressly do not re-
quire such concurrence;
(b) Policy. (1) Agencies should take
positive action to preclude, to the max- (6) Funds are available and were
imum extent possible, the need for available at the time the unauthorized
ratification actions. Although proce- commitment was made; and
dures are provided in this section for (7) The ratification is in accordance
use in those cases where the ratifica- with any other limitations prescribed
tion of an unauthorized commitment is under agency procedures.
necessary, these procedures may not be (d) Nonratifiable commitments. Cases
used in a manner that encourages such that are not ratifiable under this sub-
commitments being made by Govern- section may be subject to resolution as
ment personnel. recommended by the General Account-
(2) Subject to the limitations in para- ing Office under its claim procedure
graph (c) of this subsection, the head of (GAO Policy and Procedures Manual
the contracting activity, unless a high- for Guidance of Federal Agencies, Title
er level official is designated by the 4, Chapter 2), or as authorized by FAR
agency, may ratify an unauthorized part 50. Legal advice should be ob-
commitment. tained in these cases.
(3) The ratification authority in sub- [53 FR 3689, Feb. 8, 1988, as amended at 60 FR
paragraph (b)(2) of this subsection may 48225, Sept. 18, 1995]
be delegated in accordance with agency
procedures, but in no case shall the au- 1.603 Selection, appointment, and ter-
thority be delegated below the level of mination of appointment.
chief of the contracting office. 1.6031 General.
(4) Agencies should process unauthor-
ized commitments using the ratifica- Subsection 414(4) of title 41, United
tion authority of this subsection in- States Code, requires agency heads to
stead of referring such actions to the establish and maintain a procurement
General Accounting Office for resolu- career management program and a sys-
tion. (See 1.6023(d).) tem for the selection, appointment,
(5) Unauthorized commitments that and termination of appointment of con-
would involve claims subject to resolu- tracting officers. Agency heads or their
tion under the Contract Disputes Act designees may select and appoint con-
of 1978 should be processed in accord- tracting officers and terminate their
ance with subpart 33.2, Disputes and appointments. These selections and ap-
Appeals. pointments shall be consistent with Of-
(c) Limitations. The authority in sub- fice of Federal Procurement Policys
paragraph (b)(2) of this subsection may (OFPP) standards for skill-based train-
be exercised only when ing in performing contracting and pur-
chasing duties as published in OFPP
(1) Supplies or services have been
Policy Letter No. 923, Procurement
provided to and accepted by the Gov-
Professionalism Program Policy
ernment, or the Government otherwise
Training for Contracting Personnel,
has obtained or will obtain a benefit re-
June 24, 1992.
sulting from performance of the unau-
thorized commitment; [59 FR 67015, Dec. 28, 1994]
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Federal Acquisition Regulation 1.703
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1.704 48 CFR Ch. 1 (10103 Edition)
other contract actions that require es- (b) The contracting officer need not
sentially identical justification. cancel the solicitation if the D&F, as
(b) The findings in a class D&F shall modified, supports the contract action.
fully support the proposed action ei- [50 FR 1726, Jan. 11, 1985 (interim rule), and
ther for the class as a whole or for each 50 FR 52429, Dec. 23, 1985 (final rule), as
action. A class D&F shall be for a spec- amended at 67 FR 13053, Mar. 20, 2002]
ified period, with the expiration date
stated in the document. 1.706 Expiration.
(c) The contracting officer shall en- Expiration dates are required for
sure that individual actions taken pur- class D&Fs and are optional for indi-
suant to the authority of a class D&F vidual D&Fs. Authority to act under
are within the scope of the D&F. an individual D&F expires when it is
exercised or on an expiration date spec-
[50 FR 1726, Jan. 11, 1985 (interim rule), and ified in the document, whichever oc-
50 FR 52429, Dec. 23, 1985 (final rule), as
curs first. Authority to act under a
amended at 67 FR 13053, Mar. 20, 2002]
class D&F expires on the expiration
1.704 Content. date specified in the document. When a
solicitation has been furnished to pro-
Each D&F shall set forth enough spective offerors before the expiration
facts and circumstances to clearly and date, the authority under the D&F will
convincingly justify the specific deter- continue until award of the contract(s)
mination made. As a minimum, each resulting from that solicitation.
D&F shall include, in the prescribed
agency format, the following informa- 1.707 Signatory authority.
tion: When a D&F is required, it shall be
(a) Identification of the agency and signed by the appropriate official in ac-
of the contracting activity and specific cordance with agency regulations. Au-
identifications of the document as a thority to sign or delegate signature
Determination and Findings. authority for the various D&Fs is as
(b) Nature and/or description of the shown in the applicable FAR part.
action being approved.
(c) Citation of the appropriate stat- PART 2DEFINITIONS OF WORDS
ute and/or regulation upon which the AND TERMS
D&F is based.
(d) Findings that detail the par- Sec.
ticular circumstances, facts, or rea- 2.000 Scope of part.
soning essential to support the deter-
Subpart 2.1Definitions
mination. Necessary supporting docu-
mentation shall be obtained from ap- 2.101 Definitions.
propriate requirements and technical
personnel. Subpart 2.2Definitions Clause
(e) A determination, based on the 2.201 Contract clause.
findings, that the proposed action is
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
justified under the applicable statute ter 137; and 42 U.S.C. 2473(c).
or regulation.
(f) Expiration date of the D&F, if re- SOURCE: 48 FR 42107, Sept. 19, 1983, unless
otherwise noted.
quired (see 1.706(b)).
(g) The signature of the official au- 2.000 Scope of part.
thorized to sign the D&F (see 1.706) and
(a) This part
the date signed. (1) Defines words and terms that are
frequently used in the FAR;
1.705 Supersession and modification.
(2) Provides cross-references to other
(a) If a D&F is superseded by another definitions in the FAR of the same
D&F, that action shall not render in- word or term; and
valid any action taken under the origi- (3) Provides for the incorporation of
nal D&F prior to the date of its super- these definitions in solicitations and
session. contracts by reference.
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Federal Acquisition Regulation 2.101
(b) Other parts, subparts, and sec- a reasonable cost. It includes devel-
tions of this regulation (48 CFR chap- oping the overall strategy for man-
ter 1) may define other words or terms aging the acquisition.
and those definitions only apply to the Adequate evidence means information
part, subpart, or section where the sufficient to support the reasonable be-
word or term is defined (see the Index lief that a particular act or omission
for locations). has occurred.
Advisory and assistance services means
[66 FR 2118, Jan. 10, 2001]
those services provided under contract
by nongovernmental sources to support
Subpart 2.1Definitions or improve: organizational policy de-
velopment; decision-making; manage-
2.101 Definitions.
ment and administration; program and/
(a) A word or a term, defined in this or project management and adminis-
section, has the same meaning tration; or R&D activities. It can also
throughout this regulation (48 CFR mean the furnishing of professional ad-
chapter 1), unless vice or assistance rendered to improve
(1) The context in which the word or the effectiveness of Federal manage-
term is used clearly requires a dif- ment processes or procedures (includ-
ferent meaning; or ing those of an engineering and tech-
(2) Another FAR part, subpart, or nical nature). In rendering the fore-
section provides a different definition going services, outputs may take the
for the particular part or portion of the form of information, advice, opinions,
part. alternatives, analyses, evaluations,
(b) If a word or term that is defined recommendations, training and the
in this section is defined differently in day-to-day aid of support personnel
another part, subpart, or section of needed for the successful performance
this regulation (48 CFR chapter 1, the of ongoing Federal operations. All ad-
definition in visory and assistance services are clas-
(1) This section includes a cross-ref- sified in one of the following defini-
erence to the other definitions; and tional subdivisions:
(2) That part, subpart, or section ap- (1) Management and professional sup-
plies to the word or term when used in port services, i.e., contractual services
that part, subpart, or section. that provide assistance, advice or
Acquisition means the acquiring by training for the efficient and effective
contract with appropriated funds of management and operation of organi-
supplies or services (including con- zations, activities (including manage-
struction) by and for the use of the ment and support services for R&D ac-
Federal Government through purchase tivities), or systems. These services are
or lease, whether the supplies or serv- normally closely related to the basic
ices are already in existence or must be responsibilities and mission of the
created, developed, demonstrated, and agency originating the requirement for
evaluated. Acquisition begins at the the acquisition of services by contract.
point when agency needs are estab- Included are efforts that support or
lished and includes the description of contribute to improved organization of
requirements to satisfy agency needs, program management, logistics man-
solicitation and selection of sources, agement, project monitoring and re-
award of contracts, contract financing, porting, data collection, budgeting, ac-
contract performance, contract admin- counting, performance auditing, and
istration, and those technical and man- administrative technical support for
agement functions directly related to conferences and training programs.
the process of fulfilling agency needs (2) Studies, analyses and evaluations,
by contract. i.e., contracted services that provide
Acquisition planning means the proc- organized, analytical assessments/eval-
ess by which the efforts of all personnel uations in support of policy develop-
responsible for an acquisition are co- ment, decision-making, management,
ordinated and integrated through a or administration. Included are studies
comprehensive plan for fulfilling the in support of R&D activities. Also in-
agency need in a timely manner and at cluded are acquisitions of models,
21
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2.101 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 2.101
(i) The diversity, size, or specialized written notice to the contracting offi-
nature of the elements of the perform- cer as provided in 33.206(a), if it is dis-
ance specified; puted either as to liability or amount
(ii) The aggregate dollar value of the or is not acted upon in a reasonable
anticipated award; time.
(iii) The geographical dispersion of Classified acquisition means an acqui-
the contract performance sites; or sition in which offerors must have ac-
(iv) Any combination of the factors cess to classified information to prop-
described in paragraphs (1)(i), (ii), and erly submit an offer or quotation, to
(iii) of this definition. understand the performance require-
(2) Separate smaller contract as ments, or to perform the contract.
used in this definition, means a con- Classified contract means any contract
tract that has been performed by one in which the contractor or its employ-
or more small business concerns or ees must have access to classified in-
that was suitable for award to one or formation during contract perform-
more small business concerns. ance. A contract may be a classified
(3) This definition does not apply to a contract even though the contract doc-
contract that will be awarded and per- ument itself is unclassified.
formed entirely outside of the United Classified information means any
States. knowledge that can be communicated
Business unit means any segment of or any documentary material, regard-
an organization, or an entire business less of its physical form or characteris-
organization that is not divided into tics, that
segments. (1)(i) Is owned by, is produced by or
Central Contractor Registration (CCR) for, or is under the control of the
database means the primary Govern- United States Government; or
ment repository for contractor infor- (ii) Has been classified by the Depart-
mation required for the conduct of ment of Energy as privately generated
business with the Government. restricted data following the proce-
Change-of-name agreement means a dures in 10 CFR 1045.21; and
legal instrument executed by the con-
(2) Must be protected against unau-
tractor and the Government that rec-
thorized disclosure according to Execu-
ognizes the legal change of name of the
tive Order 12958, Classified National Se-
contractor without disturbing the
curity Information, April 17, 1995, or
original contractual rights and obliga-
classified in accordance with the
tions of the parties.
Atomic Energy Act of 1954.
Change order means a written order,
Cognizant Federal agency means the
signed by the contracting officer, di-
Federal agency that, on behalf of all
recting the contractor to make a
Federal agencies, is responsible for es-
change that the Changes clause author-
tablishing final indirect cost rates and
izes the contracting officer to order
forward pricing rates, if applicable, and
without the contractors consent.
administering cost accounting stand-
Claim means a written demand or
ards for all contracts in a business
written assertion by one of the con-
unit.
tracting parties seeking, as a matter of
right, the payment of money in a sum Commercial component means any
certain, the adjustment or interpreta- component that is a commercial item.
tion of contract terms, or other relief Commercial item means
arising under or relating to the con- (1) Any item, other than real prop-
tract. However, a written demand or erty, that is of a type customarily used
written assertion by the contractor by the general public or by non-govern-
seeking the payment of money exceed- mental entities for purposes other than
ing $100,000 is not a claim under the governmental purposes, and
Contract Disputes Act of 1978 until cer- (i) Has been sold, leased, or licensed
tified as required by the Act. A vouch- to the general public; or
er, invoice, or other routine request for (ii) Has been offered for sale, lease, or
payment that is not in dispute when license to the general public;
submitted is not a claim. The submis- (2) Any item that evolved from an
sion may be converted to a claim, by item described in paragraph (1) of this
23
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2.101 48 CFR Ch. 1 (10103 Edition)
definition through advances in tech- ket price for a specific service per-
nology or performance and that is not formed. For purposes of these serv-
yet available in the commercial mar- ices
ketplace, but will be available in the (i) Catalog price means a price in-
commercial marketplace in time to cluded in a catalog, price list, schedule,
satisfy the delivery requirements under or other form that is regularly main-
a Government solicitation; tained by the manufacturer or vendor,
(3) Any item that would satisfy a cri- is either published or otherwise avail-
terion expressed in paragraphs (1) or (2) able for inspection by customers, and
of this definition, but for states prices at which sales are cur-
(i) Modifications of a type custom- rently, or were last, made to a signifi-
arily available in the commercial mar- cant number of buyers constituting the
ketplace; or general public; and
(ii) Minor modifications of a type not (ii) Market prices means current
customarily available in the commer- prices that are established in the
cial marketplace made to meet Federal course of ordinary trade between buy-
Government requirements. Minor ers and sellers free to bargain and that
modifications means modifications can be substantiated through competi-
that do not significantly alter the non- tion or from sources independent of the
governmental function or essential offerors.
physical characteristics of an item or (7) Any item, combination of items,
component, or change the purpose of a or service referred to in paragraphs (1)
process. Factors to be considered in de- through (6) of this definition, notwith-
termining whether a modification is standing the fact that the item, com-
minor include the value and size of the bination of items, or service is trans-
modification and the comparative ferred between or among separate divi-
value and size of the final product. Dol- sions, subsidiaries, or affiliates of a
lar values and percentages may be used contractor; or
as guideposts, but are not conclusive (8) A nondevelopmental item, if the
evidence that a modification is minor; procuring agency determines the item
(4) Any combination of items meet- was developed exclusively at private
ing the requirements of paragraphs (1), expense and sold in substantial quan-
(2), (3), or (5) of this definition that are tities, on a competitive basis, to mul-
of a type customarily combined and tiple State and local governments.
sold in combination to the general pub- Component means any item supplied
lic; to the Government as part of an end
(5) Installation services, maintenance item or of another component, except
services, repair services, training serv- that for use in
ices, and other services if (1) Part 25, see the definition in
(i) Such services are procured for sup- 25.003;
port of an item referred to in para- (2) 52.2251 and 52.2253, see the defini-
graph (1), (2), (3), or (4) of this defini- tion in 52.2251(a) and 52.2253(a); and
tion, regardless of whether such serv- (3) 52.2259 and 52.22511, see the defi-
ices are provided by the same source or nition in 52.2259(a) and 52.22511(a).
at the same time as the item; and Computer software means computer
(ii) The source of such services pro- programs, computer data bases, and re-
vides similar services contempora- lated documentation.
neously to the general public under Consent to subcontract means the con-
terms and conditions similar to those tracting officers written consent for
offered to the Federal Government; the prime contractor to enter into a
(6) Services of a type offered and sold particular subcontract.
competitively in substantial quantities Construction means construction, al-
in the commercial marketplace based teration, or repair (including dredging,
on established catalog or market prices excavating, and painting) of buildings,
for specific tasks performed under structures, or other real property. For
standard commercial terms and condi- purposes of this definition, the terms
tions. This does not include services buildings, structures, or other real
that are sold based on hourly rates property include, but are not limited
without an established catalog or mar- to, improvements of all types, such as
24
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Federal Acquisition Regulation 2.101
bridges, dams, plants, highways, park- U.S.C. 6301, et seq. For discussion of
ways, streets, subways, tunnels, sew- various types of contracts, see part 16.
ers, mains, power lines, cemeteries, Contract administration office means
pumping stations, railways, airport fa- an office that performs
cilities, terminals, docks, piers, (1) Assigned postaward functions re-
wharves, ways, lighthouses, buoys, jet- lated to the administration of con-
ties, breakwaters, levees, canals, and tracts; and
channels. Construction does not in- (2) Assigned preaward functions.
clude the manufacture, production, fur- Contract clause or clause means a
nishing, construction, alteration, re- term or condition used in contracts or
pair, processing, or assembling of ves- in both solicitations and contracts, and
sels, aircraft, or other kinds of per- applying after contract award or both
sonal property. before and after award.
Contiguous United States (CONUS) Contract modification means any writ-
means the 48 contiguous States and the ten change in the terms of a contract
District of Columbia. (see 43.103).
Contingency operation (10 U.S.C. Contracting means purchasing, rent-
101(a)(13)) means a military operation ing, leasing, or otherwise obtaining
that supplies or services from nonfederal
(1) Is designated by the Secretary of sources. Contracting includes descrip-
Defense as an operation in which mem- tion (but not determination) of sup-
bers of the armed forces are or may be- plies and services required, selection
come involved in military actions, op- and solicitation of sources, preparation
erations, or hostilities against an and award of contracts, and all phases
enemy of the United States or against of contract administration. It does not
an opposing military force; or include making grants or cooperative
(2) Results in the call or order to, or agreements.
retention on, active duty of members Contracting activity means an element
of the uniformed services under section of an agency designated by the agency
688, 12301(a), 12302, 12304, 12305, or 12406 head and delegated broad authority re-
of 10 U.S.C., chapter 15 of 10 U.S.C, or garding acquisition functions.
any other provision of law during a war Contracting office means an office
or during a national emergency de- that awards or executes a contract for
clared by the President or Congress. supplies or services and performs
Continued portion of the contract postaward functions not assigned to a
means the portion of a contract that contract administration office (except
the contractor must continue to per- for use in part 48, see also 48.001).
form following a partial termination. Contracting officer means a person
Contract means a mutually binding with the authority to enter into, ad-
legal relationship obligating the seller minister, and/or terminate contracts
to furnish the supplies or services (in- and make related determinations and
cluding construction) and the buyer to findings. The term includes certain au-
pay for them. It includes all types of thorized representatives of the con-
commitments that obligate the Gov- tracting officer acting within the lim-
ernment to an expenditure of appro- its of their authority as delegated by
priated funds and that, except as other- the contracting officer. Administra-
wise authorized, are in writing. In addi- tive contracting officer (ACO) refers
tion to bilateral instruments, con- to a contracting officer who is admin-
tracts include (but are not limited to) istering contracts. Termination con-
awards and notices of awards; job or- tracting officer (TCO) refers to a con-
ders or task letters issued under basic tracting officer who is settling termi-
ordering agreements; letter contracts; nated contracts. A single contracting
orders, such as purchase orders, under officer may be responsible for duties in
which the contract becomes effective any or all of these areas. Reference in
by written acceptance or performance; this regulation (48 CFR chapter 1) to
and bilateral contract modifications. administrative contracting officer or
Contracts do not include grants and co- termination contracting officer does
operative agreements covered by 31 not
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2.101 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 2.101
throughout the acquisition and oper- transfers, and transfers made at auto-
ation of the system or equipment. matic teller machines and point-of-sale
Drug-free workplace means the site(s) terminals. For purposes of compliance
for the performance of work done by with 31 U.S.C. 3332 and implementing
the contractor in connection with a regulations at 31 CFR part 208, the
specific contract where employees of term electronic funds transfer in-
the contractor are prohibited from en- cludes a Governmentwide commercial
gaging in the unlawful manufacture, purchase card transaction.
distribution, dispensing, possession, or End product means supplies delivered
use of a controlled substance. under a line item of a Government con-
Effective date of termination means the tract, except for use in part 25 and the
date on which the notice of termi- associated clauses at 52.2251, 52.2253,
nation requires the contractor to stop and 52.2255, see the definitions in
performance under the contract. If the 25.003, 52.2251(a), 52.2253(a), and 52.225
contractor receives the termination 5(a).
notice after the date fixed for termi- Energy-efficient product means a prod-
nation, then the effective date of ter- uct that
mination means the date the con- (1) Meets Department of Energy and
tractor receives the notice. Environmental Protection Agency cri-
Electronic and information technology teria for use of the Energy Star trade-
(EIT) has the same meaning as infor- mark label; or
mation technology except EIT also in- (2) Is in the upper 25 percent of effi-
cludes any equipment or inter- ciency for all similar products as des-
connected system or subsystem of ignated by the Department of Energys
equipment that is used in the creation, Federal Energy Management Program.
conversion, or duplication of data or
Energy-efficient standby power devices
information. The term EIT, includes,
means products that use
but is not limited to, telecommuni-
cation products (such as telephones), (1) External standby power devices,
information kiosks and transaction or that contain an internal standby
machines, worldwide websites, multi- power function; and
media, and office equipment (such as (2) No more than one watt of elec-
copiers and fax machines). tricity in their standby power con-
Electronic commerce means electronic suming mode or meet recommended
techniques for accomplishing business low standby levels as designated by the
transactions including electronic mail Department of Energy Federal Energy
or messaging, World Wide Web tech- Management Program.
nology, electronic bulletin boards, pur- Energy-savings performance contract
chase cards, electronic funds transfer, means a contract that requires the
and electronic data interchange. contractor to
Electronic data interchange (EDI) (1) Perform services for the design,
means a technique for electronically acquisition, financing, installation,
transferring and storing formatted in- testing, operation, and where appro-
formation between computers utilizing priate, maintenance and repair, of an
established and published formats and identified energy conservation measure
codes, as authorized by the applicable or series of measures at one or more lo-
Federal Information Processing Stand- cations;
ards. (2) Incur the costs of implementing
Electronic Funds Transfer (EFT) means the energy savings measures, including
any transfer of funds, other than a at least the cost (if any) incurred in
transaction originated by cash, check, making energy audits, acquiring and
or similar paper instrument, that is installing equipment, and training per-
initiated through an electronic ter- sonnel in exchange for a predetermined
minal, telephone, computer, or mag- share of the value of the energy savings
netic tape, for the purpose of ordering, directly resulting from implementa-
instructing, or authorizing a financial tion of such measures during the term
institution to debit or credit an ac- of the contract; and
count. The term includes Automated (3) Guarantee future energy and cost
Clearing House transfers, Fedwire savings to the Government.
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2.101 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 2.101
F.o.b. * * * (For other types of F.o.b., August 7, 1996, under authority granted
see 47.303). GSA by the Brooks Act, 40 U.S.C. 759
Forward pricing rate agreement means (repealed by Public Law 104106). The
a written agreement negotiated be- Economy Act does not apply to orders
tween a contractor and the Govern- under a Governmentwide acquisition
ment to make certain rates available contract.
during a specified period for use in Governmentwide point of entry (GPE)
pricing contracts or modifications. means the single point where Govern-
These rates represent reasonable pro- ment business opportunities greater
jections of specific costs that are not than $25,000, including synopses of pro-
easily estimated for, identified with, or posed contract actions, solicitations,
generated by a specific contract, con- and associated information, can be
tract end item, or task. These projec- accessed electronically by the public.
tions may include rates for such things The GPE is located at http://
as labor, indirect costs, material obso- www.fedbizopps.gov.
lescence and usage, spare parts provi- Head of the agency (see agency
sioning, and material handling. head).
Forward pricing rate recommendation Head of the contracting activity means
means a rate set unilaterally by the the official who has overall responsi-
administrative contracting officer for bility for managing the contracting ac-
use by the Government in negotiations
tivity.
or other contract actions when forward
Historically black college or university
pricing rate agreement negotiations
means an institution determined by
have not been completed or when the
contractor will not agree to a forward the Secretary of Education to meet the
pricing rate agreement. requirements of 34 CFR 608.2. For the
Freight means supplies, goods, and Department of Defense, the National
transportable property. Aeronautics and Space Administration,
Full and open competition, when used and the Coast Guard, the term also in-
with respect to a contract action, cludes any nonprofit research institu-
means that all responsible sources are tion that was an integral part of such
permitted to compete. a college or university before Novem-
General and administrative (G&A) ex- ber 14, 1986.
pense means any management, finan- HUBZone means a historically under-
cial, and other expense which is in- utilized business zone that is an area
curred by or allocated to a business located within one or more qualified
unit and which is for the general man- census tracts, qualified nonmetropoli-
agement and administration of the tan counties, or lands within the exter-
business unit as a whole. G&A expense nal boundaries of an Indian reserva-
does not include those management ex- tion.
penses whose beneficial or causal rela- HUBZone small business concern
tionship to cost objectives can be more means a small business concern that
directly measured by a base other than appears on the List of Qualified
a cost input base representing the total HUBZone Small Business Concerns
activity of a business unit during a maintained by the Small Business Ad-
cost accounting period. ministration.
Governmentwide acquisition contract Humanitarian or peacekeeping oper-
(GWAC) means a task-order or deliv- ation means a military operation in
ery-order contract for information support of the provision of humani-
technology established by one agency tarian or foreign disaster assistance or
for Governmentwide use that is oper- in support of a peacekeeping operation
ated under chapter VI or VII of the Charter
(1) By an executive agent designated of the United Nations. The term does
by the Office of Management and Budg- not include routine training, force ro-
et pursuant to section 5112(e) of the tation, or stationing (10 U.S.C. 2302(8)
Clinger-Cohen Act, 40 U.S.C. 1412(e); or and 41 U.S.C. 259(d)).
(2) Under a delegation of procure- In writing, writing, or written means
ment authority issued by the General any worded or numbered expression
Services Administration (GSA) prior to that can be read, reproduced, and later
29
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2.101 48 CFR Ch. 1 (10103 Edition)
30
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Federal Acquisition Regulation 2.101
criminal judicial proceedings, contract tractor can revoke or condition the let-
management, or otherwise; ter of credit.
(iii) Significantly affect the life, lib- Labor surplus area means a geo-
erty, or property of private persons; graphical area identified by the De-
(iv) Commission, appoint, direct, or partment of Labor in accordance with
control officers or employees of the 20 CFR part 654, subpart A, as an area
United States; or of concentrated unemployment or
(v) Exert ultimate control over the underemployment or an area of labor
acquisition, use, or disposition of the surplus.
property, real or personal, tangible or Labor surplus area concern means a
intangible, of the United States, in- concern that together with its first-
cluding the collection, control, or dis- tier subcontractors will perform sub-
bursement of Federal funds. stantially in labor surplus areas. Per-
(2) Inherently governmental func- formance is substantially in labor sur-
tions do not normally include gath- plus areas if the costs incurred under
ering information for or providing ad- the contract on account of manufac-
vice, opinions, recommendations, or turing, production, or performance of
ideas to Government officials. They appropriate services in labor surplus
also do not include functions that are areas exceed 50 percent of the contract
primarily ministerial and internal in price.
nature, such as building security, mail Latent defect means a defect that ex-
operations, operation of cafeterias, ists at the time of acceptance but can-
housekeeping, facilities operations and not be discovered by a reasonable in-
maintenance, warehouse operations, spection.
motor vehicle fleet management oper- List of Parties Excluded from Federal
ations, or other routine electrical or Procurement and Nonprocurement Pro-
mechanical services. The list of com- grams means a list compiled, main-
mercial activities included in the at- tained, and distributed by the General
tachment to Office of Management and Services Administration containing
Budget (OMB) Circular No. A76 is an the names and other information about
authoritative, nonexclusive list of parties debarred, suspended, or volun-
functions that are not inherently gov- tarily excluded under the Nonprocure-
ernmental functions. ment Common Rule or the Federal Ac-
Inspection means examining and test- quisition Regulation, parties who have
ing supplies or services (including, been proposed for debarment under the
when appropriate, raw materials, com- Federal Acquisition Regulation, and
ponents, and intermediate assemblies) parties determined to be ineligible.
to determine whether they conform to Major system means that combination
contract requirements. of elements that will function together
Insurance means a contract that pro- to produce the capabilities required to
vides that for a stipulated consider- fulfill a mission need. The elements
ation, one party undertakes to indem- may include hardware, equipment,
nify another against loss, damage, or software, or any combination thereof,
liability arising from an unknown or but exclude construction or other im-
contingent event. provements to real property. A system
Invoice means a contractors bill or is a major system if
written request for payment under the (1) The Department of Defense is re-
contract for supplies delivered or serv- sponsible for the system and the total
ices performed (see also proper in- expenditures for research, develop-
voice). ment, test, and evaluation for the sys-
Irrevocable letter of credit means a tem are estimated to be more than
written commitment by a federally in- $115,000,000 (based on fiscal year 1990
sured financial institution to pay all or constant dollars) or the eventual total
part of a stated amount of money, expenditure for the acquisition exceeds
until the expiration date of the letter, $540,000,000 (based on fiscal year 1990
upon the Governments (the bene- constant dollars);
ficiary) presentation of a written de- (2) A civilian agency is responsible
mand for payment. Neither the finan- for the system and total expenditures
cial institution nor the offeror/con- for the system are estimated to exceed
31
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2.101 48 CFR Ch. 1 (10103 Edition)
$750,000 (based on fiscal year 1980 con- 1067k), including a Hispanic-serving in-
stant dollars) or the dollar threshold stitution of higher education, as de-
for a major system established by fined in section 316(b)(1) of the Act (20
the agency pursuant to Office of Man- U.S.C. 1101a).
agement and Budget Circular A109, en- Multi-agency contract (MAC) means a
titled Major System Acquisitions, task-order or delivery-order contract
whichever is greater; or established by one agency for use by
(3) The system is designated a major Government agencies to obtain sup-
system by the head of the agency re- plies and services, consistent with the
sponsible for the system (10 U.S.C. 2302 Economy Act (see 17.500(b)). Multi-
and 41 U.S.C. 403). agency contracts include contracts for
Make-or-buy program means that part information technology established
of a contractors written plan for a pursuant to section 5124(a)(2) of the
contract identifying those major items Clinger-Cohen Act, 40 U.S.C. 1424(a)(2).
to be produced or work efforts to be Must (see shall).
performed in the prime contractors fa- National defense means any activity
cilities and those to be subcontracted. related to programs for military or
Market research means collecting and atomic energy production or construc-
analyzing information about capabili- tion, military assistance to any foreign
ties within the market to satisfy agen- nation, stockpiling, or space.
cy needs. Neutral person means an impartial
Master solicitation means a document third party, who serves as a mediator,
containing special clauses and provi- fact finder, or arbitrator, or otherwise
sions that have been identified as es- functions to assist the parties to re-
sential for the acquisition of a specific solve the issues in controversy. A neu-
type of supply or service that is ac- tral person may be a permanent or
quired repetitively. temporary officer or employee of the
May denotes the permissive. How- Federal Government or any other indi-
ever, the words no person may * * * vidual who is acceptable to the parties.
mean that no person is required, au- A neutral person must have no official,
thorized, or permitted to do the act de- financial, or personal conflict of inter-
scribed. est with respect to the issues in con-
Micro-purchase means an acquisition troversy, unless the interest is fully
of supplies or services using simplified disclosed in writing to all parties and
acquisition procedures, the aggregate all parties agree that the neutral per-
amount of which does not exceed the son may serve (5 U.S.C. 583).
micro-purchase threshold. Nondevelopmental item means
Micro-purchase threshold means $2,500, (1) Any previously developed item of
except it means supply used exclusively for govern-
(1) $2,000 for construction subject to mental purposes by a Federal agency, a
the Davis Bacon Act; and State or local government, or a foreign
(2) $7,500 for acquisitions of supplies government with which the United
or services that, as determined by the States has a mutual defense coopera-
head of the agency, are to be used to tion agreement;
facilitate defense against or recovery (2) Any item described in paragraph
from terrorism (defined at Public Law (1) of this definition that requires only
107296, Sec. 2) or nuclear, biological, minor modification or modifications of
chemical, or radiological attack, as de- a type customarily available in the
scribed in 13.201(g)(1)(i), except for con- commercial marketplace in order to
struction subject to the Davis Bacon meet the requirements of the procuring
Act (Public Law 107296, Sec. 854). The department or agency; or
threshold is $15,000 for acquisitions by (3) Any item of supply being produced
or for the Department of Defense as de- that does not meet the requirements of
scribed in 13.201(g)(1)(ii) (Public Law paragraphs (1) or (2) solely because the
107107, Sec. 836(a)(1)(A)). item is not yet in use.
Minority Institution means an institu- Novation agreement means a legal in-
tion of higher education meeting the strument
requirements of section 1046(3) of the (1) Executed by the
Higher Education Act of 1965 (20 U.S.C. (i) Contractor (transferor);
32
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Federal Acquisition Regulation 2.101
(ii) Successor in interest (transferee); ular rate of pay to an employee for the
and shift involved and the higher rate paid
(iii) Government; and for overtime. It does not include shift
(2) By which, among other things, the premium, i.e., the difference between
transferor guarantees performance of the contractors regular rate of pay to
the contract, the transferee assumes an employee and the higher rate paid
all obligations under the contract, and for extra-pay-shift work.
the Government recognizes the trans- Ozone-depleting substance means any
fer of the contract and related assets. substance the Environmental Protec-
Offer means a response to a solicita- tion Agency designates in 40 CFR part
tion that, if accepted, would bind the 82 as
offeror to perform the resultant con- (1) Class I, including, but not limited
tract. Responses to invitations for bids to, chlorofluorocarbons, halons, carbon
(sealed bidding) are offers called bids tetrachloride, and methyl chloroform;
or sealed bids; responses to requests or
for proposals (negotiation) are offers (2) Class II, including, but not limited
called proposals; however, responses to, hydrochlorofluorocarbons.
to requests for quotations (simplified Partial termination means the termi-
acquisition) are quotations, not of- nation of a part, but not all, of the
fers. For unsolicited proposals, see sub- work that has not been completed and
part 15.6. accepted under a contract.
Offeror means offeror or bidder. Performance-based contracting means
Option means a unilateral right in a structuring all aspects of an acquisi-
contract by which, for a specified time, tion around the purpose of the work to
the Government may elect to purchase be performed with the contract re-
additional supplies or services called quirements set forth, in clear, specific,
for by the contract, or may elect to ex- and objective terms with measurable
tend the term of the contract. outcomes as opposed to either the man-
Organizational conflict of interest ner by which the work is to be per-
means that because of other activities formed or broad and imprecise state-
or relationships with other persons, a ments of work.
person is unable or potentially unable Personal services contract means a con-
to render impartial assistance or ad- tract that, by its express terms or as
vice to the Government, or the persons administered, makes the contractor
objectivity in performing the contract personnel appear to be, in effect, Gov-
work is or might be otherwise im- ernment employees (see 37.104).
paired, or a person has an unfair com- Pollution prevention means any prac-
petitive advantage. tice that
Outlying areas means (1)(i) Reduces the amount of any haz-
(1) Commonwealths. (i) Puerto Rico. ardous substance, pollutant, or con-
(ii) The Northern Mariana Islands; taminant entering any waste stream or
(2) Territories. (i) American Samoa. otherwise released into the environ-
(ii) Guam. ment (including fugitive emissions)
(iii) U.S. Virgin Islands; and prior to recycling, treatment, or dis-
(3) Minor outlying islands. (i) Baker Is- posal; and
land. (ii) Reduces the hazards to public
(ii) Howland Island. health and the environment associated
(iii) Jarvis Island. with the release of such substances,
(iv) Johnston Atoll. pollutants, and contaminants;
(v) Kingman Reef. (2) Reduces or eliminates the cre-
(vi) Midway Islands. ation of pollutants through increased
(vii) Navassa Island. efficiency in the use of raw materials,
(viii) Palmyra Atoll. energy, water, or other resources; or
(ix) Wake Atoll. (3) Protects natural resources by con-
Overtime means time worked by a servation.
contractors employee in excess of the Power of attorney means the author-
employees normal workweek. ity given one person or corporation to
Overtime premium means the dif- act for and obligate another, as speci-
ference between the contractors reg- fied in the instrument creating the
33
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34
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Federal Acquisition Regulation 2.101
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2.101 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 2.101
State and local taxes means taxes lev- ment-approved subcontracting; a con-
ied by the States, the District of Co- tractor that is disqualified is sus-
lumbia, outlying areas of the United pended.
States, or their political subdivisions. Task order means an order for serv-
Substantial evidence means informa- ices placed against an established con-
tion sufficient to support the reason- tract or with Government sources.
able belief that a particular act or Taxpayer Identification Number (TIN)
omission has occurred. means the number required by the IRS
Substantially as follows or substantially to be used by the offeror in reporting
the same as, when used in the prescrip- income tax and other returns. The TIN
tion and introductory text of a provi- may be either a Social Security Num-
sion or clause, means that authoriza- ber or an Employer Identification
tion is granted to prepare and utilize a Number.
variation of that provision or clause to Termination for convenience means the
accommodate requirements that are exercise of the Governments right to
peculiar to an individual acquisition; completely or partially terminate per-
provided that the variation includes formance of work under a contract
the salient features of the FAR provi- when it is in the Governments inter-
sion or clause, and is not inconsistent est.
with the intent, principle, and sub- Termination for default means the ex-
stance of the FAR provision or clause ercise of the Governments right to
or related coverage of the subject mat- completely or partially terminate a
ter. contract because of the contractors
Supplemental agreement means a con- actual or anticipated failure to per-
tract modification that is accom- form its contractual obligations.
plished by the mutual action of the Terminated portion of the contract
parties. means the portion of a contract that
Supplies means all property except the contractor is not to perform fol-
land or interest in land. It includes lowing a partial termination. For con-
(but is not limited to) public works, struction contracts that have been
buildings, and facilities; ships, floating completely terminated for conven-
equipment, and vessels of every char- ience, it means the entire contract,
acter, type, and description, together notwithstanding the completion of, and
with parts and accessories; aircraft and payment for, individual items of work
aircraft parts, accessories, and equip- before termination.
ment; machine tools; and the alter-
Unallowable cost means any cost that,
ation or installation of any of the fore-
under the provisions of any pertinent
going.
law, regulation, or contract, cannot be
Surety means an individual or cor-
included in prices, cost-reimburse-
poration legally liable for the debt, de-
ments, or settlements under a Govern-
fault, or failure of a principal to satisfy
ment contract to which it is allocable.
a contractual obligation. The types of
Unique and innovative concept, when
sureties referred to are as follows:
used relative to an unsolicited research
(1) An individual surety is one per-
proposal, means that
son, as distinguished from a business
entity, who is liable for the entire (1) In the opinion and to the knowl-
penal amount of the bond. edge of the Government evaluator, the
(2) A corporate surety is licensed meritorious proposal
under various insurance laws and, (i) Is the product of original thinking
under its charter, has legal power to submitted confidentially by one source;
act as surety for others. (ii) Contains new, novel, or changed
(3) A cosurety is one of two or more concepts, approaches, or methods;
sureties that are jointly liable for the (iii) Was not submitted previously by
penal sum of the bond. A limit of li- another; and
ability for each surety may be stated. (iv) Is not otherwise available within
Suspension means action taken by a the Federal Government.
suspending official under 9.407 to dis- (2) In this context, the term does not
qualify a contractor temporarily from mean that the source has the sole capa-
Government contracting and Govern- bility of performing the research.
37
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2.101 48 CFR Ch. 1 (10103 Edition)
United States, when used in a geo- (i) 52.2482, see the definition at
graphic sense, means the 50 States and 52.2482(b); and
the District of Columbia, except as fol- (ii) 52.2483, see the definition at
lows: 52.2483(b).
(1) For use in subpart 22.8, see the Veteran-owned small business concern
definition at 22.801. means a small business concern
(2) For use in subpart 22.10, see the (1) Not less than 51 percent of which
definition at 22.1001. is owned by one or more veterans (as
(3) For use in subpart 22.13, see the defined at 38 U.S.C. 101(2)) or, in the
definition at 22.1301. case of any publicly owned business,
(4) For use in part 25, see the defini- not less than 51 percent of the stock of
tion at 25.003. which is owned by one or more vet-
(5) For use in subpart 47.4, see the erans; and
definition at 47.401. (2) The management and daily busi-
Unsolicited proposal means a written ness operations of which are controlled
proposal for a new or innovative idea by one or more veterans.
that is submitted to an agency on the Virgin material means
initiative of the offeror for the purpose
(1) Previously unused raw material,
of obtaining a contract with the Gov-
including previously unused copper,
ernment, and that is not in response to
aluminum, lead, zinc, iron, other metal
a request for proposals, Broad Agency
Announcement, Small Business Inno- or metal ore; or
vation Research topic, Small Business (2) Any undeveloped resource that is,
Technology Transfer Research topic, or with new technology will become, a
Program Research and Development source of raw materials.
Announcement, or any other Govern- Warranty means a promise or affir-
ment-initiated solicitation or program. mation given by a contractor to the
Value engineering means an analysis Government regarding the nature, use-
of the functions of a program, project, fulness, or condition of the supplies or
system, product, item of equipment, performance of services furnished
building, facility, service, or supply of under the contract.
an executive agency, performed by Waste reduction means preventing or
qualified agency or contractor per- decreasing the amount of waste being
sonnel, directed at improving perform- generated through waste prevention,
ance, reliability, quality, safety, and recycling, or purchasing recycled and
life-cycle costs (section 36 of the Office environmentally preferable products.
of Federal Procurement Policy Act, 41 Women-owned small business concern
U.S.C. 401, et seq.). For use in the clause means a small business concern
at 52.2482, see the definition at 52.248 (1) That is at least 51 percent owned
2(b). by one or more women; or, in the case
Value engineering change proposal of any publicly owned business, at least
(VECP)(1) means a proposal that 51 percent of the stock of which is
(i) Requires a change to the instant owned by one or more women; and
contract to implement; and (2) Whose management and daily
(ii) Results in reducing the overall business operations are controlled by
projected cost to the agency without one or more women.
impairing essential functions or char-
Writing or written (see in writing).
acteristics, provided that it does not
involve a change [66 FR 2118, Jan. 10, 2001, as amended at 66
(A) In deliverable end item quantities FR 20896, Apr. 25, 2001; 66 FR 22083, May 2,
only; 2001; 66 FR 27012, May 15, 2001; 66 FR 27409,
(B) In research and development May 16, 2001; 66 FR 53484, 53486, 53488, Oct. 22,
2001; 66 FR 65350, 65352, 65354, Dec. 18, 2001; 67
(R&D) items or R&D test quantities
FR 6114, Feb. 8, 2002; 67 FR 13055, Mar. 20,
that are due solely to results of pre- 2002; 67 FR 42313, June 27, 2002; 67 FR 56121,
vious testing under the instant con- Aug. 30, 2002; 67 FR 56118, Aug. 30, 2002; 68 FR
tract; or 4049, Jan. 27, 2003; 68 FR 28080, May 22, 2003;
(C) To the contract type only. 68 FR 28091, May 22, 2003; 68 FR 43858, July 24,
(2) For use in the clauses at 2003; 68 FR 56672, 56678, Oct. 1, 2003]
38
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39
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3.000 48 CFR Ch. 1 (10103 Edition)
40
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Federal Acquisition Regulation 3.1041
(i) The fact that a firm has published port the situation to the Attorney Gen-
price lists, rates, or tariffs covering eral in accordance with 3.303.
items being acquired by the Govern- (4) The determination made under
ment. subparagraph (2) above shall not pre-
(ii) The fact that a firm has informed vent or inhibit the prosecution of any
prospective customers of proposed or criminal or civil actions involving the
pending publication of new or revised occurrences or transactions to which
price lists for items being acquired by the certificate relates.
the Government. [48 FR 42108, Sept. 19, 1983, as amended at 55
(iii) The fact that a firm has sold the FR 25526, June 21, 1990]
same items to commercial customers
at the same prices being offered to the 3.1033 The need for further certifi-
Government. cations.
(2) For the purpose of subparagraph A contractor that properly executed
(b)(2) of the certificate, an individual the certificate before award does not
may use a blanket authorization to act have to submit a separate certificate
as an agent for the person(s) respon- with each proposal to perform a work
sible for determining the offered prices order or similar ordering instrument
if issued pursuant to the terms of the
(i) The proposed contract to which contract, where the Governments re-
the certificate applies is clearly within quirements cannot be met from an-
the scope of the authorization; and other source.
(ii) The person giving the authoriza-
tion is the person within the offerors 3.104 Procurement integrity.
organization who is responsible for de-
termining the prices being offered at 3.1041 Definitions.
the time the certification is made in As used in this section
the particular offer. Agency ethics official means the des-
(3) If an offer is submitted jointly by ignated agency ethics official described
two or more concerns, the certification in 5 CFR 2638.201 or other designated
provided by the representative of each person, including
concern applies only to the activities (1) Deputy ethics officials described
of that concern. in 5 CFR 2638.204, to whom authority
(b) Rejection of offers suspected of being under 3.1046 has been delegated by the
collusive. (1) If the offeror deleted or designated agency ethics official; and
modified subparagraph (a)(1) or (a)(3) (2) Alternate designated agency eth-
or paragraph (b) of the certificate, the ics officials described in 5 CFR
contracting officer shall reject the 2638.202(b).
offerors bid or proposal. Compensation means wages, salaries,
(2) If the offeror deleted or modified honoraria, commissions, professional
subparagraph (a)(2) of the certificate, fees, and any other form of compensa-
the offeror must have furnished with tion, provided directly or indirectly for
its offer a signed statement of the cir- services rendered. Compensation is in-
cumstances of the disclosure of prices directly provided if it is paid to an en-
contained in the bid or proposal. The tity other than the individual, specifi-
chief of the contracting office shall re- cally in exchange for services provided
view the altered certificate and the by the individual.
statement and shall determine, in writ- Contractor bid or proposal information
ing, whether the disclosure was made means any of the following information
for the purpose or had the effect of re- submitted to a Federal agency as part
stricting competition. If the deter- of or in connection with a bid or pro-
mination is positive, the bid or pro- posal to enter into a Federal agency
posal shall be rejected; if it is negative, procurement contract, if that informa-
the bid or proposal shall be considered tion has not been previously made
for award. available to the public or disclosed
(3) Whenever an offer is rejected publicly:
under subparagraph (1) or (2) above, or (1) Cost or pricing data (as defined by
the certificate is suspected of being 10 U.S.C. 2306a(h)) with respect to pro-
false, the contracting officer shall re- curements subject to that section, and
41
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3.1041 48 CFR Ch. 1 (10103 Edition)
section 304A(h) of the Federal Property (3) A member of the uniformed serv-
and Administrative Services Act of 1949 ices, as defined in 5 U.S.C. 2101(3); or
(41 U.S.C. 254b(h)), with respect to pro- (4) A special Government employee,
curements subject to that section. as defined in 18 U.S.C. 202.
(2) Indirect costs and direct labor Participating personally and substan-
rates. tially in a Federal agency procurement
(3) Proprietary information about means
manufacturing processes, operations, (1) Active and significant involve-
or techniques marked by the con- ment of an official in any of the fol-
tractor in accordance with applicable lowing activities directly related to
law or regulation. that procurement:
(4) Information marked by the con- (i) Drafting, reviewing, or approving
tractor as contractor bid or proposal the specification or statement of work
information in accordance with appli- for the procurement.
cable law or regulation. (ii) Preparing or developing the solic-
(5) Information marked in accord- itation.
ance with 52.2151(e). (iii) Evaluating bids or proposals, or
Decision to award a subcontract or selecting a source.
modification of subcontract means a de- (iv) Negotiating price or terms and
cision to designate award to a par- conditions of the contract.
ticular source. (v) Reviewing and approving the
Federal agency procurement means the award of the contract.
acquisition (by using competitive pro- (2) Participating personally means par-
cedures and awarding a contract) of ticipating directly, and includes the di-
goods or services (including construc- rect and active supervision of a subor-
tion) from non-Federal sources by a dinates participation in the matter.
Federal agency using appropriated (3) Participating substantially means
funds. For broad agency announce- that the officials involvement is of
ments and small business innovative significance to the matter. Substantial
research programs, each proposal re- participation requires more than offi-
ceived by an agency constitutes a sepa- cial responsibility, knowledge, perfunc-
rate procurement for purposes of the tory involvement, or involvement on
Act. an administrative or peripheral issue.
Participation may be substantial even
In excess of $10,000,000 means
though it is not determinative of the
(1) The value, or estimated value, at
outcome of a particular matter. A find-
the time of award, of the contract, in-
ing of substantiality should be based
cluding all options;
not only on the effort devoted to a
(2) The total estimated value at the matter, but on the importance of the
time of award of all orders under an in- effort. While a series of peripheral in-
definite-delivery, indefinite-quantity, volvements may be insubstantial, the
or requirements contract; single act of approving or participating
(3) Any multiple award schedule con- in a critical step may be substantial.
tract, unless the contracting officer However, the review of procurement
documents a lower estimate; documents solely to determine compli-
(4) The value of a delivery order, task ance with regulatory, administrative,
order, or an order under a Basic Order- or budgetary procedures, does not con-
ing Agreement; stitute substantial participation in a
(5) The amount paid or to be paid in procurement.
settlement of a claim; or (4) Generally, an official will not be
(6) The estimated monetary value of considered to have participated person-
negotiated overhead or other rates ally and substantially in a procure-
when applied to the Government por- ment solely by participating in the fol-
tion of the applicable allocation base. lowing activities:
Official means (i) Agency-level boards, panels, or
(1) An officer, as defined in 5 U.S.C. other advisory committees that review
2104; program milestones or evaluate and
(2) An employee, as defined in 5 make recommendations regarding al-
U.S.C. 2105; ternative technologies or approaches
42
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Federal Acquisition Regulation 3.1043
for satisfying broad agency-level mis- 18 U.S.C. 208 and 5 CFR part 2635 from
sions or objectives. participating personally and substan-
(ii) The performance of general, tech- tially in any particular matter that
nical, engineering, or scientific effort would affect the financial interests of
having broad application not directly any person with whom the employee is
associated with a particular procure- seeking employment. An employee who
ment, notwithstanding that such gen- engages in negotiations or is otherwise
eral, technical, engineering, or sci- seeking employment with an offeror or
entific effort subsequently may be in- who has an arrangement concerning fu-
corporated into a particular procure- ture employment with an offeror must
ment. comply with the applicable disquali-
(iii) Clerical functions supporting the fication requirements of 5 CFR 2635.604
conduct of a particular procurement. and 2635.606. The statutory prohibition
(iv) For procurements to be con- in 18 U.S.C. 208 also may require an em-
ducted under the procedures of OMB ployees disqualification from partici-
Circular A76, participation in manage- pation in the acquisition even if the
ment studies, preparation of in-house employees duties may not be consid-
cost estimates, preparation of most ered participating personally and sub-
efficient organization analyses, and stantially, as this term is defined in
furnishing of data or technical support 3.1041;
to be used by others in the develop- (3) Post-employment restrictions are
ment of performance standards, state- covered by 18 U.S.C. 207 and 5 CFR
ments of work, or specifications. parts 2637 and 2641, that prohibit cer-
Source selection evaluation board tain activities by former Government
means any board, team, council, or employees, including representation of
other group that evaluates bids or pro-
a contractor before the Government in
posals.
relation to any contract or other par-
[67 FR 13059, Mar. 20, 2002] ticular matter involving specific par-
ties on which the former employee par-
3.1042 General. ticipated personally and substantially
(a) This section implements section while employed by the Government.
27 of the Office of Federal Procurement Additional restrictions apply to certain
Policy Act (the Procurement Integrity senior Government employees and for
Act) (41 U.S.C. 423) referred to as the particular matters under an employees
Act). Agency supplementation of official responsibility;
3.104, including specific definitions to (4) Parts 14 and 15 place restrictions
identify individuals who occupy posi- on the release of information related to
tions specified in 3.1043(d)(1)(ii), and procurements and other contractor in-
any clauses required by 3.104 must be formation that must be protected
approved by the senior procurement ex- under 18 U.S.C. 1905;
ecutive of the agency, unless a law es- (5) Release of information both before
tablishes a higher level of approval for and after award (see 3.1044) may be
that agency. prohibited by the Privacy Act (5 U.S.C.
(b) Agency officials are reminded 552a), the Trade Secrets Act (18 U.S.C.
that there are other statutes and regu- 1905), and other laws; and
lations that deal with the same or re- (6) Using nonpublic information to
lated prohibited conduct, for example further an employees private interest
(1) The offer or acceptance of a bribe or that of another and engaging in a fi-
or gratuity is prohibited by 18 U.S.C. nancial transaction using nonpublic in-
201 and 10 U.S.C. 2207. The acceptance formation are prohibited by 5 CFR
of a gift, under certain circumstances, 2635.703.
is prohibited by 5 U.S.C. 7353 and 5 CFR
part 2635; [67 FR 13059, Mar. 20, 2002]
(2) Contacts with an offeror during
the conduct of an acquisition may con- 3.1043 Statutory and related prohibi-
stitute seeking employment,(see tions, restrictions, and require-
subpart F of 5 CFR part 2636 and 3.104 ments.
3(c)(2)). Government officers and em- (a) Prohibition on disclosing procure-
ployees (employees) are prohibited by ment information (subsection 27(a) of the
43
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3.1043 48 CFR Ch. 1 (10103 Edition)
Act). (1) A person described in para- (A) The person is no longer an offeror
graph (a)(2) of this subsection must in that Federal agency procurement; or
not, other than as provided by law, (B) All discussions with the offeror
knowingly disclose contractor bid or regarding possible non-Federal employ-
proposal information or source selec- ment have terminated without an
tion information before the award of a agreement or arrangement for employ-
Federal agency procurement contract ment.
to which the information relates. (See (2) A contact is any of the actions in-
3.1044(a).) cluded as seeking employment in 5
(2) Paragraph (a)(1) of this subsection CFR 2635.603(b). In addition, unsolicited
applies to any person who communications from offerors regard-
(i) Is a present or former official of ing possible employment are consid-
the United States, or a person who is ered contacts.
acting or has acted for or on behalf of, (3) Agencies must retain reports of
or who is advising or has advised the employment contacts for 2 years from
United States with respect to, a Fed- the date the report was submitted.
eral agency procurement; and (4) Conduct that complies with sub-
(ii) By virtue of that office, employ- section 27(c) of the Act may be prohib-
ment, or relationship, has or had ac- ited by other criminal statutes and the
cess to contractor bid or proposal in- Standards of Ethical Conduct for Em-
ployees of the Executive Branch. See
formation or source selection informa-
3.1042(b)(2).
tion.
(d) Prohibition on former officials ac-
(b) Prohibition on obtaining procure-
ceptance of compensation from a con-
ment information (subsection 27(b) of the tractor (subsection 27(d) of the Act). (1) A
Act). A person must not, other than as former official of a Federal agency may
provided by law, knowingly obtain con- not accept compensation from a con-
tractor bid or proposal information or tractor that has been awarded a com-
source selection information before the petitive or sole source contract, as an
award of a Federal agency procurement employee, officer, director, or consult-
contract to which the information re- ant of the contractor within a period of
lates. 1 year after such former official
(c) Actions required when an agency of- (i) Served, at the time of selection of
ficial contacts or is contacted by an offer- the contractor or the award of a con-
or regarding non-Federal employment tract to that contractor, as the pro-
(subsection 27(c) of the Act). (1) If an curing contracting officer, the source
agency official, participating person- selection authority, a member of a
ally and substantially in a Federal source selection evaluation board, or
agency procurement for a contract in the chief of a financial or technical
excess of the simplified acquisition evaluation team in a procurement in
threshold, contacts or is contacted by a which that contractor was selected for
person who is an offeror in that Fed- award of a contract in excess of
eral agency procurement regarding $10,000,000;
possible non-Federal employment for (ii) Served as the program manager,
that official, the official must deputy program manager, or adminis-
(i) Promptly report the contact in trative contracting officer for a con-
writing to the officials supervisor and tract in excess of $10,000,000 awarded to
to the agency ethics official; and that contractor; or
(ii) Either reject the possibility of (iii) Personally made for the Federal
non-Federal employment or disqualify agency a decision to
himself or herself from further per- (A) Award a contract, subcontract,
sonal and substantial participation in modification of a contract or sub-
that Federal agency procurement (see contract, or a task order or delivery
3.1045) until such time as the agency order in excess of $10,000,000 to that
authorizes the official to resume par- contractor;
ticipation in that procurement, in ac- (B) Establish overhead or other rates
cordance with the requirements of 18 applicable to a contract or contracts
U.S.C. 208 and applicable agency regu- for that contractor that are valued in
lations, because excess of $10,000,000;
44
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Federal Acquisition Regulation 3.1044
(C) Approve issuance of a contract cover page and each page that the indi-
payment or payments in excess of vidual believes contains source selec-
$10,000,000 to that contractor; or tion information with the legend
(D) Pay or settle a claim in excess of Source Selection InformationSee
$10,000,000 with that contractor. FAR 2.101 and 3.104. Although the in-
(2) The 1-year prohibition begins on formation in paragraphs (1) through (9)
the date of the definition in 2.101 is considered
(i) Of contract award for positions de- to be source selection information
scribed in paragraph (d)(1)(i) of this whether or not marked, all reasonable
subsection, or the date of contractor efforts must be made to mark such ma-
selection if the official was not serving terial with the same legend.
in the position on the date of award; (d) Except as provided in paragraph
(ii) The official last served in one of (d)(3) of this subsection, the con-
the positions described in paragraph tracting officer must notify the con-
(d)(1)(ii) of this subsection; or tractor in writing if the contracting of-
(iii) The official made one of the deci- ficer believes that proprietary informa-
sions described in paragraph (d)(1)(iii) tion, contractor bid or proposal infor-
of this subsection. mation, or information marked in ac-
(3) Nothing in paragraph (d)(1) of this cordance with 52.2151(e) has been inap-
subsection may be construed to pro- propriately marked. The contractor
hibit a former official of a Federal that has affixed the marking must be
agency from accepting compensation given an opportunity to justify the
from any division or affiliate of a con-
marking.
tractor that does not produce the same
(1) If the contractor agrees that the
or similar products or services as the
marking is not justified, or does not re-
entity of the contractor that is respon-
sible for the contract referred to in spond within the time specified in the
paragraph (d)(1) of this subsection. notice, the contracting officer may re-
move the marking and release the in-
[67 FR 13059, Mar. 20, 2002] formation.
(2) If, after reviewing the contrac-
3.1044 Disclosure, protection, and
marking of contractor bid or pro- tors justification, the contracting offi-
posal information and source selec- cer determines that the marking is not
tion information. justified, the contracting officer must
notify the contractor in writing before
(a) Except as specifically provided for
releasing the information.
in this subsection, no person or other
entity may disclose contractor bid or (3) For technical data marked as pro-
proposal information or source selec- prietary by a contractor, the con-
tion information to any person other tracting officer must follow the proce-
than a person authorized, in accord- dures in 27.404(h).
ance with applicable agency regula- (e) This section does not restrict or
tions or procedures, by the agency head prohibit
or the contracting officer to receive (1) A contractor from disclosing its
such information. own bid or proposal information or the
(b) Contractor bid or proposal infor- recipient from receiving that informa-
mation and source selection informa- tion;
tion must be protected from unauthor- (2) The disclosure or receipt of infor-
ized disclosure in accordance with mation, not otherwise protected, relat-
14.401, 15.207, applicable law, and agen- ing to a Federal agency procurement
cy regulations. after it has been canceled by the Fed-
(c) Individuals unsure if particular eral agency, before contract award, un-
information is source selection infor- less the Federal agency plans to re-
mation, as defined in 2.101, should con- sume the procurement;
sult with agency officials as necessary. (3) Individual meetings between a
Individuals responsible for preparing Federal agency official and an offeror
material that may be source selection or potential offeror for, or a recipient
information as described at paragraph of, a contract or subcontract under a
(10) of the source selection informa- Federal agency procurement, provided
tion definition in 2.101 must mark the that unauthorized disclosure or receipt
45
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3.1045 48 CFR Ch. 1 (10103 Edition)
46
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Federal Acquisition Regulation 3.1047
47
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3.1048 48 CFR Ch. 1 (10103 Edition)
48
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Federal Acquisition Regulation 3.301
49
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3.302 48 CFR Ch. 1 (10103 Edition)
50
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Federal Acquisition Regulation 3.405
the Assistant Attorney General, Anti- been considered contrary to public pol-
trust Division. icy because such arrangements may
lead to attempted or actual exercise of
[48 FR 42108, Sept. 19, 1983, as amended at 49
FR 12974, Mar. 30, 1984; 50 FR 1727, Jan. 11, improper influence. In 10 U.S.C. 2306(b)
1985; 50 FR 52429, Dec. 23, 1985; 55 FR 25526, and 41 U.S.C. 254(a), Congress affirmed
June 21, 1990; 65 FR 36030, June 6, 2000; 68 FR this public policy but permitted cer-
28080, May 22, 2003] tain exceptions. These statutes
(a) Require in every negotiated con-
Subpart 3.4Contingent Fees tract a warranty by the contractor
against contingent fees;
3.400 Scope of subpart. (b) Permit, as an exception to the
This subpart prescribes policies and warranty, contingent fee arrangements
procedures that restrict contingent fee between contractors and bona fide em-
arrangements for soliciting or obtain- ployees or bona fide agencies; and
ing Government contracts to those per- (c) Provide that, for breach or viola-
mitted by 10 U.S.C. 2306(b) and 41 tion of the warranty by the contractor,
U.S.C. 254(a). the Government may annul the con-
tract without liability or deduct from
3.401 Definitions. the contract price or consideration, or
As used in this subpart otherwise recover, the full amount of
the contingent fee.
Bona fide agency, means an estab-
lished commercial or selling agency, 3.403 Applicability.
maintained by a contractor for the pur-
pose of securing business, that neither This subpart applies to all contracts.
exerts nor proposes to exert improper Statutory requirements for negotiated
influence to solicit or obtain Govern- contracts are, as a matter of policy, ex-
ment contracts nor holds itself out as tended to sealed bid contracts.
being able to obtain any Government [48 FR 42108, Sept. 19, 1983, as amended at 50
contract or contracts through im- FR 1727, Jan. 11, 1985; 50 FR 52429, Dec. 23,
proper influence. 1985]
Bona fide employee, means a person,
employed by a contractor and subject 3.404 Contract clause.
to the contractors supervision and The contracting officer shall insert
control as to time, place, and manner the clause at 52.2035, Covenant
of performance, who neither exerts nor Against Contingent Fees, in all solici-
proposes to exert improper influence to tations and contracts exceeding the
solicit or obtain Government contracts simplified acquisition threshold, other
nor holds out as being able to obtain than those for commercial items (see
any Government contract or contracts parts 2 and 12).
through improper influence.
[61 FR 39188, July 26, 1996]
Contingent fee, means any commis-
sion, percentage, brokerage, or other 3.405 Misrepresentations or violations
fee that is contingent upon the success of the Covenant Against Contingent
that a person or concern has in secur- Fees.
ing a Government contract.
(a) Government personnel who sus-
Improper influence, means any influ- pect or have evidence of attempted or
ence that induces or tends to induce a actual exercise of improper influence,
Government employee or officer to misrepresentation of a contingent fee
give consideration or to act regarding a arrangement, or other violation of the
Government contract on any basis Covenant Against Contingent Fees
other than the merits of the matter. shall report the matter promptly to
[48 FR 42108, Sept. 19, 1983, as amended at 66 the contracting officer or appropriate
FR 2127, Jan. 10, 2001] higher authority in accordance with
agency procedures.
3.402 Statutory requirements. (b) When there is specific evidence or
Contractors arrangements to pay other reasonable basis to suspect one
contingent fees for soliciting or obtain- or more of the violations in paragraph
ing Government contracts have long (a) above, the chief of the contracting
51
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3.406 48 CFR Ch. 1 (10103 Edition)
office shall review the facts and, if ap- change orders or (2) follow-on contracts
propriate, take or direct one or more of subject to cost analysis.
the following, or other, actions: (b) The Government should minimize
(1) If before award, reject the bid or the opportunity for buying-in by seek-
proposal. ing a price commitment covering as
(2) If after award, enforce the Govern- much of the entire program concerned
ments right to annul the contract or as is practical by using
to recover the fee. (1) Multiyear contracting, with a re-
(3) Initiate suspension or debarment quirement in the solicitation that a
action under subpart 9.4. price be submitted only for the total
(4) Refer suspected fraudulent or multiyear quantity; or
criminal matters to the Department of (2) Priced options for additional
Justice, as prescribed in agency regula- quantities that, together with the firm
tions. contract quantity, equal the program
[48 FR 42108, Sept. 19, 1983. Redesignated at requirements (see subpart 17.2).
61 FR 39188, July 26, 1996] (c) Other safeguards are available to
the contracting officer to preclude re-
3.406 Records. covery of buying-in losses (e.g., amorti-
For enforcement purposes, agencies zation of nonrecurring costs (see 15.408,
shall preserve any specific evidence of Table 152, paragraph A., column (2)
one or more of the violations in under Formats for Submission of Line
3.405(a), together with all other perti- Item Summaries) and treatment of un-
nent data, including a record of actions reasonable price quotations (see 15.405).
taken. Contracting offices shall not re-
48 FR 42108, Sept. 19, 1983, as amended at 62
tire or destroy these records until it is
FR 51270, Sept. 30, 1997]
certain that they are no longer needed
for enforcement purposes. If the origi- 3.502 Subcontractor kickbacks.
nal record is maintained in a central
file, a copy must be retained in the 3.5021 Definitions.
contract file.
As used in this section
[48 FR 42108, Sept. 19, 1983. Redesignated and Kickback, means any money, fee,
amended at 61 FR 39188, July 26, 1996] commission, credit, gift, gratuity,
thing of value, or compensation of any
Subpart 3.5Other Improper kind which is provided, directly or in-
Business Practices directly, to any prime contractor,
prime contractor employee, subcon-
3.501 Buying-in. tractor, or subcontractor employee for
the purpose of improperly obtaining or
3.5011 Definition. rewarding favorable treatment in con-
Buying-in as used in this section, nection with a prime contract or in
means submitting an offer below an- connection with a subcontract relating
ticipated costs, expecting to to a prime contract.
(1) Increase the contract amount Person, means a corporation, partner-
after award (e.g., through unnecessary ship, business association of any kind,
or excessively priced change orders); or trust, joint-stock company, or indi-
(2) Receive follow-on contracts at ar- vidual.
tificially high prices to recover losses Prime contract, means a contract or
incurred on the buy-in contract. contractual action entered into by the
[48 FR 42108, Sept. 19, 1983, as amended at 66 United States for the purpose of ob-
FR 2127, Jan. 10, 2001] taining supplies, materials, equipment,
or services of any kind.
3.5012 General. Prime Contractor, means a person who
(a) Buying-in may decrease competi- has entered into a prime contract with
tion or result in poor contract perform- the United States.
ance. The contracting officer must Prime Contractor employee, as used in
take appropriate action to ensure buy- this section, means any officer, part-
ing-in losses are not recovered by the ner, employee, or agent of a prime con-
contractor through the pricing of (1) tractor.
52
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Federal Acquisition Regulation 3.5022
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3.5023 48 CFR Ch. 1 (10103 Edition)
54
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Federal Acquisition Regulation 3.702
(1) The contract arises directly out of advantage in the award of a Federal
the individuals activity as a special agency procurement contract, or simi-
Government employee; lar misconduct; or
(2) In the individuals capacity as a (2) There has been an agency head de-
special Government employee, the in- termination that contractor bid or pro-
dividual is in a position to influence posal information or source selection
the award of the contract; or information has been disclosed or re-
(3) Another conflict of interest is de- ceived in exchange for a thing of value,
termined to exist. or for the purpose of obtaining or giv-
[55 FR 34864, Aug. 24, 1990]
ing anyone a competitive advantage in
the award of a Federal agency procure-
3.602 Exceptions. ment contract.
(b) This subpart does not prescribe
The agency head, or a designee not
policies or procedures for, or govern
below the level of the head of the con-
the exercise of, any other remedy
tracting activity, may authorize an ex-
available to the Government with re-
ception to the policy in 3.601 only if
spect to such contracts, including but
there is a most compelling reason to do
not limited to, the common law right
so, such as when the Governments
of avoidance, rescission, or cancella-
needs cannot reasonably be otherwise
tion.
met.
[51 FR 27116, July 29, 1986, as amended at 62
3.603 Responsibilities of the con- FR 232, Jan. 2, 1997]
tracting officer.
(a) Before awarding a contract, the 3.701 Purpose.
contracting officer shall obtain an au- This subpart provides
thorization under 3.602 if (a) An administrative remedy with
(1) The contracting officer knows, or respect to contracts in relation to
has reason to believe, that a prospec- which there has been
tive contractor is one to which award (1) A final conviction for bribery,
is otherwise prohibited under 3.601; and conflict of interest, disclosure or re-
(2) There is a most compelling reason ceipt of contractor bid or proposal in-
to make an award to that prospective formation or source selection informa-
contractor. tion in exchange for a thing of value or
(b) The contracting officer shall com- to give anyone a competitive advan-
ply with the requirements and guid- tage in the award of a Federal agency
ance in subpart 9.5 before awarding a procurement contract, or similar mis-
contract to an organization owned or conduct; or
substantially owned or controlled by (2) An agency head determination
Government employees. that contractor bid or proposal infor-
mation or source selection information
Subpart 3.7Voiding and has been disclosed or received in ex-
Rescinding Contracts change for a thing of value, or for the
purpose of obtaining or giving anyone a
competitive advantage in the award of
SOURCE: 51 FR 27116, July 29, 1986, unless
a Federal agency procurement con-
otherwise noted.
tract; and
3.700 Scope of subpart. (b) A means to deter similar mis-
conduct in the future by those who are
(a) This subpart prescribes Govern-
involved in the award, performance,
mentwide policies and procedures for
and administration of Government con-
exercising discretionary authority to
tracts.
declare void and rescind contracts in
relation to which [62 FR 232, Jan. 2, 1997]
(1) There has been a final conviction
for bribery, conflict of interest, disclo- 3.702 Definition.
sure or receipt of contractor bid or pro- Final conviction means a conviction,
posal information or source selection whether entered on a verdict or plea,
information in exchange for a thing of including a plea of nolo contendere, for
value or to give anyone a competitive which sentence has been imposed.
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3.703 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 3.801
shall be made in writing and sent by issues a final written decision on the
certified mail, return receipt re- proposed action.
quested. (e) Final agency decision. The final
(2) A thirty calendar day period after agency decision shall be based on the
receipt of the notice, for the contractor information available to the agency
to submit pertinent information before head or designee, including any perti-
any final decision is made. nent information submitted or, if a
(3) Upon request made within the pe- hearing was held, presented at the
riod for submission of pertinent infor- hearing. If the agency decision declares
mation, an opportunity shall be af- void and rescinds the contract, the
forded for a hearing at which witnesses final decision shall specify the
may be presented, and any witness the amounts due and property to be re-
agency presents may be confronted. turned to the agency, and reflect con-
However, no inquiry shall be made re- sideration of the fair value of any tan-
garding the validity of a conviction. gible benefits received and retained by
(4) If the agency head or designee de- the agency. Notice of the decision shall
cides to declare void and rescind the be sent promptly by certified mail, re-
contracts involved, that official shall turn receipt requested. Rescission of
issue a written decision which contracts under the authority of the
(i) States that determination; Act and demand for recovery of the
(ii) Reflects consideration of the fair amounts expended and property trans-
value of any tangible benefits received ferred therefor, is not a claim within
and retained by the agency; and the meaning of the Contract Disputes
(iii) States the amount due, and the Act of 1978 (CDA), 41 U.S.C. 601613, or
property to be returned, to the agency. part 33. Therefore, the procedures re-
(d) Notice of proposed action. The no- quired by the CDA and the FAR for the
tice of the proposed action, as a min- issuance of a final contracting officer
imum shall decision are not applicable to final
(1) Advise that consideration is being agency decisions under this subpart,
given to declaring void and rescinding and shall not be followed.
contracts awarded by the agency, and
recovering the amounts expended and [51 FR 27116, July 29, 1986, as amended at 62
property transferred therefor, under FR 232, Jan. 2, 1997]
the provisions of 18 U.S.C. 218;
(2) Specifically identify the contracts Subpart 3.8Limitations on the
affected by the action; Payment of Funds to Influence
(3) Specifically identify the offense or Federal Transactions
final conviction on which the action is
based;
SOURCE: 55 FR 3190, Jan. 30, 1990, unless
(4) State the amounts expended and otherwise noted.
property transferred under each of the
contracts involved, and the money and 3.800 Scope of subpart.
the property demanded to be returned;
(5) Identify any tangible benefits re- This subpart prescribes policies and
ceived and retained by the agency procedures implementing section 319 of
under the contract, and the value of the Department of the Interior and Re-
those benefits, as calculated by the lated Agencies Appropriations Act,
agency; Pub. L. 101121, which added a new sec-
(6) Advise that pertinent information tion 1352 to title 31 U.S.C., entitled
may be submitted within 30 calendar Limitation on use of appropriated
days after receipt of the notice, and funds to influence certain Federal con-
that, if requested within that time, a tracting and financial transactions
hearing shall be held at which wit- (the Act).
nesses may be presented and any wit-
ness the agency presents may be con- 3.801 Definitions.
fronted; and Agency, as used in this section,
(7) Advise that action shall be taken means an executive agency as defined
only after the agency head or designee in 2.101.
57
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3.801 48 CFR Ch. 1 (10103 Edition)
Covered Federal action, as used in this Person, as used in this section, means
section, means any of the following an individual, corporation, company,
Federal actions: association, authority, firm, partner-
(a) The awarding of any Federal con- ship, society, State, and local govern-
tract. ment, regardless of whether such enti-
(b) The making of any Federal grant. ty is operated for profit or not for prof-
(c) The making of any Federal loan. it. This term excludes an Indian tribe,
(d) The entering into of any coopera- tribal organization, or any other In-
tive agreement.
dian organization with respect to ex-
(e) The extension, continuation, re-
newal, amendment, or modification of penditures specifically permitted by
any Federal contract, grant, loan, or other Federal law.
cooperative agreement. Reasonable compensation, as used in
Indian tribe and tribal organization, as this section, means, with respect to a
used in this section, have the meaning regularly employed officer or employee
provided in section 4 of the Indian Self- of any person, compensation that is
Determination and Education Assist- consistent with the normal compensa-
ance Act (25 U.S.C. 450B) and include tion for such officer or employee for
Alaskan Natives. work that is not furnished to, not fund-
Influencing or attempting to influence, ed by, or not furnished in cooperation
as used in this section, means making, with the Federal Government.
with the intent to influence, any com- Reasonable payment, as used in this
munication to or appearance before an section, means, with respect to profes-
officer or employee of any agency, a sional and other technical services, a
Member of Congress, an officer or em-
payment in an amount that is con-
ployee of Congress, or an employee of a
sistent with the amount normally paid
Member of Congress in connection with
any covered Federal action. for such services in the private sector.
Local government, as used in this sec- Recipient, as used in this section, in-
tion, means a unit of government in a cludes the contractor and all sub-
State and, if chartered, established, or contractors. This term excludes an In-
otherwise recognized by a State for the dian tribe, tribal organization, or any
performance of a governmental duty, other Indian organization with respect
including a local public authority, a to expenditures specifically permitted
special district, an intrastate district, by other Federal law.
a council of governments, a sponsor Regularly employed, as used in this
group representative organization, and section, means, with respect to an offi-
any other instrumentality of a local cer or employee of a person requesting
government. or receiving a Federal contract, an offi-
Officer or employee of an agency, as cer or employee who is employed by
used in this section, includes the fol- such person for at least 130 working
lowing individuals who are employed
days within 1 year immediately pre-
by an agency:
ceding the date of the submission that
(a) An individual who is appointed to
a position in the Government under initiates agency consideration of such
title 5, United States Code, including a person for receipt of such contract. An
position under a temporary appoint- officer or employee who is employed by
ment; such person for less than 130 working
(b) A member of the uniformed serv- days within 1 year immediately pre-
ices, as defined in subsection 101(3), ceding the date of the submission that
title 37, United States Code; initiates agency consideration of such
(c) A special Government employee, person shall be considered to be regu-
as defined in section 202, title 18, larly employed as soon as he or she is
United States Code; and employed by such person for 130 work-
(d) An individual who is a member of ing days.
a Federal advisory committee, as de- State, as used in this section, means a
fined by the Federal Advisory Com- State of the United States, the District
mittee Act, title 5, United States Code, of Columbia, an outlying area of the
appendix 2.
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3.803 48 CFR Ch. 1 (10103 Edition)
60
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Federal Acquisition Regulation 3.901
61
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3.902 48 CFR Ch. 1 (10103 Edition)
Inspector General, the duties shall be tivity. The Inspector General shall con-
performed by an official designated by duct an investigation and provide a
the head of the executive agency. written report of findings to the head
[48 FR 42108, Sept. 19, 1983, as amended at 66
of the agency or designee.
FR 2127, Jan. 10, 2001] (c) Upon completion of the investiga-
tion, the head of the agency or des-
3.902 Applicability. ignee shall ensure that the Inspector
This subpart applies to all Govern- General provides the report of findings
ment contracts. to
(1) The complainant and any person
3.903 Policy. acting on the complainants behalf;
Government contractors shall not (2) The contractor alleged to have
discharge, demote or otherwise dis- committed the violation; and
criminate against an employee as a re- (3) The head of the contracting activ-
prisal for disclosing information to a ity.
Member of Congress, or an authorized (d) The complainant and contractor
official of an agency or of the Depart- shall be afforded the opportunity to
ment of Justice, relating to a substan- submit a written response to the report
tial violation of law related to a con- of findings within 30 days to the head
tract (including the competition for or of the agency or designee. Extensions
negotiation of a contract). of time to file a written response may
be granted by the head of the agency or
3.904 Procedures for filing complaints. designee.
(a) Any employee of a contractor who (e) At any time, the head of the agen-
believes that he or she has been dis- cy or designee may request additional
charged, demoted, or otherwise dis- investigative work be done on the com-
criminated against contrary to the pol- plaint.
icy in 3.903 may file a complaint with 3.906 Remedies.
the Inspector General of the agency
that awarded the contract. (a) If the head of the agency or des-
(b) The complaint shall be signed and ignee determines that a contractor has
shall contain subjected one of its employees to a re-
(1) The name of the contractor; prisal for providing information to a
(2) The contract number, if known; if Member of Congress, or an authorized
not, a description reasonably sufficient official of an agency or of the Depart-
to identify the contract(s) involved; ment of Justice, the head of the agency
(3) The substantial violation of law or designee may take one or more of
giving rise to the disclosure; the following actions:
(4) The nature of the disclosure giv- (1) Order the contractor to take af-
ing rise to the discriminatory act; and firmative action to abate the reprisal.
(5) The specific nature and date of (2) Order the contractor to reinstate
the reprisal. the person to the position that the per-
son held before the reprisal, together
3.905 Procedures for investigating with the compensation (including back
complaints. pay), employment benefits, and other
(a) Upon receipt of a complaint, the terms and conditions of employment
Inspector General shall conduct an ini- that would apply to the person in that
tial inquiry. If the Inspector General position if the reprisal had not been
determines that the complaint is frivo- taken.
lous or for other reasons does not merit (3) Order the contractor to pay the
further investigation, the Inspector complainant an amount equal to the
General shall advise the complainant aggregate amount of all costs and ex-
that no further action on the com- penses (including attorneys fees and
plaint will be taken. expert witnesses fees) that were rea-
(b) If the Inspector General deter- sonably incurred by the complainant
mines that the complaint merits fur- for, or in connection with, bringing the
ther investigation, the Inspector Gen- complaint regarding the reprisal.
eral shall notify the complainant, con- (b) Whenever a contractor fails to
tractor, and head of the contracting ac- comply with an order, the head of the
62
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Federal Acquisition Regulation Pt. 4
63
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4.000 48 CFR Ch. 1 (10103 Edition)
SOURCE: 48 FR 42113, Sept. 19, 1983, unless bination of individuals, partnerships,
otherwise noted. or corporations. The contract shall be
signed by each participant in the joint
4.000 Scope of part.
venture in the manner prescribed in
This part prescribes policies and pro- paragraphs (a) through (c) above for
cedures relating to the administrative each type of participant. When a cor-
aspects of contract execution, con- poration is participating, the con-
tractor-submitted paper documents, tracting officer shall verify that the
distribution, reporting, retention, and corporation is authorized to partici-
files. pate in the joint venture.
[60 FR 28493, May 31, 1995] (e) Agents. When an agent is to sign
the contract, other than as stated in
Subpart 4.1Contract Execution paragraphs (a) through (d) above, the
agents authorization to bind the prin-
4.101 Contracting officers signature. cipal must be established by evidence
satisfactory to the contracting officer.
Only contracting officers shall sign
contracts on behalf of the United [48 FR 42113, Sept. 19, 1983, as amended at 62
States. The contracting officers name FR 235, Jan. 2, 1997]
and official title shall be typed,
stamped, or printed on the contract. 4.103 Contract clause.
The contracting officer normally signs The contracting officer shall insert
the contract after it has been signed by the clause at 52.2041, Approval of Con-
the contractor. The contracting officer tract, in solicitations and contracts if
shall ensure that the signer(s) have au- required by agency procedures.
thority to bind the contractor (see spe-
cific requirements in 4.102 of this sub- [49 FR 26741, June 29, 1984]
part).
[60 FR 34736, July 3, 1995]
Subpart 4.2Contract Distribution
64
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Federal Acquisition Regulation 4.203
one copy of the contract to the cog- (b) If the TIN or type of organization
nizant administrative contracting offi- is derived from a source other than the
cer and mark the copy FOR COST AC- provision at 52.2043 or 52.2123(b), the
COUNTING STANDARDS ADMINIS- contracting officer shall annotate the
TRATION ONLY (see 30.601(b)); last page of the contract or order for-
(e) Provide one copy of each contract warded to the payment office to state
or modification that requires audit the contractors TIN and type of orga-
service to the appropriate field audit nization, unless this information is
office listed in the Directory of Fed- otherwise provided to the payment of-
eral Contract Audit Offices (copies of fice in accordance with agency proce-
this directory can be ordered from the dures.
U.S. Government Printing Office, Su- (c) If the contractor provides its TIN
perintendent of Documents, Wash- or type of organization to the con-
ington, DC 20402, referencing stock tracting officer after award, the con-
numbers 008007031899 and 008007 tracting officer shall forward the infor-
031902 for Volumes I and II, respec- mation to the payment office within 7
tively); and days of its receipt.
(f) Provide copies of contracts and (d) Federal Supply Schedule contracts.
modifications to those organizations Each contracting officer that places an
required to perform contract adminis- order under a Federal Supply Schedule
tration support functions (e.g., when contract (see Subpart 8.4) shall provide
manufacturing is performed at mul- the TIN and type of organization infor-
tiple sites, the contract administration mation to the payment office in ac-
office cognizant of each location). cordance with paragraph (b) of this sec-
tion.
[48 FR 42113, Sept. 19, 1983, as amended at 60
FR 34736, July 3, 1995] (e) Basic ordering agreements and in-
definite-delivery contracts (other than
4.202 Agency distribution require- Federal Supply Schedule contracts).
ments. (1) Each contracting officer that
Agencies shall limit additional dis- issues a basic ordering agreement or
tribution requirements to the min- indefinite-delivery contract (other
imum necessary for proper perform- than a Federal Supply Schedule con-
ance of essential functions. When con- tract) shall provide to contracting offi-
tracts are assigned for administration cers placing orders under the agree-
to a contract administration office lo- ment or contract (if the contractor is
cated in an agency different from that not required to provide this informa-
of the contracting office (see part 42), tion to a central contractor registra-
the two agencies shall agree on any tion database)
necessary distribution in addition to (i) A copy of the agreement or con-
that prescribed in 4.201 above. tract with a copy of the completed so-
licitation provision at 52.2043 or
4.203 Taxpayer identification informa- 52.2123(b) as the last page of the agree-
tion. ment or contract; or
(a) If the contractor has furnished a (ii) The contractors TIN and type of
Taxpayer Identification Number (TIN) organization information.
when completing the solicitation pro- (2) Each contracting officer that
vision at 52.2043, Taxpayer Identifica- places an order under a basic ordering
tion, or paragraph (b) of the solicita- agreement or indefinite-delivery con-
tion provision at 52.2123, Offeror Rep- tract (other than a Federal Supply
resentations and CertificationsCom- Schedule contract) shall provide the
mercial Items, the contracting officer TIN and type of organization informa-
shall, unless otherwise provided in tion to the payment office in accord-
agency procedures, attach a copy of the ance with paragraph (a) or (b) of this
completed solicitation provision as the section.
last page of the copy of the contract [63 FR 58588, Oct. 30, 1998, as amended at 68
sent to the payment office. FR 56672, Oct. 1, 2003]
65
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4.300 48 CFR Ch. 1 (10103 Edition)
Subpart 4.3Paper Documents Order 10909, January 17, 1961 (26 FR 508,
January 20, 1961).
4.300 Scope of subpart. (b) The National Industrial Security
Program Operating Manual (NISPOM)
This subpart provides policies and
incorporates the requirements of these
procedures on contractor-submitted
Executive Orders. The Secretary of De-
paper documents.
fense, in consultation with all affected
[60 FR 28493, May 31, 1995] agencies and with the concurrence of
the Secretary of Energy, the Chairman
4.301 Definition. of the Nuclear Regulatory Commission,
Printed or copied double-sided, as used and the Director of Central Intel-
in this subpart, means printing or re- ligence, is responsible for issuance and
producing a document so that informa- maintenance of this Manual. The fol-
tion is on both sides of a sheet of paper. lowing DOD publications implement
the program:
[65 FR 36017, June 6, 2000] (1) National Industrial Security Pro-
gram Operating Manual (NISPOM) (DOD
4.302 Policy. 5220.22M).
When electronic commerce methods (2) Industrial Security Regulation (ISR)
(see 4.502) are not being used, a con- (DOD 5220.22R).
tractor should submit paper documents (c) Procedures for the protection of
to the Government relating to an ac- information relating to foreign classi-
quisition printed or copied double-sided fied contracts awarded to U.S. indus-
on recycled paper whenever prac- try, and instructions for the protection
ticable. If the contractor cannot print of U.S. information relating to classi-
or copy double-sided, it should print or fied contracts awarded to foreign firms,
copy single-sided on recycled paper. are prescribed in Chapter 10 of the
NISPOM.
[65 FR 36017, June 6, 2000] (d) Part 27, Patents, Data, and Copy-
rights, contains policy and procedures
4.303 Contract clause. for safeguarding classified information
Insert the clause at 52.2044, Printed in patent applications and patents.
or Copied Double-Sided on Recycled [48 FR 42113, Sept. 19, 1983, as amended at 61
Paper, in solicitations and contracts FR 31617, June 20, 1996]
that exceed the simplified acquisition
threshold. 4.403 Responsibilities of contracting
officers.
[65 FR 36017, June 6, 2000]
(a) Presolicitation phase. Contracting
officers shall review all proposed solici-
Subpart 4.4Safeguarding Classi- tations to determine whether access to
fied Information Within Indus- classified information may be required
try by offerors, or by a contractor during
contract performance.
4.401 [Reserved] (1) If access to classified information
of another agency may be required, the
4.402 General.
contracting officer shall
(a) Executive Order 12829, January 6, (i) Determine if the agency is covered
1993 (58 FR 3479, January 8, 1993), enti- by the NISP; and
tled National Industrial Security Pro- (ii) Follow that agencys procedures
gram (NISP), establishes a program to for determining the security clearances
safeguard Federal Government classi- of firms to be solicited.
fied information that is released to (2) If the classified information re-
contractors, licensees, and grantees of quired is from the contracting officers
the United States Government. Execu- agency, the contracting officer shall
tive Order 12829 amends Executive follow agency procedures.
Order 10865, February 20, 1960 (25 FR (b) Solicitation phase. Contracting of-
1583, February 25, 1960), entitled Safe- ficers shall
guarding Classified Information Within (1) Ensure that the classified acquisi-
Industry, as amended by Executive tion is conducted as required by the
66
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Federal Acquisition Regulation 4.502
67
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4.600 48 CFR Ch. 1 (10103 Edition)
68
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Federal Acquisition Regulation 4.603
on Federal contracting. The data pro- the contracting officer must contact
vide (1) a basis for recurring and spe- the offeror and obtain the DUNS num-
cial reports to the President, the Con- ber.
gress, the General Accounting Office, (e) Unique Procurement Instrument
Federal executive agencies, and the Identifier (PIID). (1) The FPDS requires
general public; that each reporting agency assign a
(2) A means of measuring and assess- unique identifier for every contract,
ing the impact of Federal contracting purchase order, BOA, Basic Agreement,
on the Nations economy and the ex- and BPA reported to FPDS. Such iden-
tent to which small, veteran-owned tifiers shall comply with the contract
small, service-disabled veteran-owned numbering guidelines established by
small, HUBZone small, small disadvan- the Joint Financial Management Im-
taged, and women-owned small busi- provement Project. The PIID shall con-
ness concerns are sharing in Federal sist of alpha characters in the first po-
contracts; and sitions to indicate the agency, followed
(3) Data for other policy and manage- by alphanumeric characters identi-
ment control purposes. fying bureau, offices, or other adminis-
(b) The FPDS Reporting Manual pro- trative subdivisions. The last portion
vides a complete list of reporting and of the PIID shall be numbered sequen-
nonreporting agencies and organiza- tially. The PIID may include other ele-
tions. This manual (available at no ments, as appropriate, such as fiscal
charge from the General Services Ad- year. Delivery orders, task orders, and
ministration, Federal Procurement call numbers must be unique in com-
Data Center, 7th & D Streets SW., bination with the basic reference con-
room 5652, Washington, DC 20407, tele- tract vehicle identifier. When the basic
phone (202) 4011529, FAX (202) 4011546) reference contract is available for
provides the necessary instruction to multi-agency use (GWAC, Federal Sup-
the data collection point in each agen- ply Schedule contract, etc.), an order-
cy as to what data are required and ing agency shall use the same agency
how often to provide the data. identification prefix for its delivery or-
(c) Data collection points in each ders, task orders, and call numbers as
agency report data on SF 279, Federal it uses for its contractual instruments.
Procurement Data System (FPDS) In- (2) Agencies are required to have in
dividual Contract Action Report, and place, no later than October 1, 2003, a
SF 281, Federal Procurement Data Sys- process that will ensure that each PIID
tem (FPDS) Summary Contract Action reported to FPDS is unique, Govern-
Report ($25,000 or Less), or computer- mentwide, and will remain so for at
generated equivalent. Although the SF least 20 years from the date of contract
279 and SF 281 are not mandatory for award. To eliminate the possibility of
use by the agencies, they do provide duplication between agencies, agencies
the mandatory format for submitting must submit their proposed identifier
data to the FPDS. to the Federal Procurement Data Cen-
(d) The contracting officer must re- ter, which will maintain a registry of
port a Contractor Identification Num- the identifiers on the FPDC website
ber for each successful offeror. A Data and validate their use in all trans-
Universal Numbering System (DUNS) actions.
number, which is a nine-digit number
[48 FR 42113, Sept. 19. 1983. Redesignated at
assigned by Dun and Bradstreet Infor-
50 FR 52429, Dec. 23, 1985, and amended at 54
mation Services to an establishment, is FR 29280, July 11, 1989; 53 FR 43388, Oct. 26,
the Contractor Identification Number 1988; 55 FR 52788, Dec. 21, 1990; 56 FR 41744,
for Federal contractors. The DUNS Aug. 22, 1991; 57 FR 60572, Dec. 21, 1992; 60 FR
number reported must identify the suc- 48259, Sept. 18, 1995; 61 FR 67412, Dec. 20, 1996;
cessful offerors name and address ex- 62 FR 40236, July 25, 1997; 65 FR 60544, Oct. 11,
actly as stated in the offer and result- 2000; 68 FR 56680, Oct. 1, 2003]
ant contract. The contracting officer
must ask the offeror to provide its 4.603 Solicitation provisions.
DUNS number by using the provision (a) Insert the provision at 52.2046,
prescribed at 4.603(a). If the successful Data Universal Numbering System
offeror does not provide its number, (DUNS) Number, in solicitations that
69
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4.700 48 CFR Ch. 1 (10103 Edition)
(1) Are expected to result in a re- Chapter 137, Title 10, U.S.C., and the
quirement for the generation of an SF Federal Property and Administrative
279, Federal Procurement Data System Services Act of 1949, as amended, 40
(FPDS)Individual Contract Action U.S.C. 471 et seq.
Report (see 4.602(c)), or a similar agen- [48 FR 42113, Sept. 19, 1983, as amended at 50
cy form; and FR 1727, Jan. 11, 1985; 50 FR 52429, Dec. 23,
(2) Do not contain the clause at 1985; 60 FR 42650, Aug. 16, 1995; 60 FR 48211,
52.2047, Central Contractor Registra- Sept. 18, 1995; 62 FR 258, Jan. 2, 1997]
tion.
(b) Insert the provision at 52.2045, 4.703 Policy.
Women-Owned Business (Other Than (a) Except as stated in 4.703(b), con-
Small Business), in solicitations that tractors shall make available records,
(1) Are not set aside for small busi- which includes books, documents, ac-
ness concerns; counting procedures and practices, and
(2) Exceed the simplified acquisition other data, regardless of type and re-
threshold; and gardless of whether such items are in
(3) Are for contracts that will be per- written form, in the form of computer
formed in the United States or its out- data, or in any other form, and other
lying areas. supporting evidence to satisfy contract
[61 FR 67412, Dec. 20, 1996, as amended at 63 negotiation, administration, and audit
FR 9050, Feb. 23, 1998; 64 FR 10532, Mar. 4, requirements of the contracting agen-
1999; 68 FR 28080, May 22, 2003; 68 FR 56672, cies and the Comptroller General for (1)
Oct. 1, 2003] 3 years after final payment or, for cer-
tain records, (2) the period specified in
Subpart 4.7Contractor Records 4.705 through 4.7053, whichever of
Retention these periods expires first.
(b) Contractors shall make available
4.700 Scope of subpart. the foregoing records and supporting
This subpart provides policies and evidence for a longer period of time
procedures for retention of records by than is required in 4.703(a) if
contractors to meet the records review (1) A retention period longer than
requirements of the Government. In that cited in 4.703(a) is specified in any
this subpart, the terms contracts contract clause; or
and contractors include sub- (2) The contractor, for its own pur-
contracts and subcontractors. poses, retains the foregoing records and
supporting evidence for a longer period.
4.701 Purpose. Under this circumstance, the retention
The purpose of this subpart is to gen- period shall be the period of the con-
erally describe records retention re- tractors retention or 3 years after
quirements and to allow reductions in final payment, whichever period ex-
the retention period for specific classes pires first.
of records under prescribed cir- (3) The contractor does not meet the
cumstances. original due date for submission of
final indirect cost rate proposals speci-
4.702 Applicability. fied in subparagraph (d)(2) of the clause
(a) This subpart applies to records at 52.2167, Allowable Cost and Pay-
generated under contracts that contain ment, and subparagraph (c)(2) of the
one of the following clauses: clause at 52.21613, Allowable Cost and
(1) Audit and RecordsSealed Bid- PaymentFacilities. Under these cir-
ding (52.21426). cumstances, the retention periods in
(2) Audit and RecordsNegotiation 4.705 shall be automatically extended
(52.2152). one day for each day the proposal is
(b) This subpart is not mandatory on not submitted after the original due
Department of Energy contracts for date.
which the Comptroller General allows (c) Nothing in this section shall be
alternative records retention periods. construed to preclude a contractor
Apart from this exception, this subpart from duplicating or storing original
applies to record retention periods records in electronic form unless they
under contracts that are subject to contain significant information not
70
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Federal Acquisition Regulation 4.7051
shown on the record copy. Original entry is made. The contractor should
records need not be maintained or pro- cut off the records in annual blocks
duced in an audit if the contractor or and retain them for block disposal
subcontractor provides photographic or under the prescribed retention periods.
electronic images of the original (b) When records generated during a
records and meets the following re- prior contract are relied upon by a con-
quirements: tractor for cost or pricing data in nego-
(1) The contractor or subcontractor tiating a succeeding contract, the pre-
has established procedures to ensure scribed periods shall run from the date
that the imaging process preserves ac- of the succeeding contract.
curate images of the original records, (c) If two or more of the record cat-
including signatures and other written egories described in 4.705 are interfiled
or graphic images, and that the imag- and screening for disposal is not prac-
ing process is reliable and secure so as tical, the contractor shall retain the
to maintain the integrity of the entire record series for the longest pe-
records. riod prescribed for any category of
(2) The contractor or subcontractor records.
maintains an effective indexing system
to permit timely and convenient access 4.705 Specific retention periods.
to the imaged records. The contractor shall retain the
(3) The contractor or subcontractor records identified in 4.7051 through
retains the original records for a min- 4.7053 for the periods designated, pro-
imum of one year after imaging to per- vided retention is required under 4.702.
mit periodic validation of the imaging Records are identified in this subpart
systems. in terms of their purpose or use and
(d) If the information described in not by specific name or form number.
paragraph (a) of this section is main- Although the descriptive identifica-
tained on a computer, contractors shall tions may not conform to normal con-
retain the computer data on a reliable tractor usage or filing practices, these
medium for the time periods pre- identifications apply to all contractor
scribed. Contractors may transfer com- records that come within the descrip-
puter data in machine readable form tion.
from one reliable computer medium to
another. Contractors computer data 4.7051 Financial and cost accounting
retention and transfer procedures shall records.
maintain the integrity, reliability, and (a) Accounts receivable invoices, ad-
security of the original computer data. justments to the accounts, invoice reg-
Contractors shall also retain an audit isters, carrier freight bills, shipping or-
trail describing the data transfer. For ders, and other documents which detail
the record retention time periods pre- the material or services billed on the
scribed, contractors shall not destroy, related invoices: Retain 4 years.
discard, delete, or write over such com- (b) Material, work order, or service
puter data. order files, consisting of purchase req-
[48 FR 42113, Sept. 19, 1983, as amended at 51 uisitions or purchase orders for mate-
FR 2649, Jan. 17, 1986; 53 FR 43388, Oct. 26, rial or services, or orders for transfer
1988; 54 FR 48982, Nov. 28, 1989; 59 FR 67015, of material or supplies: Retain 4 years.
Dec. 28, 1994; 60 FR 42650, Aug. 16, 1995; 62 FR (c) Cash advance recapitulations, pre-
64915, Dec. 9, 1997] pared as posting entries to accounts re-
ceivable ledgers for amounts of expense
4.704 Calculation of retention periods. vouchers prepared for employees trav-
(a) The retention periods in 4.705 are el and related expenses: Retain 4 years.
calculated from the end of the contrac- (d) Paid, canceled, and voided checks,
tors fiscal year in which an entry is other than those issued for the pay-
made charging or allocating a cost to a ment of salary and wages: Retain 4
Government contract or subcontract. If years.
a specific record contains a series of (e) Accounts payable records to sup-
entries, the retention period is cal- port disbursements of funds for mate-
culated from the end of the contrac- rials, equipment, supplies, and services,
tors fiscal year in which the final containing originals or copies of the
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4.7052 48 CFR Ch. 1 (10103 Edition)
following and related documents: re- randa of negotiations showing the prin-
mittance advices and statements, ven- cipal elements of subcontract price ne-
dors invoices, invoice audits and dis- gotiations (see 52.2442): Retain 4 years.
tribution slips, receiving and inspec- (g) Production records of quality con-
tion reports or comparable certifi- trol, reliability, and inspection: Retain
cations of receipt and inspection of ma- 4 years.
terial or services, and debit and credit
memoranda: Retain 4 years. [48 FR 42113, Sept. 19, 1983, as amended at 63
FR 34060, June 22, 1998]
(f) Labor cost distribution cards or
equivalent documents: Retain 2 years. 4.706 [Reserved]
(g) Petty cash records showing de-
scription of expenditures, to whom
paid, name of person authorizing pay- Subpart 4.8Government
ment, and date, including copies of Contract Files
vouchers and other supporting docu-
ments: Retain 2 years. 4.800 Scope of subpart.
This subpart prescribes requirements
4.7052 Pay administration records. for establishing, maintaining, and dis-
(a) Payroll sheets, registers, or their posing of contract files.
equivalent, of salaries and wages paid
to individual employees for each pay- [65 FR 36022, June 6, 2000]
roll period; change slips; and tax with-
4.801 General.
holding statements: Retain 4 years.
(b) Clock cards or other time and at- (a) The head of each office per-
tendance cards: Retain 2 years. forming contracting, contract adminis-
(c) Paid checks, receipts for wages tration, or paying functions shall es-
paid in cash, or other evidence of pay- tablish files containing the records of
ments for services rendered by employ- all contractual actions.
ees: Retain 2 years. (b) The documentation in the files
[48 FR 42113, Sept. 19, 1983, as amended at 65 (see 4.803) shall be sufficient to con-
FR 36022, June 6, 2000; 67 FR 70517, Nov. 22, stitute a complete history of the trans-
2002] action for the purpose of
(1) Providing a complete background
4.7053 Acquisition and supply as a basis for informed decisions at
records. each step in the acquisition process;
(a) Store requisitions for materials, (2) Supporting actions taken;
supplies, equipment, and services: Re- (3) Providing information for reviews
tain 2 years. and investigations; and
(b) Work orders for maintenance and (4) Furnishing essential facts in the
other services: Retain 4 years. event of litigation or congressional in-
(c) Equipment records, consisting of quiries.
equipment usage and status reports (c) The files to be established in-
and equipment repair orders: Retain 4 clude
years. (1) A file for cancelled solicitations;
(d) Expendable property records, re-
(2) A file for each contract; and
flecting accountability for the receipt
and use of material in the performance (3) A file such as a contractor general
of a contract: Retain 4 years. file, containing documents relating
(e) Receiving and inspection report for exampleto (i) no specific contract,
records, consisting of reports reflecting (ii) more than one contract, or (iii) the
receipt and inspection of supplies, contractor in a general way (e.g., con-
equipment, and materials: Retain 4 tractors management systems, past
years. performance, or capabilities).
(f) Purchase order files for supplies,
4.802 Contract files.
equipment, material, or services used
in the performance of a contract; sup- (a) A contract file should generally
porting documentation and backup consist of
files including, but not limited to, in- (1) The contracting office contract
voices, and memoranda; e.g., memo- file, that documents the basis for the
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Federal Acquisition Regulation 4.803
acquisition and the award, the assign- 4.803 Contents of contract files.
ment of contract administration (in-
The following are examples of the
cluding payment responsibilities), and records normally contained, if applica-
any subsequent actions taken by the ble, in contract files:
contracting office; (a) Contracting office contract file. (1)
(2) The contract administration of- Purchase request, acquisition planning
fice contract file, that documents ac- information, and other presolicitation
tions reflecting the basis for and the documents.
performance of contract administra- (2) Justifications and approvals, de-
tion responsibilities; and terminations and findings, and associ-
(3) The paying office contract file, ated documents.
that documents actions prerequisite to, (3) Evidence of availability of funds.
substantiating, and reflecting contract (4) Synopsis of proposed acquisition
payments. as required by part 5 or a reference to
(b) Normally, each file should be kept the synopsis.
separately; however, if appropriate, (5) The list of sources solicited, and a
any or all of the files may be combined; list of any firms or persons whose re-
e.g., if all functions or any combina- quests for copies of the solicitation
tion of the functions are performed by were denied, together with the reasons
the same office. for denial.
(c) Files must be maintained at orga- (6) Set-aside decision.
nizational levels that ensure (7) Government estimate of contract
(1) Effective documentation of con- price.
tract actions; (8) A copy of the solicitation and all
(2) Ready accessibility to principal amendments thereto.
users; (9) Security requirements and evi-
(3) Minimal establishment of dupli- dence of required clearances.
cate and working files; (10) A copy of each offer or quotation,
(4) The safeguarding of classified doc- the related abstract, and records of de-
uments; and terminations concerning late offers or
quotations. Unsuccessful offers or
(5) Conformance with agency regula-
quotations may be maintained sepa-
tions for file location and mainte-
rately, if cross-referenced to the con-
nance.
tract file. The only portions of the un-
(d) If the contract files or file seg- successful offer or quotation that need
ments are decentralized (e.g., by type be retained are
or function) to various organizational (i) Completed solicitation sections A,
elements or to other outside offices, re- B, and K;
sponsibility for their maintenance (ii) Technical and management pro-
must be assigned. A central control posals;
and, if needed, a locator system should (iii) Cost/price proposals;
be established to ensure the ability to (iv) Any other pages of the solicita-
locate promptly any contract files. tion that the offeror or quoter has al-
(e) Contents of contract files that are tered or annotated.
contractor bid or proposal information (11) Contractors certifications and
or source selection information as de- representations.
fined in 2.101 must be protected from (12) Preaward survey reports or ref-
disclosure to unauthorized persons (see erence to previous preaward survey re-
3.1044). ports relied upon.
(f) Agencies may retain contract files (13) Source selection documentation.
in any medium (paper, electronic, (14) Contracting officers determina-
microfilm, etc.) or any combination of tion of the contractors responsibility.
media, as long as the requirements of (15) Small Business Administration
this subpart are satisfied. Certificate of Competency.
[48 FR 42113, Sept. 19, 1983, as amended at 54 (16) Records of contractors compli-
FR 20496, May 11, 1989; 55 FR 36794, Sept. 6, ance with labor policies including
1990; 59 FR 67016, Dec. 28, 1994; 62 FR 232, Jan. equal employment opportunity poli-
2, 1997; 67 FR 13063, Mar. 20, 2002] cies.
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4.803 48 CFR Ch. 1 (10103 Edition)
(17) Cost or pricing data and Certifi- (41) A current chronological list iden-
cates of Current Cost or Pricing Data tifying the awarding and successor con-
or a required justification for waiver, tracting officers, with inclusive dates
or information other than cost or pric- of responsibility.
ing data. (b) Contract administration office con-
(18) Packaging and transportation tract file. (1) Copy of the contract and
data. all modifications, together with offi-
(19) Cost or price analysis. cial record copies of supporting docu-
(20) Audit reports or reasons for ments executed by the contract admin-
waiver. istration office.
(21) Record of negotiation.
(2) Any document modifying the nor-
(22) Justification for type of con-
tract. mal assignment of contract adminis-
(23) Authority for deviations from tration functions and responsibility.
this regulation, statutory require- (3) Security requirements.
ments, or other restrictions. (4) Cost or pricing data, Certificates
(24) Required approvals of award and of Current Cost or Pricing Data, or in-
evidence of legal review. formation other than cost or pricing
(25) Notice of award. data; cost or price analysis; and other
(26) The original of (i) the signed con- documentation supporting contractual
tract or award, (ii) all contract modi- actions executed by the contract ad-
fications, and (iii) documents sup- ministration office.
porting modifications executed by the (5) Preaward survey information.
contracting office. (6) Purchasing system information.
(27) Synopsis of award or reference (7) Consent to subcontract or pur-
thereto. chase.
(28) Notice to unsuccessful quoters or
(8) Performance and payment bonds
offerors and record of any debriefing.
and surety information.
(29) Acquisition management reports
(see subpart 4.6). (9) Postaward conference records.
(30) Bid, performance, payment, or (10) Orders issued under the contract.
other bond documents, or a reference (11) Notice to proceed and stop or-
thereto, and notices to sureties. ders.
(31) Report of postaward conference. (12) Insurance policies or certificates
(32) Notice to proceed, stop orders, of insurance or references to them.
and any overtime premium approvals (13) Documents supporting advance
granted at the time of award. or progress payments.
(33) Documents requesting and au- (14) Progressing, expediting, and pro-
thorizing modification in the normal duction surveillance records.
assignment of contract administration (15) Quality assurance records.
functions and responsibility. (16) Property administration records.
(34) Approvals or disapprovals of re-
(17) Documentation regarding termi-
quests for waivers or deviations from
nation actions for which the contract
contract requirements.
(35) Rejected engineering change pro- administration office is responsible.
posals. (18) Cross reference to other perti-
(36) Royalty, invention, and copy- nent documents that are filed else-
right reports (including invention dis- where.
closures) or reference thereto. (19) Any additional documents on
(37) Contract completion documents. which action was taken or that reflect
(38) Documentation regarding termi- actions by the contract administration
nation actions for which the con- office pertinent to the contract.
tracting office is responsible. (20) Contract completion documents.
(39) Cross-references to pertinent (c) Paying office contract file. (1) Copy
documents that are filed elsewhere. of the contract and any modifications.
(40) Any additional documents on (2) Bills, invoices, vouchers, and sup-
which action was taken or that reflect porting documents.
actions by the contracting office perti- (3) Record of payments or receipts.
nent to the contract.
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Federal Acquisition Regulation 4.8044
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4.8045 48 CFR Ch. 1 (10103 Edition)
4.8045 Procedures for closing out (9) Invoice number and date, if the
contract files. final approved invoice has been for-
(a) The contract administration of- warded to a disbursing office of another
fice is responsible for initiating (auto- agency or activity and the status of
mated or manual) administrative the payment is unknown.
closeout of the contract after receiving (10) A statement that all required
evidence of its physical completion. At contract administration actions have
the outset of this process, the contract been fully and satisfactorily accom-
administration office must review the plished.
contract funds status and notify the (11) Name and signature of the con-
contracting office of any excess funds tracting officer.
(12) Date.
the contract administration office
(c) When the statement is completed,
might deobligate. When complete, the
the contracting officer must ensure
administrative closeout procedures
that
must ensure that
(1) The signed original is placed in
(1) Disposition of classified material
the contracting office contract file (or
is completed;
forwarded to the contracting office for
(2) Final patent report is cleared; placement in the files if the contract
(3) Final royalty report is cleared; administration office is different from
(4) There is no outstanding value en- the contracting office); and
gineering change proposal; (2) A signed copy is placed in the ap-
(5) Plant clearance report is received; propriate contract administration file
(6) Property clearance is received; if administration is performed by a
(7) All interim or disallowed costs are contract administration office.
settled;
(8) Price revision is completed; [48 FR 42113, Sept. 19, 1983, as amended at 54
FR 34752, Aug. 21, 1989; 64 FR 72445, Dec. 27,
(9) Subcontracts are settled by the 1999]
prime contractor;
(10) Prior year indirect cost rates are 4.805 Storage, handling, and disposal
settled; of contract files.
(11) Termination docket is com- (a) Agencies must prescribe proce-
pleted; dures for the handling, storing, and dis-
(12) Contract audit is completed; posing of contract files. These proce-
(13) Contractors closing statement is dures must take into account docu-
completed; ments held in all types of media, in-
(14) Contractors final invoice has cluding microfilm and various elec-
been submitted; and tronic media. Agencies may change the
(15) Contract funds review is com- original medium to facilitate storage
pleted and excess funds deobligated. as long as the requirements of Part 4,
(b) When the actions in paragraph (a) law, and other regulations are satis-
above have been verified, the con- fied. The process used to create and
tracting officer administering the con- store records must record and repro-
tract must ensure that a contract com- duce the original document, including
pletion statement, containing the fol- signatures and other written and
lowing information, is prepared: graphic images completely, accurately,
(1) Contract administration office and clearly. Data transfer, storage, and
name and address (if different from the retrieval procedures must protect the
contracting office). original data from alteration. Unless
(2) Contracting office name and ad- law or other regulations require signed
dress. originals to be kept, they may be de-
(3) Contract number. stroyed after the responsible agency of-
(4) Last modification number. ficial verifies that record copies on al-
(5) Last call or order number. ternate media and copies reproduced
(6) Contractor name and address. from the record copy are accurate,
(7) Dollar amount of excess funds, if complete, and clear representations of
any. the originals. Agency procedures for
(8) Voucher number and date, if final contract file disposal must include pro-
payment has been made. visions that the documents specified in
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Federal Acquisition Regulation 4.805
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4.900 48 CFR Ch. 1 (10103 Edition)
SOURCE: 63 FR 58589, Oct. 30, 1998, unless (2) The reporting requirement also
otherwise noted. applies to certain contracts and modi-
fications thereto in excess of $25,000 en-
4.900 Scope of subpart.
tered into on or after January 1, 1989.
This subpart provides policies and (c) The information to report is
procedures for obtaining (1) Name, address, and TIN of the
(a) Taxpayer Identification Number contractor;
(TIN) information that may be used for (2) Name and TIN of the common par-
debt collection purposes; and ent (if any);
(b) Contract information and pay-
(3) Date of the contract action;
ment information for submittal to the
(4) Amount obligated on the contract
payment office for Internal Revenue
action; and
Service (IRS) reporting purposes.
(5) Estimated contract completion
4.901 Definition. date.
Common parent, as used in this sub- (d) Transmit the information to the
part, means that corporate entity that IRS through the Federal Procurement
owns or controls an affiliated group of Data System (see Subpart 4.6 and im-
corporations that files its Federal in- plementing instructions).
come tax returns on a consolidated
4.904 Reporting payment information
basis, and of which the offeror is a to the IRS.
member.
26 U.S.C. 6041 and 6041A, as imple-
[60 FR 28493, May 31, 1995, as amended at 66 mented in 26 CFR, in part, require
FR 2127, Jan. 10, 2001]
payors, including Government agen-
4.902 General. cies, to report to the IRS, on Form
1099, payments made to certain con-
(a) Debt collection. 31 U.S.C. 7701(c) re- tractors. 26 U.S.C. 6109 requires a con-
quires each contractor doing business tractor to provide its TIN if a Form
with a Government agency to furnish 1099 is required. The payment office is
its TIN to that agency. 31 U.S.C. 3325(d) responsible for submitting reports to
requires the Government to include, the IRS.
with each certified voucher prepared by
the Government payment office and 4.905 Solicitation provision.
submitted to a disbursing official, the
TIN of the contractor receiving pay- The contracting officer shall insert
ment under the voucher. The TIN may the provision at 52.2043, Taxpayer
be used by the Government to collect Identification, in solicitations that
and report on any delinquent amounts (a) Do not include the clause at
arising out of the contractors relation- 52.2047, Central Contractor Registra-
ship with the Government. tion; and
(b) Information reporting to the IRS. (b) Are not conducted under the pro-
The TIN is also required for Govern- cedures of part 12.
ment reporting of certain contract in- [68 FR 56672, Oct. 1, 2003]
formation (see 4.903) and payment in-
formation (see 4.904) to the IRS. Subpart 4.10Administrative
4.903 Reporting contract information Matters
to the IRS.
(a) 26 U.S.C. 6050M, as implemented SOURCE: 62 FR 51230, Sept. 30, 1997, unless
in 26 CFR, requires heads of Federal ex- otherwise noted.
ecutive agencies to report certain in-
4.1001 Policy.
formation to the IRS.
(b)(1) The required information ap- Contracts may identify the items or
plies to contract modifications services to be acquired as separately
(i) Increasing the amount of a con- identified line items. Contract line
tract awarded before January 1, 1989, items should provide unit prices or
by $50,000 or more; and lump sum prices for separately identi-
(ii) Entered into on or after April 1, fiable contract deliverables, and associ-
1990. ated delivery schedules or performance
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Federal Acquisition Regulation 4.1102
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4.1103 48 CFR Ch. 1 (10103 Edition)
paragraph of the EFT clause of the (ii) In sufficient time to permit CCR
contract. registration by December 31, 2003.
(2) The contractor shall not change (b) Need not verify registration be-
the name or address for electronic fore placing an order or call if the con-
funds transfer payments (EFT) or man- tract or agreement includes the clause
ual payments, as appropriate, in the at 52.2047, or 52.2124(t), or a similar
CCR record to reflect an assignee for agency clause.
the purpose of assignment of claims (c) If the contracting officer, when
(see subpart 32.8, Assignment of awarding a contract or agreement, de-
Claims). termines that a prospective contractor
(3) Assignees shall be separately reg- is not registered in the CCR database
istered in the CCR database. Informa- and an exception to the registration re-
tion provided to the contractors CCR quirements for the award does not
record that indicates payments, includ-
apply (see 4.1102), the contracting offi-
ing those made by EFT, to an ultimate
cer shall
recipient other than that contractor
will be considered to be incorrect infor- (1) If the needs of the requiring activ-
mation within the meaning of the ity allow for a delay, make award after
Suspension of payment paragraph of the apparently successful offeror has
the EFT clause of the contract. registered in the CCR database. The
contracting officer shall advise the of-
4.1103 Procedures. feror of the number of days it will be
(a) Unless the acquisition is exempt allowed to become registered. If the of-
under 4.1102, the contracting officer feror does not become registered by the
(1) Shall verify that the prospective required date, the contracting officer
contractor is registered in the CCR shall award to the next otherwise suc-
database (see paragraph (b) of this sec- cessful registered offeror following the
tion) before awarding a contract or same procedures (i.e., if the next appar-
agreement; ently successful offeror is not reg-
(2) Should use the DUNS number or, istered, the contracting officer shall
if applicable, the DUNS+4 number, to advise the offeror of the number of
verify registration days it will be allowed to become reg-
(i) Via the Internet at http:// istered, etc.); or
www.ccr.gov; (2) If the needs of the requiring activ-
(ii) By calling toll-free: 18882272423, ity do not allow for a delay, proceed to
commercial: (269) 9615757, or Defense award to the next otherwise successful
Switched Network (DSN) (used at cer- registered offeror, provided that writ-
tain Department of Defense locations): ten approval is obtained at one level
9325757; or above the contracting officer.
(iii) As otherwise provided by agency (d) Agencies shall protect against im-
procedures; and proper disclosure of contractor CCR in-
(3) Shall modify a contract or agree- formation.
ment that does not already include the (e) The contracting officer shall, on
requirement to be registered in the contractual documents transmitted to
CCR database and maintain registra- the payment office, provide the DUNS
tion until final payment, and whose pe- number, or, if applicable, the DUNS+4,
riod of performance extends beyond De- in accordance with agency procedures.
cember 31, 2003
(i) To incorporate, as appropriate, 4.1104 Solicitation provision and con-
the clause at 52.2047, Central Con- tract clauses.
tractor Registration, and its Alternate
Except as provided in 4.1102(a), use
I, or, for a contract for commercial
the clause at 52.2047, Central Con-
items, an addendum to 52.2124, Con-
tract Terms and ConditionsCommer- tractor Registration, in solicitations
cial Items, that requires the contractor and contracts. If modifying a contract
to be registered in the CCR database by or an agreement to require registra-
December 31, 2003, and maintain reg- tion, use the clause with its Alternate
istration until final payment; and I.
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SUBCHAPTER BACQUISITION PLANNING
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5.102 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 5.201
FACNET are forwarded to the GPE to (2) May require payment of a fee, not
satisfy the requirements of paragraph exceeding the actual cost of duplica-
(a)(1) of this section. tion, for a copy of the solicitation doc-
(4) The contracting officer need not ument.
make a solicitation available through (c) In addition to the methods of dis-
the GPE when seminating proposed contract informa-
(i) Disclosure would compromise the tion in 5.101(a) and (b), provide, upon
national security (e.g., would result in request to small business concerns, as
disclosure of classified information) or required by 15 U.S.C. 637(b)
create other security risks. The fact (1) A copy of the solicitation and
that access to classified matter may be specifications. In the case of solicita-
necessary to submit a proposal or per- tions disseminated by electronic data
form the contract does not, in itself, interchange, solicitations may be fur-
justify use of this exception; nished directly to the electronic ad-
(ii) The nature of the file (e.g., size, dress of the small business concern;
format) does not make it cost-effective (2) The name and telephone number
or practicable for contracting officers of an employee of the contracting of-
to provide access through the GPE; fice who will answer questions on the
(iii) The agencys senior procurement solicitation; and
executive makes a written determina- (3) Adequate citations to each appli-
tion that access through the GPE is cable major Federal law or agency rule
not in the Governments interest; or with which small business concerns
(iv) The contracting office lacks the must comply in performing the con-
capability to access the GPE and the tract.
synopsis is issued prior to October 1, (d) When electronic commerce (see
2001. subpart 4.5) is used in the solicitation
(b) When the contracting officer does process, availability of the solicitation
not make a solicitation available may be limited to the electronic me-
through the GPE pursuant to para- dium.
graph (a)(4) of this section, the con- (e) Provide copies of a solicitation
tracting officer issued under other than full and open
(1) Should employ other electronic competition to firms requesting copies
means (e.g., CDROM or electronic that were not initially solicited, but
mail) whenever practicable and cost-ef- only after advising the requester of the
fective. When solicitations are pro- determination to limit the solicitation
vided electronically on physical media to a specified firm or firms as author-
(e.g., disks) or in paper form, the con- ized under part 6.
tracting officer must (f) This section 5.102 applies to classi-
(i) Maintain a reasonable number of fied contracts to the extent consistent
copies of solicitations, including speci- with agency security requirements (see
fications and other pertinent informa- 5.202(a)(1)).
tion determined necessary by the con- [66 FR 27409, May 16, 2001]
tracting officer (upon request, poten-
tial sources not initially solicited
should be mailed or provided copies of Subpart 5.2Synopses of
solicitations, if available); Proposed Contract Actions
(ii) Provide copies on a first-come-
first-served basis, for pickup at the 5.201 General.
contracting office, to publishers, trade (a) As required by the Small Business
associations, information services, and Act (15 U.S.C. 637(e)) and the Office of
other members of the public having a Federal Procurement Policy Act (41
legitimate interest (for construction, U.S.C. 416), agencies must make no-
see 36.211); and tices of proposed contract actions
(iii) Retain a copy of the solicitation available as specified in paragraph (b)
and other documents for review by and of this section.
duplication for those requesting copies (b)(1) For acquisitions of supplies and
after the initial number of copies is ex- services, other than those covered by
hausted; and the exceptions in 5.202 and the special
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5.202 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 5.203
contract that was previously synop- (see 5.201). All publicizing and response
sized in sufficient detail to comply times are calculated based on the date
with the requirements of 5.207 with re- of publication. The publication date is
spect to the current proposed contract the date the notice appears on the
action; GPE. The notice must be published at
(12) The proposed contract action is least 15 days before issuance of a solici-
by a Defense agency and the proposed tation except that, for acquisitions of
contract action will be made and per- commercial items, the contracting offi-
formed outside the United States and
cer may
its outlying areas, and only local
sources will be solicited. This excep- (1) Establish a shorter period for
tion does not apply to proposed con- issuance of the solicitation; or
tract actions subject to the Trade (2) Use the combined synopsis and so-
Agreements Act (see subpart 25.4). This licitation procedure (see 12.603).
exception also does not apply to North (b) The contracting officer must es-
American Free Trade Agreement pro- tablish a solicitation response time
posed contract actions, which will be that will afford potential offerors a
synopsized in accordance with agency reasonable opportunity to respond to
regulations; each proposed contract action, (includ-
(13) The proposed contract action ing actions via FACNET or for which
(i) Is for an amount not expected to the notice of proposed contract action
exceed the simplified acquisition and solicitation information is acces-
threshold; sible through the GPE), in an amount
(ii) Will be made through a means estimated to be greater than $25,000,
that provides access to the notice of
but not greater than the simplified ac-
proposed contract action through the
quisition threshold; or each contract
GPE; and
(iii) Permits the public to respond to action for the acquisition of commer-
the solicitation electronically; or cial items in an amount estimated to
(14) The proposed contract action is be greater than $25,000. The con-
made under conditions described in tracting officer should consider the cir-
6.3023 with respect to the services of cumstances of the individual acquisi-
an expert to support the Federal Gov- tion, such as the complexity,
ernment in any current or anticipated commerciality, availability, and ur-
litigation or dispute. gency, when establishing the solicita-
(b) The head of the agency deter- tion response time.
mines in writing after consultation (c) Except for the acquisition of com-
with the Administrator for Federal mercial items (see 5.203(b)), agencies
Procurement Policy and the Adminis- shall allow at least a 30-day response
trator of the Small Business Adminis- time for receipt of bids or proposals
tration, that advance notice is not ap- from the date of issuance of a solicita-
propriate or reasonable. tion, if the proposed contract action is
[50 FR 1728, Jan. 11, 1985, as amended at 50 expected to exceed the simplified ac-
FR 52430, Dec. 23, 1985; 51 FR 27117, July 29, quisition threshold.
1986; 53 FR 27463, July 20, 1988; 54 FR 46004, (d) Agencies shall allow at least a 30
Oct. 31, 1989; 56 FR 15148, Apr. 15, 1991; 56 FR
41744, Aug. 22, 1991; 59 FR 545, Jan. 5, 1994; 60 day response time from the date of
FR 34746, July 3, 1995; 60 FR 42653, Aug. 16, publication of a proper notice of intent
1995; 60 FR 49725, Sept. 26, 1995; 61 FR 39192, to contract for architect-engineer serv-
July 26, 1996; 63 FR 58592, 58593, Oct. 30, 1998; ices or before issuance of an order
66 FR 2127, Jan. 10, 2001; 66 FR 27410, May 16, under a basic ordering agreement or
2001; 68 FR 28080, May 22, 2003]
similar arrangement if the proposed
5.203 Publicizing and response time. contract action is expected to exceed
the simplified acquisition threshold.
Whenever agencies are required to
(e) Agencies must allow at least a 45-
publicize notice of proposed contract
day response time for receipt of bids or
actions under 5.201, they must proceed
as follows: proposals from the date of publication
(a) An agency must transmit a notice of the notice required in 5.201 for pro-
of proposed contract action to the GPE posed contract actions categorized as
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5.204 48 CFR Ch. 1 (10103 Edition)
research and development if the pro- tices of their interest in potential R&D
posed contract action is expected to ex- programs whenever market research
ceed the simplified acquisition thresh- does not produce a sufficient number of
old. concerns to obtain adequate competi-
(f) Nothing in this subpart prohibits tion. Advance notices must not be used
officers or employees of agencies from where security considerations prohibit
responding to requests for information. such publication. Advance notices will
(g) Contracting officers may, unless enable potential sources to learn of
they have evidence to the contrary, R&D programs and provide these
presume the notice was published one sources with an opportunity to submit
day after transmission to the GPE. information which will permit evalua-
This presumption does not negate the tion of their capabilities. Contracting
mandatory waiting or response times officers must consider potential
specified in paragraphs (a) through (d) sources which respond to advance no-
of this section. Upon learning that a tices for a subsequent solicitation. Ad-
particular notice has not in fact been vance notices must be entitled Re-
published within the presumed time- search and Development Sources
frames, contracting officers should Sought, cite the appropriate Num-
consider whether the date for receipt of bered Note, and include the name and
offers can be extended or whether cir- telephone number of the contracting
cumstances have become sufficiently officer or other contracting activity of-
compelling to justify proceeding with ficial from whom technical details of
the proposed contract action under the the project can be obtained. This will
authority of 5.202(a)(2). enable sources to submit information
(h) In addition to other requirements for evaluation of their R&D capabili-
set forth in this section, for acquisi- ties. Contracting officers must synop-
tions subject to NAFTA or the Trade size (see 5.201) all subsequent solicita-
Agreements Act (see subpart 25.4), the tions for R&D contracts, including
period of time between publication of those resulting from a previously syn-
the synopsis notice and receipt of of- opsized advance notice, unless one of
fers must be no less than 40 days. How- the exceptions in 5.202 applies.
ever, if the acquisition falls within a (b) Federally Funded Research and De-
general category identified in an an- velopment Centers. Before establishing a
nual forecast, the availability of which Federally Funded Research and Devel-
is published, the contracting officer opment Center (FFRDC) (see Part 35)
may reduce this time period to as few or before changing its basic purpose
as 10 days. and mission, the sponsor must trans-
[50 FR 52430, Dec. 23, 1985, as amended at 51 mit at least three notices over a 90-day
FR 31425, Sept. 3, 1986; 60 FR 34747, July 3, period to the GPE and the FEDERAL
1995; 60 FR 48236, Sept. 18, 1995; 61 FR 39192, REGISTER, indicating the agencys in-
July 26, 1996; 62 FR 263, Jan. 2, 1997; 62 FR tention to sponsor an FFRDC or
10710, Mar. 10, 1997; 63 FR 58592, 58593, Oct. 30, change the basic purpose and mission
1998; 66 FR 27410, May 16, 2001; 68 FR 56678,
of an FFRDC. The notice must indicate
Oct. 1, 2003]
the scope and nature of the effort to be
5.204 Presolicitation notices. performed and request comments. No-
tice is not required where the action is
Contracting officers must provide ac-
required by law.
cess to presolicitation notices through
(c) Special notices. Contracting offi-
the GPE (see 15.201 and 36.2132). The
cers may transmit to the GPE special
contracting officer must synopsize a
notices of procurement matters such as
proposed contract action before issuing
business fairs, long-range procurement
any resulting solicitation (see 5.201 and
estimates, prebid or preproposal con-
5.203).
ferences, meetings, and the availability
[66 FR 27411, May 16, 2001] of draft solicitations or draft specifica-
tions for review.
5.205 Special situations. (d) Architect-engineering services. Con-
(a) Research and development (R&D) tracting officers must publish notices
advance notices. Contracting officers of intent to contract for architect-engi-
may transmit to the GPE advance no- neering services as follows:
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Federal Acquisition Regulation 5.207
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5.207 48 CFR Ch. 1 (10103 Edition)
(12) Contract Award and Solicitation range and limitations, type of con-
Number. tract, estimated starting and comple-
(13) Contract Award Dollar Amount. tion dates, and any significant evalua-
(14) Contract Line Item Number. tion factors.
(15) Contract Award Date. (13) Numbered notes (see paragraph
(16) Contractor. (e) of this section), including instruc-
(17) Description. tions for set-asides for small busi-
(18) Place of Contract Performance. nesses.
(19) Set-aside Status. (14) In the case of noncompetitive
(b) Transmittal. Transmissions to the contract actions (including those that
GPE must be in accordance with the do not exceed the simplified acquisi-
interface description available via the tion threshold), identify the intended
Internet at http://www.fedbizopps.gov. source (see paragraph (e) of this sec-
(c) General format for Description. tion) and insert a statement of the rea-
Prepare a clear and concise description son justifying the lack of competition.
of the supplies or services that is not (15) Insert a statement that all re-
unnecessarily restrictive of competi- sponsible sources may submit a bid,
tion and will allow a prospective offer- proposal, or quotation which shall be
or to make an informed business judg- considered by the agency.
ment as to whether a copy of the solici-
(16) If solicitations synopsized
tation should be requested including
through the GPE will not be made
the following, as appropriate:
available through the GPE, provide in-
(1) National Stock Number (NSN) if
formation on how to obtain the solici-
assigned.
tation.
(2) Specification and whether an of-
(17) If the solicitation will be made
feror, its product, or service must meet
available to interested parties through
a qualification requirement in order to
electronic data interchange, provide
be eligible for award, and identification
any information necessary to obtain
of the office from which additional in-
and respond to the solicitation elec-
formation about the qualification re-
tronically.
quirement may be obtained (see sub-
part 9.2). (18) In the case of a very small busi-
(3) Manufacturer, including part ness set-aside, identify the Designated
number, drawing number, etc. Region (see Subpart 19.9).
(4) Size, dimensions, or other form, (19) If the technical data required to
fit or functional description. respond to the solicitation will not be
(5) Predominant material of manu- furnished as part of such solicitation,
facture. identify the source in the Government,
(6) Quantity, including any options if any, from which the technical data
for additional quantities. may be obtained.
(7) Unit of issue. (d) Set-asides. When the proposed ac-
(8) Destination information. quisition provides for a total, partial,
(9) Delivery schedule. or very small business set-aside or a
(10) Duration of the contract period. HUBZone small business set-aside, the
(11) For a proposed contract action in appropriate Numbered Note will be
an amount estimated to be greater cited.
than $25,000 but not greater than the (e) Numbered notes. Numbered Notes
simplified acquisition threshold, are footnotes to be used by contracting
enter officers to eliminate the unnecessary
(i) A description of the procedures to duplication of information that ap-
be used in awarding the contract (e.g., pears in various announcements. An
request for oral or written quotation or explanation of the numbered notes ap-
solicitation); and pears at http://www.fedbizopps.gov.
(ii) The anticipated award date. (f) Codes to be used in Synopses to iden-
(12) For Architect-Engineer projects tify services or supplies. Contracting offi-
and other projects for which the supply cers must use one of the classification
or service codes are insufficient, pro- codes identified at http://
vide brief details with respect to: loca- www.fedbizopps.gov/ to identify services
tion, scope of services required, cost or supplies in synopses.
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Federal Acquisition Regulation 5.303
(g) Cancellation of synopsis. Con- tract action was provided through the
tracting officers should not publish no- GPE; and
tices of solicitation cancellations (or (iii) Permitted the public to respond
indefinite suspensions) of proposed con- to the solicitation electronically; or
tract actions in the GPE. Cancellations (8) The award is for the services of an
of solicitations must be made in ac- expert to support the Federal Govern-
cordance with 14.209 and 14.4041. ment in any current or anticipated liti-
[68 FR 56678, Oct. 1, 2003] gation or dispute pursuant to the ex-
ception to full and open competition
authorized at 6.3023.
Subpart 5.3Synopses of Contract (c) With respect to acquisitions sub-
Awards ject to the Trade Agreements Act, con-
5.301 General. tracting officers must submit synopses
in sufficient time to permit their publi-
(a) Except for contract actions de- cation in the GPE not later than 60
scribed in paragraph (b) of this section days after award.
and as provided in 5.003, contracting of-
ficers must synopsize through the GPE [52 FR 19802, May 27, 1987, as amended at 53
awards exceeding $25,000 that are FR 27463, July 20, 1988; 60 FR 34747, July 3,
1995; 60 FR 42653, Aug. 16, 1995; 60 FR 49725,
(1) Subject to the Trade Agreements Sept. 26, 1995; 63 FR 58593, Oct. 30, 1998; 64 FR
Act (see Subpart 25.4); or 72418, Dec. 27, 1999; 66 FR 27412, May 16, 2001;
(2) Likely to result in the award of 68 FR 56679, Oct. 1, 2003]
any subcontracts. However, the dollar
threshold is not a prohibition against 5.302 Preparation and transmittal of
publicizing an award of a smaller synopses of awards.
amount when publicizing would be ad- Contracting officers shall transmit
vantageous to industry or to the Gov- synopses of contract awards in the
ernment. same manner as prescribed in 5.207.
(b) A notice is not required under
paragraph (a) of this section if [55 FR 52790, Dec. 21, 1990]
(1) The notice would disclose the ex-
ecutive agencys needs and the disclo- 5.303 Announcement of contract
awards.
sure of such needs would compromise
the national security; (a) Public announcement. Contracting
(2) The award results from accept- officers shall make information avail-
ance of an unsolicited research pro- able on awards over $3 million (unless
posal that demonstrates a unique and another dollar amount is specified in
innovative research concept and publi- agency acquisition regulations) in suf-
cation of any notice would disclose the ficient time for the agency concerned
originality of thought or innovative- to announce it by 5:00 p.m. Washington,
ness of the proposed research or would DC time on the day of award. Contracts
disclose proprietary information asso- excluded from this reporting require-
ciated with the proposal; ment include (1) those placed with the
(3) The award results from a proposal Small Business Administration under
submitted under the Small Business In- Section 8(a) of the Small Business Act,
novation Development Act of 1982 (Pub. (2) those placed with foreign firms
L. 97219); when the place of delivery or perform-
(4) The contract action is an order ance is outside the United States and
placed under Subpart 16.5; its outlying areas, and (3) those for
(5) The award is made for perishable which synopsis was exempted under
subsistence supplies; 5.202(a)(1). Agencies shall not release
(6) The award is for utility services, information on awards before the pub-
other than telecommunications serv- lic release time of 5:00 p.m. Wash-
ices, and only one source is available; ington, DC time.
(7) The contract action (b) Local announcement. Agencies
(i) Is for an amount not greater than may also release information on con-
the simplified acquisition threshold; tract awards to the local press or other
(ii) Was made through a means where media. When local announcements are
access to the notice of proposed con- made for contract awards in excess of
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5.401 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 5.502
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5.503 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 6.001
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6.002 48 CFR Ch. 1 (10103 Edition)
(d) Orders placed under requirements quirements efficiently (10 U.S.C. 2304
contracts or definite-quantity con- and 41 U.S.C. 253).
tracts;
[50 FR 1729, Jan. 11, 1985, and 50 FR 52429,
(e) Orders placed under indefinite- Dec. 23, 1985, as amended at 62 FR 51230, Sept.
quantity contracts that were entered 30, 1997]
into pursuant to this part when
(1) The contract was awarded under 6.102 Use of competitive procedures.
subpart 6.1 or 6.2 and all responsible
The competitive procedures available
sources were realistically permitted to
for use in fulfilling the requirement for
compete for the requirements con-
full and open competition are as fol-
tained in the order; or
lows:
(2) The contract was awarded under
subpart 6.3 and the required justifica- (a) Sealed bids. (See 6.401(a).)
tion and approval adequately covers (b) Competitive proposals. (See
the requirements contained in the 6.401(b).) If sealed bids are not appro-
order; or priated under (a) above, contracting of-
(f) Orders placed against task order ficers shall request competitive pro-
and delivery order contracts entered posals or use the other competitive
into pursuant to subpart 16.5. procedures under (c) or (d) below.
(c) Combination of competitive proce-
[50 FR 52431, Dec. 23, 1985, as amended at 55 dures. If sealed bids are not appro-
FR 52790, Dec. 21, 1990; 60 FR 34747, July 3,
1995; 60 FR 49725, Sept. 26, 1995; 62 FR 263,
priate, contracting officers may use
Jan. 2, 1997; 62 FR 64917, Dec. 9, 1997] any combination of competitive proce-
dures (e.g., two-step sealed bidding).
6.002 Limitations. (d) Other competitive procedures. (1)
No agency shall contract for supplies Selection of sources for architect-engi-
or services from another agency for the neer contracts in accordance with the
purpose of avoiding the requirements provisions of Pub. L. 92582 (40 U.S.C.
of this part. 541 et seq.) is a competitive procedure
(see subpart 36.6 for procedures).
6.003 [Reserved] (2) Competitive selection of basic and
applied research and that part of devel-
Subpart 6.1Full and Open opment not related to the development
Competition of a specific system or hardware pro-
curement is a competitive procedure if
6.100 Scope of subpart. award results from
This subpart prescribes the policy (i) A broad agency announcement
and procedures that are to be used to that is general in nature identifying
promote and provide for full and open areas of research interest, including
competition. criteria for selecting proposals, and so-
liciting the participation of all offerors
6.101 Policy. capable of satisfying the Governments
needs; and
(a) 10 U.S.C. 2304 and 41 U.S.C. 253 re-
quire, with certain limited exceptions (ii) A peer of scientific review.
(see subparts 6.2 and 6.3), that con- (3) Use of multiple award schedules
tracting officers shall promote and pro- issued under the procedures established
vide for full and open competition in by the Administrator of General Serv-
soliciting offers and awarding Govern- ices consistent with the requirement of
ment contracts. 41 U.S.C. 259(b)(3)(A) for the multiple
(b) Contracting officers shall provide award schedule program of the General
for full and open competition through Services Administration is a competi-
use of the competitive procedure(s) tive procedure.
contained in this subpart that are best [50 FR 1729, Jan. 11, 1985; 50 FR 52429, Dec. 23,
suited to the circumstances of the con- 1985, as amended at 53 FR 27463, July 20, 1988;
tract action and consistent with the 59 FR 53716, Oct. 25, 1994]
need to fulfill the Governments re-
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Federal Acquisition Regulation 6.205
Subpart 6.2Full and Open Com- necessary data to support their rec-
petition After Exclusion of ommendation to exclude a particular
source.
Sources
(3) When the authority in (a)(1) above
6.200 Scope of subpart. is cited, the findings shall include a de-
scription of the estimated reduction in
This subpart prescribes policies and
overall costs and how the estimate was
procedures for providing for full and
derived.
open competition after excluding one
or more sources. [50 FR 1729, Jan. 11, 1985, as amended at 60
FR 42653, Aug. 16, 1995]
6.201 Policy.
Acquisitions made under this subpart 6.203 Set-asides for small business
concerns.
require use of the competitive proce-
dures prescribed in 6.102. (a) To fulfill the statutory require-
ments relating to small business con-
[64 FR 51831, Sept. 24, 1999]
cerns, contracting officers may set
6.202 Establishing or maintaining al- aside solicitations to allow only such
ternative sources. business concerns to compete. This in-
cludes contract actions conducted
(a) Agencies may exclude a par-
under the Small Business Innovation
ticular source from a contract action
Research Program established under
in order to establish or maintain an al-
Pub. L. 97219.
ternative source or sources for the sup-
plies or services being acquired if the (b) No separate justification or deter-
agency head determines that to do so mination and findings is required under
would this part to set aside a contract action
(1) Increase or maintain competition for small business concerns.
and likely result in reduced overall (c) Subpart 19.5 prescribes policies
costs for the acquisition, or for any an- and procedures that shall be followed
ticipated acquisition; with respect to set-asides.
(2) Be in the interest of national de- [60 FR 48259, Sept. 18, 1995]
fense in having a facility (or a pro-
ducer, manufacturer, or other supplier) 6.204 Section 8(a) competition.
available for furnishing the supplies or (a) To fulfill statutory requirements
services in case of a national emer- relating to section 8(a) of the Small
gency or industrial mobilization; Business Act, as amended by Pub. L.
(3) Be in the interest of national de- 100656, contracting officers may limit
fense in establishing or maintaining an competition to eligible 8(a) contractors
essential engineering, research, or de- (see subpart 19.8).
velopment capability to be provided by (b) No separate justification or deter-
an educational or other nonprofit insti- mination and findings is required under
tution or a federally funded research this part to limit competition to eligi-
and development center; ble 8(a) contractors.
(4) Ensure the continuous avail-
ability of a reliable source of supplies [54 FR 46005, Oct. 31, 1989]
or services;
(5) Satisfy projected needs based on a 6.205 Set-asides for HUBZone small
history of high demand; or business concerns.
(6) Satisfy a critical need for med- (a) To fulfill the statutory require-
ical, safety, or emergency supplies. ments relating to the HUBZone Act of
(b)(1) Every proposed contract action 1997 (15 U.S.C. 631 note), contracting of-
under the authority of paragraph (a) ficers in participating agencies (see
above shall be supported by a deter- 19.1302) may set aside solicitations to
mination and findings (D&F) (see sub- allow only qualified HUBZone small
part 1.7) signed by the head of the business concerns to compete (see
agency or designee. This D&F shall not 19.1305).
be made on a class basis. (b) No separate justification or deter-
(2) Technical and requirements per- mination and findings is required under
sonnel are responsible for providing all this part to set aside a contract action
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6.300 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 6.3022
in the case of follow-on contracts for (c) Application for brand name descrip-
the continued provision of highly spe- tions. An acquisition that uses a brand
cialized services when it is likely that name description or other purchase de-
award to any other source would result scription to specify a particular brand
in (A) substantial duplication of cost to name, product, or feature of a product,
the Government that is not expected to peculiar to one manufacturer does not
be recovered through competition, or provide for full and open competition
(B) unacceptable delays in fulfilling regardless of the number of sources so-
the agencys requirements. (See 10 licited. It shall be justified and ap-
U.S.C. 2304(d)(1)(B)). proved in accordance with FAR 6.303
(b) Application. This authority shall and 6.304. The justification should indi-
be used, if appropriate, in preference to cate that the use of such descriptions
the authority in 6.3027; it shall not be in the acquisition is essential to the
used when any of the other cir- Governments requirements, thereby
cumstances is applicable. Use of this precluding consideration of a product
authority may be appropriate in situa- manufactured by another company.
tions such as the following (these ex- (Brand-name or equal descriptions, and
amples are not intended to be all-inclu- other purchase descriptions that per-
sive and do not consitute authority in mit prospective contractors to offer
and of themselves): products other than those specifically
(1) When there is a reasonable basis referenced by brand name, provide for
to conclude that the agencys min- full and open competition and do not
imum needs can only be satisfied by (i) require justifications and approvals to
unique supplies or services available support their use.)
from only one source or only one sup- (d) Limitations. (1) Contracts awarded
plier with unique capabilities; or, (ii) using this authority shall be supported
for DoD, NASA, and the Coast Guard, by the written justifications and ap-
unique supplies or services available provals described in 6.303 and 6.304.
from only one or a limited number of (2) For contracts awarded using this
sources or from only one or a limited authority, the notices required by 5.201
number of suppliers with unique capa- shall have been published and any bids
bilities. and proposals must have been consid-
(2) The existence of limited rights in ered. (See 15.402(g).)
data, patent rights, copyrights, or se- [50 FR 52431, Dec. 23, 1985, as amended at 52
cret processes; the control of basic raw FR 21886, June 9, 1987; 53 FR 27463, July 20,
material; or similar circumstances, 1988; 56 FR 29127, June 25, 1991; 59 FR 67018,
make the supplies and services avail- Dec. 28, 1994; 66 FR 2128, Jan. 10, 2001]
able from only one source (however,
the mere existence of such rights or 6.3022 Unusual and compelling ur-
circumstances does not in and of itself gency.
justify the use of these authorities) (a) Authority. (1) Citations: 10 U.S.C.
(see part 27). 2304(c)(2) or 41 U.S.C. 253(c)(2).
(3) When acquiring utility services (2) When the agencys need for the
(see 41.101), circumstances may dictate supplies or services is of such an un-
that only one supplier can furnish the usual and compelling urgency that the
service (see 41.202); or when the con- Government would be seriously injured
templated contract is for construction unless the agency is permitted to limit
of a part of a utility system and the the number of sources from which it
utility company itself is the only solicits bids or proposals, full and open
source available to work on the sys- competition need not be provided for.
tem. (b) Application. This authority applies
(4) When the agency head has deter- in those situations where (1) an un-
mined in accordance with the agencys usual and compelling urgency pre-
standardization program that only cludes full and open competition, and
specified makes and models of tech- (2) delay in award of a contract would
nical equipment and parts will satisfy result in serious injury, financial or
the agencys needs for additional units other, to the Government.
or replacement items, and only one (c) Limitations. (1) Contracts awarded
source is available. using this authority shall be supported
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6.3023 48 CFR Ch. 1 (10103 Edition)
by the written justifications and ap- full and open competition as appro-
provals described in 6.303 and 6.304. priate under this part);
These justifications may be made and (iv) Limit competition for current
approved after contract award when acquisition of selected supplies or serv-
preparation and approval prior to ices approved for production planning
award would unreasonably delay the under the Department of Defense In-
acquisition. dustrial Preparedness Program to
(2) This statutory authority requires planned producers with whom indus-
that agencies shall request offers from trial preparedness agreements for those
as many potential sources as is prac- items exist, or limit award to offerors
ticable under the circumstances. who agree to enter into industrial pre-
paredness agreements;
[50 FR 52431, Dec. 23, 1985]
(v) Create or maintain the required
6.3023 Industrial mobilization; engi- domestic capability for production of
neering, developmental, or research critical supplies by limiting competi-
capability; or expert services. tion to items manufactured in
(A) The United States or its outlying
(a) Authority. (1) Citations: 10 U.S.C. areas; or
2304(c)(3) or 41 U.S.C. 253(c)(3). (B) The United States, its outlying
(2) Full and open competition need areas, or Canada.
not to be provided for when it is nec- (vi) Continue in production, contrac-
essary to award the contract to a par- tors that are manufacturing critical
ticular source or sources in order items, where there would otherwise be
(i) To maintain a facility, producer, a break in production; or
manufacturer, or other supplier avail- (vii) Divide current production re-
able for furnishing supplies or services quirements among two or more con-
in case of a national emergency or to tractors to provide for an adequate in-
achieve industrial mobilization, dustrial mobilization base.
(ii) To establish or maintain an es- (2) Use of the authority in paragraph
sential engineering, research, or devel- (a)(2)(ii) above may be appropriate
opment capability to be provided by an when it is necessary to
educational or other nonprofit institu- (i) Establish or maintain an essential
tion or a federally funded research and capability for theoretical analyses, ex-
development center, or ploratory studies, or experiments in
(iii) To acquire the services of an ex- any field of science or technology;
pert or neutral person for any current (ii) Establish or maintain an essen-
or anticipated litigation or dispute. tial capability for engineering or devel-
(b) Application. (1) Use of the author- opmental work calling for the practical
ity in paragraph (a)(2)(i) above may be application of investigative findings
appropriate when it is necessary to and theories of a scientific or technical
(i) Keep vital facilities or suppliers in nature; or
business or make them available in the (iii) Contract for supplies or services
event of a national emergency; as are necessary incident to paragraphs
(ii) Train a selected supplier in the (b)(2)(i) or (ii) above.
furnishing of critical supplies or serv- (3) Use of the authority in paragraph
ices, prevent the loss of a suppliers (a)(2)(iii) of this section may be appro-
ability and employees skills, or main- priate when it is necessary to acquire
tain active engineering, research, or the services of either
development work; (i) An expert to use, in any litigation
(iii) Maintain properly balanced or dispute (including any reasonably
sources of supply for meeting the re- foreseeable litigation or dispute) in-
quirements of acquisition programs in volving the Government in any trial,
the interest of industrial mobilization hearing, or proceeding before any
(when the quantity required is substan- court, administrative tribunal, or
tially larger than the quantity that agency, whether or not the expert is
must be awarded in order to meet the expected to testify. Examples of such
objectives of this authority, that por- services include, but are not limited to:
tion not required to meet such objec- (A) Assisting the Government in the
tives will be acquired by providing for analysis, presentation, or defense of
98
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99
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6.3026 48 CFR Ch. 1 (10103 Edition)
(A) When the work provided for in matter will be necessary to submit a
the contract is a continuation of the proposal or to perform the contract.
work performed by the specified entity (c) Limitations. (1) Contracts awarded
under a preceding contract; or using this authority shall be supported
(B) To any contract requiring the Na- by the written justifications and ap-
tional Academy of Sciences to inves- provals described in 6.303 and 6.304.
tigate, examine, or experiment upon (2) See 5.202(a)(1) for synopsis require-
any subject of science or art of signifi- ments.
cance to an executive agency and to re- (3) This statutory authority requires
port on those matters to the Congress that agencies shall request offers from
or any agency of the Federal Govern- as many potential sources as is prac-
ment. ticable under the circumstances.
(2) Contracts awarded using this au- [50 FR 52432, Dec. 23, 1985]
thority shall be supported by the writ-
ten justifications and approvals de- 6.3027 Public interest.
scribed in 6.303 and 6.304, except for (a) Authority. (1) Citations: 10 U.S.C.
(i) Contracts awarded under (a)(2)(ii), 2304(c)(7) or 41 U.S.C. 253(c)(7).
(b)(2), or (b)(4) of this subsection; or (2) Full and open competition need
(ii) Contracts awarded under (a)(2)(i) not be provided for when the agency
of this subsection when the statute ex- head determines that it is not in the
pressly requires that the procurement public interest in the particular acqui-
be made from a specified source. (Jus- sition concerned.
tification and approval requirements (b) Application. This authority may
apply when the statute authorizes, but be used when none of the other au-
does not require, that the procurement thorities in 6.302 apply.
be made from a specified source.) (c) Limitations. (1) A written deter-
(3) The authority in (a)(2)(ii) of this mination to use this authority shall be
subsection may be used only for pur- made in accordance with subpart 1.7,
chases of brand-name commercial by (i) the Secretary of Defense, the
items for resale through commissaries Secretary of the Army, the Secretary
or other similar facilities. Ordinarily, of the Navy, the Secretary of the Air
these purchases will involve articles Force, the Secretary of Transportation
desired or preferred by customers of for the Coast Guard, or the Adminis-
the selling activities (but see 6.301(d)). trator of the National Aeronautics and
[50 FR 52432, Dec. 23, 1985, as amended at 51 Space Administration; or (ii) the head
FR 36971, Oct. 16, 1986; 54 FR 46005, Oct. 31, of any other executive agency. This au-
1989; 60 FR 42654, Aug. 16, 1995; 61 FR 39200, thority may not be delegated.
July 26, 1996; 63 FR 70267, Dec. 18, 1998; 67 FR (2) The Congress shall be notified in
13068, Mar. 20, 2002] writing of such determination not less
than 30 days before award of the con-
6.3026 National security. tract.
(a) Authority. (1) Citations: 10 U.S.C. (3) If required by the head of the
2304(c)(6) or 41 U.S.C. 253(c)(6). agency, the contracting officer shall
(2) Full and open competition need prepare a justification to support the
not be provided for when the disclosure determination under paragraph (c)(1)
of the agencys needs would com- above.
promise the national security unless (4) This Determination and Finding
the agency is permitted to limit the (D & F) shall not be made on a class
number of sources from which it solic- basis.
its bids or proposals. [50 FR 52432, Dec. 23, 1985]
(b) Application. This authority may
be used for any acquisition when dis- 6.303 Justifications.
closure of the Governments needs
would compromise the national secu- 6.3031 Requirements.
rity (e.g., would violate security re- (a) A contracting officer shall not
quirements); it shall not be used mere- commence negotiations for a sole
ly because the acquisition is classified, source contract, commence negotia-
or merely because access to classified tions for a contract resulting from an
100
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6.304 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 6.502
(a) Sealed bids. (See part 14 for proce- essary to carry out the advocates du-
dures.) Contracting officers shall so- ties and responsibilities.
licit sealed bids if
[50 FR 1729, Jan. 11, 1985, and 50 FR 52429,
(1) Time permits the solicitation, Dec. 23, 1985, as amended at 60 FR 48259, Sept.
submission, and evaluation of sealed 18, 1995]
bids;
(2) The award will be made on the 6.502 Duties and responsibilities.
basis of price and other price-related
factors; (a) Agency and procuring activity
(3) It is not necessary to conduct dis- competition advocates are responsible
cussions with the responding offerors for promoting the acquisition of com-
about their bids; and mercial items, promoting full and open
(4) There is reasonable expectation of competition, challenging requirements
receiving more than one sealed bid. that are not stated in terms of func-
(b) Competitive proposals. (See part 15 tions to be performed, performance re-
for procedures.) quired or essential physical character-
(1) Contracting officers may request istics, and challenging barriers to the
competitive proposals if sealed bids are acquisition of commercial items and
not appropriate under paragraph (a) full and open competition such as un-
above. necessarily restrictive statements of
(2) Because of differences in areas work, unnecessarily detailed specifica-
such as law, regulations, and business tions, and unnecessarily burdensome
practices, it is generally necessary to contract clauses.
conduct discussions with offerors rel- (b) Agency competition advocates
ative to proposed contracts to be made shall
and performed outside the United (1) Review the contracting operations
States and its outlying areas. Competi- of the agency and identify and report
tive proposals will therefore be used for to the agency senior procurement exec-
these contracts unless discussions are utive
not required and the use of sealed bids (i) Opportunities and actions taken
is otherwise appropriate. to acquire commercial items to meet
[50 FR 1729, Jan. 11, 1985; 50 FR 4221, Jan. 30, the needs of the agency;
1985; 50 FR 52429, Dec. 23, 1985; 54 FR 5054, (ii) Opportunities and actions taken
Jan. 31, 1989; 64 FR 51833, Sept. 24, 1999; 68 FR to achieve full and open competition in
28080, May 22, 2003] the contracting operations of the agen-
cy;
Subpart 6.5Competition (iii) Actions taken to challenge re-
Advocates quirements that are not stated in
terms of functions to be performed,
6.501 Requirement. performance required or essential phys-
As required by section 20 of the Office ical characteristics;
of Federal Procurement Policy Act, the (iv) Any condition or action that has
head of each executive agency shall the effect of unnecessarily restricting
designate a competition advocate for the acquisition of commercial items or
the agency and for each procuring ac- competition in the contract actions of
tivity of the agency. The competition the agency;
advocates shall (2) Prepare and submit an annual re-
(a) Be in positions other than that of port to the agency senior procurement
the agency senior procurement execu- executive, in accordance with agency
tive; procedures, describing
(b) Not be assigned any duties or re- (i) Such advocates activities under
sponsibilities that are inconsistent this subpart;
with 6.502 below; and (ii) New initiatives required to in-
(c) Be provided with staff or assist- crease the acquisition of commercial
ance (e.g., specialists in engineering, items;
technical operations, contract adminis- (iii) New initiatives required to in-
tration, financial management, supply crease competition;
management, and utilization of small (iv) New initiatives to ensure require-
business concerns), as may be nec- ments are stated in terms of functions
103
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Pt. 7 48 CFR Ch. 1 (10103 Edition)
104
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Federal Acquisition Regulation 7.103
105
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7.104 48 CFR Ch. 1 (10103 Edition)
(k) Waiving requirements of detail into that would result in the perform-
and formality, as necessary, in plan- ance of an inherently governmental
ning for acquisitions having com- function by a contractor and that all
pressed delivery or performance sched- contracts or orders are adequately
ules because of the urgency of the need. managed so as to ensure effective offi-
(l) Assuring that the contracting offi- cial control over contract or order per-
cer, prior to contracting, reviews: formance.
(1) The acquisition history of the sup- (r) Ensuring that knowledge gained
plies and services; and from prior acquisitions is used to fur-
(2) A description of the supplies, in- ther refine requirements and acquisi-
cluding, when necessary for adequate tion strategies. For services, greater
description, a picture, drawing, dia- use of performance-based contracting
gram, or other graphic representation. methods and, therefore, fixed-price
(m) Ensuring that agency planners contracts (see 37.6025) should occur for
include use of the metric system of follow-on acquisitions.
measurement in proposed acquisitions (s) Ensuring that acquisition plan-
in accordance with 15 U.S.C. 205b (see ners, to the maximum extent prac-
11.002(b)) and agency metric plans and ticable
guidelines. (1) Structure contract requirements
(n) Ensuring that agency planners to facilitate competition by and among
(1) Specify needs for printing and small business concerns; and
writing paper consistent with the min- (2) Avoid unnecessary and unjustified
imum content standards specified in bundling that precludes small business
section 505 of Executive Order 13101 of participation as contractors (see 7.107)
September 14, 1998, Greening the Gov- (15 U.S.C. 631(j)).
ernment through Waste Prevention, (t) Ensuring that agency planners on
Recycling, and Federal Acquisition information technology acquisitions
(see 11.303); and comply with the capital planning and
(2) Comply with the policy in 11.002(d) investment control requirements in 40
regarding procurement of products con- U.S.C. 1422 and OMB Circular A130.
taining recovered materials, and envi-
ronmentally preferable and energy-effi- [48 FR 42124, Sept. 19, 1983, as amended at 50
cient products and services. FR 1735, Jan. 11, 1985; 50 FR 27561, July 3,
1985; 50 FR 52429, Dec. 23, 1985; 51 FR 27116,
(o) Ensuring that acquisition plan-
July 29, 1986; 57 FR 60574, Dec. 21, 1992; 60 FR
ners specify needs and develop plans, 28495, May 31, 1995; 60 FR 48236, Sept. 18, 1995;
drawings, work statements, specifica- 60 FR 49721, Sept. 26, 1995; 61 FR 2628, Jan. 26,
tions, or other product descriptions 1996; 62 FR 40236, July 25, 1997; 62 FR 44814,
that address Electronic and Informa- Aug. 22, 1997; 64 FR 72442, Dec. 27, 1999; 65 FR
tion Technology Accessibility Stand- 36017, June 6, 2000; 66 FR 20896, Apr. 25, 2001;
ards (see 36 CFR part 1194) in proposed 67 FR 56118, Aug. 30, 2002]
acquisitions (see 11.002(e)) and that
these standards are included in require- 7.104 General procedures.
ments planning, as appropriate (see (a) Acquisition planning should begin
subpart 39.2). as soon as the agency need is identi-
(p) Making a determination, prior to fied, preferably well in advance of the
issuance of a solicitation for advisory fiscal year in which contract award or
and assistance services involving the order placement is necessary. In devel-
analysis and evaluation of proposals oping the plan, the planner shall form
submitted in response to a solicitation, a team consisting of all those who will
that a sufficient number of covered be responsible for significant aspects of
personnel with the training and capa- the acquisition, such as contracting,
bility to perform an evaluation and fiscal, legal, and technical personnel.
analysis of proposals submitted in re- The planner should review previous
sponse to a solicitation are not readily plans for similar acquisitions and dis-
available within the agency or from an- cuss them with the key personnel in-
other Federal agency in accordance volved in those acquisitions. At key
with the guidelines at 37.204. dates specified in the plan or whenever
(q) Ensuring that no purchase re- significant changes occur, and no less
quest is initiated or contract entered often than annually, the planner shall
106
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Federal Acquisition Regulation 7.105
review the plan and, if appropriate, re- sition, such as (i) requirements for
vise it. compatibility with existing or future
(b) Requirements and logistics per- systems or programs and (ii) any
sonnel should avoid issuing require- known cost, schedule, and capability or
ments on an urgent basis or with unre- performance constraints.
alistic delivery or performance sched- (3) Cost. Set forth the established
ules, since it generally restricts com- cost goals for the acquisition and the
petition and increases prices. Early in rationale supporting them, and discuss
the planning process, the planner related cost concepts to be employed,
should consult with requirements and including, as appropriate, the following
logistics personnel who determine items:
type, quality, quantity, and delivery (i) Life-cycle cost. Discuss how life-
requirements. cycle cost will be considered. If it is
(c) The planner shall coordinate with not used, explain why. If appropriate,
and secure the concurrence of the con- discuss the cost model used to develop
tracting officer in all acquisition plan- life-cycle-cost estimates.
ning. If the plan proposes using other (ii) Design-to-cost. Describe the de-
than full and open competition when sign-to-cost objective(s) and under-
awarding a contract, the plan shall lying assumptions, including the ra-
also be coordinated with the cognizant tionale for quantity, learning-curve,
competition advocate. and economic adjustment factors. De-
[48 FR 42124, Sept. 19, 1983, as amended at 50 scribe how objectives are to be applied,
FR 1735, Jan. 11, 1985; 50 FR 52433, Dec. 23, tracked, and enforced. Indicate specific
1985; 67 FR 56118, Aug. 30, 2002] related solicitation and contractual re-
quirements to be imposed.
7.105 Contents of written acquisition (iii) Application of should-cost. De-
plans. scribe the application of should-cost
In order to facilitate attainment of analysis to the acquisition (see 15.407
the acquisition objectives, the plan 4).
must identify those milestones at (4) Capability or performance. Specify
which decisions should be made (see the required capabilities or perform-
paragraph (b)(19) below). The plan must ance characteristics of the supplies or
address all the technical, business, the performance standards of the serv-
management, and other significant ices being acquired and state how they
considerations that will control the ac- are related to the need.
quisition. The specific content of plans (5) Delivery or performance-period re-
will vary, depending on the nature, cir- quirements. Describe the basis for estab-
cumstances, and stage of the acquisi- lishing delivery or performance-period
tion. In preparing the plan, the planner requirements (see subpart 11.4). Ex-
must follow the applicable instructions plain and provide reasons for any ur-
in paragraphs (a) and (b) below, to- gency if it results in concurrency of de-
gether with the agencys implementing velopment and production or con-
procedures. Acquisition plans for serv- stitutes justification for not providing
ice contracts or orders must describe for full and open competition.
the strategies for implementing per- (6) Trade-offs. Discuss the expected
formance-based contracting methods consequences of trade-offs among the
or must provide rationale for not using various cost, capability or perform-
those methods (see subpart 37.6). ance, and schedule goals.
(a) Acquisition background and objec- (7) Risks. Discuss technical, cost, and
tives(1) Statement of need. Introduce schedule risks and describe what ef-
the plan by a brief statement of need. forts are planned or underway to re-
Summarize the technical and contrac- duce risk and the consequences of fail-
tual history of the acquisition. Discuss ure to achieve goals. If concurrency of
feasible acquisition alternatives, the development and production is
impact of prior acquisitions on those planned, discuss its effects on cost and
alternatives, and any related in-house schedule risks.
effort. (8) Acquisition streamlining. If specifi-
(2) Applicable conditions. State all sig- cally designated by the requiring agen-
nificant conditions affecting the acqui- cy as a program subject to acquisition
107
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7.105 48 CFR Ch. 1 (10103 Edition)
streamlining, discuss plans and proce- (iii) Describe how competition will be
dures to: sought, promoted, and sustained for
(i) Encourage industry participation spares and repair parts. Identify the
by using draft solicitations, key logistic milestones, such as tech-
presolicitation conferences, and other nical data delivery schedules and ac-
means of stimulating industry involve- quisition method coding conferences,
ment during design and development in that affect competition.
recommending the most appropriate (iv) When effective subcontract com-
application and tailoring of contract petition is both feasible and desirable,
requirements; describe how such subcontract com-
(ii) Select and tailor only the nec- petition will be sought, promoted, and
essary and cost-effective requirements; sustained throughout the course of the
and acquisition. Identify any known bar-
(iii) State the timeframe for identi- riers to increasing subcontract com-
fying which of those specifications and petition and address how to overcome
standards, originally provided for guid- them.
ance only, shall become mandatory. (3) Source-selection procedures. Discuss
the source-selection procedures for the
(b) Plan of action(1) Sources. Indi-
acquisition, including the timing for
cate the prospective sources of supplies
submission and evaluation of pro-
or services that can meet the need.
posals, and the relationship of evalua-
Consider required sources of supplies or
tion factors to the attainment of the
services (see Part 8) and sources identi-
acquisition objectives (see subpart
fiable through databases including the
15.3).
Governmentwide database of contracts (4) Acquisition considerations. (i) For
and other procurement instruments in- each contract contemplated, discuss
tended for use by multiple agencies contract type selection (see part 16);
available at http:// use of multiyear contracting, options,
www.contractdirectory.gov. Include con- or other special contracting methods
sideration of small business, veteran- (see part 17); any special clauses, spe-
owned small business, service-disabled cial solicitation provisions, or FAR de-
veteran-owned small business, viations required (see subpart 1.4);
HUBZone small business, small dis- whether sealed bidding or negotiation
advantaged business, and women- will be used and why; whether equip-
owned small business concerns (see ment will be acquired by lease or pur-
part 19), and the impact of any bun- chase (see subpart 7.4) and why; and
dling that might affect their participa- any other contracting considerations.
tion in the acquisition (see 7.107) (15 Provide rationale if a performance-
U.S.C. 644(e)). Address the extent and based contract will not be used or if a
results of the market research and in- performance-based contract for serv-
dicate their impact on the various ele- ices is contemplated on other than a
ments of the plan (see part 10). firm-fixed-price basis (see 37.102(a) and
(2) Competition. (i) Describe how com- 16.505(a)(3)).
petition will be sought, promoted, and (ii) For each order contemplated, dis-
sustained throughout the course of the cuss
acquisition. If full and open competi- (A) For information technology ac-
tion is not contemplated cite the au- quisitions, how the capital planning
thority in 6.302, discuss the basis for and investment control requirements
the application of that authority, iden- of 40 U.S.C. 1422 and OMB Circular A
tify the source(s), and discuss why full 130 will be met (see 7.103(t) and part 39);
and open competition cannot be ob- and
tained. (B) Why this action benefits the Gov-
(ii) Identify the major components or ernment, such as when
subsystems. Discuss component break- (1) The agency can accomplish its
out plans relative to these major com- mission more efficiently and effec-
ponents or subsystems. Describe how tively (e.g., take advantage of the serv-
competition will be sought, promoted, icing agencys specialized expertise; or
and sustained for these components or gain access to contractors with needed
subsystems. expertise); or
108
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Federal Acquisition Regulation 7.105
(2) Ordering through an indefinite de- servicing (see subpart 7.3) and distribu-
livery contract facilitates access to tion of commercial items;
small business concerns, including (ii) The reliability, maintainability,
small disadvantaged business concerns, and quality assurance requirements,
8(a) contractors, women-owned small including any planned use of warran-
business concerns, HUBZone small ties (see part 46);
business concerns, veteran-owned small (iii) The requirements for contractor
business concerns, or service-disabled data (including repurchase data) and
veteran-owned small business concerns. data rights, their estimated cost, and
(5) Budgeting and funding. Include the use to be made of the data (see part
budget estimates, explain how they 27); and
were derived, and discuss the schedule (iv) Standardization concepts, includ-
for obtaining adequate funds at the ing the necessity to designate, in ac-
time they are required (see subpart cordance with agency procedures, tech-
32.7). nical equipment as standard so that fu-
(6) Product or service descriptions. Ex- ture purchases of the equipment can be
plain the choice of product or service made from the same manufacturing
description types (including perform- source.
ance-based contracting descriptions) to
(14) Government-furnished property. In-
be used in the acquisition.
dicate any property to be furnished to
(7) Priorities, allocations, and allot-
contractors, including material and fa-
ments. When urgency of the require-
cilities, and discuss any associated con-
ment dictates a particularly short de-
siderations, such as its availability or
livery or performance schedule, certain
the schedule for its acquisition (see
priorities may apply. If so, specify the
part 45).
method for obtaining and using prior-
ities, allocations, and allotments, and (15) Government-furnished information.
the reasons for them (see subpart 11.6). Discuss any Government information,
(8) Contractor versus Government per- such as manuals, drawings, and test
formance. Address the consideration data, to be provided to prospective
given to OMB Circular No. A76 (see offerors and contractors.
subpart 7.3). (16) Environmental and energy con-
(9) Inherently governmental functions. servation objectives. Discuss all applica-
Address the consideration given to ble environmental and energy con-
OFPP Policy Letter 921 (see subpart servation objectives associated with
7.5). the acquisition (see part 23), the appli-
(10) Management information require- cability of an environmental assess-
ments. Discuss, as appropriate, what ment or environmental impact state-
management system will be used by ment (see 40 CFR part 1502), the pro-
the Government to monitor the con- posed resolution of environmental
tractors effort. issues, and any environmentally-re-
(11) Make or buy. Discuss any consid- lated requirements to be included in
eration given to make-or-buy programs solicitations and contracts.
(see subpart 15.4072). (17) Security considerations. For acqui-
(12) Test and evaluation. To the extent sitions dealing with classified matters,
applicable, describe the test program of discuss how adequate security will be
the contractor and the Government. established, maintained, and mon-
Describe the test program for each itored (see subpart 4.4).
major phase of a major system acquisi- (18) Contract administration. Describe
tion. If concurrency is planned, discuss how the contract will be administered.
the extent of testing to be accom- In contracts for services, include how
plished before production release. inspection and acceptance cor-
(13) Logistics considerations. De- responding to the work statements
scribe performance criteria will be enforced.
(i) The assumptions determining con- (19) Other considerations. Discuss, as
tractor or agency support, both ini- applicable, standardization concepts,
tially and over the life of the acquisi- the industrial readiness program, the
tion, including consideration of con- Defense Production Act, the Occupa-
tractor or agency maintenance and tional Safety and Health Act, foreign
109
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7.106 48 CFR Ch. 1 (10103 Edition)
sales implications, and any other mat- (b) In planning for the solicitation of
ters germane to the plan not covered a major system (see part 34) production
elsewhere. contract, planners shall consider re-
(20) Milestones for the acquisition cycle. quiring offerors to include, in their of-
Address the following steps and any fers, proposals identifying opportuni-
others appropriate: ties to assure that the Government will
be able to obtain, on a competitive
Acquisition plan approval.
Statement of work. basis, items acquired in connection
Specifications. with the system that are likely to be
Data requirements. acquired in substantial quantities dur-
Completion of acquisition-package prepa- ing the service life of the system. Pro-
ration. posals submitted in response to such
Purchase request. requirements may include the fol-
Justification and approval for other than lowing:
full and open competition where applicable
and/or any required D&F approval.
(1) Proposals to provide the Govern-
Issuance of synopsis. ment the right to use technical data to
Issuance of solicitation. be provided under the contract for
Evaluations of proposals, audits, and field competitive future acquisitions, to-
reports. gether with the cost to the Govern-
Beginning and completion of negotiations. ment, if any, of acquiring such tech-
Contract preparation, review, and clear- nical data and the right to use such
ance. data.
Contract award.
(2) Proposals for the qualification or
(21) Identification of participants in ac- development of multiple sources of
quisition plan preparation. List the indi- supply for competitive future acquisi-
viduals who participated in preparing tions.
the acquisition plan, giving contact in- (c) In determining whether to apply
formation for each. paragraphs (a) and (b) above, planners
[48 FR 42124, Sept. 19, 1983, as amended at 50
shall consider the purposes for which
FR 1735, Jan. 11, 1985; 50 FR 52429, Dec. 23, the system is being acquired and the
1985, and 51 FR 27116, July 29, 1986; 53 FR technology necessary to meet the sys-
17856, May 18, 1988; 53 FR 34226, Sept. 2, 1988; tems required capabilities. If such pro-
60 FR 28495, May 31, 1995; 60 FR 48237, Sept. posals are required, the contracting of-
18, 1995; 61 FR 2628, Jan. 26, 1996; 62 FR 40236, ficer shall consider them in evaluating
July 25, 1997; 62 FR 44814, Aug. 22, 1997; 62 FR competing offers. In noncompetitive
51230, 51270, Sept. 30, 1997; 63 FR 70267, Dec. awards, the factors in paragraphs (a)
18, 1998; 64 FR 72442, Dec. 27, 1999; 65 FR 60544,
Oct. 11, 2000; 67 FR 56118, Aug. 30, 2002; 67 FR
and (b) above, may be considered by
70522, Nov. 22, 2002; 68 FR 43862, July 24, 2003] the contracting officer as objectives in
negotiating the contract.
7.106 Additional requirements for [50 FR 27561, July 3, 1985 and 51 FR 27116,
major systems. July 29, 1986]
(a) In planning for the solicitation of
a major system (see part 34) develop- 7.107 Additional requirements for ac-
ment contract, planners shall consider quisitions involving bundling.
requiring offerors to include, in their (a) Bundling may provide substantial
offers, proposals to incorporate in the benefits to the Government. However,
design of a major system because of the potential impact on
(1) Items which are currently avail- small business participation, the head
able within the supply system of the of the agency must conduct market re-
agency responsible for the major sys- search to determine whether bundling
tem, available elsewhere in the na- is necessary and justified (15 U.S.C.
tional supply system, or commercially 644(e)(2)). Market research may indi-
available from more than one source; cate that bundling is necessary and
and justified if an agency would derive
(2) Items which the Government will measurably substantial benefits (see
be able to acquire competitively in the 10.001(a)(2)(iv) and (a)(3)(vi)).
future if they are likely to be needed in (b) Measurably substantial benefits
substantial quantities during the sys- may include, individually or in any
tems service life. combination or aggregate, cost savings
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Federal Acquisition Regulation 7.202
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7.203 48 CFR Ch. 1 (10103 Edition)
(b) Each solicitation for a contract contracting officer shall consult with
for supplies is required, if practicable, the cognizant inventory manager or re-
to include a provision inviting each of- quirements development activity be-
feror responding to the solicitation (1) fore proceeding with an award or nego-
to state an opinion on whether the tiations. If this consultation discloses
quantity of the supplies proposed to be that the Government should be order-
acquired is economically advantageous ing an item of supply in different quan-
to the Government, and (2) if applica- tities and the inventory manager/re-
ble, to recommend a quantity or quan- quirements development activity con-
tities which would be more economi- curs, the solicitation for the item
cally advantageous to the Government. should be amended or canceled and a
Each such recommendation is required new requisition should be obtained.
to include a quotation of the total
price and the unit price for supplies Subpart 7.3Contractor Versus
procured in each recommended quan-
tity.
Government Performance
7.300 Scope of subpart.
7.203 Solicitation provision.
This subpart prescribes policies and
Contracting officers shall insert the
procedures for use in acquisitions of
provision at 52.2074, Economic Pur-
commercial or industrial products and
chase QuantitySupplies, in solicita-
services subject to (a) OMB Circular
tions for supplies. The provision need
No. A76 (Revised) (the Circular), Per-
not be inserted if the solicitation is for
a contract under the General Services formance of Commercial Activities,
Administrations multiple award and (b) the Supplement to the Circular.
schedule contract program, or if the [57 FR 60575, Dec. 21, 1992]
contracting officer determines that (a)
the Government already has the data, 7.301 Policy.
(b) the data is otherwise readily avail- The Circular provides that it is the
able, or (c) it is impracticable for the policy of the Government to (a) rely
Government to vary its future require- generally on private commercial
ments. sources for supplies and services, if cer-
[52 FR 30076, Aug. 12, 1987] tain criteria are met, while recognizing
that some functions are inherently
7.204 Responsibilities of contracting Governmental and must be performed
officers. by Government personnel, and (b) give
(a) Contracting officers are respon- appropriate consideration to relative
sible for transmitting offeror responses cost in deciding between Government
to the solicitation provision at 52.2074 performance and performance under
to appropriate inventory management/ contract. In comparing the costs of
requirements development activities in Government and contractor perform-
accordance with agency procedures. ance, the Circular provides that agen-
The economic purchase quantity data cies shall base the contractors cost of
so obtained are intended to assist in- performance on firm offers.
ventory managers in establishing and
evaluating economic order quantities 7.302 General.
for supplies under their cognizance. The Circular and the Supplement
(b) In recognition of the fact that (a) Prescribe the overall policies and
economic purchase quantity data fur- detailed procedures required of all
nished by offerors are only one of many agencies in making cost comparisons
data inputs required for determining between contractor and Government
the most economical order quantities, performance. In making cost compari-
contracting officers should generally sons, agencies shall
take no action to revise quantities to (1) Prepare an estimate of the cost of
be acquired in connection with the in- Government performance based on the
stant procurement. However, if a sig- same work statement and level of per-
nificant price variation is evident from formance as apply to offerors; and
offeror responses, and the potential for (2) Compare the total cost of Govern-
significant savings is apparent, the ment performance to the total cost of
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Federal Acquisition Regulation 7.304
contracting with the potentially suc- paragraph (b)(2) of this section, a find-
cessful offeror. ing that no commercial source is avail-
(b) Provide that solicitations and able may be made and the cost com-
synopses of the solicitations issued to parison canceled.
obtain offers for comparison purposes [48 FR 42124, Sept. 19, 1983, as amended at 55
shall state that they will not result in FR 25526, June 21, 1990; 57 FR 60575, Dec. 21,
a contract if Government performance 1992; 66 FR 27412, May 16, 2001]
is determined to be more advantageous
(see the solicitation provisions at 7.304 Procedures.
52.2071 and 52.2072); (a) Work statement. When private
(c) Provide that each cost compari- commercial sources are available and a
son shall be reviewed by an activity cost comparison is required, the Gov-
independent of the activity which pre- ernments functional managers respon-
pared the cost analysis to ensure con- sible for the comparison or another
formance with the instructions in the group shall prepare a comprehensive,
Supplement; and performance work statement. The
(d) Provide that, ordinarily, agencies work statement must
should not incur the delay and expense (1) Accurately reflect the actual Gov-
of conducting cost comparison studies ernment requirement, stating ade-
when the full-time equivalent Govern- quately what is to be done without pre-
ment employees involved are fewer scribing how it is to be done;
than those specified by law, the Cir- (2) Include performance standards
cular, and implementing agency guid- that can be used to ensure a com-
ance. Cost comparisons may be con- parable level of performance for both
ducted in these instances if there is Government and contractor and a com-
reason to believe that commercial mon basis for evaluation; and
prices are unreasonable. (3) Be reviewed by the contracting of-
[50 FR 35475, Aug. 30, 1985, as amended at 53 ficer to ensure that it is adequate and
FR 17856, May 18, 1988; 55 FR 25526, June 21, appropriate to serve as a basis for so-
1990; 57 FR 60575, Dec. 21, 1992] licitation and award.
(b) Cost estimate. The agency per-
7.303 Determining availability of pri- sonnel who develop the cost estimate
vate commercial sources. for Government performance
(a) During acquisition planning re- (1) Enter on a cost comparison form
views, contracting officers must assist (see Part IV of the Supplement) the
in identifying private commercial cost estimate and the other elements
sources. required to accomplish a cost compari-
(b) In making all reasonable efforts son;
to identify such sources, the con- (2) Review the estimate for complete-
tracting officer must assist in ness and accuracy and have the esti-
(1) Synopsizing the requirement mate audited; and
through the Governmentwide point of (3) Submit to the contracting officer
entry (GPE) in accordance with 5.205(e) the completed form and all necessary
until a reasonable number of potential detailed supporting data in a sealed,
sources are identified. If necessary, a dated envelope, or electronic equiva-
synopsis must be submitted up to three lent, not later than the time estab-
times in a 90-day period with a min- lished for receipt of initial proposals or
imum of 30 days between notices (but, bid opening. If more time is needed to
when necessary to meet an urgent re- develop the Governments cost esti-
quirement, this notification may be mate, the contracting officer shall
limited to a total of two notices in a amend the opening date of the solicita-
30-day period with a minimum of 15 tion.
days between them); and (c) Solicitation. (1) The contracting of-
(2) Requesting assistance from the ficer shall issue a solicitation based on
Small Business Administration, the the performance work statement pre-
Department of Commerce, and the Gen- pared in accordance with paragraph (a)
eral Services Administration. of this section. Prepriced option prices
(3) If sufficient sources are not iden- in existing contracts will not be used
tified through synopses or from sub- instead of issuing a new solicitation
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7.305 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 7.307
(2) After evaluation of bids (see sub- of the public review period specified in
part 14.4) and determinations of respon- the solicitation plus any additional pe-
sibility, the contracting officer shall riod required by the appeals procedure.
provide the price of the low responsive, (2) If the result of the cost compari-
responsible bidder to the preparer of son favors Government performance,
the cost estimate for Government per- the contracting officer shall
formance, for final Government review (i) Notify interested parties of the re-
of the cost comparison form. sult of the cost comparison;
(3) Upon completion of the review (ii) Inform interested parties that the
process, including resolution of any re- completed cost comparison form and
quest under 7.307, the responsible agen- detailed supporting data relative to the
cy official shall make the final deter- Government cost estimate are avail-
mination for performance by the Gov- able for public review (see subpara-
ernment or under contract and provide graph (3) below); and
written notification to the contracting (iii) Announce the price of the offer
officer, who shall either award a con- most advantageous to the Government.
tract or cancel the solicitation as re- (3) The public review period shall
quired. begin with the contracting officers an-
(4) The contracting officer shall nouncement of the cost comparison re-
make the completed and approved cost sult and availability of the cost com-
comparison analysis available to inter- parison forms and detailed supporting
ested parties upon request. data to interested parties. The review
(b) Negotiation. The contracting offi- period shall last for the period speci-
cer shall receive proposals, evaluate fied in the solicitation (at least 15
them (see subpart 15.3), conduct nego- working days, up to a maximum of 30
tiations, and select the most advan- working days if the contracting officer
tageous proposal in accordance with considers the action to be complex).
normal contracting procedures (see Upon completion of the public review
part 15). The contracting officer shall, period and resolution of any questions
before public announcement, open the raised under 7.307, the responsible
sealed estimate in the presence of the agency official shall provide the con-
preparer, enter the amount of the most tracting officer written notification of
advantageous proposal on the cost the final cost comparison decision. The
comparison form, and return the form contracting officer shall then, in the
to the preparer of the cost estimate for case of subparagraph (b)(1) of this sec-
Government performance for comple- tion, give the contractor notice to
tion. The preparer shall give due con- commence or cancel the contract as
sideration to all types of costs which appropriate or, in the case of subpara-
could add or subtract from the cost of graph (b)(2) of this section, cancel the
either mode of performance. solicitation or award the contract, as
(1) If the result of the cost compari- appropriate.
son favors performance under contract
[48 FR 42124, Sept. 19, 1983, as amended at 50
and the responsible agency official ap- FR 1735, Jan. 11, 1985; 50 FR 52429, Dec. 23,
proves the result, the contracting offi- 1985; 51 FR 34125, Sept. 3, 1986; 53 FR 661, Jan.
cer shall award a contract in accord- 11, 1988; 55 FR 25526, June 21, 1990; 56 FR
ance with agency procedures. Concur- 41744, Aug. 22, 1991; 57 FR 60575, Dec. 21, 1992;
rently with the award, the contracting 60 FR 34737, July 3, 1995; 62 FR 51270, Sept. 30,
officer shall publicly 1997]
(i) Notify interested parties of the re-
sult of the cost comparison; 7.307 Appeals.
(ii) Inform interested parties that the (a) The Circular provides that each
completed cost comparison form and agency shall establish an appeals pro-
detailed supporting data are available cedure for informal administrative re-
for review; view of the initial cost comparison re-
(iii) Announce the contractors name; sult. The appeals procedure shall pro-
and vide for an independent, objective re-
(iv) Advise interested parties that view of the initial result by an official
contractor preparations for perform- at a higher level than the official who
ance are conditioned upon completion approved that result. The purpose is to
115
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7.400 48 CFR Ch. 1 (10103 Edition)
116
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Federal Acquisition Regulation 7.503
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7.503 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation Pt. 8
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8.000 48 CFR Ch. 1 (10103 Edition)
120
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Federal Acquisition Regulation 8.104
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8.401 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 8.404
(ii) GSA has already determined the addition to following the procedures in
prices of items under schedule con- paragraph (b)(2) of this section and be-
tracts to be fair and reasonable. By fore placing an order that exceeds the
placing an order against a schedule maximum order threshold
using the procedures in this section, (i) Review additional schedule con-
the ordering office has concluded that tractors catalogs or pricelists, or use
the order represents the best value and the GSA Advantage! on-line shop-
results in the lowest overall cost alter- ping service;
native (considering price, special fea- (ii) Based upon the initial evaluation,
tures, administrative costs, etc.) to generally seek price reductions from
meet the Governments needs. the schedule contractor(s) appearing to
(2) Orders placed under a Federal provide the best value (considering
Supply Schedule contract are not ex- price and other factors); and
empt from the development of acquisi- (iii) After seeking price reductions,
tion plans (see subpart 7.1), and an in- place the order with the schedule con-
formation technology acquisition tractor that provides the best value
strategy (see part 39). and results in the lowest overall cost
(b) Ordering procedures for optional use alternative (see 8.404(a)). If further
schedules(1) Orders at or below the price reductions are not offered, an
micro-purchase threshold. Place orders order may still be placed, if the order-
at or below the micro-purchase thresh- ing office determines that it is appro-
old with any Federal Supply Schedule priate.
contractor. (4) Blanket purchase agreements
(2) Orders exceeding the micro-purchase (BPAs). Agencies may establish BPAs
threshold but not exceeding the maximum (see 13.3032(c)(3)) when following the
order threshold. Place orders with the ordering procedures in this subpart. All
schedule contractor that can provide schedule contracts contain BPA provi-
the supply or service that represents sions. Ordering offices may use BPAs
the best value. Before placing an order, to establish accounts with contractors
consider reasonably available informa- to fill recurring requirements. BPAs
tion about the supply or service offered should address ordering frequency,
under MAS contracts by using the invoicing, discounts, and delivery loca-
GSA Advantage! on-line shopping tions and times.
service, or by reviewing the catalogs or (5) Price reductions. In addition to the
pricelists of at least three schedule circumstances in paragraph (b)(3) of
contractors (see 8.404(b)(6)). Select the this section, there may be other rea-
delivery and other options available sons to request a price reduction. For
under the schedule that meet the agen- example, seek a price reduction when
cys needs. When selecting the supply the supply or service is available else-
or service representing the best value, where at a lower price or when estab-
the ordering office may consider lishing a BPA to fill recurring require-
(i) Special features of the supply or ments. The potential volume of orders
service required for effective program under BPAs, regardless of the size of
performance; the individual order, offer the oppor-
(ii) Trade-in considerations; tunity to secure greater discounts.
(iii) Probable life of the item selected Schedule contractors are not required
as compared with that of a comparable to pass on to all schedule users a price
item; reduction extended only to an indi-
(iv) Warranty considerations; vidual agency for a specific order.
(v) Maintenance availability; (6) Small business. When conducting
(vi) Past performance; and evaluations and before placing an
(vii) Environmental and energy effi- order, consider including, if available,
ciency considerations. one or more small business, veteran-
(3) Orders exceeding the maximum order owned small business, service-disabled
threshold. Each schedule contract has veteran-owned small business,
an established maximum order thresh- HUBZone small business, woman-
old. This threshold represents the point owned small business, and/or small dis-
where it is advantageous for the order- advantaged business schedule con-
ing office to seek a price reduction. In tractor(s). Orders placed against the
123
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8.40418.4042 48 CFR Ch. 1 (10103 Edition)
schedules may be credited toward the (v) A lower price for an identical
ordering agencys small business goals. item (i.e., same make and model) is
For orders exceeding the micro-pur- available from another source.
chase threshold, ordering offices should (4) Absence of follow-on award. Order-
give preference to the items of small ing offices, after any consultation re-
business concerns when two or more quired by the schedule, are not re-
items at the same delivered price will quired to forego or postpone their le-
satisfy the requirement. gitimate needs pending the award or
(7) Documentation. Orders should be renewal of any schedule contract.
documented, at a minimum, by identi- [59 FR 53716, Oct. 25, 1994, as amended at 59
fying the contractor the item was pur- FR 60319, Nov. 23, 1994; 60 FR 34747, July 3,
chased from, the item purchased, and 1995; 62 FR 44818, Aug. 22, 1997; 62 FR 64917,
the amount paid. If an agency require- Dec. 9, 1997; 63 FR 34079, June 22, 1998; 64 FR
ment in excess of the micro-purchase 10536, Mar. 4, 1999; 65 FR 36024, June 6, 2000;
67 FR 56119, Aug. 30, 2002; 68 FR 56689, Oct. 1,
threshold is defined so as to require a
2003]
particular brand name, product, or a
feature of a product peculiar to one 8.40418.4042 [Reserved]
manufacturer, thereby precluding con-
sideration of a product manufactured 8.4043 Requests for waivers.
by another company, the ordering of- (a) When an ordering office that is a
fice shall include an explanation in the mandatory user under a schedule deter-
file as to why the particular brand mines that items available from the
name, product, or feature is essential schedule will not meet its specific
to satisfy the agencys needs. needs, but similar items from another
(c) Ordering procedures for mandatory source will, it shall submit a request
use schedules. (1) This paragraph (c) ap- for waiver to the Commissioner, Fed-
plies only to orders against schedule eral Supply Service (F), GSA, Wash-
contracts with mandatory users. When ington, DC 20406, except as provided in
ordering from multiple-award sched- (b) below. Requests shall contain the
ules, mandatory users shall also follow following information:
the procedures in paragraphs (a) and (1) A complete description of the re-
(b) of this section. quired items, whenever possible; e.g.,
(2) In the case of mandatory sched- descriptive literature such as cuts, il-
ules, ordering offices shall not solicit lustrations, drawings, and brochures
bids, proposals, quotations, or other- that explain the characteristics and/or
wise test the market solely for the pur- construction.
pose of seeking alternative sources to (2) A comparison of prices and the
Federal Supply Schedules. technical differences between the re-
(3) Schedules identify executive agen- quested item and the schedule item,
cies required to use them as mandatory identifying as a minimum the
sources of supply. The single-award (i) Inadequacies of the schedule item
schedule shall be used as a primary to perform required functions; and
source and the multiple-award schedule (ii) Technical, economic, or other ad-
as a secondary source. Mandatory use vantages of the item requested.
of schedules is not a requirement if (3) Quantity required.
(i) The schedule contractor is unable (4) Estimated annual usage or a
to satisfy the ordering offices urgent statement that the requirement is non-
delivery requirement; recurrent or unpredictable.
(ii) The order is below the minimum (b) Ordering offices shall not initiate
order thresholds; action to acquire similar items from
(iii) The order is above the maximum nonschedule sources until a request for
order limitation; waiver is approved, except as otherwise
(iv) The consignee is located outside provided in interagency agreements.
the area of geographic coverage stated [48 FR 42129, Sept. 19, 1983, as amended at 54
in the schedule; or FR 29280, July 11, 1989]
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Federal Acquisition Regulation 8.4055
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8.4056 48 CFR Ch. 1 (10103 Edition)
(3) Any repurchase shall be made at (2) Not place further orders with the
as reasonable a price as possible con- contractor;
sidering the quality required by the (3) Repurchase against the contractor
Government, delivery requirement, and in default from sources designated by
administrative expenses. Copies of all the schedule contracting officer; or
repurchase orders, except the copy fur- (4) Proceed as otherwise directed by
nished to the contractor or any other the schedule contracting officer.
commercial concern, shall include the (c) All actions taken regarding ter-
notation Repurchase against the ac- minations for default shall comply
count of llllll [insert contrac- with the applicable requirements in
tors name] under Delivery Order part 49.
llllll [insert number] under Con- [48 FR 42129, Sept. 19, 1983, as amended at 59
tract llllll [insert number]. FR 53717, Oct. 25, 1994]
(4) When excess costs are anticipated,
the ordering office may withhold funds 8.4056 Termination for convenience.
due the contractor as offset security. (a) Ordering offices may terminate
Ordering offices shall minimize excess individual orders for the convenience
costs to be charged against the con- of the Government. Only the schedule
tractor and collect or setoff any excess contracting officer may terminate any
costs owed. or all items covered by the schedule
(5) If an ordering office is unable to contract for the convenience of the
collect excess costs, it shall take the Government.
following actions: (b) Before terminating orders for con-
(i) Notify the schedule contracting venience, the ordering office shall en-
office within 60 days after final pay- deavor to enter into a no cost can-
ment to the replacement contractor. cellation agreement with the con-
The notice shall include the following tractor.
information about the defaulted order: (c) All actions taken regarding ter-
(A) Name and address of the con- minations for convenience shall com-
tractor. ply with the applicable requirements in
(B) Schedule, contract, and order part 49.
number.
8.4057 Disputes.
(C) National stock or special item
number(s), and a brief description of (a) Disputes pertaining to the perform-
the item(s). ance of orders under a schedule contract.
(D) Cost of schedule items involved. (1) Under the Disputes clause of the
(E) Excess costs to be collected. schedule contract, the ordering office
contracting officer may
(F) Other pertinent data.
(i) Issue final decisions on disputes
(ii) In addition to the above, the no-
arising from performance of the order
tice shall include the following infor-
(but see paragraph (b) of this section);
mation about the replacement con-
or
tract:
(ii) Refer the dispute to the schedule
(A) Name and address of the con- contracting officer.
tractor. (2) The ordering office contracting of-
(B) Item repurchase cost. ficer shall notify the schedule con-
(C) Repurchase order number and tracting officer promptly of any final
date of payment. decision.
(D) Contract number, if any. (b) Disputes pertaining to the terms and
(E) Other pertinent data. conditions of schedule contracts. The or-
(b) Only the schedule contracting of- dering office contracting officer shall
ficer may terminate for default any or refer all disputes that relate to the
all items covered by the schedule con- contract terms and conditions to the
tract. When notified of default action schedule contracting officer for resolu-
by the schedule contracting officer tion under the Disputes clause of the
with respect to defaulted items, order- contract and notify the schedule con-
ing offices shall tractor of the referral.
(1) Refuse to accept further perform- (c) Appeals. Contractors may appeal
ance by the contractor; final decisions to either the Board of
126
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Federal Acquisition Regulation 8.602
127
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8.603 48 CFR Ch. 1 (10103 Edition)
(b) Subject to the priorities in 8.002 items, and other items listed in the
and 8.603, agencies are encouraged to Schedule, from FPI.
use the facilities of FPI to the max- (b) Contracting officers shall prepare
imum extent practicable in purchasing orders to FPI using the procedures in
(1) supplies that are not listed in the the Schedule.
Schedule, but that are of a type manu- (c) When the contracting officer be-
factured in Federal penal and correc- lieves that the FPI price exceeds the
tional institutions, and (2) services market price, the matter may be re-
that are listed in the Schedule. ferred to the cognizant product divi-
(c) If a supply not listed in the Sched- sion identified in the Schedule or to
ule is of a type normally produced by the FPI Washington office for resolu-
Federal penal and correctional institu- tion.
tions, agencies are encouraged to sug-
gest that FPI consider the feasibility 8.605 Clearances.
of adding the item to its Schedule. (a) Clearance is required from FPI
before supplies on the Schedule are ac-
[48 FR 42129, Sept. 19, 1983, as amended at 56
quired from other sources, except when
FR 15148, Apr. 15, 1991; 67 FR 56119, Aug. 30,
2002] the conditions in 8.606 apply. FPI clear-
ances ordinarily are of the following
8.603 Purchase priorities. types:
(1) General or blanket clearances
(a) FPI and nonprofit agencies par- issued when classes of articles or serv-
ticipating in the Javits-Wagner-ODay ices are not available from FPI.
(JWOD) Program (see subpart 8.7) may (2) Formal clearances issued in re-
produce identical supplies or services. sponse to requests from offices desiring
When this occurs, ordering offices shall to acquire, from other sources, supplies
purchase supplies and services in the listed in the Schedule and not covered
following priorities: by a general clearance. Requests
(1) Supplies: should be addressed to Federal Prison
(i) Federal Prison Industries, Inc. (41 Industries, Inc., Department of Justice,
U.S.C. 48). Washington, DC 20534.
(ii) JWOD participating nonprofit (b) Purchases from other sources be-
agencies. cause of a lower price are not normally
(iii) Commercial sources. authorized, and clearances will not be
(2) Services: issued on this basis except as a result
(i) JWOD participating nonprofit of action taken to resolve questions of
agencies. price under 8.604(c).
(ii) Federal Prison Industries, Inc., or (c) Disputes regarding price, quality,
commercial sources. character, or suitability of supplies
(b) Supplies and services manufac- produced by FPI are subject to arbitra-
tured or performed by FPI are in strict tion as specified in 18 U.S.C. 4124. The
conformity with Federal Specifica- statute provides that the arbitration
tions. These supplies and services are shall be conducted by a board con-
listed in the Schedule. Copies of the sisting of the Comptroller General of
Schedule are available from Federal the United States, the Administrator
Prison Industries, Inc., Department of of General Services, and the President,
Justice, Washington, DC 20534. or their representatives. The decisions
[48 FR 42129, Sept. 19, 1983, as amended at 56
of the board are final and binding on
FR 15149, Apr. 15, 1991; 59 FR 67027, Dec. 28, all parties.
1994] [48 FR 42129, Sept. 19, 1983, as amended at 56
FR 15149, Apr. 15, 1991]
8.604 Ordering procedures.
(a) Contracting officers shall order 8.606 Exceptions.
(1) less-than-carload lots of common- FPI clearances are not required
use items (Schedule A of the Schedule) when
from the regional warehouses of GSA, (a) Public exigency requires imme-
unless it is more practical and eco- diate delivery or performance;
nomical to purchase directly from FPI, (b) Suitable used or excess supplies
and (2) carload lots of common-use are available;
128
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Federal Acquisition Regulation 8.703
(c) Purchases are made from GSA of Committee, means the Committee for
less-than-carload lots of common-use Purchase from People Who Are Blind
items stocked by GSA (see Schedule A or Severely Disabled.
of the Schedule); Government or entity of the Govern-
(d) The supplies are acquired and ment means any entity of the legisla-
used outside the United States; or tive or judicial branch, any executive
(e) Orders are for listed items total- agency, military department, Govern-
ing $2,500 or less. ment corporation, or independent es-
tablishment, the U.S. Postal Service,
[48 FR 42129, Sept. 19, 1983, as amended at 56 or any nonappropriated-fund instru-
FR 15149, Apr. 15, 1991; 68 FR 28095, May 22, mentality of the Armed Forces.
2003]
Ordering office means any activity in
8.607 Evaluating FPI performance. an entity of the Government that
places orders for the purchase of sup-
Agencies shall evaluate FPI contract plies or services under the JWOD Pro-
performance in accordance with sub- gram.
part 42.15. Performance evaluations do Procurement List, means a list of sup-
not negate the requirements of 8.602 plies (including military resale com-
and 8.605, but they may be used to sup- modities) and services that the Com-
port a clearance request in accordance mittee has determined are suitable for
with 8.605. purchase by the Government under the
[68 FR 28096, May 22, 2003] Javits-Wagner-ODay Act.
Nonprofit agency serving people who
are blind or nonprofit agency serving peo-
Subpart 8.7Acquisition From ple with other severe disabilities (referred
Nonprofit Agencies Employing to jointly as JWOD participating non-
People Who Are Blind or Se- profit agencies) means a qualified non-
verely Disabled profit agency employing people who
are blind or have other severe disabil-
8.700 Scope of subpart. ities approved by the Committee to
This subpart prescribes the policies furnish a commodity or a service to the
and procedures for implementing the Government under the Act.
Javits-Wagner-ODay Act (41 U.S.C. 46 [59 FR 67027, Dec. 28, 1994, as amended at 66
48c), referred to in this subpart as the FR 2128, Jan. 10, 2001]
JWOD Act, and the rules of the Com-
mittee for Purchase from People Who 8.702 General.
Are Blind or Severely Disabled (41 CFR The Committee is an independent
chapter 51). Government activity with members ap-
[59 FR 67027, Dec. 28, 1994] pointed by the President of the United
States. It is responsible for
8.701 Definitions. (a) Determining those supplies and
services to be purchased by all entities
As used in this subpart
of the Government from JWOD partici-
Allocation, means an action taken by pating nonprofit agencies;
a central nonprofit agency to designate
(b) Establishing prices for the sup-
the JWOD participating nonprofit plies and services; and
agencies that will furnish definite
(c) Establishing rules and regulations
quantities of supplies or perform spe-
to implement the JWOD Act.
cific services upon receipt of orders
from ordering offices. [59 FR 67028, Dec. 28, 1994]
Central nonprofit agency, means Na-
tional Industries for the Blind (NIB), 8.703 Procurement list.
which has been designated to represent The Committee maintains a Procure-
people who are blind; or NISH, which ment List of all supplies and services
has been designated to represent JWOD required to be purchased from JWOD
participating nonprofit agencies serv- participating nonprofit agencies. Ques-
ing people with severe disabilities tions concerning whether a supply item
other than blindness. or service is on the Procurement List
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8.704 48 CFR Ch. 1 (10103 Edition)
130
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Federal Acquisition Regulation 8.706
agency to produce the supplies or per- once the ordering office places an
form the service) to the central non- order.
profit agency designated in the Pro- (b) The ordering office shall grant a
curement List. Ordering offices shall request by a central nonprofit agency
request allocations in sufficient time or JWOD participating nonprofit agen-
for a reply, for orders to be placed, and cy for revision in the delivery or com-
for the nonprofit agency to produce the pletion schedule, if feasible. If exten-
supplies or provide the service within sion of the delivery or completion date
the required delivery or performance is not feasible, the ordering office shall
schedule. notify the appropriate central non-
(b) The ordering offices request to profit agency and request that it re-
the central nonprofit agency for alloca- allocate the order, or grant a purchase
tion shall include the following infor- exception authorizing acquisition from
mation: commercial sources.
(1) For suppliesItem name, stock (c) When a JWOD participating non-
number, latest specification, quantity, profit agency fails to perform under
unit price, date delivery is required, the terms of an order, the ordering of-
and destination to which delivery is to fice shall make every effort to resolve
be made. the noncompliance with the nonprofit
(2) For servicesType and location of agency involved and to negotiate an
service required, latest specification, adjustment before taking action to
work to be performed, estimated vol- cancel the order. If the problem cannot
ume, and required date or dates for be resolved with the nonprofit agency,
completion. the ordering office shall refer the mat-
(3) Other requirements; e.g., packing, ter for resolution first to the central
marking, as necessary. nonprofit agency and then, if nec-
(c) When an allocation is received, essary, to the Committee.
the ordering office shall promptly issue
(d) When, after complying with 8.705
an order to the specified JWOD partici-
4(c), the ordering office determines
pating nonprofit agency or to the cen-
that it must cancel an order, it shall
tral nonprofit agency, as instructed by
notify the central nonprofit agency
the allocation. If the issuance of an
and, if practical, request a reallocation
order is to be delayed for more than 15
of the order. When the central non-
days beyond receipt of the allocation,
profit agency cannot reallocate the
or canceled, the ordering office shall
order, it shall grant a purchase excep-
advise the central nonprofit agency im-
tion permitting use of commercial
mediately.
sources, subject to approval by the
(d) Ordering offices may issue orders
Committee when the value of the pur-
without limitation as to dollar amount
chase exception is $25,000 or more.
and shall record them upon issuance as
obligations. Each order shall include, [48 FR 42129, Sept. 19, 1983, as amended at 56
as a minimum, the information con- FR 67136, Dec. 27, 1991; 59 FR 67028, 67029, Dec.
tained in the request for allocation. Or- 28, 1994]
dering offices shall also include addi-
tional instructions necessary for per- 8.706 Purchase exceptions.
formance under the order; e.g., on the (a) Ordering offices may acquire sup-
handling of Government-furnished plies or services on the Procurement
property, reports required, and notifi- List from commercial sources only if
cation of shipment. the acquisition is specifically author-
[48 FR 42129, Sept. 19, 1983, as amended at 59 ized in a purchase exception granted by
FR 67029, Dec. 28, 1994; 60 FR 34737, July 3, the designated central nonprofit agen-
1995] cy.
(b) The central nonprofit agency
8.7054 Compliance with orders. shall promptly grant purchase excep-
(a) The central nonprofit agency tions when
shall inform the ordering office of (1) The JWOD participating nonprofit
changes in lead time experienced by its agencies cannot provide the supplies or
JWOD participating nonprofit agencies services within the time required, and
to minimize requests for extensions commercial sources can provide them
131
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8.707 48 CFR Ch. 1 (10103 Edition)
significantly sooner in the quantities cys invoice. The ordering office shall
required; or reimburse the nonprofit agency for
(2) The quantity required cannot be these costs.
produced or provided economically by (f) Ordering offices may make rec-
the JWOD participating nonprofit ommendations to the Committee at
agencies. any time for price revisions for sup-
(c) The central nonprofit agency plies and services on the Procurement
granting the exception shall specify List.
the quantity and delivery or perform-
ance period covered by the exception. [48 FR 42129, Sept. 19, 1983, as amended at 59
FR 67028, 67029, Dec. 28, 1994]
(d) When a purchase exception is
granted, the contracting officer shall 8.708 Shipping.
(1) Initiate purchase action within 15
days following the date of the excep- (a) Delivery is accomplished when a
tion or any extension granted by the shipment is placed aboard the vehicle
central nonprofit agency; and of the initial carrier. The time of deliv-
(2) Provide a copy of the solicitation ery is the date shipment is released to
to the central nonprofit agency when it and accepted by the initial carrier.
is issued. (b) Shipment is normally under Gov-
(e) The Committee may also grant a ernment bills of lading. However, for
purchase exception, under any cir- small orders, ordering offices may
cumstances it considers appropriate. specify other shipment methods.
[48 FR 42129, Sept. 19, 1983, as amended at 59 (c) When shipments are under Gov-
FR 67028, 67029, Dec. 28, 1994] ernment bills of lading, the bills of lad-
ing may accompany orders or be other-
8.707 Prices. wise furnished promptly. Failure of an
(a) The prices of items on the Pro- ordering office to furnish bills of lading
curement List are fair market prices or to designate a method of transpor-
established by the Committee. All tation may result in an excusable delay
prices for supplies ordered under this in delivery.
subpart are f.o.b. origin. (d) JWOD participating nonprofit
(b) Prices for supplies are normally agencies shall include transportation
adjusted semiannually. Prices for serv- costs for small shipments paid by the
ices are normally adjusted annually. nonprofit agencies as an item on the
(c) The Committee may request the invoice. The ordering office shall reim-
agency responsible for acquiring the burse the nonprofit agencies for these
supplies or service to assist it in estab- costs.
lishing or revising the fair market [48 FR 42129, Sept. 19, 1983, as amended at 51
price. The Committee has the author- FR 19713, May 30, 1986; 59 FR 67028, Dec. 28,
ity to establish prices without prior co- 1994]
ordination with the responsible con-
tracting office. 8.709 Payments.
(d) Price changes shall normally The ordering office shall make pay-
apply to all orders received by the ments for supplies or services on the
JWOD participating nonprofit agency Procurement List within 30 days after
on or after the effective date of the shipment or after receipt of a proper
change. In special cases, after consid- invoice or voucher.
ering the views of the ordering office,
the Committee may make price [59 FR 67028, Dec. 28, 1994]
changes applicable to orders received
8.710 Quality of merchandise.
by the JWOD participating nonprofit
agency prior to the effective date of Supplies and services provided by
the change. JWOD participating nonprofit agencies
(e) If an ordering office desires pack- shall comply with the applicable Gov-
ing, packaging, or marking of supplies ernment specifications and standards
other than the standard pack as pro- cited in the order. When no specifica-
vided on the Procurement List, any dif- tions or standards exist
ference in costs shall be included as a (a) Supplies shall be of the highest
separate item on the nonprofit agen- quality and equal to similar items
132
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Federal Acquisition Regulation 8.714
133
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8.715 48 CFR Ch. 1 (10103 Edition)
134
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Federal Acquisition Regulation 8.1103
(2) Paper and envelopes for use by Ex- needs, and meet prescribed fuel econ-
ecutive agencies outside the District of omy standards;
Columbia and stocked by GSA shall be (2) The head of the requiring agency,
requisitioned from GSA in accordance or a designee, has certified that the re-
with the procedures listed in Federal quested passenger automobiles (sedans
Property Management Regulations and station wagons) larger than Type
(FPMR) 41 CFR part 101, subpart 101 IA, IB, or II (small, subcompact, or
26.3. compact) are essential to the agencys
mission;
[48 FR 42129, Sept. 19, 1983, as amended at 52
(3) Internal approvals have been re-
FR 9037, Mar. 20, 1987; 54 FR 48982, Nov. 28,
1989; 59 FR 67032, Dec. 28, 1994] ceived; and
(4) The General Services Administra-
tion has advised that it cannot furnish
Subparts 8.98.10 [Reserved] the vehicles.
(b) With respect to requirements for
Subpart 8.11Leasing of Motor leasing motor vehicles for a period of
Vehicles less than 60 days, the contracting offi-
cer need not obtain the certification
8.1100 Scope of subpart. specified in 8.1102(a)
This subpart covers the procedures (1) If the requirement is for type 1A,
for the leasing, from commercial con- 1B, or II vehicles, which are by defini-
cerns, of motor vehicles that comply tion fuel efficient; or
with Federal Motor Vehicle Safety (2) If the requirement is for passenger
Standards and applicable State motor vehicles larger than 1A, 1B, or II, and
vehicle safety regulations. It does not the agency has established procedures
apply to motor vehicles leased outside for advance approval, on a case-by-case
the United States and its outlying basis, of such requirements.
areas. (c) Generally, solicitations shall not
be limited to current-year production
[48 FR 42129, Sept. 19, 1983, as amended at 68 models. However, with the prior ap-
FR 28080, May 22, 2003]
proval of the head of the contracting
8.1101 Definitions. office, solicitations may be limited to
current models on the basis of overall
As used in this subpart economy.
Leasing, means the acquisition of
motor vehicles, other than by purchase [48 FR 42129, Sept. 19, 1983, as amended at 55
FR 25527, June 21, 1990]
from private or commercial sources,
and includes the synonyms hire and 8.1103 Contract requirements.
rent.
Motor vehicle means an item of equip- Contracting officers shall include the
ment, mounted on wheels and designed following items in each contract for
for highway and/or land use, that (1) leasing motor vehicles:
derives power from a self-contained (a) Scope of contract.
power unit or (2) is designed to be (b) Method of computing payments.
(c) A listing of the number and type
towed by and used in conjunction with
of vehicles required, and the equipment
self-propelled equipment.
and accessories to be provided with
[48 FR 42129, Sept. 19, 1983, as amended at 66 each vehicle.
FR 2128, Jan. 10, 2001] (d) Responsibilities of the contractor
or the Government for furnishing gaso-
8.1102 Presolicitation requirements. line, motor oil, antifreeze, and similar
(a) Except as specified in 8.1102(b), be- items.
fore preparing solicitations for leasing (e) Unless it is determined that it
of motor vehicles, contracting officers will be more economical for the Gov-
shall obtain from the requiring activ- ernment to perform the work, a state-
ity a written certification that ment that the contractor shall perform
(1) The vehicles requested are of max- all maintenance on the vehicles.
imum fuel efficiency and minimum (f) A statement as to the applica-
body size, engine size, and equipment bility of pertinent State and local laws
(if any) necessary to fulfill operational and regulations, and the responsibility
135
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8.1104 48 CFR Ch. 1 (10103 Edition)
of each party for compliance with 9.1061 Conditions for preaward surveys.
them. 9.1062 Requests for preaward surveys.
(g) Responsibilities of the contractor 9.1063 Interagency preaward surveys.
9.1064 Reports.
or the Government for emergency re- 9.107 Surveys of nonprofit agencies serving
pairs and services. people who are blind or have other severe
disabilities under the Javits-Wagner-
8.1104 Contract clauses. ODay (JWOD) Program.
Insert the following clauses in solici-
tations and contracts for leasing of Subpart 9.2Qualifications Requirements
motor vehicles, unless the motor vehi- 9.200 Scope of subpart.
cles are leased in foreign countries: 9.201 Definitions.
(a) The clause at 52.2084, Vehicle 9.202 Policy.
Lease Payments. 9.203 QPLs, QMLs, and QBLs.
(b) The clause at 52.2085, Condition 9.204 Responsibilities for establishment of a
of Leased Vehicles. qualification requirement.
(c) The clause at 52.2086, Marking of 9.205 Opportunity for qualification before
award.
Leased Vehicles.
9.206 Acquisitions subject to qualification
(d) A clause substantially the same requirements.
as the clause at 52.2087, Tagging of 9.2061 General.
Leased Vehicles, for vehicles leased 9.2062 Contract clause.
over 60 days (see subpart B of 41 CFR 9.2063 Competition.
10234). 9.207 Changes in status regarding qualifica-
(e) The provisions and clauses pre- tion requirements.
scribed elsewhere in the FAR for solici-
tations and contracts for supplies when Subpart 9.3First Article Testing and
a fixed-price contract is contemplated, Approval
but excluding 9.301 Definition.
(1) The clause at 52.21116, Variation 9.302 General.
in Quantity; 9.303 Use.
(2) The clause at 52.2321, Payments; 9.304 Exceptions.
(3) The clause at 52.22220, Walsh- 9.305 Risk.
Healey Public Contracts Act; and 9.306 Solicitation requirements.
9.307 Government administration proce-
(4) The clause at 52.24616, Responsi-
dures.
bility for Supplies. 9.308 Contract clauses.
[48 FR 42129, Sept. 19, 1983, as amended at 51 9.3081 Testing performed by the con-
FR 19714, May 30, 1986; 60 FR 48237, Sept. 18, tractor.
1995; 68 FR 28080, May 22, 2003] 9.3082 Testing performed by the Govern-
ment.
PART 9CONTRACTOR Subpart 9.4Debarment, Suspension, and
QUALIFICATIONS Ineligibility
136
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Federal Acquisition Regulation 9.103
9.4074 Period of suspension. Subpart 9.1Responsible
9.4075 Scope of suspension.
9.408 Certification regarding debarment,
Prospective Contractors
suspension, proposed debarment, and
other responsibility matters.
9.100 Scope of subpart.
9.409 Solicitation provision and contract This subpart prescribes policies,
clause. standards, and procedures for deter-
mining whether prospective contrac-
Subpart 9.5Organizational and tors and subcontractors are respon-
Consultant Conflicts of Interest sible.
9.500 Scope of subpart.
9.101 Definition.
9.501 Definition.
9.502 Applicability. Surveying activity, as used in this sub-
9.503 Waiver. part, means the cognizant contract ad-
9.504 Contracting officer responsibilities. ministration office or, if there is no
9.505 General rules. such office, another organization des-
9.5051 Providing systems engineering and ignated by the agency to conduct
technical direction. preaward surveys.
9.5052 Preparing specifications or work
statements. [48 FR 42142, Sept. 19, 1983, as amended at 66
9.5053 Providing evaluation services. FR 2128, Jan. 10, 2001]
9.5054 Obtaining access to proprietary in-
formation. 9.102 Applicability.
9.506 Procedures. (a) This subpart applies to all pro-
9.507 Solicitation provisions and contract posed contracts with any prospective
clause.
contractor that is located
9.5071 Solicitation provisions.
9.5072 Contract clause.
(1) In the United States or its out-
9.508 Examples. lying areas; or
(2) Elsewhere, unless application of
Subpart 9.6Contractor Team the subpart would be inconsistent with
Arrangements the laws or customs where the con-
tractor is located.
9.601 Definition. (b) This subpart does not apply to
9.602 General. proposed contracts with (1) foreign,
9.603 Policy. State, or local governments; (2) other
9.604 Limitations.
U.S. Government agencies or their in-
Subpart 9.7Defense Production Pools strumentalities; or (3) agencies for the
and Research and Development Pools blind or other severely handicapped
(see subpart 8.7).
9.701 Definition.
[48 FR 42142, Sept. 19, 1983, as amended at 68
9.702 Contracting with pools.
FR 28080, May 22, 2003]
9.703 Contracting with individual pool mem-
bers. 9.103 Policy.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap- (a) Purchases shall be made from,
ter 137; and 42 U.S.C. 2473(c).
and contracts shall be awarded to, re-
SOURCE: 48 FR 42142, Sept. 19, 1983, unless sponsible prospective contractors only.
otherwise noted. (b) No purchase or award shall be
made unless the contracting officer
9.000 Scope of part. makes an affirmative determination of
This part prescribes policies, stand- responsibility. In the absence of infor-
ards, and procedures pertaining to pro- mation clearly indicating that the pro-
spective contractors responsibility; spective contractor is responsible, the
debarment, suspension, and ineligi- contracting officer shall make a deter-
bility; qualified products; first article mination of nonresponsibility. If the
testing and approval; contractor team prospective contractor is a small busi-
arrangements; defense production pools ness concern, the contracting officer
and research and development pools; shall comply with subpart 19.6, Certifi-
and organizational conflicts of inter- cates of Competency and Determina-
est. tions of Responsibility. (If Section 8(a)
137
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9.104 48 CFR Ch. 1 (10103 Edition)
of the Small Business Act (15 U.S.C. (f) Have the necessary production,
637) applies, see subpart 19.8.) construction, and technical equipment
(c) The award of a contract to a sup- and facilities, or the ability to obtain
plier based on lowest evaluated price them (see 9.1043(a)); and
alone can be false economy if there is (g) Be otherwise qualified and eligi-
subsequent default, late deliveries, or ble to receive an award under applica-
other unsatisfactory performance re- ble laws and regulations.
sulting in additional contractual or ad-
[48 FR 42142, Sept. 19, 1983, as amended at 51
ministrative costs. While it is impor- FR 27119, July 29, 1986; 56 FR 55374, Oct. 25,
tant that Government purchases be 1991; 60 FR 16718, Mar. 31, 1995; 61 FR 67410,
made at the lowest price, this does not Dec. 20, 1996; 65 FR 80264, Dec. 20, 2000; 66 FR
require an award to a supplier solely 17756, Apr. 3, 2001; 66 FR 66986, 66989, Dec. 27,
because that supplier submits the low- 2001]
est offer. A prospective contractor
must affirmatively demonstrate its re- 9.1042 Special standards.
sponsibility, including, when nec- (a) When it is necessary for a par-
essary, the responsibility of its pro- ticular acquisition or class of acquisi-
posed subcontractors. tions, the contracting officer shall de-
[48 FR 42142, Sept. 19, 1983, as amended at 61 velop, with the assistance of appro-
FR 67410, Dec. 20, 1996; 62 FR 44819, Aug. 22, priate specialists, special standards of
1997; 62 FR 48921, Sept. 17, 1997; 65 FR 80264, responsibility. Special standards may
Dec. 20, 2000; 66 FR 17755, Apr. 3, 2001; 66 FR be particularly desirable when experi-
66986, 66989, Dec. 27, 2001] ence has demonstrated that unusual
expertise or specialized facilities are
9.104 Standards. needed for adequate contract perform-
ance. The special standards shall be set
9.1041 General standards.
forth in the solicitation (and so identi-
To be determined responsible, a pro- fied) and shall apply to all offerors.
spective contractor must (b) Contracting officers shall award
(a) Have adequate financial resources contracts for subsistence only to those
to perform the contract, or the ability prospective contractors that meet the
to obtain them (see 9.1043(a)); general standards in 9.1041 and are ap-
(b) Be able to comply with the re- proved in accordance with agency sani-
quired or proposed delivery or perform- tation standards and procedures.
ance schedule, taking into consider-
ation all existing commercial and gov- 9.1043 Application of standards.
ernmental business commitments; (a) Ability to obtain resources. Except
(c) Have a satisfactory performance to the extent that a prospective con-
record (see 48 CFR 9.1043(b) and part tractor has sufficient resources or pro-
42, subpart 42.15). A prospective con- poses to perform the contract by sub-
tractor shall not be determined respon- contracting, the contracting officer
sible or nonresponsible solely on the shall require acceptable evidence of the
basis of a lack of relevant performance prospective contractors ability to ob-
history, except as provided in 9.1042; tain required resources (see 9.1041(a),
(d) Have a satisfactory record of in- (e), and (f)). Acceptable evidence nor-
tegrity and business ethics; mally consists of a commitment or ex-
(e) Have the necessary organization, plicit arrangement, that will be in ex-
experience, accounting and operational istence at the time of contract award,
controls, and technical skills, or the to rent, purchase, or otherwise acquire
ability to obtain them (including, as the needed facilities, equipment, other
appropriate, such elements as produc- resources, or personnel. Consideration
tion control procedures, property con- of a prime contractors compliance
trol systems, quality assurance meas- with limitations on subcontracting
ures, and safety programs applicable to shall take into account the time period
materials to be produced or services to covered by the contract base period or
be performed by the prospective con- quantites plus option periods or quan-
tractor and subcontractors) (see 9.104 tities, if such options are considered
3(a)); when evaluating offers for award.
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Federal Acquisition Regulation 9.1051
139
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9.1052 48 CFR Ch. 1 (10103 Edition)
140
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Federal Acquisition Regulation 9.1064
including any preaward survey reports (c) Before beginning a preaward sur-
and any applicable Certificate of Com- vey, the surveying activity shall ascer-
petency, must be included in the con- tain whether the prospective con-
tract file. tractor is debarred, suspended, or ineli-
gible (see subpart 9.4). If the prospec-
9.1053 Disclosure of preaward infor- tive contractor is debarred, suspended,
mation. or ineligible, the surveying activity
(a) Except as provided in subpart 24.2, shall advise the contracting officer
Freedom of Information Act, informa- promptly and not proceed with the
tion (including the preaward survey re- preaward survey unless specifically re-
port) accumulated for purposes of de- quested to do so by the contracting of-
termining the responsibility of a pro- ficer.
spective contractor shall not be re- [48 FR 42142, Sept. 19, 1983, as amended at 51
leased or disclosed outside the Govern- FR 27489, July 31, 1986; 60 FR 48237, Sept. 18,
ment. 1995; 61 FR 39201, July 26, 1996]
(b) The contracting officer may dis-
cuss preaward survey information with 9.1062 Requests for preaward sur-
the prospective contractor before de- veys.
termining responsibility. After award, The contracting officers request to
the contracting officer or, if it is ap- the surveying activity (Preaward Sur-
propriate, the head of the surveying ac- vey of Prospective Contractor (Gen-
tivity or a designee may discuss the eral), SF 1403) shall
findings of the preaward survey with (a) Identify additional factors about
the company surveyed. which information is needed;
(c) Preaward survey information may (b) Include the complete solicitation
contain proprietary or source selection package (unless it has previously been
information and should be marked with furnished), and any information indi-
the appropriate legend and protected cating prior unsatisfactory perform-
accordingly (see 3.1044). ance by the prospective contractor;
(c) State whether the contracting of-
[48 FR 42142, Sept. 19, 1983, as amended by 54 fice will participate in the survey;
FR 20496, May 11, 1989; 62 FR 232, Jan. 2, 1997;
67 FR 13063, Mar. 20, 2002]
(d) Specify the date by which the re-
port is required. This date should be
9.106 Preaward surveys. consistent with the scope of the survey
requested and normally shall allow at
9.1061 Conditions for preaward sur- least 7 working days to conduct the
veys. survey; and
(a) A preaward survey is normally re- (e) When appropriate, limit the scope
quired only when the information on of the survey.
hand or readily available to the con-
9.1063 Interagency preaward surveys.
tracting officer, including information
from commercial sources, is not suffi- When the contracting office and the
cient to make a determination regard- surveying activity are in different
ing responsibility. In addition, if the agencies, the procedures of this section
contemplated contract will have a 9.106 and subpart 42.1 shall be followed
fixed price at or below the simplified along with the regulations of the agen-
acquisition threshold or will involve cy in which the surveying activity is
the acquisition of commercial items located, except that reasonable special
(see part 12), the contracting officer requests by the contracting office shall
should not request a preaward survey be accommodated.
unless circumstances justify its cost. [48 FR 42142, Sept. 19, 1983, as amended at 54
(b) When a cognizant contract admin- FR 20496, May 11, 1989; 55 FR 36795, Sept. 6,
istration office becomes aware of a pro- 1990; 62 FR 232, Jan. 2, 1997]
spective award to a contractor about
which unfavorable information exists 9.1064 Reports.
and no preaward survey has been re- (a) The surveying activity shall com-
quested, it shall promptly obtain and plete the applicable parts of SF 1403,
transmit details to the contracting of- Preaward Survey of Prospective Con-
ficer. tractor (General); SF 1404, Preaward
141
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9.107 48 CFR Ch. 1 (10103 Edition)
142
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Federal Acquisition Regulation 9.202
143
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9.203 48 CFR Ch. 1 (10103 Edition)
can meet them before the date speci- 9.203 QPLs, QMLs, and QBLs.
fied for award of the contract, a poten-
(a) Qualification and listing in a
tial offeror may not be denied the op- QPL, QML, or QBL is the process by
portunity to submit and have consid- which products are obtained from man-
ered an offer for a contract solely be- ufacturers or distributors, examined
cause the potential offeror and tested for compliance with speci-
(1) Is not on a QPL, QML, or QBL fication requirements, or manufactur-
maintained by the Department of De- ers or potential offerors, are provided
fense (DOD) or the National Aero- an opportunity to demonstrate their
nautics and Space Administration abilities to meet the standards speci-
(NASA); or fied for qualification. The names of
(2) Has not been identified as meeting successful products, manufacturers, or
a qualification requirement established potential offerors are included on lists
after October 19, 1984, by DOD or evidencing their status. Generally,
NASA; or qualification is performed in advance
(3) Has not been identified as meeting and independently of any specific ac-
a qualification requirement established quisition action. After qualification,
by a civilian agency (not including the products, manufacturers, or poten-
NASA). tial offerors are included in a Federal
(d) The procedures in subpart 19.6 for or Military QPL, QML, or QBL. (See
referring matters to the Small Busi- 9.202(a)(2) with regard to any product,
ness Administration are not manda- manufacturer, or potential offeror not
tory on the contracting officer when yet included on an applicable list.)
the basis for a referral would involve a (b) Specifications requiring a quali-
challenge by the offeror to either the fied product are included in the fol-
validity of the qualification require- lowing publications:
ment or the offerors compliance with (1) GSA Index of Federal Specifica-
such requirement. tions, Standards and Commercial Item
(e) The contracting officer need not Descriptions.
delay a proposed award in order to pro- (2) Department of Defense Index of
vide a potential offeror with an oppor- Specifications and Standards.
tunity to demonstrate its ability to (c) Instructions concerning qualifica-
meet the standards specified for quali- tion procedures are included in the fol-
fication. In addition, when approved by lowing publications:
the head of an agency or designee, a (1) Federal Standardization Manual,
procurement need not be delayed in FSPM0001.
order to comply with 9.202(a). (2) Defense Standardization Manual
4120.24M, Appendix 2, as amended by
(f) Within 7 years following enforce-
Military Standards 961 and 962.
ment of a QPL, QML, or QBL by DOD
(d) The publications listed in para-
or NASA, or within 7 years after any
graphs (b) and (c) of this section are
qualification requirement was origi-
sold to the public. The publications in
nally established by a civilian agency
paragraphs (b)(1) and (c)(1) of this sec-
other than NASA, the qualification re-
tion may be obtained from the ad-
quirement shall be examined and re- dressee in 11.201(d)(1). The publications
validated in accordance with the re- in paragraphs (b)(2) and (c)(2) of this
quirements of 9.202(a). For DOD and section may be obtained from the ad-
NASA, qualification requirements, dressee in 11.201(d)(2).
other than QPLs, QMLs, and QBLs,
shall be examined and revalidated [50 FR 35476, Aug. 30, 1985, as amended at 53
within 7 years after establishment of FR 17857, May 18, 1988; 63 FR 34062, June 22,
1998; 67 FR 6120, Feb. 8, 2002]
the requirement under 9.202(a). Any pe-
riods for which a waiver under 9.202(b) 9.204 Responsibilities for establish-
is in effect shall be excluded in com- ment of a qualification require-
puting the 7 years within which review ment.
and revalidation must occur. The responsibilities of agency activi-
[50 FR 35476, Aug. 30, 1985, as amended at 53 ties that establish qualification re-
FR 34227, Sept. 2, 1988] quirements include the following:
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Federal Acquisition Regulation 9.205
(a) Arranging publicity for the quali- enforce a qualification requirement for
fication requirements. If active com- a solicitation.
petition on anticipated future quali- (g) Withdrawing or omitting quali-
fication requirements is likely to be fication of a listed product, manufac-
fewer than two manufacturers or the turer or offeror, as necessary.
products of two manufacturers, the ac- (h) Advising persons furnished any
tivity responsible for establishment of list of products, manufacturers or
the qualification requirements must offerors meeting a qualification re-
(1) Periodically furnish through the quirement and suppliers whose prod-
Governmentwide point of entry (GPE) ucts are on any such list that
a notice seeking additional sources or (1) The list does not constitute en-
products for qualification unless the dorsement of the product, manufac-
contracting officer determines that turer, or other source by the Govern-
such publication would compromise the
ment;
national security.
(2) The products or sources listed
(2) Bear the cost of conducting the
have been qualified under the latest ap-
specified testing and evaluation (ex-
cluding the costs associated with pro- plicable specification;
ducing the item or establishing the (3) The list may be amended without
production, quality control, or other notice;
system to be tested and evaluated) for (4) The listing of a product or source
a small business concern or a product does not release the supplier from com-
manufactured by a small business con- pliance with the specification; and
cern which has met the standards spec- (5) Use of the list for advertising or
ified for qualification and which could publicity is permitted. However, it
reasonably be expected to compete for must not be stated or implied that a
a contract for that requirement. How- particular product or source is the only
ever, such costs may be borne only if it product or source of that type quali-
is determined in accordance with agen- fied, or that the Government in any
cy procedures that such additional way recommends or endorses the prod-
qualified sources or products are likely ucts or the sources listed.
to result in cost savings from increased (i) Reexamining a qualified product
competition for future requirements or manufacturer when
sufficient to amortize the costs in- (1) The manufacturer has modified its
curred by the agency within a reason- product, or changed the material or the
able period of time, considering the du- processing sufficiently so that the va-
ration and dollar value of anticipated lidity of previous qualification is ques-
future requirements. A prospective tionable;
contractor requesting the United (2) The requirements in the specifica-
States to bear testing and evaluation tion have been amended or revised suf-
costs must certify as to its status as a ficiently to affect the character of the
small business concern under section 3 product; or
of the Small Business Act in order to (3) It is otherwise necessary to deter-
receive further consideration. mine that the quality of the product is
(b) Qualifying products that meet maintained in conformance with the
specification requirements. specification.
(c) Listing manufacturers and sup-
pliers whose products are qualified in [50 FR 35476, Aug. 30, 1985, as amended at 66
accordance with agency procedures. FR 27413, May 16, 2001; 68 FR 56679, Oct. 1,
(d) Furnishing QPLs, OMLs, or 2003]
QBLs or the qualification require-
ments themselves to prospective 9.205 Opportunity for qualification be-
fore award.
offerors and the public upon request
(see 9.202(a)(2)(i) above). (a) If an agency determines that a
(e) Clarifying, as necessary, quali- qualification requirement is necessary,
fication requirements. the agency activity responsible for es-
(f) In appropriate cases, when re- tablishing the requirement must urge
quested by the contracting officer, pro- manufacturers and other potential
viding concurrence in a decision not to sources to demonstrate their ability to
145
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9.206 48 CFR Ch. 1 (10103 Edition)
meet the standards specified for quali- (1) Any qualification requirement es-
fication and, when possible, give suffi- tablished by statute prior to October
cient time to arrange for qualification 30, 1984, for civilian agencies (not in-
before award. The responsible agency cluding NASA); or
activity must, before establishing any (2) Any qualification requirement es-
qualification requirement, furnish no- tablished by statute or administrative
tice through the GPE. The notice must action prior to October 19, 1984, for
include DOD or NASA. Qualification require-
(1) Intent to establish a qualification ments established after the above dates
requirement; must comply with 9.202(a) to be en-
(2) The specification number and forceable.
name of the product; (b) Except when the agency head or
(3) The name and address of the ac- designee determines that an emergency
tivity to which a request for the infor- exists, whenever an agency elects,
mation and opportunity described in whether before or after award, not to
9.202(a)(2) should be submitted; enforce a qualification requirement
(4) The anticipated date that the which it established, the requirement
agency will begin awarding contracts may not thereafter be enforced unless
subject to the qualification require- the agency complies with 9.202(a).
ment; (c) If a qualification requirement ap-
plies, the contracting officer need con-
(5) A precautionary notice that when
sider only those offers identified as
a product is submitted for qualification
meeting the requirement or included
testing, the applicant must furnish any
on the applicable QPL, QML, or QBL,
specific information that may be re-
unless an offeror can satisfactorily
quested of the manufacturer before
demonstrate to the contracting officer
testing will begin; and
that it or its product or its subcon-
(6) The approximate time period fol- tractor or its product can meet the
lowing submission of a product for standards established for qualification
qualification testing within which the before the date specified for award.
applicant will be notified whether the (d) If a product subject to a qualifica-
product passed or failed the qualifica- tion requirement is to be acquired as a
tion testing (see 9.202(a)(4)). component of an end item, the con-
(b) The activity responsible for estab- tracting officer must assure that all
lishing a qualification requirement such components and their qualifica-
must keep any list maintained of those tion requirements are properly identi-
already qualified open for inclusion of fied in the solicitation since the prod-
additional products, manufacturers, or uct or source must meet the standards
other potential sources, including eli- specified for qualification before
gible products from designated coun- award.
tries under the terms of the Trade (e) In acquisitions subject to quali-
Agreements Act (see Subpart 25.4). fication requirements, the contracting
[50 FR 35476, Aug. 30, 1985, as amended at 64 officer shall take the following steps:
FR 72418, Dec. 27, 1999; 66 FR 27413, May 16, (1) Use presolicitation notices in ap-
2001; 68 FR 56679, Oct. 1, 2003] propriate cases to advise potential sup-
pliers before issuing solicitations in-
9.206 Acquisitions subject to qualifica- volving qualification requirements.
tion requirements. The notices shall identify the specifica-
tion containing the qualification re-
9.2061 General. quirement and establish an allowable
(a) Agencies may not enforce any time period, consistent with delivery
QPL, QML, or QBL without first com- requirements, for prospective offerors
plying with the requirements of to demonstrate their abilities to meet
9.202(a). However, qualification require- the standards specified for qualifica-
ments themselves, whether or not pre- tion. The notice shall be publicized in
viously embodied in a QPL, QML, or accordance with 5.204. Whether or not a
QBL, may be enforced without regard presolicitation notice is used, the gen-
to 9.202(a) if they are in either of the eral synopsizing requirements of sub-
following categories: part 5.2 apply.
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Federal Acquisition Regulation 9.207
147
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9.301 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 9.307
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9.308 48 CFR Ch. 1 (10103 Edition)
the contracting office whether to ap- same as the clause at 52.2093, First Ar-
prove, conditionally approve, or dis- ticle ApprovalContractor Testing,
approve the first article. The con- with its Alternate I.
tracting officer shall then notify the (3) If it is necessary to authorize the
contractor of the action taken and fur- contractor to purchase material or to
nish a copy of the notice to the con- commence production before first arti-
tract administration office. The notice cle approval, the contracting officer
shall include the first article shipment shall use a clause substantially the
number, when available, and the appli- same as the clause at 52.2093, First Ar-
cable contract line item number. Any ticle ApprovalContractor Testing,
changes in the drawings, designs, or with its Alternate II.
specifications determined by the con-
tracting officer to be necessary shall be 9.3082 Testing performed by the Gov-
made under the Changes clause, and ernment.
not by the notice of approval, condi- (a)(1) The contracting officer shall
tional approval, or disapproval fur- insert the clause at 52.2094, First Arti-
nished the contractor. cle ApprovalGovernment Testing, in
solicitations and contracts when a
9.308 Contract clauses. fixed-price contract is contemplated
and it is intended that the contract re-
9.3081 Testing performed by the con- quire first article approval and that
tractor.
the Government will be responsible for
(a)(1) The contracting officer shall conducting the first article test.
insert the clause at 52.2093, First Arti- (2) If it is intended that the con-
cle ApprovalContractor Testing, in tractor be required to produce the first
solicitations and contracts when a article and the production quantity at
fixed-price contract is contemplated the same facility, the contracting offi-
and it is intended that the contract re- cer shall use the basic clause with its
quire (i) first article approval and (ii) Alternate I.
that the contractor be required to con- (3) If it is necessary to authorize the
duct the first article testing. contractor to purchase material or to
(2) If it is intended that the con- commence production before first arti-
tractor be required to produce the first cle approval, the contracting officer
article and the production quantity at shall use the basic clause with its Al-
the same facility, the contracting offi- ternate II.
cer shall use the clause with its Alter- (b)(1) The contracting officer shall
nate I. insert a clause substantially the same
(3) If it is necessary to authorize the as the clause at 52.2094, First Article
contractor to purchase material or to ApprovalGovernment Testing, in so-
commence production before first arti- licitations and contracts when a cost-
cle approval, the contracting officer reimbursement contract is con-
shall use the clause with its Alternate templated and it is intended that the
II. contract require first article approval
(b)(1) The contracting officer shall and that the Government be respon-
insert a clause substantially the same sible for conducting the first article
as the clause at 52.2093, First Article test.
ApprovalContractor Testing, in so- (2) If it is intended that the con-
licitations and contracts when a cost- tractor be required to produce the first
reimbursement contract is con- article and the production quantity at
templated and it is intended that the the same facility, the contracting offi-
contract require (i) first article ap- cer shall use a clause substantially the
proval and (ii) that the contractor be same as the clause at 52.2094, First Ar-
required to conduct the first article ticle ApprovalGovernment Testing,
test. with its Alternate I.
(2) If it is intended that the con- (3) If it is necessary to authorize the
tractor be required to produce the first contractor to purchase material or to
article and the production quantity at commence production before first arti-
the same facility, the contracting offi- cle approval, the contracting officer
cer shall use a clause substantially the shall use a clause substantially the
150
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Federal Acquisition Regulation 9.403
same as the clause at 52.2094, First Ar- cordance with this subpart, are appro-
ticle ApprovalGovernment Testing, priate means to effectuate this policy.
with its Alternate II. (b) The serious nature of debarment
and suspension requires that these
Subpart 9.4Debarment, sanctions be imposed only in the public
interest for the Governments protec-
Suspension, and Ineligibility tion and not for purposes of punish-
9.400 Scope of subpart. ment. Agencies shall impose debar-
ment or suspension to protect the Gov-
(a) This subpart ernments interest and only for the
(1) Prescribes policies and procedures causes and in accordance with the pro-
governing the debarment and suspen- cedures set forth in this subpart.
sion of contractors by agencies for the (c) When more than one agency has
causes given in 9.4062 and 9.4072; an interest in the debarment or suspen-
(2) Provides for the listing of contrac- sion of a contractor, consideration
tors debarred, suspended, proposed for shall be given to designating one agen-
debarment, and declared ineligible (see cy as the lead agency for making the
the definition of ineligible in 2.101); and decision. Agencies are encouraged to
(3) Sets forth the consequences of establish methods and procedures for
this listing. coordinating their debarment or sus-
(b) Although this subpart does cover pension actions.
the listing of ineligible contractors (d) Agencies shall establish appro-
(9.404) and the effect of this listing priate procedures to implement the
(9.405(b)), it does not prescribe policies policies and procedures of this subpart.
and procedures governing declarations [48 FR 42142, Sept. 19, 1983, as amended at 54
of ineligibility. FR 19814, May 8, 1989]
[48 FR 42142, Sept. 19, 1983, as amended at 54
FR 19814, May 8, 1989; 66 FR 2128, Jan. 10,
9.403 Definitions.
2001] As used in this subpart
Affiliates. Business concerns, organi-
9.401 Applicability. zations, or individuals are affiliates of
In accordance with Public Law 103 each other if, directly or indirectly, (1)
355, Section 2455 (31 U.S.C. 6101, note), either one controls or has the power to
and Executive Order 12689, any debar- control the other, or (2) a third party
ment, suspension or other Government- controls or has the power to control
wide exclusion initiated under the Non- both. Indicia of control include, but are
procurement Common Rule imple- not limited to, interlocking manage-
menting Executive Order 12549 on or ment or ownership, identity of inter-
after August 25, 1995 shall be recog- ests among family members, shared fa-
nized by and effective for Executive cilities and equipment, common use of
Branch agencies as a debarment or sus- employees, or a business entity orga-
pension under this subpart. Similarly, nized following the debarment, suspen-
any debarment, suspension, proposed sion, or proposed debarment of a con-
debarment or other Government-wide tractor which has the same or similar
exclusion initiated on or after August management, ownership, or principal
25, 1995 under this subpart shall also be employees as the contract or that was
recognized by and effective for those debarred, suspended, or proposed for
agencies and participants as an exclu- debarment.
sion under the Nonprocurement Com- Agency means any executive depart-
mon Rule. ment, military department or defense
agency, or other agency or independent
[60 FR 33065, June 26, 1995] establishment of the executive branch.
Civil judgment means a judgment or
9.402 Policy. finding of a civil offense by any court
(a) Agencies shall solicit offers from, of competent jurisdiction.
award contracts to, and consent to sub- Contractor means any individual or
contracts with responsible contractors other legal entity that
only. Debarment and suspension are (1) Directly or indirectly (e.g.,
discretionary actions that, taken in ac- through an affiliate), submits offers for
151
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9.404 48 CFR Ch. 1 (10103 Edition)
152
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Federal Acquisition Regulation 9.405
(4) In accordance with internal reten- that there is a compelling reason for
tion procedures, maintain records re- such action (see 9.4052, 9.4061(c), 9.407
lating to each debarment, suspension, 1(d), and 23.50(e)). Contractors
or proposed debarment taken by the debarred, suspended or proposed for de-
agency; barment are also excluded from con-
(5) Establish procedures to provide ducting business with the Government
for the effective use of the List of Par- as agents or representatives of other
ties Excluded from Federal Procure- contractors.
ment and Nonprocurement Programs, (b) Contractors included on the List
including internal distribution thereof,
of Parties Excluded from Federal Pro-
to ensure that the agency does not so-
curement and Nonprocurement Pro-
licit offers from, award contracts to, or
grams as having been declared ineli-
consent to subcontracts with contrac-
tors on the List of Parties Excluded gible on the basis of statutory or other
from Federal Procurement and Non- regulatory procedures are excluded
procurement Programs, except as oth- from receiving contracts, and if appli-
erwise provided in this subpart; and cable, subcontracts, under the condi-
(6) Direct inquiries concerning listed tions and for the period set forth in the
contractors to the agency or other au- statute or regulation. Agencies shall
thority that took the action. not solicit offers from, award contracts
(d) The List of Parties Excluded from to, or consent to subcontracts with
Federal Procurement and Nonprocure- these contractors under those condi-
ment Programs is available as follows: tions and for that period.
(1) The printed version is published (c) Contractors debarred, suspended,
monthly. Copies may be obtained by or proposed for debarment are excluded
purchasing a yearly subscription. from acting as individual sureties (see
(i) Federal agencies may subscribe part 28).
through their organizations printing (d)(1) After the opening of bids or re-
and distribution office. ceipt of proposals, the contracting offi-
(ii) The public may subscribe by writ- cer shall review the List of Parties Ex-
ing the Superintendent of Documents, cluded from Federal Procurement and
U.S. Government Printing Office,
Nonprocurement Programs.
Washington, DC 20402, or by calling the
(2) Bids received from any listed con-
Government Printing Office Inquiry
and Order Desk at (202) 5121800. tractor in response to an invitation for
(2) The electronic version is updated bids shall be entered on the abstract of
daily and is available via bids, and rejected unless the agency
(i) The internet at http:// head or a designee determines in writ-
epls.arnet.gov; or ing that there is a compelling reason to
(ii) Electronic bulletin board. Dial consider the bid.
(202) 2190132. The settings are N81F. (3) Proposals, quotations, or offers re-
(e) For general questions about en- ceived from any listed contractor shall
tries on the List of Parties Excluded not be evaluated for award or included
from Federal Procurement and Non- in the competitive range, nor shall dis-
procurement Programs or additional cussions be conducted with a listed of-
information on accessing the elec- feror during a period of ineligibility,
tronic bulletin board, call GSA at (202) unless the agency head or a designee
5014873 or 5014740. determines, in writing, that there is a
[65 FR 16286, Mar. 27, 2000 compelling reason to do so. If the pe-
riod of ineligibility expires or is termi-
9.405 Effect of listing. nated prior to award, the contracting
(a) Contractors debarred, suspended, officer may, but is not required to, con-
or proposed for debarment are excluded sider such proposals, quotations, or of-
from receiving contracts, and agencies fers.
shall not solicit offers from, award con- (4) Immediately prior to award, the
tracts to, or consent to subcontracts contracting officer shall again review
with these contractors, unless the the List of Parties Excluded from Fed-
agency head or a designee determines eral Procurement and Nonprocurement
153
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9.4051 48 CFR Ch. 1 (10103 Edition)
154
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Federal Acquisition Regulation 9.4061
155
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9.4062 48 CFR Ch. 1 (10103 Edition)
(2) When debarring a contractor from (A) Failure to comply with the re-
the award of acquisition contracts and quirements of the clause at 52.2236,
from the purchase of Federal personal Drug-Free Workplace; or
property, the debarment notice shall so (B) Such a number of contractor em-
indicate and the appropriate FAR and ployees convicted of violations of
FPMR citations shall be included. criminal drug statutes occurring in the
[48 FR 42142, Sept. 19, 1983, as amended at 52
workplace as to indicate that the con-
FR 6121, Feb. 27, 1987; 54 FR 19815, May 8, tractor has failed to make a good faith
1989; 55 FR 21707, May 25, 1990; 55 FR 30465, effort to provide a drug-free workplace
July 26, 1990; 56 FR 67129, Dec. 27, 1991; 59 FR (see 23.504).
67033, Dec. 28, 1994] (iii) Intentionally affixing a label
bearing a Made in America inscrip-
9.4062 Causes for debarment. tion (or any inscription having the
The debarring official may debar same meaning) to a product sold in or
(a) A contractor for a conviction of shipped to the United States or its out-
or civil judgment for lying areas, when the product was not
(1) Commission of fraud or a criminal made in the United States or its out-
offense in connection with (i) obtain- lying areas (see Section 202 of the De-
ing, (ii) attempting to obtain, or (iii) fense Production Act (Public Law 102
performing a public contract or sub- 558)).
contract; (iv) Commission of an unfair trade
(2) Violation of Federal or State anti- practice as defined in 9.403 (see Section
trust statutes relating to the submis- 201 of the Defense Production Act (Pub-
sion of offers; lic Law 102558)).
(3) Commission of embezzlement, (2) A contractor, based on a deter-
theft, forgery, bribery, falsification or mination by the Attorney General of
destruction of records, making false the United States, or designee, that the
statements, tax evasion, or receiving contractor is not in compliance with
stolen property; Immigration and Nationality Act em-
(4) Intentionally affixing a label ployment provisions (see Executive
bearing a Made in America inscrip- Order 12989). The Attorney Generals
tion (or any inscription having the determination is not reviewable in the
same meaning) to a product sold in or debarment proceedings.
shipped to the United States or its out- (c) A contractor or subcontractor
lying areas, when the product was not based on any other cause of so serious
made in the United States or its out- or compelling a nature that it affects
lying areas (see Section 202 of the De- the present responsibility of the con-
fense Production Act (Public Law 102 tractor or subcontractor.
558)); or [48 FR 42142, Sept. 19, 1983, as amended at 54
(5) Commission of any other offense FR 4968, Jan. 31 ,1989; 54 FR 19815, May 8,
indicating a lack of business integrity 1989; 55 FR 21707, May 25, 1990; 59 FR 11372,
or business honesty that seriously and Mar. 10, 1994; 61 FR 2633, Jan. 26, 1996; 61 FR
directly affects the present responsi- 41473, Aug. 8, 1996; 61 FR 69291, Dec. 31, 1996;
bility of a Government contractor or 68 FR 28080, May 22, 2003]
subcontractor.
(b)(1) A contractor, based upon a pre- 9.4063 Procedures.
ponderance of the evidence for (a) Investigation and referral. Agencies
(i) Violation of the terms of a Gov- shall establish procedures for the
ernment contract or subcontract so se- prompt reporting, investigation, and
rious as to justify debarment, such as referral to the debarring official of
(A) Willful failure to perform in ac- matters appropriate for that officials
cordance with the terms of one or more consideration.
contracts; or (b) Decisionmaking process. (1) Agen-
(B) A history of failure to perform, or cies shall establish procedures gov-
of unsatisfactory performance of, one erning the debarment decisionmaking
or more contracts. process that are as informal as is prac-
(ii) Violations of the Drug-Free ticable, consistent with principles of
Workplace Act of 1988 (Public Law 100 fundamental fairness. These procedures
690), as indicated by shall afford the contractor (and any
156
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Federal Acquisition Regulation 9.4063
157
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9.4064 48 CFR Ch. 1 (10103 Edition)
158
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Federal Acquisition Regulation 9.4072
documents such as contracts, inspec- priate FAR and FPMR citations shall
tion reports, and correspondence. be included.
(b)(2) The existence of a cause for [48 FR 42142, Sept. 19, 1983, as amended at 54
suspension does not necessarily require FR 4968, Jan. 31, 1989; 54 FR 19816, May 8,
that the contractor be suspended. The 1989; 56 FR 67130, Dec. 27, 1991; 59 FR 67033,
suspending official should consider the Dec. 28, 1994]
seriousness of the contractors acts or
omissions and may, but is not required 9.4072 Causes for suspension.
to, consider remedial measures or miti- (a) The suspending official may sus-
gating factors, such as those set forth pend a contractor suspected, upon ade-
in 9.4061(a). A contractor has the bur- quate evidence, of
den of promptly presenting to the sus- (1) Commission of fraud or a criminal
pending official evidence of remedial offense in connection with (i) obtain-
measures or mitigating factors when it ing, (ii) attempting to obtain, or (iii)
has reason to know that a cause for performing a public contract or sub-
suspension exists. The existence or contract;
nonexistence of any remedial measures (2) Violation of Federal or State anti-
or mitigating factors is not necessarily trust statutes relating to the submis-
determinative of a contractors present sion of offers;
responsibility. (3) Commission of embezzlement,
(c) Suspension constitutes suspension theft, forgery, bribery, falsification or
of all divisions or other organizational destruction of records, making false
elements of the contractor, unless the statements, tax evasion, or receiving
suspension decision is limited by its stolen property; or
terms to specific divisions, organiza- (4) Violations of the Drug-Free Work-
tional elements, or commodities. The place Act of 1988 (Public Law 100690),
suspending official may extend the sus- as indicated by
pension decision to include any affili- (i) Failure to comply with the re-
ates of the contractor if they are (1) quirements of the clause at 52.2236,
specifically named and (2) given writ- Drug-Free Workplace; or
ten notice of the suspension and an op- (ii) Such a number of contractor em-
portunity to respond (see 9.4073(c)). ployees convicted of violations of
(d) A contractors suspension shall be criminal drug statutes occurring in the
effective throughout the executive workplace as to indicate that the con-
branch of the Government, unless the tractor has failed to make a good faith
agency head or a designee (except see effort to provide a drug-free workplace
23.506(e)) states in writing the compel- (see 23.504);
ling reasons justifying continued busi- (5) Intentionally affixing a label
ness dealings between that agency and bearing a Made in America inscrip-
the contractor. tion (or any inscription having the
(e)(1) When the suspending official same meaning) to a product sold in or
has authority to suspend contractors shipped to the United States or its out-
from both acquisition contracts pursu- lying areas, when the product was not
ant to this regulation and contracts for made in the United States or its out-
the purchase of Federal personal prop- lying areas (see Section 202 of the De-
fense Production Act (Public Law 102
erty pursuant to FPMR 10145.6, that
558));
official shall consider simultaneously
suspending the contractor from the (6) Commission of an unfair trade
practice as defined in 9.403 (see section
award of acquisition contracts and
201 of the Defense Production Act (Pub.
from the purchase of Federal personal
L. 102558)); or
property.
(7) Commission of any other offense
(2) When suspending a contractor
indicating a lack of business integrity
from the award of acquisition con- or business honesty that seriously and
tracts and from the purchase of Fed- directly affects the present responsi-
eral personal property, the suspension bility of a Government contractor or
notice shall so indicate and the appro- subcontractor.
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9.4073 48 CFR Ch. 1 (10103 Edition)
(b) Indictment for any of the causes (c) Notice of suspension. When a con-
in paragraph (a) above constitutes ade- tractor and any specifically named af-
quate evidence for suspension. filiates are suspended, they shall be im-
(c) The suspending official may upon mediately advised by certified mail, re-
adequate evidence also suspend a con- turn receipt requested
tractor for any other cause of so seri- (1) That they have been suspended
ous or compelling a nature that it af- and that the suspension is based on an
fects the present responsibility of a indictment or other adequate evidence
Government contractor or subcon- that the contractor has committed
tractor. irregularities (i) of a serious nature in
[48 FR 42142, Sept. 19, 1983, as amended at 54
business dealings with the Government
FR 4968, Jan. 31, 1989; 55 FR 21707, May 25, or (ii) seriously reflecting on the pro-
1990; 59 FR 11373, Mar. 10, 1994; 61 FR 2633, priety of further Government dealings
Jan. 26, 1996; 61 FR 69291, Dec. 31, 1996; 68 FR with the contractorany such irreg-
28081, May 22, 2003] ularities shall be described in terms
sufficient to place the contractor on
9.4073 Procedures. notice without disclosing the Govern-
(a) Investigation and referral. Agencies ments evidence;
shall establish procedures for the (2) That the suspension is for a tem-
prompt reporting, investigation, and porary period pending the completion
referral to the suspending official of of an investigation and such legal pro-
matters appropriate for that officials ceedings as may ensue;
consideration. (3) Of the cause(s) relied upon under
(b) Decisionmaking process. (1) Agen- 9.4072 for imposing suspension;
cies shall establish procedures gov- (4) Of the effect of the suspension;
erning the suspension decisionmaking (5) That, within 30 days after receipt
process that are as informal as is prac- of the notice, the contractor may sub-
ticable, consistent with principles of mit, in person, in writing, or through a
fundamental fairness. These procedures representative, information and argu-
shall afford the contractor (and any ment in opposition to the suspension,
specifically named affiliates) an oppor- including any additional specific infor-
tunity, following the imposition of sus- mation that raises a genuine dispute
pension, to submit, in person, in writ- over the material facts; and
ing, or through a representative, infor- (6) That additional proceedings to de-
mation and argument in opposition to termine disputed material facts will be
the suspension. conducted unless (i) the action is based
(2) In actions not based on an indict- on an indictment or (ii) a determina-
ment, if it is found that the contrac- tion is made, on the basis of Depart-
tors submission in opposition raises a ment of Justice advice, that the sub-
genuine dispute over facts material to stantial interests of the Government in
the suspension and if no determination pending or contemplated legal pro-
has been made, on the basis of Depart- ceedings based on the same facts as the
ment of Justice advice, that substan- suspension would be prejudiced.
tial interests of the Government in (d) Suspending officials decision. (1) In
pending or contemplated legal pro- actions (i) based on an indictment, (ii)
ceedings based on the same facts as the in which the contractors submission
suspension would be prejudiced, agen- does not raise a genuine dispute over
cies shall also material facts, or (iii) in which addi-
(i) Afford the contractor an oppor- tional proceedings to determine dis-
tunity to appear with counsel, submit puted material facts have been denied
documentary evidence, present wit- on the basis of Department of Justice
nesses, and confront any person the advice, the suspending officials deci-
agency presents; and sion shall be based on all the informa-
(ii) Make a transcribed record of the tion in the administrative record, in-
proceedings and make it available at cluding any submission made by the
cost to the contractor upon request, contractor.
unless the contractor and the agency, (2)(i) In actions in which additional
by mutual agreement, waive the re- proceedings are necessary as to dis-
quirement for a transcript. puted material facts, written findings
160
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Federal Acquisition Regulation 9.409
161
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9.500 48 CFR Ch. 1 (10103 Edition)
(b) The contracting officer shall in- tions created largely or wholly with
sert the clause at 52.2096, Protecting Government funds.
the Governments Interests when Sub- (b) The applicability of this subpart
contracting with Contractors is not limited to any particular kind of
Debarred, Suspended, or Proposed for acquisition. However, organizational
Debarment, in solicitations and con- conflicts of interest are more likely to
tracts where the contract value ex- occur in contracts involving
ceeds $25,000. (1) Management support services;
(2) Consultant or other professional
[60 FR 34748, July 3, 1995]
services;
(3) Contractor performance of or as-
Subpart 9.5Organizational and sistance in technical evaluations; or
Consultant Conflicts of Interest (4) Systems engineering and tech-
nical direction work performed by a
9.500 Scope of subpart. contractor that does not have overall
This subpart: contractual responsibility for develop-
(a) Prescribes responsibilities, gen- ment or production.
eral rules, and procedures for identi- (c) An oganizational conflict of inter-
fying, evaluating, and resolving organi- est may result when factors create an
zational conflicts of interest; actual or potential conflict of interest
(b) Provides examples to assist con- on an instant contract, or when the na-
tracting officers in applying these rules ture of the work to be performed on the
and procedures to individual con- instant contract creates an actual or
tracting situations; and potential conflict of interest on a fu-
(c) Implements section 8141 of the ture acquisition. In the latter case,
1989 Department of Defense Appropria- some restrictions on future activities
tion Act, Pub. L. 100463, 102 Stat. 2270 of the contractor may be required.
47 (1988). (d) Acquisitions subject to unique
agency organizational conflict of inter-
[55 FR 42685, Oct. 22, 1990, as amended at 65 est statutes are excluded from the re-
FR 36014, June 6, 2000]
quirements of this subpart.
9.501 Definition. [48 FR 42142, Sept. 19, 1983, as amended at 55
Marketing consultant, as used in this FR 42686, Oct. 22, 1990; 56 FR 55377, Oct. 25,
1991]
subpart, means any independent con-
tractor who furnishes advice, informa- 9.503 Waiver.
tion, direction, or assistance to an of-
feror or any other contractor in sup- The agency head or a designee may
port of the preparation or submission waive any general rule or procedure of
of an offer for a Government contract this subpart by determining that its
by that offeror. An independent con- application in a particular situation
tractor is not a marketing consultant would not be in the Governments in-
when rendering terest. Any request for waiver must be
(1) Services excluded in subpart 37.2; in writing, shall set forth the extent of
(2) Routine engineering and technical the conflict, and requires approval by
services (such as installation, oper- the agency head or a designee. Agency
ation, or maintenance of systems, heads shall not delegate waiver author-
equipment, software, components, or ity below the level of head of a con-
facilities); tracting activity.
(3) Routine legal, actuarial, auditing, 9.504 Contracting officer responsibil-
and accounting services; and ities.
(4) Training services.
(a) Using the general rules, proce-
[55 FR 42685, Oct. 22, 1990, as amended at 66 dures, and examples in this subpart,
FR 2128, Jan. 10, 2001] contracting officers shall analyze
planned acquisitions in order to
9.502 Applicability. (1) Identify and evaluate potential or-
(a) This subpart applies to contracts ganizational conflicts of interest as
with either profit or nonprofit organi- early in the acquisition process as pos-
zations, including nonprofit organiza- sible; and
162
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Federal Acquisition Regulation 9.5051
(2) Avoid, neutralize, or mitigate sig- section 9.505 or in the examples in 9.508.
nificant potential conflicts before con- Each individual contracting situation
tract award. should be examined on the basis of its
(b) Contracting officers should obtain particular facts and the nature of the
the advice of counsel and the assist- proposed contract. The exercise of
ance of appropriate technical special- common sense, good judgment, and
ists in evaluating potential conflicts sound discretion is required in both the
and in developing any necessary solici- decision on whether a significant po-
tation provisions and contract clauses tential conflict exists and, if it does,
(see 9.506). the development of an appropriate
(c) Before issuing a solicitation for a means for resolving it. The two under-
contract that may involve a significant lying principles are
potential conflict, the contracting offi- (a) Preventing the existence of con-
cer shall recommend to the head of the flicting roles that might bias a con-
contracting activity a course of action tractors judgment; and
for resolving the conflict (see 9.506).
(b) Preventing unfair competitive ad-
(d) In fulfilling their responsibilities
vantage. In addition to the other situa-
for identifying and resolving potential
conflicts, contracting officers should tions described in this subpart, an un-
avoid creating unnecessary delays, bur- fair competitive advantage exists
densome information requirements, where a contractor competing for
and excessive documentation. The con- award for any Federal contract pos-
tracting officers judgment need be for- sesses
mally documented only when a sub- (1) Proprietary information that was
stantive issue concerning potential or- obtained from a Government official
ganizational conflict of interest exists. without proper authorization; or
(e) The contracting officer shall (2) Source selection information (as
award the contract to the apparent defined in 2.101) that is relevant to the
successful offeror unless a conflict of contract but is not available to all
interest is determined to exist that competitors, and such information
cannot be avoided or mitigated. Before would assist that contractor in obtain-
determining to withhold award based ing the contract.
on conflict of interest considerations, [48 FR 42142, Sept. 19, 1983, as amended at 55
the contracting officer shall notify the FR 42686, Oct. 22, 1990; 56 FR 55377, Oct. 25,
contractor, provide the reasons there- 1991; 62 FR 232, Jan. 2, 1997; 64 FR 32748, June
for, and allow the contractor a reason- 17, 1999; 67 FR 13063, Mar. 20, 2002]
able opportunity to respond. If the con-
tracting officer finds that it is in the 9.5051 Providing systems engineering
best interest of the United States to and technical direction.
award the contract notwithstanding a (a) A contractor that provides sys-
conflict of interest, a request for waiv- tems engineering and technical direc-
er shall be submitted in accordance tion for a system but does not have
with 9.503. The waiver request and deci- overall contractual responsibility for
sion shall be included in the contract its development, its integration, as-
file. sembly, and checkout, or its produc-
[48 FR 42142, Sept. 19, 1983, as amended at 55 tion shall not (1) be awarded a contract
FR 42686, Oct. 22, 1990; 56 FR 55377, Oct. 25, to supply the system or any of its
1991] major components or (2) be a subcon-
tractor or consultant to a supplier of
9.505 General rules. the system or any of its major compo-
The general rules in 9.5051 through nents.
9.5054 prescribe limitations on con- (b) Systems engineering includes a
tracting as the means of avoiding, neu- combination of substantially all of the
tralizing, or mitigating organizational following activities: determining speci-
conflicts of interest that might other- fications, identifying and resolving
wise exist in the stated situations. interface problems, developing test re-
Some illustrative examples are pro- quirements, evaluating test data, and
vided in 9.508. Conflicts may arise in supervising design. Technical direction
situations not expressly covered in this includes a combination of substantially
163
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9.5052 48 CFR Ch. 1 (10103 Edition)
164
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Federal Acquisition Regulation 9.506
can use the leverage of the contract to mercial services, such as credit rating
obtain it, the contractor may gain an services, trade and financial journals,
unfair competitive advantage unless and business directories and registers.
restrictions are imposed. These restric- (b) If the contracting officer decides
tions protect the information and en- that a particular acquisition involves a
courage companies to provide it when significant potential organizational
necessary for contract performance. conflict of interest, the contracting of-
They are not intended to protect infor- ficer shall, before issuing the solicita-
mation (1) furnished voluntarily with-
tion, submit for approval to the chief
out limitations on its use or (2) avail-
of the contracting office (unless a high-
able to the Government or contractor
from other sources without restriction. er level official is designated by the
(b) A contractor that gains access to agency)
proprietary information of other com- (1) A written analysis, including a
panies in performing advisory and as- recommended course of action for
sistance services for the Government avoiding, neutralizing, or mitigating
must agree with the other companies the conflict, based on the general rules
to protect their information from un- in 9.505 or on another basis not ex-
authorized use or disclosure for as long pressly stated in that section;
as it remains proprietary and refrain (2) A draft solicitation provision (see
from using the information for any 9.5071); and
purpose other than that for which it (3) If appropriate, a proposed con-
was furnished. The contracting officer tract clause (see 9.5072).
shall obtain copies of these agreements (c) The approving official shall
and ensure that they are properly exe- (1) Review the contracting officers
cuted. analysis and recommended course of
(c) Contractors also obtain propri-
action, including the draft provision
etary and source selection information
and any proposed clause;
by acquiring the services of marketing
consultants which, if used in connec- (2) Consider the benefits and det-
tion with an acquisition, may give the riments to the Government and pro-
contractor an unfair competitive ad- spective contractors; and
vantage. Contractors should make in- (3) Approve, modify, or reject the rec-
quiries of marketing consultants to en- ommendations in writing.
sure that the marketing consultant has (d) The contracting officer shall
provided no unfair competitive advan- (1) Include the approved provision(s)
tage. and any approved clause(s) in the solic-
[48 FR 42142, Sept. 19, 1983, as amended at 55 itation or the contract, or both;
FR 42686, Oct. 22, 1990; 56 FR 55377, Oct. 25, (2) Consider additional information
1991; 62 FR 235, Jan. 2, 1997] provided by prospective contractors in
response to the solicitation or during
9.506 Procedures. negotiations; and
(a) If information concerning pro- (3) Before awarding the contract, re-
spective contractors is necessary to solve the conflict or the potential con-
identify and evaluate potential organi- flict in a manner consistent with the
zational conflicts of interest or to de- approval or other direction by the head
velop recommended actions, con- of the contracting activity.
tracting officers should first seek the (e) If, during the effective period of
information from within the Govern- any restriction (see 9.507), a con-
ment or from other readily available tracting office transfers acquisition re-
sources. Government sources include sponsibility for the item or system in-
the files and the knowledge of per- volved, it shall notify the successor
sonnel within the contracting office,
contracting office of the restriction,
other contracting offices, the cognizant
and send a copy of the contract under
contract administration and audit ac-
which the restriction was imposed.
tivities and offices concerned with con-
tract financing. Non-Government [55 FR 42686, Oct. 22, 1990, as amended at 62
sources include publications and com- FR 235, Jan. 2, 1997]
165
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9.507 48 CFR Ch. 1 (10103 Edition)
166
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Federal Acquisition Regulation 9.603
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9.604 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 10.001
10.001 Policy. (i) Determine if sources capable of
10.002 Procedures. satisfying the agencys requirements
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap- exist;
ter 137; and 42 U.S.C. 2473(c). (ii) Determine if commercial items
or, to the extent commercial items
SOURCE: 60 FR 48237, Sept. 18, 1995, unless suitable to meet the agencys needs are
otherwise noted.
not available, nondevelopmental items
10.000 Scope of part. are available that
(A) Meet the agencys requirements;
This part prescribes policies and pro- (B) Could be modified to meet the
cedures for conducting market re- agencys requirements; or
search to arrive at the most suitable (C) Could meet the agencys require-
approach to acquiring, distributing, ments if those requirements were
and supporting supplies and services. modified to a reasonable extent;
This part implements requirements of (iii) Determine the extent to which
41 U.S.C. 253a(a)(1), 41 U.S.C 264b, and commercial items or nondevelopmental
10 U.S.C. 2377. items could be incorporated at the
component level;
10.001 Policy. (iv) Determine the practices of firms
(a) Agencies must engaged in producing, distributing, and
(1) Ensure that legitimate needs are supporting commercial items, such as
identified and trade-offs evaluated to terms for warranties, buyer financing,
acquire items that meet those needs; maintenance and packaging, and mark-
(2) Conduct market research appro- ing;
priate to the circumstances (v) Ensure maximum practicable use
of recovered materials (see subpart
(i) Before developing new require-
23.4) and promote energy conservation
ments documents for an acquisition by
and efficiency; and
that agency;
(vi) Determine whether bundling is
(ii) Before soliciting offers for acqui- necessary and justified (see 7.107) (15
sitions with an estimated value in ex- U.S.C. 644(e)(2)(A)).
cess of the simplified acquisition (vii) Assess the availability of elec-
threshold; tronic and information technology that
(iii) Before soliciting offers for acqui- meets all or part of the applicable ac-
sitions with an estimated value less cessibility standards issued by the Ar-
than the simplified acquisition thresh- chitectural and Transportation Bar-
old when adequate information is not riers Compliance Board at 36 CFR part
available and the circumstances justify 1194(see Subpart 39.2).
its cost; (b) When conducting market re-
(iv) Before soliciting offers for acqui- search, agencies should not request po-
sitions that could lead to a bundled tential sources to submit more than
contract (15 U.S.C. 644(e)(2)(A)); and the minimum information necessary.
(v) Agencies shall conduct market re- (c) If an agency contemplates award-
search on an ongoing basis, and take ing a bundled contract, the agency
advantage to the maximum extent (1) When performing market re-
practicable of commercially available search, should consult with the local
market research methods, to identify Small Business Administration pro-
effectively the capabilities, including curement center representative (PCR)
the capabilities of small businesses and or, if a PCR is not assigned to the pro-
new entrants into Federal contracting, curing activity, the SBA Office of Gov-
that are available in the marketplace ernment Contracting Area Office serv-
for meeting the requirements of the ing the area in which the procuring ac-
agency in furtherance of defense tivity is located; and
against or recovery from terrorism or (2) At least 30 days before release of
nuclear, biological, chemical or radio- the solicitation
logical attack (Public Law 107296, Sec. (i) Must notify any affected incum-
858); and bent small business concerns of the
(3) Use the results of market research Governments intention to bundle the
to requirement; and
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10.002 48 CFR Ch. 1 (10103 Edition)
(ii) Should notify any affected in- (2) Techniques for conducting market
cumbent small business concerns of research may include any or all of the
how the concerns may contact the ap- following:
propriate Small Business Administra- (i) Contacting knowledgeable individ-
tion representative. uals in Government and industry re-
garding market capabilities to meet re-
[60 FR 48237, Sept. 18, 1995, as amended at 64
FR 72443, Dec. 27, 1999; 65 FR 46054, July 26,
quirements.
2000; 66 FR 20896, Apr. 25, 2001; 68 FR 4049, (ii) Reviewing the results of recent
Jan. 27, 2003] market research undertaken to meet
similar or identical requirements.
10.002 Procedures. (iii) Publishing formal requests for
(a) Acquisitions begin with a descrip- information in appropriate technical or
tion of the Governments needs stated scientific journals or business publica-
in terms sufficient to allow conduct of tions.
market research. (iv) Querying the Governmentwide
database of contracts and other pro-
(b) Market research is then con-
curement instruments intended for use
ducted to determine if commercial
by multiple agencies available at http:/
items or nondevelopmental items are
/www.contractdirectory.gov and other
available to meet the Governments
Government and commercial databases
needs or could be modified to meet the
that provide information relevant to
Governments needs.
agency acquisitions.
(1) The extent of market research
(v) Participating in interactive, on-
will vary, depending on such factors as
line communication among industry,
urgency, estimated dollar value, com-
acquisition personnel, and customers.
plexity, and past experience. Market
(vi) Obtaining source lists of similar
research involves obtaining informa-
items from other contracting activities
tion specific to the item being acquired
or agencies, trade associations or other
and should include
sources.
(i) Whether the Governments needs (vii) Reviewing catalogs and other
can be met by generally available product literature
(A) Items of a type customarily published by manufacturers, distribu-
available in the commercial market- tors, and dealers or available on-line.
place; (viii) Conducting interchange meet-
(B) Items of a type customarily ings or holding presolicitation con-
available in the commercial market- ferences to involve potential offerors
place with modifications; or early in the acquisition process.
(C) Items used exclusively for govern- (c) If market research indicates com-
mental purposes; mercial or nondevelopmental items
(ii) Customary practices regarding might not be available to satisfy agen-
customizing, modifying or tailoring of cy needs, agencies shall reevaluate the
items to meet customer needs and as- need in accordance with 10.001(a)(3)(ii)
sociated costs; and determine whether the need can be
(iii) Customary practices, including restated to permit commercial or non-
warranty, buyer financing, discounts, developmental items to satisfy the
etc., under which commercial sales of agencys needs.
the products are made; (d)(1) If market research establishes
(iv) The requirements of any laws that the Governments need may be
and regulations unique to the item met by a type of item or service cus-
being acquired; tomarily available in the commercial
(v) The availability of items that marketplace that would meet the defi-
contain recovered materials and items nition of a commercial item at subpart
that are energy efficient; 2.1, the contracting officer shall solicit
(vi) The distribution and support ca- and award any resultant contract using
pabilities of potential suppliers, includ- the policies and procedures in part 12.
ing alternative arrangements and cost (2) If market research establishes
estimates; and that the Governments need cannot be
(vii) Size and status of potential met by a type of item or service cus-
sources (see part 19). tomarily available in the marketplace,
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Federal Acquisition Regulation 11.002
171
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11.002 48 CFR Ch. 1 (10103 Edition)
172
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Federal Acquisition Regulation 11.103
U.S.C. 794d), requiring activities must where inconsistent with law or other-
prepare requirements documents for wise impractical. The private sector
electronic and information technology manages and administers voluntary
that comply with the applicable acces- consensus standards. Such standards
sibility standards issued by the Archi- are not mandated by law (e.g., industry
tectural and Transportation Barriers standards such as ISO 9000).
Compliance Board at 36 CFR part 1194
[60 FR 48238, Sept. 18, 1995, as amended at 62
(see subpart 39.2). FR 44810, Aug. 22, 1997; 64 FR 51834, Sept. 24,
[60 FR 48238, Sept. 18, 1995, as amended at 61 1999; 66 FR 65352, Dec. 18, 2001; 68 FR 43858,
FR 39192, July 26, 1996; 62 FR 263, Jan. 2, 1997; July 24, 2003]
62 FR 44810, Aug. 22, 1997; 62 FR 51230, Sept.
30, 1997; 65 FR 36017, June 6, 2000; 66 FR 20897, 11.102 Standardization program.
Apr. 25, 2001; 66 FR 65352, Dec. 18, 2001; 68 FR Agencies shall select existing re-
43858, July 24, 2003]
quirements documents or develop new
requirements documents that meet the
Subpart 11.1Selecting and De- needs of the agency in accordance with
veloping Requirements Docu- the guidance contained in the Federal
ments Standardization Manual, FSPM0001,
and, for DoD components, DoD 4120.3
11.101 Order of precedence for re- M, Defense Standardization Program
quirements documents. Policies and Procedures. The Federal
(a) Agencies may select from existing Standardization Manual may be ob-
requirements documents, modify or tained from the General Services Ad-
combine existing requirements docu- ministration (see address in
ments, or create new requirements doc- 11.201(d)(1)). DoD 4120.3M may be ob-
uments to meet agency needs, con- tained from DoD (see address in
sistent with the following order of 11.201(d)(2)).
precedence:
[63 FR 34062, June 22, 1998]
(1) Documents mandated for use by
law. 11.103 Market acceptance.
(2) Performance-oriented documents.
(3) Detailed design-oriented docu- (a) Section 8002(c) of Pub. L. 103355
ments. provides that, in accordance with agen-
(4) Standards, specifications and re- cy procedures, the head of an agency
lated publications issued by the Gov- may, under appropriate circumstances,
ernment outside the Defense or Federal require offerors to demonstrate that
series for the non-repetitive acquisi- the items offered
tion of items. (1) Have either
(b) Agencies shall prepare require- (i) Achieved commercial market ac-
ments documents to achieve maximum ceptance; or
practicable (ii) Been satisfactorily supplied to an
(1) Energy efficiency, including using agency under current or recent con-
products containing energy-efficient tracts for the same or similar require-
standby power devices and renewable ments; and
energy technologies; and (2) Otherwise meet the item descrip-
(2) Use of recovered material, other tion, specifications, or other criteria
materials that are environmentally prescribed in the public notice and so-
preferable, energy- and water-efficient licitation.
products, and renewable energy tech- (b) Appropriate circumstances may,
nologies (see subparts 23.2, 23.4, and for example, include situations where
23.7). the agencys minimum need is for an
(c) In accordance with OMB Circular item that has a demonstrated reli-
A119, Federal Participation in the ability, performance or product sup-
Development and Use of Voluntary port record in a specified environment.
Consensus Standards and in Con- Use of market acceptance is inappro-
formity Assessment Activities,agen- priate when new or evolving items may
cies must use voluntary consensus meet the agencys needs.
standards, when they exist, in lieu of (c) In developing criteria for dem-
Government-unique standards, except onstrating that an item has achieved
173
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11.104 48 CFR Ch. 1 (10103 Edition)
174
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Federal Acquisition Regulation 11.201
175
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11.202 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 11.304
(2) All paper, paperboard, and fibrous ernment surplus property proposed for
materials that enter and are collected use under the contract. The request for
from municipal solid waste; but not the information must be included in
(3) Fiber derived from printers over- the solicitation, and to the maximum
runs, converters scrap, and over-issue extent practicable must be limited to
publications. information or standards consistent
Recovered material for paper and paper with normal commercial practices.
products, is defined by EPA in its Com- (c) When the contracting officer
prehensive Procurement Guideline as needs additional information to deter-
recovered fiber and means the fol- mine whether supplies meet minimum
lowing materials: recovered material standards stated in
(1) Postconsumer fiber. the solicitation, the contracting officer
(2) Manufacturing wastes such as may require offerors to submit addi-
(i) Dry paper and paperboard waste tional information on the recycled con-
generated after completion of the pa- tent or related standards. The request
permaking process (that is, those man- for the information must be included in
ufacturing operations up to and includ- the solicitation. When acquiring com-
ing the cutting and trimming of the mercial items, limit the information to
paper machine reel into smaller rolls the maximum extent practicable to
or rough sheets) including: envelope that available under normal commer-
cuttings, bindery trimmings, and other cial practices.
paper and paperboard waste resulting
from printing, cutting, forming, and 11.303 Special requirements for print-
other converting operations; bag, box, ing and writing paper.
and carton manufacturing wastes; and
(a) Section 505 of Executive Order
butt rolls, mill wrappers, and rejected
13101, Greening the Government
unused stock; and
(ii) Repulped finished paper and pa- through Waste Prevention, Recycling,
perboard from obsolete inventories of and Federal Acquisition, establishes
paper and paperboard manufacturers, minimum recovered material content
merchants, wholesalers, dealers, print- standards for agency purchases of
ers, converters, or others. printing and writing paper. Section 505
requires that 100 percent of an agencys
11.302 Policy. purchases of printing and writing paper
(a) Agencies must not require virgin must meet or exceed one of the min-
material or supplies composed of or imum content standards specified in
manufactured using virgin material paragraph (b) of this section.
unless compelled by law or regulation (b) For high-speed copier paper, off-
or unless virgin material is vital for set paper, forms bond, computer print-
safety or meeting performance require- out paper, carbonless paper, file fold-
ments of the contract. ers, white wove envelopes, writing and
(b)(1) When acquiring other than office paper, book paper, cotton fiber
commercial items, agencies must re- paper, and cover stock, the minimum
quire offerors to identify used, recondi- content standard must be no less than
tioned, or remanufactured supplies; or 30 percent postconsumer materials. If
unused former Government surplus paper containing 30 percent
property proposed for use under the postconsumer material is not reason-
contract. These supplies or property ably available, does not meet reason-
may not be used in contract perform- able performance requirements, or is
ance unless authorized by the con- only available at an unreasonable
tracting officer. price, then the agency must purchase
(2) When acquiring commercial paper containing no less than 20 per-
items, the contracting officer must cent postconsumer material.
consider the customary practices in
the industry for the item being ac- 11.304 Contract clause.
quired. The contracting officer may re- Insert the clause at 52.2115, Material
quire offerors to provide information Requirements, in solicitations and con-
on used, reconditioned, or remanufac- tracts for supplies that are not com-
tured supplies, or unused former Gov- mercial items.
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11.401 48 CFR Ch. 1 (10103 Edition)
178
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Federal Acquisition Regulation 11.404
179
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11.500 48 CFR Ch. 1 (10103 Edition)
proceed by a certain day, the con- the probable damage to the Govern-
tracting officer may use the clause ment to change over the contract pe-
with its Alternate I. riod of performance.
[48 FR 42159, Sept. 19, 1983, as amended at 56 (c) The contracting officer must take
FR 41732, Aug. 22, 1991. Redesignated and all reasonable steps to mitigate liq-
amended at 60 FR 48241, Sept. 18, 1995] uidated damages. If the contract con-
tains a liquidated damages clause and
Subpart 11.5Liquidated the contracting officer is considering
Damages terminating the contract for default,
the contracting officer should seek ex-
peditiously to obtain performance by
SOURCE: 65 FR 46064, July 26, 2000, unless
otherwise noted.
the contractor or terminate the con-
tract and repurchase (see subpart 49.4).
11.500 Scope. Prompt contracting officer action will
prevent excessive loss to defaulting
This subpart prescribes policies and
procedures for using liquidated dam- contractors and protect the interests of
ages clauses in solicitations and con- the Government.
tracts for supplies, services, research (d) The head of the agency may re-
and development, and construction. duce or waive the amount of liquidated
This subpart does not apply to liq- damages assessed under a contract, if
uidated damages for subcontracting the Commissioner, Financial Manage-
plans (see 19.7057) or liquidated dam- ment Service, or designee approves (see
ages related to the Contract Work Treasury Order 14510).
Hours and Safety Standards Act (see
subpart 22.3). 11.502 Procedures.
(a) Include the applicable liquidated
11.501 Policy. damages clause and liquidated damages
(a) The contracting officer must con- rates in solicitations when the con-
sider the potential impact on pricing, tract will contain liquidated damages
competition, and contract administra- provisions.
tion before using a liquidated damages (b) Construction contracts with liq-
clause. Use liquidated damages clauses uidated damages provisions must de-
only when scribe the rate(s) of liquidated damages
(1) The time of delivery or timely assessed per day of delay. The rate(s)
performance is so important that the should include the estimated daily cost
Government may reasonably expect to of Government inspection and super-
suffer damage if the delivery or per- intendence. The rate(s) should also in-
formance is delinquent; and clude an amount for other expected ex-
(2) The extent or amount of such penses associated with delayed comple-
damage would be difficult or impos- tion such as
sible to estimate accurately or prove. (1) Renting substitute property; or
(b) Liquidated damages are not puni-
(2) Paying additional allowance for
tive and are not negative performance
living quarters.
incentives (see 16.4022). Liquidated
damages are used to compensate the 11.503 Contract clauses.
Government for probable damages.
Therefore, the liquidated damages rate (a) Use the clause at 52.21111, Liq-
must be a reasonable forecast of just uidated DamagesSupplies, Services,
compensation for the harm that is or Research and Development, in fixed-
caused by late delivery or untimely price solicitations and contracts for
performance of the particular contract. supplies, services, or research and de-
Use a maximum amount or a maximum velopment when the contracting officer
period for assessing liquidated damages determines that liquidated damages
if these limits reflect the maximum are appropriate (see 11.501(a)).
probable damage to the Government. (b) Use the clause at 52.21112, Liq-
Also, the contracting officer may use uidated DamagesConstruction, in so-
more than one liquidated damages rate licitations and contracts for construc-
when the contracting officer expects tion, other than cost-plus-fixed-fee,
180
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Federal Acquisition Regulation 11.602
181
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11.603 48 CFR Ch. 1 (10103 Edition)
182
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Federal Acquisition Regulation 11.703
183
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11.801 48 CFR Ch. 1 (10103 Edition)
Subpart 12.2Special Requirements for the AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
ter 137; and 42 U.S.C. 2473(c).
Acquisition of Commercial Items
EFFECTIVE DATE NOTE: At 68 FR 56683, Oct.
12.201 General. 1, 2003, the authority citation for Part 12 was
12.202 Market research and description of revised, effective Oct. 31, 2003. For the con-
agency need. venience of the user, the revised text is set
12.203 Procedures for solicitation, evalua- forth below:
tion, and award. AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
12.204 Solicitation/contract form. ter 137; and 42 U.S.C. 2473(c).
12.205 Offers. SOURCE: 60 FR 48241, Sept. 18, 1995, unless
12.206 Use of past performance. otherwise noted.
12.207 Contract type.
12.208 Contract quality assurance. 12.000 Scope of part.
12.209 Determination of price reasonable-
ness. This part prescribes policies and pro-
12.210 Contract financing. cedures unique to the acquisition of
12.211 Technical data. commercial items. It implements the
12.212 Computer software. Federal Governments preference for
12.213 Other commercial practices. the acquisition of commercial items
12.214 Cost Accounting Standards. contained in Title VIII of the Federal
12.215 Notification of overpayment. Acquisition Streamlining Act of 1994
(Public Law 103355) by establishing ac-
Subpart 12.3Solicitation Provisions and quisition policies more closely resem-
Contract Clauses for the Acquisition of bling those of the commercial market-
Commercial Items place and encouraging the acquisition
of commercial items and components.
12.300 Scope of subpart.
12.301 Solicitation provisions and contract 12.001 Definition.
clauses for the acquisition of commercial
items. Subcontract, as used in this part, in-
12.302 Tailoring of provisions and clauses cludes, but is not limited to, a transfer
for the acquisition of commercial items. of commercial items between divisions,
184
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Federal Acquisition Regulation 12.201
185
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12.202 48 CFR Ch. 1 (10103 Edition)
186
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Federal Acquisition Regulation 12.212
and contract award for commercial quantities ordered, length of the per-
items. Contracting officers should con- formance period, and specific perform-
sider past performance data from a ance requirements. The contracting of-
wide variety of sources both inside and ficer must ensure that contract terms,
outside the Federal Government in ac- conditions, and prices are commensu-
cordance with the policies and proce- rate with the Governments need.
dures contained in subpart 9.1, section
[66 FR 53484, Oct. 22, 2001]
13.106, or subpart 15.3, as applicable.
[60 FR 48241, Sept. 18, 1995, as amended at 61 12.210 Contract financing.
FR 39192, July 26, 1996; 62 FR 51270, Sept. 30,
1997; 62 FR 64917, Dec. 9, 1997] Customary market practice for some
commercial items may include buyer
12.207 Contract type. contract financing. The contracting of-
ficer may offer Government financing
Agencies shall use firm-fixed-price
in accordance with the policies and
contracts or fixed-price contracts with
procedures in part 32.
economic price adjustment for the ac-
quisition of commercial items. Indefi- 12.211 Technical data.
nite-delivery contracts (see subpart
16.5) may be used where the prices are Except as provided by agency-specific
established based on a firm-fixed-price statutes, the Government shall acquire
or fixed-price with economic price ad- only the technical data and the rights
justment. Use of any other contract in that data customarily provided to
type to acquire commercial items is the public with a commercial item or
prohibited. These contract types may process. The contracting officer shall
be used in conjunction with an award presume that data delivered under a
fee and performance or delivery incen- contract for commercial items was de-
tives when the award fee or incentive is veloped exclusively at private expense.
based solely on factors other than cost When a contract for commercial items
(see 16.2021 and 16.2031). requires the delivery of technical data,
the contracting officer shall include
[60 FR 48241, Sept. 18, 1995, as amended at 68
appropriate provisions and clauses de-
FR 13201, Mar. 18, 2003]
lineating the rights in the technical
12.208 Contract quality assurance. data in addenda to the solicitation and
contract (see part 27 or agency FAR
Contracts for commercial items shall supplements).
rely on contractors existing quality
assurance systems as a substitute for 12.212 Computer software.
Government inspection and testing be-
fore tender for acceptance unless cus- (a) Commercial computer software or
tomary market practices for the com- commercial computer software docu-
mercial item being acquired include in- mentation shall be acquired under li-
process inspection. Any in-process in- censes customarily provided to the
spection by the Government shall be public to the extent such licenses are
conducted in a manner consistent with consistent with Federal law and other-
commercial practice. wise satisfy the Governments needs.
Generally, offerors and contractors
12.209 Determination of price reason- shall not be required to
ableness. (1) Furnish technical information re-
While the contracting officer must lated to commercial computer software
establish price reasonableness in ac- or commercial computer software doc-
cordance with 13.1063, 14.4082, or sub- umentation that is not customarily
part 15.4, as applicable, the contracting provided to the public; or
officer should be aware of customary (2) Relinquish to, or otherwise pro-
commercial terms and conditions when vide, the Government rights to use,
pricing commercial items. Commercial modify, reproduce, release, perform,
item prices are affected by factors that display, or disclose commercial com-
include, but are not limited to, speed of puter software or commercial com-
delivery, length and extent of war- puter software documentation except
ranty, limitations of sellers liability, as mutually agreed to by the parties.
187
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12.213 48 CFR Ch. 1 (10103 Edition)
(b) With regard to commercial com- payment, the contracting officer must
puter software and commercial com- promptly provide instructions to the
puter software documentation, the contractor, in coordination with the
Government shall have only those cognizant payment office, regarding
rights specified in the license con- timely disposition of the overpayment.
tained in any addendum to the con-
[68 FR 56683, Oct. 1, 2003]
tract.
EFFECTIVE DATE NOTE: At 68 FR 56683, Oct.
12.213 Other commercial practices. 1, 2003, 12.215 was added, effective Oct. 31,
2003.
It is a common practice in the com-
mercial marketplace for both the
buyer and seller to propose terms and Subpart 12.3Solicitation Provi-
conditions written from their par- sions and Contract Clauses
ticular perspectives. The terms and for the Acquisition of Com-
conditions prescribed in this part seek mercial Items
to balance the interests of both the
buyer and seller. These terms and con- 12.300 Scope of subpart.
ditions are generally appropriate for This subpart establishes provisions
use in a wide range of acquisitions. and clauses to be used when acquiring
However, market research may indi- commercial items.
cate other commercial practices that
are appropriate for the acquisition of 12.301 Solicitation provisions and con-
the particular item. These practices tract clauses for the acquisition of
should be considered for incorporation commercial items.
into the solicitation and contract if the (a) In accordance with Section 8002 of
contracting officer determines them Public Law 103355 (41 U.S.C 264, note),
appropriate in concluding a business contracts for the acquisition of com-
arrangement satisfactory to both par- mercial items shall, to the maximum
ties and not otherwise precluded by law extent practicable, include only those
or Executive order. clauses
[62 FR 264, Jan. 2, 1997]
(1) Required to implement provisions
of law or executive orders applicable to
12.214 Cost Accounting Standards. the acquisition of commercial items; or
(2) Determined to be consistent with
Cost Accounting Standards (CAS) do
customary commercial practice.
not apply to contracts and sub-
(b) Insert the following provisions in
contracts for the acquisition of com-
solicitations for the acquisition of
mercial items when these contracts
commercial items, and clauses in so-
and subcontracts are firm-fixed-price
licitations and contracts for the acqui-
or fixed-price with economic price ad-
sition of commercial items:
justment (provided that the price ad-
(1) The provision at 52.2121, Instruc-
justment is not based on actual costs
tions to OfferorsCommercial Items.
incurred). See 48 CFR 30.2011 for CAS
This provision provides a single,
applicability to fixed-price with eco-
streamlined set of instructions to be
nomic price adjustment contracts and
used when soliciting offers for commer-
subcontracts for commercial items
cial items and is incorporated in the
when the price adjustment is based on
solicitation by reference (see Block
actual costs incurred. When CAS ap-
27a, SF 1449). The contracting officer
plies, the contracting officer shall in-
may tailor these instructions or pro-
sert the appropriate provisions and
vide additional instructions tailored to
clauses as prescribed in 48 CFR 30.201.
the specific acquisition in accordance
[63 FR 9054, Feb. 23, 1998] with 12.302.
(2) The provision at 52.2123, Offeror
12.215 Notification of overpayment. Representations and CertificationsCom-
If the contractor notifies the con- mercial Items. This provision provides a
tracting officer of a duplicate contract single, consolidated list of certifi-
financing or invoice payment or that cations and representations for the ac-
the Government has otherwise over- quisition of commercial items and is
paid on a contract financing or invoice attached to the solicitation for offerors
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Federal Acquisition Regulation 12.301
to complete and return with their by section 13.106, subpart 14.2 or sub-
offer. This provision may not be tai- part 15.3, as an addendum (see
lored except in accordance with Sub- 12.302(d)).
part 1.4. Use the provision with its Al- (d) Use of required provisions and
ternate I in solicitations issued by clauses. Notwithstanding prescriptions
DoD, NASA, or the Coast Guard that contained elsewhere in the FAR, when
are expected to exceed the threshold at acquiring commercial items, con-
4.601(a). Use the provision with its Al- tracting officers shall be required to
ternate II in solicitations for acquisi- use only those provisions and clauses
tions for which small disadvantaged prescribed in this part. The provisions
business procurement mechanisms are and clauses prescribed in this part
authorized on a regional basis. shall be revised, as necessary, to reflect
(3) The clause at 52.2124, Contract the applicability of statutes and execu-
Terms and ConditionsCommercial tive orders to the acquisition of com-
Items. This clause includes terms and mercial items.
conditions which are, to the maximum (e) Discretionary use of FAR provisions
extent practicable, consistent with cus- and clauses. The contracting officer
tomary commercial practices and is in- may include in solicitations and con-
corporated in the solicitation and con- tracts by addendum other FAR provi-
tract by reference (see Block 27, SF sions and clauses when their use is con-
1449). The contracting officer may tai- sistent with the limitations contained
lor this clause in accordance with in 12.302. For example:
12.302. (1) The contracting officer may in-
(4) The clause at 52.2125, Contract clude appropriate clauses when an in-
Terms and Conditions Required to Im- definite-delivery type of contract will
plement Statutes or Executive Or- be used. The clauses prescribed at
dersCommercial Items. This clause 16.506 may be used for this purpose.
incorporates by reference only those (2) The contracting officer may in-
clauses required to implement provi- clude appropriate provisions and
sions of law or executive orders appli- clauses when the use of options is in
cable to the acquisition of commercial the Governments interest. The provi-
items. The contracting officer shall at- sions and clauses prescribed in 17.208
tach this clause to the solicitation and may be used for this purpose. If the
contract and, using the appropriate provision at 52.2122 is used, paragraph
clause prescriptions, indicate which, if (b) provides for the evaluation of op-
any, of the additional clauses cited in tions.
(3) The contracting officer may use
52.2125(b) or (c) are applicable to the
the provisions and clauses contained in
specific acquisition. When cost infor-
part 23 regarding the use of recovered
mation is obtained pursuant to part 15
material when appropriate for the item
to establish the reasonableness of
being acquired.
prices for commercial items, the con-
(f) Agencies may supplement the pro-
tracting officer shall insert the clauses
visions and clauses prescribed in this
prescribed for this purpose in an adden-
part (to require use of additional provi-
dum to the solicitation and contract. sions and clauses) only as necessary to
This clause may not be tailored. Use reflect agency unique statutes applica-
the clause with its Alternate I when ble to the acquisition of commercial
the head of the agency has waived the items or as may be approved by the
examination of records by the Comp- agency senior procurement executive,
troller General in accordance with or the individual responsible for rep-
25.1001. resenting the agency on the FAR Coun-
(c) When the use of evaluation fac- cil, without power of delegation.
tors is appropriate, the contracting of-
ficer may [60 FR 48241, Sept. 18, 1995, as amended at 61
(1) Insert the provision at 52.2122, FR 39192, July 26, 1996; 61 FR 67430, Dec. 20,
1996; 62 FR 51270, Sept. 30, 1997; 62 FR 64917,
Evaluation Commercial Items, in so-
Dec. 9, 1997; 63 FR 35720, June 30, 1998; 63 FR
licitations for commercial items (see 52427, Sept. 30, 1998; 63 FR 70267, Dec. 18, 1998;
12.602); or 64 FR 32748, June 17, 1999; 64 FR 72418, Dec.
(2) Include a similar provision con- 27, 1999; 67 FR 6120, Feb. 8, 2002; 67 FR 13065,
taining all evaluation factors required Mar. 20, 2002; 67 FR 21538, Apr. 30, 2002]
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12.302 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 12.403
(d) Any contract documents, exhibits mercial items used in critical applica-
or attachments; and tions. In such cases, the contracting of-
(e) Solicitation provisions ficer shall include alternative inspec-
(1) 52.2121, Instructions to Offerors tion procedure(s) in an addendum and
Commercial Items, by reference (see ensure these procedures and the
SF 1449, Block 27a); postaward remedies adequately protect
(2) Any addendum to 52.2121; the interests of the Government. The
(3) 52.2122, EvaluationCommercial contracting officer must carefully ex-
Items, or other description of evalua- amine the terms and conditions of any
tion factors for award, if used; and express warranty with regard to the ef-
(4) 52.2123, Offeror Representations fect it may have on the Governments
and CertificationsCommercial Items. available postaward remedies (see
[60 FR 48241, Sept. 18, 1995; 60 FR 54817, Oct. 12.404).
26, 1995; 61 FR 67430, Dec. 20, 1996; 63 FR 35720, (c) The acquisition of commercial
June 30, 1997; 63 FR 36121, July 1, 1998; 64 FR items under other circumstances such
10536, Mar. 4, 1999] as on an as is basis may also require
acceptance procedures different from
Subpart 12.4Unique Require- those contained in 52.2124. The con-
ments Regarding Terms and tracting officer should consider the ef-
Conditions for Commercial fect the specific circumstances will
have on the acceptance paragraph as
Items
well as other paragraphs of the clause.
12.401 General.
12.403 Termination.
This subpart provides
(a) Guidance regarding tailoring of (a) General. The clause at 52.2124 per-
the paragraphs in the clause at 52.212 mits the Government to terminate a
4, Contract Terms and Conditions contract for commercial items either
Commercial Items, when the para- for the convenience of the Government
graphs do not reflect the customary or for cause. However, the paragraphs
practice for a particular market; and in 52.2124 entitled Termination for
(b) Guidance on the administration of the Governments Convenience and
contracts for commercial items in Termination for Cause contain con-
those areas where the terms and condi- cepts which differ from those contained
tions in 52.2124 differ substantially in the termination clauses prescribed
from those contained elsewhere in the in part 49. Consequently, the require-
FAR. ments of part 49 do not apply when ter-
minating contracts for commercial
12.402 Acceptance. items and contracting officers shall
(a) The acceptance paragraph in follow the procedures in this section.
52.2124 is based upon the assumption Contracting officers may continue to
that the Government will rely on the use part 49 as guidance to the extent
contractors assurances that the com- that part 49 does not conflict with this
mercial item tendered for acceptance section and the language of the termi-
conforms to the contract requirements. nation paragraphs in 52.2124.
The Government inspection of com- (b) Policy. The contracting officer
mercial items will not prejudice its should exercise the Governments right
other rights under the acceptance para- to terminate a contract for commercial
graph. Additionally, although the para- items either for convenience or for
graph does not address the issue of re- cause only when such a termination
jection, the Government always has would be in the best interests of the
the right to refuse acceptance of non- Government. The contracting officer
conforming items. This paragraph is should consult with counsel prior to
generally appropriate when the Gov- terminating for cause.
ernment is acquiring noncomplex com- (c) Termination for cause. (1) The para-
mercial items. graph in 52.2124 entitled Excusable
(b) Other acceptance procedures may Delay requires contractors notify the
be more appropriate for the acquisition contracting officer as soon as possible
of complex commercial items or com- after commencement of any excusable
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12.404 48 CFR Ch. 1 (10103 Edition)
delay. In most situations, this require- (2) Generally, the parties should mu-
ment should eliminate the need for a tually agree upon the requirements of
show cause notice prior to terminating the termination proposal. The parties
a contract. The contracting officer must balance the Governments need to
shall send a cure notice prior to termi- obtain sufficient documentation to
nating a contract for a reason other support payment to the contractor
than late delivery. against the goal of having a simple and
(2) The Governments rights after a expeditious settlement.
termination for cause shall include all
the remedies available to any buyer in 12.404 Warranties.
the marketplace. The Governments (a) Implied warranties. The Govern-
preferred remedy will be to acquire ments post award rights contained in
similar items from another contractor 52.2124 are the implied warranty of
and to charge the defaulted contractor merchantability, the implied warranty
with any excess reprocurement costs of fitness for particular purpose and
together with any incidental or con- the remedies contained in the accept-
sequential damages incurred because of ance paragraph.
the termination.
(1) The implied warranty of
(3) When a termination for cause is
merchantability provides that an item
appropriate, the contracting officer
is reasonably fit for the ordinary pur-
shall send the contractor a written no-
poses for which such items are used.
tification regarding the termination.
The items must be of at least average,
At a minimum, this notification
fair or medium-grade quality and must
shall
be comparable in quality to those that
(i) Indicate the contract is termi-
will pass without objection in the trade
nated for cause;
or market for items of the same de-
(ii) Specify the reasons for the termi-
scription.
nation;
(iii) Indicate which remedies the (2) The implied warranty of fitness
Government intends to seek or provide for a particular purpose provides that
a date by which the Government will an item is fit for use for the particular
inform the contractor of the remedy; purpose for which the Government will
and use the items. The Government can
(iv) State that the notice constitutes rely upon an implied warranty of fit-
a final decision of the contracting offi- ness for particular purpose when
cer and that the contractor has the (i) The seller knows the particular
right to appeal under the Disputes purpose for which the Government in-
clause (see 33.211). tends to use the item; and
(d) Termination for the Governments (ii) The Government relied upon the
convenience. (1) When the contracting contractors skill and judgment that
officer terminates a contract for com- the item would be appropriate for that
mercial items for the Governments particular purpose.
convenience, the contractor shall be (3) Contracting officers should con-
paid sult with legal counsel prior to assert-
(i) The percentage of the contract ing any claim for a breach of an im-
price reflecting the percentage of the plied warranty.
work performed prior to the notice of (b) Express warranties. The Federal
the termination, and Acquisition Streamlining Act of 1994
(ii) Any charges the contractor can (41 U.S.C. 264 note) requires con-
demonstrate directly resulted from the tracting officers to take advantage of
termination. The contractor may dem- commercial warranties. To the max-
onstrate such charges using its stand- imum extent practicable, solicitations
ard record keeping system and is not for commercial items shall require
required to comply with the cost ac- offerors to offer the Government at
counting standards or the contract least the same warranty terms, includ-
cost principles in part 31. The Govern- ing offers of extended warranties, of-
ment does not have any right to audit fered to the general public in cus-
the contractors records solely because tomary commercial practice. Solicita-
of the termination for convenience. tions may specify minimum warranty
192
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Federal Acquisition Regulation 12.503
terms, such as minimum duration, ap- (b) Nothing in this subpart shall be
propriate for the Governments in- construed to authorize the waiver of
tended use of the item. any provision of law with respect to
(1) Any express warranty the Govern- any subcontract if the prime con-
ment intends to rely upon must meet tractor is reselling or distributing com-
the needs of the Government. The con- mercial items of another contractor
tracting officer should analyze any without adding value. This limitation
commercial warranty to determine if is intended to preclude establishment
(i) The warranty is adequate to pro- of unusual contractual arrangements
tect the needs of the Government, e.g., solely for the purpose of Government
items covered by the warranty and sales.
length of warranty; (c) For purposes of this subpart, con-
(ii) The terms allow the Government tractors awarded subcontracts under
effective postaward administration of subpart 19.8, Contracting with the
the warranty to include the identifica- Small Business Administration (the
tion of warranted items, procedures for 8(a) Program), shall be considered
the return of warranted items to the prime contractors.
contractor for repair or replacement,
and collection of product performance 12.502 Procedures.
information; and
(iii) The warranty is cost-effective. (a) The FAR prescription for the pro-
(2) In some markets, it may be cus- vision or clause for each of the laws
tomary commercial practice for con- listed in 12.503 has been revised in the
tractors to exclude or limit the implied appropriate part to reflect its proper
warranties contained in 52.2124 in the application to prime contracts for the
provisions of an express warranty. In acquisition of commercial items.
such cases, the contracting officer (b) For subcontracts for the acquisi-
shall ensure that the express warranty tion of commercial items or commer-
provides for the repair or replacement cial components, the clauses at 52.212
of defective items discovered within a 5, Contract Terms and Conditions Re-
reasonable period of time after accept- quired to Implement Statutes or Exec-
ance. utive OrdersCommercial Items, and
(3) Express warranties shall be in- 52.2446, Subcontracts for Commercial
cluded in the contract by addendum Items and Commercial Components, re-
(see 12.302). flect the applicability of the laws listed
in 12.504 by identifying the only provi-
Subpart 12.5Applicability of sions and clauses that are required to
Certain Laws to the Acquisi- be included in a subcontract at any tier
for the acquisition of commercial
tion of Commercial Items items or commercial components.
12.500 Scope of subpart.
12.503 Applicability of certain laws to
As required by Section 34 of the Of- Executive agency contracts for the
fice of Federal Procurement Policy Act acquisition of commercial items.
(41 U.S.C. 430), this subpart lists provi-
sions of laws that are not applicable to (a) The following laws are not appli-
contracts for the acquisition of com- cable to Executive agency contracts for
mercial items, or are not applicable to the acquisition of commercial items:
subcontracts, at any tier, for the acqui- (1) 41 U.S.C. 43, Walsh-Healey Act
sition of a commercial item. This sub- (see subpart 22.6).
part also lists provisions of law that (2) 41 U.S.C. 254(a) and 10 U.S.C.
have been amended to eliminate or 2306(b), Contingent Fees (see 3.404).
modify their applicability to either (3) 41 U.S.C. 416(a)(6), Minimum Re-
contracts or subcontracts for the ac- sponse Time for Offers under Office of
quisition of commercial items. Federal Procurement Policy Act (see
5.203).
12.501 Applicability. (4) 41 U.S.C. 701, et seq., Drug-Free
(a) This subpart applies to any con- Workplace Act of 1988 (see 23.501).
tract or subcontract at any tier for the (5) 31 U.S.C. 1354(a), Limitation on
acquisition of commercial items. use of appropriated funds for contracts
193
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12.504 48 CFR Ch. 1 (10103 Edition)
with entities not meeting veterans em- (5) 41 U.S.C. 253d, Validation of Pro-
ployment reporting requirements (see prietary Data Restrictions (see subpart
22.1302). 27.4).
(b) Certain requirements of the fol- (6) 41 U.S.C. 254(a) and 10 U.S.C.
lowing laws are not applicable to exec- 2306(b), Contingent Fees (see subpart
utive agency contracts for the acquisi- 3.4).
tion of commercial items: (7) 41 U.S.C. 254d(c) and 10 U.S.C.
(1) 40 U.S.C. 327 et seq., Requirement 2313(c), Examination of Records of Con-
for a certificate and clause under the tractor, when a subcontractor is not
Contract Work Hours and Safety required to provide cost or pricing data
Standards Act (see 22.305). (15.209(b)).
(2) 41 U.S.C. 57(a) and (b), and 58, Re- (8) 41 U.S.C. 416(a)(6), Minimum Re-
quirement for a clause and certain sponse Time for Offers under Office of
other requirements related to the Anti- Federal Procurement Policy Act (see
Kickback Act of 1986 (see 3.502). subpart 5.2).
(3) 49 U.S.C. 40118, Requirement for a (9) 41 U.S.C. 418a, Rights in Technical
clause under the Fly American provi- Data (see subpart 27.4).
sions (see 47.405). (10) 41 U.S.C. 701, et seq., Drug-Free
(c) The applicability of the following Workplace Act of 1988 (see subpart
laws have been modified in regards to 23.5).
Executive agency contracts for the ac- (11) 46 U.S.C. Appx 1241(b), Transpor-
quisition of commercial items: tation in American Vessels of Govern-
(1) 41 U.S.C. 253g and 10 U.S.C. 2402, ment Personnel and Certain Cargo (see
Prohibition on Limiting Subcontractor Subpart 47.5) (except for the types of
Direct Sales to the United States (see
subcontracts listed at 47.504(d)).
3.503).
(12) 49 U.S.C. 40118, Fly American
(2) 41 U.S.C. 254(d) and 10 U.S.C. 2306a,
provisions (see subpart 47.4).
Truth in Negotiations Act (see 15.403).
(b) The requirements for a certificate
(3) 41 U.S.C. 422, Cost Accounting
and clause under the Contract Work
Standards (see 48 CFR chapter 99) (see
Hours and Safety Standards Act, 40
12.214).
U.S.C. 327, et seq., (see Subpart 22.3) are
[60 FR 48241, Sept. 18, 1995, as amended at 61 not applicable to subcontracts at any
FR 67418, Dec. 20, 1996; 62 FR 232, 236, Jan. 2, tier for the acquisition of commercial
1997; 62 FR 10710, Mar. 10, 1997; 62 FR 51270, items or commercial components.
Sept. 30, 1997; 64 FR 10532, Mar. 4, 1999; 64 FR
72416, Dec. 27, 1999; 66 FR 53488, Oct. 22, 2001] (c) The applicability of the following
laws have been modified in regards to
12.504 Applicability of certain laws to subcontracts at any tier for the acqui-
subcontracts for the acquisition of sition of commercial items or commer-
commercial items. cial components:
(a) The following laws are not appli- (1) 41 U.S.C. 253g and 10 U.S.C. 2402,
cable to subcontracts at any tier for Prohibition on Limiting Subcontractor
the acquisition of commercial items or Direct Sales to the United States (see
commercial components at any tier: subpart 3.5).
(1) 10 U.S.C. 2631, Transportation of (2) 41 U.S.C. 254(d) and 10 U.S.C. 2306a,
Supplies by Sea (except for the types of Truth in Negotiations Act (see subpart
subcontracts listed at 47.504(d)). 15.4).
(2) 15 U.S.C. 644(d), Requirements rel- (3) 41 U.S.C. 422, Cost Accounting
ative to labor surplus areas under the Standards (48 CFR chapter 99) (see
Small Business Act (see subpart 19.2). 12.214).
(3) 31 U.S.C. 1352, Limitation on Pay- [60 FR 48241, Sept. 18, 1996 as amended at 61
ments to Influence Certain Federal FR 67418, Dec. 20, 1996; 62 FR 232, 236, Jan. 2,
Transactions (see subpart 3.8). 1997; 62 FR 51270, Sept. 30, 1997; 64 FR 72416,
(4) 41 U.S.C. 43, Walsh-Healey Act 72418, Dec. 27, 1999; 65 FR 46069, July 26, 2000;
(see subpart 22.6). 68 FR 13203, Mar. 18, 2003]
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Federal Acquisition Regulation 12.603
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12.603 48 CFR Ch. 1 (10103 Edition)
196
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SUBCHAPTER CCONTRACTING METHODS AND CONTRACT
TYPES
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13.002 48 CFR Ch. 1 (10103 Edition)
appropriation, from an agency finance set aside (see 19.000 and subpart 19.5).
or disbursing officer to a duly ap- See 19.5022 for exceptions.
pointed cashier, for disbursement as (2) The contracting officer may set
needed from time to time in making aside for HUBZone small business con-
payment in cash for relatively small cerns (see 19.1305) an acquisition of sup-
amounts. plies or services that has an antici-
Third party draft means an agency pated dollar value exceeding the micro-
bank draft, similar to a check, that is purchase threshold and not exceeding
used to acquire and to pay for supplies the simplified acquisition threshold.
and services. (See Treasury Financial The contracting officers decision not
Management Manual, Section 3040.70.) to set aside an acquisition for
[62 FR 64917, Dec. 9, 1997 as amended at 66 FR HUBZone participation below the sim-
2128, Jan. 10, 2001] plified acquisition threshold is not sub-
ject to review under subpart 19.4.
13.002 Purpose. (3) Each written solicitation under a
The purpose of this part is to pre- set-aside shall contain the appropriate
scribe simplified acquisition proce- provisions prescribed by part 19. If the
dures in order to solicitation is oral, however, informa-
(a) Reduce administrative costs; tion substantially identical to that in
(b) Improve opportunities for small, the provision shall be given to poten-
small disadvantaged, and women- tial quoters.
owned small business concerns to ob- (c) The contracting officer shall not
tain a fair proportion of Government use simplified acquisition procedures
contracts; to acquire supplies and services if the
(c) Promote efficiency and economy anticipated award will exceed the sim-
in contracting; and plified acquisition threshold (or
(d) Avoid unnecessary burdens for $5,000,000, including options, for acqui-
agencies and contractors.
sitions of commercial items using Sub-
13.003 Policy. part 13.5). Do not break down require-
ments aggregating more than the sim-
(a) Agencies shall use simplified ac- plified acquisition threshold (or for
quisition procedures to the maximum commercial items, the threshold in
extent practicable for all purchases of subpart 13.5) or the micro-purchase
supplies or services not exceeding the
threshold into several purchases that
simplified acquisition threshold (in-
are less than the applicable threshold
cluding purchases at or below the
merely to
micro-purchase threshold). This policy
(1) Permit use of simplified acquisi-
does not apply if an agency can meet
tion procedures; or
its requirement using
(1) Required sources of supply under (2) Avoid any requirement that ap-
part 8 (e.g., Federal Prison Industries, plies to purchases exceeding the micro-
Committee for Purchase from People purchase threshold.
Who are Blind or Severely Disabled, (d) An agency that has specific statu-
and Federal Supply Schedule con- tory authority to acquire personal
tracts); services (see 37.104) may use simplified
(2) Existing indefinite delivery/indefi- acquisition procedures to acquire those
nite quantity contracts; or services.
(3) Other established contracts. (e) Agencies shall use the Govern-
(b)(1) Each acquisition of supplies or mentwide commercial purchase card
services that has an anticipated dollar and electronic purchasing techniques
value exceeding $2,500 ($7,500 for acqui- to the maximum extent practicable in
sitions as described in 13.201(g)(1)(i) and conducting simplified acquisitions.
$15,000 for acquisitions as described in (f) Agencies shall maximize the use
13.201(g)(1)(ii)) and not exceeding of electronic commerce when prac-
$100,000 ($200,000 for acquisitions de- ticable and cost-effective (see Subpart
scribed in paragraph (2)(i) of the Sim- 4.5). Drawings and lengthy specifica-
plified Acquisition Threshold defini- tions can be provided off-line in hard
tion at 2.101) is reserved exclusively for copy or through other appropriate
small business concerns and shall be means.
198
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Federal Acquisition Regulation 13.005
199
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13.006 48 CFR Ch. 1 (10103 Edition)
(8) 10 U.S.C. 2402 and 41 U.S.C. 253g at or below the simplified acquisition
(Prohibition on Limiting Subcon- threshold:
tractor Direct Sales to the United (a) 52.2035, Covenant Against Contin-
States). gent Fees.
(9) 15 U.S.C. 631 note (HUBZone Act (b) 52.2036, Restrictions on Subcon-
of 1997), except for 15 U.S.C. tractor Sales to the
657a(b)(2)(B), which is optional for the Government.
agencies subject to the requirements of (c) 52.2037, Anti-Kickback Proce-
the Act. dures.
(10) 31 U.S.C. 1354(a) (Limitation on (d) 52.2152, Audits and RecordsNe-
use of appropriated funds for contracts gotiation.
with entities not meeting veterans em- (e) 52.2224, Contract Work Hours and
ployment reporting requirements). Safety Standards ActOvertime Com-
(b) When acquiring commercial items pensation.
or supplies or services procured in ac- (f) 52.2236, Drug-Free Workplace, ex-
cordance with 12.102(f)(1) and (f)(2), the cept for individuals.
contracting officer may use a combined (g) 52.2239, Estimate of Percentage
synopsis and solicitation. The FAR of Recovered Material Content for
Council may make exceptions when it EPA-Designated Products.
determines in writing that it is in the [62 FR 64917, Dec. 9, 1997, as amended at 65
best interest of the Government that FR 36018, June 6, 2000]
the enactment should apply to con-
tracts or subcontracts not greater than Subpart 13.1Procedures
the simplified acquisition threshold.
(c) The provisions of paragraph (b) of 13.101 General.
this section do not apply to laws that (a) In making purchases, contracting
(1) Provide for criminal or civil pen- officers shall
alties; or (1) Comply with the policy in 7.202 re-
(2) Specifically state that notwith- lating to economic purchase quan-
standing the language of Section 4101, tities, when practicable;
Public Law 103355, the enactment will (2) Satisfy the procedures described
be applicable to contracts or sub- in subpart 19.6 with respect to Certifi-
contracts in amounts not greater than cates of Competency before rejecting a
the simplified acquisition threshold. quotation, oral or written, from a
(d) Any individual may petition the small business concern determined to
Administrator, Office of Federal Pro- be nonresponsible (see subpart 9.1); and
curement Policy (OFPP), to include (3) Provide for the inspection of sup-
any applicable provision of law not in- plies or services as prescribed in 46.404.
cluded on the list set forth in para- (b) In making purchases, contracting
graph (a) of this section unless the officers should
FAR Council has already determined in (1) Include related items (such as
writing that the law is applicable. The small hardware items or spare parts for
Administrator, OFPP, will include the vehicles) in one solicitation and make
law on the list in paragraph (a) of this award on an all-or-none or multiple
section unless the FAR Council makes award basis provided suppliers are so
a determination that it is applicable advised when quotations or offers are
within 60 days of receiving the peti- requested;
tion. (2) Incorporate provisions and clauses
[62 FR 64917, Dec. 9, 1997, as amended at 63 by reference in solicitations and in
FR 58593, Oct. 30, 1998; 63 FR 70267, Dec. 18, awards under requests for quotations,
1998; 65 FR 36018, June 6, 2000; 66 FR 53488, provided the requirements in 52.102 are
Oct. 22, 2001; 68 FR 4050, Jan. 27, 2003] satisfied;
(3) Make maximum effort to obtain
13.006 Inapplicable provisions and trade and prompt payment discounts
clauses. (see 14.4083). Prompt payment dis-
While certain statutes still apply, counts shall not be considered in the
pursuant to Public Law 103355, the fol- evaluation of quotations; and
lowing provisions and clauses are inap- (4) Use bulk funding to the maximum
plicable to contracts and subcontracts extent practicable. Bulk funding is a
200
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Federal Acquisition Regulation 13.105
system whereby the contracting officer services from the source whose offer is
receives authorization from a fiscal the most advantageous to the Govern-
and accounting officer to obligate ment, considering the administrative
funds on purchase documents against a cost of the purchase.
specified lump sum of funds reserved (a) The contracting officer must
for the purpose for a specified period of not
time rather than obtaining individual (1) Solicit quotations based on per-
obligational authority on each pur- sonal preference; or
chase document. Bulk funding is par- (2) Restrict solicitation to suppliers
ticularly appropriate if numerous pur- of well-known and widely distributed
chases using the same type of funds are makes or brands.
to be made during a given period. (b) If using simplified acquisition
[62 FR 64917, Dec. 9, 1997, as amended at 64 procedures and not using either
FR 72418, Dec. 27, 1999] FACNET or providing access to the no-
tice of proposed contract action and so-
13.102 Source list. licitation information through the
(a) Contracting officers should use Governmentwide point of entry (GPE),
the Central Contractor Registration maximum practicable competition or-
database (see Subpart 4.11) at http:// dinarily can be obtained by soliciting
www.ccr.gov as their primary sources of quotations or offers from sources with-
vendor information. Offices maintain- in the local trade area. Unless the con-
ing additional vendor source files or tract action requires synopsis pursuant
listings should identify the status of to 5.101 and an exception under 5.202 is
each source (when the status is made not applicable, consider solicitation of
known to the contracting office) in the at least three sources to promote com-
following categories: petition to the maximum extent prac-
(1) Small business. ticable. Whenever practicable, request
(2) Small disadvantaged business. quotations or offers from two sources
(3) Women-owned small business. not included in the previous solicita-
(4) HUBZone small business. tion.
(5) Service-disabled veteran-owned
small business. [62 FR 64917, Dec. 9, 1997, as amended at 63
(6) Veteran-owned small business. FR 58593, Oct. 30, 1998; 66 FR 27413, May 16,
(b) The status information may be 2001; 68 FR 56679, Oct. 1, 2003]
used as the basis to ensure that small
13.105 Synopsis and posting require-
business concerns are provided the ments.
maximum practicable opportunities to
respond to solicitations issued using (a) The contracting officer must com-
simplified acquisition procedures. ply with the public display and syn-
opsis requirements of 5.101 and 5.203 un-
[62 FR 64917, Dec. 9, 1997, as amended at 63
less
FR 58593, Oct. 30, 1998; 68 FR 56672, Oct. 1,
2003] (1)(i) FACNET is used for an acquisi-
tion at or below the simplified acquisi-
13.103 Use of standing price tion threshold; or
quotations. (ii) The GPE is used at or below the
Authorized individuals do not have to simplified acquisition threshold for
obtain individual quotations for each providing widespread public notice of
purchase. Standing price quotations acquisition opportunities and offerors
may be used if are provided a means of responding to
(a) The pricing information is cur- the solicitation electronically; or
rent; and (2) An exception in 5.202 applies.
(b) The Government obtains the ben- (b) When acquiring commercial items
efit of maximum discounts before or supplies or services produced in ac-
award. cordance with 12.102(f)(1) and (f)(2) the
contracting officer may use a combined
13.104 Promoting competition. synopsis and solicitation. In these
The contracting officer must pro- cases, a separate solicitation is not re-
mote competition to the maximum ex- quired. The contracting officer must
tent practicable to obtain supplies and include enough information to
201
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13.106 48 CFR Ch. 1 (10103 Edition)
202
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Federal Acquisition Regulation 13.1063
203
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13.201 48 CFR Ch. 1 (10103 Edition)
204
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Federal Acquisition Regulation 13.3021
205
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13.3022 48 CFR Ch. 1 (10103 Edition)
206
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Federal Acquisition Regulation 13.3032
(2) Part 49 or 52.2134 for other than tions, deletions, or substitutions) must
commercial items. not create a void or internal contradic-
(b) If a purchase order that has not tion in the clause. For example, do not
been accepted in writing by the con- add an inspection and acceptance or
tractor is to be canceled, the con- termination for convenience require-
tracting officer shall notify the con- ment unless the existing requirement
tractor in writing that the purchase is deleted. Also, do not delete a para-
order has been canceled, request the graph without providing for an appro-
contractors written acceptance of the priate substitute.
cancellation, and proceed as follows: (3)(i) When an acquisition for sup-
(1) If the contractor accepts the can- plies for use within the United States
cellation and does not claim that costs cannot be set aside for small business
were incurred as a result of beginning concerns and trade agreements apply
performance under the purchase order, (see Subpart 25.4), substitute the clause
no further action is required (i.e., the at FAR 52.2253, Buy American Act
purchase order shall be considered can- North American Free Trade Agree-
celed). mentIsraeli Trade Act, used with Al-
(2) If the contractor does not accept ternate I or Alternate II, if appro-
the cancellation or claims that costs priate, instead of the clause at FAR
were incurred as a result of beginning 52.2251, Buy American ActSupplies.
performance under the purchase order, (ii) When acquiring supplies for use
the contracting officer shall process outside the United States, delete
the termination action as prescribed in clause 52.2251 from the clause list at
paragraph (a) of this subsection. 52.2134(b).
13.3025 Clauses. [62 FR 64917, Dec. 9, 1997, as amended at 64
FR 72418, Dec. 27, 1999; 67 FR 21534, Apr. 30,
(a) Each purchase order (and each 2002]
purchase order modification (see 13.302
3)) shall incorporate all clauses pre- 13.303 Blanket purchase agreements
scribed for the particular acquisition. (BPAs).
(b) The contracting officer shall in-
sert the clause at 52.2132, Invoices, in 13.3031 General.
purchase orders that authorize advance (a) A blanket purchase agreement
payments (see 31 U.S.C. 3324(d)(2)) for (BPA) is a simplified method of filling
subscriptions or other charges for anticipated repetitive needs for sup-
newspapers, magazines, periodicals, or plies or services by establishing
other publications (i.e., any publication charge accounts with qualified
printed, microfilmed, photocopied, or sources of supply (see subpart 16.7 for
magnetically or otherwise recorded for additional coverage of agreements).
auditory or visual usage). (b) BPAs should be established for
(c) The contracting officer shall in- use by an organization responsible for
sert the clause at 52.2133, Notice to providing supplies for its own oper-
Supplier, in unpriced purchase orders. ations or for other offices, installa-
(d)(1) The contracting officer may tions, projects, or functions. Such or-
use the clause at 52.2134, Terms and ganizations, for example, may be orga-
ConditionsSimplified Acquisitions nized supply points, separate inde-
(Other Than Commercial Items), in pendent or detached field parties, or
simplified acquisitions exceeding the one-person posts or activities.
micro-purchase threshold that are for (c) The use of BPAs does not exempt
other than commercial items (see an agency from the responsibility for
12.301). keeping obligations and expenditures
(2) The clause within available funds.
(i) Is a compilation of the most com-
monly used clauses that apply to sim- 13.3032 Establishment of BPAs.
plified acquisitions; and (a) The following are circumstances
(ii) May be modified to fit the indi- under which contracting officers may
vidual acquisition to add other needed establish BPAs:
clauses, or those clauses may be added (1) There is a wide variety of items in
separately. Modifications (i.e., addi- a broad class of supplies or services
207
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13.3033 48 CFR Ch. 1 (10103 Edition)
that are generally purchased, but the (a) The following terms and condi-
exact items, quantities, and delivery tions are mandatory:
requirements are not known in advance (1) Description of agreement. A state-
and may vary considerably. ment that the supplier shall furnish
(2) There is a need to provide com- supplies or services, described in gen-
mercial sources of supply for one or eral terms, if and when requested by
more offices or projects in a given area the contracting officer (or the author-
that do not have or need authority to ized representative of the contracting
purchase otherwise. officer) during a specified period and
(3) The use of this procedure would within a stipulated aggregate amount,
avoid the writing of numerous pur- if any.
chase orders. (2) Extent of obligation. A statement
(4) There is no existing requirements that the Government is obligated only
contract for the same supply or service to the extent of authorized purchases
that the contracting activity is re- actually made under the BPA.
quired to use. (3) Purchase limitation. A statement
(b) After determining a BPA would be that specifies the dollar limitation for
advantageous, contracting officers each individual purchase under the
shall BPA (see 13.3035(b)).
(1) Establish the parameters to limit (4) Individuals authorized to purchase
purchases to individual items or com- under the BPA. A statement that a list
modity groups or classes, or permit the of individuals authorized to purchase
supplier to furnish unlimited supplies under the BPA, identified either by
or services; and title of position or by name of indi-
(2) Consider suppliers whose past per- vidual, organizational component, and
formance has shown them to be de- the dollar limitation per purchase for
pendable, who offer quality supplies or each position title or individual shall
services at consistently lower prices, be furnished to the supplier by the con-
and who have provided numerous pur- tracting officer.
chases at or below the simplified acqui-
(5) Delivery tickets. A requirement
sition threshold.
that all shipments under the agree-
(c) BPAs may be established with
ment, except those for newspapers,
(1) More than one supplier for sup-
magazines, or other periodicals, shall
plies or services of the same type to
be accompanied by delivery tickets or
provide maximum practicable competi-
sales slips that shall contain the fol-
tion;
lowing minimum information:
(2) A single firm from which numer-
ous individual purchases at or below (i) Name of supplier.
the simplified acquisition threshold (ii) BPA number.
will likely be made in a given period; (iii) Date of purchase.
or (iv) Purchase number.
(3) Federal Supply Schedule contrac- (v) Itemized list of supplies or serv-
tors, if not inconsistent with the terms ices furnished.
of the applicable schedule contract. (vi) Quantity, unit price, and exten-
(d) BPAs should be prepared without sion of each item, less applicable dis-
a purchase requisition and only after counts (unit prices and extensions need
contacting suppliers to make the nec- not be shown when incompatible with
essary arrangements for the use of automated systems, provided
(1) Securing maximum discounts; that the invoice is itemized to show
(2) Documenting individual purchase this information).
transactions; (vii) Date of delivery or shipment.
(3) Periodic billings; and (6) Invoices. One of the following
(4) Incorporating other necessary de- statements shall be included (except
tails. that the statement in paragraph
(a)(6)(iii) of this subsection should not
13.3033 Preparation of BPAs. be used if the accumulation of the indi-
Prepare BPAs on the forms specified vidual invoices by the Government ma-
in 13.307. Do not cite accounting and terially increases the administrative
appropriation data (see 13.3035(e)(4)). costs of this purchase method):
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Federal Acquisition Regulation 13.3035
(i) A summary invoice shall be sub- old. However, agency regulations may
mitted at least monthly or upon expi- establish a higher threshold consistent
ration of this BPA, whichever occurs with the following:
first, for all deliveries made during a (1) The simplified acquisition thresh-
billing period, identifying the delivery old and the $5,000,000 limitation for in-
tickets covered therein, stating their dividual purchases do not apply to
total dollar value, and supported by re- BPAs established in accordance with
ceipt copies of the delivery tickets. 13.3032(c)(3).
(ii) An itemized invoice shall be sub- (2) The limitation for individual pur-
mitted at least monthly or upon expi- chases for commercial item acquisi-
ration of this BPA, whichever occurs tions conducted under subpart 13.5 is
first, for all deliveries made during a $5,000,000.
billing period and for which payment (c) The existence of a BPA does not
has not been received. These invoices justify purchasing from only one
need not be supported by copies of de- source or avoiding small business set-
livery tickets. asides. The requirements of 13.003(b)
(iii) When billing procedures provide and subpart 19.5 also apply to each
for an individual invoice for each deliv- order.
ery, these invoices shall be accumu- (d) If, for a particular purchase great-
lated, provided that er than the micro-purchase threshold,
(A) A consolidated payment will be there is an insufficient number of BPAs
made for each specified period; and to ensure maximum practicable com-
(B) The period of any discounts will petition, the contracting officer shall
commence on the final date of the bill- (1) Solicit quotations from other
ing period or on the date of receipt of sources (see 13.105) and make the pur-
invoices for all deliveries accepted dur- chase as appropriate; and
ing the billing period, whichever is (2) Establish additional BPAs to fa-
later. cilitate future purchases if
(iv) An invoice for subscriptions or (i) Recurring requirements for the
other charges for newspapers, maga- same or similar supplies or services
zines, or other periodicals shall show seem likely;
the starting and ending dates and shall (ii) Qualified sources are willing to
state either that ordered subscriptions accept BPAs; and
have been placed in effect or will be (iii) It is otherwise practical to do so.
placed in effect upon receipt of pay- (e) Limit documentation of purchases
ment. to essential information and forms as
(b) If the fast payment procedure is follows:
used, include the requirements stated (1) Purchases generally should be
in 13.403. made electronically, or orally when it
is not considered economical or prac-
13.3034 Clauses. tical to use electronic methods.
(a) The contracting officer shall in- (2) A paper purchase document may
sert in each BPA the clauses prescribed be issued if necessary to ensure that
elsewhere in this part that are required the supplier and the purchaser agree
for or applicable to the particular BPA. concerning the transaction.
(b) Unless a clause prescription speci- (3) Unless a paper document is issued,
fies otherwise (e.g., see 22.305(a), record essential elements (e.g., date,
22.605(a)(5), or 22.1006), if the prescrip- supplier, supplies or services, price, de-
tion includes a dollar threshold, the livery date) on the purchase requisi-
amount to be compared to that thresh- tion, in an informal memorandum, or
old is that of any particular order on a form developed locally for the pur-
under the BPA. pose.
(4) Cite the pertinent purchase req-
13.3035 Purchases under BPAs. uisitions and the accounting and ap-
(a) Use a BPA only for purchases that propriation data.
are otherwise authorized by law or reg- (5) When delivery is made or the serv-
ulation. ices are performed, the suppliers sales
(b) Individual purchases shall not ex- document, delivery document, or in-
ceed the simplified acquisition thresh- voice may (if it reflects the essential
209
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13.3036 48 CFR Ch. 1 (10103 Edition)
210
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Federal Acquisition Regulation 13.306
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13.307 48 CFR Ch. 1 (10103 Edition)
212
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Federal Acquisition Regulation 13.500
213
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13.501 48 CFR Ch. 1 (10103 Edition)
214
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Federal Acquisition Regulation 14.101
14.203 Methods of soliciting bids. 14.4088 Protests against award.
14.2031 Transmittal to prospective bidders. 14.409 Information to bidders.
14.2032 Dissemination of information con- 14.4091 Award of unclassified contracts.
cerning invitations for bids. 14.4092 Award of classified contracts.
14.2033 Master solicitation.
14.204 Records of invitations for bids and Subpart 14.5Two-Step Sealed Bidding
records of bids.
14.205 Presolicitation notices. 14.501 General.
14.206 [Reserved] 14.502 Conditions for use.
14.207 Pre-bid conference. 14.503 Procedures.
14.208 Amendment of invitation for bids. 14.5031 Step one.
14.209 Cancellation of invitations before 14.5032 Step two.
opening.
14.210 Qualified products. AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
14.211 Release of acquisition information. ter 137; and 42 U.S.C. 2473(c).
14.212 Economic purchase quantities (sup- SOURCE: 48 FR 42171, Sept. 19, 1983, unless
plies). otherwise noted.
14.213 Annual submission of representations
and certifications. 14.000 Scope of part.
14.214 [Reserved]
This part prescribes (a) the basic re-
Subpart 14.3Submission of Bids quirements of contracting for supplies
and services (including construction)
14.301 Responsiveness of bids. by sealed bidding, (b) the information
14.302 Bid submission.
14.303 Modification or withdrawal of bids.
to be included in the solicitation (invi-
14.304 Submission, modification, and with- tation for bids), (c) procedures con-
drawal of bids. cerning the submission of bids, (d) re-
quirements for opening and evaluating
Subpart 14.4Opening of Bids and Award bids and awarding contracts, and (e)
of Contract procedures for two-step sealed bidding.
14.400 Scope of subpart. [48 FR 42171, Sept. 19, 1983, as amended at 50
14.401 Receipt and safeguarding of bids. FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
14.402 Opening of bids. 1985]
14.4021 Unclassified bids.
14.4022 Classified bids.
14.4023 Postponement of openings.
Subpart 14.1Use of Sealed
14.403 Recording of bids. Bidding
14.404 Rejection of bids.
14.4041 Cancellation of invitations after 14.101 Elements of sealed bidding.
opening. Sealed bidding is a method of con-
14.4042 Rejection of individual bids. tracting that employs competitive
14.4043 Notice to bidders of rejection of all
bids, public opening of bids, and
bids.
14.4044 Restrictions on disclosure of de- awards. The following steps are in-
scriptive literature. volved:
14.4045 All or none qualifications. (a) Preparation of invitations for bids.
14.405 Minor informalities or irregularities Invitations must describe the require-
in bids. ments of the Government clearly, accu-
14.406 Receipt of an unreadable electronic rately, and completely. Unnecessarily
bid. restrictive specifications or require-
14.407 Mistakes in bids.
ments that might unduly limit the
14.4071 General.
14.4072 Apparent clerical mistakes. number of bidders are prohibited. The
14.4073 Other mistakes disclosed before invitation includes all documents
award. (whether attached or incorporated by
14.4074 Mistakes after awards. reference) furnished prospective bid-
14.408 Award. ders for the purpose of bidding.
14.4081 General. (b) Publicizing the invitation for bids.
14.4082 Responsible bidderreasonableness Invitations must be publicized through
of price.
distribution to prospective bidders,
14.4083 Prompt payment discounts.
14.4084 Economic price adjustment. posting in public places, and such other
14.4085 [Reserved] means as may be appropriate. Publi-
14.4086 Equal low bids. cizing must occur a sufficient time be-
14.4087 Documentation of award. fore public opening of bids to enable
215
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14.102 48 CFR Ch. 1 (10103 Edition)
216
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Federal Acquisition Regulation 14.2012
(b) Information suitable for inclusion tract format. When the SF 1447 is used
in invitations for bids under the uni- as the solicitation document, the infor-
form contract format shall also be in- mation in subdivisions (a)(2)(i) and
cluded in invitations for bids not sub- (a)(2)(iv) of this subsection shall be in-
ject to that format if applicable. serted in block 9 of the SF 1447.
(c) Solicitations to which the uni- (2) When the SF 33 or SF 1447 is not
form contract format applies shall in- used, include the following on the first
clude Parts I, II, III, and IV. If any sec- page of the invitation for bids:
tion of the uniform contract format (i) Name, address, and location of
does not apply, the contracting officer issuing activity, including room and
should so mark that section in the so- building where bids must be submitted.
licitation. Upon award, the contracting
(ii) Invitation for bids number.
officer shall not physically include
Part IV in the resulting contract, but (iii) Date of issuance.
shall retain it in the contract file. (iv) Time specified for receipt of bids.
Award by acceptance of a bid on the (v) Number of pages.
award portion of Standard Form 33, So- (vi) Requisition or other purchase au-
licitation Offer and Award (SF 33), thority.
Standard Form 26, Award/Contract (SF (vii) Requirement for bidder to pro-
26), or Standard Form 1447, Solicita- vide its name and complete address, in-
tion/Contract (SF 1447), incorporates cluding street, city, county, State, and
Section K, Representations, certifi- ZIP code.
cations, and other statements of bid- (viii) A statement that bidders
ders, in the resultant contract even should include in the bid the address to
though not physically attached. which payment should be mailed, if
that address is different from that of
TABLE 141
the bidder.
Uniform Contract Format
(b) Section B, Supplies or services and
Section Title prices. Include a brief description of the
Part IThe Schedule
supplies or services; e.g., item number,
A Solicitation/contract form
national stock number/part number if
B Supplies or services and prices applicable, title or name identifying
C Description/specifications the supplies or services, and quantities
D Packaging and marking
E Inspection and acceptance
(see part 11). The SF 33 and SF 1447
F Deliveries or performance may be supplemented as necessary by
G Contract administration data the Optional Form 336 (OF 336), Con-
H Special contract requirements
tinuation Sheet (53.302336).
Part IIContract Clauses (c) Section C, Description/specifications.
I Contract clauses Include any description or specifica-
Part IIIList of Documents, Exhibits, and Other Attachments tions needed in addition to Section B
J List of documents, exhibits, and other attachments to permit full and open competition
Part IVRepresentations and Instructions (see part 11).
K Representations, certifications, and other state- (d) Section D, Packaging and marking.
ments of bidders Provide packaging, packing, preserva-
L Instructions, conditions, and notices to bidders
M Evaluation factors for award tion, and marking requirements, if
any.
[48 FR 42171, Sept. 19, 1983, as amended at 54 (e) Section E, Inspection and accept-
FR 48982, Nov. 28, 1989] ance. Include inspection, acceptance,
quality assurance, and reliability re-
14.2012 Part IThe Schedule. quirements (see part 46, Quality Assur-
The contracting officer shall prepare ance).
the Schedule as follows: (f) Section F, Deliveries or performance.
(a) Section A, Solicitation/contract form. Specify the requirements for time,
(1) Prepare the invitation for bids on place, and method of delivery or per-
SF 33, or the SF 1447, unless otherwise formance (see subpart 11.4, Delivery or
permitted by this regulation. The SF 33 Performance Schedules).
is the first page of the solicitation and (g) Section G, Contract administration
includes Section A of the uniform con- data. Include any required accounting
217
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14.2013 48 CFR Ch. 1 (10103 Edition)
and appropriation data and any re- tors other than the bid price that will
quired contract administration infor- be considered in evaluating bids and
mation or instructions other than awarding the contract. (See 14.2018.)
those on the solicitation form.
[48 FR 42171, Sept. 19, 1983, as amended at 50
(h) Section H, Special contract require- FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
ments. Include a clear statement of any 1985; 53 FR 17857, May 18, 1988]
special contract requirements that are
not included in Section I, Contract 14.2016 Solicitation provisions.
clauses, or in other sections of the uni-
form contract format. (a) The provisions prescribed in this
subsection apply to preparation and
[48 FR 42171, Sept. 19, 1983, as amended at 50 submission of bids in general. See other
FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23, FAR parts for provisions and clauses
1985; 51 FR 27119, July 29, 1986; 54 FR 48982,
related to specific acquisition require-
Nov. 28, 1989; 55 FR 38516, Sept. 18, 1990; 60 FR
48248, Sept. 18, 1995] ments.
(b) Insert in all invitations for bids
14.2013 Part IIContract clauses. the provisions at
Section I, Contract clauses. The con- (1) 52.2143, Amendments to Invita-
tracting officer shall include in this tions for Bids; and
section the clauses required by law or (2) 52.2144, False Statements in Bids.
by this regulation and any additional (c) Insert the following provisions in
clauses expected to apply to any result- invitations for bids:
ing contract, if these clauses are not (1) 52.2145, Submission of Bids.
required to be included in any other (2) 52.2146, Explanation to Prospec-
section of the uniform contract format. tive Bidders.
(3) 52.2147, Late Submissions, Modi-
[48 FR 42171, Sept. 19, 1983, as amended at 53
FR 17857, May 18, 1988]
fications, and Withdrawals of Bids.
(d) [Reserved]
14.2014 Part IIIDocuments, exhib- (e) Insert in all invitations for bids,
its, and other attachments. except those for construction, the pro-
Section J, List of documents, exhibits, vision at 52.21410, Contract Award-
and other attachments. The contracting Sealed Bidding.
officer shall list the title, date, and (f) Insert in invitations for bids to
number of pages for each attached doc- which the uniform contract format ap-
ument. plies, the provision at 52.21412, Prepa-
ration of Bids.
14.2015 Part IVRepresentations and (g)(1) Insert the provision at 52.21413,
instructions. Telegraphic Bids, in invitations for
The contracting officer shall prepare bids if the contracting officer decides
the representations and instructions as to authorize telegraphic bids.
follows: (2) Use the provision with its Alter-
(a) Section K, Representations, certifi- nate I in invitations for bids that are
cations, and other statements of bidders. for perishable subsistence, and when
Include in this section those solicita- the contracting officer considers that
tion provisions that require representa- offerors will be unwilling to provide ac-
tions, certifications, or the submission ceptance periods long enough to allow
of other information by bidders. written confirmation.
(b) Section L, Instructions, conditions, (h) Insert the provision at 52.21414,
and notices to bidders. Insert in this sec- Place of PerformanceSealed Bidding,
tion solicitation provisions and other in invitations for bids except those in
information and instructions not re- which the place of performance is spec-
quired elsewhere to guide bidders. Invi- ified by the Government.
tations shall include the time and (i) Insert the provision at 52.21415,
place for bid openings, and shall advise Period for Acceptance of Bids, in invi-
bidders that bids will be evaluated tations for bids (IFBs) that are not
without discussions (see 52.21410 and, issued on SF 33 or SF 1447 except IFBs
for construction contracts, 52.21419). (1) for construction work or (2) in
(c) Section M, Evaluation factors for which the Government specifies a min-
award. Identify the price-related fac- imum acceptance period.
218
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219
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14.2017 48 CFR Ch. 1 (10103 Edition)
other solicitations when the con- (d) When contracting by sealed bid-
tracting officer decides that it is nec- ding, the contracting officer shall in-
essary. sert the clause at 52.21429, Order of
PrecedenceSealed Bidding, in solici-
[48 FR 42171, Sept. 19, 1983, as amended at 50
tations and contracts to which the uni-
FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 51 FR 2649, Jan. 17, 1986; 53 FR 43390,
form contract format applies.
Oct. 26, 1988; 54 FR 5054, Jan. 31, 1989; 54 FR [48 FR 42171, Sept. 19, 1983, as amended at 50
48982, Nov. 28, 1989; 55 FR 25527, June 21, 1990; FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23,
56 FR 15149, Apr. 15, 1991; 58 FR 31141, May 28, 1985; 51 FR 2649, Jan. 17, 1986; 56 FR 67413,
1993; 59 FR 545, Jan. 5, 1994; 60 FR 34737, July Dec. 30, 1991; 59 FR 62499, Dec. 5, 1994; 60 FR
3, 1995; 62 FR 51230, Sept. 30, 1997; 63 FR 58589, 42650, Aug. 16, 1995; 60 FR 48211, Sept. 18, 1995;
Oct. 30, 1998; 64 FR 10532, Mar. 4, 1999; 64 FR 62 FR 51270, Sept. 30, 1997]
51838, Sept. 24, 1999; 64 FR 72418, 72451, Dec.
27, 1999; 67 FR 13055, Mar. 20, 2002; 68 FR 43856, 14.2018 Price-related factors.
July 24, 2003]
The factors set forth in paragraphs
14.2017 Contract clauses. (a) through (e) below may be applicable
in evaluation of bids for award and
(a) When contracting by sealed bid- shall be included in the solicitation
ding, the contracting officer shall in- when applicable. (See 14.2015(c).)
sert the clause at 52.21426, Audit and (a) Foreseeable costs or delays to the
RecordsSealed Bidding, in solicita- Government resulting from such fac-
tions and contracts if the contract tors as differences in inspection, loca-
amount is expected to exceed the tions of supplies, and transportation. If
threshold at 15.4034(a)(1) for submis- bids are on an f.o.b. origin basis (see
sion of cost or pricing data. 47.303 and 47.305), transportation costs
(b)(1) When contracting by sealed to the designated points shall be con-
bidding, the contracting officer shall sidered in determining the lowest cost
insert the clause at 52.21427, Price Re- to the Government.
duction for Defective Cost or Pricing (b) Changes made, or requested by
DataModificationsSealed Bidding, the bidder, in any of the provisions of
in solicitations and contracts if the the invitation for bids, if the change
contract amount is expected to exceed does not constitute a ground for rejec-
the threshold for submission of cost or tion under 14.404.
pricing data at 15.4034(a)(1). (c) Advantages or disadvantages to
(2) In exceptional cases, the head of the Government that might result
the contracting activity may waive the from making more than one award (see
requirement for inclusion of the clause 14.2016(q)). The contracting officer
in a contract with a foreign govern- shall assume, for the purpose of mak-
ment or agency of that government. ing multiple awards, that $500 would be
The authorizations for the waiver and the administrative cost to the Govern-
the reasons for granting it shall be in ment for issuing and administering
writing. each contract awarded under a solicita-
(c)(1) When contracting by sealed bid- tion. Individual awards shall be for the
ding, the contracting officer shall in- items or combinations of items that re-
sert the clause at 52.21428, Subcon- sult in the lowest aggregate cost to the
tractor Cost or Pricing DataModi- Government, including the assumed ad-
ficationsSealed Bidding, in solicita- ministrative costs.
tions and contracts if the contract (d) Federal, State, and local taxes
amount is expected to exceed the (see part 29).
threshold for submission of cost or (e) Origin of supplies, and, if foreign,
pricing data at 15.4034(a)(1). the application of the Buy American
(2) In exceptional cases, the head of Act or any other prohibition on foreign
the contracting activity may waive the purchases (see part 25).
requirement for inclusion of the clause [50 FR 1738, Jan. 11, 1985, and 50 FR 52429,
in a contract with a foreign govern- Dec. 23, 1985; 55 FR 25527, June 21, 1990]
ment or agency of that government.
The authorizations for the waiver and 14.2019 Simplified contract format.
the reasons for granting it shall be in Policy. For firm-fixed-price or fixed-
writing. price with economic price adjustment
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14.2023 48 CFR Ch. 1 (10103 Edition)
telegraphic bids shall not be considered shall be set forth in the contract file,
(see 14.301(b)). except where the submission is re-
quired by the formal specifications
[48 FR 42171, Sept. 19, 1983, as amended at 60
FR 34737, July 3, 1995] (Federal, Military, or other) applicable
to the acquisition.
14.2023 Bid envelopes. (d) Requirements for samples in invita-
tions for bids. (1) Invitations for bids
(a) Postage or envelopes bearing Post-
shall
age and Fees Paid indicia shall not be
(i) State the number and, if appro-
distributed with the invitation for bids
priate, the size of the samples to be
or otherwise supplied to prospective
submitted and otherwise fully describe
bidders.
the samples required; and
(b) To provide for ready identifica-
(ii) List all the characteristics for
tion and proper handling of bids, Op-
which the samples will be examined.
tional Form 17, Offer Label, may be
(2) If bid samples are required, see
furnished with each bid set. The form
14.2016(o).
may be obtained from the General
(e) Waiver of requirement for bid sam-
Services Administration (see 53.107).
ples. (1) The requirement for furnishing
[48 FR 42171, Sept. 19, 1983, as amended at 59 bid samples may be waived when a bid-
FR 67033, Dec. 28, 1994] der offers a product previously or cur-
rently being contracted for or tested by
14.2024 Bid samples. the Government and found to comply
(a) Policy. (1) Bidders shall not be re- with specification requirements con-
quired to furnish bid samples unless forming in every material respect with
there are characteristics of the product those in the current invitation for bids.
that cannot be described adequately in When the requirement may be waived,
the specification or purchase descrip- see 14.2016(o)(2).
tion. (2) Where samples required by a Fed-
(2) Bid samples will be used only to eral, Military, or other formal speci-
determine the responsiveness of the bid fication are not considered necessary
and will not be used to determine a bid- and a waiver of the sample require-
ders ability to produce the required ments of the specification has been au-
items. thorized, a statement shall be included
(3) Bid samples may be examined for in the invitation that notwithstanding
any required characteristic, whether or the requirements of the specification,
not such characteristic is adequately samples will not be required.
described in the specification, if listed (f) Unsolicited samples. Bid samples
in accordance with subdivision (e)(1)(ii) furnished with a bid that are not re-
below. quired by the invitation generally will
(4) Bids will be rejected as nonrespon- not be considered as qualifying the bid
sive if the sample fails to conform to and will be disregarded. However, the
each of the characteristics listed in the bid sample will not be disregarded if it
invitation. is clear from the bid or accompanying
(b) When to use. The use of bid sam- papers that the bidders intention was
ples would be appropriate for products to qualify the bid. (See 14.4042(d) if the
that must be suitable from the stand- qualification does not conform to the
point of balance, facility of use, gen- solicitation.)
eral feel, color, pattern, or other (g) Handling bid samples. (1) Samples
characteristics that cannot be de- that are not destroyed in testing shall
scribed adequately in the specification. be returned to bidders at their request
However, when more than a minor por- and expense, unless otherwise specified
tion of the characteristics of the prod- in the invitation.
uct cannot be adequately described in (2) Disposition instructions shall be
the specification, products should be requested from bidders and samples
acquired by two-step sealed bidding or disposed of accordingly.
negotiation, as appropriate. (3) Samples ordinarily will be re-
(c) Justification. The reasons why ac- turned collect to the address from
ceptable products cannot be acquired which received if disposition instruc-
without the submission of bid samples tions are not received within 30 days.
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14.2028 48 CFR Ch. 1 (10103 Edition)
set for bid opening, request the appar- (a) Make available copies of the mas-
ently successful offeror to provide the ter solicitation on request; and
complete original signed bid. (b) Provide the cognizant contract
administration activity a current copy
[54 FR 48983, Nov. 28, 1989, as amended at 64
FR 51838, Sept. 24, 1999] of the master solicitation.
[66 FR 2128, Jan. 10, 2001]
14.2028 Electronic bids.
In accordance with subpart 4.5, con- 14.204 Records of invitations for bids
tracting officers may authorize use of and records of bids.
electronic commerce for submission of (a) Each contracting office shall re-
bids. If electronic bids are authorized, tain a record of each invitation that it
the solicitation shall specify the elec- issues and each abstract or record of
tronic commerce method(s) that bid- bids. Contracting officers shall review
ders may use. and utilize the information available in
connection with subsequent acquisi-
[60 FR 34737, July 3, 1995
tions of the same or similar items.
14.203 Methods of soliciting bids. (b) The file for each invitation shall
show the distribution that was made
14.2031 Transmittal to prospective and the date the invitation was issued.
bidders. The names and addresses of prospective
Invitations for bids or presolicitation bidders who requested the invitation
notices must be provided in accordance and were not included on the original
with 5.102. When a contracting office is solicitation list shall be added to the
located in the United States, any solic- list and made a part of the record.
itation sent to a prospective bidder lo- 14.205 Presolicitation notices.
cated outside the United States shall
be sent by electronic data interchange In lieu of initially forwarding com-
or air mail if security classification plete bid sets, the contracting officer
permits. may send presolicitation notices to
concerns. The notice shall
[68 FR 28081, May 22, 2003, as amended at 68 (a) Specify the final date for receipt
FR 43856, July 24, 2003] of requests for a complete bid set;
14.2032 Dissemination of information (b) Briefly describe the requirement
concerning invitations for bids. and furnish other essential information
to enable concerns to determine wheth-
(a) Procedures concerning display of er they have an interest in the invita-
invitations for bids in a public place, tion; and
information releases to newspapers and (c) Normally not include drawings,
trade journals, paid advertisements, plans, and specifications. The return
and synopsizing through the Govern- date of the notice must be sufficiently
mentwide point of entry (GPE) are set in advance of the mailing date of the
forth in 5.101 and Subpart 5.2. invitation for bids to permit an accu-
(b) For procedures that apply to pub- rate estimate of the number of bid sets
licizing notices through the GPE to de- required. Bid sets shall be sent to con-
termine whether commercial sources cerns that request them in response to
are available, as prescribed by OMB the notice.
Circular A76, see 5.205(e) and 7.303(b).
[68 FR 43856, July 24, 2003]
[66 FR 27413, May 16, 2001]
14.206 [Reserved]
14.2033 Master solicitation.
The master solicitation is provided 14.207 Pre-bid conference.
to potential sources who are requested A pre-bid conference may be used,
to retain it for continued and repet- generally in a complex acquisition, as
itive use. Individual solicitations must a means of briefing prospective bidders
reference the date of the current mas- and explaining complicated specifica-
ter solicitation and identify any tions and requirements to them as
changes. The contracting officer early as possible after the invitation
must has been issued and before the bids are
224
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14.212 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 14.304
14.302 Bid submission. gram that formed the basis for the
(a) Bids shall be submitted so that telephone call. If the solicitation au-
they will be received in the office des- thorizes facsimile bids, bids may be
ignated in the invitation for bids (re- modified or withdrawn via facsimile re-
ferred to in paragraphs (b) and (c) ceived at any time before the exact
below as the designated office) not later time set for receipt of bids, subject to
than the exact time set for opening of the conditions specified in the provi-
bids. sion prescribed in 14.2016(v). Modifica-
(b) Except as specified in paragraph tions received by telephone (including
(c) below, if telegraphic bids are au- a record of those telephoned by the
thorized, a telegraphic bid that is com- telegraph company) or facsimile shall
municated by means of a telephone call be sealed in an envelope by a proper of-
to the designated office shall be consid- ficial. The official shall write on the
ered if envelope (1) the date and time of re-
(1) Agency regulations authorize such ceipt and by whom, and (2) the number
consideration; of the invitation for bids, and shall
(2) The telephone call is made by the sign the envelope. No information con-
telegraph office that received the tele- tained in the envelope shall be dis-
graphic bid; closed before the time set for bid open-
(3) The telephone call is received by ing.
the designated office not later than the (b) A bid may be withdrawn in person
time set for the bid opening; by a bidder or its authorized represent-
(4) The telegraph office that received ative if, before the exact time set for
the telegraphic bid sends the des- opening of bids, the identity of the per-
ignated office the telegram that sons requesting withdrawal is estab-
formed the basis for the telephone call; lished and that person signs a receipt
(5) The telegram indicates on its face for the bid.
that it was received in the telegraph (c) Upon withdrawal of an electroni-
office before the telephone call was re- cally transmitted bid, the data re-
ceived by the designated office; and ceived shall not be viewed and shall be
(6) The bid in the telegram is iden- purged from primary and backup data
tical in all essential respects to the bid storage systems.
received in the telephone call from the [48 FR 42171, Sept. 19, 1983, as amended at 54
telegraph office. FR 48983, Nov. 28, 1989; 60 FR 34738, July 3,
(c) If the conditions in paragraph (b) 1995; 64 FR 51838, Sept. 24, 1999]
above apply and the bid received by
telephone is the apparent low bid, 14.304 Submission, modification, and
award may not be made until the tele- withdrawal of bids.
gram is received by the designated of- (a) Bidders are responsible for sub-
fice; however, if the telegram is not re- mitting bids, and any modifications or
ceived by the designated office within 5 withdrawals, so as to reach the Govern-
days after the bid opening date, the bid ment office designated in the invita-
shall be rejected. tion for bid (IFB) by the time specified
in the IFB. They may use any trans-
14.303 Modification or withdrawal of mission method authorized by the IFB
bids. (i.e., regular mail, electronic com-
(a) Bids may be modified or with- merce, or facsimile). If no time is spec-
drawn by any method authorized by ified in the IFB, the time for receipt is
the solicitation, if notice is received in 4:30 p.m., local time, for the designated
the office designated in the solicitation Government office on the date that
not later than the exact time set for bids are due.
opening of bids. Unless proscribed by (b)(1) Any bid, modification, or with-
agency regulations, a telegraphic drawal of a bid received at the Govern-
modification or withdrawal of a bid re- ment office designated in the IFB after
ceived in such office by telephone from the exact time specified for receipt of
the receiving telegraph office shall be bids is late and will not be consid-
considered. However, the message shall ered unless it is received before award
be confirmed by the telegraph company is made, the contracting officer deter-
by sending a copy of the written tele- mines that accepting the late bid
227
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14.400 48 CFR Ch. 1 (10103 Edition)
would not unduly delay the acquisi- viewed and, where practicable, must be
tion; and purged from primary and backup data
(i) If it was transmitted through an storage systems.
electronic commerce method author- (f) The contracting officer must
ized by the IFB, it was received at the promptly notify any bidder if its bid,
initial point of entry to the Govern- modification, or withdrawal was re-
ment infrastructure not later than 5:00 ceived late, and must inform the bidder
p.m. one working day prior to the date whether its bid will be considered, un-
specified for receipt of bids; or less contract award is imminent and
(ii) There is acceptable evidence to the notices prescribed in 14.409 would
establish that it was received at the suffice.
Government installation designated for (g) Late bids and modifications that
receipt of bids and was under the Gov- are not considered must be held un-
ernments control prior to the time set opened, unless opened for identifica-
for receipt of bids. tion, until after award and then re-
(2) However, a late modification of an tained with other unsuccessful bids.
otherwise successful bid, that makes However, any bid bond or guarantee
its terms more favorable to the Gov- must be returned.
ernment, will be considered at any (h) If available, the following must be
time it is received and may be accept- included in the contract files for each
ed. late bid, modification, or withdrawal:
(c) Acceptable evidence to establish (1) The date and hour of receipt.
the time of receipt at the Government (2) A statement, with supporting ra-
installation includes the time/date tionale, regarding whether the bid was
stamp of that installation on the bid considered for award.
wrapper, other documentary evidence (3) The envelope, wrapper, or other
of receipt maintained by the installa- evidence of the date of receipt.
tion, or oral testimony or statements [64 FR 51838, Sept. 24, 1999]
of Government personnel.
(d) If an emergency or unanticipated
event interrupts normal Government
Subpart 14.4Opening of Bids
processes so that bids cannot be re- and Award of Contract
ceived at the Government office des- 14.400 Scope of subpart.
ignated for receipt of bids by the exact
time specified in the IFB, and urgent This subpart contains procedures for
Government requirements preclude the receipt, handling, opening, and dis-
amendment of the bid opening date, position of bids including mistakes in
the time specified for receipt of bids bids, and subsequent award of con-
will be deemed to be extended to the tracts.
same time of day specified in the IFB [48 FR 42171, Sept. 19, 1983, as amended at 63
on the first work day on which normal FR 58594, Oct. 30, 1998].
Government processes resume.
(e) Bids may be withdrawn by written 14.401 Receipt and safeguarding of
notice received at any time before the bids.
exact time set for receipt of bids. If the (a) All bids (including modifications)
IFB authorizes facsimile bids, bids may received before the time set for the
be withdrawn via facsimile received at opening of bids shall be kept secure.
any time before the exact time set for Except as provided in paragraph (b) of
receipt of bids, subject to the condi- this section, the bids shall not be
tions specified in the provision at opened or viewed, and shall remain in a
52.21431, Facsimile Bids. A bid may be locked bid box, a safe, or in a secured,
withdrawn in person by a bidder or its restricted-access electronic bid box. If
authorized representative if, before the an invitation for bids is cancelled, bids
exact time set for receipt of bids, the shall be returned to the bidders. Nec-
identity of the person requesting with- essary precautions shall be taken to
drawal is established and the person ensure the security of the bid box or
signs a receipt for the bid. Upon with- safe. Before bid opening, information
drawal of an electronically transmitted concerning the identity and number of
bid, the data received must not be bids received shall be made available
228
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229
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14.403 48 CFR Ch. 1 (10103 Edition)
the time set for bid opening for the 14.404 Rejection of bids.
purpose of determining late bids
under 14.304. A note should be made on 14.4041 Cancellation of invitations
the abstract of bids or otherwise added after opening.
to the file explaining the cir- (a)(1) Preservation of the integrity of
cumstances of the postponement. the competitive bid system dictates
that, after bids have been opened,
[48 FR 42171, Sept. 19, 1983, as amended at 60 award must be made to that respon-
FR 34738, July 3, 1995; 61 FR 31619, June 20,
sible bidder who submitted the lowest
1996]
responsive bid, unless there is a com-
14.403 Recording of bids. pelling reason to reject all bids and
cancel the invitation.
(a) Standard Form 1409, Abstract of (2) Every effort shall be made to an-
Offers, or Optional Form 1419, Abstract ticipate changes in a requirement be-
of OffersConstruction (or automated fore the date of opening and to notify
equivalent), shall be completed and all prospective bidders of any resulting
certified as to its accuracy by the bid modification or cancellation. This will
opening officer as soon after bid open- permit bidders to change their bids and
ing as practicable. Where bid items are prevent unnecessary exposure of bid
too numerous to warrant complete re- prices.
cording of all bids, abstract entries for (3) As a general rule, after the open-
individual bids may be limited to item ing of bids, an invitation should not be
numbers and bid prices. In preparing cancelled and resolicited due solely to
these forms, the extra columns and SF increased requirements for the items
1410, Abstract of OffersContinuation, being acquired. Award should be made
and OF 1419A, Abstract of OffersCon- on the initial invitation for bids and
struction, Continuation Sheet, may be the additional quantity should be
used to label and record such informa- treated as a new acquisition.
(b) When it is determined before
tion as the contracting activity deems
award but after opening that the re-
necessary.
quirements of 11.201 (relating to the
(b) Abstracts of offers for unclassified availability and identification of speci-
acquisitions shall be available for pub- fications) have not been met, the invi-
lic inspection. Such abstracts shall not tation shall be cancelled.
contain information regarding failure (c) Invitations may be cancelled and
to meet minimum standards of respon- all bids rejected before award but after
sibility, apparent collusion of bidders, opening when, consistent with para-
or other notations properly exempt graph (a)(1) above, the agency head de-
from disclosure to the public in accord- termines in writing that
ance with agency regulations imple- (1) Inadequate or ambiguous speci-
menting subpart 24.2. fications were cited in the invitation;
(c) The forms identified in paragraph (2) Specifications have been revised;
(a) above need not be used by the De- (3) The supplies or services being con-
fense Fuel Supply Center for acquisi- tracted for are no longer required;
tions of coal or petroleum products or (4) The invitation did not provide for
by the Defense Personnel Support Cen- consideration of all factors of cost to
ter for perishable subsistence items. the Government, such as cost of trans-
(d) If an invitation for bids is can- porting Government-furnished prop-
celled before the time set for bid open- erty to bidders plants;
ing, this fact shall be recorded together (5) Bids received indicate that the
needs of the Government can be satis-
with a statement of the number of bids
fied by a less expensive article differing
invited and the number of bids re-
from that for which the bids were in-
ceived.
vited;
[48 FR 42171, Sept. 19, 1983, as amended at 54 (6) All otherwise acceptable bids re-
FR 29280, July 11, 1989] ceived are at unreasonable prices, or
230
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Federal Acquisition Regulation 14.4042
only one bid is received and the con- with part 15, as appropriate) and make
tracting officer cannot determine the award without issuing a new solicita-
reasonableness of the bid price; tion provided
(7) The bids were not independently (1) Each responsible bidder in the
arrived at in open competition, were sealed bid acquisition has been given
collusive, or were submitted in bad notice that negotiations will be con-
faith (see subpart 3.3 for reports to be ducted and has been given an oppor-
made to the Department of Justice); tunity to participate in negotiations;
(8) No responsive bid has been re- and
ceived from a responsible bidder. (2) The award is made to the respon-
(9) A cost comparison as prescribed in sible bidder offering the lowest nego-
OMB Circular A76 and subpart 7.3 tiated price.
shows that performance by the Govern- [48 FR 42171, Sept. 19, 1983, as amended at 50
ment is more economical; or FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23,
(10) For other reasons, cancellation is 1985; 55 FR 52790, Dec. 21, 1990; 60 FR 48248,
clearly in the publics interest. Sept. 18, 1995; 62 FR 51230, Sept. 30, 1997]
(d) Should administrative difficulties
be encountered after bid opening that 14.4042 Rejection of individual bids.
may delay award beyond bidders ac- (a) Any bid that fails to conform to
ceptance periods, the several lowest the essential requirements of the invi-
bidders whose bids have not expired (ir- tation for bids shall be rejected.
respective of the acceptance period (b) Any bid that does not conform to
specified in the bid) should be re- the applicable specifications shall be
quested, before expiration of their bids, rejected unless the invitation author-
to extend in writing the bid acceptance ized the submission of alternate bids
period (with consent of sureties, if any) and the supplies offered as alternates
in order to avoid the need for resolic- meet the requirements specified in the
iting. invitation.
(e) Under some circumstances, com- (c) Any bid that fails to conform to
pletion of the acquisition after can- the delivery schedule or permissible al-
cellation of the invitation for bids may ternates stated in the invitation shall
be appropriate. be rejected.
(1) If the invitation for bids has been (d) A bid shall be rejected when the
cancelled for the reasons specified in bidder imposes conditions that would
subparagraphs (c) (6), (7), or (8) of this modify requirements of the invitation
subsection, and the agency head has or limit the bidders liability to the
authorized, in the determination in Government, since to allow the bidder
paragraph (c) of this subsection, the to impose such conditions would be
completion of the acquisition through prejudicial to other bidders. For exam-
negotiation, the contracting officer ple, bids shall be rejected in which the
shall proceed in accordance with para- bidder
graph (f) of this subsection. (1) Protects against future changes in
(2) If the invitation for bids has been conditions, such as increased costs, if
cancelled for the reasons specified in total possible costs to the Government
subparagraphs (c) (1), (2), (4), (5), or (10) cannot be determined;
of this subsection, or for the reasons in (2) Fails to state a price and indi-
subparagraphs (c) (6), (7), or (8) of this cates that price shall be price in effect
subsection and completion through ne- at time of delivery;
gotiation is not authorized under sub- (3) States a price but qualifies it as
paragraph (e)(1) of this subsection, the being subject to price in effect at time of
contracting officer shall proceed with a delivery;
new acquisition. (4) When not authorized by the invi-
(f) When the agency head has deter- tation, conditions or qualifies a bid by
mined, in accordance with paragraph stipulating that it is to be considered
(e)(1) of this subsection, that an invita- only if, before date of award, the bidder
tion for bids should be canceled and receives (or does not receive) award
that use of negotiation is in the Gov- under a separate solicitation;
ernments interest, the contracting of- (5) Requires that the Government is
ficer may negotiate (in accordance to determine that the bidders product
231
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14.4043 48 CFR Ch. 1 (10103 Edition)
232
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Federal Acquisition Regulation 14.4072
variation of a bid from the exact re- ports, and 52.22225, Affirmative Action
quirements of the invitation that can Compliance.
be corrected or waived without being [48 FR 42171, Sept. 19, 1983, as amended at 55
prejudicial to other bidders. The defect FR 25527, June 21, 1990; 62 FR 236, Jan. 2, 1997;
or variation is immaterial when the ef- 64 FR 10532, Mar. 4, 1999]
fect on price, quantity, quality, or de-
livery is negligible when contrasted 14.406 Receipt of an unreadable elec-
with the total cost or scope of the sup- tronic bid.
plies or services being acquired. The If a bid received at the Government
contracting officer either shall give the facility by electronic data interchange
bidder an opportunity to cure any defi- is unreadable to the degree that con-
ciency resulting from a minor infor- formance to the essential requirements
mality or irregularity in a bid or waive of the invitation for bids cannot be
the deficiency, whichever is to the ad- ascertained, the contracting officer im-
vantage of the Government. Examples mediately shall notify the bidder that
of minor informalities or irregularities the bid will be rejected unless the bid-
include failure of a bidder to der provides clear and convincing evi-
(a) Return the number of copies of dence
signed bids required by the invitation; (a) Of the content of the bid as origi-
nally submitted; and
(b) Furnish required information con-
cerning the number of its employees; (b) That the unreadable condition of
the bid was caused by Government
(c) Sign its bid, but only if
software or hardware error, malfunc-
(1) The unsigned bid is accompanied tion, or other Government mis-
by other material indicating the bid- handling.
ders intention to be bound by the un-
signed bid (such as the submission of a [60 FR 34738, July 3, 1995]
bid guarantee or a letter signed by the
14.407 Mistakes in bids.
bidder, with the bid, referring to and
clearly identifying the bid itself); or 14.4071 General.
(2) The firm submitting a bid has for-
mally adopted or authorized, before the After the opening of bids, contracting
officers shall examine all bids for mis-
date set for opening of bids, the execu-
takes. In cases of apparent mistakes
tion of documents by typewritten,
and in cases where the contracting offi-
printed, or stamped signature and sub- cer has reason to believe that a mis-
mits evidence of such authorization take may have been made, the con-
and the bid carries such a signature; tracting officer shall request from the
(d) Acknowledge receipt of an amend- bidder a verification of the bid, calling
ment to an invitation for bids, but only attention to the suspected mistake. If
if the bidder alleges a mistake, the mat-
(1) The bid received clearly indicates ter shall be processed in accordance
that the bidder received the amend- with this section 14.407. Such actions
ment, such as where the amendment shall be taken before award.
added another item to the invitation
[48 FR 42171, Sept. 19, 1983. Redesignated and
and the bidder submitted a bid on the amended at 60 FR 34738, July 3, 1995]
item; or
(2) The amendment involves only a 14.4072 Apparent clerical mistakes.
matter of form or has either no effect (a) Any clerical mistake, apparent on
or merely a negligible effect on price, its face in the bid, may be corrected by
quantity, quality, or delivery of the the contracting officer before award.
item bid upon; and The contracting officer first shall ob-
(e) Execute the representations with tain from the bidder a verification of
respect to Equal Opportunity and Af- the bid intended. Examples of apparent
firmative Action Programs, as set mistakes are
forth in the clauses at 52.22222, Pre- (1) Obvious misplacement of a dec-
vious Contracts and Compliance Re- imal point;
233
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14.4073 48 CFR Ch. 1 (10103 Edition)
(2) Obviously incorrect discounts (for received, the agency head may make a
example, 1 percent 10 days, 2 percent 20 determination to correct the bid and
days, 5 percent 30 days); not permit its withdrawal.
(3) Obvious reversal of the price f.o.b. (c) If, under paragraph (a) or (b) of
destination and price f.o.b. origin; and this subsection,
(4) Obvious mistake in designation of (1) The evidence of a mistake is clear
unit. and convincing only as to the mistake
(b) Correction of the bid shall be ef- but not as to the intended bid, or
fected by attaching the verification to (2) The evidence reasonably supports
the original bid and a copy of the the existence of a mistake but is not
verification to the duplicate bid. Cor- clear and convincing, an official above
rection shall not be made on the face of the contracting officer, unless other-
the bid; however, it shall be reflected wise provided by agency procedures,
in the award document. may make a determination permitting
(c) Correction of bids submitted by the bidder to withdraw the bid.
electronic data interchange shall be ef- (d) If the evidence does not warrant a
fected by including in the electronic determination under paragraph (a), (b),
solicitation file the original bid, the or (c) above, the agency head may
verification request, and the bid make a determination that the bid be
verification. neither withdrawn nor corrected.
[48 FR 42171, Sept. 19, 1983. Redesignated and (e) Heads of agencies may delegate
amended at 60 FR 34738, July 3, 1995] their authority to make the determina-
tions under paragraphs (a), (b), (c), and
14.4073 Other mistakes disclosed be- (d) of this 14.4073 to a central author-
fore award. ity, or a limited number of authorities
In order to minimize delays in con- as necessary, in their agencies, without
tract awards, administrative deter- power of redelegation.
minations may be made as described in (f) Each proposed determination shall
this 14.4073 in connection with mis- have the concurrence of legal counsel
takes in bids alleged after opening of within the agency concerned before
bids and before award. The authority issuance.
to permit correction of bids is limited (g) Suspected or alleged mistakes in
to bids that, as submitted, are respon- bids shall be processed as follows. A
sive to the invitation and may not be mere statement by the administrative
used to permit correction of bids to officials that they are satisfied that an
make them responsive. This authority error was made is insufficient.
is in addition to that in 14.4072 or that (1) The contracting officer shall im-
may be otherwise available. mediately request the bidder to verify
(a) If a bidder requests permission to the bid. Action taken to verify bids
correct a mistake and clear and con- must be sufficient to reasonably assure
vincing evidence establishes both the the contracting officer that the bid as
existence of the mistake and the bid confirmed is without error, or to elicit
actually intended, the agency head the allegation of a mistake by the bid-
may make a determination permitting der. To assure that the bidder will be
the bidder to correct the mistake; pro- put on notice of a mistake suspected by
vided, that if this correction would re- the contracting officer, the bidder
sult in displacing one or more lower should be advised as appropriate
bids, such a determination shall not be (i) That its bid is so much lower than
made unless the existence of the mis- the other bids or the Governments es-
take and the bid actually intended are timate as to indicate a possibility of
ascertainable substantially from the error;
invitation and the bid itself. (ii) Of important or unusual charac-
(b) If (1) a bidder requests permission teristics of the specifications;
to withdraw a bid rather than correct (iii) Of changes in requirements from
it, (2) the evidence is clear and con- previous purchases of a similar item; or
vincing both as to the existence of a (iv) Of any other information, proper
mistake and as to the bid actually in- for disclosure, that leads the con-
tended, and (3) the bid, both as uncor- tracting officer to believe that there is
rected and as corrected, is the lowest a mistake in bid.
234
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Federal Acquisition Regulation 14.4073
(2) If the bid is verified, the con- ices involved or, in the absence of a re-
tracting officer shall consider the bid cent comparable contract, the con-
as originally submitted. If the time for tracting officers estimate of a fair
acceptance of bids is likely to expire price for the supplies or services;
before a decision can be made, the con- (F) Any additional pertinent evi-
tracting officer shall request all bid- dence; and
ders whose bids may become eligible (G) A recommendation that either
for award to extend the time for ac- the bid be considered for award in the
ceptance of their bids in accordance form submitted, or the bidder be au-
with 14.4041(d). If the bidder whose bid thorized to withdraw or modify the bid.
is believed erroneous does not (or can- (4) When time is of the essence be-
not) grant an extension of time, the bid cause of the expiration of bids or other-
shall be considered as originally sub- wise, the contracting officer may refer
mitted (but see subparagraph (5) the case by telegraph or telephone to
below). If the bidder alleges a mistake, the appropriate authority. Ordinarily,
the contracting officer shall advise the the contracting officer will not refer
bidder to make a written request to mistake in bid cases by telegraph or
withdraw or modify the bid. The re- telephone to the appropriate authority
quest must be supported by statements when the determination set forth in
(sworn statements, if possible) and paragraphs (a) or (b) above is applica-
shall include all pertinent evidence
ble, since actual examination is gen-
such as the bidders file copy of the bid,
erally necessary to determine whether
the original worksheets and other data
the evidence presented is clear and
used in preparing the bid, subcontrac-
convincing.
tors quotations, if any, published price
lists, and any other evidence that es- (5) Where the bidder fails or refuses
tablishes the existence of the error, the to furnish evidence in support of a sus-
manner in which it occurred, and the pected or alleged mistake, the con-
bid actually intended. tracting officer shall consider the bid
(3) When the bidder furnishes evi- as submitted unless (i) the amount of
dence supporting an alleged mistake, the bid is so far out of line with the
the contracting officer shall refer the amounts of other bids received, or with
case to the appropriate authority (see the amount estimated by the agency or
paragraph (e) above) together with the determined by the contracting officer
following data: to be reasonable, or (ii) there are other
(i) A signed copy of the bid involved. indications of error so clear, as to rea-
(ii) A copy of the invitation for bids sonably justify the conclusion that ac-
and any specifications or drawings rel- ceptance of the bid would be unfair to
evant to the alleged mistake. the bidder or to other bona fide bid-
(iii) An abstract or record of the bids ders. Attempts made to obtain the in-
received. formation required and the action
(iv) The written request by the bidder taken with respect to the bid shall be
to withdraw or modify the bid, to- fully documented.
gether with the bidders written state- (h) Each agency shall maintain
ment and supporting evidence. records of all determinations made in
(v) A written statement by the con- accordance with this subsection 14.407
tracting officer setting forth 3, the facts involved, and the action
(A) A description of the supplies or taken in each case. Copies of all such
services involved; determinations shall be included in the
(B) The expiration date of the bid in file.
question and of the other bids sub- (i) Nothing contained in this sub-
mitted; section 14.4073 prevents an agency
(C) Specific information as to how from submitting doubtful cases to the
and when the mistake was alleged; Comptroller General for advance deci-
(D) A summary of the evidence sub- sion.
mitted by the bidder; [48 FR 42171, Sept. 19, 1983, as amended at 53
(E) In the event only one bid was re- FR 17857, May 18, 1988; 54 FR 13023, Mar. 29,
ceived, a quotation of the most recent 1989. Redesignated and amended at 60 FR
contract price for the supplies or serv- 34738, July 3, 1995]
235
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14.4074 48 CFR Ch. 1 (10103 Edition)
14.4074 Mistakes after award. take occurred, and the bid actually in-
If a contractors discovery and re- tended.
quest for correction of a mistake in bid (2) The case file concerning an al-
is not made until after the award, it leged mistake shall contain the fol-
shall be processed under the procedures lowing:
of subpart 33.2 and the following: (i) All evidence furnished by the con-
(a) When a mistake in a contractors tractor in support of the alleged mis-
bid is not discovered until after award, take.
the mistake may be corrected by con- (ii) A signed statement by the con-
tract modification if correcting the tracting officer
mistake would be favorable to the Gov- (A) Describing the supplies or serv-
ernment without changing the essen- ices involved;
tial requirements of the specifications. (B) Specifying how and when the mis-
(b) In addition to the cases con- take was alleged or disclosed;
templated in paragraph (a) above or as (C) Summarizing the evidence sub-
otherwise authorized by law, agencies mitted by the contractor and any addi-
are authorized to make a determina- tional evidence considered pertinent;
tion (D) Quoting, in cases where only one
(1) To rescind a contract; bid was received, the most recent con-
(2) To reform a contract (i) to delete tract price for the supplies or services
the items involved in the mistake or involved, or in the absence of a recent
(ii) to increase the price if the contract comparable contract, the contracting
price, as corrected, does not exceed officers estimate of a fair price for the
that of the next lowest acceptable bid supplies or services and the basis for
under the original invitation for bids; the estimate;
or
(E) Setting forth the contracting offi-
(3) That no change shall be made in
cers opinion whether a bona fide mis-
the contract as awarded, if the evi-
take was made and whether the con-
dence does not warrant a determina-
tracting officer was, or should have
tion under subparagraphs (1) or (2)
been, on constructive notice of the mis-
above.
take before the award, together with
(c) Determinations under subpara-
the reasons for, or data in support of,
graphs (b)(1) and (2) above may be made
such opinion;
only on the basis of clear and con-
vincing evidence that a mistake in bid (F) Setting forth the course of action
was made. In addition, it must be clear with respect to the alleged mistake
that the mistake was (1) mutual, or (2) that the contracting officer considers
if unilaterally made by the contractor, proper on the basis of the evidence, and
so apparent as to have charged the con- if other than a change in contract price
tracting officer with notice of the prob- is recommended, the manner by which
ability of the mistake. the supplies or services will otherwise
(d) Each proposed determination be acquired; and
shall be coordinated with legal counsel (G) Disclosing the status of perform-
in accordance with agency procedures. ance and payments under the contract,
(e) Mistakes alleged or disclosed including contemplated performance
after award shall be processed as fol- and payments.
lows: (iii) A signed copy of the bid in-
(1) The contracting officer shall re- volved.
quest the contractor to support the al- (iv) A copy of the invitation for bids
leged mistake by submission f written and any specifications or drawings rel-
statements and pertinent evidence, evant to the alleged mistake.
such as (i) the contractors file copy of (v) An abstract of written record of
the bid, (ii) the contractors original the bids received.
worksheets and other data used in pre- (vi) A written request by the con-
paring the bid, (iii) subcontractors and tractor to reform or rescind the con-
suppliers quotations, if any, (iv) pub- tract, and copies of all other relevant
lished price lists, and (v) any other evi- correspondence between the con-
dence that will serve to establish the tracting officer and the contractor con-
mistake, the manner in which the mis- cerning the alleged mistake.
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Federal Acquisition Regulation 14.4083
(vii) A copy of the contract and any state that the Government may make
related change orders or supplemental subsequent awards on those additional
agreements. items within the bid acceptance period.
(f) Each agency shall include in the (5) All provisions of the invitation for
contract file a record of (1) all deter- bids, including any acceptable addi-
minations made in accordance with tions or changes made by a bidder in
this 14.4074, (2) the facts involved, and the bid, shall be clearly and accurately
(3) the action taken in each case. set forth (either expressly or by ref-
[48 FR 42171, Sept. 19, 1983, as amended at 50 erence) in the award document. The
FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23, award is an acceptance of the bid, and
1985. Redesignated and amended at 60 FR the bid and the award constitute the
34738, July 3, 1995; 63 FR 58602, Oct. 30, 1998] contract.
(d)(1) Award is generally made by
14.408 Award. using the Award portion of Standard
Form (SF) 33, Solicitation, Offer, and
14.4081 General.
Award, or SF 1447, Solicitation/Con-
(a) The contracting officer shall tract (see 53.214). If an offer on an SF 33
make a contract award (1) by written leads to further changes, the resulting
or electronic notice, (2) within the time contract shall be prepared as a bilat-
for acceptance specified in the bid or eral document on SF 26, Award/Con-
an extension (see 14.4041(d)), and (3) to tract.
that responsible bidder whose bid, con- (2) Use of the Award portion of SF 33,
forming to the invitation, will be most SF 26, or SF 1447, does not preclude the
advantageous to the Government, con- additional use of informal documents,
sidering only price and the price-re- including telegrams or electronic
lated factors (see 14.2018) included in transmissions, as notices of awards.
the invitation. Award shall not be
made until all required approvals have [48 FR 42171, Sept. 19, 1983, as amended at 50
been obtained and the award otherwise FR 1739, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 54 FR 48984, Nov. 28, 1989; 55 FR 3881,
conforms with 14.1032. Feb. 5, 1990. Redesignated at 60 FR 34738,
(b) If less than three bids have been July 3, 1995; 60 FR 42654, Aug. 16, 1995]
received, the contracting officer shall
examine the situation to ascertain the 14.4082 Responsible bidderreason-
reasons for the small number of re- ableness of price.
sponses. Award shall be made notwith-
(a) The contracting officer shall de-
standing the limited number of bids.
termine that a prospective contractor
However, the contracting officer shall
is responsible (see subpart 9.1) and that
initiate, if appropriate, corrective ac-
the prices offered are reasonable before
tion to increase competition in future
awarding the contract. The price anal-
solicitations for the same or similar
ysis techniques in 15.4041(b) may be
items, and include a notation of such
used as guidelines. In each case the de-
action in the records of the invitation
termination shall be made in the light
for bids (see 14.204).
of all prevailing circumstances. Par-
(c)(1) Award shall be made by mailing
ticular care must be taken in cases
or otherwise furnishing a properly exe-
where only a single bid is received.
cuted award document to the success-
(b) The price analysis shall consider
ful bidder.
whether bids are materially unbal-
(2) When a notice of award is issued,
anced (see 15.4041(g)).
it shall be followed as soon as possible
by the formal award. [48 FR 42171, Sept. 19, 1983, as amended at 55
(3) When more than one award results FR 25527, June 21, 1990. Redesignated at 60
from any single invitation for bids, sep- FR 34738, July 3, 1995, as amended at 62 FR
arate award documents shall be suit- 51270, Sept. 30, 1997]
ably numbered and executed.
(4) When an award is made to a bid- 14.4083 Prompt payment discounts.
der for less than all of the items that (a) Prompt payment discounts shall
may be awarded to that bidder and ad- not be considered in the evaluation of
ditional items are being withheld for bids. However, any discount offered
subsequent award, the award shall will form a part of the award, and will
237
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14.4084 48 CFR Ch. 1 (10103 Edition)
be taken by the payment center if pay- price adjustment provisions are there-
ment is made within the discount pe- by limited.
riod specified by the bidder. As an al- (4) When a bidder decreases the max-
ternative to indicating a discount in imum percentage of economic price ad-
conjunction with the offer, bidders may justment stipulated in the invitation,
prefer to offer discounts on individual the bid shall be evaluated at the base
invoices. price on an equal basis with bids that
(b) See 32.111(c)(1), which prescribes do not reduce the stipulated ceiling.
the contract clause at 52.2328, Dis- However, after evaluation, if the bidder
counts for Prompt Payment. offering the lower ceiling is in a posi-
[48 FR 42171, Sept. 19, 1983, as amended at 50
tion to receive the award, the award
FR 26903, June 28, 1985. Redesignated at 60 shall reflect the lower ceiling.
FR 34738, July 3, 1995] [48 FR 42171, Sept. 19, 1983. Redesignated at
60 FR 34738, July 3, 1995]
14.4084 Economic price adjustment.
(a) Bidder proposes economic price ad- 14.4085 [Reserved]
justment.
14.4086 Equal low bids.
(1) When a solicitation does not con-
tain an economic price adjustment (a) Contracts shall be awarded in the
clause but a bidder proposes one with a following order of priority when two or
ceiling that the price will not exceed, more low bids are equal in all respects:
the bid shall be evaluated on the basis (1) Small business concerns that are
of the maximum possible economic also labor surplus area concerns.
price adjustment of the quoted base (2) Other small business concerns.
price. (3) Other business concerns.
(2) If the bid is eligible for award, the (b) If two or more bidders still re-
contracting officer shall request the main equally eligible after application
bidder to agree to the inclusion in the of paragraph (a) above, award shall be
award of an approved economic price made by a drawing by lot limited to
adjustment clause (see 16.203) that is those bidders. If time permits, the bid-
subject to the same ceiling. If the bid- ders involved shall be given an oppor-
der will not agree to an approved tunity to attend the drawing. The
clause, the award may be made on the drawing shall be witnessed by at least
basis of the bid as originally sub- three persons, and the contract file
mitted. shall contain the names and addresses
(3) Bids that contain economic price of the witnesses and the person super-
adjustments with no ceiling shall be re- vising the drawing.
jected unless a clear basis for evalua- (c) When an award is to be made by
tion exists. using the priorities under this 14.4086,
(b) Government proposes economic price the contracting officer shall include a
adjustment. written agreement in the contract that
(1) When an invitation contains an the contractor will perform, or cause
economic price adjustment clause and to be performed, the contract in ac-
no bidder takes exception to the provi- cordance with the circumstances justi-
sions, bids shall be evaluated on the fying the priority used to break the tie
basis of the quoted prices without the or select bids for a drawing by lot.
allowable economic price adjustment [48 FR 42171, Sept. 19, 1983. Redesignated and
being added. amended at 60 FR 34738, July 3, 1995; 60 FR
(2) When a bidder increases the max- 48260, Sept. 18, 1995]
imum percentage of economic price ad-
justment stipulated in the invitation 14.4087 Documentation of award.
or limits the downward economic price (a) The contracting officer shall doc-
adjustment provisions of the invita- ument compliance with 14.1032 in the
tion, the bid shall be rejected as non- contract file.
responsive. (b) The documentation shall either
(3) When a bid indicates deletion of state that the accepted bid was the
the economic price adjustment clause, lowest bid received, or list all lower
the bid shall be rejected as nonrespon- bids with reasons for their rejection in
sive since the downward economic sufficient detail to justify the award.
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Federal Acquisition Regulation 14.501
(c) When an award is made after re- an inquirer who is neither a bidder nor
ceipt of equal low bids, the documenta- a representative of a bidder, the con-
tion shall describe how the tie was bro- tracting officer should make every ef-
ken. fort to furnish the names of successful
[48 FR 42171, Sept. 19, 1983. Redesignated at bidders and, if requested, the prices at
60 FR 34738, July 3, 1995] which awards were made. However,
when such requests require so much
14.4088 Protests against award. work as to interfere with the normal
See subpart 33.1, Protests. operations of the contracting office,
the inquirer will be advised where a
[50 FR 23606, June 4, 1985. Redesignated at 60
FR 34738, July 3, 1995] copy of the abstract of offers may be
seen.
14.409 Information to bidders. (d) Requests for records shall be gov-
erned by agency regulations imple-
14.4091 Award of unclassified con- menting Subpart 24.2.
tracts.
(a)(1) The contracting officer shall as [60 FR 42654, Aug. 16, 1995, as amended at 64
a minimum (subject to any restrictions FR 72418, Dec. 27, 1999; 67 FR 6120, Feb. 8,
2002]
in Subpart 9.4)
(i) Notify each unsuccessful bidder in
14.4092 Award of classified contracts.
writing or electronically within three
days after contract award, that its bid In addition to 14.4091, if classified in-
was not accepted. Day, for purposes formation was furnished or created in
of the notification process, means cal- connection with the solicitation, the
endar day, except that the period will contracting officer shall advise the un-
run until a day which is not a Satur- successful bidders, including any who
day, Sunday, or legal holiday; did not bid, to take disposition action
(ii) Extend appreciation for the inter- in accordance with agency procedures.
est the unsuccessful bidder has shown The name of the successful bidder and
in submitting a bid; and the contract price will be furnished to
(iii) When award is made to other unsuccessful bidders only upon request.
than a low bidder, state the reason for Information regarding a classified
rejection in the notice to each of the award shall not be furnished by tele-
unsuccessful low bidders. phone.
(2) For acquisitions subject to the
Trade Agreements Act or the North [48 FR 42171, Sept. 19, 1983. Redesignated and
American Free Trade Agreement amended at 60 FR 34738, July 3, 1995]
(NAFTA) Implementation Act (see
25.408(a)(5)), agencies must include in Subpart 14.5Two-Step Sealed
notices given unsuccessful bidders from Bidding
designated or NAFTA countries
(i) The dollar amount of the success- 14.501 General.
ful bid; and
(ii) The name and address of the suc- Two-step sealed bidding is a com-
cessful bidder. bination of competitive procedures de-
(b) Information included in para- signed to obtain the benefits of sealed
graph (a)(2) of this subsection shall be bidding when adequate specifications
provided to any unsuccessful bidder are not available. An objective is to
upon request except when multiple permit the development of a suffi-
awards have been made and furnishing ciently descriptive and not unduly re-
information on the successful bids strictive statement of the Govern-
would require so much work as to ments requirements, including an ade-
interfere with normal operations of the quate technical data package, so that
contracting office. In such cir- subsequent acquisitions may be made
cumstances, only information con- by conventional sealed bidding. This
cerning location of the abstract of of- method is especially useful in acquisi-
fers need be given. tions requiring technical proposals,
(c) When a request is received con- particularly those for complex items.
cerning an unclassified invitation from It is conducted in two steps:
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14.502 48 CFR Ch. 1 (10103 Edition)
(a) Step one consists of the request (4) The use of the price evaluation ad-
for, submission, evaluation, and (if nec- justment for small disadvantaged busi-
essary) discussion of a technical pro- ness concerns (see Subpart 19.11).
posal. No pricing is involved. The ob- (5) The use of a set-aside or price
jective is to determine the accept- evaluation preference for HUBZone
ability of the supplies or services of- small business concerns (see subpart
fered. As used in this context, the word 19.13).
technical has a broad connotation and (6) A first or subsequent production
includes, among other things, the engi- quantity is being acquired under a per-
neering approach, special manufac- formance specification.
turing processes, and special testing [48 FR 42171, Sept. 19, 1983, as amended at 50
techniques. It is the proper step for FR 1739, Jan. 11, 1985; 50 FR 52429, Dec. 23,
clarification of questions relating to 1985; 60 FR 48260, Sept. 18, 1995; 63 FR 35721,
technical requirements. Conformity to June 30, 1998; 63 FR 70267, Dec. 18, 1998]
the technical requirements is resolved
in this step, but not responsibility as 14.503 Procedures.
defined in 9.1.
(b) Step two involves the submission 14.5031 Step one.
of sealed priced bids by those who sub- (a) Requests for technical proposals
mitted acceptable technical proposals shall be synopsized in accordance with
in step one. Bids submitted in step two Part 5. The request must include, as a
are evaluated and the awards made in minimum, the following:
accordance with subparts 14.3 and 14.4. (1) A description of the supplies or
services required.
[48 FR 42171, Sept. 19, 1983, as amended at 50
(2) A statement of intent to use the
FR 1739, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985] two step method.
(3) The requirements of the technical
14.502 Conditions for use. proposal.
(4) The evaluation criteria, to include
(a) Unless other factors require the all factors and any significant subfac-
use of sealed bidding, two-step sealed tors.
bidding may be used in preference to (5) A statement that the technical
negotiation when all of the following proposals shall not include prices or
conditions are present: pricing information.
(1) Available specifications or pur- (6) The date, or date and hour, by
chase descriptions are not definite or which the proposal must be received
complete or may be too restrictive (see 14.2016(r)).
without technical evaluation, and any (7) A statement that (i) in the second
necessary discussion, of the technical step, only bids based upon technical
aspects of the requirement to ensure proposals determined to be acceptable,
mutual understanding between each either initially or as a result of discus-
source and the Government. sions, will be considered for awards and
(2) Definite criteria exist for evalu- (ii) each bid in the second step must be
ating technical proposals. based on the bidders own technical
(3) More than one technically quali- proposals.
fied source is expected to be available. (8) A statement that (i) offerors
(4) Sufficient time will be available should submit proposals that are ac-
for use of the two-step method. ceptable without additional expla-
(5) A firm-fixed-price contract or a nation or information, (ii) the Govern-
fixed-price contract with economic ment may make a final determination
price adjustment will be used. regarding a proposals acceptability
(b) None of the following precludes solely on the basis of the proposal as
the use of two-step sealed bidding: submitted, and (iii) the Government
(1) Multi-year contracting. may proceed with the second step with-
(2) Government-owned facilities or out requesting further information
special tooling to be made available to from any offeror; however, the Govern-
the successful bidder. ment may request additional informa-
(3) A total small business set-aside tion from offerors of proposals that it
(see 19.5022). considers reasonably susceptible of
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Federal Acquisition Regulation 14.5031
being made acceptable, and may dis- (f)(1) The contracting officer may
cuss proposals with their offerors. proceed directly with step two if there
(9) A statement that a notice of are sufficient acceptable proposals to
unacceptability will be forwarded to ensure adequate price competition
the offeror upon completion of the pro- under step two, and if further time, ef-
posal evaluation and final determina- fort and delay to make additional pro-
tion of unacceptability. posals acceptable and thereby increase
(10) A statement either that only one competition would not be in Govern-
technical proposal may be submitted ments interest. If this is not the case,
by each offeror or that multiple tech- the contracting officer shall request
nical proposals may be submitted. bidders whose proposals may be made
When specifications permit different acceptable to submit additional clari-
technical approaches, it is generally in fying or supplementing information.
the Governments interest to authorize The contracting officer shall identify
multiple proposals. If multiple pro- the nature of the deficiencies in the
posals are authorized, see 14.2016(s). proposal or the nature of the additional
(b) Information on delivery or per- information required. The contracting
formance requirements may be of as- officer may also arrange discussions for
sistance to bidders in determining this purpose. No proposal shall be dis-
whether or not to submit a proposal cussed with any offeror other than the
and may be included in the request. submitter.
The request shall also indicate that the
(2) In initiating requests for addi-
information is not binding on the Gov-
ernment and that the actual delivery tional information, the contracting of-
or performance requirements will be ficer shall fix an appropriate time for
contained in the invitation issued bidders to conclude discussions, if any,
under step two. submit all additional information, and
(c) Upon receipt, the contracting offi- incorporate such additional informa-
cer shall tion as part of their proposals sub-
(1) Safeguard proposals against dis- mitted. Such time may be extended in
closure to unauthorized persons; the discretion of the contracting offi-
(2) Accept and handle data marked in cer. If the additional information in-
accordance with 15.609 as provided in corporated as part of a proposal within
that section; and the final time fixed by the contracting
(3) Remove any reference to price or officer establishes that the proposal is
cost. acceptable, it shall be so categorized.
(d) The contracting officer shall es- Otherwise, it shall be categorized as
tablish a time period for evaluating unacceptable.
technical proposals. The period may (g) When a technical proposal is
vary with the complexity and number found unacceptable (either initially or
of proposals involved. However, the after clarification), the contracting of-
evaluation should be completed quick- ficer shall promptly notify the offeror
ly. of the basis of the determination and
(e)(1) Evaluations shall be based on that a revision of the proposal will not
the criteria in the request for proposals be considered. Upon written request,
but not consideration of responsibility the contracting officer shall debrief un-
as defined in 9.1. Proposals shall be cat- successful offerors (see 15.505 and
egorized as 15.506).
(i) Acceptable; (h) Late technical proposals are gov-
(ii) Reasonably susceptible of being erned by 15.208 (b), (c), and (f).
made acceptable; or (i) If it is necessary to discontinue
(iii) Unacceptable. two-step sealed bidding, the con-
(2) Any proposal which modifies, or tracting officer shall include a state-
fails to conform to the essential re- ment of the facts and circumstances in
quirements or specifications of, the re- the contract file. Each offeror shall be
quest for technical proposals shall be notified in writing. When step one re-
considered nonresponsive and cat- sults in no acceptable technical pro-
egorized as unacceptable. posal or only one acceptable technical
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14.5032 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 15.101
15.4073 Forward pricing rate agreements. response to an amendment, or made to
15.4074 Should-cost review. correct a mistake at any time before
15.4075 Estimating systems. award.
15.408 Solicitation provisions and contract
clauses. Proposal revision is a change to a pro-
posal made after the solicitation clos-
TABLE 152INSTRUCTIONS FOR SUBMITTING ing date, at the request of or as allowed
COST PRICING PROPOSALS WHEN COST OR by a contracting officer, as the result
PRICING DATA ARE REQUIRED of negotiations.
Subpart 15.5Preaward, Award, and Weakness means a flaw in the pro-
Postaward Notifications, Protests, and posal that increases the risk of unsuc-
Mistakes cessful contract performance. A sig-
nificant weakness in the proposal is a
15.501 Definition. flaw that appreciably increases the
15.502 Applicability. risk of unsuccessful contract perform-
15.503 Notifications to unsuccessful offerors. ance.
15.504 Award to successful offeror.
15.505 Preaward debriefing of offerors. [62 FR 51230, Sept. 30, 1997, as amended at 66
15.506 Postaward debriefing of offerors. FR 2129, Jan. 10, 2001]
15.507 Protests against award.
15.508 Discovery of mistakes. 15.002 Types of negotiated acquisition.
15.509 Forms.
(a) Sole source acquisitions. When con-
Subpart 15.6Unsolicited Proposals tracting in a sole source environment,
the request for proposals (RFP) should
15.600 Scope of subpart. be tailored to remove unnecessary in-
15.601 Definitions.
formation and requirements; e.g., eval-
15.602 Policy.
15.603 General. uation criteria and voluminous pro-
15.604 Agency points of contact. posal preparation instructions.
15.605 Content of unsolicited proposals. (b) Competitive acquisitions. When con-
15.606 Agency procedures. tracting in a competitive environment,
15.6061 Receipt and initial review. the procedures of this part are intended
15.6062 Evaluation. to minimize the complexity of the so-
15.607 Criteria for acceptance and negotia-
tion of an unsolicited proposal.
licitation, the evaluation, and the
15.608 Prohibitions. source selection decision, while main-
15.609 Limited use of data. taining a process designed to foster an
impartial and comprehensive evalua-
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. chap-
ter 137; and 42 U.S.C. 2473(c). tion of offerors proposals, leading to
selection of the proposal representing
SOURCE: 62 FR 51230, Sept. 30, 1997, unless the best value to the Government (see
otherwise noted.
2.101).
15.000 Scope of part.
This part prescribes policies and pro- Subpart 15.1Source Selection
cedures governing competitive and Processes and Techniques
noncompetitive negotiated acquisi-
tions. A contract awarded using other 15.100 Scope of subpart.
than sealed bidding procedures is a ne- This subpart describes some of the
gotiated contract (see 14.101). acquisition processes and techniques
that may be used to design competitive
15.001 Definitions. acquisition strategies suitable for the
As used in this part specific circumstances of the acquisi-
Deficiency is a material failure of a tion.
proposal to meet a Government re-
quirement or a combination of signifi- 15.101 Best value continuum.
cant weaknesses in a proposal that in- An agency can obtain best value in
creases the risk of unsuccessful con- negotiated acquisitions by using any
tract performance to an unacceptable one or a combination of source selec-
level. tion approaches. In different types of
Proposal modification is a change acquisitions, the relative importance
made to a proposal before the solicita- of cost or price may vary. For example,
tion closing date and time, or made in in acquisitions where the requirement
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15.1011 48 CFR Ch. 1 (10103 Edition)
is clearly definable and the risk of un- the acceptability standards for non-
successful contract performance is cost factors. If the contracting officer
minimal, cost or price may play a dom- documents the file pursuant to
inant role in source selection. The less 15.304(c)(3)(iv), past performance need
definitive the requirement, the more not be an evaluation factor in lowest
development work required, or the price technically acceptable source se-
greater the performance risk, the more lections. If the contracting officer
technical or past performance consid- elects to consider past performance as
erations may play a dominant role in an evaluation factor, it shall be evalu-
source selection. ated in accordance with 15.305. How-
ever, the comparative assessment in
15.1011 Tradeoff process. 15.305(a)(2)(i) does not apply. If the con-
(a) A tradeoff process is appropriate tracting officer determines that a
when it may be in the best interest of small business past performance is not
the Government to consider award to acceptable, the matter shall be referred
other than the lowest priced offeror or to the Small Business Administration
other than the highest technically for a Certificate of Competency deter-
rated offeror. mination, in accordance with the pro-
(b) When using a tradeoff process, the cedures contained in subpart 19.6 and 15
following apply: U.S.C. 637(b)(7)).
(1) All evaluation factors and signifi- (2) Tradeoffs are not permitted.
cant subfactors that will affect con- (3) Proposals are evaluated for ac-
tract award and their relative impor- ceptability but not ranked using the
tance shall be clearly stated in the so- non-cost/price factors.
licitation; and (4) Exchanges may occur (see 15.306).
(2) The solicitation shall state wheth- [62 FR 51230, Sept. 30, 1997, as amended at 64
er all evaluation factors other than FR 72443, Dec. 27, 1999]
cost or price, when combined, are sig-
nificantly more important than, ap- 15.102 Oral presentations.
proximately equal to, or significantly (a) Oral presentations by offerors as
less important than cost or price. requested by the Government may sub-
(c) This process permits tradeoffs stitute for, or augment, written infor-
among cost or price and non-cost fac- mation. Use of oral presentations as a
tors and allows the Government to ac- substitute for portions of a proposal
cept other than the lowest priced pro- can be effective in streamlining the
posal. The perceived benefits of the source selection process. Oral presen-
higher priced proposal shall merit the tations may occur at any time in the
additional cost, and the rationale for acquisition process, and are subject to
tradeoffs must be documented in the the same restrictions as written infor-
file in accordance with 15.406. mation, regarding timing (see 15.208)
and content (see 15.306). Oral presen-
15.1012 Lowest price technically ac- tations provide an opportunity for dia-
ceptable source selection process. logue among the parties. Pre-recorded
(a) The lowest price technically ac- videotaped presentations that lack
ceptable source selection process is ap- real-time interactive dialogue are not
propriate when best value is expected considered oral presentations for the
to result from selection of the tech- purposes of this section, although they
nically acceptable proposal with the may be included in offeror submissions,
lowest evaluated price. when appropriate.
(b) When using the lowest price tech- (b) The solicitation may require each
nically acceptable process, the fol- offeror to submit part of its proposal
lowing apply: through oral presentations. However,
(1) The evaluation factors and signifi- certifications, representations, and a
cant subfactors that establish the re- signed offer sheet (including any excep-
quirements of acceptability shall be set tions to the Governments terms and
forth in the solicitation. Solicitations conditions) shall be submitted in writ-
shall specify that award will be made ing.
on the basis of the lowest evaluated (c) Information pertaining to areas
price of proposals meeting or exceeding such as an offerors capability, past
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Federal Acquisition Regulation 15.201
performance, work plans or ap- record placed in the file may be pro-
proaches, staffing resources, transition vided to the offeror.
plans, or sample tasks (or other types (f) When an oral presentation in-
of tests) may be suitable for oral pres- cludes information that the parties in-
entations. In deciding what informa- tend to include in the contract as ma-
tion to obtain through an oral presen- terial terms or conditions, the informa-
tation, consider the following: tion shall be put in writing. Incorpora-
(1) The Governments ability to ade- tion by reference of oral statements is
quately evaluate the information; not permitted.
(2) The need to incorporate any infor- (g) If, during an oral presentation,
mation into the resultant contract; the Government conducts discussions
(3) The impact on the efficiency of (see 15.306(d)), the Government must
the acquisition; and comply with 15.306 and 15.307.
(4) The impact (including cost) on
small businesses. In considering the Subpart 15.2Solicitation and Re-
costs of oral presentations, contracting ceipt of Proposals and Infor-
officers should also consider alter- mation
natives to on-site oral presentations
(e.g., teleconferencing, video tele- 15.200 Scope of subpart.
conferencing). This subpart prescribes policies and
(d) When oral presentations are re- procedures for
quired, the solicitation shall provide (a) Exchanging information with in-
offerors with sufficient information to dustry prior to receipt of proposals;
prepare them. Accordingly, the solici- (b) Preparing and issuing requests for
tation may describe proposals (RFPs) and requests for in-
(1) The types of information to be formation (RFIs); and
presented orally and the associated (c) Receiving proposals and informa-
evaluation factors that will be used; tion.
(2) The qualifications for personnel
that will be required to provide the 15.201 Exchanges with industry before
oral presentation(s); receipt of proposals.
(3) The requirements for, and any (a) Exchanges of information among
limitations and/or prohibitions on, the all interested parties, from the earliest
use of written material or other media identification of a requirement
to supplement the oral presentations; through receipt of proposals, are en-
(4) The location, date, and time for couraged. Any exchange of information
the oral presentations; must be consistent with procurement
(5) The restrictions governing the integrity requirements (see 3.104). In-
time permitted for each oral presen- terested parties include potential
tation; and offerors, end users, Government acqui-
(6) The scope and content of ex- sition and supporting personnel, and
changes that may occur between the others involved in the conduct or out-
Governments participants and the come of the acquisition.
offerors representatives as part of the (b) The purpose of exchanging infor-
oral presentations, including whether mation is to improve the under-
or not discussions (see 15.306(d)) will be standing of Government requirements
permitted during oral presentations. and industry capabilities, thereby al-
(e) The contracting officer shall lowing potential offerors to judge
maintain a record of oral presentations whether or how they can satisfy the
to document what the Government re- Governments requirements, and en-
lied upon in making the source selec- hancing the Governments ability to
tion decision. The method and level of obtain quality supplies and services,
detail of the record (e.g., videotaping, including construction, at reasonable
audio tape recording, written record, prices, and increase efficiency in pro-
Government notes, copies of offeror posal preparation, proposal evaluation,
briefing slides or presentation notes) negotiation, and contract award.
shall be at the discretion of the source (c) Agencies are encouraged to pro-
selection authority. A copy of the mote early exchanges of information
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15.202 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 15.203
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15.204 48 CFR Ch. 1 (10103 Edition)
248
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Federal Acquisition Regulation 15.206
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15.207 48 CFR Ch. 1 (10103 Edition)
proposals shall be issued to all parties ceipt and shall be transmitted to the
receiving the solicitation. designated officials.
(c) Amendments issued after the es- (b) Proposals shall be safeguarded
tablished time and date for receipt of from unauthorized disclosure through-
proposals shall be issued to all offerors out the source selection process. (See
that have not been eliminated from the 3.104 regarding the disclosure of source
competition. selection information (41 U.S.C. 423)).
(d) If a proposal of interest to the Information received in response to an
Government involves a departure from RFI shall be safeguarded adequately
the stated requirements, the con- from unauthorized disclosure.
tracting officer shall amend the solici- (c) If any portion of a proposal re-
tation, provided this can be done with- ceived by the contracting officer elec-
out revealing to the other offerors the tronically or by facsimile is
alternate solution proposed or any unreadable, the contracting officer im-
other information that is entitled to mediately shall notify the offeror and
protection (see 15.207(b) and 15.306(e)). permit the offeror to resubmit the
(e) If, in the judgment of the con- unreadable portion of the proposal. The
tracting officer, based on market re- method and time for resubmission shall
search or otherwise, an amendment be prescribed by the contracting officer
proposed for issuance after offers have after consultation with the offeror, and
been received is so substantial as to ex- documented in the file. The resubmis-
ceed what prospective offerors reason- sion shall be considered as if it were re-
ably could have anticipated, so that ad- ceived at the date and time of the
ditional sources likely would have sub- original unreadable submission for the
mitted offers had the substance of the purpose of determining timeliness
amendment been known to them, the under 15.208(a), provided the offeror
contracting officer shall cancel the complies with the time and format re-
original solicitation and issue a new
quirements for resubmission prescribed
one, regardless of the stage of the ac-
by the contracting officer.
quisition.
(f) Oral notices may be used when 15.208 Submission, modification, revi-
time is of the essence. The contracting sion, and withdrawal of proposals.
officer shall document the contract file
and formalize the notice with an (a) Offerors are responsible for sub-
amendment (see subpart 4.5, Electronic mitting proposals, and any revisions,
Commerce in Contracting). and modifications, so as to reach the
(g) At a minimum, the following in- Government office designated in the
formation should be included in each solicitation by the time specified in
amendment: the solicitation. Offerors may use any
(1) Name and address of issuing activ- transmission method authorized by the
ity. solicitation (i.e., regular mail, elec-
(2) Solicitation number and date. tronic commerce, or facsimile). If no
(3) Amendment number and date. time is specified in the solicitation, the
(4) Number of pages. time for receipt is 4:30 p.m., local time,
(5) Description of the change being for the designated Government office
made. on the date that proposals are due.
(6) Government point of contact and (b)(1) Any proposal, modification, or
phone number (and electronic or fac- revision, that is received at the des-
simile address, if appropriate). ignated Government office after the
(7) Revision to solicitation closing exact time specified for receipt of pro-
date, if applicable. posals is late and will not be consid-
ered unless it is received before award
15.207 Handling proposals and infor- is made, the contracting officer deter-
mation. mines that accepting the late proposal
(a) Upon receipt at the location spec- would not unduly delay the acquisi-
ified in the solicitation, proposals and tion; and
information received in response to a (i) If it was transmitted through an
request for information (RFI) shall be electronic commerce method author-
marked with the date and time of re- ized by the solicitation, it was received
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Federal Acquisition Regulation 15.209
at the initial point of entry to the Gov- bulky proposals must only be returned
ernment infrastructure not later than at the offerors request and expense.
5:00 p.m. one working day prior to the (f) The contracting officer must
date specified for receipt of proposals; promptly notify any offeror if its pro-
or posal, modification, or revision was re-
(ii) There is acceptable evidence to ceived late, and must inform the offer-
establish that it was received at the or whether its proposal will be consid-
Government installation designated for ered, unless contract award is immi-
receipt of proposals and was under the nent and the notice prescribed in
Governments control prior to the time 15.503(b) would suffice.
set for receipt of proposals; or (g) Late proposals and modifications
(iii) It was the only proposal re- that are not considered must be held
ceived. unopened, unless opened for identifica-
(2) However, a late modification of an tion, until after award and then re-
otherwise successful proposal, that tained with other unsuccessful pro-
makes its terms more favorable to the posals.
Government, will be considered at any (h) If available, the following must be
time it is received and may be accept- included in the contracting office files
ed. for each late proposal, modification,
(c) Acceptable evidence to establish revision, or withdrawal:
the time of receipt at the Government
(1) The date and hour of receipt.
installation includes the time/date
(2) A statement regarding whether
stamp of that installation on the pro-
the proposal was considered for award,
posal wrapper, other documentary evi-
dence of receipt maintained by the in- with supporting rationale.
stallation, or oral testimony or state- (3) The envelope, wrapper, or other
ments of Government personnel. evidence of date of receipt.
(d) If an emergency or unanticipated [64 FR 51839, Sept. 24, 1999, as amended at 64
event interrupts normal Government FR 72451, Dec. 27, 1999]
processes so that proposals cannot be
received at the Government office des- 15.209 Solicitation provisions and con-
ignated for receipt of proposals by the tract clauses.
exact time specified in the solicitation, When contracting by negotiation
and urgent Government requirements (a) The contracting officer shall in-
preclude amendment of the solicitation sert the provision at 52.2151, Instruc-
closing date, the time specified for re- tions to OfferorsCompetitive Acquisi-
ceipt of proposals will be deemed to be tion, in all competitive solicitations
extended to the same time of day speci- where the Government intends to
fied in the solicitation on the first award a contract without discussions.
work day on which normal Government (1) If the Government intends to
processes resume.
make award after discussions with
(e) Proposals may be withdrawn by offerors within the competitive range,
written notice at any time before the contracting officer shall use the
award. Oral proposals in response to
basic provision with its Alternate I.
oral solicitations may be withdrawn
(2) If the Government would be will-
orally. The contracting officer must
ing to accept alternate proposals, the
document the contract file when oral
withdrawals are made. One copy of contracting officer shall alter the basic
withdrawn proposals should be retained clause to add a paragraph (c)(9) sub-
in the contract file (see 4.803(a)(10)). stantially the same as Alternate II.
Extra copies of the withdrawn pro- (b)(1) The contracting officer shall
posals may be destroyed or returned to insert the clause at 52.2152, Audit and
the offeror at the offerors request. Records-Negotiation (10 U.S.C. 2313, 41
Where practicable, electronically U.S.C. 254d, and OMB Circular No. A
transmitted proposals that are with- 133), in solicitations and contracts ex-
drawn must be purged from primary cept those for
and backup data storage systems after (i) Acquisitions not exceeding the
a copy is made for the file. Extremely simplified acquisition threshold;
251
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15.210 48 CFR Ch. 1 (10103 Edition)
(ii) The acquisition of utility services Acquisition, may be used to issue RFPs
at rates not exceeding those estab- and RFIs.
lished to apply uniformly to the gen- (b) Standard Form 30, Amendment of
eral public, plus any applicable reason- Solicitation/Modification of Contract,
able connection charge; or and Optional Form 309, Amendment of
(iii) The acquisition of commercial Solicitation, may be used to amend so-
items exempted under 15.4031. licitations of negotiated contracts.
(2) For facilities acquisitions, the (c) Optional Form 17, Offer Label,
contracting officer shall use the clause may be furnished with each request for
with its Alternate I. proposal.
(3) For cost-reimbursement contracts
with State and local Governments,
educational institutions, and other
Subpart 15.3Source Selection
nonprofit organizations, the con- 15.300 Scope of subpart.
tracting officer shall use the clause
with its Alternate II. This subpart prescribes policies and
(4) When the head of the agency has procedures for selection of a source or
waived the examination of records by sources in competitive negotiated ac-
the Comptroller General in accordance quisitions.
with 25.1001, use the clause with its Al-
15.301 [Reserved]
ternate III.
(c) When issuing a solicitation for in- 15.302 Source selection objective.
formation or planning purposes, the
contracting officer shall insert the pro- The objective of source selection is
vision at 52.2153, Request for Informa- to select the proposal that represents
tion or Solicitation for Planning Pur- the best value.
poses, and clearly mark on the face of
15.303 Responsibilities.
the solicitation that it is for informa-
tion or planning purposes. (a) Agency heads are responsible for
(d) [Reserved] source selection. The contracting offi-
(f) The contracting officer shall in- cer is designated as the source selec-
sert the provision at 52.2156, Place of tion authority, unless the agency head
Performance, in solicitations unless appoints another individual for a par-
the place of performance is specified by ticular acquisition or group of acquisi-
the Government. tions.
(g) The contracting officer shall in- (b) The source selection authority
sert the provision at 52.2157, Annual shall
Representations and Certifications (1) Establish an evaluation team, tai-
Negotiation, in solicitations if annual lored for the particular acquisition,
representations and certifications are that includes appropriate contracting,
used (see 14.213). legal, logistics, technical, and other ex-
(h) The contracting officer shall in- pertise to ensure a comprehensive eval-
sert the clause at 52.2158, Order of uation of offers;
PrecedenceUniform Contract For- (2) Approve the source selection
mat, in solicitations and contracts strategy or acquisition plan, if applica-
using the format at 15.204. ble, before solicitation release;
[62 FR 51230, Sept. 30, 1997, as amended at 63 (3) Ensure consistency among the so-
FR 9055, Feb. 23, 1998; 63 FR 58589, Oct. 30, licitation requirements, notices to
1998; 64 FR 72418, Dec. 27, 1999] offerors, proposal preparation instruc-
tions, evaluation factors and subfac-
15.210 Forms. tors, solicitation provisions or contract
Prescribed forms are not required to clauses, and data requirements;
prepare solicitations described in this (4) Ensure that proposals are evalu-
part. The following forms may be used ated based solely on the factors and
at the discretion of the contracting of- subfactors contained in the solicitation
ficer: (10 U.S.C. 2305(b)(1) and 41 U.S.C.
(a) Standard Form 33, Solicitation, 253b(d)(3));
Offer, and Award, and Optional Form (5) Consider the recommendations of
308, Solicitation and Offer Negotiated advisory boards or panels (if any); and
252
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Federal Acquisition Regulation 15.304
(6) Select the source or sources whose ceed $100,000. Agencies should develop
proposal is the best value to the Gov- phase-in schedules that meet or exceed
ernment (10 U.S.C. 2305(b)(4)(B) and 41 this schedule.
U.S.C. 253b(d)(3)). (iii) For solicitations involving bun-
(c) The contracting officer shall dling that offer a significant oppor-
(1) After release of a solicitation, tunity for subcontracting, the con-
serve as the focal point for inquiries tracting officer must include a factor
from actual or prospective offerors; to evaluate past performance indi-
(2) After receipt of proposals, control cating the extent to which the offeror
exchanges with offerors in accordance attained applicable goals for small
with 15.306; and business participation under contracts
(3) Award the contract(s). that required subcontracting plans (15
U.S.C. 637(d)(4)(G)(ii)).
15.304 Evaluation factors and signifi-
cant subfactors. (iv) Past performance need not be
evaluated if the contracting officer
(a) The award decision is based on
documents the reason past perform-
evaluation factors and significant sub-
ance is not an appropriate evaluation
factors that are tailored to the acquisi-
factor for the acquisition.
tion.
(b) Evaluation factors and significant (4) The extent of participation of
subfactors must small disadvantaged business concerns
(1) Represent the key areas of impor- in performance of the contract shall be
tance and emphasis to be considered in evaluated in unrestricted acquisitions
the source selection decision; and expected to exceed $500,000 ($1,000,000
(2) Support meaningful comparison for construction) subject to certain
and discrimination between and among limitations (see 19.201 and 19.1202).
competing proposals. (5) For solicitations involving bun-
(c) The evaluation factors and sig- dling that offer a significant oppor-
nificant subfactors that apply to an ac- tunity for subcontracting, the con-
quisition and their relative importance tracting officer must include proposed
are within the broad discretion of agen- small business subcontracting partici-
cy acquisition officials, subject to the pation in the subcontracting plan as an
following requirements: evaluation factor (15 U.S.C.
(1) Price or cost to the Government 637(d)(4)(G)(i)).
shall be evaluated in every source se- (d) All factors and significant subfac-
lection (10 U.S.C. 2305(a)(3)(A) (ii) and tors that will affect contract award
41 U.S.C. 253a(c)(1)(B)) (also see part 36 and their relative importance shall be
for architect-engineer contracts); stated clearly in the solicitation (10
(2) The quality of the product or serv- U.S.C. 2305(a)(2)(A)(i) and 41 U.S.C.
ice shall be addressed in every source 253a(b)(1)(A)) (see 15.204-5(c)). The rat-
selection through consideration of one ing method need not be disclosed in the
or more non-cost evaluation factors solicitation. The general approach for
such as past performance, compliance evaluating past performance informa-
with solicitation requirements, tech- tion shall be described.
nical excellence, management capa- (e) The solicitation shall also state,
bility, personnel qualifications, and at a minimum, whether all evaluation
prior experience (10 U.S.C. 2305(a)(3) factors other than cost or price, when
(A)(i) and 41 U.S.C. 253a(c)(1)(A)); and combined, are
(3)(i) Except as set forth in paragraph (1) Significantly more important
(c)(3)(iv) of this section, past perform-
than cost or price;
ance shall be evaluated in all source se-
(2) Approximately equal to cost or
lections for negotiated competitive ac-
price; or
quisitions expected to exceed $1,000,000.
(ii) Except as set forth in paragraph (3) Significantly less important than
(c)(3)(iv) of this section, past perform- cost or price (10 U.S.C. 2305(a)(3)(A)(iii)
ance shall be evaluated in all source se- and 41 U.S.C. 253a(c)(1)(C)).
lections for negotiated competitive ac- [62 FR 51230, Sept. 30, 1997, as amended at 63
quisitions issued on or after January 1, FR 36121, July 1, 1998; 64 FR 72443, Dec. 27,
1999, for acquisitions expected to ex- 1999; 65 FR 36014, June 6, 2000]
253
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15.305 48 CFR Ch. 1 (10103 Edition)
254
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Federal Acquisition Regulation 15.306
(5) Small business subcontracting eval- (i) Shall be held with offerors whose
uation. Solicitations must be struc- past performance information is the
tured to give offers from small business determining factor preventing them
concerns the highest rating for the from being placed within the competi-
evaluation factors in 15.304(c)(3)(iii) tive range. Such communications shall
and (c)(5). address adverse past performance infor-
(b) The source selection authority mation to which an offeror has not had
may reject all proposals received in re- a prior opportunity to respond; and
sponse to a solicitation, if doing so is (ii) May only be held with those
in the best interest of the Government. offerors (other than offerors under
(c) For restrictions on the use of sup- paragraph (b)(1)(i) of this section)
port contractor personnel in proposal whose exclusion from, or inclusion in,
evaluation, see 37.203(d). the competitive range is uncertain;
[62 FR 51230, Sept. 30, 1997, as amended at 63 (2) May be conducted to enhance Gov-
FR 36121, July 1, 1998; 64 FR 51842, 51850, Sept. ernment understanding of proposals;
24, 1999; 65 FR 46054, July 26, 2000] allow reasonable interpretation of the
proposal; or facilitate the Govern-
15.306 Exchanges with offerors after
receipt of proposals. ments evaluation process. Such com-
munications shall not be used to cure
(a) Clarifications and award without proposal deficiencies or material omis-
discussions. (1) Clarifications are lim- sions, materially alter the technical or
ited exchanges, between the Govern- cost elements of the proposal, and/or
ment and offerors, that may occur otherwise revise the proposal. Such
when award without discussions is con- communications may be considered in
templated.
rating proposals for the purpose of es-
(2) If award will be made without tablishing the competitive range;
conducting discussions, offerors may be
(3) Are for the purpose of addressing
given the opportunity to clarify cer-
tain aspects of proposals (e.g., the rel- issues that must be explored to deter-
evance of an offerors past performance mine whether a proposal should be
information and adverse past perform- placed in the competitive range. Such
ance information to which the offeror communications shall not provide an
has not previously had an opportunity opportunity for the offeror to revise its
to respond) or to resolve minor or cler- proposal, but may address
ical errors. (i) Ambiguities in the proposal or
(3) Award may be made without dis- other concerns (e.g., perceived defi-
cussions if the solicitation states that ciencies, weaknesses, errors, omissions,
the Government intends to evaluate or mistakes (see 14.407)); and
proposals and make award without dis- (ii) Information relating to relevant
cussions. If the solicitation contains past performance; and
such a notice and the Government de- (4) Shall address adverse past per-
termines it is necessary to conduct dis- formance information to which the of-
cussions, the rationale for doing so feror has not previously had an oppor-
shall be documented in the contract tunity to comment.
file (see the provision at 52.2151) (10 (c) Competitive range. (1) Agencies
U.S.C. 2305(b)(4)(A)(ii) and 41 U.S.C. shall evaluate all proposals in accord-
253b(d)(1)(B)).
ance with 15.305(a), and, if discussions
(b) Communications with offerors before are to be conducted, establish the com-
establishment of the competitive range.
petitive range. Based on the ratings of
Communications are exchanges, be-
each proposal against all evaluation
tween the Government and offerors,
after receipt of proposals, leading to criteria, the contracting officer shall
establishment of the competitive establish a competitive range com-
range. If a competitive range is to be prised of all of the most highly rated
established, these communications proposals, unless the range is further
(1) Shall be limited to the offerors de- reduced for purposes of efficiency pur-
scribed in paragraphs (b)(1)(i) and suant to paragraph (c)(2) of this sec-
(b)(1)(ii) of this section and tion.
255
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15.306 48 CFR Ch. 1 (10103 Edition)
(2) After evaluating all proposals in the requirement and the evaluation
accordance with 15.305(a) and para- factors set forth in the solicitation.
graph (c)(1) of this section, the con- (3) At a minimum, the contracting
tracting officer may determine that officer must, subject to paragraphs
the number of most highly rated pro- (d)(5) and (e) of this section and
posals that might otherwise be in- 15.307(a), indicate to, or discuss with,
cluded in the competitive range ex- each offeror still being considered for
ceeds the number at which an efficient award, deficiencies, significant weak-
competition can be conducted. Pro- nesses, and adverse past performance
vided the solicitation notifies offerors information to which the offeror has
that the competitive range can be lim- not yet had an opportunity to respond.
ited for purposes of efficiency (see The contracting officer also is encour-
52.2151(f)(4)), the contracting officer aged to discuss other aspects of the
may limit the number of proposals in offerors proposal that could, in the
the competitive range to the greatest opinion of the contracting officer, be
number that will permit an efficient altered or explained to enhance materi-
competition among the most highly ally the proposals potential for award.
rated proposals (10 U.S.C. 2305(b)(4) and However, the contracting officer is not
41 U.S.C. 253b(d)). required to discuss every area where
(3) If the contracting officer, after the proposal could be improved. The
complying with paragraph (d)(3) of this scope and extent of discussions are a
section, decides that an offerors pro- matter of contracting officer judg-
posal should no longer be included in ment.
the competitive range, the proposal (4) In discussing other aspects of the
shall be eliminated from consideration proposal, the Government may, in situ-
for award. Written notice of this deci- ations where the solicitation stated
sion shall be provided to unsuccessful that evaluation credit would be given
offerors in accordance with 15.503. for technical solutions exceeding any
(4) Offerors excluded or otherwise mandatory minimums, negotiate with
eliminated from the competitive range offerors for increased performance be-
may request a debriefing (see 15.505 and yond any mandatory minimums, and
15.506). the Government may suggest to
(d) Exchanges with offerors after estab- offerors that have exceeded any manda-
lishment of the competitive range. Nego- tory minimums (in ways that are not
tiations are exchanges, in either a com- integral to the design), that their pro-
petitive or sole source environment, posals would be more competitive if
between the Government and offerors, the excesses were removed and the of-
that are undertaken with the intent of fered price decreased.
allowing the offeror to revise its pro- (5) If, after discussions have begun,
posal. These negotiations may include an offeror originally in the competitive
bargaining. Bargaining includes per- range is no longer considered to be
suasion, alteration of assumptions and among the most highly rated offerors
positions, give-and-take, and may being considered for award, that offeror
apply to price, schedule, technical re- may be eliminated from the competi-
quirements, type of contract, or other tive range whether or not all material
terms of a proposed contract. When ne- aspects of the proposal have been dis-
gotiations are conducted in a competi- cussed, or whether or not the offeror
tive acquisition, they take place after has been afforded an opportunity to
establishment of the competitive range submit a proposal revision (see 15.307(a)
and are called discussions. and 15.503(a)(1)).
(1) Discussions are tailored to each (e) Limits on exchanges. Government
offerors proposal, and must be con- personnel involved in the acquisition
ducted by the contracting officer with shall not engage in conduct that
each offeror within the competitive (1) Favors one offeror over another;
range. (2) Reveals an offerors technical so-
(2) The primary objective of discus- lution, including unique technology,
sions is to maximize the Governments innovative and unique uses of commer-
ability to obtain best value, based on cial items, or any information that
256
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Federal Acquisition Regulation 15.402
would compromise an offerors intellec- for any business judgments and trade-
tual property to another offeror; offs made or relied on by the SSA, in-
(3) Reveals an offerors price without cluding benefits associated with addi-
that offerors permission. However, the tional costs. Although the rationale for
contracting officer may inform an of- the selection decision must be docu-
feror that its price is considered by the mented, that documentation need not
Government to be too high, or too low, quantify the tradeoffs that led to the
and reveal the results of the analysis decision.
supporting that conclusion. It is also
permissible, at the Governments dis- Subpart 15.4Contract Pricing
cretion, to indicate to all offerors the
cost or price that the Governments 15.400 Scope of subpart.
price analysis, market research, and
This subpart prescribes the cost and
other reviews have identified as reason-
able (41 U.S.C. 423(h)(1)(2)); price negotiation policies and proce-
(4) Reveals the names of individuals dures for pricing negotiated prime con-
providing reference information about tracts (including subcontracts) and
an offerors past performance; or contract modifications, including
(5) Knowingly furnishes source selec- modifications to contracts awarded by
tion information in violation of 3.104 sealed bidding.
and 41 U.S.C. 423(h)(1)(2).
15.401 Definitions.
[62 FR 51230, Sept. 30, 1997, as amended at 66
As used in this subpart
FR 65369, Dec. 18, 2001]
Price means cost plus any fee or prof-
15.307 Proposal revisions. it applicable to the contract type.
Subcontract (except as used in 15.407
(a) If an offerors proposal is elimi-
2) also includes a transfer of commer-
nated or otherwise removed from the
cial items between divisions, subsidi-
competitive range, no further revisions
aries, or affiliates of a contractor or a
to that offerors proposal shall be ac-
subcontractor (10 U.S.C. 2306a(h)(2) and
cepted or considered.
41 U.S.C. 254b(h)(2)).
(b) The contracting officer may re-
quest or allow proposal revisions to [62 FR 51230, Sept. 30, 1997, as amended at 66
clarify and document understandings FR 2129, Jan. 10, 2001; 66 FR 65369, Dec. 18,
reached during negotiations. At the 2001]
conclusion of discussions, each offeror
still in the competitive range shall be 15.402 Pricing policy.
given an opportunity to submit a final Contracting officers must
proposal revision. The contracting offi- (a) Purchase supplies and services
cer is required to establish a common from responsible sources at fair and
cut-off date only for receipt of final reasonable prices. In establishing the
proposal revisions. Requests for final reasonableness of the offered prices,
proposal revisions shall advise offerors the contracting officer must not obtain
that the final proposal revisions shall more information than is necessary. To
be in writing and that the Government the extent that cost or pricing data are
intends to make award without obtain- not required by 15.4034, the con-
ing further revisions. tracting officer must generally use the
following order of preference in deter-
15.308 Source selection decision. mining the type of information re-
The source selection authoritys quired:
(SSA) decision shall be based on a com- (1) No additional information from
parative assessment of proposals the offeror, if the price is based on ade-
against all source selection criteria in quate price competition, except as pro-
the solicitation. While the SSA may vided by 15.4033(b).
use reports and analyses prepared by (2) Information other than cost or
others, the source selection decision pricing data:
shall represent the SSAs independent (i) Information related to prices (e.g.,
judgment. The source selection deci- established catalog or market prices or
sion shall be documented, and the doc- previous contract prices), relying first
umentation shall include the rationale on information available within the
257
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15.403 48 CFR Ch. 1 (10103 Edition)
258
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Federal Acquisition Regulation 15.4033
(2) The offeror had no reason to be- or pricing data. Consequently, award of
lieve that other potential offerors did any lower-tier subcontract expected to
not intend to submit an offer; and exceed the cost or pricing data thresh-
(B) The determination that the pro- old requires the submission of cost or
posed price is based on adequate price pricing data unless
competition, is reasonable, and is ap- (i) An exception otherwise applies to
proved at a level above the contracting the subcontract; or
officer; or (ii) The waiver specifically includes
(iii) Price analysis clearly dem- the subcontract and the rationale sup-
onstrates that the proposed price is porting the waiver for that sub-
reasonable in comparison with current contract.
or recent prices for the same or similar
items, adjusted to reflect changes in [62 FR 51230, Sept. 30, 1997, as amended at 64
market conditions, economic condi- FR 10545, Mar. 4, 1999; 64 FR 51836, Sept. 24,
1999; 66 FR 2129, Jan. 10, 2001]
tions, quantities, or terms and condi-
tions under contracts that resulted
15.4032 Other circumstances where
from adequate price competition. cost or pricing data are not re-
(2) Prices set by law or regulation. Pro- quired.
nouncements in the form of periodic
rulings, reviews, or similar actions of a (a) The exercise of an option at the
governmental body, or embodied in the price established at contract award or
laws, are sufficient to set a price. initial negotiation does not require
(3) Commercial items. Any acquisition submission of cost or pricing data.
for an item that meets the commercial (b) Cost or pricing data are not re-
item definition in 2.101, or any modi- quired for proposals used solely for
fication, as defined in paragraph (3)(i) overrun funding or interim billing
or (ii) of that definition, that does not price adjustments.
change the item from a commercial
item to a noncommercial item, is ex- 15.4033 Requiring information other
empt from the requirement for cost or than cost or pricing data.
pricing data. If the contracting officer (a) General. (1) The contracting offi-
determines that an item claimed to be cer is responsible for obtaining infor-
commercial is, in fact, not commercial mation that is adequate for evaluating
and that no other exception or waiver the reasonableness of the price or de-
applies, the contracting officer must termining cost realism, but the con-
require submission of cost or pricing tracting officer should not obtain more
data. information than is necessary (see
(4) Waivers. The head of the con- 15.402(a)). If the contracting officer
tracting activity (HCA) may, without cannot obtain adequate information
power of delegation, waive the require- from sources other than the offeror,
ment for submission of cost or pricing the contracting officer must require
data in exceptional cases. The author- submission of information other than
ization for the waiver and the sup- cost or pricing data from the offeror
porting rationale shall be in writing. that is adequate to determine a fair
The HCA may consider waiving the re- and reasonable price (10 U.S.C.
quirement if the price can be deter- 2306a(d)(1) and 41 U.S.C. 254b(d)(1)). Un-
mined to be fair and reasonable with- less an exception under 15.4031(b) (1) or
out submission of cost or pricing data. (2) applies, the contracting officer
For example, if cost or pricing data must require that the information sub-
were furnished on previous production mitted by the offeror include, at a min-
buys and the contracting officer deter- imum, appropriate information on the
mines such data are sufficient, when prices at which the same item or simi-
combined with updated information, a lar items have previously been sold,
waiver may be granted. If the HCA has adequate for determining the reason-
waived the requirement for submission ableness of the price. To determine the
of cost or pricing data, the contractor information an offeror should be re-
or higher-tier subcontractor to whom quired to submit, the contracting offi-
the waiver relates shall be considered cer should consider the guidance in
as having been required to provide cost Section 3.3, Chapter 3, Volume I, of the
259
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15.4034 48 CFR Ch. 1 (10103 Edition)
Contract Pricing Reference Guide cited even after obtaining additional infor-
at 15.4041(a)(7). mation from sources other than the of-
(2) The contractors format for sub- feror, then the contracting officer must
mitting the information should be used require the offeror to submit informa-
(see 15.4035(b)(2)). tion other than cost or pricing data to
(3) The contracting officer must en- support further analysis (see 15.4041).
sure that information used to support (2) Limitations relating to commercial
price negotiations is sufficiently cur- items (10 U.S.C. 2306a(d)(2) and 41 U.S.C.
rent to permit negotiation of a fair and 254b(d)). (i) The contracting officer
reasonable price. Requests for updated must limit requests for sales data re-
offeror information should be limited lating to commercial items to data for
to information that affects the ade- the same or similar items during a rel-
quacy of the proposal for negotiations, evant time period.
such as changes in price lists. (ii) The contracting officer must, to
(4) As specified in Section 808 of Pub- the maximum extent practicable, limit
lic Law 105261, an offeror who does not the scope of the request for informa-
comply with a requirement to submit tion relating to commercial items to
information for a contract or sub- include only information that is in the
contract in accordance with paragraph form regularly maintained by the of-
(a)(1) of this subsection is ineligible for feror as part of its commercial oper-
award unless the HCA determines that ations.
it is in the best interest of the Govern- (iii) The Government must not dis-
ment to make the award to that offer- close outside the Government informa-
or, based on consideration of the fol- tion obtained relating to commercial
lowing: items that is exempt from disclosure
(i) The effort made to obtain the under 24.202(a) or the Freedom of Infor-
data. mation Act (5 U.S.C. 552(b)).
(ii) The need for the item or service. [62 FR 51230, Sept. 30, 1997, as amended at 64
(iii) Increased cost or significant FR 51836, Sept. 24, 1999; 65 FR 24321, Apr. 25,
harm to the Government if award is 2000]
not made.
(b) Adequate price competition. When 15.4034 Requiring cost or pricing
adequate price competition exists (see data (10 U.S.C. 2306a and 41 U.S.C.
15.4031(c)(1)), generally no additional 254b).
information is necessary to determine (a)(1) The contracting officer must
the reasonableness of price. However, if obtain cost or pricing data only if the
there are unusual circumstances where contracting officer concludes that none
it is concluded that additional infor- of the exceptions in 15.4031(b) applies.
mation is necessary to determine the However, if the contracting officer has
reasonableness of price, the con- sufficient information available to de-
tracting officer shall, to the maximum termine price reasonableness, then the
extent practicable, obtain the addi- contracting officer should consider re-
tional information from sources other questing a waiver under the exception
than the offeror. In addition, the con- at 15.4031(b)(4). The threshold for ob-
tracting officer may request informa- taining cost or pricing data is $550,000.
tion to determine the cost realism of Unless an exception applies, cost or
competing offers or to evaluate com- pricing data are required before accom-
peting approaches. plishing any of the following actions
(c) Commercial items. (1) At a min- expected to exceed the current thresh-
imum, the contracting officer must use old or, for existing contracts, the
price analysis to determine whether threshold specified in the contract:
the price is fair and reasonable when- (i) The award of any negotiated con-
ever the contracting officer acquires a tract (except for undefinitized actions
commercial item (see 15.4041(b)). The such as letter contracts).
fact that a price is included in a cata- (ii) The award of a subcontract at
log does not, in and of itself, make it any tier, if the contractor and each
fair and reasonable. If the contracting higher-tier subcontractor were re-
officer cannot determine whether an quired to submit cost or pricing data
offered price is fair and reasonable, (but see waivers at 15.4031(c)(4)).
260
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261
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15.404 48 CFR Ch. 1 (10103 Edition)
specific format is essential and the for- tion Institute (FAI) jointly prepared a
mat has been described in the solicita- five-volume set of Contract Pricing
tion. Reference Guides to guide pricing and
(3) Data supporting forward pricing negotiation personnel. The five guides
rate agreements or final indirect cost are: I Price Analysis, II Quantitative
proposals shall be submitted in a form Techniques for Contract Pricing, III
acceptable to the contracting officer. Cost Analysis, IV Advanced Issues in
Contract Pricing, and V Federal Con-
15.404 Proposal analysis. tract Negotiation Techniques. These
references provide detailed discussion
15.4041 Proposal analysis techniques. and examples applying pricing policies
(a) General. The objective of proposal to pricing problems. They are to be
analysis is to ensure that the final used for instruction and professional
agreed-to price is fair and reasonable. guidance. However, they are not direc-
(1) The contracting officer is respon- tive and should be considered informa-
sible for evaluating the reasonableness tional only. They are available via the
of the offered prices. The analytical internet at http://www.acq.osd.mil/dp/
techniques and procedures described in cpf.
this section may be used, singly or in (b) Price analysis. (1) Price analysis is
combination with others, to ensure the process of examining and evalu-
that the final price is fair and reason- ating a proposed price without evalu-
able. The complexity and cir- ating its separate cost elements and
cumstances of each acquisition should proposed profit.
determine the level of detail of the (2) The Government may use various
analysis required. price analysis techniques and proce-
(2) Price analysis shall be used when dures to ensure a fair and reasonable
cost or pricing data are not required price. Examples of such techniques in-
(see paragraph (b) of this subsection clude, but are not limited to, the fol-
and 15.4043). lowing:
(3) Cost analysis shall be used to (i) Comparison of proposed prices re-
evaluate the reasonableness of indi- ceived in response to the solicitation.
vidual cost elements when cost or pric- Normally, adequate price competition
ing data are required. Price analysis establishes price reasonableness (see
should be used to verify that the over- 15.4031(c)(1)).
all price offered is fair and reasonable. (ii) Comparison of previously pro-
(4) Cost analysis may also be used to posed prices and previous Government
evaluate information other than cost and commercial contract prices with
or pricing data to determine cost rea- current proposed prices for the same or
sonableness or cost realism. similar items, if both the validity of
(5) The contracting officer may re- the comparison and the reasonableness
quest the advice and assistance of of the previous price(s) can be estab-
other experts to ensure that an appro- lished.
priate analysis is performed. (iii) Use of parametric estimating
(6) Recommendations or conclusions methods/application of rough
regarding the Governments review or yardsticks (such as dollars per pound
analysis of an offerors or contractors or per horsepower, or other units) to
proposal shall not be disclosed to the highlight significant inconsistencies
offeror or contractor without the con- that warrant additional pricing in-
currence of the contracting officer. quiry.
Any discrepancy or mistake of fact (iv) Comparison with competitive
(such as duplications, omissions, and published price lists, published market
errors in computation) contained in prices of commodities, similar indexes,
the cost or pricing data or information and discount or rebate arrangements.
other than cost or pricing data sub- (v) Comparison of proposed prices
mitted in support of a proposal shall be with independent Government cost es-
brought to the contracting officers at- timates.
tention for appropriate action. (vi) Comparison of proposed prices
(7) The Air Force Institute of Tech- with prices obtained through market
nology (AFIT) and the Federal Acquisi- research for the same or similar items.
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Federal Acquisition Regulation 15.4041
(vii) Analysis of pricing information nomical past practices are not pro-
provided by the offeror. jected into the future. In pricing pro-
(3) The first two techniques at 15.404 duction of recently developed complex
1(b)(2) are the preferred techniques. equipment, the contracting officer
However, if the contracting officer de- should perform a trend analysis of
termines that information on competi- basic labor and materials, even in peri-
tive proposed prices or previous con- ods of relative price stability.
tract prices is not available or is insuf- (iii) Comparison of costs proposed by
ficient to determine that the price is the offeror for individual cost elements
fair and reasonable, the contracting of- with
ficer may use any of the remaining (A) Actual costs previously incurred
techniques as appropriate to the cir- by the same offeror;
cumstances applicable to the acquisi- (B) Previous cost estimates from the
tion. offeror or from other offerors for the
(4) Value analysis can give insight same or similar items;
into the relative worth of a product (C) Other cost estimates received in
and the Government may use it in con- response to the Governments request;
junction with the price analysis tech-
(D) Independent Government cost es-
niques listed in paragraph (b)(2) of this
timates by technical personnel; and
section.
(E) Forecasts of planned expendi-
(c) Cost analysis. (1) Cost analysis is
tures.
the review and evaluation of the sepa-
rate cost elements and profit in an (iv) Verification that the offerors
offerors or contractors proposal (in- cost submissions are in accordance
cluding cost or pricing data or informa- with the contract cost principles and
tion other than cost or pricing data), procedures in part 31 and, when appli-
and the application of judgment to de- cable, the requirements and procedures
termine how well the proposed costs in 48 CFR Chapter 99 (Appendix to the
represent what the cost of the contract FAR looseleaf edition), Cost Account-
should be, assuming reasonable econ- ing Standards.
omy and efficiency. (v) Review to determine whether any
(2) The Government may use various cost or pricing data necessary to make
cost analysis techniques and proce- the contractors proposal accurate,
dures to ensure a fair and reasonable complete, and current have not been ei-
price, given the circumstances of the ther submitted or identified in writing
acquisition. Such techniques and pro- by the contractor. If there are such
cedures include the following: data, the contracting officer shall at-
(i) Verification of cost or pricing tempt to obtain them and negotiate,
data and evaluation of cost elements, using them or making satisfactory al-
including lowance for the incomplete data.
(A) The necessity for, and reasonable- (vi) Analysis of the results of any
ness of, proposed costs, including al- make-or-buy program reviews, in eval-
lowances for contingencies; uating subcontract costs (see 15.4072).
(B) Projection of the offerors cost (d) Cost realism analysis. (1) Cost real-
trends, on the basis of current and his- ism analysis is the process of independ-
torical cost or pricing data; ently reviewing and evaluating specific
(C) Reasonableness of estimates gen- elements of each offerors proposed
erated by appropriately calibrated and cost estimate to determine whether the
validated parametric models or cost-es- estimated proposed cost elements are
timating relationships; and realistic for the work to be performed;
(D) The application of audited or ne- reflect a clear understanding of the re-
gotiated indirect cost rates, labor quirements; and are consistent with
rates, and cost of money or other fac- the unique methods of performance and
tors. materials described in the offerors
(ii) Evaluating the effect of the technical proposal.
offerors current practices on future (2) Cost realism analyses shall be per-
costs. In conducting this evaluation, formed on cost-reimbursement con-
the contracting officer shall ensure tracts to determine the probable cost
that the effects of inefficient or uneco- of performance for each offeror.
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15.4041 48 CFR Ch. 1 (10103 Edition)
(i) The probable cost may differ from (f) Unit prices. (1) Except when pricing
the proposed cost and should reflect an item on the basis of adequate price
the Governments best estimate of the competition or catalog or market
cost of any contract that is most likely price, unit prices shall reflect the in-
to result from the offerors proposal. trinsic value of an item or service and
The probable cost shall be used for pur- shall be in proportion to an items base
poses of evaluation to determine the cost (e.g., manufacturing or acquisition
best value. costs). Any method of distributing
(ii) The probable cost is determined costs to line items that distorts the
by adjusting each offerors proposed unit prices shall not be used. For exam-
cost, and fee when appropriate, to re- ple, distributing costs equally among
flect any additions or reductions in line items is not acceptable except
cost elements to realistic levels based when there is little or no variation in
on the results of the cost realism anal- base cost.
ysis. (2) Except for the acquisition of com-
(3) Cost realism analyses may also be mercial items, contracting officers
used on competitive fixed-price incen- shall require that offerors identify in
tive contracts or, in exceptional cases, their proposals those items of supply
on other competitive fixed-price-type that they will not manufacture or to
contracts when new requirements may which they will not contribute signifi-
not be fully understood by competing cant value, unless adequate price com-
offerors, there are quality concerns, or petition is expected (10 U.S.C. 2304 and
41 U.S.C. 254(d)(5)(A)(i)). Such informa-
past experience indicates that contrac-
tion shall be used to determine wheth-
tors proposed costs have resulted in
er the intrinsic value of an item has
quality or service shortfalls. Results of
been distorted through application of
the analysis may be used in perform-
overhead and whether such items
ance risk assessments and responsi-
should be considered for breakout. The
bility determinations. However, pro-
contracting officer may require such
posals shall be evaluated using the cri-
information in all other negotiated
teria in the solicitation, and the of-
contracts when appropriate.
fered prices shall not be adjusted as a
(g) Unbalanced pricing. (1) Unbalanced
result of the analysis.
pricing may increase performance risk
(e) Technical analysis. (1) The con- and could result in payment of unrea-
tracting officer may request that per- sonably high prices. Unbalanced pric-
sonnel having specialized knowledge, ing exists when, despite an acceptable
skills, experience, or capability in en- total evaluated price, the price of one
gineering, science, or management per- or more contract line items is signifi-
form a technical analysis of the pro- cantly over or understated as indicated
posed types and quantities of mate- by the application of cost or price anal-
rials, labor, processes, special tooling, ysis techniques. The greatest risks as-
facilities, the reasonableness of scrap sociated with unbalanced pricing occur
and spoilage, and other associated fac- when
tors set forth in the proposal(s) in (i) Startup work, mobilization, first
order to determine the need for and articles, or first article testing are sep-
reasonableness of the proposed re- arate line items;
sources, assuming reasonable economy (ii) Base quantities and option quan-
and efficiency. tities are separate line items; or
(2) At a minimum, the technical (iii) The evaluated price is the aggre-
analysis should examine the types and gate of estimated quantities to be or-
quantities of material proposed and the dered under separate line items of an
need for the types and quantities of indefinite-delivery contract.
labor hours and the labor mix. Any (2) All offers with separately priced
other data that may be pertinent to an line items or subline items shall be
assessment of the offerors ability to analyzed to determine if the prices are
accomplish the technical requirements unbalanced. If cost or price analysis
or to the cost or price analysis of the techniques indicate that an offer is un-
service or product being proposed balanced, the contracting officer
should also be included in the analysis. shall
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Federal Acquisition Regulation 15.4042
(i) Consider the risks to the Govern- commerciality and price reasonable-
ment associated with the unbalanced ness.
pricing in determining the competitive (iv) Information relative to the busi-
range and in making the source selec- ness, technical, production, or other
tion decision; and capabilities and practices of an offeror.
(ii) Consider whether award of the (3) When field pricing assistance is
contract will result in paying unrea- requested, contracting officers are en-
sonably high prices for contract per- couraged to team with appropriate
formance. field experts throughout the acquisi-
(3) An offer may be rejected if the
tion process, including negotiations.
contracting officer determines that the
Early communication with these ex-
lack of balance poses an unacceptable
perts will assist in determining the ex-
risk to the Government.
tent of assistance required, the specific
[62 FR 51230, Sept. 30, 1997, as amended at 63 areas for which assistance is needed, a
FR 58602, Oct. 30, 1998; 64 FR 51837, Sept. 24, realistic review schedule, and the in-
1999; 65 FR 16286, Mar. 27, 2000]
formation necessary to perform the re-
15.4042 Information to support pro- view.
posal analysis. (4) When requesting field pricing as-
(a) Field pricing assistance. (1) The sistance on a contractors request for
contracting officer should request field equitable adjustment, the contracting
pricing assistance when the informa- officer shall provide the information
tion available at the buying activity is listed in 43.204(b)(5).
inadequate to determine a fair and rea- (5) Field pricing information and
sonable price. The contracting officer other reports may include proprietary
must tailor requests to reflect the min- or source selection information (see
imum essential supplementary infor- 2.101). This information must be appro-
mation needed to conduct a technical priately identified and protected ac-
or cost or pricing analysis. cordingly.
(2) The contracting officer must tai- (b) Reporting field pricing information.
lor the type of information and level of (1) Depending upon the extent and com-
detail requested in accordance with the plexity of the field pricing review, re-
specialized resources available at the sults, including supporting rationale,
buying activity and the magnitude and may be reported directly to the con-
complexity of the required analysis. tracting officer orally, in writing, or by
Field pricing assistance is generally any other method acceptable to the
available to provide contracting officer.
(i) Technical, audit, and special re- (i) Whenever circumstances permit,
ports associated with the cost elements the contracting officer and field pric-
of a proposal, including subcontracts; ing experts are encouraged to use tele-
(ii) Information on related pricing
phonic and/or electronic means to re-
practices and history;
quest and transmit pricing informa-
(iii) Information to help contracting
tion.
officers determine commerciality and
price reasonableness, including (ii) When it is necessary to have writ-
(A) Verifying sales history to source ten technical and audit reports, the
documents; contracting officer shall request that
(B) Identifying special terms and the audit agency concurrently forward
conditions; the audit report to the requesting con-
(C) Identifying customarily granted tracting officer and the administrative
or offered discounts for the item; contracting officer (ACO). The com-
(D) Verifying the item to an existing pleted field pricing assistance results
catalog or price list; may reference audit information, but
(E) Verifying historical data for an need not reconcile the audit rec-
item previously not determined com- ommendations and technical rec-
mercial that the offeror is now trying ommendations. A copy of the informa-
to qualify as a commercial item; and tion submitted to the contracting offi-
(F) Identifying general market condi- cer by field pricing personnel shall be
tions affecting determinations of provided to the audit agency.
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15.4043 48 CFR Ch. 1 (10103 Edition)
(2) Audit and field pricing informa- sidered essential to conduct a satisfac-
tion, whether written or reported tele- tory review or audit. Oral notifications
phonically or electronically, shall be shall be confirmed promptly in writing,
made a part of the official contract file including a description of deficient or
(see 4.807(f)). denied data or records. The contracting
(c) Audit assistance for prime contracts officer immediately shall take appro-
or subcontracts. (1) The contracting offi- priate action to obtain the required
cer may contact the cognizant audit of- data. Should the offeror/contractor
fice directly, particularly when an again refuse to provide adequate data,
audit is the only field pricing support or provide access to necessary data, the
required. The audit office shall send contracting officer shall withhold the
the audit report, or otherwise transmit award or price adjustment and refer
the audit recommendations, directly to the contract action to a higher author-
the contracting officer. ity, providing details of the attempts
(i) The auditor shall not reveal the made to resolve the matter and a state-
audit conclusions or recommendations ment of the practicability of obtaining
to the offeror/contractor without ob- the supplies or services from another
taining the concurrence of the con- source.
tracting officer. However, the auditor [62 FR 51230, Sept. 30, 1997, as amended at 64
may discuss statements of facts with FR 51837, Sept. 24, 1999; 67 FR 13063, Mar. 20,
the contractor. 2002]
(ii) The contracting officer should be
notified immediately of any informa- 15.4043 Subcontract pricing consider-
tion disclosed to the auditor after sub- ations.
mission of a report that may signifi- (a) The contracting officer is respon-
cantly affect the audit findings and, if sible for the determination of price
necessary, a supplemental audit report reasonableness for the prime contract,
shall be issued. including subcontracting costs. The
(2) The contracting officer shall not contracting officer should consider
request a separate preaward audit of whether a contractor or subcontractor
indirect costs unless the information has an approved purchasing system,
already available from an existing has performed cost or price analysis of
audit, completed within the preceding proposed subcontractor prices, or has
12 months, is considered inadequate for negotiated the subcontract prices be-
determining the reasonableness of the fore negotiation of the prime contract,
proposed indirect costs (41 U.S.C. 254d in determining the reasonableness of
and 10 U.S.C. 2313). the prime contract price. This does not
(3) The auditor is responsible for the relieve the contracting officer from the
scope and depth of the audit. Copies of responsibility to analyze the contrac-
updated information that will signifi- tors submission, including subcontrac-
cantly affect the audit should be pro- tors cost or pricing data.
vided to the auditor by the contracting (b) The prime contractor or subcon-
officer. tractor shall
(4) General access to the offerors (1) Conduct appropriate cost or price
books and financial records is limited analyses to establish the reasonable-
to the auditor. This limitation does not ness of proposed subcontract prices;
preclude the contracting officer or the (2) Include the results of these anal-
ACO, or their representatives, from re- yses in the price proposal; and
questing that the offeror provide or (3) When required by paragraph (c) of
make available any data or records this subsection, submit subcontractor
necessary to analyze the offerors pro- cost or pricing data to the Government
posal. as part of its own cost or pricing data.
(d) Deficient proposals. The ACO or (c) Any contractor or subcontractor
the auditor, as appropriate, shall no- that is required to submit cost or pric-
tify the contracting officer imme- ing data also shall obtain and analyze
diately if the data provided for review cost or pricing data before awarding
is so deficient as to preclude review or any subcontract, purchase order, or
audit, or if the contractor or offeror modification expected to exceed the
has denied access to any records con- cost or pricing data threshold, unless
266
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Federal Acquisition Regulation 15.4044
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15.4044 48 CFR Ch. 1 (10103 Edition)
(2) When the price negotiation is ale for its profit or fee objective but
based on cost analysis, contracting of- may consider it, if it is submitted vol-
ficers in agencies that have a struc- untarily.
tured approach shall use it to analyze (6) If a change or modification calls
profit. When not using a structured ap- for essentially the same type and mix
proach, contracting officers shall com- of work as the basic contract and is of
ply with paragraph (d)(1) of this sub- relatively small dollar value compared
section in developing profit or fee to the total contract value, the con-
prenegotiation objectives. tracting officer may use the basic con-
(3) Contracting officers shall use the tracts profit or fee rate as the
Government prenegotiation cost objec- prenegotiation objective for that
tive amounts as the basis for calcu- change or modification.
lating the profit or fee prenegotiation (d) Profit-analysis factors(1) Common
objective. Before applying profit or fee factors. Unless it is clearly inappro-
factors, the contracting officer shall priate or not applicable, each factor
exclude any facilities capital cost of outlined in paragraphs (d)(1)(i) through
money included in the cost objective (vi) of this subsection shall be consid-
amounts. If the prospective contractor ered by agencies in developing their
fails to identify or propose facilities structured approaches and by con-
capital cost of money in a proposal for tracting officers in analyzing profit,
a contract that will be subject to the whether or not using a structured ap-
cost principles for contracts with com- proach.
mercial organizations (see subpart (i) Contractor effort. This factor meas-
31.2), facilities capital cost of money ures the complexity of the work and
will not be an allowable cost in any re- the resources required of the prospec-
sulting contract (see 15.408(i)). tive contractor for contract perform-
(4)(i) The contracting officer shall ance. Greater profit opportunity should
not negotiate a price or fee that ex- be provided under contracts requiring a
ceeds the following statutory limita- high degree of professional and mana-
tions, imposed by 10 U.S.C. 2306(d) and gerial skill and to prospective contrac-
41 U.S.C. 254(b): tors whose skills, facilities, and tech-
(A) For experimental, developmental, nical assets can be expected to lead to
or research work performed under a efficient and economical contract per-
cost-plus-fixed-fee contract, the fee formance. The subfactors in paragraphs
shall not exceed 15 percent of the con- (d)(1)(i) (A) through (D) of this sub-
tracts estimated cost, excluding fee. section shall be considered in deter-
(B) For architect-engineer services mining contractor effort, but they may
for public works or utilities, the con- be modified in specific situations to ac-
tract price or the estimated cost and commodate differences in the cat-
fee for production and delivery of de- egories used by prospective contractors
signs, plans, drawings, and specifica- for listing costs
tions shall not exceed 6 percent of the (A) Material acquisition. This sub-
estimated cost of construction of the factor measures the managerial and
public work or utility, excluding fees. technical effort needed to obtain the
(C) For other cost-plus-fixed-fee con- required purchased parts and material,
tracts, the fee shall not exceed 10 per- subcontracted items, and special tool-
cent of the contracts estimated cost, ing. Considerations include the com-
excluding fee. plexity of the items required, the num-
(ii) The contracting officers signa- ber of purchase orders and sub-
ture on the price negotiation memo- contracts to be awarded and adminis-
randum or other documentation sup- tered, whether established sources are
porting determination of fair and rea- available or new or second sources
sonable price documents the con- must be developed, and whether mate-
tracting officers determination that rial will be obtained through routine
the statutory price or fee limitations purchase orders or through complex
have not been exceeded. subcontracts requiring detailed speci-
(5) The contracting officer shall not fications. Profit consideration should
require any prospective contractor to correspond to the managerial and tech-
submit breakouts or supporting ration- nical effort involved.
268
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Federal Acquisition Regulation 15.4044
(B) Conversion direct labor. This sub- price. Some firm-fixed-price contracts
factor measures the contribution of di- may entail substantially less cost risk
rect engineering, manufacturing, and than others because, for example, the
other labor to converting the raw ma- contract task is less complex or many
terials, data, and subcontracted items of the contractors costs are known at
into the contract items. Considerations the time of price agreement, in which
include the diversity of engineering, case the risk factor should be reduced
scientific, and manufacturing labor accordingly. The contractor assumes
skills required and the amount and the least cost risk in a cost-plus-fixed-
quality of supervision and coordination fee level-of-effort contract, under
needed to perform the contract task. which it is reimbursed those costs de-
(C) Conversion-related indirect costs. termined to be allocable and allowable,
This subfactor measures how much the plus the fixed fee.
indirect costs contribute to contract (C) In evaluating assumption of cost
performance. The labor elements in the risk, contracting officers shall, except
allocable indirect costs should be given in unusual circumstances, treat time-
the profit consideration they would re- and-materials, labor-hour, and firm-
ceive if treated as direct labor. The fixed-price, level-of-effort term con-
other elements of indirect costs should tracts as cost-plus-fixed-fee contracts.
be evaluated to determine whether (iii) Federal socioeconomic programs.
they merit only limited profit consid- This factor measures the degree of sup-
eration because of their routine nature, port given by the prospective con-
or are elements that contribute signifi- tractor to Federal socioeconomic pro-
cantly to the proposed contract. grams, such as those involving small
(D) General management. This sub- business concerns, small business con-
factor measures the prospective con- cerns owned and controlled by socially
tractors other indirect costs and gen- and economically disadvantaged indi-
eral and administrative (G&A) expense,
viduals, women-owned small business
their composition, and how much they
concerns, handicapped sheltered work-
contribute to contract performance.
shops, and energy conservation. Great-
Considerations include how labor in
er profit opportunity should be pro-
the overhead pools would be treated if
vided contractors that have displayed
it were direct labor, whether elements
unusual initiative in these programs.
within the pools are routine expenses
or instead are elements that contribute (iv) Capital investments. This factor
significantly to the proposed contract, takes into account the contribution of
and whether the elements require rou- contractor investments to efficient and
tine as opposed to unusual managerial economical contract performance.
effort and attention. (v) Cost-control and other past accom-
(ii) Contract cost risk. (A) This factor plishments. This factor allows addi-
measures the degree of cost responsi- tional profit opportunities to a pro-
bility and associated risk that the pro- spective contractor that has previously
spective contractor will assume as a re- demonstrated its ability to perform
sult of the contract type contemplated similar tasks effectively and economi-
and considering the reliability of the cally. In addition, consideration should
cost estimate in relation to the com- be given to measures taken by the pro-
plexity and duration of the contract spective contractor that result in pro-
task. Determination of contract type ductivity improvements, and other
should be closely related to the risks cost-reduction accomplishments that
involved in timely, cost-effective, and will benefit the Government in follow-
efficient performance. This factor on contracts.
should compensate contractors propor- (vi) Independent development. Under
tionately for assuming greater cost this factor, the contractor may be pro-
risks. vided additional profit opportunities in
(B) The contractor assumes the recognition of independent develop-
greatest cost risk in a closely priced ment efforts relevant to the contract
firm-fixed-price contract under which end item without Government assist-
it agrees to perform a complex under- ance. The contracting officer should
taking on time and at a predetermined consider whether the development cost
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15.405 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 15.4063
Data, using the format in this para- sociated with proposal updates. Closing
graph, and must include the executed or cutoff dates should be included as
certificate in the contract file. part of the data submitted with the
proposal and, before agreement on
CERTIFICATE OF CURRENT COST OR
PRICING DATA
price, data should be updated by the
contractor to the latest closing or cut-
This is to certify that, to the best of my off dates for which the data are avail-
knowledge and belief, the cost or pricing
able. Use of cutoff dates coinciding
data (as defined in section 2.101 of the Fed-
eral Acquisition Regulation (FAR) and re- with reports is acceptable, as certain
quired under FAR subsection 15.4034) sub- data may not be reasonably available
mitted, either actually or by specific identi- before normal periodic closing dates
fication in writing, to the Contracting Offi- (e.g., actual indirect costs). Data with-
cer or to the Contracting Officers represent- in the contractors or a subcontractors
ative in support of ll* are accurate, com- organization on matters significant to
plete, and current as of ll**. This certifi-
contractor management and to the
cation includes the cost or pricing data sup-
porting any advance agreements and forward Government will be treated as reason-
pricing rate agreements between the offeror ably available. What is significant de-
and the Government that are part of the pro- pends upon the circumstances of each
posal. acquisition.
Firm llllllllllllllllllll (d) Possession of a Certificate of Cur-
Signature llllllllllllllllll rent Cost or Pricing Data is not a sub-
Name llllllllllllllllllll stitute for examining and analyzing
Title lllllllllllllllllllll the contractors proposal.
Date of execution*** llllllllllll (e) If cost or pricing data are re-
* Identify the proposal, request for price
quested by the Government and sub-
adjustment, or other submission involved, mitted by an offeror, but an exception
giving the appropriate identifying number is later found to apply, the data shall
(e.g., RFP No.). not be considered cost or pricing data
** Insert the day, month, and year when and shall not be certified in accordance
price negotiations were concluded and price with this subsection.
agreement was reached or, if applicable, an
earlier date agreed upon between the parties [62 FR 51230, Sept. 30, 1997, as amended at 66
that is as close as practicable to the date of FR 2129, Jan. 10, 2001]
agreement on price.
*** Insert the day, month, and year of sign- 15.4063 Documenting the negotiation.
ing, which should be as close as practicable
to the date when the price negotiations were (a) The contracting officer shall doc-
concluded and the contract price was agreed ument in the contract file the principal
to. (End of certificate) elements of the negotiated agreement.
The documentation (e.g., price negotia-
(b) The certificate does not con-
tion memorandum (PNM)) shall in-
stitute a representation as to the accu-
clude the following:
racy of the contractors judgment on
the estimate f future costs or projec- (1) The purpose of the negotiation.
tions. It applies to the data upon which (2) A description of the acquisition,
the judgment or estimate was based. including appropriate identifying num-
This distinction between fact and judg- bers (e.g., RFP No.).
ment should be clearly understood. If (3) The name, position, and organiza-
the contractor had information reason- tion of each person representing the
ably available at the time of agree- contractor and the Government in the
ment showing that the negotiated price negotiation.
was not based on accurate, complete, (4) The current status of any con-
and current data, the contractors re- tractor systems (e.g., purchasing, esti-
sponsibility is not limited by any lack mating, accounting, and compensation)
of personal knowledge of the informa- to the extent they affected and were
tion on the part of its negotiators. considered in the negotiation.
(c) The contracting officer and con- (5) If cost or pricing data were not re-
tractor are encouraged to reach a prior quired in the case of any price negotia-
agreement on criteria for establishing tion exceeding the cost or pricing data
closing or cutoff dates when appro- threshold, the exception used and the
priate in order to minimize delays as- basis for it.
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15.407 48 CFR Ch. 1 (10103 Edition)
(6) If cost or pricing data were re- 15.407 Special cost or pricing areas.
quired, the extent to which the con-
tracting officer 15.4071 Defective cost or pricing
(i) Relied on the cost or pricing data data.
submitted and used them in negoti- (a) If, before agreement on price, the
ating the price; contracting officer learns that any cost
(ii) Recognized as inaccurate, incom- or pricing data submitted are inac-
plete, or noncurrent any cost or pricing curate, incomplete, or noncurrent, the
data submitted; the action taken by contracting officer shall immediately
the contracting officer and the con- bring the matter to the attention of
tractor as a result; and the effect of the the prospective contractor, whether
defective data on the price negotiated; the defective data increase or decrease
or the contract price. The contracting of-
(iii) Determined that an exception ficer shall consider any new data sub-
applied after the data were submitted mitted to correct the deficiency, or
and, therefore, considered not to be consider the inaccuracy, incomplete-
cost or pricing data. ness, or noncurrency of the data when
(7) A summary of the contractors
negotiating the contract price. The
proposal, any field pricing assistance
price negotiation memorandum shall
recommendations, including the rea-
reflect the adjustments made to the
sons for any pertinent variances from
data or the corrected data used to ne-
them, the Governments negotiation
gotiate the contract price.
objective, and the negotiated position.
Where the determination of price rea- (b)(1) If, after award, cost or pricing
sonableness is based on cost analysis, data are found to be inaccurate, incom-
the summary shall address each major plete, or noncurrent as of the date of
cost element. When determination of final agreement on price or an earlier
price reasonableness is based on price date agreed upon by the parties given
analysis, the summary shall include on the contractors or subcontractors
the source and type of data used to Certificate of Current Cost or Pricing
support the determination. Data, the Government is entitled to a
(8) The most significant facts or con- price adjustment, including profit or
siderations controlling the establish- fee, of any significant amount by which
ment of the prenegotiation objectives the price was increased because of the
and the negotiated agreement includ- defective data. This entitlement is en-
ing an explanation of any significant sured by including in the contract one
differences between the two positions. of the clauses prescribed in 15.408 (b)
(9) To the extent such direction has a and (c) and is set forth in the clauses at
significant effect on the action, a dis- 52.21510, Price Reduction for Defective
cussion and quantification of the im- Cost or Pricing Data, and 52.21511,
pact of direction given by Congress, Price Reduction for Defective Cost or
other agencies, and higher-level offi- Pricing DataModifications. The
cials (i.e., officials who would not nor- clauses give the Government the right
mally exercise authority during the to a price adjustment for defects in
award and review process for the in- cost or pricing data submitted by the
stant contract action). contractor, a prospective subcon-
(10) The basis for the profit or fee tractor, or an actual subcontractor.
prenegotiation objective and the profit (2) In arriving at a price adjustment,
or fee negotiated. the contracting officer shall consider
(11) Documentation of fair and rea- the time by which the cost or pricing
sonable pricing. data became reasonably available to
(b) Whenever field pricing assistance the contractor, and the extent to which
has been obtained, the contracting offi- the Government relied upon the defec-
cer shall forward a copy of the negotia- tive data.
tion documentation to the office(s) (3) The clauses referred to in para-
providing assistance. When appro- graph (b)(1) of this subsection recognize
priate, information on how advisory that the Governments right to a price
field support can be made more effec- adjustment is not affected by any of
tive should be provided separately. the following circumstances:
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Federal Acquisition Regulation 15.4071
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15.4071 48 CFR Ch. 1 (10103 Edition)
and current, or were not adequately tent necessary to secure a prime con-
verified by the contractor as of the tract price reduction, the contracting
time of negotiation, the contracting of- officer should make this information
ficer shall request an audit to evaluate available to the prime contractor or
the accuracy, completeness, and cur- appropriate subcontractors, upon re-
rency of the data. The Government quest. If release of the information
may evaluate the profit-cost relation- would compromise Government secu-
ships only if the audit reveals that the rity or disclose trade secrets or con-
data certified by the contractor were fidential business information, the con-
defective. The contracting officer shall
tracting officer shall release it only
not reprice the contract solely because
the profit was greater than forecast or under conditions that will protect it
because a contingency specified in the from improper disclosure. Information
submission failed to materialize. made available under this paragraph
(d) For each advisory audit received shall be limited to that used as the
based on a postaward review that indi- basis for the prime contract price re-
cates defective pricing, the contracting duction. In order to afford an oppor-
officer shall make a determination as tunity for corrective action, the con-
to whether or not the data submitted tracting officer should give the prime
were defective and relied upon. Before contractor reasonable advance notice
making such a determination, the con- before determining to reduce the prime
tracting officer should give the con- contract price.
tractor an opportunity to support the (1) When a prime contractor includes
accuracy, completeness, and currency defective subcontract data in arriving
of the data in question. The con- at the price but later awards the sub-
tracting officer shall prepare a memo- contract to a lower priced subcon-
randum documenting both the deter-
tractor (or does not subcontract for the
mination and any corrective action
work), any adjustment in the prime
taken as a result. The contracting offi-
cer shall send one copy of this memo- contract price due to defective sub-
randum to the auditor and, if the con- contract data is limited to the dif-
tract has been assigned for administra- ference (plus applicable indirect cost
tion, one copy to the administrative and profit markups) between the sub-
contracting officer (ACO). A copy of contract price used for pricing the
the memorandum or other notice of the prime contract, and either the actual
contracting officers determination subcontract price or the actual cost to
shall be provided to the contractor. the contractor, if not subcontracted,
(e) If both the contractor and subcon- provided the data on which the actual
tractor submitted, and the contractor subcontract price is based are not
certified, or should have certified, cost themselves defective.
or pricing data, the Government has (2) Under cost-reimbursement con-
the right, under the clauses at 52.215 tracts and under all fixed-price con-
10, Price Reduction for Defective Cost tracts except firm-fixed-price contracts
or Pricing Data, and 52.21511, Price and fixed-price contracts with eco-
Reduction for Defective Cost or Pricing
nomic price adjustment, payments to
DataModifications, to reduce the
subcontractors that are higher than
prime contract price if it was signifi-
cantly increased because a subcon- they would be had there been no defec-
tractor submitted defective data. This tive subcontractor cost or pricing data
right applies whether these data sup- shall be the basis for disallowance or
ported subcontract cost estimates or nonrecognition of costs under the
supported firm agreements between clauses prescribed in 15.408 (b) and (c).
subcontractor and contractor. The Government has a continuing and
(f) If Government audit discloses de- direct financial interest in such pay-
fective subcontractor cost or pricing ments that is unaffected by the initial
data, the information necessary to sup- agreement on prime contract price.
port a reduction in prime contract and
[62 FR 51230, Sept. 30, 1997, as amended at 66
subcontract prices may be available
FR 65354, Dec. 18, 2001]
only from the Government. To the ex-
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Federal Acquisition Regulation 15.4072
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15.4073 48 CFR Ch. 1 (10103 Edition)
276
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Federal Acquisition Regulation 15.4074
277
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15.4075 48 CFR Ch. 1 (10103 Edition)
plan or acquisition plan updates (see manage regular programs for reviewing
subpart 7.1) and in the solicitation. selected contractors estimating sys-
(c) Overhead should-cost review. (1) An tems or methods, in order to reduce the
overhead should-cost review is used to scope of reviews to be performed on in-
evaluate indirect costs, such as fringe dividual proposals, expedite the nego-
benefits, shipping and receiving, facili- tiation process, and increase the reli-
ties and equipment, depreciation, plant ability of proposals. The results of esti-
maintenance and security, taxes, and mating system reviews shall be docu-
general and administrative activities. mented in survey reports.
It is normally used to evaluate and (b) The auditor shall send a copy of
negotiate an FPRA with the con- the estimating system survey report
tractor. When an overhead should-cost and a copy of the official notice of cor-
review is conducted, a separate audit rective action required to each con-
report is required. tracting office and contract adminis-
(2) The following factors should be tration office having substantial busi-
considered when selecting contractor ness with that contractor. Significant
sites for overhead should-cost reviews: deficiencies not corrected by the con-
(i) Dollar amount of Government tractor shall be a consideration in sub-
business. sequent proposal analyses and negotia-
(ii) Level of Government participa- tions.
tion.
(iii) Level of noncompetitive Govern- 15.408 Solicitation provisions and con-
ment contracts. tract clauses.
(iv) Volume of proposal activity. (a) Changes or Additions to Make-or-
(v) Major system or program. Buy Program. The contracting officer
(vi) Corporate reorganizations, merg- shall insert the clause at 52.2159,
ers, acquisitions, or takeovers. Changes or Additions to Make-or-Buy
(vii) Other conditions (e.g., changes Program, in solicitations and contracts
in accounting systems, management, when it is contemplated that a make-
or business activity). or- buy program will be incorporated in
(3) The objective of the overhead the contract. If a less economical
should-cost review is to evaluate sig- make or buy categorization is se-
nificant indirect cost elements in- lected for one or more items of signifi-
depth, and identify and recommend cant value, the contracting officer
corrective actions regarding inefficient shall use the clause with
and uneconomical practices. If it is (1) Its Alternate I, if a fixed-price in-
conducted in conjunction with a pro- centive contract is contemplated; or
gram should-cost review, a separate (2) Its Alternate II, if a cost-plus-in-
overhead should-cost review report is centive-fee contract is contemplated.
not required. However, the findings and (b) Price Reduction for Defective Cost or
recommendations of the overhead Pricing Data. The contracting officer
should-cost team, or any separate over- shall, when contracting by negotiation,
head should-cost review report, shall be insert the clause at 52.21510, Price Re-
provided to the ACO. The ACO should duction for Defective Cost or Pricing
use this information to form the basis Data, in solicitations and contracts
for the Government position in negoti- when it is contemplated that cost or
ating an FPRA with the contractor. pricing data will be required from the
The ACO shall establish a follow-up contractor or any subcontractor (see
plan to monitor the correction of the 15.4034).
uneconomical or inefficient practices. (c) Price Reduction for Defective Cost or
Pricing DataModifications. The con-
15.4075 Estimating systems. tracting officer shall, when contracting
(a) Using an acceptable estimating by negotiation, insert the clause at
system for proposal preparation bene- 52.21511, Price Reduction for Defective
fits both the Government and the con- Cost or Pricing Data Modifications,
tractor by increasing the accuracy and in solicitations and contracts when it
reliability of individual proposals. Cog- is contemplated that cost or pricing
nizant audit activities, when it is ap- data will be required from the con-
propriate to do so, shall establish and tractor or any subcontractor (see
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Federal Acquisition Regulation 15.408
15.4034) for the pricing of contract does not propose facilities capital cost
modifications, and the clause pre- of money in its offer, the contracting
scribed in paragraph (b) of this section officer shall insert the clause at 52.215
has not been included. 17, Waiver of Facilities Capital Cost of
(d) Subcontractor Cost or Pricing Data. Money, in the resulting contract.
The contracting officer shall insert the (j) Reversion or Adjustment of Plans for
clause at 52.21512, Subcontractor Cost Postretirement Benefits (PRB) Other
or Pricing Data, in solicitations and Than Pensions. The contracting officer
contracts when the clause prescribed in shall insert the clause at 52.21518, Re-
paragraph (b) of this section is in- version or Adjustment of Plans for
cluded. Postretirement Benefits (PRB) Other
(e) Subcontractor Cost or Pricing Than Pensions, in solicitations and
Data Modifications. The contracting contracts for which it is anticipated
officer shall insert the clause at 52.215 that cost or pricing data will be re-
13, Subcontractor Cost or Pricing quired or for which any preaward or
DataModifications, in solicitations postaward cost determinations will be
and contracts when the clause pre- subject to part 31.
scribed in paragraph (c) of this section (k) Notification of Ownership Changes.
is included. The contracting officer shall insert the
(f) Integrity of Unit Prices. (1) The con- clause at 52.21519, Notification of Own-
tracting officer shall insert the clause ership Changes, in solicitations and
at 52.21514, Integrity of Unit Prices, in contracts for which it is contemplated
solicitations and contracts except for that cost or pricing data will be re-
(i) Acquisitions at or below the sim- quired or for which any preaward or
plified acquisition threshold; postaward cost determination will be
(ii) Construction or architect-engi- subject to subpart 31.2.
neer services under part 36; (l) Requirements for Cost or Pricing
(iii) Utility services under part 41; Data or Information Other Than Cost or
(iv) Service contracts where supplies Pricing Data. Considering the hierarchy
are not required; at 15.402, the contracting officer may
(v) Acquisitions of commercial items; insert the provision at 52.21520, Re-
and quirements for Cost or Pricing Data or
(vi) Contracts for petroleum prod- Information Other Than Cost or Pric-
ucts. ing Data, in solicitations if it is rea-
(2) The contracting officer shall in- sonably certain that cost or pricing
sert the clause with its Alternate I data or information other than cost or
when contracting without adequate pricing data will be required. This pro-
price competition or when prescribed vision also provides instructions to
by agency regulations. offerors on how to request an excep-
(g) Pension Adjustments and Asset Re- tion. The contracting officer shall
versions. The contracting officer shall (1) Use the provision with its Alter-
insert the clause at 52.21515, Pension nate I to specify a format for cost or
Adjustments and Asset Reversions, in pricing data other than the format re-
solicitations and contracts for which it quired by Table 152 of this section;
is anticipated that cost or pricing data (2) Use the provision with its Alter-
will be required or for which any nate II if copies of the proposal are to
preaward or postaward cost determina- be sent to the ACO and contract audi-
tions will be subject to Part 31 of the tor;
FAR. (3) Use the provision with its Alter-
(h) Facilities Capital Cost of Money. nate III if submission via electronic
The contracting officer shall insert the media is required; and
provision at 52.21516, Facilities Capital (4) Replace the basic provision with
Cost of Money, in solicitations ex- its Alternate IV if cost or pricing data
pected to result in contracts that are are not expected to be required because
subject to the cost principles for con- an exception may apply, but informa-
tracts with commercial organizations tion other than cost or pricing data is
(see subpart 31.2). required as described in 15.4033.
(i) Waiver of Facilities Capital Cost of (m) Requirements for Cost or Pricing
Money. If the prospective contractor Data or Information Other Than Cost or
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Pt. 15, Table 152 48 CFR Ch. 1 (10103 Edition)
280
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Federal Acquisition Regulation Pt. 15, Table 152
of all the cost or pricing data and informa- duct price analyses of all subcontractor pro-
tion accompanying or identified in the pro- posals. Conduct cost analyses for all sub-
posal. In addition, you must annotate any contracts when cost or pricing data are sub-
future additions and/or revisions, up to the mitted by the subcontractor. Include these
date of agreement on price, or an earlier date analyses as part of your own cost or pricing
agreed upon by the parties, on a supple- data submissions for subcontracts expected
mental index. to exceed the appropriate threshold in FAR
C. As part of the specific information re- 15.4034. Submit the subcontractor cost or
quired, you must submit, with your proposal, pricing data as part of your own cost or pric-
cost or pricing data (that is, data that are ing data as required in paragraph IIA(2) of
verifiable and factual and otherwise as de- this table. These requirements also apply to
fined at FAR 2.101). You must clearly iden- all subcontractors if required to submit cost
tify on your cover sheet that cost or pricing or pricing data.
data are included as part of the proposal. In (1) Adequate Price Competition. Provide data
addition, you must submit with your pro- showing the degree of competition and the
posal any information reasonably required to basis for establishing the source and reason-
explain your estimating process, including ableness of price for those acquisitions (such
(1) The judgmental factors applied and the as subcontracts, purchase orders, material
mathematical or other methods used in the order, etc.) exceeding, or expected to exceed,
estimate, including those used in projecting the appropriate threshold set forth at FAR
from known data; and 15.4034 priced on the basis of adequate price
(2) The nature and amount of any contin- competition. For interorganizational trans-
gencies included in the proposed price. fers priced at other than the cost of com-
D. You must show the relationship between parable competitive commercial work of the
contract line item prices and the total con- division, subsidiary, or affiliate of the con-
tract price. You must attach cost-element tractor, explain the pricing method (see FAR
breakdowns for each proposed line item, 31.20526(e)).
using the appropriate format prescribed in (2) All Other. Obtain cost or pricing data
the Formats for Submission of Line Item from prospective sources for those acquisi-
Summaries section of this table. You must tions (such as subcontracts, purchase orders,
furnish supporting breakdowns for each cost material order, etc.) exceeding the threshold
element, consistent with your cost account- set forth in FAR 15.4034 and not otherwise
ing system. exempt, in accordance with FAR 15.4031(b)
E. When more than one contract line item (i.e., adequate price competition, commercial
is proposed, you must also provide summary items, prices set by law or regulation or
total amounts covering all line items for waiver). Also provide data showing the basis
each element of cost. for establishing source and reasonableness of
F. Whenever you have incurred costs for price. In addition, provide a summary of
work performed before submission of a pro- your cost analysis and a copy of cost or pric-
posal, you must identify those costs in your ing data submitted by the prospective source
cost/price proposal. in support of each subcontract, or purchase
G. If you have reached an agreement with order that is the lower of either $10,000,000 or
Government representatives on use of for- more, or both more than the pertinent cost
ward pricing rates/factors, identify the or pricing data threshold and more than 10
agreement, include a copy, and describe its percent of the prime contractors proposed
nature. price. The Contracting Officer may require
H. As soon as practicable after final agree- you to submit cost or pricing data in support
ment on price or an earlier date agreed to by of proposals in lower amounts. Subcon-
the parties, but before the award resulting tractor cost or pricing data must be accu-
from the proposal, you must, under the con- rate, complete and current as of the date of
ditions stated in FAR 15.4062, submit a Cer- final price agreement, or an earlier date
tificate of Current Cost or Pricing Data. agreed upon by the parties, given on the
prime contractors Certificate of Current
II. Cost Elements Cost or Pricing Data. The prime contractor
Depending on your system, you must pro- is responsible for updating a prospective sub-
vide breakdowns for the following basic cost contractors data. For standard commercial
elements, as applicable: items fabricated by the offeror that are gen-
A. Materials and services. Provide a consoli- erally stocked in inventory, provide a sepa-
dated priced summary of individual material rate cost breakdown, if priced based on cost.
quantities included in the various tasks, or- For interorganizational transfers priced at
ders, or contract line items being proposed cost, provide a separate breakdown of cost
and the basis for pricing (vendor quotes, in- elements. Analyze the cost or pricing data
voice prices, etc.). Include raw materials, and submit the results of your analysis of
parts, components, assemblies, and services the prospective sources proposal. When sub-
to be produced or performed by others. For mission of a prospective sources cost or
all items proposed, identify the item and pricing data is required as described in this
show the source, quantity, and price. Con- paragraph, it must be included along with
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Pt. 15, Table 152 48 CFR Ch. 1 (10103 Edition)
your own cost or pricing data submission, as (1) Name and address of licensor.
part of your own cost or pricing data. You (2) Date of license agreement.
must also submit any other cost or pricing (3) Patent numbers.
data obtained from a subcontractor, either (4) Patent application serial numbers, or
actually or by specific identification, along other basis on which the royalty is payable.
with the results of any analysis performed (5) Brief description (including any part or
on that data. model numbers of each contract item or
B. Direct Labor. Provide a time-phased component on which the royalty is payable).
(e.g., monthly, quarterly, etc.) breakdown of (6) Percentage or dollar rate of royalty per
labor hours, rates, and cost by appropriate unit.
category, and furnish bases for estimates. (7) Unit price of contract item.
C. Indirect Costs. Indicate how you have (8) Number of units.
computed and applied your indirect costs, in- (9) Total dollar amount of royalties.
cluding cost breakdowns. Show trends and (10) If specifically requested by the Con-
budgetary data to provide a basis for evalu- tracting Officer, a copy of the current license
ating the reasonableness of proposed rates. agreement and identification of applicable
Indicate the rates used and provide an appro- claims of specific patents (see FAR 27.204 and
priate explanation. 31.20537).
D. Other Costs. List all other costs not oth- F. Facilities Capital Cost of Money. When
erwise included in the categories described you elect to claim facilities capital cost of
above (e.g., special tooling, travel, computer money as an allowable cost, you must sub-
and consultant services, preservation, pack- mit Form CASB-CMF and show the calcula-
aging and packing, spoilage and rework, and tion of the proposed amount (see FAR 31.205
Federal excise tax on finished articles) and 10).
provide bases for pricing. III. Formats for Submission of Line Item
E. Royalties. If royalties exceed $1,500, you Summaries
must provide the following information on a
separate page for each separate royalty or li- A. New Contracts (Including Letter
cense fee: Contracts)
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Federal Acquisition Regulation Pt. 15, Table 152
the cost and proposed disposition of each line of them. When any of the costs in this col-
item. Also, if you desire to retain these umn have already been incurred, describe
items or any portion of them, indicate the them on an attached supporting schedule.
amount offered for them. (6) Enter the net cost of change, which is
(4) Enter the net cost to be deleted, which the cost of work added, less the net cost to
is the estimated cost of all deleted work less be deleted. Column (5) minus Column (4)
the cost of deleted work already performed. equals Column (6). When this result is nega-
Column (2) minus Column (3) equals Column tive, place the amount in parentheses.
(4). (7) Identify the attachment in which the
(5) Enter your estimate for cost of work information supporting the specific cost ele-
added by the change. When nonrecurring ment may be found. (Attach separate pages
costs are significant, or when specifically re- as necessary.)
quested to do so by the Contracting Officer,
provide a full identification and explanation C. Price Revision/Redetermination
Rede- In-
Num- In- curred Esti-
Num- ter-
ber of Con- mina- curred Total mated Esti-
Cutoff ber of Dif- Cost Incurred
units tract cost cost in- cost mated Ref-
units tion fer- ele- cost work curred er-
date com- to be amount com- to total ence
pro- ence ments preproduction pleted in
com- cost com- cost
pleted posal
pleted units proc- plete
amount ess
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14)
(Use as applicable). Explain the basis for each estimate and how
the costs are charged on your accounting
Column and Instruction records (e.g., included in production costs as
(1) Enter the cutoff date required by the direct engineering labor, charged to manu-
contract, if applicable. facturing overhead). Also show how the costs
(2) Enter the number of units completed would be allocated to the units at their var-
during the period for which experienced costs ious stages of contract completion.
of production are being submitted. (9) Enter in Column (9) the production
(3) Enter the number of units remaining to costs from your books and records (exclusive
be completed under the contract. of preproduction costs reported in Column
(4) Enter the cumulative contract amount. (8)) of the units completed as of the cutoff
(5) Enter your redetermination proposal date.
amount. (10) Enter in Column (10) the costs of work
(6) Enter the difference between the con- in process as determined from your records
tract amount and the redetermination pro- or inventories at the cutoff date. When the
posal amount. When this result is negative, amounts for work in process are not avail-
place the amount in parentheses. Column (4) able in your records but reliable estimates
minus Column (5) equals Column (6). for them can be made, enter the estimated
(7) Enter appropriate cost elements. When amounts in Column (10) and enter in Column
residual inventory exists, the final costs es- (9) the differences between the total incurred
tablished under fixed-price-incentive and costs (exclusive of preproduction costs) as of
fixed-price-redeterminable arrangements the cutoff date and these estimates. Explain
should be net of the fair market value of the basis for the estimates, including identi-
such inventory. In support of subcontract fication of any provision for experienced or
costs, submit a listing of all subcontracts anticipated allowances, such as shrinkage,
subject to repricing action, annotated as to rework, design changes, etc. Furnish experi-
their status. enced unit or lot costs (or labor hours) from
(8) Enter all costs incurred under the con- inception of contract to the cutoff date, im-
tract before starting production and other provement curves, and any other available
nonrecurring costs (usually referred to as production cost history pertaining to the
startup costs) from your books and records item(s) to which your proposal relates.
as of the cutoff date. These include such (11) Enter total incurred costs (Total of
costs as preproduction engineering, special Columns (8), (9), and (10)).
plant rearrangement, training program, and (12) Enter those necessary and reasonable
any identifiable nonrecurring costs such as costs that in your judgment will properly be
initial rework, spoilage, pilot runs, etc. In incurred in completing the remaining work
the event the amounts are not segregated in to be performed under the contract with re-
or otherwise available from your records, spect to the item(s) to which your proposal
enter in this column your best estimates. relates.
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15.501 48 CFR Ch. 1 (10103 Edition)
(13) Enter total estimated cost (Total of (A) The name and address of the ap-
Columns (11) and (12)). parently successful offeror;
(14) Identify the attachment in which the (B) That the Government will not
information supporting the specific cost ele-
ment may be found. (Attach separate pages
consider subsequent revisions of the
as necessary.) offerors proposal; and
(C) That no response is required un-
[62 FR 51230, Sept. 30, 1997, as amended at 63 less a basis exists to challenge the
FR 58596, Oct. 30, 1998; 66 FR 2129, Jan. 10,
2001; 67 FR 6115, Feb. 8, 2002]
small business size status, disadvan-
taged status, or HUBZone status of the
apparently successful offeror.
Subpart 15.5Preaward, Award, (iii) The notice is not required when
and Postaward Notifications, the contracting officer determines in
Protests, and Mistakes writing that the urgency of the re-
quirement necessitates award without
15.501 Definition. delay or when the contract is entered
Day, as used in this subpart, has the into under the 8(a) program (see 19.805
meaning set forth at 33.101. 2).
(b) Postaward notices. (1) Within 3
15.502 Applicability. days after the date of contract award,
This subpart applies to competitive the contracting officer shall provide
proposals, as described in 6.102(b), and a written notification to each offeror
combination of competitive proce- whose proposal was in the competitive
dures, as described in 6.102(c). The pro- range but was not selected for award
cedures in 15.504, 15.506, 15.507, 15.508, (10 U.S.C. 2305(b)(5) and 41 U.S.C.
and 15.509, with reasonable modifica- 253b(c)) or had not been previously no-
tion, should be followed for sole source tified under paragraph (a) of this sec-
acquisitions and acquisitions described tion. The notice shall include
in 6.102(d)(1) and (2). (i) The number of offerors solicited;
(ii) The number of proposals received;
15.503 Notifications to unsuccessful (iii) The name and address of each of-
offerors. feror receiving an award;
(a) Preaward notices(1) Preaward no- (iv) The items, quantities, and any
tices of exclusion from competitive range. stated unit prices of each award. If the
The contracting officer shall notify number of items or other factors
offerors promptly in writing when their makes listing any stated unit prices
proposals are excluded from the com- impracticable at that time, only the
petitive range or otherwise eliminated total contract price need be furnished
from the competition. The notice shall in the notice. However, the items,
state the basis for the determination quantities, and any stated unit prices
and that a proposal revision will not be of each award shall be made publicly
considered. available, upon request; and
(2) Preaward notices for small business (v) In general terms, the reason(s)
programs. (i) In addition to the notice the offerors proposal was not accepted,
in paragraph (a)(1) of this section, the unless the price information in para-
contracting officer shall notify each of- graph (b)(1)(iv) of this section readily
feror in writing prior to award, upon reveals the reason. In no event shall an
completion of negotiations, determina- offerors cost breakdown, profit, over-
tions of responsibility, and, if nec- head rates, trade secrets, manufac-
essary, the process in 19.304(d) turing processes and techniques, or
(A) When using a small business set- other confidential business informa-
aside (see subpart 19.5); tion be disclosed to any other offeror.
(B) When a small disadvantaged busi- (2) Upon request, the contracting of-
ness concern receives a benefit based ficer shall furnish the information de-
on its disadvantaged status (see sub- scribed in paragraph (b)(1) of this sec-
part 19.11 and 19.1202) and is the appar- tion to unsuccessful offerors in solici-
ently successful offeror; or tations using simplified acquisition
(C) When using the HUBZone proce- procedures in part 13.
dures in 19.1305 or 19.1307. (3) Upon request, the contracting of-
(ii) The notice shall state ficer shall provide the information in
284
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Federal Acquisition Regulation 15.505
paragraph (b)(1) of this section to un- (a)(1) The offeror may request a
successful offerors that received a preaward debriefing by submitting a
preaward notice of exclusion from the written request for debriefing to the
competitive range. contracting officer within 3 days after
receipt of the notice of exclusion from
[62 FR 51230, Sept. 30, 1997, as amended at 63
the competition.
FR 35721, June 30, 1998; 63 FR 36121, July 1,
1998; 63 FR 70267, Dec. 18, 1998; 65 FR 80265, (2) At the offerors request, this de-
Dec. 20, 2000; 66 FR 17756, Apr. 3, 2001; 66 FR briefing may be delayed until after
66986, 66990, Dec. 27, 2001] award. If the debriefing is delayed until
after award, it shall include all infor-
15.504 Award to successful offeror. mation normally provided in a
postaward debriefing (see 15.506(d)).
The contracting officer shall award a
Debriefings delayed pursuant to this
contract to the successful offeror by
paragraph could affect the timeliness
furnishing the executed contract or
of any protest filed subsequent to the
other notice of the award to that offer-
debriefing.
or.
(3) If the offeror does not submit a
(a) If the award document includes timely request, the offeror need not be
information that is different than the given either a preaward or a postaward
latest signed proposal, as amended by debriefing. Offerors are entitled to no
the offerors written correspondence, more than one debriefing for each pro-
both the offeror and the contracting of- posal.
ficer shall sign the contract award. (b) The contracting officer shall
(b) When an award is made to an of- make every effort to debrief the unsuc-
feror for less than all of the items that cessful offeror as soon as practicable,
may be awarded and additional items but may refuse the request for a de-
are being withheld for subsequent briefing if, for compelling reasons, it is
award, each notice shall state that the not in the best interests of the Govern-
Government may make subsequent ment to conduct a debriefing at that
awards on those additional items with- time. The rationale for delaying the de-
in the proposal acceptance period. briefing shall be documented in the
(c) If the Optional Form (OF) 307, contract file. If the contracting officer
Contract Award, Standard Form (SF) delays the debriefing, it shall be pro-
26, Award/Contract, or SF 33, Solicita- vided no later than the time postaward
tion, Offer and Award, is not used to debriefings are provided under 15.506. In
award the contract, the first page of that event, the contracting officer
the award document shall contain the shall include the information at
Governments acceptance statement 15.506(d) in the debriefing.
from Block 15 of that form, exclusive of (c) Debriefings may be done orally, in
the Item 3 reference language, and writing, or by any other method ac-
shall contain the contracting officers ceptable to the contracting officer.
name, signature, and date. In addition, (d) The contracting officer should
if the award document includes infor- normally chair any debriefing session
mation that is different than the held. Individuals who conducted the
signed proposal, as amended by the evaluations shall provide support.
offerors written correspondence, the (e) At a minimum, preaward
first page shall include the contractors debriefings shall include
agreement statement from Block 14 of (1) The agencys evaluation of signifi-
the OF 307 and the signature of the cant elements in the offerors proposal;
contractors authorized representative. (2) A summary of the rationale for
eliminating the offeror from the com-
15.505 Preaward debriefing of petition; and
offerors. (3) Reasonable responses to relevant
Offerors excluded from the competi- questions about whether source selec-
tive range or otherwise excluded from tion procedures contained in the solici-
the competition before award may re- tation, applicable regulations, and
quest a debriefing before award (10 other applicable authorities were fol-
U.S.C. 2305(b)(6)(A) and 41 U.S.C. lowed in the process of eliminating the
253b(f)(h)). offeror from the competition.
285
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15.506 48 CFR Ch. 1 (10103 Edition)
(f) Preaward debriefings shall not dis- (1) The Governments evaluation of
close the significant weaknesses or defi-
(1) The number of offerors; ciencies in the offerors proposal, if ap-
(2) The identity of other offerors; plicable;
(3) The content of other offerors pro- (2) The overall evaluated cost or
posals; price (including unit prices), and tech-
(4) The ranking of other offerors; nical rating, if applicable, of the suc-
(5) The evaluation of other offerors; cessful offeror and the debriefed offer-
or or, and past performance information
(6) Any of the information prohibited on the debriefed offeror;
in 15.506(e). (3) The overall ranking of all offerors,
(g) An official summary of the de- when any ranking was developed by the
briefing shall be included in the con- agency during the source selection;
tract file. (4) A summary of the rationale for
award;
15.506 Postaward debriefing of
offerors. (5) For acquisitions of commercial
items, the make and model of the item
(a)(1) An offeror, upon its written re- to be delivered by the successful offer-
quest received by the agency within 3 or; and
days after the date on which that offer- (6) Reasonable responses to relevant
or has received notification of contract questions about whether source selec-
award in accordance with 15.503(b), tion procedures contained in the solici-
shall be debriefed and furnished the tation, applicable regulations, and
basis for the selection decision and other applicable authorities were fol-
contract award. lowed.
(2) To the maximum extent prac- (e) The debriefing shall not include
ticable, the debriefing should occur point-by-point comparisons of the de-
within 5 days after receipt of the writ- briefed offerors proposal with those of
ten request. Offerors that requested a other offerors. Moreover, the debriefing
postaward debriefing in lieu of a shall not reveal any information pro-
preaward debriefing, or whose debrief- hibited from disclosure by 24.202 or ex-
ing was delayed for compelling reasons empt from release under the Freedom
beyond contract award, also should be of Information Act (5 U.S.C. 552) in-
debriefed within this time period. cluding
(3) An offeror that was notified of ex-
(1) Trade secrets;
clusion from the competition (see
(2) Privileged or confidential manu-
15.505(a)), but failed to submit a timely
facturing processes and techniques;
request, is not entitled to a debriefing.
(4)(i) Untimely debriefing requests (3) Commercial and financial infor-
may be accommodated. mation that is privileged or confiden-
(ii) Government accommodation of a tial, including cost breakdowns, profit,
request for delayed debriefing pursuant indirect cost rates, and similar infor-
to 15.505(a)(2), or any untimely debrief- mation; and
ing request, does not automatically ex- (4) The names of individuals pro-
tend the deadlines for filing protests. viding reference information about an
Debriefings delayed pursuant to offerors past performance.
15.505(a)(2) could affect the timeliness (f) An official summary of the de-
of any protest filed subsequent to the briefing shall be included in the con-
debriefing. tract file.
(b) Debriefings of successful and un-
successful offerors may be done orally, 15.507 Protests against award.
in writing, or by any other method ac- (a) Protests against award in nego-
ceptable to the contracting officer. tiated acquisitions shall be handled in
(c) The contracting officer should accordance with part 33. Use of agency
normally chair any debriefing session protest procedures that incorporate the
held. Individuals who conducted the alternative dispute resolution provi-
evaluations shall provide support. sions of Executive Order 12979 is en-
(d) At a minimum, the debriefing in- couraged for both preaward and
formation shall include postaward protests.
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Federal Acquisition Regulation 15.603
287
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15.604 48 CFR Ch. 1 (10103 Edition)
technical issues, are not unsolicited (4) Agency points of contact for infor-
proposals. mation regarding advertising, con-
(c) A valid unsolicited proposal tributions, and other types of trans-
must actions similar to unsolicited pro-
(1) Be innovative and unique; posals.
(2) Be independently originated and (5) Information sources on agency ob-
developed by the offeror; jectives and areas of potential interest.
(3) Be prepared without Government (6) Procedures for submission and
supervision, endorsement, direction, or evaluation of unsolicited proposals.
direct Government involvement; (7) Instructions for identifying and
(4) Include sufficient detail to permit marking proprietary information so
a determination that Government sup- that it is protected and restrictive leg-
port could be worthwhile and the pro- ends conform to 15.609.
posed work could benefit the agencys (b) Only the cognizant contracting
research and development or other mis- officer has the authority to bind the
sion responsibilities; and Government regarding unsolicited pro-
(5) Not be an advance proposal for a posals.
known agency requirement that can be [62 FR 51230, Sept. 30, 1997, as amended at 66
acquired by competitive methods. FR 2129, Jan. 10, 2001]
(d) Unsolicited proposals in response
to a publicized general statement of 15.605 Content of unsolicited pro-
agency needs are considered to be inde- posals.
pendently originated. Unsolicited proposals should contain
(e) Agencies must evaluate unsolic- the following information to permit
ited proposals for energy-savings per- consideration in an objective and time-
formance contracts in accordance with ly manner:
the procedures in 10 CFR 436.33(b). (a) Basic information including
[62 FR 51230, Sept. 30, 1997, as amended at 66 (1) Offerors name and address and
FR 65352, Dec. 18, 2002] type of organization; e.g., profit, non-
profit, educational, small business;
15.604 Agency points of contact. (2) Names and telephone numbers of
(a) Preliminary contact with agency technical and business personnel to be
technical or other appropriate per- contacted for evaluation or negotiation
sonnel before preparing a detailed un- purposes;
solicited proposal or submitting propri- (3) Identification of proprietary data
etary information to the Government to be used only for evaluation pur-
may save considerable time and effort poses;
for both parties (see 15.201). Agencies (4) Names of other Federal, State, or
must make available to potential local agencies or parties receiving the
offerors of unsolicited proposals at proposal or funding the proposed effort;
least the following information: (5) Date of submission; and
(1) Definition (see 2.101) and content (6) Signature of a person authorized
(see 15.605) of an unsolicited proposal to represent and contractually obligate
acceptable for formal evaluation. the offeror.
(2) Requirements concerning respon- (b) Technical information including
sible prospective contractors (see sub- (1) Concise title and abstract (ap-
part 9.1), and organizational conflicts proximately 200 words) of the proposed
of interest (see subpart 9.5). effort;
(3) Guidance on preferred methods for (2) A reasonably complete discussion
submitting ideas/concepts to the Gov- stating the objectives of the effort or
ernment, such as any agency: upcom- activity, the method of approach and
ing solicitations; Broad Agency An- extent of effort to be employed, the na-
nouncements; Small Business Innova- ture and extent of the anticipated re-
tion Research programs; Small Busi- sults, and the manner in which the
ness Technology Transfer Research work will help to support accomplish-
programs; Program Research and De- ment of the agencys mission;
velopment Announcements; or grant (3) Names and biographical informa-
programs. tion on the offerors key personnel who
288
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Federal Acquisition Regulation 15.607
would be involved, including alter- (6) Complies with the marking re-
nates; and quirements of 15.609.
(4) Type of support needed from the (b) If the proposal meets these re-
agency; e.g., facilities, equipment, ma- quirements, the contact point shall
terials, or personnel resources. promptly acknowledge receipt and
(c) Supporting information includ- process the proposal.
ing (c) If a proposal is rejected because
(1) Proposed price or total estimated the proposal does not meet the require-
cost for the effort in sufficient detail ments of paragraph (a) of this sub-
for meaningful evaluation; section, the agency contact point shall
(2) Period of time for which the pro- promptly inform the offeror of the rea-
posal is valid (a 6-month minimum is sons for rejection in writing and of the
suggested);
proposed disposition of the unsolicited
(3) Type of contract preferred;
proposal.
(4) Proposed duration of effort;
(5) Brief description of the organiza- 15.6062 Evaluation.
tion, previous experience, relevant past
performance, and facilities to be used; (a) Comprehensive evaluations shall
(6) Other statements, if applicable, be coordinated by the agency contact
about organizational conflicts of inter- point, who shall attach or imprint on
est, security clearances, and environ- each unsolicited proposal, circulated
mental impacts; and for evaluation, the legend required by
(7) The names and telephone numbers 15.609(d). When performing a com-
of agency technical or other agency prehensive evaluation of an unsolicited
points of contact already contacted re- proposal, evaluators shall consider the
garding the proposal. following factors, in addition to any
others appropriate for the particular
15.606 Agency procedures. proposal:
(a) Agencies shall establish proce- (1) Unique, innovative and meri-
dures for controlling the receipt, eval- torious methods, approaches, or con-
uation, and timely disposition of unso- cepts demonstrated by the proposal;
licited proposals consistent with the (2) Overall scientific, technical, or so-
requirements of this subpart. The pro- cioeconomic merits of the proposal;
cedures shall include controls on the (3) Potential contribution of the ef-
reproduction and disposition of pro- fort to the agencys specific mission;
posal material, particularly data iden- (4) The offerors capabilities, related
tified by the offeror as subject to dupli- experience, facilities, techniques, or
cation, use, or disclosure restrictions. unique combinations of these that are
(b) Agencies shall establish agency integral factors for achieving the pro-
points of contact (see 15.604) to coordi-
posal objectives;
nate the receipt and handling of unso-
(5) The qualifications, capabilities,
licited proposals.
and experience of the proposed prin-
15.6061 Receipt and initial review. cipal investigator, team leader, or key
personnel critical to achieving the pro-
(a) Before initiating a comprehensive
posal objectives; and
evaluation, the agency contact point
shall determine if the proposal (6) The realism of the proposed cost.
(1) Is a valid unsolicited proposal, (b) The evaluators shall notify the
meeting the requirements of 15.603(c); agency point of contact of their rec-
(2) Is suitable for submission in re- ommendations when the evaluation is
sponse to an existing agency require- completed.
ment (see 15.602);
(3) Is related to the agency mission; 15.607 Criteria for acceptance and ne-
gotiation of an unsolicited proposal.
(4) Contains sufficient technical and
cost information for evaluation; (a) A favorable comprehensive eval-
(5) Has been approved by a respon- uation of an unsolicited proposal does
sible official or other representative not, in itself, justify awarding a con-
authorized to obligate the offeror con- tract without providing for full and
tractually; and open competition. The agency point of
289
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15.608 48 CFR Ch. 1 (10103 Edition)
contact shall return an unsolicited pro- purpose or used by the Government ex-
posal to the offeror, citing reasons, cept for evaluation purposes. If the of-
when its substance feror wishes to restrict the data, the
(1) Is available to the Government title page must be marked with the fol-
without restriction from another lowing legend:
source;
Use and Disclosure of Data
(2) Closely resembles a pending com-
petitive acquisition requirement; This proposal includes data that shall not
(3) Does not relate to the activitys be disclosed outside the Government and
mission; or shall not be duplicated, used, or disclosedin
whole or in partfor any purpose other than
(4) Does not demonstrate an innova- to evaluate this proposal. However, if a con-
tive and unique method, approach, or tract is awarded to this offeror as a result
concept, or is otherwise not deemed a ofor in connection withthe submission of
meritorious proposal. these data, the Government shall have the
(b) The contracting officer may com- right to duplicate, use, or disclose the data
mence negotiations on a sole source to the extent provided in the resulting con-
basis only when tract. This restriction does not limit the
(1) An unsolicited proposal has re- Governments right to use information con-
tained in these data if they are obtained
ceived a favorable comprehensive eval-
from another source without restriction. The
uation; data subject to this restriction are contained
(2) A justification and approval has in Sheets [insert numbers or other identifica-
been obtained (see 6.3021(a)(2)(i) for re- tion of sheets].
search proposals or other appropriate
provisions of subpart 6.3, and 6.303 (b) The offeror shall also mark each
2(b)); sheet of data it wishes to restrict with
(3) The agency technical office spon- the following legend: Use or disclosure
soring the contract furnishes the nec- of data contained on this sheet is sub-
essary funds; and ject to the restriction on the title page
(4) The contracting officer has com- of this proposal.
plied with the synopsis requirements of (c) The agency point of contact shall
subpart 5.2. return to the offeror any unsolicited
proposal marked with a legend dif-
15.608 Prohibitions. ferent from that provided in paragraph
(a) of this section. The return letter
(a) Government personnel shall not
will state that the proposal cannot be
use any data, concept, idea, or other
considered because it is impracticable
part of an unsolicited proposal as the
for the Government to comply with the
basis, or part of the basis, for a solici-
legend and that the agency will con-
tation or in negotiations with any
sider the proposal if it is resubmitted
other firm unless the offeror is notified
with the proper legend.
of and agrees to the intended use. How-
(d) The agency point of contact shall
ever, this prohibition does not preclude
place a cover sheet on the proposal or
using any data, concept, or idea in the
clearly mark it as follows, unless the
proposal that also is available from an-
offeror clearly states in writing that no
other source without restriction.
restrictions are imposed on the disclo-
(b) Government personnel shall not
sure or use of the data contained in the
disclose restrictively marked informa-
proposal:
tion (see 3.104 and 15.609) included in an
unsolicited proposal. The disclosure of Unsolicited ProposalUse of Data Limited
such information concerning trade se- All Government personnel must exercise
crets, processes, operations, style of extreme care to ensure that the information
work, apparatus, and other matters, in this proposal is not disclosed to an indi-
except as authorized by law, may re- vidual who has not been authorized access to
sult in criminal penalties under 18 such data in accordance with FAR 3.104, and
U.S.C. 1905. is not duplicated, used, or disclosed in whole
or in part for any purpose other than evalua-
15.609 Limited use of data. tion of the proposal, without the written per-
mission of the offeror. If a contract is award-
(a) An unsolicited proposal may in- ed on the basis of this proposal, the terms of
clude data that the offeror does not the contract shall control disclosure and use.
want disclosed to the public for any This notice does not limit the Governments
290
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Federal Acquisition Regulation Pt. 16
right to use information contained in the (1) Clearly mark the cover sheet with
proposal if it is obtainable from another the legend in paragraph (d) or as modi-
source without restriction. This is a Govern- fied in paragraph (f) of this section; and
ment notice, and shall not by itself be con- (2) Obtain a written agreement from
strued to impose any liability upon the Gov-
any non-Government evaluator stating
ernment or Government personnel for disclo-
sure or use of data contained in this pro- that data in the proposal will not be
posal. disclosed to persons outside the Gov-
ernment.
(e) Use the notice in paragraph (d) of
[62 FR 51230, Sept. 30, 1997, as amended at 67
this section solely as a manner of han-
FR 13056, Mar. 20, 2002]
dling unsolicited proposals that will be
compatible with this subpart. However,
do not use this notice to justify with- PART 16TYPES OF CONTRACTS
holding of a record, or to improperly
Sec.
deny the public access to a record,
16.000 Scope of part.
where an obligation is imposed by the
Freedom of Information Act (5 U.S.C. Subpart 16.1Selecting Contract Types
552). An offeror should identify trade
secrets, commercial or financial infor- 16.101 General.
16.102 Policies.
mation, and privileged or confidential 16.103 Negotiating contract type.
information to the Government (see 16.104 Factors in selecting contract types.
paragraph (a) of this section). 16.105 Solicitation provision.
(f) When an agency receives an unso-
licited proposal without any restrictive Subpart 16.2Fixed-Price Contracts
legend from an educational or non- 16.201 General.
profit organization or institution, and 16.202 Firm-fixed-price contracts.
an evaluation outside the Government 16.2021 Description.
is necessary, the agency point of con- 16.2022 Application.
tact shall 16.203 Fixed-price contracts with economic
price adjustment.
(1) Attach a cover sheet clearly 16.2031 Description.
marked with the legend in paragraph 16.2032 Application.
(d) of this section; 16.2033 Limitations.
(2) Change the beginning of this leg- 16.2034 Contract clauses.
end to read All Government and non- 16.204 Fixed-price incentive contracts.
Government personnel * * * ; and 16.205 Fixed-price contracts with prospec-
tive price redetermination.
(3) Require any non-Government 16.2051 Description.
evaluator to agree in writing that data 16.2052 Application.
in the proposal will not be disclosed to 16.2053 Limitations.
others outside the Government. 16.2054 Contract clause.
(g) If the proposal is received with 16.206 Fixed-ceiling-price contracts with
the restrictive legend (see paragraph retroactive price redetermination.
16.2061 Description.
(a) of this section), the modified cover 16.2062 Application.
sheet shall also be used and permission 16.2063 Limitations.
shall be obtained from the offeror be- 16.2064 Contract clause.
fore release of the proposal for evalua- 16.207 Firm-fixed-price, level-of-effort term
tion by non-Government personnel. contracts.
(h) When an agency receives an unso- 16.2071 Description.
16.2072 Application.
licited proposal with or without a re-
16.2073 Limitations.
strictive legend from other than an
educational or nonprofit organization Subpart 16.3Cost-Reimbursement
or institution, and evaluation by Gov- Contracts
ernment personnel outside the agency
or by experts outside of the Govern- 16.301 General.
16.3011 Description.
ment is necessary, written permission
16.3012 Application.
must be obtained from the offeror be- 16.3013 Limitations.
fore release of the proposal for evalua- 16.302 Cost contracts.
tion. The agency point of contact 16.303 Cost-sharing contracts.
shall 16.304 Cost-plus-incentive-fee contracts.
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16.000 48 CFR Ch. 1 (10103 Edition)
16.305 Cost-plus-award-fee contracts. tract type appropriate to the cir-
16.306 Cost-plus-fixed-fee contracts. cumstances of the acquisition.
16.307 Contract clauses.
[48 FR 42219, Sept. 19, 1983, as amended at 60
Subpart 16.4Incentive Contracts FR 34756, July 3, 1995; 61 FR 39197, July 26,
1996]
16.401 General.
16.402 Application of predetermined, for-
mula-type incentives. Subpart 16.1Selecting Contract
16.4021 Cost incentives. Types
16.4022 Performance incentives.
16.4023 Delivery incentives. 16.101 General.
16.4024 Structuring multiple-incentive con-
tracts. (a) A wide selection of contract types
16.403 Fixed-price incentive contracts. is available to the Government and
16.4031 Fixed-price incentive (firm target) contractors in order to provide needed
contracts. flexibility in acquiring the large vari-
16.4032 Fixed-price incentive (successive ety and volume of supplies and services
targets) contracts. required by agencies. Contract types
16.404 Fixed-price contracts with award
vary according to (1) the degree and
fees.
16.405 Cost-reimbursement incentive con- timing of the responsibility assumed
tracts. by the contractor for the costs of per-
16.4051 Cost-plus-incentive-fee contracts. formance and (2) the amount and na-
16.4052 Cost-plus-award-fee contracts. ture of the profit incentive offered to
16.406 Contract clauses. the contractor for achieving or exceed-
ing specified standards or goals.
Subpart 16.5Indefinite-Delivery Contracts (b) The contract types are grouped
16.500 Scope of subpart. into two broad categories: fixed-price
16.5011 Definitions. contracts (see subpart 16.2) and cost-re-
16.5012 General. imbursement contracts (see subpart
16.502 Definite-quantity contracts. 16.3). The specific contract types range
16.503 Requirements contracts. from firm-fixed-price, in which the con-
16.504 Indefinite-quantity contracts.
tractor has full responsibility for the
16.505 Ordering.
16.506 Solicitation provisions and contract performance costs and resulting profit
clauses. (or loss), to cost-plus-fixed-fee, in
which the contractor has minimal re-
Subpart 16.6Time-and-Materials, Labor- sponsibility for the performance costs
Hour, and Letter Contracts and the negotiated fee (profit) is fixed.
In between are the various incentive
16.601 Time-and-materials contracts.
16.602 Labor-hour contracts.
contracts (see subpart 16.4), in which
16.603 Letter contracts. the contractors responsibility for the
16.6031 Description. performance costs and the profit or fee
16.6032 Application. incentives offered are tailored to the
16.6033 Limitations. uncertainties involved in contract per-
16.6034 Contract clauses. formance.
Subpart 16.7Agreements 16.102 Policies.
16.701 Scope. (a) Contracts resulting from sealed
16.702 Basic agreements. bidding shall be firm-fixed-price con-
16.703 Basic ordering agreements. tracts or fixed-price contracts with
AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chap- economic price adjustment.
ter 137; and 42 U.S.C. 2473(c). (b) Contracts negotiated under part
SOURCE: 48 FR 42219, Sept. 19, 1983, unless 15 may be of any type or combination
otherwise noted. of types that will promote the Govern-
ments interest, except as restricted in
16.000 Scope of part. this part (see 10 U.S.C. 2306(a) and 41
This part describes types of contracts U.S.C. 254(a)). Contract types not de-
that may be used in acquisitions. It scribed in this regulation shall not be
prescribes policies and procedures and used, except as a deviation under sub-
provides guidance for selecting a con- part 1.4.
292
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Federal Acquisition Regulation 16.401
contract (other than a facilities con- contracting officer shall use the clause
tract) is contemplated. If the contract with its Alternate I.
is with an educational institution, (f)(1) The contracting officer shall in-
modify the clause by deleting from sert the clause at 52.21612, Cost-Shar-
paragraph (a) the words subpart 31.2 ing ContractNo Fee, in solicitations
and substituting for them subpart and contracts when a cost-sharing con-
31.3. If the contract is with a State or tract (other than a facilities contract)
local government, modify the clause by is contemplated.
deleting from paragraph (a) the words (2) If a cost-sharing research and de-
subpart 31.2 and substituting for velopment contract with an edu-
them subpart 31.6. If the contract is cational institution or a nonprofit or-
with a nonprofit organization other ganization is contemplated, and if the
than an educational institution, a contracting officer determines that
State or local government, or a non- withholding of a portion of allowable
profit organization exempted under costs is not required, the contracting
OMB Circular No. A122, modify the officer shall use the clause with its Al-
clause by deleting from paragraph (a) ternate I.
the words subpart 31.2 and sub- (g)(1) The contracting officer shall
stituting for them subpart 31.7. insert the clause at 52.21613, Allowable
Cost and PaymentFacilities, in so-
(2) If the contract is a construction
licitations and contracts when a cost-
contract and contains the clause at reimbursement consolidated facilities
52.23227, Prompt Payment for Con- contract or a cost-reimbursement fa-
struction Contracts, the contracting cilities acquisition contract (see 45.302
officer shall use the clause at 52.2167 6) is contemplated.
with its Alternate I. (2) If a facilities acquisition contract
(b) The contracting officer shall in- is contemplated and, in the judgment
sert the clause at 52.2168, Fixed Fee, in of the contracting officer, it may be
solicitations and contracts when a necessary to withhold payment of an
cost-plus-fixed-fee contract (other than amount to protect the Governments
a facilities contract or a construction interest, the contracting officer shall
contract) is contemplated. use the clause with its Alternate I.
(c) The contracting officer shall in- (h) The contracting officer shall in-
sert the clause at 52.2169, Fixed-Fee sert the clause at 52.21614, Allowable
Construction, in solicitations and con- Cost and PaymentFacilities Use, in
tracts when a cost-plus-fixed-fee con- solicitations and contracts when a fa-
struction contract is contemplated. cilities use contract is contemplated.
(d) The contracting officer shall in- (i) The contracting officer shall in-
sert the clause at 52.21610, Incentive sert the clause at 52.21615, Predeter-
Fee, in solicitations and contracts mined Indirect Cost Rates, in solicita-
when a cost-plus-incentive-fee contract tions and contracts when a cost-reim-
(other than a facilities contract) is bursement research and development
contemplated. contract with an educational institu-
(e)(1) The contracting officer shall in- tion (see 42.7053(b)) is contemplated
sert the clause at 52.21611, Cost Con- and predetermined indirect cost rates
tractNo Fee, in solicitations and con- are to be used. If the contract is a fa-
tracts when a cost-reimbursement con- cilities contract, modify paragraph (c)
tract is contemplated that provides no by deleting the words Subpart 31.1
fee and is not a cost-sharing contract and substituting for them section
or a facilities contract. 31.106.
(2) If a cost-reimbursement research [48 FR 42219, Sept. 19, 1983, as amended at 50
and development contract with an edu- FR 23606, June 4, 1985; 61 FR 31622, June 20,
cational institution or a nonprofit or- 1996; 61 FR 67419, Dec. 20, 1996]
ganization that provides no fee or
other payment above cost and is not a Subpart 16.4Incentive Contracts
cost-sharing contract is contemplated,
and if the contracting officer deter- 16.401 General.
mines that withholding of a portion of (a) Incentive contracts as described
allowable costs is not required, the in this subpart are appropriate when a
301
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16.402 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 16.403
303
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16.4031 48 CFR Ch. 1 (10103 Edition)
304
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Federal Acquisition Regulation 16.4051
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16.4052 48 CFR Ch. 1 (10103 Edition)
paid total allowable costs, plus the termining the award fee are unilateral
minimum or maximum fee. decisions made solely at the discretion
(b) Application. (1) A cost-plus-incen- of the Government.
tive-fee contract is appropriate for (b) Application. (1) The cost-plus-
services or development and test pro- award-fee contract is suitable for use
grams when when
(i) A cost-reimbursement contract is (i) The work to be performed is such
necessary (see 16.3012) and that it is neither feasible nor effective
(ii) A target cost and a fee adjust- to devise predetermined objective in-
ment formula can be negotiated that centive targets applicable to cost,
are likely to motivate the contractor technical performance, or schedule;
to manage effectively.
(ii) The likelihood of meeting acqui-
(2) The contract may include tech-
nical performance incentives when it is sition objectives will be enhanced by
highly probable that the required de- using a contract that effectively moti-
velopment of a major system is feasible vates the contractor toward excep-
and the Government has established its tional performance and provides the
performance objectives, at least in gen- Government with the flexibility to
eral terms. This approach may also evaluate both actual performance and
apply to other acquisitions, if the use the conditions under which it was
of both cost and technical performance achieved; and
incentives is desirable and administra- (iii) Any additional administrative
tively practical. effort and cost required to monitor and
(3) The fee adjustment formula evaluate performance are justified by
should provide an incentive that will the expected benefits.
be effective over the full range of rea- (2) The number of evaluation criteria
sonably foreseeable variations from and the requirements they represent
target cost. If a high maximum fee is will differ widely among contracts. The
negotiated, the contract shall also pro- criteria and rating plan should moti-
vide for a low minimum fee that may vate the contractor to improve per-
be a zero fee or, in rare cases, a nega- formance in the areas rated, but not at
tive fee. the expense of at least minimum ac-
(c) Limitations. No cost-plus-incen- ceptable performance in all other
tive-fee contract shall be awarded un- areas.
less all limitations in 16.3013 are com- (3) Cost-plus-award-fee contracts
plied with. shall provide for evaluation at stated
[48 FR 42219, Sept. 19, 1983. Redesignated at intervals during performance, so that
62 FR 12696, Mar. 17, 1997, as amended at 62 the contractor will periodically be in-
FR 44815, Aug. 22, 1997] formed of the quality of its perform-
ance and the areas in which improve-
16.4052 Cost-plus-award-fee con-
tracts. ment is expected. Partial payment of
fee shall generally correspond to the
(a) Description. A cost-plus-award-fee evaluation periods. This makes effec-
contract is a cost-reimbursement con- tive the incentive which the award fee
tract that provides for a fee consisting can create by inducing the contractor
of (1) a base amount fixed at inception to improve poor performance or to con-
of the contract and (2) an award tinue good performance.
amount that the contractor may earn (c) Limitations. No cost-plus-award-
in whole or in part during performance fee contract shall be awarded unless
and that is sufficient to provide moti-
(1) All of the limitations in 16.3013
vation for excellence in such areas as
are complied with; and
quality, timeliness, technical inge-
nuity, and cost-effective management. (2) The contract amount, perform-
The amount of the award fee to be paid ance period, and expected benefits are
is determined by the Governments sufficient to warrant the additional ad-
judgmental evaluation of the contrac- ministrative effort and cost involved.
tors performance in terms of the cri- [48 FR 42219, Sept. 19, 1983. Redesignated at
teria stated in the contract. This deter- 62 FR 12696, Mar. 17, 1997; 63 FR 34073, June
mination and the methodology for de- 22, 1998; 64 FR 72449, Dec. 27, 1999]
306
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307
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308
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16.504 48 CFR Ch. 1 (10103 Edition)
(vi) Include a description of the ac- (B) The contracting officer must not
tivities authorized to issue orders; and use the multiple award approach if
(vii) Include authorization for plac- (1) Only one contractor is capable of
ing oral orders, if appropriate, provided providing performance at the level of
that the Government has established quality required because the supplies
procedures for obligating funds and or services are unique or highly spe-
that oral orders are confirmed in writ- cialized;
ing. (2) Based on the contracting officers
(b) Application. Contracting officers knowledge of the market, more favor-
may use an indefinite-quantity con- able terms and conditions, including
tract when the Government cannot pricing, will be provided if a single
predetermine, above a specified min- award is made;
imum, the precise quantities of sup- (3) The expected cost of administra-
plies or services that the Government tion of multiple contracts outweighs
will require during the contract period, the expected benefits of making mul-
and it is inadvisable for the Govern- tiple awards;
ment to commit itself for more than a (4) The projected orders are so inte-
minimum quantity. The contracting grally related that only a single con-
officer should use an indefinite-quan- tractor can reasonably perform the
tity contract only when a recurring work;
need is anticipated. (5) The total estimated value of the
(c) Multiple award preference(1) contract is less than the simplified ac-
Planning the acquisition. (i) Except for quisition threshold; or
indefinite-quantity contracts for advi- (6) Multiple awards would not be in
sory and assistance services as pro- the best interests of the Government.
vided in paragraph (c)(2) of this sec- (C) The contracting officer must doc-
tion, the contracting officer must, to ument the decision whether or not to
the maximum extent practicable, give use multiple awards in the acquisition
preference to making multiple awards plan or contract file. The contracting
of indefinite-quantity contracts under officer may determine that a class of
a single solicitation for the same or acquisitions is not appropriate for mul-
similar supplies or services to two or tiple awards (see subpart 1.7).
more sources. (2) Contracts for advisory and assist-
(ii)(A) The contracting officer must ance services. (i) Except as provided in
determine whether multiple awards are paragraph (c)(2)(ii) of this section, if an
appropriate as part of acquisition plan- indefinite-quantity contract for advi-
ning. The contracting officer must sory and assistance services exceeds 3
avoid situations in which awardees spe- years and $10 million, including all op-
cialize exclusively in one or a few areas tions, the contracting officer must
within the statement of work, thus cre- make multiple awards unless
ating the likelihood that orders in (A) The contracting officer or other
those areas will be awarded on a sole- official designated by the head of the
source basis; however, each awardee agency determines in writing, as part
need not be capable of performing of acquisition planning, that multiple
every requirement as well as any other awards are not practicable. The con-
awardee under the contracts. The con- tracting officer or other official must
tracting officer should consider the fol- determine that only one contractor can
lowing when determining the number reasonably perform the work because
of contracts to be awarded: either the scope of work is unique or
(1) The scope and complexity of the highly specialized or the tasks so inte-
contract requirement. grally related;
(2) The expected duration and fre- (B) The contracting officer or other
quency of task or delivery orders. official designated by the head of the
(3) The mix of resources a contractor agency determines in writing, after the
must have to perform expected task or evaluation of offers, that only one of-
delivery order requirements. feror is capable of providing the serv-
(4) The ability to maintain competi- ices required at the level of quality re-
tion among the awardees throughout quired; or
the contracts period of performance. (C) Only one offer is received.
310
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Federal Acquisition Regulation 16.505
(ii) The requirements of paragraph (i) Are not exempt from the develop-
(c)(2)(i) of this section do not apply if ment of acquisition plans (see subpart
the contracting officer or other official 7.1), and an information technology ac-
designated by the head of the agency quisition strategy (see part 39); and
determines that the advisory and as- (ii) May not be used to circumvent
sistance services are incidental and not conditions and limitations imposed on
a significant component of the con- the use of funds (e.g., 31 U.S.C.
tract. 1501(a)(1)).
[65 FR 24318, Apr. 25, 2000] (8) No protest under subpart 33.1 is
authorized in connection with the
16.505 Ordering. issuance or proposed issuance of an
(a) General. (1) The contracting offi- order under a task-order contract or
cer does not synopsize orders under in- delivery-order contract, except for a
definite-delivery contracts. protest on the grounds that the order
(2) Individual orders shall clearly de- increases the scope, period, or max-
scribe all services to be performed or imum value of the contract (10 U.S.C.
supplies to be delivered so the full cost 2304c(d) and 41 U.S.C. 253j(d)).
or price for the performance of the (b) Orders under multiple award con-
work can be established when the order tracts(1) Fair opportunity. (i) The con-
is placed. Orders shall be within the tracting officer must provide each
scope, issued within the period of per- awardee a fair opportunity to be con-
formance, and be within the maximum sidered for each order exceeding $2,500
value of the contract. issued under multiple delivery-order
(3) Performance-based work state- contracts or multiple task-order con-
ments must be used to the maximum tracts, except as provided for in para-
extent practicable, if the contract or graph (b)(2) of this section.
order is for services (see 37.102(a)). (ii) The contracting officer may exer-
(4) When acquiring information tech- cise broad discretion in developing ap-
nology and related services, consider propriate order placement procedures.
the use of modular contracting to re- The contracting officer should keep
duce program risk (see 39.103(a)). submission requirements to a min-
(5) Orders may be placed by using any imum. Contracting officers may use
medium specified in the contract.
streamlined procedures, including oral
(6) Orders placed under indefinite-de-
presentations. In addition, the con-
livery contracts must contain the fol-
tracting officer need not contact each
lowing information:
of the multiple awardees under the
(i) Date of order.
contract before selecting an order
(ii) Contract number and order num-
ber. awardee if the contracting officer has
(iii) For supplies and services, con- information available to ensure that
tract item number and description, each awardee is provided a fair oppor-
quantity, and unit price or estimated tunity to be considered for each order.
cost or fee. The competition requirements in part 6
(iv) Delivery or performance sched- and the policies in subpart 15.3 do not
ule. apply to the ordering process. However,
(v) Place of delivery or performance the contracting officer must
(including consignee). (A) Develop placement procedures
(vi) Any packaging, packing, and that will provide each awardee a fair
shipping instructions. opportunity to be considered for each
(vii) Accounting and appropriation order and that reflect the requirement
data. and other aspects of the contracting
(viii) Method of payment and pay- environment;
ment office, if not specified in the con- (B) Not use any method (such as allo-
tract (see 32.1110(e)). cation or designation of any preferred
(7) Orders placed under a task-order awardee) that would not result in fair
contract or delivery-order contract consideration being given to all award-
awarded by another agency (i.e., a Gov- ees prior to placing each order;
ernmentwide acquisition contract, or (C) Tailor the procedures to each ac-
multi-agency contract) quisition;
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16.505 48 CFR Ch. 1 (10103 Edition)
(D) Include the procedures in the so- because the supplies or services ordered
licitation and the contract; and are unique or highly specialized.
(E) Consider price or cost under each (iii) The order must be issued on a
order as one of the factors in the selec- sole-source basis in the interest of
tion decision. economy and efficiency because it is a
(iii) The contracting officer should logical follow-on to an order already
consider the following when developing issued under the contract, provided
the procedures: that all awardees were given a fair op-
(A)(1) Past performance on earlier or- portunity to be considered for the
ders under the contract, including original order.
quality, timeliness and cost control. (iv) It is necessary to place an order
(2) Potential impact on other orders to satisfy a minimum guarantee.
placed with the contractor. (3) Pricing orders. If the contract did
(3) Minimum order requirements. not establish the price for the supply
or service, the contracting officer must
(4) The amount of time contractors
establish prices for each order using
need to make informed business deci-
the policies and methods in subpart
sions on whether to respond to poten-
15.4.
tial orders.
(4) Decision documentation for orders.
(5) Whether contractors could be en-
The contracting officer shall document
couraged to respond to potential orders
in the contract file the rationale for
by outreach efforts to promote ex-
placement and price of each order, in-
changes of information, such as
cluding the basis for award and the ra-
(i) Seeking comments from two or tionale for any tradeoffs among cost or
more contractors on draft statements price and non-cost considerations in
of work; making the award decision. This docu-
(ii) Using a multiphased approach mentation need not quantify the trade-
when effort required to respond to a po- offs that led to the decision. The con-
tential order may be resource intensive tract file shall also identify the basis
(e.g., requirements are complex or need for using an exception to the fair op-
continued development), where all con- portunity process. If the agency uses
tractors are initially considered on the logical follow-on exception, the ra-
price considerations (e.g., rough esti- tionale shall describe why the relation-
mates), and other considerations as ap- ship between the initial order and the
propriate (e.g., proposed conceptual ap- follow-on is logical (e.g., in terms of
proach, past performance). The con- scope, period of performance, or value).
tractors most likely to submit the (5) Task-order and delivery-order om-
highest value solutions are then se- budsman. The head of the agency shall
lected for one-on-one sessions with the designate a task-order and delivery-
Government to increase their under- order ombudsman. The ombudsman
standing of the requirements, provide must review complaints from contrac-
suggestions for refining requirements, tors and ensure they are afforded a fair
and discuss risk reduction measures. opportunity to be considered, con-
(B) Formal evaluation plans or scor- sistent with the procedures in the con-
ing of quotes or offers are not required. tract. The ombudsman must be a sen-
(2) Exceptions to the fair opportunity ior agency official who is independent
process. The contracting officer shall of the contracting officer and may be
give every awardee a fair opportunity the agencys competition advocate.
to be considered for a delivery-order or (c) Limitation on ordering period for
task-order exceeding $2,500 unless one task-order contracts for advisory and as-
of the following statutory exceptions sistance services. (1) Except as provided
applies: for in paragraphs (c)(2) and (c)(3), the
(i) The agency need for the supplies ordering period of a task-order con-
or services is so urgent that providing tract for advisory and assistance serv-
a fair opportunity would result in un- ices, including all options or modifica-
acceptable delays. tions, normally may not exceed 5
(ii) Only one awardee is capable of years.
providing the supplies or services re- (2) The 5-year limitation does not
quired at the level of quality required apply when
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Federal Acquisition Regulation 16.601
(i) A longer ordering period is specifi- sale in the same Schedule, and similar
cally authorized by a statute; or products may be acquired on a brand-
(ii) The contract is for an acquisition name basis, use the clause with its Al-
of supplies or services that includes the ternate II (but see paragraph (d)(5) of
acquisition of advisory and assistance this section).
services and the contracting officer, or (4) If the contract involves a partial
other official designated by the head of small business set-aside, use the clause
the agency, determines that the advi- with its Alternate III (but see subpara-
sory and assistance services are inci- graph (5) below).
dental and not a significant component (5) If the contract
of the contract. (i) Includes subsistence for Govern-
(3) The contracting officer may ex- ment use and resale in the same sched-
tend the contract on a sole-source basis ule and similar products may be ac-
only once for a period not to exceed 6 quired on a brand-name basis; and
months if the contracting officer, or (ii) Involves a partial small business
other official designated by the head of set-aside, use the clause with its Alter-
the agency, determines that nate IV.
(i) The award of a follow-on contract (e) Insert the clause at 52.21622, In-
is delayed by circumstances that were definite Quantity, in solicitations and
not reasonably foreseeable at the time contracts when an indefinite-quantity
the initial contract was entered into; contract is contemplated.
and (f) Insert the provision at 52.21627,
(ii) The extension is necessary to en- Single or Multiple Awards, in solicita-
sure continuity of services, pending the tions for indefinite-quantity contracts
award of the follow-on contract. that may result in multiple contract
awards. Modify the provision to specify
[65 FR 24319, Apr. 25, 2000, as amended at 67 the estimated number of awards. Do
FR 56119, Aug. 30, 2002]
not use this provision for advisory and
16.506 Solicitation provisions and con- assistance services contracts that ex-
tract clauses. ceed 3 years and $10 million (including
all options).
(a) Insert the clause at 52.21618, Or-
(g) Insert the provision at 52.21628,
dering, in solicitations and contracts
Multiple Awards for Advisory and As-
when a definite-quantity contract, a
sistance Services, in solicitations for
requirements contract, or an indefi- task-order contracts for advisory and
nite-quantity contract is con- assistance services that exceed 3 years
templated. and $10 million (including all options),
(b) Insert a clause substantially the
unless a determination has been made
same as the clause at 52.21619, Order
under 16.504(c)(2)(i)(A). Modify the pro-
Limitations, in solicitations and con-
vision to specify the estimated number
tracts when a definite-quantity con-
of awards.
tract, a requirements contract, or an
indefinite-quantity contract is con- [48 FR 42219, Sept. 19, 1983; 60 FR 48260, Sept.
templated. 18, 1995. Redesignated and amended at 60 FR
(c) Insert the clause at 52.21620, Defi- 49726, 49727, Sept. 26, 1995; 65 FR 24320, Apr.
25, 2000]
nite Quantity, in solicitations and con-
tracts when a definite-quantity con-
tract is contemplated. Subpart 16.6Time-and-Materials,
(d)(1) Insert the clause at 52.21621, Labor-Hour, and Letter Contracts
Requirements, in solicitations and con-
tracts when a requirements contract is 16.601 Time-and-materials contracts.
contemplated. (a) Description. A time-and-materials
(2) If the contract is for nonpersonal contract provides for acquiring sup-
services and related supplies and covers plies or services on the basis of (1) di-
estimated requirements that exceed a rect labor hours at specified fixed hour-
specific Government activitys internal ly rates that include wages, overhead,
capability to produce or perform, use general and administrative expenses,
the clause with its Alternate I. and profit and (2) materials at cost, in-
(3) If the contract includes subsist- cluding, if appropriate, material han-
ence for both Government use and re- dling costs as part of material costs.
313
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16.602 48 CFR Ch. 1 (10103 Edition)
314
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Federal Acquisition Regulation 16.701
315
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16.702 48 CFR Ch. 1 (10103 Edition)
316
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Federal Acquisition Regulation 16.703
(b) Application. A basic ordering ment itself and not by individual or-
agreement may be used to expedite ders issued under it. Modifying a basic
contracting for uncertain requirements ordering agreement shall not retro-
for supplies or services when specific actively affect orders previously issued
items, quantities, and prices are not under it.
known at the time the agreement is ex- (d) Orders. A contracting officer rep-
ecuted, but a substantial number of re- resenting any Government activity
quirements for the type of supplies or listed in a basic ordering agreement
services covered by the agreement are may issue orders for required supplies
anticipated to be purchased from the or services covered by that agreement.
contractor. Under proper cir- (1) Before issuing an order under a
cumstances, the use of these proce- basic ordering agreement, the con-
dures can result in economies in order- tracting officer shall
ing parts for equipment support by re- (i) Obtain competition in accordance
ducing administrative lead-time, in- with part 6;
ventory investment, and inventory ob- (ii) If the order is being placed after
solescence due to design changes. competition, ensure that use of the
(c) Limitations. A basic ordering basic ordering agreement is not preju-
agreement shall not state or imply any dicial to other offerors; and
agreement by the Government to place (iii) Sign or obtain any applicable
future contracts or orders with the justifications and approvals, and any
contractor or be used in any manner to determination and findings, in accord-
restrict competition. ance with 1.6021(b), and comply with
(1) Each basic ordering agreement other requirements, as if the order
shall were a contract awarded independently
(i) Describe the method for deter- of a basic ordering agreement.
mining prices to be paid to the con- (2) Contracting officers shall
tractor for the supplies or services; (i) Issue orders under basic ordering
(ii) Include delivery terms and condi- agreements on Optional Form (OF) 347,
tions or specify how they will be deter- Order for Supplies or Services, or on
mined; any other appropriate contractual in-
(iii) List one or more Government ac- strument;
tivities authorized to issue orders (ii) Incorporate by reference the pro-
under the agreement; visions of the basic ordering agree-
(iv) Specify the point at which each ment;
order becomes a binding contract (e.g., (iii) If applicable, cite the authority
issuance of the order, acceptance of the under 6.302 in each order; and
order in a specified manner, or failure (iv) Comply with 5.203 when synopsis
to reject the order within a specified is required by 5.201.
number of days); (3) The contracting officer shall nei-
(v) Provide that failure to reach ther make any final commitment nor
agreement on price for any order issued authorize the contractor to begin work
before its price is established (see para- on an order under a basic ordering
graph (d)(3) below) is a dispute under agreement until prices have been es-
the Disputes clause included in the tablished, unless the order establishes
basic ordering agreement; and a ceiling price limiting the Govern-
(vi) If fast payment procedures will ments obligation and either
apply to orders, include the special (i) The basic ordering agreement pro-
data required by 13.403. vides adequate procedures for timely
(2) Each basic ordering agreement pricing of the order early in its per-
shall be reviewed annually before the formance period; or
anniversary of its effective date and re- (ii) The need for the supplies or serv-
vised as necessary to conform to the ices is compelling and unusually ur-
requirements of this regulation. Basic gent (i.e., when the Government would
ordering agreements may need to be re- be seriously injured, financially or oth-
vised before the annual review due to erwise, if the requirement is not met
mandatory statutory requirements. A sooner than would be possible if prices
basic ordering agreement shall be were established before the work
changed only by modifying the agree- began). The contracting officer shall
317
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Pt. 17 48 CFR Ch. 1 (10103 Edition)
318
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Federal Acquisition Regulation 17.1051
319
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17.1052 48 CFR Ch. 1 (10103 Edition)
(b) For DoD, NASA, and the Coast compete for lesser quantities, particu-
Guard, the head of the agency may larly in cases involving high startup
enter into a multiyear contract for costs.
supplies if (h) Providing incentives to contrac-
(1) The use of such a contract will re- tors to improve productivity through
sult in substantial savings of the total investment in capital facilities, equip-
estimated costs of carrying out the ment, and advanced technology.
program through annual contracts;
(2) The minimum need to be pur- 17.106 Procedures.
chased is expected to remain substan-
tially unchanged during the con- 17.1061 General.
templated contract period in terms of (a) Method of contracting. The nature
production rate, procurement rate, and of the requirement should govern the
total quantities; selection of the method of contracting,
(3) There is a stable design for the since the multiyear procedure is com-
supplies to be acquired, and the tech- patible with sealed bidding, including
nical risks associated with such sup- two-step sealed bidding, and negotia-
plies are not excessive; tion.
(4) There is a reasonable expectation (b) Type of contract. Given the longer
that, throughout the contemplated performance period associated with
contract period, the head of the agency multiyear acquisition, consideration in
will request funding for the contract at pricing fixed-priced contracts should be
a level to avoid contract cancellation; given to the use of economic price ad-
and justment terms and profit objectives
(5) The estimates of both the cost of commensurate with contractor risk
the contract and the cost avoidance and financing arrangements.
through the use of a multiyear con- (c) Cancellation procedures. (1) All pro-
tract are realistic. gram years except the first are subject
(c) The multiyear contracting meth- to cancellation. For each program year
od may be used for the acquisition of subject to cancellation, the con-
supplies or services. tracting officer shall establish a can-
(d) If funds are not appropriated to cellation ceiling. Ceilings must exclude
support the succeeding years require- amounts for requirements included in
ments, the agency must cancel the con- prior program years. The contracting
tract. officer shall reduce the cancellation
ceiling for each program year in direct
17.1052 Objectives. proportion to the remaining require-
Use of multiyear contracting is en- ments subject to cancellation. For ex-
couraged to take advantage of one or ample, consider that the total non-
more of the following: recurring costs (see 15.408, Table 152,
(a) Lower costs. Formats for Submission of Line Items
(b) Enhancement of standardization. Summaries C(8)) are estimated at 10
(c) Reduction of administrative bur- percent of the total multiyear price,
den in the placement and administra- and the percentages for each of the pro-
tion of contracts. gram year requirements for 5 years are
(d) Substantial continuity of produc- (i) 30 in the first year, (ii) 30 in the sec-
tion or performance, thus avoiding an- ond, (iii) 20 in the third, (iv) 10 in the
nual startup costs, preproduction test- fourth, and (v) 10 in the fifth. The can-
ing costs, make-ready expenses, and cellation percentages, after deducting 3
phaseout costs. percent for the first program year,
(e) Stabilization of contractor work would be 7, 4, 2, and 1 percent of the
forces. total price applicable to the second,
(f) Avoidance of the need for estab- third, fourth, and fifth program years,
lishing quality control techniques and respectively.
procedures for a new contractor each (2) In determining cancellation ceil-
year. ings, the contracting officer must esti-
(g) Broadening the competitive base mate reasonable preproduction or
with opportunity for participation by startup, labor learning, and other non-
firms not otherwise willing or able to recurring costs to be incurred by an
320
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Federal Acquisition Regulation 17.1062
321
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17.1063 48 CFR Ch. 1 (10103 Edition)
if they can be reasonably established also provides a basis for the computa-
and are stated in the solicitation. tion of savings and other benefits.
(g) The cancellation ceiling shall not However, the preparation and evalua-
be an evaluation factor. tion of dual offers may increase admin-
istrative costs and workload for both
17.1063 Special procedures applicable offerors and the Government, espe-
to DoD, NASA, and the Coast cially for large or complex acquisi-
Guard.
tions. The head of a contracting activ-
(a) Participation by subcontractors, ity may authorize the use of a solicita-
suppliers, and vendors. In order to tion requesting only multiyear prices,
broaden the defense industrial base, to provided it is found that such a solicita-
the maximum extent practicable tion is in the Governments interest,
(1) Multiyear contracting shall be and that dual proposals are not nec-
used in such a manner as to seek, re- essary to meet the objectives in 17.105
tain, and promote the use under such 2.
contracts of companies that are sub- (g) Level unit prices. Multiyear con-
contractors, suppliers, and vendors; tract procedures provide for the amor-
and tization of certain costs over the entire
(2) Upon accrual of any payment or contract quantity resulting in iden-
other benefit under such a multiyear tical (level) unit prices (except when
contract to any subcontractor, sup- the economic price adjustment terms
plier, or vendor company participating apply) for all items or services under
in such contract, such payment or ben- the multiyear contract. If level unit
efit shall be delivered to such company pricing is not in the Governments in-
in the most expeditious manner prac- terest, the head of a contracting activ-
ticable. ity may approve the use of variable
(b) Protection of existing authority. To unit prices, provided that for competi-
the extent practicable, multiyear con- tive proposals there is a valid method
tracting shall not be carried out in a of evaluation.
manner to preclude or curtail the ex-
isting ability of the Department or 17.107 Options.
agency to provide for termination of a
prime contract, the performance of Benefits may accrue by including op-
which is deficient with respect to cost, tions in a multiyear contract. In that
quality, or schedule. event, contracting officers must follow
(c) Cancellation or termination for in- the requirements of subpart 17.2. Op-
sufficient funding. In the event funds tions should not include charges for
are not made available for the continu- plant and equipment already amor-
ation of a multiyear contract awarded tized, or other nonrecurring charges
using the procedures in this section, which were included in the basic con-
the contract shall be canceled or ter- tract.
minated.
(d) Contracts awarded under the 17.108 Congressional notification.
multiyear procedure shall be firm- (a) Except for DoD, NASA, and the
fixed-price, fixed-price with economic Coast Guard, a multiyear contract
price adjustment, or fixed-price incen- which includes a cancellation ceiling in
tive. excess of $10 million may not be award-
(e) Recurring costs in cancellation ceil- ed until the head of the agency gives
ing. The inclusion of recurring costs in written notification of the proposed
cancellation ceilings is an exception to contract and of the proposed cancella-
normal contract financing arrange- tion ceiling for that contract to the
ments and requires approval by the committees on appropriations of the
agency head. House of Representatives and Senate
(f) Annual and multiyear proposals. Ob- and the appropriate oversight commit-
taining both annual and multiyear of- tees of the House and Senate for the
fers provides reduced lead time for agency in question. Information on
making an annual award in the event such committees may not be readily
that the multiyear award is not in the available to contracting officers. Ac-
Governments interest. Obtaining both cordingly, agencies should provide such
322
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Federal Acquisition Regulation 17.202
information through its internal regu- tation provisions and contract clauses.
lations. The contract may not be Except as provided in agency regula-
awarded until the thirty-first day after tions, this subpart does not apply to
the date of notification. contracts for
(b) For DoD, NASA, and the Coast (a) Services involving the construc-
guard, a multiyear contract which in- tion, alteration, or repair (including
cludes a cancellation ceiling in excess dredging, excavating, and painting) of
of $100 million may not be awarded buildings, bridges, roads, or other
until the head of the agency gives writ- kinds of real property;
ten notification of the proposed con- (b) Architect-engineer services; and
tract and of the proposed cancellation (c) Research and development serv-
ceiling for that contract to the com- ices.
mittees on armed services and on ap- However, it does not preclude the use
propriations of the House of Represent- of options in those contracts.
ative and Senate. The contract may
[61 FR 41469, Aug. 8, 1996]
not be awarded until the thirty-first
day after the date of notification. 17.201 [Reserved]
17.109 Contract clauses. 17.202 Use of options.
(a) The contracting officer shall in- (a) Subject to the limitations of
sert the clause at 52.2172, Cancellation paragraphs (b) and (c) of this section,
Under Multiyear Contracts, in solicita- for both sealed bidding and contracting
tions and contracts when a multiyear by negotiation, the contracting officer
contract is contemplated. may include options in contracts when
(b) Economic price adjustment clauses. it is in the Governments interest.
Economic price adjustment clauses are When using sealed bidding, the con-
adaptable to multiyear contracting tracting officer shall make a written
needs. When the period of production is determination that there is a reason-
likely to warrant a labor and material able likelihood that the options will be
costs contingency in the contract exercised before including the provi-
price, the contracting officer should sion at 52.2175, Evaluation of Options,
normally use an economic price adjust- in the solicitation. (See 17.207(f) with
ment clause (see 16.203). When con- regard to the exercise of options.)
tracting for services, the contracting (b) Inclusion of an option is normally
officer not in the Governments interest when,
(1) Shall add the clause at 52.22243, in the judgment of the contracting offi-
Fair Labor Standards Act and Service cer
Contract Act-Price Adjustment (Mul- (1) The foreseeable requirements in-
tiple Year and Option Contracts), when volve
the contract includes the clause at (i) Minimum economic quantities
52.22241, Service Contract Act of 1965, (i.e., quantities large enough to permit
as amended; the recovery of startup costs and pro-
(2) May modify the clause at 52.22243 duction of the required supplies at a
in overseas contracts when laws, regu- reasonable price); and
lations, or international agreements (ii) Delivery requirements far enough
require contractors to pay higher wage into the future to permit competitive
rates; or acquisition, production, and delivery.
(3) May use an economic price adjust- (2) An indefinite quantity or require-
ment clause authorized by 16.203, when ments contract would be more appro-
potential fluctuations require coverage priate than a contract with options.
and are not included in cost contin- However, this does not preclude the use
gencies provided for by the clause at of an indefinite quantity contract or
52.22243. requirements contract with options.
(c) The contracting officer shall not
Subpart 17.2Options employ options if
(1) The contractor will incur undue
17.200 Scope of subpart. risks; e.g., the price or availability of
This subpart prescribes policies and necessary materials or labor is not rea-
procedures for the use of option solici- sonably foreseeable;
323
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17.203 48 CFR Ch. 1 (10103 Edition)
(2) Market prices for the supplies or fered at prices no higher than those for
services involved are likely to change the initial requirement; e.g., when (1)
substantially; or the option cannot be evaluated under
(3) The option represents known firm 17.206, or (2) future competition for the
requirements for which funds are avail- option is impracticable.
able unless (i) the basic quantity is a (g) Solicitations that require the of-
learning or testing quantity and (ii) fering of an option at prices no higher
competition for the option is impracti- than those for the initial requirement
cable once the initial contract is shall
awarded. (1) Specify that the Government will
(d) In recognition of (1) the Govern- accept an offer containing an option
ments need in certain service con- price higher than the base price only if
tracts for continuity of operations and the acceptance does not prejudice any
(2) the potential cost of disrupted sup- other offeror; and
port, options may be included in serv- (2) Limit option quantities for addi-
ice contracts if there is an anticipated tional supplies to not more than 50 per-
need for a similar service beyond the cent of the initial quantity of the same
first contract period. contract line item. In unusual cir-
[48 FR 42231, Sept. 19, 1983, as amended at 53 cumstances, an authorized person at a
FR 17858, May 18, 1988; 56 FR 15150, Apr. 15, level above the contracting officer may
1991; 60 FR 42656, Aug. 16, 1995] approve a greater percentage of quan-
tity.
17.203 Solicitations. (h) Include the value of options in de-
(a) Solicitations shall include appro- termining if the acquisition will exceed
priate option provisions and clauses the Trade Agreements Act and North
when resulting contracts will provide American Free Trade Agreement
for the exercise of options (see 17.208). thresholds.
(b) Solicitations containing option [48 FR 42231, Sept. 19, 1983, as amended at 53
provisions shall state the basis of eval- FR 27464, July 20, 1988; 58 FR 31141, May 28,
uation, either exclusive or inclusive of 1993; 59 FR 545, Jan. 5, 1994; 64 FR 72419, Dec.
the option and, when appropriate, shall 27, 1999]
inform offerors that it is anticipated
that the Government may exercise the 17.204 Contracts.
option at time of award. (a) The contract shall specify limits
(c) Solicitations normally should on the purchase of additional supplies
allow option quantities to be offered or services, or the overall duration of
without limitation as to price, and the term of the contract, including any
there shall be no limitation as to price extension.
if the option quantity is to be consid- (b) The contract shall state the pe-
ered in the evaluation for award (see riod within which the option may be
17.206). exercised.
(d) Solicitations that allow the offer (c) The period shall be set so as to
of options at unit prices which differ provide the contractor adequate lead
from the unit prices for the basic re- time to ensure continuous production.
quirement shall state that offerors (d) The period may extend beyond the
may offer varying prices for options, contract completion date for service
depending on the quantities actually contracts. This is necessary for situa-
ordered and the dates when ordered. tions when exercise of the option would
(e) If it is anticipated that the Gov- result in the obligation of funds that
ernment may exercise an option at the are not available in the fiscal year in
time of award and if the condition which the contract would otherwise be
specified in paragraph (d) above ap- completed.
plies, solicitations shall specify the (e) Unless otherwise approved in ac-
price at which the Government will cordance with agency procedures, the
evaluate the option (highest option total of the basic and option periods
price offered or option price for speci- shall not exceed 5 years in the case of
fied requirements). services, and the total of the basic and
(f) Solicitations may, in unusual cir- option quantities shall not exceed the
cumstances, require that options be of- requirement for 5 years in the case of
324
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325
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17.208 48 CFR Ch. 1 (10103 Edition)
factors as market stability and com- cludes an option clause and does not
parison of the time since award with include one of the provisions prescribed
the usual duration of contracts for in paragraph (b) or (c) below.
such supplies or services. (b) Insert a provision substantially
(e) The determination of other fac- the same as the provision at 52.2174,
tors under (c)(3) of this section should Evaluation of Options Exercised at
take into account the Governments Time of Contract Award, in solicita-
need for continuity of operations and tions when the solicitation includes an
potential costs of disrupting oper- option clause, the contracting officer
ations. has determined that there is a reason-
(f) Before exercising an option, the able likelihood that the option will be
contracting officer shall make a writ- exercised, and the option may be exer-
ten determination for the contract file cised at the time of contract award.
that exercise is in accordance with the (c) Insert a provision substantially
terms of the option, the requirements the same as the provision at 52.2175,
of this section, and part 6. To satisfy Evaluation of Options, in solicitations
requirements of part 6 regarding full when
and open competition, the option must
(1) The solicitation contains an op-
have been evaluated as part of the ini-
tion clause;
tial competition and be exercisable at
an amount specified in or reasonably (2) An option is not to be exercised at
determinable from the terms of the the time of contract award;
basic contract, e.g. (3) A firm-fixed-price contract, a
(1) A specific dollar amount; fixed-price contract with economic
(2) An amount to be determined by price adjustment, or other type of con-
applying provisions (or a formula) pro- tract approved under agency proce-
vided in the basic contract, but not in- dures is contemplated; and
cluding renegotiation of the price for (4) The contracting officer has deter-
work in a fixed-price type contract; mined that there is a reasonable likeli-
(3) In the case of a cost-type con- hood that the option will be exercised.
tract, if For sealed bids, the determination
(i) The option contains a fixed or shall be in writing.
maximum fee; or (d) Insert a clause substantially the
(ii) The fixed or maximum fee same as the clause at 52.2176, Option
amount is determinable by applying a for Increased Quantity, in solicitations
formula contained in the basic con- and contracts, other than those for
tract (but see 16.102(c)); services, when the inclusion of an op-
(4) A specific price that is subject to tion is appropriate (see 17.200 and
an economic price adjustment provi- 17.202) and the option quantity is ex-
sion; or pressed as a percentage of the basic
(5) A specific price that is subject to contract quantity or as an additional
change as the result of changes to pre- quantity of a specific line item.
vailing labor rates provided by the Sec- (e) Insert a clause substantially the
retary of Labor. same as the clause at 52.2177, Option
(g) The contract modification or for Increased QuantitySeparately
other written document which notifies Priced Line Item, in solicitations and
the contractor of the exercise of the contracts, other than those for serv-
option shall cite the option clause as ices, when the inclusion of an option is
authority. appropriate (see 17.200 and 17.202) and
[48 FR 42231, Sept. 19, 1983, as amended at 50 the option quantity is identified as a
FR 1742, Jan. 11, 1985; 50 FR 52429, 52434, Dec. separately priced line item having the
23, 1985; 53 FR 17858, May 18, 1988] same nomenclature as a corresponding
basic contract line item.
17.208 Solicitation provisions and con- (f) Insert a clause substantially the
tract clauses. same as the clause at 52.2178, Options
(a) Insert a provision substantially to Extend Services, in solicitations and
the same as the provision at 52.2173, contracts for services when the inclu-
Evaluation Exclusive of Options, in so- sion of an option is appropriate. (See
licitations when the solicitation in- 17.200, 17.202, and 37.111.)
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Federal Acquisition Regulation 17.403
(g) Insert a clause substantially the (g) Facilitate the transition from de-
same as the clause at 52.2179, Option velopment to production and to subse-
to Extend the Term of the Contract, in quent competitive acquisition of end
solicitations and contracts when the items or major components.
inclusion of an option is appropriate
(see 17.200 and 17.202) and it is nec- 17.402 Limitations.
essary to include in the contract any (a) Leader company contracting is to
or all of the following: be used only when
(1) A requirement that the Govern- (1) The leader company has the nec-
ment must give the contractor a pre- essary production know-how and is
liminary written notice of its intent to able to furnish required assistance to
extend the contract. the follower(s);
(2) A statement that an extension of (2) No other source can meet the Gov-
the contract includes an extension of
ernments requirements without the
the option.
assistance of a leader company;
(3) A specified limitation on the total
(3) The assistance required of the
duration of the contract.
leader company is limited to that
[48 FR 42231, Sept. 19, 1983, as amended at 53 which is essential to enable the fol-
FR 17858, May 18, 1988; 54 FR 5055, Jan. 31, lower(s) to produce the items; and
1989; 54 FR 29281, July 11, 1989; 55 FR 38516, (4) Its use is authorized in accordance
Sept. 18, 1990; 60 FR 42656, Aug. 16, 1995; 64 FR
51843, Sept. 24, 1999]
with agency procedures.
(b) When leader company contracting
is used, the Government shall reserve
Subpart 17.3 [Reserved] the right to approve subcontracts be-
tween the leader company and the fol-
Subpart 17.4Leader Company lower(s).
Contracting
17.403 Procedures.
17.401 General.
(a) The contracting officer may
Leader company contracting is an ex- award a prime contract to a
traordinary acquisition technique that (1) Leader company, obligating it to
is limited to special circumstances and subcontract a designated portion of the
utilized only when its use is in accord- required end items to a specified fol-
ance with agency procedures. A devel- lower company and to assist it to
oper or sole producer of a product or produce the required end items;
system is designated under this acqui- (2) Leader company, for the required
sition technique to be the leader com- assistance to a follower company, and
pany, and to furnish assistance and a prime contract to the follower for
know-how under an approved contract production of the items; or
to one or more designated follower (3) Follower company, obligating it
companies, so they can become a to subcontract with a designated leader
source of supply. The objectives of this company for the required assistance.
technique are one or more of the fol-
(b) The contracting officer shall en-
lowing:
sure that any contract awarded under
(a) Reduce delivery time.
this arrangement contains a firm
(b) Achieve geographic dispersion of agreement regarding disclosure, if any,
suppliers. of contractor trade secrets, technical
(c) Maximize the use of scarce tool- designs or concepts, and specific data,
ing or special equipment. or software, of a proprietary nature.
(d) Achieve economies in production.
(e) Ensure uniformity and reliability
in equipment, compatibility or stand- Subpart 17.5Interagency Acqui-
ardization of components, and inter- sitions Under the Economy
changeability of parts. Act
(f) Eliminate problems in the use of
proprietary data that cannot be re- SOURCE: 60 FR 49721, Sept. 26, 1995, unless
solved by more satisfactory solutions. otherwise noted.
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17.500 48 CFR Ch. 1 (10103 Edition)
328
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Federal Acquisition Regulation 17.600
both agencies. The order should in- (e) Nonsponsoring Federal agencies
clude may use a Federally Funded Research
(1) A description of the supplies or and Development Center (FFRDC) only
services required; if the terms of the FFRDCs sponsoring
(2) Delivery requirements; agreement permit work from other
(3) A funds citation; than a sponsoring agency. Work placed
(4) A payment provision (see 17.505); with the FFRDC is subject to the ac-
and ceptance by the sponsor and must fall
(5) Acquisition authority as may be within the purpose, mission, general
appropriate (see 17.504(d)). scope of effort, or special competency
(c) The requesting and servicing of the FFRDC. (See 35.017; see also 6.302
agencies should agree to procedures for for procedures to follow where using
the resolution of disagreements that other than full and open competition.)
may arise under interagency acquisi- The nonsponsoring agency shall pro-
tions, including, in appropriate cir- vide to the sponsoring agency nec-
cumstances, the use of a third-party essary documentation that the re-
forum. If a third party is proposed, con- quested work would not place the
sent of the third party should be ob- FFRDC in direct competition with do-
tained in writing. mestic private industry.
(d) When an interagency acquisition
requires the servicing agency to award 17.505 Payment.
a contract, the following procedures (a) The servicing agency may ask the
also apply: requesting agency, in writing, for ad-
(1) If a justification and approval or a vance payment for all or part of the es-
D&F (other than the requesting agen- timated cost of furnishing the supplies
cys D&F required in 17.503) is required or services. Adjustment on the basis of
by law or regulation, the servicing actual costs shall be made as agreed to
agency shall execute and issue the jus- by the agencies.
tification and approval or D&F. The re- (b) If approved by the servicing agen-
questing agency shall furnish the serv- cy, payment for actual costs may be
icing agency any information needed to made by the requesting agency after
make the justification and approval or the supplies or services have been fur-
D&F. nished.
(2) The requesting agency shall also (c) Bills rendered or requests for ad-
be responsible for furnishing other as- vance payment shall not be subject to
sistance that may be necessary, such audit or certification in advance of
as providing information or special payment.
contract terms needed to comply with (d) If the Economy Act order requires
any condition or limitation applicable use of a contract by the servicing agen-
to the funds of the requesting agency. cy, then in no event shall the servicing
(3) The servicing agency is respon- agency require, or the requiring agency
sible for compliance with all other pay, any fee or charge in excess of the
legal or regulatory requirements appli- actual cost (or estimated cost if the ac-
cable to the contract, including tual cost is not known) of entering into
(i) Having adequate statutory au- and administering the contract or
thority for the contractual action, and other agreement under which the order
(ii) Complying fully with the com- is filled.
petition requirements of part 6 (see
6.002). However, if the servicing agency
is not subject to the Federal Acquisi-
Subpart 17.6Management and
tion Regulation, the requesting agency Operating Contracts
shall verify that contracts utilized to
17.600 Scope of subpart.
meet its requirements contain provi-
sions protecting the Government from This subpart prescribes policies and
inappropriate charges (for example, procedures for management and oper-
provisions mandated for FAR agencies ating contracts for the Department of
by part 31), and that adequate contract Energy and any other agency having
administration will be provided. requisite statutory authority.
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17.601 48 CFR Ch. 1 (10103 Edition)
330
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Federal Acquisition Regulation 17.605
for special protection covering the or- at appropriate intervals and at least
derly transition of personnel and work once every 5 years. The review should
in the event of a change in contractors. determine whether meaningful im-
provement in performance or cost
17.605 Award, renewal, and extension. might reasonably be achieved. Any ex-
(a) Effective work performance under tension or renewal of an operating and
management and operating contracts management contract must be author-
usually involves high levels of exper- ized at a level within the agency no
tise and continuity of operations and lower than the level at which the origi-
personnel. Because of program require- nal contract was authorized in accord-
ments and the unusual (sometimes ance with 17.602(a).
unique) nature of the work performed (c) Replacement of an incumbent
under management and operating con- contractor is usually based largely
tracts, the Government is often limited upon expectation of meaningful im-
in its ability to effect competition or provement in performance or cost.
to replace a contractor. Therefore con- Therefore, when reviewing contractor
tracting officers should take extraor- performance, contracting officers
dinary steps before award to assure should consider
themselves that the prospective con- (1) The incumbent contractors over-
tractors technical and managerial ca-
all performance, including, specifi-
pacity are sufficient, that organiza-
cally, technical, administrative, and
tional conflicts of interest are ade-
cost performance;
quately covered, and that the contract
will grant the Government broad and (2) The potential impact of a change
continuing rights to involve itself, if in contractors on program needs, in-
necessary, in technical and managerial cluding safety, national defense, and
decisionmaking concerning perform- mobilization considerations; and
ance. (3) Whether it is likely that qualified
(b) The contracting officer shall re- offerors will compete for the contract.
view each management and operating
contract, following agency procedures, PART 18 [RESERVED]
331
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SUBCHAPTER DSOCIOECONOMIC PROGRAMS
Subpart 19.5Set-Asides for Small Business Subpart 19.8Contracting With the Small
Business Administration (the 8(a) Program)
19.501 General.
19.502 Setting aside acquisitions. 19.800 General.
19.5021 Requirements for setting aside ac- 19.801 [Reserved]
quisitions. 19.802 Selecting concerns for the 8(a) Pro-
19.5022 Total small business set-asides. gram.
19.5023 Partial set-asides. 19.803 Selecting acquisitions for the 8(a)
19.5024 Methods of conducting set-asides. Program.
19.5025 Insufficient causes for not setting 19.804 Evaluation, offering, and acceptance.
aside an acquisition. 19.8041 Agency evaluation.
332
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Federal Acquisition Regulation 19.000
19.8042 Agency offering. Subpart 19.13Historically Underutilized
19.8043 SBA acceptance. Business Zone (HUBZone) Program
19.8044 Repetitive acquisitions.
19.8045 Basic ordering agreements. 19.1301 General.
19.8046 Multiple award and Federal Supply 19.1302 Applicability.
Schedule contracts. 19.1303 Status as a qualified HUBZone small
19.805 Competitive 8(a). business concern.
19.8051 General. 19.1304 Exclusions.
19.8052 Procedures. 19.1305 HUBZone set-aside procedures.
19.806 Pricing the 8(a) contract. 19.1306 HUBZone sole source awards.
19.807 Estimating the fair market price.
19.1307 Price evaluation preference for
19.808 Contract negotiation.
HUBZone small business concerns.
19.8081 Sole source.
19.1308 Contract clauses.
19.8082 Competitive.
19.809 Preaward considerations. AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
19.810 SBA appeals. ter 137; and 42 U.S.C. 2473(c).
19.811 Preparing the contracts.
19.8111 Sole source. SOURCE: 48 FR 42240, Sept. 19, 1983, unless
19.8112 Competitive. otherwise noted.
19.8113 Contract clauses.
19.812 Contract administration. 19.000 Scope of part.
(a) This part implements the acquisi-
Subpart 19.9Very Small Business Pilot tion-related sections of the Small Busi-
Program ness Act (15 U.S.C. 631, et seq.), applica-
19.901 General. ble sections of the Armed Services Pro-
19.902 Designated SBA district. curement Act (10 U.S.C. 2302, et seq.),
19.903 Applicability. the Federal Property and Administra-
19.904 Procedures. tive Services Act (41 U.S.C. 252), sec-
19.905 Solicitation provision and contract tion 7102 of the Federal Acquisition
clause.
Streamlining Act of 1994 (Public Law
Subpart 19.10Small Business 103355), 10 U.S.C. 2323, and Executive
Competitiveness Demonstration Program Order 12138, May 18, 1979. It covers
(1) The determination that a concern
19.1001 General. is eligible for participation in the pro-
19.1002 Definitions. grams identified in this part;
19.1003 Purpose.
(2) The respective roles of executive
19.1004 Participating agencies.
19.1005 Applicability. agencies and the Small Business Ad-
19.1006 Exclusions. ministration (SBA) in implementing
19.1007 Procedures. the programs;
19.1008 Solicitation provisions. (3) Setting acquisitions aside for ex-
clusive competitive participation by
Subpart 19.11Price Evaluation Adjust- small business concerns and HUBZone
ment for Small Disadvantaged Busi- small business concerns, and sole
ness Concerns source awards to HUBZone small busi-
19.1101 General. ness concerns;
19.1102 Applicability. (4) The certificate of competency pro-
19.1103 Procedures. gram;
19.1104 Contract clauses. (5) The subcontracting assistance
program;
Subpart 19.12Small Disadvantaged (6) The 8(a) program, under which
Business Participation Program agencies contract with the SBA for
19.1201 General. goods or services to be furnished under
19.1202 Evaluation factor or subfactor. a subcontract by a small disadvantaged
19.12021 General. business concern;
19.12022 Applicability. (7) The use of women-owned small
19.12023 Considerations in developing an business concerns;
evaluation factor or subfactor.
(8) The use of a price evaluation ad-
19.12024 Procedures.
19.1203 Incentive subcontracting with small justment for small disadvantaged busi-
disadvantaged business concerns. ness concerns, and the use of a price
19.1204 Solicitation provisions and contract evaluation preference for HUBZone
clauses. small business concerns;
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19.001 48 CFR Ch. 1 (10103 Edition)
(9) The Small Disadvantaged Busi- Small business concern means a con-
ness Participation Program; cern, including its affiliates, that is
(10) The Very Small Business Pilot independently owned and operated, not
Program; and dominant in the field of operation in
(11) The use of veteran-owned small which it is bidding on government con-
business concerns and service-disabled tracts, and qualified as a small busi-
veteran-owned small business concerns. ness under the criteria and size stand-
(b) This part, except for subpart 19.6, ards in 13 CFR part 121 (see 19.102).
applies only in the United States or its Such a concern is not dominant in its
outlying areas. Subpart 19.6 applies field of operation when it does not exer-
worldwide. cise a controlling or major influence on
a national basis in a kind of business
[48 FR 42240, Sept. 19, 1983, as amended at 59 activity in which a number of business
FR 64785, Dec. 15, 1994; 59 FR 67036, Dec. 28, concerns are primarily engaged. In de-
1994; 63 FR 35721, June 30, 1998; 63 FR 36122, termining whether dominance exists,
July 1, 1998; 63 FR 70268, Dec. 18, 1998; 64 FR
consideration shall be given to all ap-
10536, Mar. 4, 1999; 65 FR 60544, Oct. 11, 2000;
68 FR 28081, May 22, 2003] propriate factors, including volume of
business, number of employees, finan-
19.001 Definitions. cial resources, competitive status or
position, ownership or control of mate-
As used in this part rials, processes, patents, license agree-
Concern means any business entity ments, facilities, sales territory, and
organized for profit (even if its owner- nature of business activity.
ship is in the hands of a nonprofit enti- Very small business concern means a
ty) with a place of business located in small business concern
the United States or its outlying areas (1) Whose headquarters is located
and that makes a significant contribu- within the geographic area served by a
tion to the U.S. economy through pay- designated SBA district; and
ment of taxes and/or use of American (2) Which, together with its affiliates,
products, material and/or labor, etc. has no more than 15 employees and has
Concern includes but is not limited average annual receipts that do not ex-
to an individual, partnership, corpora- ceed $1 million.
tion, joint venture, association, or co-
operative. For the purpose of making [51 FR 2650, Jan. 17, 1986, as amended at 52
affiliation findings (see 19.101), include FR 38189, Oct. 14, 1987; 54 FR 25062, June 12,
any business entity, whether organized 1989; 55 FR 3881, Feb. 5, 1990; 57 FR 60580, Dec.
21, 1992; 60 FR 48260, Sept. 18, 1995; 61 FR
for profit or not, and any foreign busi-
67410, Dec. 20, 1996; 62 FR 236, Jan. 2, 1997; 62
ness entity, i.e., any entity located out- FR 44820, 44822, Aug. 22, 1997; 63 FR 36122,
side the United States and its outlying July 1, 1998; 63 FR 70268, Dec. 18, 1998; 63 FR
areas. 71723, Dec. 29, 1998; 64 FR 10536, Mar. 4, 1999;
Fair market price means a price based 64 FR 36223, July 2, 1999; 65 FR 46056, July 26,
on reasonable costs under normal com- 2000; 65 FR 60544, Oct. 11, 2000; 66 FR 2129,
petitive conditions and not on lowest Jan. 10, 2001; 68 FR 28081, May 22, 2003]
possible cost (see 19.2026).
Industry means all concerns pri- Subpart 19.1Size Standards
marily engaged in similar lines of ac-
tivity, as listed and described in the 19.101 Explanation of terms.
North American Industry Classifica- As used in this subpart
tion system (NAICS) manual (available Affiliates. Business concerns are af-
via the Internet at http:// filiates of each other if, directly or in-
www.census.gov/epcd/www/naics.html). directly, either one controls or has the
Nonmanufacturer rule means that a power to control the other, or another
contractor under a small business set- concern controls or has the power to
aside or 8(a) contract shall be a small control both. In determining whether
business under the applicable size affiliation exists, consideration is
standard and shall provide either its given to all appropriate factors includ-
own produce or that of another domes- ing common ownership, common man-
tic small business manufacturing or agement, and contractual relation-
processing concern (see 13 CFR 121.406). ships; provided, that restraints imposed
334
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Federal Acquisition Regulation 19.101
by a franchise agreement are not con- (iii) If a concerns voting stock is dis-
sidered in determining whether the tributed other than as described above,
franchisor controls or has the power to its management (officers and directors)
control the franchisee, if the franchisee is deemed to be in control of such con-
has the right to profit from its effort, cern.
commensurate with ownership, and (4) Stock options and convertible deben-
bears the risk of loss or failure. Any tures. Stock options and convertible de-
business entity may be found to be an bentures exercisable at the time or
affiliate, whether or not it is organized within a relatively short time after a
for profit or located in the United size determination and agreements to
States or its outlying areas. merge in the future, are considered as
(1) Nature of control. Every business having a present effect on the power to
concern is considered as having one or control the concern. Therefore, in mak-
more parties who directly or indirectly ing a size determination, such options,
control or have the power to control it. debentures, and agreements are treated
Control may be affirmative or negative as though the rights held thereunder
and it is immaterial whether it is exer- had been exercised.
cised so long as the power to control (5) Voting trusts. If the purpose of a
exists. voting trust, or similar agreement, is
(2) Meaning of party or parties. The to separate voting power from bene-
term party or parties includes, but is ficial ownership of voting stock for the
not limited to, two or more persons purpose of shifting control of or the
with an identity of interest such as power to control a concern in order
members of the same family or persons that such concern or another concern
with common investments in more may qualify as a small business within
than one concern. In determining who the size regulations, such voting trust
controls or has the power to control a shall not be considered valid for this
concern, persons with an identity of in- purpose regardless of whether it is or is
terest may be treated as though they not valid within the appropriate juris-
were one person. diction. However, if a voting trust is
(3) Control through stock ownership. (i) entered into for a legitimate purpose
A party is considered to control or other than that described above, and it
have the power to control a concern, if is valid within the appropriate jurisdic-
the party controls or has the power to tion, it may be considered valid for the
control 50 percent or more of the con- purpose of a size determination, pro-
cerns voting stock. vided such consideration is determined
(ii) A party is considered to control to be in the best interest of the small
or have the power to control a concern, business program.
even though the party owns, controls, (6) Control through common manage-
or has the power to control less than 50 ment. A concern may be found as con-
percent of the concerns voting stock, trolling or having the power to control
if the block of stock the party owns, another concern when one or more of
controls, or has the power to control is the following circumstances are found
large, as compared with any other out- to exist, and it is reasonable to con-
standing block of stock. If two or more clude that under the circumstances,
parties each owns, controls, or has the such concern is directing or influ-
power to control, less than 50 percent encing, or has the power to direct or
of the voting stock of a concern, and influence, the operation of such other
such minority block is equal or sub- concern.
stantially equal in size, and large as (i) Interlocking management. Officers,
compared with any other block out- directors, employees, or principal
standing, there is a presumption that stockholders of one concern serve as a
each such party controls or has the working majority of the board of direc-
power to control such concern; how- tors or officers of another concern.
ever, such presumption may be rebut- (ii) Common facilities. One concern
ted by a showing that such control or shares common office space and/or em-
power to control, in fact, does not ployees and/or other facilities with an-
exist. other concern, particularly where such
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19.101 48 CFR Ch. 1 (10103 Edition)
concerns are in the same or related in- tractor which is to perform primary or
dustry or field of operation, or where vital requirements of a contract may
such concerns were formerly affiliated. have a controlling role such to be con-
(iii) Newly organized concern. Former sidered a joint venturer affiliated on
officers, directors, principal stock- the contract with the prime con-
holders, and/or key employees of one tractor. A joint venture affiliation
concern organize a new concern in the finding is limited to particular con-
same or a related industry or field op- tracts unless the SBA size determina-
eration, and serve as its officers, direc- tion finds general affiliation between
tors, principal stockholders, and/or key the parties. The rules governing 8(a)
employees, and one concern is fur- Program joint ventures are described
nishing or will furnish the other con- in 13 CFR 124.513.
cern with subcontracts, financial or (iii) Where a concern is not consid-
technical assistance, and/or facilities, ered as being an affiliate of a concern
whether for a fee or otherwise. with which it is participating in a joint
(7) Control through contractual rela- venture, it is necessary, nevertheless,
tionships(i) Definition of a joint venture in computing annual receipts, etc., for
for size determination purposes. A joint the purpose of applying size standards,
venture for size determination pur- to include such concerns share of the
poses is an association of persons or joint venture receipts (as distinguished
concerns with interests in any degree from its share of the profits of such
or proportion by way of contract, ex- venture).
press or implied, consorting to engage
(iv) Franchise and license agreements.
in and carry out a single specific busi-
If a concern operates or is to operate
ness venture for joint profit, for which
under a franchise (or a license) agree-
purpose they combine their efforts,
ment, the following policy is applica-
property, money, skill, or knowledge,
ble: In determining whether the
but not on a continuing or permanent
franchisor controls or has the power to
basis for conducting business gen-
control and, therefore, is affiliated
erally. A joint venture is viewed as a
with the franchisee, the restraints im-
business entity in determining power
posed on a franchisee by its franchise
to control its management.
agreement shall not be considered, pro-
(A) For bundled requirements, apply
size standards for the requirement to vided that the franchisee has the right
individual persons or concerns, not to to profit from its effort and the risk of
the combined assets, of the joint ven- loss or failure, commensurate with
ture. ownership. Even though a franchisee
(B) For other than bundled require- may not be controlled by the
ments, apply size standards for the re- franchisor by virtue of the contractual
quirement to individual persons or con- relationship between them, the
cerns, not to the combined assets, of franchisee may be controlled by the
the joint venture, if franchisor or others through common
(1) A revenue-based size standard ap- ownership or common management, in
plies to the requirement and the esti- which case they would be considered as
mated contract value, including op- affiliated.
tions, exceeds one-half the applicable (v) Size determination for teaming ar-
size standard; or rangements. For size determination pur-
(2) An employee-based size standard poses, apply the size standard tests in
applies to the requirement and the es- (7)(1)(A) and (B) of this section when a
timated contract value, including op- teaming arrangement of two or more
tions, exceeds $10 million. business concerns submits an offer, as
(ii) Joint ventureacquisition and appropriate.
property sale assistance. Concerns bid- Annual receipts. (1) Annual receipts of
ding on a particular acquisition or a concern which has been in business
property sale as joint ventures are con- for 3 or more complete fiscal years
sidered as affiliated and controlling or means the annual average gross rev-
having the power to control each other enue of the concern taken for the last
with regard to performance of the con- 3 fiscal years. For the purpose of this
tract. Moreover, an ostensible subcon- definition, gross revenue of the concern
336
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Federal Acquisition Regulation 19.102
337
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19.102 48 CFR Ch. 1 (10103 Edition)
the product or service being acquired business and can qualify as such for a
even though for other purposes it could given acquisition if it meets the size
be classified in more than one. qualifications of a small nonmanufac-
(d) When acquiring a product or serv- turer for the acquisition, and if more
ice that could be classified in two or than 50 percent of the total value of
more industries with different size the kit and its contents is accounted
standards, contracting officers shall for by items manufactured by small
apply the size standard for the industry business.
accounting for the greatest percentage (3) For the purpose of receiving a Cer-
of the contract price. tificate of Competency on an unre-
(e) If a solicitation calls for more stricted acquisition, a small business
than one item and allows offers to be nonmanufacturer may furnish any do-
submitted on any or all of the items, mestically produced or manufactured
an offeror must meet the size standard product.
for each item it offers to furnish. If a (4) In the case of acquisitions set
solicitation calling for more than one aside for small business or awarded
item requires offers on all or none of under section 8(a) of the Small Busi-
the items, an offeror may qualify as a ness Act, when the acquisition is for a
small business by meeting the size specific product (or a product in a class
standard for the item accounting for of products) for which the SBA has de-
the greatest percentage of the total termined that there are no small busi-
contract price. ness manufacturers or processors in
(f) Any concern submitting a bid or the Federal market, then the SBA may
offer in its own name, other than on a grant a class waiver so that a non-
construction or service contract, that manufacturer does not have to furnish
proposes to furnish an end product it the product of a small business. For
did not manufacture (a nonmanufac- the most current listing of classes for
turer), is a small business if it has no which SBA has granted a waiver, con-
more than 500 employees, and tact an SBA Office of Government Con-
(1) Except as provided in paragraphs tracting. A listing is also available on
(f)(4) through (f)(7) of this section, in SBAs Internet Homepage at http://
the case of Government acquisitions www.sba.gov/gc. Contracting officers
set-aside for small businesses, fur- may request that the SBA waive the
nishes in the performance of the con- nonmanufacturer rule for a particular
tract, the product of a small business class of products.
manufacturer or producer. The end (5) For a specific solicitation, a con-
product furnished must be manufac- tracting officer may request a waiver
tured or produced in the United States of that part of the nonmanufacturer
or its outlying areas. The term non- rule which requires that the actual
manufacturer includes a concern that manufacturer or processor be a small
can, but elects not to, manufacture or business concern if the contracting of-
produce the end product for the specific ficer determines that no known domes-
acquisition. For size determination tic small business manufacturers or
purposes, there can be only one manu- processors can reasonably be expected
facturer of the end product being ac- to offer a product meeting the require-
quired. The manufacturer of the end ments of the solicitation.
product being acquired is the concern (6) Requests for waivers shall be sent
that, with its own forces, transforms to the Associate Administrator for
inorganic or organic substances includ- Government Contracting, United
ing raw materials and/or miscellaneous States Small Business Administration,
parts or components into the end prod- Mail Code 6250, 409 Third Street, SW.,
uct. However, see the limitations on Washington, DC 20416.
subcontracting at 52.21914 that apply (7) The SBA provides for an exception
to any small business offeror other to the nonmanufacturer rule if
than a nonmanufacturer for purposes (i) The procurement of a manufac-
of set-asides and 8(a) awards. tured end product processed under the
(2) A concern which purchases items procedures set forth in part 13
and packages them into a kit is consid- (A) Is set aside for small business;
ered to be a nonmanufacturer small and
338
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Federal Acquisition Regulation 19.201
339
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19.201 48 CFR Ch. 1 (10103 Edition)
340
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Federal Acquisition Regulation 19.2021
341
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19.2022 48 CFR Ch. 1 (10103 Edition)
(i) Proposed acquisition cannot be di- wide point of entry (see subparts 5.2
vided into reasonably small lots (not and 5.3).
less than economic production runs) to [48 FR 42240, Sept. 19, 1983, as amended at 63
permit offers on quantities less than FR 70268, Dec. 18, 1998; 65 FR 60544, Oct. 11,
the total requirement; 2000; 66 FR 27413, May 16, 2001; 68 FR 43856,
(ii) Delivery schedules cannot be es- July 24, 2003]
tablished on a realistic basis that will
encourage small business participation 19.2023 Equal low bids.
to the extent consistent with the ac- In the event of equal low bids (see
tual requirements of the Government; 14.4086), awards shall be made first to
(iii) Proposed acquisition cannot be small business concerns which are also
structured so as to make it likely that labor surplus area concerns, and second
small businesses can compete for the to small business concerns which are
prime contract; not also labor surplus area concerns.
(iv) Consolidated construction
project cannot be acquired as separate [60 FR 48261, Sept. 18, 1995]
discrete projects; or
19.2024 Solicitation.
(v) Bundling is necessary and justi-
fied. The contracting officer must encour-
(3) The 30-day notification process age maximum response to solicitations
shall occur concurrently with other by small business, veteran-owned small
processing steps required prior to the business, service-disabled veteran-
issuance of the solicitation. owned small business, HUBZone small
(4) If the contracting officer rejects business, small disadvantaged business,
the SBA procurement center represent- and women-owned small business con-
atives recommendation, made in ac- cerns by taking the following actions:
cordance with 19.402(c)(2), the con- (a) Allow the maximum amount of
tracting officer shall document the time practicable for the submission of
basis for the rejection and notify the offers.
SBA procurement center representa- (b) Furnish specifications, plans, and
tive in accordance with 19.505. drawings with solicitations, or furnish
information as to where they may be
[48 FR 42240, Sept. 19, 1983, as amended at 56
obtained or examined.
FR 67132, Dec. 27, 1991; 57 FR 60581, Dec. 21,
1992; 64 FR 72444, Dec. 27, 1999; 65 FR 46055, (c) Provide to any small business
July 26, 2000] concern, upon its request, a copy of bid
sets and specifications with respect to
19.2022 Locating small business any contract to be let, the name and
sources. telephone number of an agency contact
The contracting officer must, to the to answer questions related to such
extent practicable, encourage max- prospective contract and adequate ci-
imum participation by small business, tations to each major Federal law or
veteran-owned small business, service- agency rule with which such business
disabled veteran-owned small business, concern must comply in performing
HUBZone small business, small dis- such contract other than laws or agen-
advantaged business, and women- cy rules with which the small business
owned small business concerns in ac- must comply when doing business with
quisitions by taking the following ac- other than the Government.
tions: [48 FR 42240, Sept. 19, 1983, as amended at 63
(a) Before issuing solicitations, make FR 70268, Dec. 18, 1998; 65 FR 60544, Oct. 11,
every reasonable effort to find addi- 2000; 68 FR 43856, July 24, 2003]
tional small business concerns, unless
lists are already excessively long and 19.2025 Data collection and reporting
only some of the concerns on the list requirements.
will be solicited. This effort should in- Agencies must measure the extent of
clude contacting the agency SBA pro- small business participation in their
curement center representative, or if acquisition programs by taking the fol-
there is none, the SBA. lowing actions:
(b) Publicize solicitations and con- (a) Require each prospective con-
tract awards through the Government- tractor to represent whether it is a
342
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Federal Acquisition Regulation 19.301
343
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19.302 48 CFR Ch. 1 (10103 Edition)
other provision of Federal law that spe- close of business of the 5th business
cifically references Section 8(d) of the day after bid opening (in sealed bid ac-
Small Business Act for a definition of quisitions) or receipt of the special no-
program eligibility, the SBA may take tification from the contracting officer
action as specified in Section 16(d) of that identifies the apparently success-
the Act. If the SBA declines to take ac- ful offeror (in negotiated acquisitions)
tion, the agency may initiate the proc- (see 15.503(a)(2)).
ess. The SBAs regulations on penalties (i) A protest may be made orally if it
for misrepresentations and false state- is confirmed in writing either within
ments are contained in 13 CFR 124.6. the 5-day period or by letter post-
[48 FR 42240, Sept. 19, 1983, as amended at 55 marked no later than 1 business day
FR 3882, Feb. 5, 1990; 60 FR 48261, Sept. 18, after the oral protest.
1995; 62 FR 236, Jan. 2, 1997; 63 FR 70268, Dec. (ii) A protest may be made in writing
18, 1998; 65 FR 60545, Oct. 11, 2000]
if it is delivered to the contracting offi-
19.302 Protesting a small business rep- cer by hand, telegram, or letter within
resentation. the 5-day period.
(a) An offeror, the SBA, or another (2) A contracting officers protest is
interested party may protest the small always considered timely whether filed
business representation of an offeror in before or after award.
a specific offer. However, for competi- (3) A protest under a Multiple Award
tive 8(a) contracts, the filing of a pro- Schedule will be timely if received by
test is limited to an offeror, the con- SBA at any time prior to the expira-
tracting officer, or the SBA. tion of the contract period, including
(b) Any time after offers are opened, renewals.
the contracting officer may question (e) Upon receipt of a protest from or
the small business representation of forwarded by the Contracting Office,
any offeror in a specific offer by filing the SBA will
a contracting officers protest (see (1) Notify the contracting officer and
paragraph (c) below). the protester of the date it was re-
(c)(1) Any contracting officer who re- ceived, and that the size of the concern
ceives a protest, whether timely or not, being challenged is under consideration
or who, as the contracting officer, by the SBA; and
wishes to protest the small business (2) Furnish to the concern whose rep-
representation of an offeror, shall resentation is being protested a copy of
promptly forward the protest to the the protest and a blank SBA Form 355,
SBA Government Contracting Area Of- Application for Small Business Deter-
fice for the geographical area where mination, by certified mail, return re-
the principal office of the concern in ceipt requested.
question is located.
(f) Within 3 business days after re-
(2) The protest, or confirmation if the
ceiving a copy of the protest and the
protest was initiated orally, shall be in
form, the challenged offeror must file
writing and shall contain the basis for
the protest with specific, detailed evi- with the SBA a completed SBA Form
dence to support the allegation that 355 and a statement answering the alle-
the offeror is not small. The SBA will gations in the protest, and furnish evi-
dismiss any protest that does not con- dence to support its position. If the of-
tain specific grounds for the protest. feror does not submit the required ma-
(d) In order to affect a specific solici- terial within the 3 business days or an-
tation, a protest must be timely. SBAs other period of time granted by the
regulations on timeliness are contained SBA, the SBA may assume that the
in 13 CFR 121.1004. SBAs regulations disclosure would be contrary to the
on timeliness related to protests of dis- offerors interests.
advantaged status are contained in 13 (g)(1) Within 10 business days after
CFR 124, Subpart B. receiving a protest, the challenged
(1) To be timely, a protest by any offerors response, and other pertinent
concern or other interested party must information, the SBA will determine
be received by the contracting officer the size status of the challenged con-
(see (i) and (ii) of this section by the cern and notify the contracting officer,
344
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Federal Acquisition Regulation 19.303
the protester, and the challenged offer- rector; any concern or other interested
or of its decision by certified mail, re- party that has been adversely affected
turn receipt requested. by a Government Contracting Area Di-
(2) The SBA Government Contracting rectors decision; or the SBA Associate
Area Director, or designee, will deter- Administrator for the SBA program in-
mine the small business status of the volved. The appeal must be filed with
questioned bidder or offeror and notify the
the contracting officer and the bidder Office of Hearings and Appeals, Small Busi-
or offeror of the determination. Award ness Administration, Suite 5900, 409 3rd
may be made on the basis of that deter- Street, SW., Washington, DC 20416
mination. This determination is final
unless it is appealed in accordance with within the time limits and in strict ac-
paragraph (i) of this section, and the cordance with the procedures con-
contracting officer is notified of the tained in subpart C of 13 CFR Part 134.
appeal before award. If an award was It is within the discretion of the SBA
made before the time the contracting Judge whether to accept an appeal
officer received notice of the appeal, from a size determination. If the Judge
the contract shall be presumed to be decides not to consider such an appeal,
valid. the Judge will issue an order denying
(h)(1) After receiving a protest in- review and specifying the reasons for
volving an offeror being considered for the decision. The SBA will inform the
award, the contracting officer shall not contracting officer of its ruling on the
award the contract until (i) the SBA appeal. The SBA decision, if received
has made a size determination or (ii) 10 before award, will apply to the pending
business days have expired since SBAs acquisition. SBA rulings received after
receipt of a protest, whichever occurs award shall not apply to that acquisi-
first; however, award shall not be with- tion.
held when the contracting officer de- (j) A protest that is not timely, even
termines in writing that an award though received before award, shall be
forwarded to the SBA Government
must be made to protect the public in-
Contracting Area Office (see paragraph
terest.
(c)(1) of this section), with a notation
(2) After the 10-day period has ex-
on it that the protest is not timely.
pired, the contracting officer may,
The protester shall be notified that the
when practical, continue to withhold
protest cannot be considered on the in-
award until the SBAs determination is
stant acquisition but has been referred
received, unless further delay would be
to SBA for its consideration in any fu-
disadvantageous to the Government.
ture actions. A protest received by a
(3) Whenever an award is made before
contracting officer after award of a
the receipt of SBAs size determina-
contract shall be forwarded to the SBA
tion, the contracting officer shall no-
Government Contracting Area Office
tify SBA that the award has been
with a notation that award has been
made.
made. The protester shall be notified
(4) If a protest is received that chal-
that the award has been made and that
lenges the small business status of an
the protest has been forwarded to SBA
offeror not being considered for award,
for its consideration in future actions.
the contracting officer is not required
to suspend contract action. The con- [48 FR 42240, Sept. 19, 1983, as amended at 50
tracting officer shall forward the pro- FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
test to the SBA (see paragraph (c)(1) of 1985; 51 FR 2664, Jan. 17, 1986; 60 FR 42656,
Aug. 16, 1995; 61 FR 69289, Dec. 31, 1996; 62 FR
this section) with a notation that the
44820, Aug. 22, 1997; 62 FR 51270, Sept. 30, 1997;
concern is not being considered for 63 FR 9053, 9055, Feb. 23, 1998; 63 FR 35722,
award, and shall notify the protester of June 30, 1998; 64 FR 32743, June 17, 1999; 67 FR
this action. 13054, Mar. 20, 2002]
(i) An appeal from an SBA size deter-
mination may be filed by: any concern 19.303 Determining North American
or other interested party whose protest Industry Classification System
of the small business representation of (NAICS) codes and size standards.
another concern has been denied by an (a) The contracting officer shall de-
SBA Government Contracting Area Di- termine the appropriate NAICS code
345
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19.304 48 CFR Ch. 1 (10103 Edition)
and related small business size stand- gument and evidence (see 13 CFR Part
ard and include them in solicitations 134), and must be received by OHA
above the micro-purchase threshold. within 10 calendar days from the date
(b) If different products or services of the docketing notice and order, un-
are required in the same solicitation, less otherwise specified by the Admin-
the solicitation shall identify the ap- istrative Judge. Upon receipt of OHAs
propriate small business size standard docketing notice and order, the con-
for each product or service. tracting officer must immediately send
(c) The contracting officers deter- to OHA a copy of the solicitation relat-
mination is final unless appealed as ing to the NAICS code appeal.
follows: (5) After close of record, OHA will
(1) An appeal from a contracting offi- issue a decision and inform the con-
cers NAICS code designation and the tracting officer. If OHAs decision is re-
applicable size standard must be served ceived by the contracting officer before
and filed within 10 calendar days after the date the offers are due, the decision
the issuance of the initial solicitation. shall be final and the solicitation must
SBAs Office of Hearings and Appeals be amended to reflect the decision, if
(OHA) will dismiss summarily an un- appropriate. OHAs decision received
timely NAICS code appeal. after the due date of the initial offers
(2)(i) The appeal petition must be in shall not apply to the pending solicita-
writing and must be addressed to the tion but shall apply to future solicita-
tions of the same products or services.
Office of Hearings and Appeals, Small Busi [48 FR 42240, Sept. 19, 1983, as amended at 51
ness Administration, Suite 5900, 409 3rd FR 2664, Jan. 17, 1986; 55 FR 38516, Sept. 18,
Street, SW., Washington, DC 20416 1990; 55 FR 52791, Dec. 21, 1990; 60 FR 34756,
(ii) There is no required format for July 3, 1995; 61 FR 39198, July 26, 1996; 62 FR
the appeal; however, the appeal must 236, Jan. 2, 1997; 63 FR 9056, Feb. 23, 1998; 65
FR 46056, 46057, July 26, 2000]
include
(A) The solicitation or contract num- 19.304 Disadvantaged business status.
ber and the name, address, and tele-
phone number of the contracting offi- (a) To be eligible to receive a benefit
cer; as a prime contractor based on its dis-
(B) A full and specific statement as advantaged status, a concern, at the
to why the size determination or time of its offer, must either be cer-
NAICS code designation is allegedly er- tified as a small disadvantaged busi-
roneous and argument supporting the ness (SDB) concern or have a com-
allegation; and pleted SDB application pending at the
(C) The name, address, telephone SBA or a Private Certifier (see 19.001).
number, and signature of the appellant (b) The contracting officer may ac-
or its attorney. cept an offerors representation that it
(3) The appellant must serve the ap- is an SDB concern for general statis-
peal petition upon tical purposes. The provision at 52.219
(i) The SBA official who issued the 1, Small Business Program Representa-
size determination; tions, or 52.2123(c)(4), Offeror Rep-
(ii) The contracting officer who as- resentations and Certifications-Com-
signed the NAICS code to the acquisi- mercial Items, is used to collect SDB
tion; data for general statistical purposes.
(iii) The business concern whose size (c) The provision at 52.21922, Small
status is at issue; Disadvantaged Business Status, or
(iv) All persons who filed protests; 52.2123(c)(9), Offeror Representations
and and CertificationsCommercial Items,
(v) SBAs Office of General Counsel. is used to obtain SDB status when the
(4) Upon receipt of a NAICS code ap- prime contractor may receive a benefit
peal, OHA will notify the contracting based on its disadvantaged status. The
officer by a notice and order of the date mechanisms that may provide benefits
OHA received the appeal, the docket on the basis of disadvantaged status as
number, and Judge assigned to the a prime contractor are a price evalua-
case. The contracting officers response tion adjustment for SDB concerns (see
to the appeal, if any, must include ar- Subpart 19.11), and an evaluation factor
346
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Federal Acquisition Regulation 19.305
or subfactor for SDB participation (see expiration of the 15-day response pe-
19.1202). riod.
(1) If the apparently successful offer- (4) When the contracting officer
or has represented that it is currently makes a written determination that
certified as an SDB, the contracting of- award must be made to protect the
ficer may confirm that the concern is public interest, the contracting officer
identified as a small disadvantaged may proceed to contract award without
business concern by accessing SBAs notifying SBA or before receiving a de-
database (PRO-Net) or by contacting termination of SDB status from SBA
the SBAs Office of Small Disadvan- during the 15-day response period. In
taged Business Certification and Eligi- both cases, the contracting officer
bility. shall presume that the apparently suc-
(2) If the apparently successful offer- cessful offeror, or any other offeror re-
or has represented that its SDB appli- ferred to the SBA whose SDB applica-
cation is pending at the SBA or a Pri- tion is pending, is not an SDB and shall
vate Certifier, and its position as the make award accordingly.
apparently successful offeror is due to [63 FR 35722, June 30, 1998, as amended at 63
the application of the price evaluation FR 36122, July 1, 1998; 64 FR 36223, July 2,
adjustment, the contracting officer 1999; 65 FR 60545, Oct. 11, 2000]
shall follow the procedure in paragraph
(d) of this section. 19.305 Protesting a representation of
(d) Notifications to SBA of potential disadvantaged business status.
awards to offerors with pending SDB (a) This section applies to protests of
applications. (1) The contracting offi- a small business concerns disadvan-
cer shall notify the Small Business Ad- taged status as a prime contractor.
ministration Assistant Administrator Protests of a small business concerns
for SDBCE 409 Third Street, SW Wash- disadvantaged status as a subcon-
ington, DC 20416. The notification shall tractor are processed under 19.703(a)(2).
contain the name of the apparently Protests of a concerns size as a prime
successful offeror, and the names of contractor are processed under 19.302.
any other offerors that have rep- Protests of a concerns size as a sub-
resented that their applications for contractor are processed under
SDB status are pending at the SBA or 19.703(b). An offeror, the contracting of-
a Private Certifier and that could re- ficer, or the SBA may protest the ap-
ceive the award due to the application parently successful offerors represen-
of a price evaluation adjustment if the tation of disadvantaged status if the
apparently successful offeror is deter- concern is eligible to receive a benefit
mined not to be an SDB by the SBA. based on its disadvantaged status (see
(2) The SBA will, within 15 calendar Subpart 19.11 and 19.1202).
days after receipt of the notification, (b) An offeror, excluding an offeror
determine the disadvantaged status of determined by the contracting officer
the apparently successful offeror and, to be non-responsive or outside the
as appropriate, any other offerors re- competitive range, or an offeror that
ferred by the contracting officer and SBA has previously found to be ineli-
will notify the contracting officer. gible for the requirement at issue, may
(3) If the contracting officer does not protest the apparently successful
receive an SBA determination within offerors representation of disadvan-
15 calendar days after the SBAs re- taged status by filing a protest in writ-
ceipt of the notification, the con- ing with the contracting officer. SBA
tracting officer shall presume that the regulations concerning protests are
apparently successful offeror, and any contained in 13 CFR 124, Subpart B.
other offerors referred by the con- The protest
tracting officer, are not disadvantaged, (1) Must be filed within the times
and shall make award accordingly, un- specified in 19.302(d)(1); and
less the contracting officer grants an (2) Must contain specific facts or al-
extension to the 15-day response pe- legations supporting the basis of pro-
riod. No written determination is re- test.
quired for the contracting officer to (c) The contracting officer or the
make award at any point following the SBA may protest in writing a concerns
347
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19.306 48 CFR Ch. 1 (10103 Edition)
348
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Federal Acquisition Regulation 19.306
SBA may protest the apparently suc- granted SBA an extension. The con-
cessful offerors HUBZone small busi- tracting officer may award the con-
ness concern status. tract after receipt of a protest if the
(b) Protests relating to whether a contracting officer determines in writ-
HUBZone small business concern is a ing that an award must be made to pro-
small business for purposes of any Fed- tect the public interest.
eral program are subject to the proce- (g) SBA will notify the contracting
dures of subpart 19.3. Protests relating officer, the protester, and the protested
to small business size status for the ac- concern of its determination. The de-
quisition and the HUBZone qualifying termination is effective immediately
requirements will be processed concur- and is final unless overturned on ap-
rently by SBA. peal by SBAs Associate Deputy Ad-
(c) All protests must be in writing ministrator for Government Con-
and must state all specific grounds for tracting and 8(a) Business Development
the protest. Assertions that a protested (ADA/GC&8(a)BD).
concern is not a qualified HUBZone (h) The protested HUBZone small
small business concern, without set- business concern, the protester, or the
ting forth specific facts or allegations, contracting officer may file appeals of
are insufficient. An offeror must sub- protest determinations with SBAs
mit its protest to the contracting offi- ADA/GC&8(a)BD. The ADA/GC&8(a)BD
cer. The contracting officer and the must receive the appeal no later than 5
SBA must submit protests to SBAs As- business days after the date of receipt
sociate Administrator for the HUBZone of the protest determination. SBA will
Program (AA/HUB). dismiss any appeal received after the 5-
(d) An offerors protest must be re- day period.
ceived by close of business on the fifth
(i) The appeal must be in writing.
business day after bid opening (in
The appeal must identify the protest
sealed bid acquisitions) or by close of
determination being appealed and must
business on the fifth business day after
set forth a full and specific statement
notification by the contracting officer
as to why the decision is erroneous or
of the apparently successful offeror (in
negotiated acquisitions). Any protest what significant fact the AA/HUB
received after these time limits is un- failed to consider.
timely. Any protest received prior to (j) The party appealing the decision
bid opening or notification of intended must provide notice of the appeal to
award, whichever applies, is premature the contracting officer and either the
and shall be returned to the protester. protested HUBZone small business con-
(e) Except for premature protests, cern or the original protester, as appro-
the contracting officer must forward priate. SBA will not consider addi-
any protest received, notwithstanding tional information or changed cir-
whether the contracting officer be- cumstances that were not disclosed at
lieves that the protest is insufficiently the time of the AA/HUBs decision or
specific or untimely, to: AA/HUB, U.S. that are based on disagreement with
Small Business Administration, 409 3rd the findings and conclusions contained
Street, SW, Washington, DC 20416. The in the determination.
AA/HUB will notify the protester and (k) The ADA/GC&8(a)BD will make
the contracting officer of the date the its decision within 5 business days of
protest was received and whether the the receipt of the appeal, if practicable,
protest will be processed or dismissed and will base its decision only on the
for lack of timeliness or specificity. information and documentation in the
(f) SBA will determine the HUBZone protest record as supplemented by the
status of the protested HUBZone small appeal. SBA will provide a copy of the
business concern within 15 business decision to the contracting officer, the
days after receipt of a protest. If SBA protester, and the protested HUBZone
does not contact the contracting offi- small business concern. The SBA deci-
cer within 15 business days, the con- sion, if received before award, will
tracting officer may award the con- apply to the pending acquisition. SBA
tract to the apparently successful of- rulings received after award will not
feror, unless the contracting officer has apply to that acquisition. The ADA/
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19.307 48 CFR Ch. 1 (10103 Edition)
350
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Federal Acquisition Regulation 19.403
(4) Appealing to the chief of the con- obtain for its breakout procurement
tracting office any contracting offi- center representatives and technical
cers determination not to solicit a advisors security clearances required
concern recommended by the SBA for a by the contracting agency.
particular acquisition, when not doing (b) Contracting officers shall comply
so results in no small business being with 19.402(b) in their relationships
solicited. with SBA breakout procurement center
(5) Conducting periodic reviews of the representatives and SBA small busi-
contracting activity to which assigned ness technical advisors.
to ascertain whether it is complying (c) The SBA breakout procurement
with the small business policies in this center representative is authorized to
regulation. (1) Attend any provisioning con-
(6) Sponsoring and participating in ference or similar evaluation session
conferences and training designed to during which determinations are made
increase small business participation as to whether requirements are to be
in the contracting activities of the of- acquired using other than full and open
fice. competition and make recommenda-
[48 FR 42240, Sept. 19, 1983, as amended at 51 tions with respect to such require-
FR 19715, May 30, 1986; 56 FR 67132, Dec. 27, ments to the members of such con-
1991; 60 FR 48261, Sept. 18, 1995; 63 FR 70269, ference or session;
Dec. 18, 1998; 65 FR 60545, Oct. 11, 2000; 68 FR (2) Review, at any time, restrictions
43856, July 24, 2003]
on competition previously imposed on
19.403 Small Business Administration items through acquisition method cod-
breakout procurement center rep- ing or similar procedures and rec-
resentatives. ommend to personnel of the appro-
priate activity the prompt reevalua-
(a) The SBA is required by section 403
tion of such limitations;
of Pub. L. 98577 to assign a breakout
procurement center representative to (3) Review restrictions on competi-
each major procurement center. A tion arising out of restrictions on the
major procurement center means a pro- rights of the United States in technical
curement center that, in the opinion of data and, when appropriate, rec-
the administrator, purchases substan- ommend that personnel of the appro-
tial dollar amounts of other than com- priate activity initiate a review of the
mercial items, and which has the po- validity of such an asserted restriction;
tential to incur significant savings as a (4) Obtain from any governmental
result of the placement of a breakout source, and make available to per-
procurement representative. The SBA sonnel of the appropriate center, tech-
breakout procurement center rep- nical data necessary for the prepara-
resentative is an advocate for (1) the tion of a competitive solicitation pack-
appropriate use of full and open com- age for any item of supply or service
petition, and (2) the breakout of items, previously acquired noncompetitively
when appropriate and while maintain- due to the unavailability of such tech-
ing the integrity of the system in nical data;
which such items are used. The SBA (5) Have access to procurement
breakout procurement center rep- records and other data of the procure-
resentative is in addition to the SBA ment center commensurate with the
procurement center representative (see level of such representatives approved
19.402). When an SBA breakout procure- security clearance classification;
ment center representative is assigned, (6) Receive unsolicited engineering
the SBA is required to assign at least proposals and, when appropriate
two collocated small business technical (i) Conduct a value analysis of such
advisors. Assigned SBA breakout pro- proposal to determine whether it, if
curement center representatives and adopted, will result in lower costs to
technical advisors are required to com- the United States without substan-
ply with the contracting agencys di- tially impeding legitimate acquisition
rectives governing the conduct of con- objectives and forward to personnel of
tracting personnel and the release of the appropriate center recommenda-
contract information. The SBA must tions with respect to such proposal; or
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19.501 48 CFR Ch. 1 (10103 Edition)
352
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Federal Acquisition Regulation 19.5022
(f) To the extent practicable, unilat- (see subpart 19.9), each acquisition of
eral determinations initiated by a con- supplies or services that has an antici-
tracting officer shall be used as the pated dollar value exceeding $2,500
basis for small business set-asides rath- ($7,500 for acquisitions as described in
er than joint determinations by an 13.201(g)(1)(i) or $15,000 for acquisitions
SBA procurement center representa- as described in 13.201(g)(1)(ii)), but not
tive and a contracting officer. over $100,000 ($200,000 for acquisitions
(g) All solicitations involving set- described in paragraph (2)(i) of the
asides must specify the applicable Simplified Acquisition Threshold defi-
small business size standard and nition at 2.101), is automatically re-
NAICS code (see 19.303). served exclusively for small business
(h) Except as authorized by law, a concerns and shall be set aside for
contract may not be awarded as a re- small business unless the contracting
sult of a small business set-aside if the officer determines there is not a rea-
cost to the awarding agency exceeds sonable expectation of obtaining offers
the fair market price. from two or more responsible small
[48 FR 42240, Sept. 19, 1983] business concerns that are competitive
in terms of market prices, quality, and
EDITORIAL NOTE: For FEDERAL REGISTER ci- delivery. If the contracting officer does
tations affecting section 19.501, see the List
of CFR Sections Affected which appears in
not proceed with the small business
the Finding Aids section of the printed vol- set-aside and purchases on an unre-
ume and on GPO Access. stricted basis, the contracting officer
shall include in the contract file the
19.502 Setting aside acquisitions. reason for this unrestricted purchase.
If the contracting officer receives only
19.5021 Requirements for setting one acceptable offer from a responsible
aside acquisitions. small business concern in response to a
(a) The contracting officer shall set set-aside, the contracting officer
aside an individual acquisition or class should make an award to that firm. If
of acquisitions for competition among the contracting officer receives no ac-
small businesses when ceptable offers from responsible small
(1) It is determined to be in the inter- business concerns, the set-aside shall
est of maintaining or mobilizing the be withdrawn and the requirement, if
Nations full productive capacity, war still valid, shall be resolicited on an
or national defense programs; or unrestricted basis. The small business
(2) Assuring that a fair proportion of reservation does not preclude the
Government contracts in each industry award of a contract with a value not
category is placed with small business greater than $100,000 under Subpart
concerns; and the circumstances de- 19.8, Contracting with the Small Busi-
scribed in 19.5022 or 19.5023(a) exist. ness Administration, under 19.1007(c),
(b) This requirement does not apply Solicitations equal to or less than the
to purchases of $2,500 or less ($7,500 or ESB reserve amount, or under 19.1305,
less for acquisitions as described in HUBZone set-aside procedures.
13.201(g)(1)(i) or $15,000 or less for acqui- (b) The contracting officer shall set
sitions as described in 13.201(g)(1)(ii)), aside any acquisition over $100,000 for
or purchases from required sources of small business participation when
supply under Part 8 (e.g., Federal Pris- there is a reasonable expectation that
on Industries, Committee for Purchase (1) offers will be obtained from at least
From People Who are Blind or Severely two responsible small business con-
Disabled, and Federal Supply Schedule cerns offering the products of different
contracts). small business concerns (but see para-
[63 FR 70270, Dec. 18, 1998, as amended at 67 graph (c) of this subsection); and (2)
FR 56121, Aug. 30, 2002; 68 FR 4050, Jan. 27, award will be made at fair market
2003] prices. Total small business set-asides
shall not be made unless such a reason-
19.5022 Total small business set- able expectation exists (but see 19.502
asides. 3 as to partial set-asides). Although
(a) Except for those acquisitions set past acquisition history of an item or
aside for very small business concerns similar items is always important, it is
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19.5023 48 CFR Ch. 1 (10103 Edition)
not the only factor to be considered in (1) A total set-aside is not appro-
determining whether a reasonable ex- priate (see 19.5022);
pectation exists. In making R&D small (2) The requirement is severable into
business set-asides, there must also be two or more economic production runs
a reasonable expectation of obtaining or reasonable lots;
from small businesses the best sci- (3) One or more small business con-
entific and technological sources con- cerns are expected to have the tech-
sistent with the demands of the pro- nical competence and productive ca-
posed acquisition for the best mix of pacity to satisfy the set-aside portion
cost, performances, and schedules. of the requirement at a fair market
(c) For small business set-asides price;
other than for construction or services, (4) The acquisition is not subject to
any concern proposing to furnish a simplified acquisition procedures; and
product that it did not itself manufac- (5) A partial set-aside shall not be
ture must furnish the product of a made if there is a reasonable expecta-
small business manufacturer unless the tion that only two concerns (one large
SBA has granted either a waiver or ex- and one small) with capability will re-
ception to the nonmanufacturer rule spond with offers unless authorized by
(see 19.102(f)). In industries where the the head of a contracting activity on a
SBA finds that there are no small busi- case-by-case basis. Similarly, a class of
ness manufacturers, it may issue a acquisitions, not including construc-
waiver to the nonmanufacturer rule tion, may be partially set aside. Under
(see 19.102(f) (4) and (5)). In addition, certain specified conditions, partial
SBA has excepted procurements proc- set-asides may be used in conjunction
essed under simplified acquisition pro- with multiyear contracting procedures.
cedures (see part 13), where the antici- (b) When the contracting officer de-
pated cost of the procurement will not termines that a portion of an acquisi-
exceed $25,000, from the nonmanufac- tion is to be set aside, the requirement
turer rule. Waivers permit small busi- shall be divided into a set-aside portion
nesses to provide any firms product. and a non-set-aside portion, each of
The exception permits small businesses which shall (1) be an economic produc-
to provide any domestic firms product. tion run or reasonable lot and (2) have
In both of these cases, the contracting terms and a delivery schedule com-
officers determination in paragraph parable to the other. When practicable,
(b)(1) of this subsection or the decision the set-aside portion should make max-
not to set aside a procurement reserved imum use of small business capacity.
for small business under paragraph (a) (c)(1) The contracting officer shall
of this subsection will be based on the award the non-set-aside portion using
expectation of receiving offers from at normal contracting procedures.
least two responsible small businesses, (2)(i) After all awards have been
including nonmanufacturers, offering made on the non-set-aside portion, the
the products of different concerns. contracting officer shall negotiate with
(d) The requirements of this sub- eligible concerns on the set-aside por-
section do not apply to acquisitions tion, as provided in the solicitation,
over $25,000 during the period when and make award. Negotiations shall be
small business set-asides cannot be conducted only with those offerors who
considered for the four designated in- have submitted responsive offers on the
dustry groups (see 19.1007(b)). non-set-aside portion. Negotations
[60 FR 34757, July 3, 1995, as amended at 61 shall be conducted with small business
FR 39209, July 26, 1996; 63 FR 70270, Dec. 18, concerns in the order of priority as in-
1998; 64 FR 10536, Mar. 4, 1999; 65 FR 16275, dicated in the solicitation (but see (ii)
Mar. 27, 2000; 67 FR 56121, Aug. 30, 2002; 67 FR below). The set-aside portion shall be
70522, Nov. 22, 2002; 68 FR 4050, Jan. 27, 2003] awarded as provided in the solicitation.
An offeror entitled to receive the
19.5023 Partial set-asides. award for quantities of an item under
(a) The contracting officer shall set the non-set-aside portion and who ac-
aside a portion of an acquisition, ex- cepts the award of additional quan-
cept for construction, for exclusive tities under the set-aside portion shall
small business participation when not be requested to accept a lower
354
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Federal Acquisition Regulation 19.503
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19.504 48 CFR Ch. 1 (10103 Edition)
(3) Provide that the set-aside applies ative, the contracting officer shall sus-
only to the (named) contracting of- pend action on the acquisition.
fice(s) making the determination; and (c) If the head of the contracting ac-
(4) Provide that the set-aside does tivity agrees that the contracting offi-
not apply to any individual acquisition cers rejection was appropriate
if the requirement is not severable into (1) Within 1 working day, the SBA
two or more economic production runs procurement center representative
or reasonable lots, in the case of a par- may request the contracting officer to
tial class set-aside. suspend action on the acquisition until
(d) The contracting officer shall re- the SBA Administrator appeals to the
view each individual acquisition aris- agency head (see paragraph (f) of this
ing under a class small business set- section); and
(2) The SBA must be allowed 15 work-
aside to identify any changes in the
ing days after making such a written
magnitude of requirements, specifica-
request, within which the Adminis-
tions, delivery requirements, or com-
trator of SBA
petitive market conditions that have
(i) May appeal to the Secretary of the
occurred since the initial approval of
Department concerned; and
the class small business set-aside. If
(ii) Must notify the contracting offi-
there are any changes of such a mate- cer whether the further appeal has, in
rial nature as to result in probable pay- fact, been taken. If notification is not
ment of more than a fair market price received by the contracting officer
by the Government or in a change in within the 15-day period, it is deemed
the capability of small business con- that the SBA request to suspend the
cerns to satisfy the requirements, the contract action has been withdrawn
contracting officer may withdraw or and that an appeal to the Secretary
modify (see 19.506(a)) the unilateral or was not taken.
joint set-aside by giving written notice (d) When the contracting officer has
to the SBA procurement center rep- been notified within the 15-day period
resentative (if one is assigned), stating that the SBA has appealed to the agen-
the reasons. cy head, the head of the contracting
[48 FR 42240, Sept. 19, 1989, as amended at 53 activity (or designee) shall forward jus-
FR 43390, Oct. 26, 1988; 60 FR 34757, July 3, tification for its decision to the agency
1995; 63 FR 70270, Dec. 18, 1998] head. The contracting officer shall sus-
pend contract action until notification
19.504 [Reserved] is received that the SBA appeal has
been settled.
19.505 Rejecting Small Business Ad- (e) The agency head shall reply to the
ministration recommendations. SBA within 30 working days after re-
(a) If the contracting officer rejects a ceiving the appeal. The decision of the
recommendation of the SBA procure- agency head shall be final.
ment center representative or breakout (f) A request to suspend action on an
procurement center representative, acquisition need not be honored if the
written notice shall be furnished to the contracting officer determines that
appropriate SBA center representative proceeding to contract award and per-
within 5 working days of the con- formance is in the public interest. The
tracting officers receipt of the rec- contracting officer shall include in the
ommendation. contract file a statement of the facts
(b) The SBA procurement center rep- justifying the determination, and shall
resentative may appeal the contracting promptly notify the SBA representa-
officers rejection to the head of the tive of the determination and provide a
contracting activity (or designee) with- copy of the justification.
in 2 working days after receiving the [60 FR 48261, Sept. 18, 1995, as amended at 67
notice. The head of the contracting ac- FR 13054, Mar. 20, 2002]
tivity (or designee) shall render a deci-
sion in writing, and provide it to the 19.506 Withdrawing or modifying
SBA representative within 7 working small business set-asides.
days. Pending issuance of a decision to (a) If, before award of a contract in-
the SBA procurement center represent- volving a small business set-aside, the
356
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Federal Acquisition Regulation 19.601
357
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19.602 48 CFR Ch. 1 (10103 Edition)
358
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Federal Acquisition Regulation 19.6023
that includes all required documenta- Office to review all documentation con-
tion. tained in the case file and to attempt
[48 FR 42240, Sept. 19, 1983, as amended at 51
to resolve any issues.
FR 27489, July 31, 1986; 62 FR 44820, Aug. 22, (iii) To submit any information to
1997] the SBA Area Office that the con-
tracting officer believes the SBA did
19.6022 Issuing or denying a Certifi- not consider (at which time the SBA
cate of Competency (COC). Area Office will establish a new sus-
Within 15 business days (or a longer pense date mutually agreeable to the
period agreed to by the SBA and the contracting officer and the SBA).
contracting agency) after receiving a (iv) To permit resolution of an appeal
notice that a small business concern by the contracting agency to SBA
lacks certain elements of responsi- Headquarters under 19.6023. However,
bility, the SBA Area Office will take there is no contracting officers appeal
the following actions: when the Area Office proposes to issue
(a) Inform the small business concern a COC valued at $100,000 or less.
of the contracting officers determina- (e) At the completion of the process,
tion and offer it an opportunity to notify the concern and the contracting
apply to the SBA for a COC. (A concern officer that the COC is denied or is
wishing to apply for a COC should no- being issued.
tify the SBA Area Office serving the (f) Refer recommendations for
geographical area in which the head- issuing a COC on contracts greater
quarters of the offeror is located.) than $25,000,000 to SBA Headquarters.
(b) Upon timely receipt of a complete
and acceptable application, elect to [62 FR 44820, Aug. 22, 1997]
visit the applicants facility to review
its responsibility. 19.6023 Resolving differences be-
tween the agency and the Small
(1) The COC review process is not Business Administration.
limited to the areas of nonresponsi-
bility cited by the contracting officer. (a) COCs valued between $100,000 and
(2) The SBA may, at its discretion, $25,000,000. (1) When disagreements
independently evaluate the COC appli- arise about a concerns ability to per-
cant for all elements of responsibility, form, the contracting officer and the
but may presume responsibility exists SBA shall make every effort to reach a
as to elements other than those cited resolution before the SBA takes final
as deficient. action on a COC. This shall be done
(c) Consider denying a COC for rea- through the complete exchange of in-
sons of nonresponsibility not originally formation and in accordance with
cited by the contracting officer. agency procedures. If agreement can-
(d) When the Area Director deter- not be reached between the contracting
mines that a COC is warranted (for officer and the SBA Area Office, the
contracts valued at $25,000,000 or less), contracting officer shall request that
notify the contracting officer and pro- the Area Office suspend action and
vide the following options: refer the matter to SBA Headquarters
(1) Accept the Area Directors deci- for review. The SBA Area Office shall
sion to issue a COC and award the con- honor the request for a review if the
tract to the concern. The COC issuance contracting officer agrees to withhold
letter will then be sent, including as an award until the review process is con-
attachment a detailed rationale for the cluded. Without an agreement to with-
decision; or hold award, the SBA Area Office will
(2) Ask the Area Director to suspend issue the COC in accordance with appli-
the case for one or more of the fol- cable SBA regulations.
lowing purposes: (2) SBA Headquarters will furnish
(i) To permit the SBA to forward a written notice to the procuring agen-
detailed rationale for the decision to cys Director, Office of Small and Dis-
the contracting officer for review with- advantaged Business Utilization
in a specified period of time. (OSDBU) or other designated official
(ii) To afford the contracting officer (with a copy to the contracting officer)
the opportunity to meet with the Area that the case file has been received and
359
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19.6024 48 CFR Ch. 1 (10103 Edition)
that an appeal decision may be re- cern from making an offer on any other
quested by an authorized official. procurement.
(3) If the contracting agency decides [62 FR 44821, Aug. 22, 1997]
to file an appeal, it must notify SBA
Headquarters through its procuring 19.6024 Awarding the contract.
agencys Director, OSDBU, or other
(a) If new information causes the
designated official, within 10 business
contracting officer to determine that
days (or a time period agreed upon by
the concern referred to the SBA is ac-
both agencies) that it intends to appeal
tually responsible to perform the con-
the issuance of the COC.
tract, and award has not already been
(4) The appeal and any supporting
made under paragraph (c) below, the
documentation shall be filed by the
contracting officer shall reverse the de-
procuring agencys Director, OSDBU,
termination of nonresponsibility, no-
or other designated official, within 10
tify the SBA of this action, withdraw
business days (or a period agreed upon
the referral, and proceed to award the
by both agencies) after SBA Head-
contract.
quarters receives the agencys notifica-
(b) The contracting officer shall
tion in accordance with paragraph
award the contract to the concern in
(a)(3) of this subsection.
question if the SBA issues a COC after
(5) The SBA Associate Administrator
receiving the referral. An SBA-cer-
for Government Contracting will make
tified concern shall not be required to
a final determination, in writing, to
meet any other requirements of respon-
issue or to deny the COC.
sibility. SBA COCs are conclusive with
(b) SBA Headquarters decisions on
respect to all elements of responsi-
COCs valued over $25,000,000. (1) Prior to
bility of prospective small business
taking final action, SBA Headquarters
contractors.
will contact the contracting agency
(c) The contracting officer shall pro-
and offer it the following options:
ceed with the acquisition and award
(i) To request that the SBA suspend
the contract to another appropriately
case processing to allow the agency to
selected and responsible offeror if the
meet with SBA Headquarters personnel
SBA has not issued a COC within 15
and review all documentation con-
business days (or a longer period of
tained in the case file; or
time agreed to with the SBA) after re-
(ii) To submit to SBA Headquarters
ceiving the referral.
for evaluation any information that
the contracting agency believes has
not been considered. Subpart 19.7The Small Business
(2) After reviewing all available in- Subcontracting Program
formation, the SBA will make a final
decision to either issue or deny the 19.701 Definitions.
COC. As used in this subpart
(c) Reconsideration of a COC after Commercial plan means a subcon-
issuance. (1) The SBA reserves the right tracting plan (including goals) that
to reconsider its issuance of a COC, covers the offerors fiscal year and that
prior to contract award, if applies to the entire production of
(i) The COC applicant submitted false commercial items sold by either the
information or omitted materially ad- entire company or a portion thereof
verse information; or (e.g., division, plant, or product line).
(ii) The COC has been issued for more Failure to make a good faith effort to
than 60 days (in which case the SBA comply with the subcontracting plan
may investigate the firms current cir- means willful or intentional failure to
cumstances). perform in accordance with the re-
(2) When the SBA reconsiders and re- quirements of the subcontracting plan,
affirms the COC, the procedures in sub- or willful or intentional action to frus-
section 19.6022 do not apply. trate the plan.
(3) Denial of a COC by the SBA does Individual contract plan means a sub-
not preclude a contracting officer from contracting plan that covers the entire
awarding a contract to the referred contract period (including option peri-
concern, nor does it prevent the con- ods), applies to a specific contract, and
360
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Federal Acquisition Regulation 19.702
has goals that are based on the ($1,000,000 for construction) and that
offerors planned subcontracting in has subcontracting possibilities, shall
support of the specific contract, except require the apparently successful offer-
that indirect costs incurred for com- or to submit an acceptable subcon-
mon or joint purposes may be allocated tracting plan. If the apparently suc-
on a prorated basis to the contract. cessful offeror fails to negotiate a sub-
Master plan means a subcontracting contracting plan acceptable to the con-
plan that contains all the required ele- tracting officer within the time limit
ments of an individual contract plan, prescribed by the contracting officer,
except goals, and may be incorporated the offeror will be ineligible for award.
into individual contract plans, pro- (2) In sealed bidding acquisitions,
vided the master plan has been ap- each invitation for bids to perform a
proved. contract or contract modification, that
Subcontract means any agreement individually is expected to exceed
(other than one involving an employer- $500,000 ($1,000,000 for construction) and
employee relationship) entered into by that has subcontracting possibilities,
a Government prime contractor or sub- shall require the bidder selected for
contractor calling for supplies and/or award to submit a subcontracting plan.
services required for performance of If the selected bidder fails to submit a
the contract, contract modification, or plan within the time limit prescribed
subcontract. by the contracting officer, the bidder
[63 FR 34064, June 22, 1998, as amended at 66 will be ineligible for award.
FR 2130, Jan. 10, 2001] (b) Subcontracting plans (see sub-
paragraphs (a)(1) and (2) above) are not
19.702 Statutory requirements. required
Any contractor receiving a contract (1) From small business concerns;
for more than the simplified acquisi- (2) For personal services contracts;
tion threshold must agree in the con- (3) For contracts or contract modi-
tract that small business, veteran- fications that will be performed en-
owned small business, service-disabled tirely outside of the United States and
veteran-owned small business, its outlying areas; or
HUBZone small business, small dis- (4) For modifications to contracts
advantaged business, and women- within the general scope of the con-
owned small business concerns will tract that do not contain the clause at
have the maximum practicable oppor- 52.2198, Utilization of Small Business
tunity to participate in contract per- Concerns (or equivalent prior clauses;
formance consistent with its efficient e.g., contracts awarded before the en-
performance. It is further the policy of actment of Public Law 95507).
the United States that its prime con- (c) As stated in 15 U.S.C. 637(d)(8),
tractors establish procedures to ensure any contractor or subcontractor failing
the timely payment of amounts due to comply in good faith with the re-
pursuant to the terms of their sub- quirements of the subcontracting plan
contracts with small business, veteran- is in material breach of its contract.
owned small business, service-disabled Further, 15 U.S.C. 637(d)(4)(F) directs
veteran-owned small business, that a contractors failure to make a
HUBZone small business, small dis- good faith effort to comply with the re-
advantaged business, and women- quirements of the subcontracting plan
owned small business concerns. shall result in the imposition of liq-
(a) Except as stated in paragraph (b) uidated damages.
of this section, Section 8(d) of the (d) As authorized by 15 U.S.C.
Small Business Act (15 U.S.C. 637(d)) 637(d)(11), certain costs incurred by a
imposes the following requirements re- mentor firm in providing develop-
garding subcontracting with small mental assistance to a Protege firm
businesses and small business subcon- under the Department of Defense Pilot
tracting plans: Mentor-Protege Program, may be cred-
(1) In negotiated acquisitions, each ited as subcontract awards to a small
solicitation of offers to perform a con- disadvantaged business for the purpose
tract or contract modification, that in- of determining whether the mentor
dividually is expected to exceed $500,000 firm attains a small disadvantaged
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19.703 48 CFR Ch. 1 (10103 Edition)
business goal under any subcontracting officer or the SBA to initiate a protest.
plan entered into with any executive Such protests, in order to be considered
agency. However, the mentor-protege timely, must be submitted to the SBA
agreement must have been approved by prior to completion of performance by
the the intended subcontractor.
(b) A contractor acting in good faith
Office of Small and Disadvantaged Business
Utilization, Office of the Under Secretary
may rely on the written representation
of Defense (Acquisition, Technology and of its subcontractor regarding the sub-
Logistics), 1777 N. Kent Street, Suite 9100, contractors status as a small business,
Arlington, VA 22209 veteran-owned small business, service-
disabled veteran-owned small business,
before developmental assistance costs HUBZone small business, or a woman-
may be credited against subcontracting owned small business concern. The
goals. A list of approved agreements clause at 52.21925, Small Disadvan-
may be obtained at http:// taged Business Participation Pro-
www.acq.osd.mil/sadbu/ gramDisadvantaged Status and Re-
mentorlprotege/ or by calling 1800 porting, requires the contractor to ob-
5531858. tain representations of small disadvan-
[48 FR 42240, Sept. 19, 1983, as amended at 50 taged status from subcontractors
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23, through use of a provision substan-
1985; 50 FR 27562, July 3, 1985; 51 FR 27116, tially the same as paragraph (b)(1)(i) of
July 29, 1986; 54 FR 30709, July 21, 1989; 56 FR the provision at 52.21922, Small Dis-
41731, Aug. 22, 1991; 60 FR 48262, Sept. 18, 1995; advantaged Business Status. The
61 FR 2638, Jan. 26, 1996; 61 FR 39190, July 26, clause requires the contractor to con-
1996; 61 FR 67420, Dec. 20, 1996; 62 FR 40236, firm that a subcontractor representing
July 25, 1997; 63 FR 36122, July 1, 1998; 63 FR
itself as a small disadvantaged business
70270, Dec. 18, 1998; 64 FR 72451, Dec. 27, 1999;
65 FR 60545, Oct. 11, 2000; 68 FR 28081, May 22, concern is identified by SBA as a small
2003] disadvantaged business concern by ac-
cessing SBAs database (PRO-Net) or
19.703 Eligibility requirements for by contacting the SBAs Office of
participating in the program. Small Disadvantaged Business Certifi-
(a) To be eligible as a subcontractor cation and Eligibility. The contractor,
under the program, a concern must the contracting officer, or any other
represent itself as a small business, interested party can challenge a sub-
veteran-owned small business, service- contractors size status representation
disabled veteran-owned small business, by filing a protest, in accordance with
HUBZone small business, small dis- 13 CFR 121.1601 through 121.1608. Pro-
advantaged business, or woman-owned tests challenging a subcontractors
small business concern. small disadvantaged business represen-
(1) To represent itself as a small busi- tation must be filed in accordance with
ness, veteran-owned small business, 13 CFR 124.1015 through 124.1022. Pro-
tests challenging HUBZone small busi-
service-disabled veteran-owned small
ness concerns status must be filed in
business, HUBZone small business, or
accordance with 13 CFR 126.800.
woman-owned small business concern,
a concern must meet the appropriate [48 FR 42240, Sept. 19, 1983, as amended at 51
definition (see 2.101 and 19.001). FR 2664, Jan. 17, 1986; 55 FR 3882, Feb. 5, 1990;
(2) In connection with a subcontract, 55 FR 52792, Dec. 21, 1990; 60 FR 48262, Sept.
18, 1995; 62 FR 236, Jan. 2, 1997; 63 FR 34065,
or a requirement for which the appar-
July 1, 1998; 63 FR 70270, Dec. 18, 1998; 63 FR
ently successful offeror received an 71723, Dec. 29, 1998; 64 FR 36223, July 2, 1999;
evaluation credit for proposing one or 65 FR 60545, Oct. 11, 2000; 66 FR 2130, Jan. 10,
more SDB subcontractors, the con- 2001]
tracting officer or the SBA may pro-
test the disadvantaged status of a pro- 19.704 Subcontracting plan require-
posed subcontractor. Such protests will ments.
be processed in accordance with 13 CFR (a) Each subcontracting plan re-
124.1015 through 124.1022. Other inter- quired under 19.702(a)(1) and (2) must
ested parties may submit information include
to the contracting officer or the SBA (1) Separate percentage goals for
in an effort to persuade the contracting using small business, veteran-owned
362
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Federal Acquisition Regulation 19.704
small business, service-disabled vet- and that the offeror will require all
eran-owned small business, HUBZone subcontractors (except small business
small business, small disadvantaged concerns) that receive subcontracts in
business, and women-owned small busi- excess of $500,000 ($1,000,000 for con-
ness concerns as subcontractors; struction) to adopt a plan that com-
(2) A statement of the total dollars plies with the requirements of the
planned to be subcontracted and a clause at 52.2199, Small Business Sub-
statement of the total dollars planned contracting Plan (see 19.708(b));
to be subcontracted to small business, (10) Assurances that the offeror will
veteran-owned small business, service- (i) Cooperate in any studies or sur-
disabled veteran-owned small business, veys as may be required;
HUBZone small business, small dis- (ii) Submit periodic reports so that
advantaged business, and women- the Government can determine the ex-
owned small business concerns; tent of compliance by the offeror with
(3) A description of the principal the subcontracting plan;
types of supplies and services to be sub- (iii) Submit Standard Form (SF) 294,
contracted and an identification of Subcontracting Report for Individual
types planned for subcontracting to Contracts, and SF 295, Summary Sub-
small business, veteran-owned small contract Report, following the instruc-
business, service-disabled veteran- tions on the forms or as provided in
owned small business, HUBZone small agency regulations; and
business, small disadvantaged business, (iv) Ensure that its subcontractors
and women-owned small business con- agree to submit SF 294 and SF 295; and
cerns; (11) A description of the types of
(4) A description of the method used records that will be maintained con-
to develop the subcontracting goals; cerning procedures adopted to comply
(5) A description of the method used with the requirements and goals in the
to identify potential sources for solici- plan, including establishing source
tation purposes; lists; and a description of the offerors
(6) A statement as to whether or not efforts to locate small business, vet-
the offeror included indirect costs in eran-owned small business, service-dis-
establishing subcontracting goals, and abled veteran-owned small business,
a description of the method used to de- HUBZone small business, small dis-
termine the proportionate share of in- advantaged business, and women-
direct costs to be incurred with small owned small business concerns and to
business, veteran-owned small busi- award subcontracts to them.
ness, service-disabled veteran-owned (b) Contractors may establish, on a
small business, HUBZone small busi- plant or division-wide basis, a master
ness, small disadvantaged business, and plan (see 19.701) that contains all the
women-owned small business concerns; elements required by the clause at
(7) The name of an individual em- 52.2199, Small Business Subcon-
ployed by the offeror who will admin- tracting Plan, except goals. Master
ister the offerors subcontracting pro- plans shall be effective for a 3-year pe-
gram, and a description of the duties of riod after approval by the contracting
the individual; officer; however, it is incumbent upon
(8) A description of the efforts the of- contractors to maintain and update
feror will make to ensure that small master plans. Changes required to up-
business, veteran-owned small busi- date master plans are not effective
ness, service-disabled veteran-owned until approved by the contracting offi-
small business, HUBZone small busi- cer. A master plan, when incorporated
ness, small disadvantaged business, and in an individual plan, shall apply to
women-owned small business concerns that contract throughout the life of
have an equitable opportunity to com- the contract.
pete for subcontracts; (c) For multiyear contracts or con-
(9) Assurances that the offeror will tracts containing options, the cumu-
include the clause at 52.2198, Utiliza- lative value of the basic contract and
tion of Small Business Concerns (see all options is considered in deter-
19.708(a)), in all subcontracts that offer mining whether a subcontracting plan
further subcontracting opportunities, is necessary (see 19.7052(a)). If a plan is
363
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19.705 48 CFR Ch. 1 (10103 Edition)
364
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Federal Acquisition Regulation 19.7054
any other time prior to award. In de- (see 19.704), the contracting officer
termining when subcontracting plans shall advise the bidder of the defi-
should be required, as well as when and ciency and request submission of a re-
with whom plans should be negotiated, vised plan by a specific date. If the bid-
the contracting officer must consider der does not submit a plan that incor-
the integrity of the competitive proc- porates the required elements within
ess, the goal of affording maximum the time allotted, the bidder shall be
practicable opportunity for small busi- ineligible for award. If the plan, al-
ness, veteran-owned small business, though responsive, evidences the bid-
service-disabled veteran-owned small ders intention not to comply with its
business, HUBZone small business, obligations under the clause at 52.2198,
small disadvantaged business, and Utilization of Small Business Concerns,
women-owned small business concerns the contracting officer may find the
to participate, and the burden placed bidder nonresponsible.
on offerors. (c) In negotiated acquisitions, the
[48 FR 42240, Sept. 19, 1983, as amended at 51
contracting officer shall determine
FR 2664, Jan. 17, 1986; 51 FR 19716, May 30, whether the plan is acceptable based on
1986; 60 FR 48262, Sept. 18, 1995; 61 FR 2638, the negotiation of each of the 11 ele-
Jan. 26, 1996; 63 FR 70271, Dec. 18, 1998; 65 FR ments of the plan (see 19.704). Subcon-
60545, Oct. 11, 2000; 66 FR 53493, Oct. 22, 2001] tracting goals should be set at a level
that the parties reasonably expect can
19.7053 Preparing the solicitation. result from the offeror expending good
The contracting officer shall provide faith efforts to use small business, vet-
the Small Business Administrations eran-owned small business, service-dis-
(SBAs) resident procurement center abled veteran-owned small business,
representative, if any, a reasonable pe- HUBZone small business, small dis-
riod of time to review any solicitation advantaged business, and women-
requiring submission of a subcon- owned small business subcontractors to
tracting plan and to submit advisory the maximum practicable extent. The
findings before the solicitation is contracting officer shall take par-
issued. ticular care to ensure that the offeror
has not submitted unreasonably low
19.7054 Reviewing the subcontracting goals to minimize exposure to liq-
plan. uidated damages and to avoid the ad-
The contracting officer must review ministrative burden of substantiating
the subcontracting plan for adequacy, good faith efforts. Additionally, par-
ensuring that the required informa- ticular attention should be paid to the
tion, goals, and assurances are included identification of steps that, if taken,
(see 19.704). would be considered a good faith effort.
(a) No detailed standards apply to No goal should be negotiated upward if
every subcontracting plan. Instead, the it is apparent that a higher goal will
contracting officer must consider each significantly increase the Govern-
plan in terms of the circumstances of ments cost or seriously impede the at-
the particular acquisition, including tainment of acquisition objectives. An
(1) Previous involvement of small incentive subcontracting clause (see
business concerns as prime contractors 52.21910, Incentive Subcontracting
or subcontractors in similar acquisi- Program), may be used when additional
tions; and unique contract effort, such as pro-
(2) Proven methods of involving viding technical assistance, could sig-
small business concerns as subcontrac- nificantly increase subcontract awards
tors in similar acquisitions; and to small business, veteran-owned small
(3) The relative success of methods business, service-disabled veteran-
the contractor intends to use to meet owned small business, HUBZone small
the goals and requirements of the plan, business, or women-owned small busi-
as evidenced by records maintained by ness concerns.
contractors. (d) In determining the acceptability
(b) If, under a sealed bid solicitation, of a proposed subcontracting plan, the
a bidder submits a plan that does not contracting officer should take the fol-
cover each of the 11 required elements lowing actions:
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19.7055 48 CFR Ch. 1 (10103 Edition)
(1) Obtain information available from (6) Advise the offeror of available
the cognizant contract administration sources of information on potential
office, as provided for in 19.706(a), and small business, veteran-owned small
evaluate the offerors past performance business, service-disabled veteran-
in awarding subcontracts for the same owned small business, HUBZone small
or similar products or services to small business, small disadvantaged business,
business, veteran-owned small busi- and women-owned small business sub-
ness, service-disabled veteran-owned contractors, as well as any specific
small business, HUBZone small busi- concerns known to be potential sub-
ness, small disadvantaged business, and contractors. If the offerors proposed
women-owned small business concerns. goals are questionable, the contracting
If information is not available on a spe- officer must emphasize that the infor-
cific type of product or service, evalu- mation should be used to develop real-
ate the offerors overall past perform- istic and acceptable goals.
ance and consider the performance of (7) Obtain advice and recommenda-
other contractors on similar efforts. tions from the SBA procurement cen-
(2) In accordance with 15 U.S.C. ter representative (if any) and the
637(d)(4)(F)(iii), ensure that the goals agency small business specialist.
offered are attainable in relation to
[48 FR 42240, Sept. 19, 1983, as amended at 50
(i) The subcontracting opportunities FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
available to the contractor, commensu- 1985; 51 FR 19716, May 30, 1986; 54 FR 30709,
rate with the efficient and economical July 21, 1989; 55 FR 52792, Dec. 21, 1990; 60 FR
performance of the contract; 48262, Sept. 18, 1995; 63 FR 34066, June 22, 1998;
(ii) The pool of eligible subcontrac- 63 FR 36123, July 1, 1998; 63 FR 70271, Dec. 18,
tors available to fulfill the subcon- 1998; 65 FR 60545, Oct. 11, 2000; 66 FR 53493,
tracting opportunities; and Oct. 22, 2001; 67 FR 1858, Jan. 14, 2002]
(iii) The actual performance of such
contractor in fulfilling the subcon- 19.7055 Awards involving subcon-
tracting plans.
tracting goals specified in prior plans.
(3) Ensure that the subcontracting (a) In making an award that requires
goals are consistent with the offerors a subcontracting plan, the contracting
cost or pricing data or information officer shall be responsible for the fol-
other than cost or pricing data. lowing:
(4) Evaluate the offerors make-or- (1) Consider the contractors compli-
buy policy or program to ensure that it ance with the subcontracting plans
does not conflict with the offerors pro- submitted on previous contracts as a
posed subcontracting plan and is in the factor in determining contractor re-
Governments interest. If the contract sponsibility.
involves products or services that are (2) Assure that a subcontracting plan
particularly specialized or not gen- was submitted when required.
erally available in the commercial (3) Notify the SBA resident procure-
market, consider the offerors current ment center representative of the op-
capacity to perform the work and the portunity to review the proposed con-
possibility of reduced subcontracting tract (including the plan and sup-
opportunities. porting documentation). The notice
(5) Evaluate subcontracting poten- shall be issued in sufficient time to
tial, considering the offerors make-or- provide the representative a reasonable
buy policies or programs, the nature of time to review the material and submit
the supplies or services to be subcon- advisory recommendations to the con-
tracted, the known availability of tracting officer. Failure of the rep-
small business, veteran-owned small resentative to respond in a reasonable
business, service-disabled veteran- period of time shall not delay contract
owned small business, HUBZone small award.
business, small disadvantaged business, (4) Determine any fee that may be
and women-owned small business con- payable if an incentive is used in con-
cerns in the geographical area where junction with the subcontracting plan.
the work will be performed, and the po- (5) Ensure that an acceptable plan is
tential contractors long-standing con- incorporated into and made a material
tractual relationship with its suppliers. part of the contract.
366
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Federal Acquisition Regulation 19.7057
(b) Letter contracts and similar (g) Taking action to enforce the
undefinitized instruments, which would terms of the contract upon receipt of a
otherwise meet the requirements of notice under 19.706(f).
19.702(a)(1) and (2), shall contain at
[48 FR 42240, Sept. 19, 1983, as amended at 52
least a preliminary basic plan address-
FR 19803, May 27, 1987; 53 FR 27464, July 20,
ing the requirements of 19.704 and in 1988; 53 FR 34228, Sept. 2, 1988; 54 FR 30709,
such cases require the negotiation of July 21, 1989; 55 FR 52792, Dec. 21, 1990; 63 FR
the final plan within 90 days after 34066, June 22, 1998; 63 FR 70271, Dec. 18, 1998]
award or before definitization, which-
ever occurs first. 19.7057 Liquidated damages.
[48 FR 42240, Sept. 19, 1983, as amended at 50 (a) Maximum practicable utilization
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23, of small business, veteran-owned small
1985] business, service-disabled veteran-
owned small business, HUBZone small
19.7056 Postaward responsibilities of
the contracting officer. business, small disadvantaged business
and women-owned small business con-
After a contract or contract modi- cerns as subcontractors in Government
fication containing a subcontracting contracts is a matter of national inter-
plan is awarded, the contracting officer est with both social and economic ben-
who approved the plan is responsible efits. When a contractor fails to make
for the following: a good faith effort to comply with a
(a) Notifying the SBA of the award subcontracting plan, these objectives
by sending a copy of the award docu- are not achieved, and 15 U.S.C.
ment to the Area Director, Office of
637(d)(4)(F) directs that liquidated
Government Contracting, in the SBA
damages shall be paid by the con-
area office where the contract will be
tractor.
performed.
(b) Forwarding a copy of each com- (b) The amount of damages attrib-
mercial plan and any associated ap- utable to the contractors failure to
provals to the Area Director, Office of comply shall be an amount equal to the
Government Contracting, in the SBA actual dollar amount by which the con-
area office where the contractors tractor failed to achieve each subcon-
headquarters is located. tracting goal.
(c) Giving to the assigned SBA resi- (c) If, at completion of the basic con-
dent procurement center representa- tract or any option, or in the case of a
tive (if any) a copy of commercial plan, at the close of the
(1) Any subcontracting plan sub- fiscal year for which the plan is appli-
mitted in response to a sealed bid solic- cable, a contractor has failed to meet
itation; and its subcontracting goals, the con-
(2) The final negotiated subcon- tracting officer shall review all avail-
tracting plan that was incorporated able information for an indication that
into a negotiated contract or contract the contractor has not made a good
modification. faith effort to comply with the plan. If
(d) Notifying the SBA resident pro- no such indication is found, the con-
curement center representative of the tracting officer shall document the file
opportunity to review subcontracting accordingly. If the contracting officer
plans in connection with contract decides in accordance with paragraph
modifications. (d) of this subsection that the con-
(e) Forwarding a copy of each plan, tractor failed to make a good faith ef-
or a determination that there is no re- fort to comply with its subcontracting
quirement for a subcontracting plan, to plan, the contracting officer shall give
the cognizant contract administration the contractor written notice speci-
office. fying the failure, advising the con-
(f) Initiating action to assess liq- tractor of the possibility that the con-
uidated damages in accordance with tractor may have to pay to the Govern-
19.7057 upon a recommendation by the ment liquidated damages, and pro-
administrative contracting officer or viding a period of 15 working days (or
receipt of other reliable evidence to in- longer period as necessary) within
dicate that such action is warranted. which to respond. The notice shall give
367
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19.7057 48 CFR Ch. 1 (10103 Edition)
the contractor an opportunity to dem- (e) If, after consideration of all the
onstrate what good faith efforts have pertinent data, the contracting officer
been made before the contracting offi- finds that the contractor failed to
cer issues the final decision, and shall make a good faith effort to comply
further state that failure of the con- with its subcontracting plan, the con-
tractor to respond may be taken as an tracting officer shall issue a final deci-
admission that no valid explanation ex- sion to the contractor to that effect
ists. and require the payment of liquidated
(d) In determining whether a con- damages in an amount stated. The con-
tractor failed to make a good faith ef- tracting officers final decision shall
fort to comply with its subcontracting state that the contractor has the right
plan, a contracting officer must look to to appeal under the clause in the con-
the totality of the contractors actions, tract entitled Disputes.
consistent with the information and (f) With respect to commercial plans
assurances provided in its plan. The approved under the clause at 52.2199,
fact that the contractor failed to meet Small Business Subcontracting Plan,
its subcontracting goals does not, in the contracting officer that approved
and of itself, constitute a failure to the plan shall
make a good faith effort. For example, (1) Perform the functions of the con-
notwithstanding a contractors diligent tracting officer under this subsection
effort to identify and solicit offers on behalf of all agencies with contracts
from small business, veteran-owned covered by the commercial plan;
small business, service-disabled vet- (2) Determine whether or not the
eran-owned small business, HUBZone goals in the commercial plan were
small business, small disadvantaged achieved and, if they were not
business and women-owned small busi- achieved, review all available informa-
ness concerns, factors such as unavail- tion for an indication that the con-
ability of anticipated sources or unrea- tractor has not made a good faith ef-
sonable prices may frustrate achieve- fort to comply with the plan, and docu-
ment of the contractors goals. How- ment the results of the review;
ever, when considered in the context of (3) If a determination is made to as-
the contractors total effort in accord- sess liquidated damages, in order to
ance with its plan, the following, calculate and assess the amount of
though not all inclusive, may be con- damages, the contracting officer shall
sidered as indicators of a failure to ask the contractor to provide
make a good faith effort: a failure to (i) Contract numbers for the Govern-
attempt to identify, contact, solicit, or ment contracts subject to the plan;
consider for contract award small busi- (ii) The total Government sales dur-
ness, veteran-owned small business, ing the contractors fiscal year; and
service-disabled veteran-owned small (iii) The amount of payments made
business, HUBZone small business, under the Government contracts sub-
small disadvantaged business or ject to that plan that contributed to
women-owned small business concerns; the contractors total sales during the
a failure to designate and maintain a contractors fiscal year; and
company official to administer the sub- (4) When appropriate, assess liq-
contracting program and monitor and uidated damages on the Governments
enforce compliance with the plan; a behalf, based on the pro rata share of
failure to submit Standard Form (SF) subcontracting attributable to the
294, Subcontracting Report for Indi- Government contracts. For example:
vidual Contracts, or SF 295, Summary The contractors total actual sales
Subcontract Report, in accordance were $50 million and its actual subcon-
with the instructions on the forms or tracting was $20 million. The Govern-
as provided in agency regulations; a ments total payments under contracts
failure to maintain records or other- subject to the plan contributing to the
wise demonstrate procedures adopted contractors total sales were $5 million,
to comply with the plan; or the adop- which accounted for 10 percent of the
tion of company policies or procedures contractors total sales. Therefore, the
that have as their objectives the frus- pro rata share of subcontracting attrib-
tration of the objectives of the plan. utable to the Government contracts
368
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Federal Acquisition Regulation 19.707
369
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19.708 48 CFR Ch. 1 (10103 Edition)
contract basis, or, in the case of con- tracting plan is required (see 19.702),
tractors having multiple contracts, on and inclusion of a monetary incentive
an aggregate basis. is, in the judgment of the contracting
(b) The SBA is not authorized to (1) officer, necessary to increase subcon-
prescribe the extent to which any con- tracting opportunities for small busi-
tractor or subcontractor shall sub- ness, veteran-owned small business,
contract, (2) specify concerns to which service-disabled veteran-owned small
subcontracts will be awarded, or (3) ex- business, HUBZone small business, and
ercise any authority regarding the ad-
women-owned small business concerns,
ministration of individual prime con-
and is commensurate with the efficient
tracts or subcontracts.
and economical performance of the
[48 FR 42240, Sept. 19, 1983, as amended at 51 contract; unless the conditions in para-
FR 2664, Jan. 17, 1986] graph (c)(3) of this section are applica-
19.708 Contract clauses. ble. The contracting officer may vary
the terms of the clause as specified in
(a) Insert the clause at 52.2198, Utili- paragraph (c)(2) of this section.
zation of Small Business Concerns, in
(2) Various approaches may be used
solicitations and contracts when the
contract amount is expected to exceed in the development of small business,
the simplified acquisition threshold veteran-owned small business, service-
unless disabled veteran-owned small business,
(1) A personal services contract is HUBZone small business, and women-
contemplated (see 37.104); or owned small business concerns subcon-
(2) The contract, together with all of tracting incentives. They can take
its subcontracts, will be performed en- many forms, from a fully quantified
tirely outside of the United States and schedule of payments based on actual
its outlying areas. subcontract achievement to an award
(b)(1) Insert the clause at 52.2199, fee approach employing subjective
Small Business Subcontracting Plan, evaluation criteria (see paragraph
in solicitations and contracts that (c)(3) of this section). The incentive
offer subcontracting possibilities, are should not reward the contractor for
expected to exceed $500,000 ($1,000,000 results other than those that are at-
for construction of any public facility), tributable to the contractors efforts
and are required to include the clause under the incentive subcontracting
at 52.2198, Utilization of Small Busi- program.
ness Concerns, unless the acquisition is
(3) As specified in paragraph (c)(2) of
set aside or is to be accomplished under
the 8(a) program. When contracting by this section, the contracting officer
sealed bidding rather than by negotia- may include small business, veteran-
tion, the contracting officer shall use owned small business, service-disabled
the clause with its Alternate I. When veteran-owned small business,
contracting by negotiation, and sub- HUBZone small business, and women-
contracting plans are required with ini- owned small business subcontracting
tial proposals as provided for in 19.705 as one of the factors to be considered in
2(d), the contracting officer shall use determining the award fee in a cost-
the clause with its Alternate II. plus-award-fee contract; in such cases,
(2) Insert the clause at 52.21916, Liq- however, the contracting officer shall
uidated DamagesSubcontracting not use the clause at 52.21910, Incen-
Plan, in all solicitations and contracts tive Subcontracting Program.
containing the clause at 52.2199, Small
[48 FR 42240, Sept. 19, 1983, as amended at 50
Business Subcontracting Plan, or the
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
clause with its Alternate I or II. 1985; 51 FR 2664, Jan. 17, 1986; 54 FR 30710,
(c)(1) The contracting officer may, July 21, 1989; 56 FR 41731, Aug. 22, 1991; 60 FR
when contracting by negotiation, in- 48263, Sept. 18, 1995; 61 FR 2639, Jan. 26, 1996;
sert in solicitations and contracts a 61 FR 39190, July 26, 1996; 63 FR 34067, June
clause substantially the same as the 22, 1998; 63 FR 36123, July 1, 1998; 63 FR 70272,
clause at 52.21910, Incentive Subcon- Dec. 18, 1998; 65 FR 60545, Oct. 11, 2000; 66 FR
tracting Program, when a subcon- 53493, Oct. 22, 2001; 68 FR 28081, May 22, 2003]
370
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Federal Acquisition Regulation 19.803
371
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19.804 48 CFR Ch. 1 (10103 Edition)
instances, in addition to the informa- port of the 8(a) Program, the agency
tion in paragraph (a) of this section, should evaluate
the SBA will provide (a) Its current and future plans to ac-
(1) A clear identification of the ac- quire the specific items or work that
quisition sought; e.g., project name or 8(a) contractors are seeking to provide,
number; identified in terms of
(2) A statement as to how any addi- (1) Quantities required or the number
tional needed facilities will be provided of construction projects planned; and
in order to ensure that the firm will be (2) Performance or delivery require-
fully capable of satisfying the agencys ments, including required monthly pro-
requirements; duction rates, when applicable.
(3) If construction, information as to (b) Its current and future plans to ac-
the bonding capability of the firm(s); quire items or work similar in nature
and and complexity to that specified in the
(4) Either business plan;
(c) Problems encountered in previous
(i) If sole source request
acquisitions of the items or work from
(A) The reasons why the firm is con- the 8(a) contractors and/or other con-
sidered suitable for this particular ac- tractors;
quisition; e.g., previous contracts for (d) The impact of any delay in deliv-
the same or similar supply or service; ery;
and (e) Whether the items or work have
(B) A statement that the firm is eli- previously been acquired using small
gible in terms of NAICS code, business business set-asides; and
support levels, and business activity (f) Any other pertinent information
targets; or, about known 8(a) contractors, the
(ii) If competitive, a statement that items, or the work. This includes any
at least two 8(a) firms are considered information concerning the firms ca-
capable of satisfying the agencys re- pabilities. When necessary, the con-
quirements and a statement that the tracting agency shall make an inde-
firms are also eligible in terms of the pendent review of the factors in
NAICS code, business support levels, 19.803(a) and other aspects of the firms
and business activity targets. If re- capabilities which would ensure the
quested by the contracting activity, satisfactory performance of the re-
SBA will identify at least two such quirement being considered for com-
firms and provide information con- mitment to the 8(a) Program.
cerning the firms capabilities.
(c) Agencies may also review other 19.8042 Agency offering.
proposed acquisitions for the purpose (a) After completing its evaluation,
of identifying requirements which may the agency must notify the SBA of the
be offered to the SBA. Where agencies extent of its plans to place 8(a) con-
independently, or through the self mar- tracts with the SBA for specific quan-
keting efforts of an 8(a) firm, identify a tities of items or work. The notifica-
requirement for the 8(a) Program, they tion must identify the timeframes
may offer on behalf of a specific 8(a) within which prime contract and sub-
firm, for the 8(a) Program in general, contract actions must be completed in
or for 8(a) competition (but see order for the agency to meet its re-
19.800(e)). sponsibilities. The notification must
[54 FR 46005, Oct. 31, 1989, as amended at 55 also contain the following information
FR 3882, Feb. 5, 1990; 61 FR 67410, Dec. 20, applicable to each prospective con-
1996; 63 FR 70272, Dec. 18, 1998; 64 FR 32748, tract:
June 17, 1999; 65 FR 46057, July 26, 2000] (1) A description of the work to be
performed or items to be delivered, and
19.804 Evaluation, offering, and ac- a copy of the statement of work, if
ceptance. available.
(2) The estimated period of perform-
19.8041 Agency evaluation. ance.
In determining the extent to which a (3) The NAICS code that applies to
requirement should be offered in sup- the principal nature of the acquisition.
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Federal Acquisition Regulation 19.8043
(4) The anticipated dollar value of (16) Any other pertinent and reason-
the requirement, including options, if ably available data.
any. (b)(1) An agency offering a construc-
(5) Any special restrictions or geo- tion requirement should submit it to
graphical limitations on the require- the SBA District Office for the geo-
ment (for construction, include the lo- graphical area where the work is to be
cation of the work to be performed). performed.
(6) Any special capabilities or dis- (2) Sole source requirements, other
ciplines needed for contract perform- than construction, should be forwarded
ance. directly to the district office that serv-
(7) The type of contract anticipated. ices the nominated firm. If the con-
(8) The acquisition history, if any, of tracting officer is not nominating a
the requirement, including the names specific firm, the offering letter should
and addresses of any small business be forwarded to the district office serv-
contractors that have performed this icing the geographical area in which
requirement during the previous 24 the contracting office is located.
months. (c) All requirements for 8(a) competi-
(9) A statement that prior to the of- tion, other than construction, should
fering no solicitation for the specific be forwarded to the district office serv-
acquisition has been issued as a small icing the geographical area in which
business or HUBZone set-aside and the contracting office is located. All
that no other public communication requirements for 8(a) construction
(such as a notice through the Govern- competition should be forwarded to the
mentwide point of entry (GPE)) has district office servicing the geo-
been made showing the contracting graphical area in which all or the
agencys clear intention to set-aside major portion of the construction is to
the acquisition for small business or be performed. All requirements, includ-
HUBZone small business concerns. ing construction, must be synopsized
(10) Identification of any particular through the GPE. For construction,
8(a) concern designated for consider- the synopsis must include the geo-
ation, including a brief justification, graphical area of the competition set
such as forth in the SBAs acceptance letter.
(i) The 8(a) concern, through its own [54 FR 46005, Oct. 31, 1989, as amended at 61
efforts, marketed the requirement and FR 67421, Dec. 20, 1996; 62 FR 44823, Aug. 22,
caused it to be reserved for the 8(a) 1997; 64 FR 32744, June 17, 1999; 65 FR 46057,
Program; or July 26, 2000; 66 FR 27413, May 16, 2001]
(ii) The acquisition is a follow-on or
renewal contract and the nominated 19.8043 SBA acceptance.
concern is the incumbent. (a) Upon receipt of the contracting
(11) Bonding requirements, if applica- agencys offer, the SBA will determine
ble. whether to accept the requirement for
(12) Identification of all known 8(a) the 8(a) Program. The SBAs decision
concerns, including HUBZone 8(a) con- whether to accept the requirement will
cerns, that have expressed an interest be transmitted to the contracting
in being considered for the specific re- agency in writing within 10 working
quirement. days of receipt of the offer if the con-
(13) Identification of all SBA field of- tract is likely to exceed the simplified
fices that have asked for the acquisi- acquisition threshold and within 2 days
tion for the 8(a) Program. of receipt if the contract is at or below
(14) A request, if appropriate, that a the simplified acquisition threshold.
requirement with an estimated con- The contracting agency may grant an
tract value under the applicable com- extension of these time periods. If SBA
petitive threshold be awarded as an 8(a) does not respond to an offering letter
competitive contract (see 19.8051(d)). within 10 days, the contracting activ-
(15) A request, if appropriate, that a ity may seek SBAs acceptance
requirement with a contract value over through the Associate Administrator
the applicable competitive threshold be (AA)/8(a)BD.
awarded as a sole source contract (see (b) If the acquisition is accepted as a
19.8051(b)). sole source, the SBA will advise the
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19.8044 48 CFR Ch. 1 (10103 Edition)
contracting activity of the 8(a) firm se- 19.8045 Basic ordering agreements.
lected for negotiation. Generally, the
(a) The contracting activity must
SBA will accept a contracting activi-
offer, and SBA must accept, each order
tys recommended source.
under a basic ordering agreement
(c) For acquisitions not exceeding the
(BOA) in addition to offering and ac-
simplified acquisition threshold, when
cepting the BOA itself.
the contracting activity makes an offer
to the 8(a) Program on behalf of a spe- (b) SBA will not accept for award on
cific 8(a) firm and does not receive a a sole-source basis any order that
reply to its offer within 2 days, the would cause the total dollar amount of
contracting activity may assume the orders issued under a specific BOA to
offer is accepted and proceed with exceed the competitive threshold
award of an 8(a) contract. amount in 19.8051.
(d) As part of the acceptance process, (c) Once an 8(a) concerns program
SBA will review the appropriateness of term expires, the concern otherwise
the NAICS code designation assigned exits the 8(a) Program, or becomes
to the requirement by the contracting other than small for the NAICS code
activity. assigned under the BOA, SBA will not
(1) SBA will not challenge the NAICS accept new orders for the concern.
code assigned to the requirement by [64 FR 32744, June 17, 1999, as amended at 65
the contracting activity if it is reason- FR 46057, July 26, 2000]
able, even though other NAICS codes
may also be reasonable. 19.8046 Multiple award and Federal
(2) If SBA and the contracting activ- Supply Schedule contracts.
ity are unable to agree on a NAICS (a) Separate offers and acceptances
code designation for the requirement, must not be made for individual orders
SBA may refuse to accept the require- under multiple award or Federal Sup-
ment for the 8(a) Program, appeal the ply Schedule (FSS) contracts. SBAs
contracting officers determination to acceptance of the original multiple
the head of the agency pursuant to award or FSS contract is valid for the
19.810, or appeal the NAICS code des- term of the contract.
ignation to the SBA Office of Hearings (b) The requirements of 19.8051 do
and Appeals under subpart C of 13 CFR not apply to individual orders that ex-
part 134. ceed the competitive threshold as long
[48 FR 42240, Sept. 19, 1983, as amended at 56 as the original contract was competed.
FR 55380, Oct. 25, 1991; 61 FR 67421, Dec. 20, (c) An 8(a) concern may continue to
1996; 64 FR 32744, June 17, 1999; 65 FR 46057, accept new orders under a multiple
July 26, 2000] award or FSS contract even after a
concerns program term expires, the
19.8044 Repetitive acquisitions. concern otherwise exits the 8(a) Pro-
In order for repetitive acquisitions to gram, or the concern becomes other
be awarded through the 8(a) Program, than small for the NAICS code assigned
there must be separate offers and ac- under the contract.
ceptances. This allows the SBA to de-
[64 FR 32744, June 17, 1999, as amended at 65
termine FR 46057, July 26, 2000]
(a) Whether the requirement should
be a competitive 8(a) award; 19.805 Competitive 8(a).
(b) A nominated firms eligibility,
whether or not it is the same firm that 19.8051 General.
performed the previous contract;
(a) Except as provided in paragraph
(c) The effect that contract award (b) of this subsection, an acquisition of-
would have on the equitable distribu- fered to the SBA under the 8(a) Pro-
tion of 8(a) contracts; and gram shall be awarded on the basis of
(d) Whether the requirement should competition limited to eligible 8(a)
continue under the 8(a) Program. firms if
10. Add sections 19.8045 and 19.8046
(1) There is a reasonable expectation
to read as follows:
that at least two eligible and respon-
[64 FR 32744, June 17, 1999] sible 8(a) firms will submit offers and
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Federal Acquisition Regulation 19.8052
that award can be made at a fair mar- questing agency is supporting the 8(a)
ket price; and Program on a noncompetitive basis.
(2) The anticipated total value of the The agency may include recommenda-
contract, including options, will exceed tions for competition below the thresh-
$5,000,000 for acquisitions assigned old in the offering letter or by separate
manufacturing North American Indus- correspondence to the AA/8(a)BD.
try Classification System (NAICS) [54 FR 46005, Oct. 31, 1989, as amended at 61
codes and $3,000,000 for all other acqui- FR 67421, Dec. 20, 1996; 64 FR 32744, June 17,
sitions. 1999; 65 FR 46056, July 26, 2000; 68 FR 4051,
(b) Where an acquisition exceeds the Jan. 27, 2003]
competitive threshold, the SBA may
accept the requirement for a sole 19.8052 Procedures.
source 8(a) award if (a) Offers shall be solicited from
(1) There is not a reasonable expecta- those sources identified in accordance
tion that at least two eligible and re- with 19.8043.
sponsible 8(a) firms will submit offers (b) The SBA will determine the eligi-
at a fair market price; bility of the firms for award of the con-
(2) SBA accepts the requirement on tract. Eligibility will be determined by
behalf of a concern owned by an Indian the SBA as of the time of submission of
tribe or an Alaska Native Corporation; initial offers which include price. Eligi-
or bility is based on Section 8(a) Program
(3) The acquisition is conducted criteria.
under the authority of the Homeland (1) In sealed bid acquisitions, upon
Security Act (Public Law 107296) and receipt of offers, the contracting offi-
(i) The acquisition is for supplies or cer will provide the SBA a copy of the
services that, as determined by the solicitation, the estimated fair market
head of the agency, are to be used to price, and a list of offerors ranked in
facilitate defense against or recovery the order of their standing for award
from terrorism or nuclear, biological, (i.e., first low, second low, etc.) with
chemical, or radiological attack; the total evaluated price for each offer,
(ii) The solicitation is issued during differentiating between basic require-
the period of January 24, 2003, through ments and any options. The SBA will
November 24, 2003; and consider the eligibility of the first low
(iii) There is either an approved 13.501 offeror. If the first low offeror is not
justification for sole source acquisi- determined to be eligible, the SBA will
tion, or an approved 6.303 justification consider the eligibility of the next low
using one of the authorities at 6.3021, offeror until an eligible offeror is iden-
6.3022, 6.3026, or 6.3027. tified. The SBA will determine the eli-
(c) A proposed 8(a) requirement with gibility of the firms and advise the con-
an estimated value exceeding the appli- tracting officer within 5 working days
cable competitive threshold amount after its receipt of the list of bidders.
shall not be divided into several re- Once eligibility has been established by
quirements for lesser amounts in order the SBA, the successful offeror will be
to use 8(a) sole source procedures for determined by the contracting activity
award to a single firm. in accordance with normal contracting
(d) The SBA Associate Administrator procedures.
for 8(a) Business Development (AA/ (2) In negotiated acquisition, the
8(a)BD) may approve an agency request SBA will determine eligibility when
for a competitive 8(a) award below the the successful offeror has been estab-
competitive thresholds. Such requests lished by the agency and the contract
will be approved only on a limited basis transmitted for signature unless a re-
and will be primarily granted where ferral has been made under 19.809, in
technical competitions are appropriate which case the SBA will determine eli-
or where a large number of responsible gibility at that point.
8(a) firms are available for competi- (c) In any case in which a firm is de-
tion. In determining whether a request termined to be ineligible, the SBA will
to compete below the threshold will be notify the firm of that determination.
approved, the AA/8(a)BD will, in part, (d) The eligibility of an 8(a) firm for
consider the extent to which the re- a competitive 8(a) award may not be
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19.806 48 CFR Ch. 1 (10103 Edition)
376
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Federal Acquisition Regulation 19.8111
377
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19.8112 48 CFR Ch. 1 (10103 Edition)
(b) of this subsection, use a single con- Contract Conditions, in contracts be-
tract document for both the prime con- tween the SBA and the agency when
tract between the agency and the SBA the acquisition is accomplished using
and its 8(a) contractor. The single con- the procedures of 19.8111(a) and (b).
tract document shall contain the infor- (b) The contracting officer shall in-
mation in paragraphs (b) (1), (2), and (3) sert the clause at 52.21912, Special 8(a)
of this subsection. Appropriate blocks Subcontract Conditions, in contracts
on the Standard Form (SF) 26 or 1442 between the SBA and its 8(a) con-
will be asterisked and a continuation tractor when the acquisition is accom-
sheet appended as a tripartite agree- plished using the procedures of 19.811
ment which includes the following: 1(a) and (b).
(1) Agency acquisition office, prime (c) The contracting officer shall in-
contract number, name of agency con- sert the clause at 52.21917, Section 8(a)
tracting officer and lines for signature, Award, in competitive solicitations and
date signed, and effective date. contracts when the acquisition is ac-
(2) The SBA office, the SBA contract complished using the procedures of
number, name of the SBA contracting 19.805 and in sole source awards which
officer, and lines for signature and date utilize the alternative procedure in
signed. 19.8111(c).
(3) Name and lines for the 8(a) con- (d) The contracting officer shall in-
tractors signature and date signed. sert the clause at 52.21918, Notifica-
(d) For acquisitions not exceeding tion of Competition Limited to Eligible
the simplified acquisition threshold, 8(a) Concerns, in competitive solicita-
the contracting officer may use the al- tions and contracts when the acquisi-
ternative procedures in paragraph (c) tion is accomplished using the proce-
of this subsection with the appropriate dures of 19.805.
simplified acquisition forms. (1) The clause at 52.21918 with its Al-
[54 FR 46005, Oct. 31, 1989, as amended at 55 ternate I will be used when competi-
FR 3883, Feb. 5, 1990; 61 FR 67421, Dec. 20, tion is to be limited to 8(a) concerns
1996; 62 FR 233, Jan. 2, 1997; 62 FR 64940, Dec. within one or more specific SBA dis-
9, 1997; 64 FR 32745, June 17, 1999] tricts pursuant to 19.8042.
(2) The clause at 52.21918 with its Al-
19.8112 Competitive. ternate II will be used when the acqui-
(a) The contract will be prepared in sition is for a product in a class for
accordance with 14.4081(d), except that which the Small Business Administra-
appropriate blocks on the Standard tion has waived the nonmanufacturer
Form 26 or 1442 will be asterisked and rule (see 19.102(f) (4) and (5)).
a continuation sheet appended as a tri- (e) The contracting officer shall in-
partite agreement which includes the sert the clause at 52.21914, Limitations
following: or Subcontracting, in any solicitation
(1) The agency contracting activity, and contract resulting from this sub-
prime contract number, name of agen- part.
cy contracting officer, and lines for
[54 FR 46005, Oct. 31, 1989, as amended at 55
signature, date signed, and effective FR 3883, Feb. 5, 1990; 55 FR 25529, June 21,
date. 1990; 60 FR 48263, Sept. 18, 1995; 61 FR 39209,
(2) The SBA office, the SBA sub- July 26, 1996; 61 FR 67421, Dec. 20, 1996]
contract number, name of the SBA
contracting officer and lines for signa- 19.812 Contract administration.
ture and date signed. (a) The contracting officer shall as-
(b) The process for obtaining signa- sign contract administration functions,
tures shall be as specified in 19.811 as required, based on the location of
1(b)(4). the 8(a) contractor (see Federal Direc-
[54 FR 46005, Oct. 31, 1989, as amended at 60 tory of Contract Administration Serv-
FR 34739, July 3, 1995; 62 FR 233, Jan. 2, 1997; ices Components (available via the
64 FR 32745, June 17, 1999] Internet at http://www.dcma.mil/
casbook/casbook.htm)).
19.8113 Contract clauses. (b) The agency shall distribute copies
(a) The contracting officer shall in- of the contract(s) in accordance with
sert the clause at 52.21911, Special 8(a) part 4. All contracts and modifications,
378
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Federal Acquisition Regulation 19.902
if any, shall be distributed to both the such longer period as agreed to by the
SBA and the firm in accordance with agency and the SBA, the agency head
the timeframes set forth in 4.201. must either confirm or withdraw the
(c) To the extent consistent with the request for waiver. Unless a waiver is
contracting activitys capability and approved by the SBA, the contracting
resources, 8(a) contractors furnishing officer must terminate the contract for
requirements shall be afforded produc- convenience upon receipt of a written
tion and technical assistance, includ- request by the SBA. This requirement
ing, when appropriate, identification of for a convenience termination does not
causes of deficiencies in their products affect the Governments right to termi-
and suggested corrective action to nate for default if the cause for termi-
make such products acceptable. nation of an 8(a) contract is other than
(d) An 8(a) contract, whether in the the transfer of ownership or control.
base or an option year, must be termi-
[54 FR 46005, Oct. 31, 1989, as amended at 56
nated for convenience if the 8(a) con- FR 15151, Apr. 15, 1991; 64 FR 32745, June 17,
cern to which it was awarded transfers 1999; 66 FR 2141, Jan. 10, 2001]
ownership or control of the firm or if
the contract is transferred or novated
for any reason to another firm, unless
Subpart 19.9Very Small Business
the Administrator of the SBA waives Pilot Program
the requirement for contract termi-
nation (13 CFR 124.515). The Adminis- AUTHORITY: 41 U.S.C. 486(c); 10 U.S.C. chap-
trator may waive the termination re- ter 137; and 42 U.S.C. 2473(c).
quirement only if certain conditions SOURCE: 64 FR 10536, Mar. 4, 1999, unless
exist. Moreover, a waiver of the re- otherwise noted.
quirement for termination is permitted
only if the 8(a) firms request for waiv- 19.901 General.
er is made to the SBA prior to the ac- (a) The Very Small Business Pilot
tual relinquishment of ownership or Program was established under Section
control, except in the case of death or 304 of the Small Business Administra-
incapacity where the waiver must be tion Reauthorization and Amendments
submitted within 60 days after such an Act of 1994 (Public Law 103403).
occurrence. The clauses in the contract (b) The purpose of the program is to
entitled Special 8(a) Contract Condi- improve access to Government con-
tions and Special 8(a) Subcontract tract opportunities for concerns that
Conditions require the SBA and the are substantially below SBAs size
8(a) subcontractor to notify the con- standards by reserving certain acquisi-
tracting officer when ownership of the tions for competition among such con-
firm is being transferred. When the cerns.
contracting officer receives informa- (c) This pilot program terminates on
tion that an 8(a) contractor is planning September 30, 2003. Therefore, any
to transfer ownership or control to an- award under this program must be
other firm, the contracting officer made on or before this date.
must take action immediately to pre-
serve the option of waiving the termi- [64 FR 10536, Mar. 4, 1999, as amended at 66
nation requirement. The contracting FR 53500, Oct. 22, 2001]
officer should determine the timing of
19.902 Designated SBA district.
the proposed transfer and its effect on
contract performance and mission sup- A designated SBA district is the geo-
port. If the contracting officer deter- graphic area served by any of the fol-
mines that the SBA does not intend to lowing SBA district offices:
waive the termination requirement, (1) Albuquerque, NM, serving New
and termination of the contract would Mexico.
severely impair attainment of the (2) Los Angeles, CA, serving the fol-
agencys program objectives or mis- lowing counties in California: Los An-
sion, the contracting officer should im- geles, Santa Barbara, and Ventura.
mediately notify the SBA in writing (3) Boston, MA, serving Massachu-
that the agency is requesting a waiver. setts.
Within 15 business days thereafter, or (4) Louisville, KY, serving Kentucky.
379
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19.903 48 CFR Ch. 1 (10103 Edition)
(5) Columbus, OH, serving the fol- (b) The Very Small Business Pilot
lowing counties in Ohio: Adams, Allen, Program does not apply to
Ashland, Athens, Auglaize, Belmont, (1) Acquisitions that will be awarded
Brown, Butler, Champaign, Clark, pursuant to the 8(a) Program;
Clermont, Clinton, Coshocton, (2) Any requirement that is subject
Crawford, Darke, Delaware, Fairfield, to the Small Business Competitiveness
Fayette, Franklin, Gallia, Greene, Demonstration Program (see Subpart
Guernsey, Hamilton, Hancock, Hardin, 19.10);
Highland, Hocking, Holmes, Jackson, (3) Acquisitions of $7,500 or less for
Knox, Lawrence, Licking, Logan, Madi- acquisitions of supplies or services
son, Marion, Meigs, Mercer, Miami, that, as determined by the head of the
Monroe, Montgomery, Morgan, Mor- agency, are to be used to facilitate de-
row, Muskingum, Noble, Paulding, fense against or recovery from ter-
Perry, Pickaway, Pike, Preble, Put- rorism or nuclear, biological, chemical,
nam, Richland, Ross, Scioto, Shelby, or radiological attack as described in
Union, Van Wert, Vinton, Warren, 13.201(g)(1)(i); or
Washington, and Wyandot. (4) Acquisitions of $15,000 or less fa-
(6) New Orleans, LA, serving Lou- cilitating the defense against terrorism
isiana. or biological or chemical attack
(7) Detroit, MI, serving Michigan. against the United States as described
(8) Philadelphia, PA, serving the in 13.201(g)(1)(ii).
State of Delaware and the following
[64 FR 10536, Mar. 4, 1999, as amended at 67
counties in Pennsylvania: Adams,
FR 56121, Aug. 30, 2002; 68 FR 4051, Jan. 27,
Berks, Bradford, Bucks, Carbon, Ches- 2003]
ter, Clinton, Columbia, Cumberland,
Dauphin, Delaware, Franklin, Fulton, 19.904 Procedures.
Huntington, Juniata, Lackawanna, (a) A contracting officer must set-
Lancaster, Lebanon, Lehigh, Luzerne, aside for very small business concerns
Lycoming, Mifflin, Monroe, Mont- each acquisition that has an antici-
gomery, Montour, Northampton, pated dollar value exceeding $2,500 but
Northumberland, Philadelphia, Perry, not greater than $50,000 if
Pike, Potter, Schuylkill, Snyder, Sul- (1) In the case of an acquisition for
livan, Susquehanna, Tioga, Union, supplies
Wayne, Wyoming, and York. (i) The contracting office is located
(9) El Paso, TX, serving the following within the geographical area served by
counties in Texas: Brewster, Culberson, a designated SBA district; and
El Paso, Hudspeth, Jeff Davis, Pecos, (ii) There is a reasonable expectation
Presidio, Reeves, and Terrell. of obtaining offers from two or more
(10) Santa Ana, CA, serving the fol- responsible very small business con-
lowing counties in California: Orange, cerns headquartered within the geo-
Riverside, and San Bernadino. graphical area served by the designated
[64 FR 10536, Mar. 4, 1999, as amended at 66 SBA district that are competitive in
FR 2130, Jan. 10, 2001] terms of market prices, quality, and
delivery; or
19.903 Applicability. (2) In the case of an acquisition for
(a) The Very Small Business Pilot services
Program applies to acquisitions, in- (i) The contract will be performed
cluding construction acquisitions, with within the geographical area served by
an estimated value exceeding $2,500 but a designated SBA district; and
not greater than $50,000, when (ii) There is a reasonable expectation
(1) In the case of an acquisition for of obtaining offers from two or more
supplies, the contracting office is lo- responsible very small business con-
cated within the geographical area cerns headquartered within the geo-
served by a designated SBA district; or graphical area served by the designated
(2) In the case of an acquisition for SBA district that are competitive in
other than supplies, the contract will terms of market prices, quality, and
be performed within the geographical delivery.
area served by a designated SBA dis- (b) Contracting officers must deter-
trict. mine the applicable designated SBA
380
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Federal Acquisition Regulation 19.1003
381
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19.1004 48 CFR Ch. 1 (10103 Edition)
237110 ....................... Water and Sewer Line and Related Structures Construction.
237120 ....................... Oil and Gas Pipeline and Related Structures Construction.
237130 ....................... Power and Communication Line and Related Structures Construction.
237210 ....................... Land Subdivision.
237310 ....................... Highway, Street, and Bridge Construction.
237990 ....................... Other Heavy and Civil Engineering Construction (except dredging).
382
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Federal Acquisition Regulation 19.1007
PSC J999 ................... Non-nuclear Ship Repair (West) Ship Repair (including overhauls and conversions) performed on non-
nuclear propelled and nonpropelled ships west of the 108th meridian.
383
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19.1008 48 CFR Ch. 1 (10103 Edition)
384
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Federal Acquisition Regulation 19.1201
(2) That are awarded pursuant to the (c) Do not evaluate offers using the
8(a) Program; price evaluation adjustment when it
(3) That are set aside for small busi- would cause award, as a result of this
ness concerns; adjustment, to be made at a price that
(4) That are set aside for HUBZone exceeds fair market price by more than
small business concerns; the factor as determined by the De-
(5) Where price is not a selection fac- partment of Commerce (see 19.2026(a)).
tor so that a price evaluation adjust- [63 FR 35724, June 30, 1998, as amended at 63
ment would not be considered (e.g., ar- FR 52427, Sept. 30, 1998; 64 FR 36223, July 2,
chitect/engineer acquisitions); or 1999; 64 FR 72419, Dec. 27, 1999]
(6) Where all fair and reasonable of-
fers are accepted (e.g., the award of 19.1104 Contract clause.
multiple award schedule contracts). Insert the clause at 52.21923, Notice
of Price Evaluation Adjustment for
[64 FR 36223, July 2, 1999, as amended at 65
FR 46057, July 26, 2000]
Small Disadvantaged Business Con-
cerns, in solicitations and contracts
19.1103 Procedures. when the circumstances in 19.1101 and
19.1102 apply. If a price evaluation ad-
(a) Give offers from small disadvan- justment is authorized on a regional
taged business concerns a price evalua- basis, the clause shall be included in
tion adjustment by adding the factor the solicitation even if the place of per-
determined by the Department of Com- formance is outside an authorized re-
merce to all offers, except gion. The contracting officer shall in-
(1) Offers from small disadvantaged sert the authorized price evaluation ad-
business concerns that have not waived justment factor. The clause shall be
the evaluation adjustment; or, if a used with its Alternate I when the con-
price evaluation adjustment for small tracting officer determines that there
disadvantaged business concerns is au- are no small disadvantaged business
thorized on a regional basis, offers manufacturers that can meet the re-
from small disadvantaged business con- quirements of the solicitation. The
cerns, whose address is in such a re- clause shall be used with its Alternate
gion, that have not waived the evalua- II when a price evaluation adjustment
tion adjustment; is authorized on a regional basis.
(2) An otherwise successful offer of
eligible products under the Trade [63 FR 52427, Sept. 30, 1998, as amended at 64
FR 36223, July 2, 1999]
Agreements Act when the acquisition
equals or exceeds the dollar threshold
in 25.403; Subpart 19.12Small Disadvan-
(3) An otherwise successful offer taged Business Participation
where application of the factor would Program
be inconsistent with a Memorandum of
Understanding or other international SOURCE: 63 FR 36123, July 1, 1998, unless
agreement with a foreign government; otherwise noted.
(4) For DoD, NASA, and Coast Guard
acquisitions, an otherwise successful 19.1201 General.
offer from a historically black college This subpart addresses the evalua-
or university or minority institution; tion of the extent of participation of
or small disadvantaged business (SDB)
(5) For DoD acquisitions, an other- concerns in performance of contracts
wise successful offer of qualifying in the North American Industry Classi-
country end products (see DFARS fication System (NAICS) Industry Sub-
225.00070 and 252.2257001). sectors as determined by the Depart-
(b) Apply the factor to a line item or ment of Commerce (see 19.201(b)), and
a group of line items on which award to the extent authorized by law. Two
may be made. Add other evaluation mechanisms are addressed in this sub-
factors such as transportation costs or part
rent-free use of Government facilities (a) An evaluation factor or subfactor
to the offers before applying the price for the participation of SDB concerns
evaluation adjustment. in performance of the contract; and
385
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19.1202 48 CFR Ch. 1 (10103 Edition)
(b) An incentive subcontracting pro- (4) Contract actions that will be per-
gram for SDB concerns. formed entirely outside of the United
States and its outlying areas.
[63 FR 36123, July 1, 1998, as amended at 65
FR 46057, July 26, 2000] [63 FR 36123, July 1, 1998, as amended at 63
FR 70272, Dec. 18, 1998; 65 FR 46057, July 26,
19.1202 Evaluation factor or subfactor. 2000; 68 FR 28082, May 22, 2003]
386
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Federal Acquisition Regulation 19.1303
387
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19.1304 48 CFR Ch. 1 (10103 Edition)
388
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Federal Acquisition Regulation 19.1307
shall file its formal appeal with the (2) The solicitation is issued, during
head of the contracting activity, or the period of January 24, 2003, through
that agency may consider the appeal November 24, 2003; and
withdrawn. The head of the con- (3) There is either an approved 13.501
tracting activity shall reply to SBA justification for sole source acquisi-
within 15 working days of receiving the tion, or an approved 6.303 justification
appeal. The decision of the head of the using one of the authorities at 6.3021,
contracting activity shall be final. 6.3022, 6.3026, or 6.3027.
[63 FR 70272, Dec. 18, 1998, as amended at 65
19.1306 HUBZone sole source awards. FR 46057, July 26, 2000; 68 FR 4051, Jan. 27,
(a) A participating agency con- 2003]
tracting officer may award contracts
19.1307 Price evaluation preference
to HUBZone small business concerns for HUBZone small business con-
on a sole source basis without consid- cerns.
ering small business set-asides (see
(a) The price evaluation preference
subpart 19.5), provided
for HUBZone small business concerns
(1) Only one HUBZone small business shall be used in acquisitions conducted
concern can satisfy the requirement; using full and open competition. The
(2) Except as provided in paragraph preference shall not be used
(c) of this section, the anticipated price (1) In acquisitions expected to be less
of the contract, including options, will than or equal to the simplified acquisi-
not exceed tion threshold;
(i) $5,000,000 for a requirement within (2) Where price is not a selection fac-
the North American Industry Classi- tor so that a price evaluation pref-
fication System (NAICS) codes for erence would not be considered (e.g.,
manufacturing; or Architect/Engineer acquisitions);
(ii) $3,000,000 for a requirement with- (3) Where all fair and reasonable of-
in any other NAICS code; fers are accepted (e.g., the award of
(3) The requirement is not currently multiple award schedule contracts).
being performed by a non-HUBZone (b) The contracting officer shall give
small business concern; offers from HUBZone small business
(4) The acquisition is greater than concerns a price evaluation preference
the simplified acquisition threshold by adding a factor of 10 percent to all
(see part 13); offers, except
(5) The HUBZone small business con- (1) Offers from HUBZone small busi-
cern has been determined to be a re- ness concerns that have not waived the
evaluation preference;
sponsible contractor with respect to
(2) Otherwise successful offers from
performance; and
small business concerns;
(6) Award can be made at a fair and (3) Otherwise successful offers of eli-
reasonable price. gible products under the Trade Agree-
(b) The SBA has the right to appeal ments Act when the acquisition equals
the contracting officers decision not or exceeds the dollar threshold in
to make a HUBZone sole source award. 25.403; and
(c) The contracting officer may (4) Otherwise successful offers where
award contracts exceeding the limits in application of the factor would be in-
paragraph (a)(2) of this section to consistent with a Memorandum of Un-
HUBZone small business concerns on a derstanding or other international
sole source basis if the acquisition is agreement with a foreign government
conducted under the authority of the (see agency supplement).
Homeland Security Act (Public Law (c) The factor of 10 percent shall be
107296, Sec. 856(b)) and applied on a line item basis or to any
(1) The acquisition is for supplies or group of items on which award may be
services that, as determined by the made. Other evaluation factors, such as
head of the agency, are to be used to transportation costs or rent-free use of
facilitate defense against or recovery Government facilities, shall be added
from terrorism or nuclear, biological, to the offer to establish the base offer
chemical, or radiological attack; before adding the factor of 10 percent.
389
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19.1308 48 CFR Ch. 1 (10103 Edition)
390
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Federal Acquisition Regulation Pt. 22
22.4064 Apprentices and trainees. 22.10021 General.
22.4065 Subcontracts. 22.10022 Wage determinations based on pre-
22.4066 Payrolls and statements. vailing rates.
22.4067 Compliance checking. 22.10023 Wage determinations based on col-
22.4068 Investigations. lective bargaining agreements.
22.4069 Withholding from or suspension of 22.10024 Application of the Fair Labor
contract payments. Standards Act minimum wage.
22.40610 Disposition of disputes concerning 22.1003 Applicability.
construction contract labor standards 22.10031 General.
enforcement. 22.10032 Geographical coverage of the Act.
22.40611 Contract terminations. 22.10033 Statutory exemptions.
22.40612 Cooperation with the Department 22.10034 Administrative limitations, vari-
of Labor. ations, tolerances, and exemptions.
22.40613 Semiannual enforcement reports. 22.10035 Some examples of contracts cov-
22.407 Contract clauses. ered.
22.10036 Repair distinguished from remanu-
Subpart 22.5 [Reserved] facturing of equipment.
22.10037 Questions concerning applicability
Subpart 22.6Walsh-Healey Public of the Act.
Contracts Act 22.1004 Department of Labor responsibilities
and regulations.
22.601 [Reserved] 22.1005 [Reserved]
22.602 Statutory requirements. 22.1006 Contract clauses.
22.603 Applicability. 22.1007 Requirement to submit Notice (SF
22.604 Exemptions. 98/98a).
22.6041 Statutory exemptions. 22.1008 Procedures for preparing and sub-
22.6042 Regulatory exemptions. mitting Notice (SF 98/98a).
22.605 Rulings and interpretations of the 22.10081 Preparation of Notice (SF 98/98a).
Act. 22.10082 Preparation of SF 98a.
22.60622.607 [Reserved] 22.10083 Section 4(c) successorship with in-
22.608 Procedures. cumbent contractor collective bar-
22.609 Regional jurisdictions of the Depart- gaining agreement.
ment of Labor, Wage and Hour Division. 22.10084 Procedures when place of perform-
22.610 Contract clause. ance is unknown.
22.10085 Multiple-year contracts.
Subpart 22.7 [Reserved] 22.10086 Contract modifications (options,
extensions, changes in scope) and anni-
Subpart 22.8Equal Employment versary dates.
Opportunity 22.10087 Required time of submission of No-
tice.
22.800 Scope of subpart. 22.1009 Place of performance unknown.
22.801 Definitions. 22.10091 General.
22.802 General. 22.10092 Attempt to identify possible places
22.803 Responsibilities. of performance.
22.804 Affirmative action programs. 22.10093 All possible places of performance
22.8041 Nonconstruction. identified.
22.8042 Construction. 22.10094 All possible places of performance
22.805 Procedures. not identified.
22.806 Inquiries. 22.1010 Notification to interested parties
22.807 Exemptions. under collective bargaining agreements.
22.808 Complaints. 22.1011 Response to Notice by Department
22.809 Enforcement. of Labor.
22.810 Solicitation provisions and contract 22.10111 Department of Labor action.
clauses. 22.10112 Requests for status or expediting
of response.
Subpart 22.9Nondiscrimination Because 22.1012 Late receipt or nonreceipt of wage
of Age determination.
22.10121 General.
22.901 Policy. 22.10122 Response to timely submission of
22.902 Handling complaints. Noticeno collective bargaining agree-
ment.
Subpart 22.10Service Contract Act of 22.10123 Response to timely submission of
1965, as Amended Noticewith collective bargaining agree-
ment.
22.1000 Scope of subpart. 22.10124 Response to late submission of No-
22.1001 Definitions. ticeno collective bargaining agree-
22.1002 Statutory requirements. ment.
391
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22.000 48 CFR Ch. 1 (10103 Edition)
22.10125 Response to late submission of No- 22.1408 Contract clause.
ticewith collective bargaining agree-
ment. Subpart 22.15Prohibition of Acquisition of
22.1013 Review of wage determination. Products Produced by Forced or In-
22.1014 Delay of acquisition dates over 60 dentured Child Labor
days.
22.1015 Discovery of errors by the Depart- 22.1500 Scope.
ment of Labor. 22.1501 Definitions.
22.1502 Policy.
22.1016 Statement of equivalent rates for
22.1503 Procedures for acquiring end prod-
Federal hires.
ucts on the List of Products Requiring
22.1017 Notice of award. Contractor Certification as to Forced or
22.1018 Notification to contractors and em- Indentured Child Labor.
ployees. 22.1504 Violations and remedies.
22.1019 Additional classes of service employ- 22.1505 Solicitation provision and contract
ees. clause.
22.1020 Seniority lists.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
22.1021 Requests for hearing. ter 137; and 42 U.S.C. 2473(c).
22.1022 Withholding of contract payments.
22.1023 Termination for default. SOURCE: 48 FR 42258, Sept. 19, 1983, unless
22.1024 Cooperation with the Department of otherwise noted.
Labor.
22.000 Scope of part.
22.1025 Ineligibility of violators.
22.1026 Disputes concerning labor standards. This part
(a) Deals with general policies re-
Subpart 22.11Professional Employee garding contractor labor relations as
Compensation they pertain to the acquisition process;
(b) Prescribes contracting policy and
22.1101 Applicability. procedures for implementing pertinent
22.1102 Definition. labor laws; and
22.1103 Policy, procedures, and solicitation
(c) Prescribes contract clauses with
provision.
respect to each pertinent labor law.
Subpart 22.12 [Reserved] 22.001 Definition.
Subpart 22.13Special Disabled Veterans, Administrator or Administrator, Wage
Veterans of the Vietnam Era, and and Hour Division, as used in this part,
Other Eligible Veterans means the Administrator, Wage and
Hour Division, Employment Standards
22.1300 Scope of subpart. Administration, U.S. Department of
22.1301 Definition. Labor, Washington, DC 20210 or an au-
22.1302 Policy. thorized representative.
22.1303 Applicability.
22.1304 Procedures. [53 FR 4935, Feb. 18, 1988]
22.1305 Waivers.
22.1306 Department of Labor notices and re- Subpart 22.1Basic Labor Policies
ports.
22.1307 Collective bargaining agreements. 22.101 Labor relations.
22.1308 Complaint procedures.
22.1309 Actions because of noncompliance. 22.1011 General.
22.1310 Solicitation provision and contract (a) Agencies shall maintain sound re-
clauses. lations with industry and labor to en-
sure (1) prompt receipt of information
Subpart 22.14Employment of Workers involving labor relations that may ad-
with Disabilities versely affect the Government acquisi-
22.1400 Scope of subpart. tion process and (2) that the Govern-
22.1401 Policy. ment obtains needed supplies and serv-
22.1402 Applicability. ices without delay. All matters regard-
22.1403 Waivers. ing labor relations shall be handled in
22.1404 Department of Labor notices. accordance with agency procedures.
22.1405 Collective bargaining agreements. (b)(1) Agencies shall remain impar-
22.1406 Complaint procedures. tial concerning any dispute between
22.1407 Actions because of noncompliance. labor and contractor management and
392
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Federal Acquisition Regulation 22.1012
not undertake the conciliation, medi- threaten to delay the timely contract
ation, or arbitration of a labor dispute. performance (see 22.1035(a)).
To the extent practicable, agencies [48 FR 42258, Sept. 19, 1983, as amended at
should ensure that the parties to the 27415, May 16, 2001]
dispute use all available methods for
resolving the dispute, including the 22.1012 Contract pricing and admin-
services of the National Labor Rela- istration.
tions Board, Federal Mediation and (a) Contractor labor policies and
Conciliation Service, the National Me- compensation practices, whether or not
diation Board and other appropriate included in labor-management agree-
Federal, State, local, or private agen- ments, are not acceptable bases for al-
cies. lowing costs in cost-reimbursement
(2) For use of project labor agree- contracts or for recognition of costs in
pricing fixed-price contracts if they re-
ments, see 36.202(d).
sult in unreasonable costs to the Gov-
(c) Agencies should, when prac- ernment. For a discussion of allowable
ticable, exchange information con- costs resulting from labor-management
cerning labor matters with other af- agreements, see 31.2056(b).
fected agencies to ensure a uniform (b) Labor disputes may cause work
Government approach concerning a stoppages that delay the performance
particular plant or labor-management of Government contracts. Contracting
dispute. officers shall impress upon contractors
(d) Agencies should take other ac- that each contractor shall be held ac-
tions concerning labor relations prob- countable for reasonably avoidable
lems to the extent consistent with delays. Standard contract clauses deal-
their acquisition responsibilities. For ing with default, excusable delays, etc.,
example, agencies should do not relieve contractors or sub-
(1) Notify the agency responsible for contractors from the responsibility for
conciliation, mediation, arbitration, or delays that are within the contractors
other related action of the existence of or their subcontractors control. A
any labor dispute affecting or threat- delay caused by a strike that the con-
ening to affect agency acquisition pro- tractor or subcontractor could not rea-
sonably prevent can be excused; how-
grams;
ever, it cannot be excused beyond the
(2) Furnish to the parties to a dispute point at which a reasonably diligent
factual information pertinent to the contractor or subcontractor could have
disputes potential or actual adverse acted to end the strike by actions such
impact on these programs, to the ex- as
tent consistent with security regula- (1) Filing a charge with the National
tions; and Labor Relations Board to permit the
(3) Seek a voluntary agreement be- Board to seek injunctive relief in
tween management and labor, notwith- court.
standing the continuance of the dis- (2) Using other available Government
pute, to permit uninterrupted acquisi- procedures.
tion of supplies and services. This shall (3) Using private boards or organiza-
only be done, however, if the attempt tions to settle disputes.
to obtain voluntary agreement does (c) Strikes normally result in chang-
not involve the agency in the merits of ing patterns of cost incurrence and
the dispute and only after consultation therefore may have an impact on the
with the agency responsible for concil- allowability of costs for cost-reim-
iation, mediation, arbitration, or other bursement contracts or for recognition
related action. of costs in pricing fixed-price con-
tracts. Certain costs may increase be-
(e) The head of the contracting activ-
cause of strikes; e.g., guard services
ity may designate programs or require- and attorneys fees. Other costs in-
ments for which it is necessary that curred during a strike may not fluc-
contractors be required to notify the tuate (e.g., fixed costs such as rent and
Government of actual or potential depreciation), but because of reduced
labor disputes that are delaying or production, their proportion of the unit
393
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22.1013 48 CFR Ch. 1 (10103 Edition)
cost of items produced increases. All sure that the necessary coordination is
costs incurred during strikes shall be accomplished.
carefully examined to ensure recogni-
tion of only those costs necessary for 22.102 Federal and State labor re-
performing the contract in accordance quirements.
with the Governments essential inter-
est. 22.1021 Policy.
(d) If during a labor dispute, the in- Agencies shall cooperate, and encour-
spectors safety is not endangered, the age contractors to cooperate with Fed-
normal functions of inspection at the eral and State agencies responsible for
plant of a Government contractor shall enforcing labor requirements such as
be continued without regard to the ex- (a) Safety;
istence of a labor dispute, strike, or (b) Health and sanitation;
picket line. (c) Maximum hours and minimum
[48 FR 42258, Sept. 19, 1983, as amended at 68 wages;
FR 43866, July 24, 2003] (d) Equal employment opportunity;
(e) Child and convict labor;
22.1013 Reporting labor disputes.
(f) Age discrimination;
The office administering the contract (g) Disabled and Vietnam veteran
shall report, in accordance with agency employment; and
procedures, any potential or actual (h) Employment of the handicapped.
labor disputes that may interfere with
performing any contracts under its [48 FR 42258, Sept. 19, 1983, as amended at 56
cognizance. If a contract contains the FR 55374, Oct. 25, 1991]
clause at 52.2221, Notice to the Gov-
ernment of Labor Disputes, the con- 22.1022 Administration.
tractor also must report any actual or (a) Agencies shall cooperate with,
potential dispute that may delay con- and encourage contractors to use to
tract performance. the fullest extent practicable, the
United States Employment Service
22.1014 Removal of items from con- (USES) and its affiliated local State
tractors facilities affected by work
stoppages. Employment Service offices in meeting
contractors labor requirements. These
(a) Items shall be removed from con- requirements may be to staff new or
tractors facilities affected by work expanding plant facilities, including re-
stoppages in accordance with agency quirements for workers in all occupa-
procedures. Agency procedures should tions and skills from local labor mar-
allow for the following: ket areas or through the Federal-State
(1) Determine whether removal of employment clearance system.
items is in the Governments interest.
(b) Local State employment offices
Normally the determining factor is the
are operated throughout the United
critical needs of an agency program.
States, Puerto Rico, Guam, and the
(2) Attempt to arrange with the con-
U.S. Virgin Islands. In addition to pro-
tractor and the union representative
involved their approval of the shipment viding recruitment assistance to con-
of urgently required items. tractors, cooperation with the local
(3) Obtain appropriate approvals from State Employment Service offices will
within the agency. further the national program of main-
taining continuous assessment of man-
(4) Determine who will remove the
items from the plant(s) involved. power requirements and resources on a
national and local basis.
(b) Avoid the use or appearance of
force and prevent incidents that might (c) The U.S. Department of Labor is
detrimentally affect labor-manage- responsible for the administration and
ment relations. enforcement of the Occupational Safe-
(c) When two or more agencies re- ty and Health Act.
quirements are or may become in- [48 FR 42258, Sept. 19, 1983, as amended at 56
volved in the removal of items, the FR 55374, Oct. 25, 1991; 68 FR 28082, May 22,
contract administration office shall en- 2003]
394
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Federal Acquisition Regulation 22.1034
395
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22.1035 48 CFR Ch. 1 (10103 Edition)
396
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Federal Acquisition Regulation 22.303
(a) The contract will be subject to the Government. The contracting offi-
the Walsh-Healey Public Contracts Act cer must assess liquidated damages at
(see subpart 22.6), which contains a sep- the rate of $10 per affected employee
arate prohibition against the employ- for each calendar day on which the em-
ment of convict labor; ployer required or permitted the em-
(b) The supplies or services are to be ployee to work in excess of the stand-
purchased from Federal Prison Indus- ard workweek of 40 hours without pay-
tries, Inc. (see subpart 8.6); or ing overtime wages required by the
(c) The acquisition involves the pur-
Act.
chase, from any State prison, of fin-
ished supplies that may be secured in (b) If the contractor or subcontractor
the open market or from existing fails or refuses to comply with over-
stocks, as distinguished from supplies time pay requirements of the Act and
requiring special fabrication. the funds withheld by Federal agencies
for labor standards violations do not
[48 FR 42258, Sept. 19, 1983, as amended at 60
cover the unpaid wages due laborers
FR 34758, July 3, 1995; 61 FR 31644, June 20,
1996; 68 FR 28082, May 22, 2003] and mechanics and the liquidated dam-
ages due the Government, make pay-
Subpart 22.3Contract Work ments in the following order
Hours and Safety Standards Act (1) Pay laborers and mechanics the
wages they are owed (or prorate avail-
22.300 Scope of subpart. able funds if they do not cover the en-
This subpart prescribes policies and tire amount owed); and
procedures for applying the require- (2) Pay liquidated damages.
ments of the Contract Work Hours and (c) If the head of an agency finds that
Safety Standards Act (40 U.S.C. 327333) the administratively determined liq-
(the Act) to contracts that may require uidated damages due under paragraph
or involve laborers or mechanics. In (a) of this section are incorrect, or that
this subpart, the term laborers or me- the contractor or subcontractor inad-
chanics includes apprentices, trainees, vertently violated the Act despite the
helpers, watchmen, guards, fire- exercise of due care, the agency head
fighters, fireguards, and workmen who may
perform services in connection with (1) Reduce the amount of liquidated
dredging or rock excavation in rivers damages assessed for liquidated dam-
or harbors, but does not include any
ages of $500 or less;
employee employed as a seaman.
(2) Release the contractor or subcon-
[51 FR 12293, Apr. 9, 1986] tractor from the liability for liquidated
damages of $500 or less; or
22.301 Statutory requirement.
(3) Recommend that the Secretary of
The Act requires that certain con- Labor reduce or waive liquidated dam-
tracts contain a clause specifying that ages over $500.
no laborer or mechanic doing any part (d) After the contracting officer de-
of the work contemplated by the con-
termines the liquidated damages and
tract shall be required or permitted to
the contractor makes appropriate pay-
work more than 40 hours in any work-
ments, disburse any remaining assess-
week unless paid for all such overtime
hours at not less than 112 times the ments in accordance with agency pro-
basic rate of pay. cedures.
[48 FR 42258, Sept. 19, 1983 as amended at 51 [65 FR 46065, July 26, 2000]
FR 12293, Apr. 9, 1986]
22.303 Administration and enforce-
22.302 Liquidated damages and over- ment.
time pay. The procedures and reports required
(a) When an overtime computation for construction contracts in subpart
discloses underpayments, the respon- 22.4 also apply to investigations of al-
sible contractor or subcontractor must leged violations of the Act on other
pay the affected employee any unpaid than construction contracts.
wages and pay liquidated damages to
397
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22.304 48 CFR Ch. 1 (10103 Edition)
398
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Federal Acquisition Regulation 22.401
Housing Act of 1949 in the construction which has been so certified by the Ad-
or development of the project. ministration.
Construction, alteration, or repair (3) Working foremen who devote
means all types of work done on a par- more than 20 percent of their time dur-
ticular building or work at the site ing a workweek performing duties of a
thereof, including without limitation, laborer or mechanic, and who do not
altering, remodeling, installation (if meet the criteria of 29 CFR part 541, for
appropriate) on the site of the work of the time so spent; and
items fabricated off-site, painting and (4) Every person performing the du-
decorating, the transporting of mate- ties of a laborer or mechanic, regard-
rials and supplies to or from the build- less of any contractual relationship al-
ing or work by the employees of the leged to exist between the contractor
construction contractor or construc- and those individuals. The terms ex-
tion subcontractor, and the manufac- clude workers whose duties are pri-
turing or furnishing of materials, arti- marily executive, supervisory (except
cles, supplies, or equipment on the site as provided in paragraph (3) of this def-
of the building or work by persons em- inition), administrative, or clerical,
ployed by the contractor or subcon- rather than manual. Persons employed
tractor. in a bona fide executive, administra-
Laborers or mechanics includes tive, or professional capacity as de-
(1) Those workers, utilized by a con- fined in 29 CFR part 541 are not deemed
tractor or subcontractor at any tier, to be laborers or machanics.
whose duties are manual or physical in Public building or public work means
nature (including those workers who building or work, the construction,
use tools or who are performing the prosecution, completion, or repair of
work of a trade), as distinguished from which, as defined in this section, is car-
mental or managerial; ried on directly by authority of, or
(2) Apprentices, trainees, helpers, with funds of, a Federal agency to
and, in the case of contracts subject to serve the interest of the general public
the Contract Work Hours and Safety regardless of whether title thereof is in
Standards Act, watchmen and guards. a Federal agency.
The terms apprentice and trainee Site of the work is defined as follows:
are defined as follows: (1) The site of the work is limited to
(i) Apprentice means (A) a person em- the physical place or places where the
ployed and individually registered in a construction called for in the contract
bona fide apprenticeship program reg- will remain when work on it is com-
istered with the U.S. Department of pleted, and nearby property, as de-
Labor, Employment and Training Ad- scribed in paragraph (2) of this defini-
ministration, Bureau of Apprenticeship tion, used by the contractor or subcon-
and Training, or with a State Appren- tractor during construction that, be-
ticeship Agency recognized by the Bu- cause of proximity, can reasonably be
reau, or (B) a person in the first 90 days included in the site.
of probationary employment as an ap- (2) Except as provided in paragraph
prentice in such an apprenticeship pro- (3) of this definition, fabrication
gram, who is not individually reg- plants, mobile factories, batch plants,
istered in the program, but who has borrow pits, job headquarters, tool
been certified by the Bureau of Appren- yards, etc., are parts of the site of the
ticeship and Training or a State Ap- work; provided they are dedicated ex-
prenticeship Agency (where appro- clusively, or nearly so, to performance
priate) to be eligible for probationary of the contract or project, and are so
employment as an apprentice. located in proximity to the actual con-
(ii) Trainee means a person registered struction location that it would be rea-
and receiving on-the-job training in a sonable to include them.
construction occupation under a pro- (3) The site of the work does not in-
gram which has been approved in ad- clude permanent home offices, branch
vance by the U.S. Department of plant establishments, fabrication
Labor, Employment and Training Ad- plants, or tool yards of a contractor or
ministration, as meeting its standards subcontractor whose locations and con-
for on-the-job training programs and tinuance in operation are determined
399
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22.402 48 CFR Ch. 1 (10103 Edition)
400
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Federal Acquisition Regulation 22.4034
service, research and development, upon the site of the work shall receive
etc.) if less than the prevailing wage rates as
(i) The construction work is to be determined by the Secretary of Labor.
performed on a public building or pub-
lic work; 22.4032 Copeland Act.
(ii) The contract contains specific re- The Copeland (Anti-Kickback) Act
quirements for a substantial amount of (18 U.S.C. 874 and 40 U.S.C. 276c) makes
construction work exceeding the mone- it unlawful to induce, by force, intimi-
tary threshold for application of the dation, threat of procuring dismissal
Davis Bacon Act (the word substantial from employment, or otherwise, any
relates to the type and quantity of con- person employed in the construction or
struction work to be performed and not repair of public buildings or public
merely to the total value of construc- works, financed in whole or in part by
tion work as compared to the total the United States, to give up any part
value of the contract); and of the compensation to which that per-
(iii) The construction work is phys- son is entitled under a contract of em-
ically or functionally separate from, ployment. The Copeland Act also re-
and is capable of being performed on a quires each contractor and subcon-
segregated basis from, the other work tractor to furnish weekly a statement
required by the contract. of compliance with respect to the
(2) The requirements of this subpart wages paid each employee during the
do not apply if preceding week. Contracts subject to
(i) The construction work is inci- the Copeland Act shall contain a clause
dental to the furnishing of supplies, (see 52.22210) requiring contractors
equipment, or services (for example, and subcontractors to comply with the
the requirements do not apply to sim- regulations issued by the Secretary of
ple installation or alteration at a pub- Labor under the Copeland Act.
lic building or public work that is inci-
dental to furnishing supplies or equip- 22.4033 Contract Work Hours and
ment under a supply contract; how- Safety Standards Act.
ever, if a substantial and segregable
amount of construction, alteration, or The Contract Work Hours and Safety
repair is required, such as for installa- Standards Act (40 U.S.C. 327333) re-
tion of heavy generators or large re- quires that certain contracts (see
frigerator systems or for plant modi- 22.305) contain a clause (see 52.2224)
fication or rearrangement, the require- specifying that no laborer or mechanic
ments of this subpart apply); or doing any part of the work con-
(ii) The construction work is so templated by the contract shall be re-
merged with nonconstruction work or quired or permitted to work more than
so fragmented in terms of the locations 40 hours in any workweek unless paid
or time spans in which it is to be per- for all additional hours at not less than
formed, that it is not capable of being 112 times the basic rate of pay (see
segregated as a separate contractual 22.301).
requirement.
22.4034 Department of Labor regula-
22.403 Statutory and regulatory re- tions.
quirements. (a) Under the statutes referred to in
this 22.403 and Reorganization Plan No.
22.4031 Davis-Bacon Act. 14 of 1950 (3 CFR 194953 Comp., p. 1007),
The Davis-Bacon Act (40 U.S.C. 276a the Secretary of Labor has issued regu-
276a7) provides that contracts in ex- lations in Title 29, Subtitle A, Code of
cess of $2,000 to which the United Federal Regulations, prescribing stand-
States or the District of Columbia is a ards and procedures to be observed by
party for construction, alteration, or the Department of Labor and the Fed-
repair (including painting and deco- eral contracting agencies. Those stand-
rating) of public buildings or public ards and procedures applicable to con-
works within the United States, shall tracts involving construction are im-
contain a clause (see 52.2226) that no plemented in this subpart. The Depart-
laborer or mechanic employed directly ment of Labor regulations include
401
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22.404 48 CFR Ch. 1 (10103 Edition)
(b) The Department of Labor regula- only to the types of construction des-
tions include ignated in the determination.
(1) Part 1, relating to Davis-Bacon
Act minimum wage rates; 22.4041 Types of wage determina-
(2) Part 3, relating to the Copeland tions.
(Anti-Kickback) Act and requirements (a) General wage determinations.
for submission of weekly statements of (1) A general wage determination
compliance and the preservation and contains prevailing wage rates for the
inspection of weekly payroll records; types of construction designated in the
(3) Part 5, relating to enforcement of determination, and is used in contracts
the Davis-Bacon Act, Contract Work performed within a specified geo-
Hours and Safety Standards Act, and graphical area. General wage deter-
Copeland (Anti-Kickback) Act; minations contain no expiration date
(4) Part 6, relating to rules of prac- and remain valid until modified, super-
tice for appealing the findings of the seded, or canceled by a notice in the
Administrator, Wage and Hour Divi- FEDERAL REGISTER by the Department
sion, in enforcement cases under the of Labor. Once incorporated in a con-
Davis-Bacon Act, Contract Work Hours tract, a general wage determination
and Safety Standards Act, Copeland normally remains effective for the life
(Anti-Kickback) Act, and Service Con- of the contract, unless the contracting
tract Act, and by which Administrative officer exercises an option to extend
Law Judge hearings are held; and the term of the contract (see 22.40412).
(5) Part 7, relating to rules of prac- These determinations shall be used
tice by which contractors and other in- whenever possible. They are issued at
terested parties may appeal to the De- the discretion of the Department of
partment of Labor Administrative Re- Labor either upon receipt of an agency
view Board, decisions issued by the Ad- request or on the Department of La-
ministrator, Wage and Hour Division, bors own initiative.
or administrative law judges under the (2) General wage determinations are
Davis-Bacon Act, Contract Work Hours published weekly in the Government
and Safety Standards Act, or Copeland Printing Office (GPO) document enti-
(Anti-Kickback) Act. tled General Wage Determinations
(c) Refer all questions relating to the Issued Under the Davis-Bacon and Re-
application and interpretation of wage lated Acts. Notices of general wage
determinations (including the classi- determinations are published in the
fications therein) and the interpreta- FEDERAL REGISTER. General wage de-
tion of the Department of Labor regu- terminations are effective on the publi-
lations in this subsection to the Ad- cation date of the notice or upon re-
ministrator, Wage and Hour Division. ceipt of the determination by the con-
[53 FR 4935, Feb. 18, 1988, as amended at 66 tracting agency, whichever occurs
FR 2141, Jan. 10, 2001; 66 FR 53480, Oct. 22, first.
2001] (3) The GPO publication is available
for examination at each of the 50 Re-
22.404 Davis-Bacon Act wage deter- gional Government Depository Librar-
minations.
ies and many other of the 1,400 Govern-
The Department of Labor is respon- ment Depository Libraries across the
sible for issuing wage determinations country. Subscriptions may be ob-
reflecting prevailing wages, including tained by contacting: Superintendent
fringe benefits. The wage determina- of Documents, U.S. Government Print-
tions apply only to those laborers and ing Office, Washington, DC 20402. The
mechanics employed by a contractor GPO publication is divided into three
upon the site of the work including volumes East, Central, and West which
drivers who transport to or from the may be ordered separately. The States
site materials and equipment used in covered by each volume are as follows:
the course of contract operations. De-
terminations are issued for different VOLUME IEAST
types of construction, such as building, Alabama Florida
heavy, highway, and residential (re- Connecticut Georgia
ferred to as rate schedules), and apply Delaware Kentucky
402
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Federal Acquisition Regulation 22.4042
Maine Rhode Island 22.4042 General requirements.
Maryland South Carolina
Massachusetts Tennessee (a) The contracting officer must in-
Mississippi Vermont corporate only the appropriate wage
New Hampshire Virginia determinations in solicitations and
New Jersey West Virginia contracts and must designate the work
New York District of Columbia to which each determination or part
North Carolina Puerto Rico thereof applies. The contracting officer
Pennsylvania Virgin Islands must not include project wage deter-
minations in contracts or options other
VOLUME IICENTRAL
than those for which they are issued.
Arkansas Missouri When exercising an option to extend
Illinois Nebraska the term of a contract, the contracting
Iowa Ohio officer must select the most current
Indiana Oklahoma wage determination(s) from the same
Kansas Texas
Louisiana schedule(s) as the wage determina-
Wisconsin tion(s) incorporated into the contract.
Michigan
Minnesota New Mexico (b) If the wage determination is a
general wage determination or a
VOLUME IIIWEST
project wage determination containing
Alaska North Dakota more than one rate schedule, the con-
Arizona Hawaii tracting officer shall either include
California South Dakota only the rate schedules that apply to
Colorado Utah the particular types of construction
Guam Washington
Idaho (building, heavy, highway, etc.) or in-
Wyoming clude the entire wage determination
Montana
Nevada Oregon and clearly indicate the parts of the
(4) On or about January 1 of each work to which each rate schedule shall
year, an annual edition will be issued be applied. Inclusion by reference is
that includes all current general wage not permitted.
determinations for the States covered (c) The Wage and Hour Division has
by each volume. Throughout the re- issued the following general guidelines
mainder of the year regular weekly up- for use in selecting the proper sched-
dates will be distributed providing any ule(s) of wage rates:
modifications or superseded wage de- (1) Building construction is generally
terminations issued. Each volumes an- the construction of sheltered enclo-
nual and weekly editions will be pro- sures with walk-in access, for housing
vided in loose-leaf format. persons, machinery, equipment, or sup-
(b) Project wage determinations. A plies. It typically includes all construc-
project wage determination is issued at tion of such structures, installation of
the specific request of a contracting utilities and equipment (both above
agency. It is used only when no general and below grade level), as well as inci-
wage determination applies, and is ef- dental grading, utilities and paving,
fective for 180 calendar days from the unless there is an established area
date of the determination. However, if practice to the contrary.
a determination expires before con- (2) Residential construction is gen-
tract award, it may be possible to ob- erally the construction, alteration, or
tain an extension to the 180-day life of repair of single family houses or apart-
the determination (see 22.4045(b)(2)). ment buildings of no more than four (4)
stories in height, and typically in-
Once incorporated in a contract, a
cludes incidental items such as site
project wage determination normally
work, parking areas, utilities, streets
remains effective for the life of the
and sidewalks, unless there is an estab-
contract, unless the contracting officer lished area practice to the contrary.
exercises an option to extend the term
(3) Highway construction is generally
of the contract (see 22.40412).
the construction, alteration, or repair
[53 FR 4935, Feb. 18, 1988, as amended at 66 of roads, streets, highways, runways,
FR 53480, Oct. 22, 2001] taxiways, alleys, parking areas, and
403
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22.4043 48 CFR Ch. 1 (10103 Edition)
other similar projects that are not in- tion involved (e.g., building, heavy,
cidental to building, residential, or highway, residential, or other type).
heavy construction. (3) Any available pertinent wage pay-
(4) Heavy construction includes those ment information, unless wage pat-
projects that are not properly classi- terns in the area are clearly estab-
fied as either building, residential, or lished.
highway, and is of a catch-all nature. (4) The estimated cost of each
Such heavy projects may sometimes be project.
distinguished on the basis of their indi- (5) All the classifications of laborers
vidual characteristics, and separate and mechanics likely to be employed.
schedules issued (e.g., dredging, water (c) Time for submission of requests. The
and sewer line, dams, flood control, etc.). time required by the Department of
(5) When the nature of a project is Labor for processing requests for
not clear, it is necessary to look at ad- project wage determinations varies ac-
ditional factors, with primary consid- cording to the facts and circumstances
eration given to locally established in each case. An agency should expect
area practices. If there is any doubt as the processing to take at least 30 days.
to the proper application of wage rate
Accordingly, agencies should submit
schedules to the type or types of con-
requests to the Department of Labor at
struction involved, guidance shall be
least 45 days (60 days if possible) before
sought before the opening of bids, or
issuing the solicitation or exercising
receipt of best and final offers, from
an option to extend the term of a con-
the Administrator, Wage and Hour Di-
vision. Further examples are contained tract.
in Department of Labor All Agency (d) Review of wage determinations. Im-
Memoranda Numbers 130 and 131. mediately upon receipt, the con-
tracting agency shall examine the
[53 FR 4935, Feb. 18, 1988, as amended at 66 wage determination and inform the De-
FR 53480, Oct. 22, 2001] partment of Labor of any changes nec-
essary or appropriate to correct errors.
22.4043 Procedures for requesting
wage determinations. Private parties requesting changes
should be advised to submit their re-
(a) Requests for general wage deter- quests to the Department of Labor.
minations. If there is a general wage de-
termination applicable to the project, [53 FR 4935, Feb. 18, 1988, as amended at 66
the agency may use it without noti- FR 53480, Oct. 22, 2001]
fying the Department of Labor. When
22.4044 Solicitations issued without
necessary, a request for a general wage
wage determinations.
determination may be made by submit-
ting Standard Form (SF) 308, Request (a) If a solicitation is issued before
for Determination and Response to Re- the wage determination is obtained, a
quest, to the Administrator, Wage and notice shall be included in the solicita-
Hour Division, attention: Branch of tion that the schedule of minimum
Construction Contract Wage Deter- wage rates to be paid under the con-
minations. tract will be issued as an amendment
(b) Requests for project wage determina- to the solicitation.
tions. A contracting agency shall sub- (b) In sealed bidding, bids may not be
mit requests for project wage deter- opened until a reasonable time after
minations on SF 308 to the Department the wage determination has been fur-
of Labor. The requests shall include nished to all bidders.
the following information: (c) In negotiated acquisitions, the
(1) The location, including the coun- contracting officer may open proposals
ty (or other civil subdivision) and and conduct negotiations before ob-
State in which the proposed project is taining the wage determination. How-
located. ever, the contracting officer shall in-
(2) The name of the project and a suf- corporate the wage determination into
ficiently detailed description of the the solicitation before submission of
work to indicate the types of construc- best and final offers.
404
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Federal Acquisition Regulation 22.4045
405
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22.4046 48 CFR Ch. 1 (10103 Edition)
406
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Federal Acquisition Regulation 22.4048
undue hardship, or to avoid serious im- Wage and Hour Division, may correct
pairment in the conduct of Govern- any wage determination found to con-
ment business. The contracting officer tain clerical errors. Such corrections
shall follow the procedures in 22.404 will be effective immediately, and will
5(b)(2). apply to any solicitation or active con-
(c) The following applies when con- tract. Before contract award, the con-
tracting by negotiation: tracting officer must follow the proce-
(1) All written actions modifying dures in 22.4045(b)(1) or (2)(i) or (ii) in
wage determinations received by the sealed bidding, and the procedures in
contracting agency before contract 22.4045(c)(3) or (4) in negotiations.
award, or modifications to general After contract award, the contracting
wage determinations notices of which officer must follow the procedures at
are published in the FEDERAL REGISTER 22.4046(b)(5), except that for contract
before award, shall be effective. modifications to exercise an option to
(2) If an effective wage modification extend the term of the contract, the
is received by the contracting officer contracting officer must follow the
before award, the contracting officer procedures at 22.4046(d)(2).
shall follow the procedures in 22.404
5(c)(3) or (4). [66 FR 53480, Oct. 22, 2001]
(3) If an effective wage modification
22.4048 Notification of improper
is received by the contracting officer wage determination before award.
after award, the contracting officer
shall follow the procedures in 22.404 (a) Written notification by the De-
6(b)(5). partment of Labor received by the con-
(d) The following applies when modi- tracting officer prior to award that (1)
fying a contract to exercise an option a solicitation includes the wrong wage
to extend the term of a contract: determination or the wrong rate sched-
(1) A modified wage determination is ule or (2) a wage determination is with-
effective if drawn by the Department of Labor as a
(i) The contracting agency receives a result of a decision by the Wage Ap-
written action from the Department of peals Board, shall be effective imme-
Labor prior to exercise of the option, diately without regard to 22.4046.
or within 45 days after submission of a (b) In sealed bidding, the contracting
wage determination request (22.404 officer shall proceed in accordance
3(c)), whichever is later; or with the following:
(ii) The Department of Labor pub- (1) If the notification reaches the
lishes notice of modifications to gen- contracting officer before bid opening,
eral wage determinations in the FED- the contracting officer shall postpone
ERAL REGISTER before exercise of the the bid opening date, if necessary, to
option. allow a reasonable time to (i) obtain
(2) If the contracting officer receives the appropriate determination if a new
an effective modified wage determina- wage determination is required, (ii)
tion either before or after execution of amend the solicitation to incorporate
the contract modification to exercise the determination (or rate schedule),
the option, the contracting officer and (iii) permit bidders to amend their
must modify the contract to incor- bids. If the appropriate wage deter-
porate the modified wage determina- mination does not change any wage
tion, and any changed wage rates, ef- rates and would not warrant amended
fective as of the date that the option to bids, the contracting officer shall
extend was effective. amend the solicitation to include the
[53 FR 4935, Feb. 18, 1988, as amended at 66 number and date of the new determina-
FR 53480, Oct. 22, 2001] tion.
(2) If the notification reaches the
22.4047 Correction of wage deter- contracting officer after bid opening
minations containing clerical er- but before award, the contracting offi-
rors. cer shall delay awarding the contract,
Upon the Department of Labors own if necessary, and if required, obtain the
initiative or at the request of the con- appropriate wage determination. The
tracting agency, the Administrator, appropriate wage determination shall
407
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22.4049 48 CFR Ch. 1 (10103 Edition)
408
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Federal Acquisition Regulation 22.4061
must not further adjust the contract tracting officer determines, prior to
price as a result of the incorporation of issuance of the solicitation, that a dif-
a new or revised wage determination at ferent percentage is more appropriate
the exercise of each option to extend for a particular contract or require-
the term of the contract. Generally, ment. This percentage adjustment to
this method is used in construction- the designated labor costs must be the
only contracts (with options to extend only adjustment made to cover in-
the term) that are not expected to ex- creases in wages and/or benefits result-
ceed a total of 3 years. ing from the incorporation of a new or
(2) The contracting officer may in- revised wage determination at the ex-
clude in the contract a separately spec- ercise of the option.
ified pricing method that permits an (4) The contracting officer may pro-
adjustment to the contract price or vide a computation method to adjust
contract labor unit price at the exer- the contract price to reflect the con-
cise of each option to extend the term tractors actual increase or decrease in
of the contract. At the time of option wages and fringe benefits (combined) to
exercise, the contracting officer must the extent that the increase is made to
incorporate a new wage determination comply with, or the decrease is volun-
into the contract, and must apply the tarily made by the contractor as a re-
specific pricing method to calculate sult of incorporation of, a new or re-
the contract price adjustment. An ex- vised wage determination at the exer-
ample of a contract pricing method cise of the option to extend the term of
that the contracting officer might sep- the contract. Generally, this method is
arately specify is incorporation in the appropriate for use only if contract re-
solicitation and resulting contract of quirements are predominately services
the pricing data from an annually pub- subject to the Service Contract Act
lished unit pricing book (e.g., the R.S. and the construction requirements are
Means Cost Estimating System, or the substantial and segregable. The meth-
U.S. Army Computer-Aided Cost Esti- ods used to adjust the contract price
mating System), which is multiplied in for the service requirements and the
the contract by a factor proposed by construction requirements would be
the contractor (e.g., .95 or 1.1). At op- similar.
tion exercise, the contracting officer
incorporates the pricing data from the [66 FR 53481, Oct. 22, 2001]
latest annual edition of the unit pric-
ing book, multiplied by the factor 22.405 Labor standards for construc-
agreed to in the basic contract. The tion work performed under facili-
ties contracts.
contracting officer must not further
adjust the contract price as a result of If it is not certain at the time of con-
the incorporation of the new or revised tract award that construction work
wage determination. may be required under a facilities con-
(3) The contracting officer may pro- tract (see 45.301), the clause at 52.222
vide for a contract price adjustment 17, Labor Standards for Construction
based solely on a percentage rate deter- WorkFacilities Contracts (see
mined by the contracting officer using 22.407(c)) shall be included in the con-
a published economic indicator incor- tract. When covered construction work
porated into the solicitation and re- is necessary after contract award, the
sulting contract. At the exercise of contracting officer shall obtain the ap-
each option to extend the term of the propriate wage determination and in-
contract, the contracting officer will corporate it in the contract and iden-
apply the percentage rate, based on the tify the item or items of construction
economic indicator, to the portion of work to which the clauses apply.
the contract price or contract unit
price designated in the contract clause 22.406 Administration and enforce-
as labor costs subject to the provisions ment.
of the Davis-Bacon Act. The con-
tracting officer must insert 50 percent 22.4061 Policy.
as the estimated portion of the con- (a) General. Contracting agencies are
tract price that is labor unless the con- responsible for ensuring the full and
409
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22.4062 48 CFR Ch. 1 (10103 Edition)
410
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Federal Acquisition Regulation 22.4064
wage determination, or the basic hour- the contracting officer do not agree on
ly rate actually paid by the contractor, the proposed additional classification,
if higher. The basic rate of pay includes or if the criteria are not met, the con-
employee contributions to fringe bene- tracting officer shall submit a report
fits, but excludes the contractors con- (including a copy of SF 1444) giving the
tributions, costs, or payment of cash views of all interested parties and the
equivalents for fringe benefits. Over- contracting officers recommendation
time shall not be computed on a rate to the Administrator, Wage and Hour
lower than the basic hourly rate in the Division, for determination of appro-
wage determination. priate classification and wage rate.
(d)(1) Within 30 days of receipt of the
22.4063 Additional classifications. report, the Administrator, Wage and
(a) If any laborer or mechanic is to be Hour Division, will complete action
employed in a classification that is not and so advise the contracting officer,
listed in the wage determination appli- or will notify the contracting officer
cable to the contract, the contracting that additional time is necessary.
officer, pursuant to the clause at (2) Upon receipt of the Department of
52.2226, Davis-Bacon Act, shall require Labors action, the contracting officer
that the contractor submit to the con- shall forward a copy of the action to
tracting officer, Standard Form (SF) the contractor, directing that the clas-
1444, Request for Authorization of Ad- sification and wage rate be posted in
ditional Classification and Rate, which, accordance with paragraph (a) of the
along with other pertinent data, con- clause at 52.2226 and that workers in
tains the proposed additional classi- the affected classification receive no
fication and minimum wage rate in- less than the minimum rate indicated
cluding any fringe benefits payments. from the first day on which work under
(b) Upon receipt of SF 1444 from the the contract was performed in the clas-
contractor, the contracting officer sification.
shall review the request to determine (e) In each option to extend the term
whether it meets the following criteria: of the contract, if any laborer or me-
(1) The classification is appropriate chanic is to be employed during the op-
and the work to be performed by the tion in a classification that is not list-
classification is not performed by any ed (or no longer listed) on the wage de-
classification contained in the applica- termination incorporated in that op-
ble wage determination. tion, the contracting officer must re-
(2) The classification is utilized in quire that the contractor submit a re-
the area by the construction industry. quest for conformance using the proce-
(3) The proposed wage rate, including dures noted in paragraphs (a) through
any fringe benefits, bears a reasonable (d) of this section.
relationship to the wage rates in the [53 FR 4935, Feb. 18, 1988, as amended at 57
wage determination in the contract. FR 44263, Sept. 24, 1992; 59 FR 67038, Dec. 28,
(c)(1) If the criteria in paragraph (b) 1994; 66 FR 53481, Oct. 22, 2001]
of this section are met and the con-
tractor and the laborers or mechanics 22.4064 Apprentices and trainees.
to be employed in the additional classi- (a) The contracting officer shall re-
fication (if known) or their representa- view the contractors employment and
tives agree to the proposed additional payment records of apprentices and
classification, and the contracting offi- trainees made available pursuant to
cer approves, the contracting officer the clause at 52.2228, Payrolls and
shall submit a report (including a copy Basic Records, to ensure that the con-
of SF 1444) of that action to the Admin- tractor has complied with the clause at
istrator, Wage and Hour Division, for 52.2229, Apprentices and Trainees.
approval, modification, or disapproval (b) If a contractor has classified em-
of the additional classification and ployees as apprentices or trainees with-
wage rate (including any amount des- out complying with the requirements
ignated for fringe benefits); or of the clause at 52.2229, the con-
(2) If the contractor, the laborers or tracting officer shall reject the classi-
mechanics to be employed in the clas- fication and require the contractor to
sification or their representatives, and pay the affected employees at the rates
411
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22.4065 48 CFR Ch. 1 (10103 Edition)
412
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Federal Acquisition Regulation 22.4068
(c) Special compliance checks. Situa- (b) Investigation report. The con-
tions that may require special compli- tracting officer must review the inves-
ance checks include tigation report on receipt and make
(1) Inconsistencies, errors, or omis- preliminary findings. The contracting
sions detected during regular compli- officer normally must not base adverse
ance checks; or findings solely on employee statements
(2) Receipt of a complaint alleging that the employee does not wish to
violations. If the complaint is not spe- have disclosed. However, if the inves-
cific enough, the complainant shall be tigation establishes a pattern of pos-
so advised and invited to submit addi- sible violations that are based on em-
tional information. ployees statements that are not au-
thorized for disclosure, the pattern
22.4068 Investigations.
itself may support a finding of non-
Conduct labor standards investiga- compliance.
tions when available information indi- (c) Contractor notification. After com-
cates such action is warranted. In addi- pleting the review, the contracting of-
tion, the Department of Labor may ficer must
conduct an investigation on its own
(1) Provide the contractor any writ-
initiative or may request a contracting
ten preliminary findings and proposed
agency to do so.
corrective actions, and notice that the
(a) Contracting agency responsibilities.
contractor has the right to request
Conduct an investigation when a com-
pliance check indicates that substan- that the basis for the findings be made
tial or willful violations may have oc- available and to submit written rebut-
curred or violations have not been cor- tal information.
rected. (2) Upon request, provide the con-
(1) The investigation must tractor with rationale for the findings.
(i) Include all aspects of the contrac- However, under no circumstances will
tors compliance with contract labor the contracting officer permit the con-
standards requirements; tractor to examine the investigation
(ii) Not be limited to specific areas report. Also, the contracting officer
raised in a complaint or uncovered dur- must not disclose the identity of any
ing compliance checks; and employee who filed a complaint or who
(iii) Use personnel familiar with was interviewed, without the prior con-
labor laws and their application to con- sent of the employee.
tracts. (3)(i) The contractor may rebut the
(2) Do not disclose contractor em- findings in writing within 60 days after
ployees oral or written statements it receives a copy of the preliminary
taken during an investigation or the findings. The rebuttal becomes part of
employees identity to anyone other the official investigation record. If the
than an authorized Government official contractor submits a rebuttal, evaluate
without that employees prior signed the preliminary findings and notify the
consent. contractor of the final findings.
(3) Send a written request to the Ad- (ii) If the contracting officer does not
ministrator, Wage and Hour Division, receive a timely rebuttal, the con-
to obtain tracting officer must consider the pre-
(i) Investigation and enforcement in- liminary findings final.
structions; or (4) If appropriate, request the con-
(ii) Available pertinent Department tractor to make restitution for under-
of Labor files.
paid wages and assess liquidated dam-
(4) Obtain permission from the De- ages. If the request includes liquidated
partment of Labor before disclosing
damages, the request must state that
material obtained from Labor Depart-
the contractor has 60 days to request
ment files, other than computations of
back wages and liquidated damages and relief from such assessment.
summaries of back wages due, to any- (d) Contracting officers report. After
one other than Government contract taking the actions prescribed in para-
administrators. graphs (b) and (c) of this subsection
413
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22.4069 48 CFR Ch. 1 (10103 Edition)
(1) The contracting officer must pre- vision, when the report is forwarded for
pare and forward a report of any viola- the Attorney Generals consideration.
tions, including findings and sup- (e) Department of Labor investigations.
porting evidence, to the agency head. The Department of Labor will furnish
Standard Form 1446, Labor Standards the contracting officer an enforcement
Investigation Summary Sheet, is the report detailing violations found and
first page of the report; and any corrective action taken by the con-
(2) The agency head must process the tractor, in investigations that dis-
report as follows: close
(i) The contracting officer must send (1) Underpayments totaling $1,000 or
a detailed enforcement report to the more;
Administrator, Wage and Hour Divi- (2) Aggravated or willful violations
sion, within 60 days after completion of (or, when the contracting officer be-
the investigation, if lieves that the contractor has dis-
(A) A contractor or subcontractor regarded its obligations to employees
underpaid by $1,000 or more; and subcontractors under the Davis-
(B) The contracting officer believes Bacon Act); or
that the violations are aggravated or (3) Potential assessment of liquidated
willful (or there is reason to believe damages under the Contract Work
that the contractor has disregarded its Hours and Safety Standards Act.
obligations to employees and sub- (f) Other investigations. The Depart-
contractors under the Davis-Bacon ment of Labor will provide a letter
Act); summarizing the findings of the inves-
(C) The contractor or subcontractor tigation to the contracting officer for
has not made restitution; or all investigations that are not de-
(D) Future compliance has not been scribed in paragraph (e) of this sub-
assured. section.
(ii) If the Department of Labor ex- [65 FR 46065, July 26, 2000]
pressly requested the investigation and
none of the conditions in paragraph 22.4069 Withholding from or suspen-
(d)(2)(i) of this subsection exist, submit sion of contract payments.
a summary report to the Adminis- (a) Withholding from contract pay-
trator, Wage and Hour Division. The ments. If the contracting officer be-
report must include lieves a violation exists (see 22.406
(A) A summary of any violations; 8), or upon request of the Department
(B) The amount of restitution paid; of Labor, the contracting officer must
(C) The number of workers who re- withhold from payments due the con-
ceived restitution; tractor an amount equal to the esti-
(D) The amount of liquidated dam- mated wage underpayment and esti-
ages assessed under the Contract Work mated liquidated damages due the
Hours and Safety Standards Act; United States under the Contract Work
(E) Corrective measures taken; and Hours and Safety Standards Act. (See
(F) Any information that may be 22.302.)
necessary to review any recommenda- (1) If the contracting officer believes
tions for an appropriate adjustment in a violation exists or upon request of
liquidated damages. the Department of Labor, the con-
(iii) If none of the conditions in para- tracting officer must withhold funds
graphs (d)(2)(i) or (ii) of this subsection from any current Federal contract or
are present, close the case and retain Federally assisted contract with the
the report in the appropriate contract same prime contractor that is subject
file. to either Davis-Bacon Act or Contract
(iv) If substantial evidence is found Work Hours and Safety Standards Act
that violations are willful and in viola- requirements.
tion of a criminal statute, (generally 18 (2) If a subsequent investigation con-
U.S.C. 874 or 1001), forward the report firms violations, the contracting offi-
(supplemented if necessary) to the At- cer must adjust the withholding as nec-
torney General of the United States for essary. However, if the Department of
prosecution if the facts warrant. Notify Labor requested the withholding, the
the Administrator, Wage and Hour Di- contracting officer must not reduce or
414
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Federal Acquisition Regulation 22.40610
release the withholding without writ- the contracting officer must not for-
ten approval of the Department of ward the funds to the Secretary of the
Labor. Treasury, or return them to the con-
(3) Use withheld funds as provided in tractor without approval by the De-
paragraph (c) of this subsection to sat- partment of Labor.
isfy assessed liquidated damages, and (4) Liquidated damages. Upon final ad-
unless the contractor makes restitu- ministrative determination, the con-
tion, validated wage underpayments. tracting officer must dispose of funds
(b) Suspension of contract payments. If withheld or collected for liquidated
a contractor or subcontractor fails or damages in accordance with agency
refuses to comply with the labor stand- procedures.
ards clauses of the Davis-Bacon Act [65 FR 46066, July 26, 2000]
and related statutes, the agency, upon
its own action or upon the written re- 22.40610 Disposition of disputes con-
quest of the Department of Labor, cerning construction contract labor
must suspend any further payment, ad- standards enforcement.
vance, or guarantee of funds until the (a) The areas of possible differences
violations cease or until the agency of opinion between contracting officers
has withheld sufficient funds to com- and contractors in construction con-
pensate employees for back wages, and tract labor standards enforcement in-
to cover any liquidated damages due. clude
(c) Disposition of contract payments (1) Misclassification of workers;
withheld or suspended. (1) Forwarding (2) Hours of work;
wage underpayments to the Secretary of (3) Wage rates and payment;
the Treasury. Upon final administrative (4) Payment of overtime;
determination, if the contractor or (5) Withholding practices; and
subcontractor has not made restitu- (6) The applicability of the labor
tion, the contracting officer must for- standards requirements under varying
ward to the appropriate disbursing of- circumstances.
fice Standard Form (SF) 1093, Schedule (b) Generally, these differences are
of Withholdings Under the Davis-Bacon settled administratively at the project
Act (40 U.S.C. 276(a)) and/or Contract level by the contracting agency. If nec-
Work Hours and Safety Standards Act essary, these differences may be settled
(40 U.S.C. 327333). Attach to the SF with assistance from the Department
1093 a list of the name, social security of Labor.
number, and last known address of (c) When requesting the contractor to
each affected employee; the amount take corrective action in labor viola-
due each employee; employee claims if tion cases, the contracting officer shall
feasible; and a brief rationale for res- inform the contractor of the following:
titution. Also, the contracting officer (1) Disputes concerning the labor
must indicate if restitution was not standards requirements of the contract
made because the employee could not are handled under the contract clause
be located. The Government may assist at 52.22214, Disputes Concerning Labor
underpaid employees in preparation of Standards, and not under the clause at
their claims. The disbursing office 52.2331, Disputes.
must submit the SF 1093 with attached (2) The contractor may appeal the
additional data and the funds withheld contracting officers findings or part
(by check) to the Secretary of the thereof by furnishing the contracting
Treasury. officer a complete statement of the
(2) Returning of withheld funds to con- reasons for the disagreement with the
tractor. When funds withheld exceed the findings.
amount required to satisfy validated (d) The contracting officer shall
wage underpayments and assessed liq- promptly transmit the contracting of-
uidated damages, return the funds to ficers findings and the contractors
the contractor. statement to the Administrator, Wage
(3) Limitation on forwarding or return- and Hour Division.
ing funds. If the Department of Labor (e) The Administrator, Wage and
requested the withholding or if the Hour Division, will respond directly to
findings are disputed (see 22.40610(e)), the contractor or subcontractor, with a
415
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22.40611 48 CFR Ch. 1 (10103 Edition)
copy to the contracting agency. The When requested, the contracting agen-
contractor or subcontractor may ap- cy shall furnish to the Secretary of
peal the Administrators findings in ac- Labor any available information on
cordance with the procedures outlined contractors, subcontractors, current
in Labor Department Regulations (29 and previous contracts, and the nature
CFR 5.11). Hearings before administra- of the contract work.
tive law judges are conducted in ac- (b) If a Department of Labor rep-
cordance with 29 CFR part 6, and hear- resentative undertakes an investiga-
ings before the Labor Department Ad- tion at a construction project, the con-
ministrative Review Board are con- tracting officer shall inquire into the
ducted in accordance with 29 CFR part scope of the investigation, and request
7. to be notified immediately of any vio-
(f) The Administrator, Wage and lations discovered under the Davis-
Hour Division, may institute debar- Bacon Act, the Contract Work Hours
ment proceedings against the con- and Safety Standards Act, or the
tractor or subcontractor if the Admin- Copeland (Anti-Kickback) Act.
istrator finds reasonable cause to be-
lieve that the contractor or subcon- 22.40613 Semiannual enforcement re-
tractor has committed willful or aggra- ports.
vated violations of the Contract Work
A semiannual report on compliance
Hours and Safety Standards Act or the
with and enforcement of the construc-
Copeland (Anti-Kickback) Act, or any
tion labor standards requirements of
of the applicable statutes listed in 29
the Davis-Bacon Act and Contract
CFR 5.1 other than the Davis-Bacon
Work Hours and Safety Standards Act
Act, or has committed violations of the
is required from each contracting agen-
Davis-Bacon Act that constitute a dis-
cy. The reporting periods are October 1
regard of its obligations to employees
through March 31 and April 1 through
or subcontractors under section 3(a) of
September 30. The reports shall only
that Act.
contain information as to the enforce-
[53 FR 4935, Feb. 18, 1988, as amended at 66 ment actions of the contracting agency
FR 53481, Oct. 22, 2001] and shall be prepared as prescribed in
Department of Labor memoranda and
22.40611 Contract terminations. submitted to the Department of Labor
If a contract or subcontract is termi- within 30 days after the end of the re-
nated for violation of the labor stand- porting period. This report has been as-
ards clauses, the contracting agency signed interagency report control num-
shall submit a report to the Adminis- ber 1482DOLSA.
trator, Wage and Hour Division, and
the Comptroller General. The report 22.407 Contract clauses.
shall include (a) The contracting officer shall in-
(a) The number of the terminated sert the following clauses in solicita-
contract; tions and contracts in excess of $2,000
(b) The name and address of the ter- for construction within the United
minated contractor or subcontractor; States:
(c) The name and address of the con-
(1) The clause at 52.2226, Davis-
tractor or subcontractor, if any, who is
Bacon Act.
to complete the work;
(d) The amount and number of the re- (2) The clause at 52.2227, With-
placement contract, if any; and holding of Funds.
(e) A description of the work. (3) The clause at 52.2228, Payrolls
and Basic Records.
22.40612 Cooperation with the De- (4) The clause at 52.2229, Apprentices
partment of Labor. and Trainees.
(a) The contracting agency shall co- (5) The clause at 52.22210, Compli-
operate with representatives of the De- ance with Copeland Act Requirements.
partment of Labor in the inspection of (6) The clause at 52.22211, Sub-
records, interviews with workers, and contracts (Labor Standards).
all other aspects of investigations un- (7) The clause at 52.22212, Contract
dertaken by the Department of Labor. TerminationDebarment.
416
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Federal Acquisition Regulation 22.603
(8) The clause at 52.22213, Compli- ject to the Davis-Bacon Act that will
ance with Davis-Bacon and Related Act contain option provisions by which the
Regulations. contracting officer may extend the
(9) The clause at 52.22214, Disputes term of the contract, and the con-
Concerning Labor Standards. tracting officer determines the most
(10) The clause at 52.22215, Certifi- appropriate contract price adjustment
cation of Eligibility. method is the method at 22.40412(c)(3).
(b) The contracting officer shall in- (g) Insert the clause at 52.22232,
sert the clause at 52.22216, Approval of Davis-Bacon ActPrice Adjustment
Wage Rates, in solicitations and con- (Actual Method), in solicitations and
tracts in excess of $2,000 for cost-reim- contracts if the contract is expected to
bursement construction to be per- be a fixed-price contract subject to the
formed within the United States, ex- Davis-Bacon Act that will contain op-
cept for contracts with a State or po- tion provisions by which the con-
litical subdivision thereof. tracting officer may extend the term of
(c) A contract that is not primarily the contract, and the contracting offi-
for construction may contain a re- cer determines the most appropriate
quirement for some construction work method to establish contract price is
to be performed in the United States. If the method at 22.40412(c)(4).
under 22.402(b) the requirements of this [53 FR 4935, Feb. 18, 1988, as amended at 66
subpart apply to the construction FR 53481, Oct. 22, 2001]
work, the contracting officer shall in-
sert in such solicitations and contracts Subpart 22.5 [Reserved]
the applicable construction labor
standards clauses required in this sec-
tion and identify the item or items of Subpart 22.6Walsh-Healey
construction work to which the clauses Public Contracts Act
apply. 22.601 [Reserved]
(d) The contracting officer shall in-
sert the clause at 52.22217, Labor 22.602 Statutory requirements.
Standards for Construction WorkFa-
Except for the exemptions at 22.604,
cilities Contracts, in solicitations and
all contracts subject to the Walsh-
contracts, if a facilities contract (see
Healey Public Contracts Act (the Act)
45.301) may require covered construc-
(41 U.S.C. 3545) and entered into by
tion work (see 22.402(b)) to be per-
any executive department, independent
formed in the United States.
establishment, or other agency or in-
(e) Insert the clause at 52.22230,
strumentality of the United States, or
Davis-Bacon ActPrice Adjustment
by the District of Columbia, or by any
(None or Separately Specified Pricing
corporation (all the stock of which is
Method), in solicitations and contracts
beneficially owned by the United
if the contract is expected to be
States) for the manufacture or fur-
(1) A fixed-price contract subject to
nishing of materials, supplies, articles,
the Davis-Bacon Act that will contain
and equipment (referred to in this sub-
option provisions by which the con-
part as supplies) in any amount exceed-
tracting officer may extend the term of
ing $10,000, shall include or incorporate
the contract, and the contracting offi-
by reference the stipulations required
cer determines the most appropriate
by the Act pertaining to such matters
contract price adjustment method is
as minimum wages, maximum hours,
the method at 22.40412(c)(1) or (2); or
child labor, convict labor, and safe and
(2) A cost-reimbursable type contract
sanitary working conditions.
subject to the Davis-Bacon Act that
will contain option provisions by which [61 FR 67410, Dec. 20, 1996]
the contracting officer may extend the
term of the contract. 22.603 Applicability.
(f) Insert the clause at 52.22231, The requirements in 22.602 apply to
Davis-Bacon ActPrice Adjustment contracts (including for this purpose,
(Percentage Method), in solicitations indefinite-delivery contracts, basic or-
and contracts if the contract is ex- dering agreements, and blanket pur-
pected to be a fixed-price contract sub- chase agreements) and subcontracts
417
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22.604 48 CFR Ch. 1 (10103 Edition)
under Section 8(a) of the Small Busi- cation of one or more of the Acts stip-
ness Act, for the manufacture or fur- ulations; provided, that the request in-
nishing of supplies that cludes a finding by the agency head
(a) Will be performed in the United stating the reasons why the conduct of
States, Puerto Rico, or the U.S. Virgin Government business will be seriously
Islands; impaired unless the exemption is
(b) Exceed or may exceed $10,000; and granted.
(c) Are not exempt under 22.604. (2) Those requests for exemption that
[68 FR 28082, May 22, 2003] relate solely to safety and health
standards shall be transmitted to the
22.604 Exemptions. Assistant Secretary for Occupational
Safety and Health, U.S. Department of
22.6041 Statutory exemptions. Labor, Washington, DC 202l0. All other
Contracts for acquisition of the fol- requests shall be transmitted to the
lowing supplies are exempt from the Administrator of the Wage and Hour
Act: Division, U.S. Department of Labor,
(a) Any item in those situations Washington, DC 202l0.
where the contracting officer is author-
ized by the express language of a stat- [48 FR 42258, Sept. 19, 1983, as amended at 61
FR 67410, Dec. 20, 1996; 68 FR 28082, May 22,
ute to purchase in the open market 2003]
generally (such as commercial items,
see part 12); or where a specific pur- 22.605 Rulings and interpretations of
chase is made under the conditions de- the Act.
scribed in 6.3022 in circumstances
where immediate delivery is required (a) As authorized by the Act, the Sec-
by the public exigency. retary of Labor has issued rulings and
(b) Perishables, including dairy, live- interpretations concerning the admin-
stock, and nursery products. istration of the Act (see 41 CFR 50206).
(c) Agricultural or farm products The substance of certain rulings and
processed for first sale by the original interpretations is as follows:
producers. (1) If a contract for $10,000 or less is
(d) Agricultural commodities or the subsequently modified to exceed
products thereof purchased under con- $10,000, the contract becomes subject to
tract by the Secretary of Agriculture. the Act for work performed after the
date of the modification.
[48 FR 42258, Sept. 19, 1983, as amended at 53
FR 4944, Feb. 18, 1988; 60 FR 48248, Sept. 18, (2) If a contract for more than $10,000
1995] is subsequently modified by mutual
agreement to $10,000 or less, the con-
22.6042 Regulatory exemptions. tract is not subject to the Act for work
(a) Contracts for the following acqui- performed after the date of the modi-
sitions are fully exempt from the Act fication.
(see 41 CFR 50201.603): (3) If a contract awarded to a prime
(1) Public utility services. contractor contains a provision where-
(2) Supplies manufactured outside by the prime contractor is made an
the United States, Puerto Rico, and agent of the Government, the prime
the U.S. Virgin Islands. contractor is required to include the
(3) Purchases against the account of stipulations of the Act in contracts in
a defaulting contractor where the stip- excess of $10,000 awarded for and on be-
ulations of the Act were not included half of the Government for supplies
in the defaulted contract. that are to be used in the construction
(4) Newspapers, magazines, or peri- and equipment of Government facili-
odicals, contracted for with sales ties.
agents or publisher representatives, (4) If a contract subject to the Act is
which are to be delivered by the pub- awarded to a contractor operating Gov-
lishers thereof. ernment-owned facilities, the stipula-
(b)(1) Upon the request of the agency tions of the Act affect the employees of
head, the Secretary of Labor may ex- that contractor the same as employees
empt specific contracts or classes of of contractors operating privately
contracts from the inclusion or appli- owned facilities.
418
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Federal Acquisition Regulation 22.801
419
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22.802 48 CFR Ch. 1 (10103 Edition)
420
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Federal Acquisition Regulation 22.805
11246, except for the issuance of rules tracting officer contemplating a con-
and regulations of a general nature. struction project in excess of $10,000
(c) The head of each agency is respon- within a geographic area not known to
sible for ensuring that the require- be covered by specific affirmative ac-
ments of this subpart are carried out tion goals shall request instructions on
within the agency, and for cooperating the most current information from the
with and assisting the OFCCP in ful- OFCCP regional office, or as otherwise
filling its responsibilities. specified in agency regulations, before
(d) In the event the applicability of issuing the solicitation.
E.O. 11246 and implementing regula- (c) Contracting officers shall give
tions is questioned, the contracting of- written notice to the OFCCP regional
ficer shall forward the matter to the office within 10 working days of award
Deputy Assistant Secretary, through of a construction contract subject to
agency channels, for resolution. these affirmative action requirements.
The notification shall include the
[48 FR 42258, Sept. 19, 1983, as amended at 63 name, address, and telephone number
FR 70283, 70285, Dec. 18, 1998]
of the contractor; employer identifica-
22.804 Affirmative action programs. tion number; dollar amount of the con-
tract; estimated starting and comple-
22.8041 Nonconstruction. tion dates of the contract; the contract
number; and the geographical area in
Except as provided in 22.807, each which the contract is to be performed.
nonconstruction prime contractor and When requested by the OFCCP regional
each subcontractor with 50 or more em- office, the contracting officer shall ar-
ployees and either a contract or sub- range a conference among contractor,
contract of $50,000 or more, or Govern- contracting activity, and compliance
ment bills of lading that in any 12- personnel to discuss the contractors
month period total, or can reasonably compliance responsibilities.
be expected to total, $50,000 or more, is
required to develop a written affirma- [48 FR 42258, Sept. 19, 1983, as amended at 63
tive action program for each of its es- FR 70284, Dec. 18, 1998]
tablishments. Each contractor and sub- 22.805 Procedures.
contractor shall develop its written af-
firmative action programs within 120 (a) Preaward clearances for contracts
days from the commencement of its and subcontracts of $10 million or more
first such Government contract, sub- (excluding construction). (1) Except as
contract, or Government bill of lading. provided in paragraphs (a)(4) and (a)(8)
of this section, if the estimated
[63 FR 70284, Dec. 18, 1998] amount of the contract or subcontract
is $10 million or more, the contracting
22.8042 Construction.
officer shall request clearance from the
(a) Construction contractors that appropriate OFCCP regional office be-
hold a nonexempt (see 22.807) Govern- fore
ment construction contract are re- (i) Award of any contract, including
quired to meet (1) the contract terms any indefinite delivery contract or let-
and conditions citing affirmative ac- ter contract; or
tion requirements applicable to cov- (ii) Modificaton of an existing con-
ered geographical areas or projects and tract for new effort that would con-
(2) applicable requirements of 41 CFR stitute a contract award.
601 and 604. (2) Preaward clearance for each pro-
(b) Each agency shall maintain a list- posed contract and for each proposed
ing of covered geographical areas that first-tier subcontract of $10 million or
are subject to affirmative action re- more shall be requested by the con-
quirements that specify goals for mi- tracting officer directly from the
norities and women in covered con- OFCCP regional office(s). Verbal re-
struction trades. Information con- quests shall be confirmed by letter or
cerning, and additions to, this listing facsimile transmission.
will be provided to the principally af- (3) When the contract work is to be
fected contracting officers in accord- performed outside the United States
ance with agency procedures. Any con- with employees recruited within the
421
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22.805 48 CFR Ch. 1 (10103 Edition)
United States, the contracting officer officer shall process a preaward clear-
shall send the request for a preaward ance request in accordance with agency
clearance to the OFCCP regional office procedures, assuring, if possible, that
serving the area where the proposed the preaward clearance request is sub-
contractors corporate home or branch mitted to the OFCCP regional office at
office is located in the United States, least 30 days before the proposed award
or the corporate location where per- date.
sonnel recruiting is handled, if dif- (7) Within 15 days of the clearance re-
ferent from the contractors corporate quest, OFCCP will inform the awarding
home or branch office. If the proposed agency of its intention to conduct a
contractor has no corporate office or preaward compliance evaluation. If
location within the United States, the OFCCP does not inform the awarding
preaward clearance request action agency within that period of its inten-
should be based on the location of the tion to conduct a preaward compliance
recruiting and training agency in the evaluation, clearance shall be pre-
United States. sumed and the awarding agency is au-
(4) The contracting officer does not thorized to proceed with the award. If
need to request a preaward clearance OFCCP informs the awarding agency of
if its intention to conduct a preaward
(i) The specific proposed contractor compliance evaluation, OFCCP shall be
is listed in OFCCPs National Preaward allowed an additional 20 days after the
Registry via the Internet at http:// date that it so informs the awarding
www.dol-esa.gov/preaward/; agency to provide its conclusions. If
(ii) The projected award date is with- OFCCP does not provide the awarding
in 24 months of the proposed contrac- agency with its conclusions within
tors Notice of Compliance completion that period, clearance shall be pre-
date in the Registry; and sumed and the awarding agency is au-
(iii) The contracting officer docu- thorized to proceed with the award.
ments the Registry review in the con- (8) If the procedures specified in para-
tract file. graphs (a)(6) and (a)(7) of this section
(5) The contracting officer shall in- would delay award of an urgent and
clude the following information in the critical contract beyond the time nec-
preaward clearance request: essary to make award or beyond the
(i) Name, address, and telephone time specified in the offer or extension
number of the prospective contractor thereof, the contracting officer shall
and of any corporate affiliate at which immediately inform the OFCCP re-
work is to be performed. gional office of the expiration date of
(ii) Name, address, and telephone the offer or the required date of award
number of each proposed first-tier sub- and request clearance be provided be-
contractor with a proposed subcontract fore that date. If the OFCCP regional
estimated at $10 million or more. office advises that a preaward evalua-
(iii) Anticipated date of award. tion cannot be completed by the re-
(iv) Information as to whether the quired date, the contracting officer
contractor and first-tier subcontrac- shall submit written justification for
tors have previously held any Govern- the award to the head of the con-
ment contracts or subcontracts. tracting activity, who, after informing
(v) Place or places of performance of the OFCCP regional office, may then
the prime contract and first-tier sub- approve the award without the
contracts estimated at $10 million or preaward clearance. If an award is
more, if known. made under this authority, the con-
(vi) The estimated dollar amount of tracting officer shall immediately re-
the contract and each first-tier sub- quest a postaward evaluation from the
contract, if known. OFCCP regional office.
(6) The contracting officer shall (9) If, under the provisions of para-
allow as much time as feasible before graph (a)(8) of this section, a postaward
award for the conduct of necessary evaluation determines the contractor
compliance evaluation by OFCCP. As to be in noncompliance with E.O. 11246,
soon as the apparently successful offer- the Deputy Assistant Secretary may
or can be determined, the contracting authorize the use of the enforcement
422
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Federal Acquisition Regulation 22.807
procedures at 22.809 against the non- (1) Transactions of $10,000 or less. The
complying contractor. Equal Opportunity clause is required to
(b) Furnishing posters. The con- be included in prime contracts and sub-
tracting officer shall furnish to the contracts by 22.802(a). Individual prime
contractor appropriate quantities of contracts or subcontracts of $10,000 or
the poster entitled Equal Employment less are exempt from application of the
Opportunity Is The Law. These shall be Equal Opportunity clause, unless the
obtained in accordance with agency aggregate value of all prime contracts
procedures. or subcontracts awarded to a con-
tractor in any 12-month period exceeds,
[48 FR 42258, Sept. 19, 1983, as amended at 63
FR 70284, Dec. 18, 1998] or can reasonably be expected to ex-
ceed, $10,000. (Note: Government bills
22.806 Inquiries. of lading, regardless of amount, are not
exempt.)
(a) An inquiry from a contractor re-
(2) Work outside the United States.
garding status of its compliance with
Contracts are exempt from the require-
E.O. 11246, or rights of appeal to any of
ments of E.O. 11246 for work performed
the actions in 22.809, shall be referred
outside the United States by employees
to the OFCCP regional office.
who were not recruited within the
(b) Labor union inquiries regarding
United States.
the revision of a collective bargaining
(3) Contracts with State or local govern-
agreement in order to comply with
ments. The requirements of E.O. 11246
E.O. 11246 shall be referred to the Dep-
in any contract with a State or local
uty Assistant Secretary.
government (or any agency, instrumen-
[63 FR 70284, Dec. 18, 1998] tality, or subdivision thereof) shall not
be applicable to any agency, instru-
22.807 Exemptions. mentality, or subdivision of such gov-
(a) Under the following exemptions, ernment that does not participate in
all or part of the requirements of E.O. work on or under the contract.
11246 may be excluded from a contract (4) Work on or near Indian reservations.
subject to E.O. 11246: It shall not be a violation of E.O. 11246
(1) National security. The agency head for a contractor to extend a publicly
may determine that a contract is es- announced preference in employment
sential to the national security and to Indians living on or near an Indian
that the award of the contract without reservation in connection with employ-
complying with one or more of the re- ment opportunities on or near an In-
quirements of this subpart is necessary dian reservation. This applies to that
to the national security. Upon making area where a person seeking employ-
such a determination, the agency shall ment could reasonably be expected to
notify the Deputy Assistant Secretary commute to and from in the course of
in writing within 30 days. a work day. Contractors extending
(2) Specific contracts. The Deputy As- such a preference shall not, however,
sistant Secretary may exempt an agen- discriminate among Indians on the
cy from requiring the inclusion of one basis of religion, sex, or tribal affili-
or more of the requirements of E.O. ation, and the use of such preference
11246 in any contract if the Deputy As- shall not excuse a contractor from
sistant Secretary deems that special complying with E.O. 11246, rules and
circumstances in the national interest regulations of the Secretary of Labor,
so require. Groups or categories of con- and applicable clauses in the contract.
tracts of the same type may also be ex- (5) Facilities not connected with con-
empted if the Deputy Assistant Sec- tracts. The Deputy Assistant Secretary
retary finds it impracticable to act may exempt from the requirements of
upon each request individually or if E.O. 11246 any of a contractors facili-
group exemptions will contribute to ties that the Deputy Assistant Sec-
convenience in the administration of retary finds to be in all respects sepa-
E.O. 11246. rate and distinct from activities of the
(b) The following exemptions apply contractor related to performing the
even though a contract or subcontract contract, provided, that the Deputy As-
contains the Equal Opportunity clause: sistant Secretary also finds that the
423
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22.808 48 CFR Ch. 1 (10103 Edition)
exemption will not interfere with, or advised in writing of the referral. The
impede the effectiveness of, E.O. 11246. contractor that is the subject of a com-
(6) Indefinite-quantity contracts. With plaint shall not be advised in any man-
respect to indefinite-quantity con- ner or for any reason of the complain-
tracts and subcontracts, the Equal Op- ants name, the nature of the com-
portunity clause applies unless the plaint, or the fact that the complaint
contracting officer has reason to be- was received.
lieve that the amount to be ordered in
[48 FR 42258, Sept. 19, 1983, as amended at 63
any year under the contract will not
FR 70285, Dec. 18, 1998]
exceed $10,000. The applicability of the
Equal Opportunity clause shall be de- 22.809 Enforcement.
termined by the contracting officer at
the time of award for the first year, Upon the written direction of the
and annually thereafter for succeeding Deputy Assistant Secretary, one or
years, if any. Notwithstanding the more of the following actions, as well
above, the Equal Opportunity clause as administrative sanctions and pen-
shall be applied to the contract when- alties, may be exercised against con-
ever the amount of a single order ex- tractors found to be in violation of E.O.
ceeds $10,000. Once the Equal Oppor- 11246, the regulations of the Secretary
tunity clause is determined to be appli- of Labor, or the applicable contract
cable, the contract shall continue to be clauses:
subject to such clause for its duration (a) Publication of the names of the
regardless of the amounts ordered, or contractor or its unions.
reasonably expected to be ordered, in (b) Cancellation, termination, or sus-
any year. pension of the contractors contracts
(c) To request an exemption under or portion thereof.
paragraph (a)(2) or (b)(5) of this sec- (c) Debarment from future Govern-
tion, the contracting officer shall sub- ment contracts, or extensions or modi-
mit, under agency procedures, a de- fications of existing contracts, until
tailed justification for omitting all, or the contractor has established and car-
part of, the requirements of E.O. 11246. ried out personnel and employment
Requests for exemptions under para- policies in compliance with E.O. 11246
graph (a)(2) or (b)(5) of this section and the regulations of the Secretary of
shall be submitted to the Deputy As- Labor.
sistant Secretary for approval. (d) Referral by the Deputy Assistant
(d) The Deputy Assistant Secretary Secretary of any matter arising under
may withdraw the exemption for a spe- E.O. 11246 to the Department of Justice
cific contract, or group of contracts, if or to the Equal Employment Oppor-
the Deputy Assistant Secretary deems tunity Commission (EEOC) for the in-
that such action is necessary and ap- stitution of appropriate civil or crimi-
propriate to achieve the purposes of nal proceedings.
E.O. 11246. Such withdrawal shall not [48 FR 42258, Sept. 19, 1983, as amended at 63
apply FR 70285, Dec. 18, 1998]
(1) To contracts awarded before the
withdrawal; or 22.810 Solicitation provisions and con-
(2) To any sealed bid contract (in- tract clauses.
cluding restricted sealed bidding), un- (a) When a contract is contemplated
less the withdrawal is made more than that will include the clause at 52.22226,
10 days before the bid opening date. Equal Opportunity, the contracting of-
[48 FR 42258, Sept. 19, 1983, as amended at 52 ficer shall insert
FR 19803, May 27, 1987; 63 FR 70284, 70285, Dec. (1) The clause at 52.22221, Prohibi-
18, 1998] tion of Segregated Facilities, in the so-
licitation and contract; and
22.808 Complaints. (2) The provision at 52.22222, Pre-
Complaints received by the con- vious Contracts and Compliance Re-
tracting officer alleging violation of ports, in the solicitation.
the requirements of E.O. 11246 shall be (b) The contracting officer shall in-
referred immediately to the OFCCP re- sert the provision at 52.22223, Notice of
gional office. The complainant shall be Requirement for Affirmative Action to
424
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Federal Acquisition Regulation 22.1000
425
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22.1001 48 CFR Ch. 1 (10103 Edition)
426
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Federal Acquisition Regulation 22.10034
the predecessor contract. This require- under. This subpart does not apply to
ment is self-executing and is not con- individual contract requirements for
tingent upon incorporating a wage de- services in contracts not having as
termination or the wage and fringe their principal purpose the furnishing
benefit terms of the predecessor con- of services. The nomenclature, type, or
tractors collective bargaining agree- particular form of contract used by
ment in the successor contract. This contracting agencies is not determina-
requirement will not apply if the Sec- tive of coverage.
retary of Labor determines (1) after a
hearing, that the wages and fringe ben- 22.10032 Geographical coverage of
efits are substantially at variance with the Act.
those which prevail for services of a The Act applies to service contracts
similar character in the locality or (2) performed in the United States (see
that the wages and fringe benefits are 22.1001). The Act does not apply to con-
not the result of arms length negotia- tracts performed outside the United
tions. States.
(b) Paragraphs in this subpart 22.10
which deal with this statutory require- 22.10033 Statutory exemptions.
ment and the Department of Labors The Act does not apply to
implementing regulations are 22.10083, (a) Any contract for construction, al-
concerning applicability of this re- teration, or repair of public buildings
quirement and the forwarding of a col- or public works, including painting and
lective bargaining agreement with a decorating;
Notice (SF 98, 98a); 22.1010, concerning (b) Any work required to be done in
notification to contractors and bar- accordance with the provisions of the
gaining representatives of procurement Walsh-Healey Public Contracts Act (41
dates; 22.10123, explaining when a col- U.S.C. 3545);
lective bargaining agreement will not (c) Any contract for transporting
apply due to late receipt by the con- freight or personnel by vessel, aircraft,
tracting officer; and 22.1013 and 22.1021, bus, truck, express, railroad, or oil or
explaining when the application of a gas pipeline where published tariff
collective bargaining agreement can be rates are in effect;
challenged due to a variance with pre- (d) Any contract for furnishing serv-
vailing rates or lack of arms length ices by radio, telephone, telegraph, or
bargaining. cable companies subject to the Com-
[54 FR 19816, May 8, 1989, as amended at 59 munications Act of 1934;
FR 67039, Dec. 28, 1994] (e) Any contract for public utility
services;
22.10024 Application of the Fair (f) Any employment contract pro-
Labor Standards Act minimum viding for direct services to a Federal
wage. agency by an individual or individuals;
No contractor or subcontractor hold- or
ing a service contract for any dollar (g) Any contract for operating postal
amount shall pay any of its employees contract stations for the U.S. Postal
working on the contract less than the Service.
minimum wage specified in section
6(a)(1) of the Fair Labor Standards Act 22.10034 Administrative limitations,
(29 U.S.C. 206). variations, tolerances, and exemp-
tions.
22.1003 Applicability. (a) The Secretary of Labor may pro-
vide reasonable limitations and may
22.10031 General. make rules and regulations allowing
This subpart 22.10 applies to all Gov- reasonable variations, tolerances, and
ernment contracts, the principal pur- exemptions to and from any or all pro-
pose of which is to furnish services in visions of the Act other than section 10
the United States through the use of (41 U.S.C. 358). These will be made only
service employees, except as exempted in special circumstances where it has
in 22.10033 and 22.10034 of this section, been determined that the limitation,
or any subcontract at any tier there- variation, tolerance, or exemption is
427
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22.10034 48 CFR Ch. 1 (10103 Edition)
necessary and proper in the public in- (for example, Federal Supply Classi-
terest or to avoid the serious impair- fication (FSC) Group 65, Class 6515,
ment of Government business, and is in Medical Diagnostic Equipment; Class
accord with the remedial purpose of 6525, X-Ray Equipment; FSC Group 66,
the Act to protect prevailing labor Class 6630, Chemical Analysis Instru-
standards (41 U.S.C. 353(b)). See 29 CFR ments; and Class 6665, Geographical and
4.123 for a listing of administrative ex- Astronomical Instruments, are largely
emptions, tolerances, and variations. composed of the types of equipment ex-
Requests for limitations, variances, empted hereunder).
tolerances, and exemptions from the (C) Office/business machines not oth-
Act shall be submitted in writing erwise exempt pursuant to subdivision
through contracting channels and the (b)(4)(i)(A) of this subsection, if such
agency labor advisor to the Wage and services are performed by the manufac-
Hour Administrator. turer or supplier of the equipment.
(b) In addition to the statutory ex- (ii) The exemption set forth in this
emptions cited in 22.10033 of this sub- subparagraph (b)(4) of this subsection
section, the Secretary of Labor has ex- shall apply only under the following
empted the following types of con- circumstances:
tracts from all provisions of the Act: (A) The items of equipment are com-
(1) Contracts entered into by the mercial items which are used regularly
United States with common carriers for other than Government purposes
for the carriage of mail by rail, air (ex- and are sold or traded by the con-
cept air star routes), bus, and ocean tractor in substantial quantities to the
vessel, where such carriage is per- general public in the course of normal
formed on regularly scheduled runs of business operations.
the trains, airplanes, buses, and vessels (B) The contract services are fur-
over regularly established routes and nished at prices which are, or are based
accounts for an insubstantial portion on, established catalog or market
of the revenue therefrom. prices (see 29 CFR 4.123(e)(1)(ii)(B)) for
(2) Any contract entered into by the the maintenance, calibration, or repair
U.S. Postal Service with an individual of such commercial items.
owner-operator for mail service if it is (C) The contractor utilizes the same
not contemplated at the time the con- compensation (wage and fringe bene-
tract is made that the owner-operator fits) plan for all service employees per-
will hire any service employee to per- forming work under the contract as the
form the services under the contract contractor uses for equivalent employ-
except for short periods of vacation ees servicing the same equipment of
time or for unexpected contingencies commercial customers.
or emergency situations such as ill- (D) The contractor certifies in the
ness, or accident. contract to the provisions in subdivi-
(3) Contracts for the carriage of sion (b)(4)(ii) of this subsection. (See
freight or personnel if such carriage is 22.1006(e).)
subject to rates covered by section (iii)(A) Determinations of the appli-
10721 of the Interstate Commerce Act. cability of this exemption shall be
(4) Contracts as follows: made in the first instance by the con-
(i) Contracts principally for the tracting officer before contract award.
maintenance, calibration, or repair of In determining that the exemption ap-
the following types of equipment are plies, the contracting officer shall con-
exempt, subject to the restrictions in sider all factors and make an affirma-
subdivisions (b)(4)(ii), (b)(4)(iii), and tive determination that all of the
(b)(4)(iv) of this subsection. above conditions have been met.
(A) Automated data processing equip- (B) If any potential offerors would
ment and office information/word proc- not qualify for the exemption, the con-
essing systems. tracting officer shall incorporate in the
(B) Scientific equipment and medical solicitation the Service Contract Act
apparatus or equipment if the applica- clause (see 22.1006(a)) and, if the con-
tion of micro-electronic circuitry or tract will exceed $2,500, the appropriate
other technology of at least similar so- Department of Labor wage determina-
phistication is an essential element tion (see 22.1007).
428
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Federal Acquisition Regulation 22.10036
429
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22.10037 48 CFR Ch. 1 (10103 Edition)
(b) Remanufacturing does not include (a) Service contract labor standards
the repair of damaged or broken equip- provisions and procedures (29 CFR part
ment which does not require a com- 4, subpart A);
plete teardown, overhaul, and rebuild (b) Wage determination procedures
as described in subparagraphs (a)(1) and (29 CFR part 4, subpart B);
(a)(2) of this subsection, or the periodic (c) Application of the Act (rulings
and routine maintenance, preservation, and interpretations) (29 CFR part 4,
care, adjustment, upkeep, or servicing subpart C);
of equipment to keep it in usable, serv- (d) Compensation standards (29 CFR
iceable, working order. Such contracts part 4, subpart D);
typically are billed on an hourly rate (e) Enforcement (29 CFR part 4, sub-
(labor plus materials and parts) basis. part E);
Any contract principally for this type
(f) Safe and sanitary working condi-
of work is subject to the Service Con-
tions (29 CFR part 1925);
tract Act. Examples of such work in-
clude the following: (g) Rules of practice for administra-
(1) Repair of an automobile, truck, or tive proceedings enforcing service con-
other vehicle, construction equipment, tract labor standards (29 CFR part 6);
tractor, crane, aerospace, air condi- and
tioning and refrigeration equipment, (h) Practice before the Board of Serv-
electric motors, and ground powered ice Contract Appeals (29 CFR part 8).
industrial or vehicular equipment.
22.1005 [Reserved]
(2) Repair of typewriters and other
office equipment (but see 22.1003 22.1006 Contract clauses.
4(b)(4)).
(3) Repair of appliances, radios, tele- (a) The contracting officer shall in-
vision sets, calculators, and other elec- sert the clause at 52.22241, Service
tronic equipment. Contract Act of 1965, as amended, in so-
(4) Inspecting, testing, calibration, licitations and contracts if the con-
painting, packaging, lubrication, tune- tract is subject to the Act and is (1) for
up, or replacement of internal parts of over $2,500 or (2) for an indefinite dollar
equipment listed in subparagraphs amount and the contracting officer
(b)(1), (b)(2), and (b)(3) of this sub- does not know in advance that the con-
section. tract amount will be $2,500 or less.
(5) Reupholstering, reconditioning, (b) The contracting officer shall in-
repair, and refinishing of furniture. sert the clause at 52.22242, Statement
of Equivalent Rates for Federal Hires,
22.10037 Questions concerning appli- in solicitations and contracts if the
cability of the Act. contract amount is expected to be over
If the contracting officer questions $2,500 and the Act is applicable. (See
the applicability of the Act to an ac- 22.1016.)
quisition, the contracting officer shall (c)(1) The contracting officer shall in-
request the advice of the agency labor sert the clause at 52.22243, Fair Labor
advisor. Unresolved questions shall be Standards Act and Service Contract
submitted in a timely manner to the ActPrice Adjustment (Multiple Year
Administrator, Wage and Hour Divi- and Option Contracts), or another
sion, for determination. clause which accomplishes the same
purpose, in solicitations and contracts
22.1004 Department of Labor respon- if the contract is expected to be a
sibilities and regulations. fixed-price service contract containing
Under the Act, the Secretary of the clause at 52.22241, Service Con-
Labor is authorized and directed to en- tract Act of 1965, as amended, and is a
force the provisions of the Act, make multiple year contract or is a contract
rules and regulations, issue orders, with options to renew which exceeds
hold hearings, make decisions, and the simplified acquisition threshold.
take other appropriate action. The De- The clause may be used in contracts
partment of Labor has issued imple- that do not exceed the simplified ac-
menting regulations on such matters quisition threshold. The clause at
as 52.22243, Fair Labor Standards Act and
430
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Federal Acquisition Regulation 22.1007
431
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22.1008 48 CFR Ch. 1 (10103 Edition)
432
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Federal Acquisition Regulation 22.10083
(b) Section 4(c) of the Act provides timely written notification of the ap-
that a successor contractor must pay plicable acquisition dates (see 22.1010).
wages and fringe benefits (including ac- (d) If section 4(c) of the Act applies,
crued wages and benefits and prospec- the contracting officer shall obtain a
tive increases) to service employees at copy of any collective bargaining
least equal to those agreed upon by a agreement between an incumbent con-
predecessor contractor under the fol- tractor or subcontractor and its em-
lowing conditions: ployees. Obtaining a copy of an incum-
(1) The services to be furnished under bent contractors collective bargaining
the proposed contract will be substan- agreement may involve coordination
tially the same as services being fur- with the administrative contracting of-
nished by an incumbent contractor ficer responsible for administering the
whose contract the proposed contract predecessor contract. (Paragraph (m) of
will succeed. the clause at 52.22241, Service Con-
(2) The services will be performed in tract Act of 1965, as amended, requires
the same locality. the incumbent prime contractor to fur-
(3) The incumbent prime contractor nish the contracting officer a copy of
or subcontractor is furnishing such each collective bargaining agreement.)
services through the use of service em- The contracting officer shall submit a
ployees whose wages and fringe bene- copy of each collective bargaining
fits are the subject of one or more col- agreement together with any related
lective bargaining agreements. documents specifying the wage rates
(c) The application of section 4(c) of and fringe benefits currently or pro-
the Act is subject to the following limi- spectively payable under each agree-
tations: ment with the Notice.
(1) Section 4(c) of the Act will not (e) Section 4(c) of the Act will not
apply if the incumbent contractor en- apply if the Secretary of Labor deter-
ters into a collective bargaining agree- mines (1) after a hearing, that the
ment for the first time and the agree- wages and fringe benefits in the prede-
ment does not become effective until cessor contractors collective bar-
after the expiration of the incumbents gaining agreement are substantially at
contract. variance with those which prevail for
(2) If the incumbent contractor en- services of a similar character in the
ters into a new or revised collective locality, or (2) that the wages and
bargaining agreement during the pe- fringe benefits in the predecessor con-
riod of the incumbents performance on tractors collective bargaining agree-
the current contract, the terms of the ment are not the result of arms length
new or revised agreement shall not be negotiations (see 22.1013 and 22.1021).
effective for the purposes of section The Department of Labor (DOL) has
4(c) of the Act under the following con- concluded that contingent collective
ditions: bargaining agreement provisions that
(i)(A) In sealed bidding, the con- attempt to limit a contractors obliga-
tracting agency receives notice of the tions by means such as requiring
terms of the collective bargaining issuance of a wage determination by
agreement less than 10 days before bid the DOL, requiring inclusion of the
opening and finds that there is not rea- wage determination in the contract, or
sonable time still available to notify requiring the Government to ade-
bidders (see 22.10123(a)); or quately reimburse the contractor, gen-
(B) For contractual actions other erally reflect a lack of arms length ne-
than sealed bidding, the contracting gotiations.
agency receives notice of the terms of (f) If the services are being furnished
the collective bargaining agreement at more than one location and the col-
after award, provided that the start of lectively bargained wage rates and
performance is within 30 days of award fringe benefits are different at different
(see 22.10123(b)); and locations or do not apply to one or
(ii) The contracting officer has given more locations, the contracting officer
both the incumbent contractor and its shall identify the locations to which
employees collective bargaining agent the agreements apply.
433
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22.10084 48 CFR Ch. 1 (10103 Edition)
(g) If the collective bargaining agree- of the Wage and Hour Division) before
ment does not apply to all service em- the earlier of (1) issuance of any invita-
ployees under the contract, the con- tion for bids, (2) issuance of any re-
tracting officer shall separately list on quest for proposals, (3) commencement
the SF 98a the service employee classi- of negotiations, (4) issuance of modi-
fications (1) subject to the collective fication for exercise of option, contract
bargaining agreement and (2) not sub- extension, or change in scope, (5) an-
ject to any collective bargaining agree- nual anniversary date of a contract for
ment. more than 1 year subject to annual ap-
[54 FR 19816, May 8, 1989, as amended at 59 propriations, or (6) each biennial anni-
FR 67040, Dec. 28, 1994] versary date of a contract for more
than 2 years not subject to annual ap-
22.10084 Procedures when place of
performance is unknown. propriations unless otherwise advised
by the Wage and Hour Division (see
See 22.1009. 22.10085).
22.10085 Multiple-year contracts. (b) If the contract action is for a non-
recurring or unknown requirement for
If the proposed contract is multiple
which the advance planning described
year and is not subject to annual ap-
in paragraph (a) of this subsection is
propriations, the contracting officer
not feasible, the contracting officer
shall furnish with the Notice a state-
ment in writing describing the type of shall submit the Notice as soon as pos-
funding and giving the length of the sible, but not later than 30 days before
performance period. Unless otherwise the contracting actions in paragraph
advised by the wage and hour division (a) of this subsection. The contracting
that a Notice must be filed on the an- officer should indicate on the Notice
nual anniversary date, the contracting that the requirement is nonrecurring
officer shall submit a new Notice on or unknown and advance planning was
each biannual anniversary date of the not feasible.
multiple year contract if its term is for (c) If exceptional circumstances pre-
a period in excess of 2 years. vent timely submission, as required by
paragraphs (a) and (b) of this sub-
22.10086 Contract modifications (op- section, the contracting officer shall
tions, extensions, changes in scope) submit the Notice and the required
and anniversary dates.
supplemental information with a writ-
If the purpose of the Notice is to ob- ten statement of the reason for delay
tain a wage determination for an exer- as soon as practicable.
cise of an option, an extension to the (d) In an emergency situation requir-
contract term, a change in scope (see ing an immediate wage determination
22.1007(b)(2)), or the anniversary date of response, the contracting officer shall,
a multiple year contract, the con-
in accordance with contracting agency
tracting officer shall fill in Box 2 of the
procedures, contact the Wage and Hour
SF 98 as follows:
(a) In the Estimated solicitation date Division by telephone for guidance be-
subbox, indicate, as appropriate: Mod- fore submitting the Notice.
Exercise of Option; Mod-Extension; Mod-
22.1009 Place of performance un-
Change in Scope; Annual Anniversary; or known.
Biennial Anniversary; and
(b) In the month/day/year subbox, in- 22.10091 General.
dicate the date the wage determination
is required. If the place of performance is un-
known, the contracting officer may use
22.10087 Required time of submission the procedures in this section. The con-
of Notice. tracting officer should first attempt to
(a) If the contract action is for a re- identify the specific places or geo-
curring or known requirement, the graphical areas where the services
contracting officer shall submit the might be performed (see 22.10092) and
Notice not less than 60 days (nor more then may follow the procedures either
than 120 days, except with the approval in 22.10093 or in 22.10094.
434
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Federal Acquisition Regulation 22.10094
22.10092 Attempt to identify possible (i) Submit Notices for the additional
places of performance. places of performance to the Wage and
The contracting officer should at- Hour Division, and
(ii) Amend the solicitation to include
tempt to identify the specific places or
all wage determinations and, if nec-
geographical areas where the services
essary, extend the time for submission
might be performed. The following may
of final offers.
indicate possible places of perform-
(2) Follow the procedures in 22.10094.
ance:
(a) Locations of previous contractors 22.10094 All possible places of per-
and their competitors. formance not identified.
(b) Databases available via the Inter- If the contracting officer believes
net for lists of prospective offerors and that there may be offerors interested
contractors. in performing in unidentified places or
(c) Responses to a presolicitation no- areas, the contracting officer may use
tice (see 5.204). the following procedures:
[48 FR 42258, Sept. 19, 1983, as amended at 68 (a) If the contracting officer has iden-
FR 43856, July 24, 2003] tified possible places or areas where
services might be performed, the con-
22.10093 All possible places of per- tracting officer must submit the Notice
formance identified. to the Wage and Hour Division (see
(a) If the contracting officer can 22.10093 (a) and (b)).
identify all the possible places or areas (b) Include the following information
in the notice of contract action:
of performance (even though the actual
(1) That the place of performance is
place of performance will not be known
unknown.
until the successful offeror is chosen),
(2) The possible places or areas of
the contracting officer, as required in
performance for which the contracting
22.1008, shall submit the Notice to the
officer has requested wage determina-
Wage and Hour Division. If the number
tions.
of places of performance exceeds the
(3) That the contracting officer will
space available on the Notice, the con-
request wage determinations for addi-
tracting officer shall provide a listing
tional possible places of performance if
by state-county-city/town in an attach-
asked to do so in writing.
ment to the Notice.
(4) The time and date by which re-
(b) The Wage and Hour Division may quests for wage determinations for ad-
issue a wage determination for each ditional places must be received by the
different geographical area of perform- contracting officer.
ance identified by the contracting offi- (c) Insert the clause at 52.22249,
cer, or in unusual situations it may Service Contract ActPlace of Per-
issue a wage determination for one or formance Unknown, in solicitations
more composite areas of performance. and contracts. Include the information
If there is a substantial number of required in the clause by subpara-
places or areas of performance indi- graphs (b)(2) and (b)(4) of this sub-
cating the need for a wage determina- section. The closing date for receipt of
tion for one or more composite areas of offerors requests for wage determina-
performance, the contracting officer tions for additional possible places of
should, before submitting the Notice, performance should allow reasonable
contact the Wage and Hour Division time for potential offerors to review
concerning the issuance of such a wage the solicitation and determine their in-
determination. terest in competing. Generally, 10 to 15
(c) If the contracting officer subse- days from the date of issuance of the
quently learns of any potential offerors solicitation may be considered a rea-
in previously unidentified places before sonable period of time.
the closing date for submission of of- (d) The procedures in 14.304 shall
fers, the contracting officer shall fol- apply to late receipt of offerors re-
low one of the following procedures: quests for wage determinations for ad-
(1) Continue to follow the procedures ditional places of performance. How-
in this subsection and: ever, late receipt of an offerors request
435
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22.1010 48 CFR Ch. 1 (10103 Edition)
436
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Federal Acquisition Regulation 22.10123
22.10122 Response to timely submis- the new or changed terms of the collec-
sion of Noticeno collective bar- tive bargaining agreement in the solic-
gaining agreement. itation (see 52.22247).
(a) If the contracting officer has not (b) For contractual actions other
received a response from the Depart- than sealed bidding, a wage determina-
ment of Labor within 60 days (or 30 tion or revision based on a new or
days if a nonrecurring or unknown re- changed collective bargaining agree-
quirement), the contracting agency ment shall not be effective if notice of
shall contact the Wage and Hour Divi- the terms of the new or changed collec-
sion to determine when the wage deter- tive bargaining agreement is received
mination or revision can be expected. by the contracting agency after award
(b) In sealed bidding, a revision of a of a successor contract or a modifica-
wage determination shall not be effec- tion as specified in 22.1007(b), provided
tive if a collective bargaining agree- that the contract start of performance
ment does not exist, the revision is re- is within 30 days of the award of the
ceived by the contracting agency less contract or of the specified modifica-
than 10 days before the opening of bids, tion. If the contract does not specify a
and the contracting officer finds that start of performance date which is
there is not reasonable time to incor- within 30 days of the award of the con-
porate the revision in the solicitation. tract or of the specified modification,
(c) For contractual actions other or if contract performance does not
than sealed bidding where a collective commence within 30 days of the award
bargaining agreement does not exist, a of the contract or of the specified
revision of a wage determination re- modification, any notice of the terms
ceived by the contracting agency after of a new or changed collective bar-
award of a new contract or a modifica- gaining agreement received by the
tion as specified in 22.1007(b) shall not agency not less than 10 days before
be effective provided that the start of commencement of the work shall be ef-
performance is within 30 days of the fective for purposes of the successor
award or the specified modification. If contract under section 4(c) of the Act.
the contract does not specify a start of (c) The limitations in paragraphs (a)
performance date which is within 30 and (b) of this subsection shall apply
days of the award or the specified only if timely Notices and notifica-
modification, and if contract perform- tions required in 22.10087 and 22.1010
ance does not commence within 30 days have been given.
of the award or the specified modifica- (d) If the contracting officer has not
tion, the Department of Labor shall be received a response from the Depart-
notified and any revision received by ment of Labor within 60 days (or 30
the contracting agency not less than 10 days if a nonrecurring or unknown re-
days before commencement of the quirement), the contracting agency
work shall be effective. shall contact the Wage and Hour Divi-
(d) The limitations in paragraphs (b) sion to determine when the wage deter-
and (c) of this subsection shall apply mination or revision can be expected.
only if a timely Notice required in If the Department of Labor is unable to
22.10087 (a) and (b) has been submitted. provide the wage determination or re-
vision by the latest date needed to
22.10123 Response to timely submis- maintain the acquisition schedule, the
sion of Noticewith collective bar- solicitation/contract action should pro-
gaining agreement. ceed according to the following in-
(a) In sealed bidding, a wage deter- structions:
mination or revision based on a new or (1) If a successorship/same locality/
changed collective bargaining agree- incumbent collective bargaining agree-
ment shall not be effective if the con- ment situation exists, the contracting
tracting agency has received notice of officer shall incorporate in the solicita-
the terms of the new or changed collec- tion the wage and fringe benefit terms
tive bargaining agreement less than 10 of the collective bargaining agreement,
days before bid opening and the con- or the collective bargaining agreement
tracting officer determines that there itself, and the clause at 52.22247, Serv-
is not reasonable time to incorporate ice Contract Act (SCA) Minimum
437
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22.10124 48 CFR Ch. 1 (10103 Edition)
438
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Federal Acquisition Regulation 22.1017
439
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22.1018 48 CFR Ch. 1 (10103 Edition)
with the Wage and Hour Division for disagreement of the employees rep-
notifying it of contract awards. resentative or the employees them-
selves together with the agency rec-
22.1018 Notification to contractors and ommendation) and all other pertinent
employees. information to the Wage and Hour Di-
The contracting officer shall take the vision. Within 30 days of receipt of the
following steps to ensure that service request, the Wage and Hour Division
employees are notified of minimum will (1) approve, modify, or disapprove
wages and fringe benefits. the request when the parties are in
(a) As soon as possible after contract agreement or (2) render a final deter-
award, inform the contractor of the mination in the event of disagreement
labor standards requirements of the among the parties. If the Wage and
contract relating to the Act and of the Hour Division will require more than 30
contractors responsibilities under days to take action, it will notify the
these requirements, unless it is clear contracting officer within 30 days of re-
that the contractor is fully informed. ceipt of the request that additional
(b) At the time of award, furnish the time is necessary.
contractor Department of Labor Publi- (b) Some wage determinations will
cation WH1313, Notice to Employees list a series of classes within a job clas-
Working on Government Contracts, for sification family, for example, Com-
posting at a prominent and accessible puter Operators, level I, II, and III, or
place at the worksite before contract Electronic Technicians, level I, II, and
performance begins. The publication III, or Clerk Typist, level I and II. Gen-
advises employees of the compensation erally, level I is the lowest level. It is
(wages and fringe benefits) required to the entry level, and establishment of a
be paid or furnished under the Act and lower level through conformance is not
satisfies the notice requirements in permissible. Further, trainee classi-
paragraph (g) of the clause at 52.22241, fications may not be conformed. Help-
Service Contract Act of 1965, as amend- ers in skilled maintenance trades (for
ed. example, electricians, machinists, and
(c) Attach any applicable wage deter- automobile mechanics) whose duties
mination to Publication WH1313. constitute, in fact, separate and dis-
tinct jobs may also be used if listed on
22.1019 Additional classes of service the wage determination, but may not
employees. be conformed. Conformance may not be
(a) If the contracting officer is aware used to artificially split or subdivide
that contract performance involves classifications listed in the wage deter-
classes of service employees not in- mination. However, conforming proce-
cluded in the wage determination, the dures may be used if the work which an
contracting officer shall require the employee performs under the contract
contractor to classify the unlisted is not within the scope of any classi-
classes so as to provide a reasonable re- fication listed on the wage determina-
lationship (i.e., appropriate level of tion, regardless of job title. (See 29
skill comparison) between the unlisted CFR 4.152.)
classifications and the classifications (c) Subminimum rates for appren-
listed in the determination (see para- tices, student learners, and handi-
graph (c) of the clause at 52.22241, capped workers are permissible in ac-
Service Contract Act of 1965, as amend- cordance with paragraph (q) of the
ed). The contractor shall initiate the clause at 52.22241, Service Contract
conforming procedure before unlisted Act of 1965, as amended.
classes of employees perform contract
work. The contractor shall submit 22.1020 Seniority lists.
Standard Form (SF) 1444, Request For If a contract is performed at a Fed-
Authorization of Additional Classifica- eral facility where employees may be
tion and Rate. The contracting officer hired/retained by a succeeding con-
shall review the proposed classification tractor, the incumbent prime con-
and rate and promptly submit the com- tractor is required to furnish a cer-
pleted SF 1444 (which must include in- tified list of all service employees on
formation regarding the agreement or the contractors or subcontractors
440
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Federal Acquisition Regulation 22.1022
payroll during the last month of the (c) A request for an arms length
contract, together with anniversary hearing shall include
dates of employment, to the con- (1) A statement of the applicants
tracting officer no later than 10 days case setting forth in detail the reasons
before contract completion. (See para- why the applicant believes that the
graph (n) of the clause at 52.22241, wages and fringe benefits contained in
Service Contract Act of 1965, as amend- the collective bargaining agreement
ed.) At the commencement of the suc- were not reached as a result of arms
ceeding contract, the contracting offi- length negotiations;
cer shall provide a copy of the list to (2) A statement regarding the status
the successor contractor for deter- of the procurement and any estimated
mining employee eligibility for vaca- procurement dates, such as bid open-
tion or other fringe benefits which are ing, contract award, and commence-
based upon length of service, including ment date of the contract or its follow-
service with predecessor contractors if up option period; and
such benefit is required by an applica- (3) Names and addresses (to the ex-
ble wage determination. tent known) of interested parties.
(d) Unless the Administrator deter-
22.1021 Requests for hearing. mines that extraordinary cir-
(a) A contracting agency or other in- cumstances exist, the Administrator
terested party may request a hearing will not consider requests for a hearing
on an issue presented in 22.1013(a). To unless received as follows:
obtain a hearing for the contracting (1) For sealed bid contracts, more
agency, the contracting officer shall than 10 days before the award of the
submit a written request through ap- contract; or
propriate channels (ordinarily the (2) For negotiated contracts and for
agency labor advisor) to: Adminis- contracts with provisions exceeding
trator, Wage and Hour Division, Em- the initial term by option, before the
ployment Standards Administration, commencement date of the contract or
U.S. Department of Labor, Washington, the follow-up option period.
DC 20210.
[59 FR 67041, Dec. 28, 1994]
(b) A request for a substantial vari-
ance hearing shall include sufficient 22.1022 Withholding of contract pay-
data to show that the rates at issue ments.
vary substantially from those pre-
vailing for similar services in the local- Any violations of the clause at 52.222
ity. The request shall also include 41, Service Contract Act of 1965, as
amended, renders the responsible con-
(1) The number of the wage deter-
tractor liable for the amount of any de-
minations at issue;
ductions, rebates, refunds, or under-
(2) The name of the contracting agen- payments (which includes nonpayment)
cy whose contract is involved; of compensation due employees per-
(3) A brief description of the services forming the contract. The contracting
to be performed under the contract; officer may withholdor, upon written
(4) The status of the procurement and request of the Department of Labor
any estimated procurement dates, such from a level no lower than that of As-
as bid opening, contract award, and sistant Regional Administrator, Wage
commencement date of the contract or and Hour Division, Employment Stand-
its follow-up option period; ards Administration, Department of
(5) A statement of the applicants Labor, shall withholdthe amount
case, setting forth in detail the reasons needed to pay such underpaid employ-
why the applicant believes that a sub- ees from accrued payments due the
stantial variance exists with respect to contractor on the contract, or on any
some or all of the wages and/or fringe other prime contract (whether subject
benefits; to the Service Contract Act or not)
(6) Names and addresses (to the ex- with the contractor. The agency shall
tent known) of interested parties; and place the amount withheld in a deposit
(7) Any other data required by the fund. Such withheld funds shall be
Administrator. transferred to the Department of Labor
441
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22.1023 48 CFR Ch. 1 (10103 Edition)
442
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Federal Acquisition Regulation 22.1303
443
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22.1304 48 CFR Ch. 1 (10103 Edition)
the contractor or subcontractor has re- (d) The Deputy Assistant Secretary
ceived an award of $25,000 or more, ex- of Labor may withdraw an approved
cept for awards to State and local gov- waiver for a specific contract or group
ernments, and foreign organizations of contracts to be awarded, when in the
where the workers are recruited out- Deputys judgment such action is nec-
side of the United States. essary to achieve the purposes of the
Act. The withdrawal does not apply to
22.1304 Procedures.
awarded contracts. For procurements
To verify if a proposed contractor is entered into by sealed bidding, such
current with its submission of the withdrawal does not apply unless the
VETS100 Report, the contracting offi- withdrawal is made more than 10 cal-
cer may endar days before the date set for the
(a) Query the Department of Labors opening of bids.
VETS100 Database via the Internet at
http://www.vets100.cudenver.edu/ 22.1306 Department of Labor notices
vets100search.htm using the validation and reports.
code vets to proceed with the search
in the database; or (a) The contracting officer must fur-
(b) Contact the VETS100 Reporting nish to the contractor appropriate no-
Systems via e-mail at tices for posting when they are pre-
verify@vets100.com for confirmation, if scribed by the Deputy Assistant Sec-
the proposed contractor represents retary of Labor (see http://
that it has submitted the VETS100 Re- www2.dol.gov/dol/esa/public/
port and is not listed in the database. ofcplorg.htm).
(b) The Act requires contractors and
22.1305 Waivers. subcontractors to submit a report at
(a) The Deputy Assistant Secretary least annually to the Secretary of
for Federal Contract Compliance Pro- Labor regarding employment of special
grams, Department of Labor (Deputy disabled veterans, veterans of the Viet-
Assistant Secretary of Labor), may nam era, and other eligible veterans
waive any or all of the terms of the unless all of the terms of the clause at
clause at 52.22235, Equal Opportunity 52.22235, Equal Opportunity for Special
for Special Disabled Veterans, Vet- Disabled Veterans, Veterans of the
erans of the Vietnam Era, and Other Vietnam Era, and Other Eligible Vet-
Eligible Veterans for erans, have been waived (see 22.1305).
(1) Any contract if a waiver is in the The contractor and subcontractor must
national interest; or use Form VETS100, Federal Con-
(2) Groups or categories of contracts tractor Veterans Employment Report,
if a waiver is in the national interest to submit the required reports.
and it is
(i) Impracticable to act on each re- 22.1307 Collective bargaining agree-
quest individually; and ments.
(ii) Determined that the waiver will
substantially contribute to conven- If performance under the clause at
ience in administering the Act. 52.22235, Equal Opportunity for Special
(b) The head of the agency may waive Disabled Veterans, Veterans of the
any requirement in this subpart when Vietnam Era, and Other Eligible Vet-
it is determined that the contract is es- erans, may necessitate a revision of a
sential to the national security, and collective bargaining agreement, the
that its award without complying with contracting officer must advise the af-
such requirements is necessary to the fected labor unions that the Depart-
national security. Upon making such a ment of Labor will give them appro-
determination, the head of the agency priate opportunity to present their
must notify the Deputy Assistant Sec- views. However, neither the con-
retary of Labor in writing within 30 tracting officer nor any representative
days. of the contracting officer may discuss
(c) The contracting officer must sub- with the contractor or any labor rep-
mit requests for waivers in accordance resentative any aspect of the collective
with agency procedures. bargaining agreement.
444
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Federal Acquisition Regulation 22.1402
445
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22.1403 48 CFR Ch. 1 (10103 Edition)
446
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Federal Acquisition Regulation 22.1503
(c) Debarment of the contractor. with Executive Order 13126 of June 12,
[48 FR 42258, Sept. 19, 1983, as amended at 63
1999, Prohibition of Acquisition of
FR 34074, June 22, 1998] Products Produced by Forced or Inden-
tured Child Labor. The list identifies
22.1408 Contract clause. products, by their country of origin,
(a) Insert the clause at 52.22236, Af- that the Departments of Labor, Treas-
firmative Action for Workers with Dis- ury, and State have a reasonable basis
abilities, in solicitations and contracts to believe might have been mined, pro-
that exceed or are expected to exceed duced, or manufactured by forced or in-
$10,000, except when dentured child labor.
(1) Both the performance of the work
and the recruitment of workers will 22.1502 Policy.
occur outside the United States, Puer- Agencies must take appropriate ac-
to Rico, the Northern Mariana Islands, tion to enforce the laws prohibiting the
American Samoa, Guam, the U.S. Vir- manufacture or importation of prod-
gin Islands, and Wake Island; or ucts that have been mined, produced,
(2) The agency head has waived, in or manufactured wholly or in part by
accordance with 22.1403(a) or 22.1403(b) forced or indentured child labor (19
all the terms of the clause. U.S.C. 1307, 29 U.S.C. 201, et seq., and 41
(b) If the agency head waives one or U.S.C. 35, et seq.). Agencies should
more (but not all) of the terms of the make every effort to avoid acquiring
clause in accordance with 22.1403(a) or such products.
22.1403(b), use the basic clause with its
Alternate I. 22.1503 Procedures for acquiring end
[48 FR 42258, Sept. 19, 1983, as amended at 63 products on the List of Products
FR 34074, June 22, 1998; 68 FR 28082, May 22, Requiring Contractor Certification
2003] as to Forced or Indentured Child
Labor.
Subpart 22.15Prohibition of Ac- (a) When issuing a solicitation for
quisition of Products Produced supplies expected to exceed the micro-
by Forced or Indentured Child purchase threshold, the contracting of-
ficer must check the List of Products
Labor
Requiring Contractor Certification as
to Forced or Indentured Child Labor
SOURCE: 66 FR 5347, Jan. 18, 2001, unless (the List) (www.dol.gov/ilab/) (see
otherwise noted.
22.1505(a)). Appearance of a product on
22.1500 Scope. the List is not a bar to purchase of any
such product mined, produced, or man-
This subpart applies to acquisitions
ufactured in the identified country, but
of supplies that exceed the micro-pur-
rather is an alert that there is a rea-
chase threshold.
sonable basis to believe that such prod-
22.1501 Definitions. uct may have been mined, produced, or
manufactured by forced or indentured
As used in this subpart
child labor.
Forced or indentured child labor means
all work or service (b) The requirements of this subpart
(1) Exacted from any person under that result from the appearance of any
the age of 18 under the menace of any end product on the List do not apply to
penalty for its nonperformance and for a solicitation or contract if the identi-
which the worker does not offer him- fied country of origin on the List is
self voluntarily; or (1) Canada, and the anticipated value
(2) Performed by any person under of the acquisition is $25,000 or more
the age of 18 pursuant to a contract the (see 25.405);
enforcement of which can be accom- (2) Israel, and the anticipated value
plished by process or penalties. of the acquisition is $50,000 or more
List of Products Requiring Contractor (see 25.406);
Certification as to Forced or Indentured (3) Mexico, and the anticipated value
Child Labor means the list published by of the acquisition is $56,190 or more
the Department of Labor in accordance (see 25.405); or
447
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22.1504 48 CFR Ch. 1 (10103 Edition)
(4) Aruba, Austria, Belgium, Den- (f) Proper certification will not pre-
mark, Finland, France, Germany, vent the head of an agency from impos-
Greece, Hong Kong, Iceland, Ireland, ing remedies in accordance with sec-
Italy, Japan, Korea, Liechtenstein, tion 22.1504(a)(4) if it is later discovered
Luxembourg, Netherlands, Norway, that the contractor has furnished an
Portugal, Singapore, Spain, Sweden, end product or component that has in
Switzerland, or the United Kingdom fact been mined, produced, or manufac-
and the anticipated value of the acqui- tured, wholly or in part, using forced
sition is $169,000 or more (see 25.403(b)). or indentured child labor.
(c) Except as provided in paragraph
(b) of this section, before the con- [66 FR 5347, Jan. 18, 2001, as amended at 66
tracting officer may make an award for FR 65371, Dec. 18, 2001; 67 FR 56123, 56126,
an end product (regardless of country Aug. 30, 2002]
of origin) of a type identified by coun-
try of origin on the List the offeror 22.1504 Violations and remedies.
must certify that (a) Violations. The Government may
(1) It will not supply any end product impose remedies set forth in paragraph
on the List that was mined, produced, (b) of this section for the following vio-
or manufactured in a country identi- lations (note that the violations in
fied on the List for that product, as paragraphs (a)(3) and (a)(4) of this sec-
specified in the solicitation by the con- tion go beyond violations of the re-
tracting officer in the Certification Re- quirements relating to certification of
garding Knowledge of Child Labor for end products) (see 22.1503):
Listed End Products; or (1) The contractor has submitted a
(2)(i) It has made a good faith effort
false certification regarding knowledge
to determine whether forced or inden-
of the use of forced or indentured child
tured child labor was used to mine,
produce, or manufacture any end prod- labor.
uct to be furnished under the contract (2) The contractor has failed to co-
that is on the List and was mined, pro- operate as required in accordance with
duced, or manufactured in a country the clause at 52.22219, Child Labor Co-
identified on the List for that product; operation with Authorities and Rem-
and edies, with an investigation of the use
(ii) On the basis of those efforts, the of forced or indentured child labor by
offeror is unaware of any such use of an Inspector General, the Attorney
child labor. General, or the Secretary of the Treas-
(d) Absent any actual knowledge that ury.
the certification is false, the con- (3) The contractor uses forced or in-
tracting officer must rely on the dentured child labor in its mining, pro-
offerors certifications in making duction, or manufacturing processes.
award decisions. (4) The contractor has furnished an
(e) Whenever a contracting officer end product or component mined, pro-
has reason to believe that forced or in- duced, or manufactured, wholly or in
dentured child labor was used to mine, part, by forced or indentured child
produce, or manufacture an end prod-
labor. Remedies in paragraphs (b)(2)
uct furnished pursuant to a contract
and (b)(3) of this section are inappro-
awarded subject to the certification re-
priate unless the contractor knew of
quired in paragraph (c) of this section,
the contracting officer must refer the the violation.
matter for investigation by the agen- (b) Remedies. (1) The contracting offi-
cys Inspector General, the Attorney cer may terminate the contract.
General, or the Secretary of the Treas- (2) The suspending official may sus-
ury, whichever is determined appro- pend the contractor in accordance with
priate in accordance with agency pro- the procedures in subpart 9.4.
cedures, except to the extent that the (3) The debarring official may debar
end product is from the country listed the contractor for a period not to ex-
in paragraph (b) of this section, under ceed 3 years in accordance with the
a contract exceeding the applicable procedures in subpart 9.4.
threshold.
448
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Federal Acquisition Regulation Pt. 23
449
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23.000 48 CFR Ch. 1 (10103 Edition)
23.906 Solicitation provision and contract ucts that use renewable energy tech-
clause. nology; and
(2) Using an energy-savings perform-
Subpart 23.10Federal Compliance With ance contract to obtain energy-effi-
Right-To-Know Laws and Pollution Pre- cient technologies at Government fa-
vention Requirements cilities without Government capital
23.1000 Scope. expense.
23.1001 Authorities. (b) This subpart applies to acquisi-
23.1002 Applicability. tions in the United States and its out-
23.1003 Definitions. lying areas. Agencies conducting ac-
23.1004 Requirements. quisitions outside of these areas must
23.1005 Contract clause. use their best efforts to comply with
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap- this subpart.
ter 137; and 42 U.S.C. 2473(c). [66 FR 65352, Dec. 18, 2001, as amended at 68
SOURCE: 48 FR 42275, Sept. 19, 1983, unless FR 28082, May 22, 2003]
otherwise noted.
23.201 Authorities.
23.000 Scope. (a) Energy Policy and Conservation
This part prescribes acquisition poli- Act (42 U.S.C.
cies and procedures supporting the 6361(a)(1)) and Resource Conservation
Governments program for ensuring a and Recovery Act of 1976 (42 U.S.C.
drug-free workplace and for protecting 6901, et seq.).
and improving the quality of the envi- (b) National Energy Conservation
ronment by Policy Act (42 U.S.C. 8253, 8262g, and
(a) Controlling pollution; 8287).
(b) Managing energy and water use in (c) Executive Order 11912 of April 13,
Government facilities efficiently; 1976, Delegations of Authority under
(c) Using renewable energy and re- the Energy Policy and Conservation
newable energy technologies; Act.
(d) Acquiring energy- and water-effi- (d) Executive Order 13123 of June 3,
cient products and services, environ- 1999, Greening the Government through
mentally preferable products, and prod- Efficient Energy Management.
ucts that use recovered materials; and (e) Executive Order 13221 of July 31,
(e) Requiring contractors to identify 2001, Energy-Efficient Standby Power
hazardous materials. Devices.
[66 FR 65352, Dec. 18, 2001, as amended at 68
[66 FR 65352, Dec. 18, 2001]
FR 43858, July 24, 2003]
23.001 Definition. 23.202 Policy.
Toxic chemical, as used in this part, The Governments policy is to ac-
means a chemical or chemical category quire supplies and services that pro-
listed in 40 CFR 372.65. mote energy and water efficiency, ad-
[68 FR 43869, July 24, 2003] vance the use of renewable energy
products, and help foster markets for
Subpart 23.1 [Reserved] emerging technologies. This policy ex-
tends to all acquisitions, including
those below the simplified acquisition
Subpart 23.2 Energy and Water threshold.
Efficiency and Renewable Energy
23.203 Energy-efficient products.
SOURCE: 66 FR 65352, Dec. 18, 2001, unless (a) If life-cycle cost-effective and
otherwise noted. available
(1) When acquiring energy-using
23.200 Scope. products
(a) This subpart prescribes policies (i) Agencies shall purchase ENERGY
and procedures for STAR or other energy-efficient items
(1) Acquiring energy- and water-effi- listed on the Department of Energys
cient products and services, and prod- Federal Energy Management Program
450
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Federal Acquisition Regulation 23.302
(FEMP) Product Energy Efficiency ury. The energy service company fi-
Recommendations product list; and nances the capital costs of imple-
(ii) For products that consume power menting energy conservation measures
in a standby mode and are listed on and receives, in return, a contractually
FEMPs Standby Power Devices prod- determined share of the cost savings
uct listing, agencies shall that result.
(A) Purchase items which meet (2) Except as provided in 10 CFR
FEMPs standby power wattage rec- 436.34, ESPCs are subject to subpart
ommendation or document the reason 17.1.
for not purchasing such items; or (c) To solicit and award an ESPC, the
(B) If FEMP has listed a product contracting officer
without a corresponding wattage rec- (1) Must use the procedures, selection
ommendation, purchase items which method, and terms and conditions pro-
use no more than one watt in their vided in 10 CFR part 436, subpart B; at
standby power consuming mode. When http://www.eren.doe.gov/femp/resources/
it is impracticable to meet the one legislation.html; and
watt requirement, agencies shall pur- (2) May use the Qualified List of
chase items with the lowest standby energy service companies established
wattage practicable; and
by the Department of Energy and other
(2) When contracting for services
agencies.
that will include the provision of en-
ergy-using products, including con-
tracts for design, construction, renova- Subpart 23.3Hazardous Material
tion, or maintenance of a public build- Identification and Material
ing, the specifications shall incor- Safety Data
porate the applicable requirements in
paragraph (a)(1) of this section. 23.300 Scope of subpart.
(b) The requirements in paragraph (a) This subpart prescribes policies and
of this section only apply when the rel- procedures for acquiring deliverable
evant products utility and perform- items, other than ammunition and ex-
ance meet the agencys need. plosives, that require the furnishing of
(c) Information is available via the data involving hazardous materials.
Internet about Agencies may prescribe special proce-
(1) ENERGY STAR at http:// dures for ammunition and explosives.
www.energystar.gov/; and
(2) FEMP at http:// 23.301 Definition.
www.eere.energy.gov/femp/procurement.
Hazardous material is defined in the
[68 FR 43858, July 24, 2003] latest version of Federal Standard No.
313 (Federal Standards are sold to the
23.204 Energy-savings performance public and Federal agencies through:
contracts.
General Services Administration, Spec-
(a) Section 403 of Executive Order ifications Unit (3FBPW), 7th & D Sts.,
13123 of June 3, 1999, Greening the Gov- SW., Washington, DC 20407.
ernment through Efficient
EnergyManagement, requires an agen- [56 FR 55374, Oct. 25, 1991]
cy to make maximum use of the au-
23.302 Policy.
thority provided in the National En-
ergy Conservation Policy Act (42 U.S.C. (a) The Occupational Safety and
8287) to use an energy-savings perform- Health Administration (OSHA) is re-
ance contract (ESPC), when life-cycle sponsible for issuing and administering
cost-effective, to reduce energy use and regulations that require Government
cost in the agencys facilities and oper- activities to apprise their employees
ations. of
(b)(1) Under an ESPC, an agency can (1) All hazards to which they may be
contract with an energy service com- exposed;
pany for a period not to exceed 25 years (2) Relative symptoms and appro-
to improve energy efficiency in one or priate emergency treatment; and
more agency facilities at no direct cap- (3) Proper conditions and precautions
ital cost to the United States Treas- for safe use and exposure.
451
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23.303 48 CFR Ch. 1 (10103 Edition)
452
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Federal Acquisition Regulation 23.405
453
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23.406 48 CFR Ch. 1 (10103 Edition)
(3) To reasonable performance stand- ments of this subpart apply to all con-
ards in the specifications, provided a tracts of any value awarded to an indi-
written determination by technical or vidual;
requirements personnel of the perform- (b) For the acquisition of commercial
ance standards reasonableness is in- items (see part 12);
cluded with the justification. The tech- (c) Performed outside the United
nical and requirements personnel must States and its outlying areas or any
base their determination on National part of a contract performed outside
Institute of Standards and Technology the United States and its outlying
guidelines, if available. areas;
(d) Agencies must establish proce- (d) By law enforcement agencies, if
dures for consolidating and reporting the head of the law enforcement agen-
contractor estimates required by the cy or designee involved determines
clause at 52.2239, Estimate of Percent- that application of this subpart would
age of Recovered Material Content for be inappropriate in connection with
EPA-Designated Products. the law enforcement agencys under-
cover operations; or
[65 FR 36019, June 6, 2000, as ameded at 68 FR
43858, July 24, 2003]
(e) Where application would be incon-
sistent with the international obliga-
23.406 Solicitation provision and con- tions of the United States or with the
tract clause. laws and regulations of a foreign coun-
(a) Insert the provision at 52.2234, try.
Recovered Material Certification, in [54 FR 4968, Jan. 31, 1989, as amended at 55
solicitations that are for, or specify the FR 21707, May 25, 1990; 60 FR 34758, July 3,
use of, EPA-designated products con- 1995; 60 FR 48248, Sept. 18, 1995; 68 FR 28082,
taining recovered materials. May 22, 2003]
(b) Insert the clause at 52.2239, Esti-
23.502 Authority.
mate of Percentage of Recovered Mate-
rial Content for EPA-Designated Prod- Drug-Free Workplace Act of 1988
ucts, in solicitations and contracts ex- (Pub. L. 100690).
ceeding $100,000 that include the provi-
23.503 Definitions.
sion at 52.2234. If technical personnel
advise that estimates can be verified, As used in this subpart
use the clause with its Alternate I. Controlled substance means a con-
trolled substance in schedules I
[65 FR 36019, June 6, 2000, as amended at 68
through V of section 202 of the Con-
FR 43858, July 24, 2003]
trolled Substances Act (21 U.S.C. 812),
and as further defined in regulation at
Subpart 23.5DrugFree 21 CFR 1308.111308.15.
Workplace Conviction means a finding of guilt
(including a plea of nolo contendere) or
SOURCE: 54 FR 4968, Jan. 31, 1989 (interim) imposition of sentence, or both, by any
and 55 FR 21707, May 25, 1990 (final), unless judicial body charged with the respon-
otherwise noted. sibility to determine violations of the
Federal or State criminal drug stat-
23.500 Scope of subpart. utes.
This subpart implements the Drug Criminal drug statute means a Federal
Free Workplace Act of 1988 (Pub. L. or non-Federal criminal statute involv-
100690). ing the manufacture, distribution, dis-
pensing, possession, or use of any con-
23.501 Applicability. trolled substance.
This subpart applies to contracts, in- Employee means an employee of a
cluding contracts with 8(a) contractors contractor directly engaged in the per-
under FAR subpart 19.8 and modifica- formance of work under a Government
tions that require a justification and contract. Directly engaged is defined to
approval (see subpart 6.3), except con- include all direct cost employees and
tracts any other contract employee who has
(a) At or below the simplified acqui- other than a minimal impact or in-
sition threshold; however, the require- volvement in contract performance.
454
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Federal Acquisition Regulation 23.504
455
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23.505 48 CFR Ch. 1 (10103 Edition)
456
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Federal Acquisition Regulation 23.705
457
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23.800 48 CFR Ch. 1 (10103 Edition)
458
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Federal Acquisition Regulation 23.905
the States. See EPAs Web site at http:/ (i) Do not manufacture, process, or
/www.epa.gov/tri for guidance. otherwise use any toxic chemicals list-
ed under section 313(c) of EPCRA, 42
[60 FR 55307, Oct. 30, 1995, as amended at 61
FR 41474, Aug. 8, 1996; 68 FR 43869, July 24, U.S.C. 11023(c);
2003] (ii) Do not have 10 or more full-time
employees as specified in section
23.903 Applicability. 313(b)(1)(A) of EPCRA, 42 U.S.C.
(a) This subpart applies to all com- 11023(b)(1)(A);
petitive contracts expected to exceed (iii) Do not meet the reporting
$100,000 and competitive 8(a) contracts. thresholds of toxic chemicals estab-
(b) This subpart does not apply to lished under section 313(f) of EPCRA, 42
U.S.C. 11023(f) (including the alternate
(1) Acquisitions of commercial items
thresholds at 40 CFR 372.27, provided an
as defined in part 2; or
appropriate certification form has been
(2) Contractor facilities located out-
filed with EPA);
side the United States and its outlying
areas. (iv) Do not fall within the following
Standard Industrial Classification
[60 FR 55307, Oct. 30, 1995, as amended at 61 (SIC) codes or their corresponding
FR 41474, Aug. 8, 1996; 68 FR 28083, May 22, North American Industry Classifica-
2003; 68 FR 43869, July 24, 2003] tion System sectors:
(A) Major group code 10 (except 1011,
23.904 Policy.
1081, and 1094.
(a) It is the policy of the Government (B) Major group code 12 (except 1241).
to purchase supplies and services that (C) Major group codes 20 through 39.
have been produced with a minimum (D) Industry code 4911, 4931, or 4939
adverse impact on community health (limited to facilities that combust coal
and the environment. and/or oil for the purpose of generating
(b) Federal agencies, to the greatest power for distribution in commerce).
extent practicable, shall contract with
(E) Industry code 4953 (limited to fa-
companies that report in a public man-
cilities regulated under the Resource
ner on toxic chemicals released to the
Conservation and Recovery Act, Sub-
environment.
title C (42 U.S.C. 6921, et seq.), or 5169,
[60 FR 55307, Oct. 30, 1995. Redesignated at 68 or 5171, or 7389 (limited to facilities pri-
FR 43869, July 24, 2003] marily engaged in solvent recovery
services on a contract or fee basis); or
23.905 Requirements. (v) Are not located in the United
(a) E.O. 13148 requires that solicita- States and its outlying areas.
tions for competitive contracts ex- (b) A determination that it is not
pected to exceed $100,000 include, to the practicable to include the solicitation
maximum extent practicable, as an provision at 52.22313, Certification of
award eligibility criterion, a certifi- Toxic Chemical Release Reporting, in a
cation by an offeror that, if awarded a solicitation or class of solicitations
contract, either shall be approved by a procurement of-
(1) As the owner or operator of facili- ficial at a level no lower than the head
ties to be used in the performance of of the contracting activity. Prior to
the contract that are subject to Form making such a determination for a so-
R filing and reporting requirements, licitation or class of solicitations with
the offeror will file, and will continue an estimated value in excess of $500,000
to file throughout the life of the con- (including all options), the agency
tract, for such facilities, the Toxic shall consult with the Environmental
Chemical Release Inventory Form Protection Agency, Director, Environ-
(Form R) as described in EPCRA sec- mental Assistance Division, Office of
tions 313 (a) and (g) and PPA section Pollution Prevention and Toxic Sub-
6607; or stances (Mail Code 7408), Washington,
(2) Facilities to be used in the per- DC 20460.
formance of the contract are exempt (c) Award shall not be made to
from Form R filing and reporting re- offerors who do not certify in accord-
quirements because the facilities ance with paragraph (a) of this section
459
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23.906 48 CFR Ch. 1 (10103 Edition)
460
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Federal Acquisition Regulation 24.101
461
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24.102 48 CFR Ch. 1 (10103 Edition)
System of records on individuals means (1) Ensure that the contract work
a group of any records under the con- statement specifically identifies the
trol of any agency from which informa- system of records on individuals and
tion is retrieved by the name of the in- the design, development, or operation
dividual or by some identifying num- work to be performed; and
ber, symbol, or other identifying par- (2) Make available, in accordance
ticular assigned to the individual. with agency procedures, agency rules
[48 FR 42277, Sept. 19, 1983, as amended at 66
and regulation implementing the Act.
FR 2130, Jan. 10, 2001]
24.104 Contract clauses.
24.102 General. When the design, development, or op-
(a) The Act requires that when an eration of a system of records on indi-
agency contracts for the design, devel- viduals is required to accomplish an
opment, or operation of a system of agency function, the contracting offi-
records on individuals on behalf of the cer shall insert the following clauses in
agency to accomplish an agency func- solicitations and contracts:
tion the agency must apply the re- (a) The clause at 52.2241, Privacy
quirements of the Act to the con- Act Notification.
tractor and its employees working on (b) The clause at 52.2242, Privacy
the contract. Act.
(b) An agency officer or employee
may be criminally liable for violations Subpart 24.2Freedom of
of the Act. When the contract provides Information Act
for operation of a system of records on
individuals, contractors and their em- 24.201 Authority.
ployees are considered employees of The Freedom of Information Act (5
the agency for purposes of the criminal U.S.C. 552, as amended) provides that
penalties of the Act. information is to be made available to
(c) If a contract specifically provides the public either by (a) publication in
for the design, development, or oper- the FEDERAL REGISTER; (b) providing
ation of a system of records on individ- an opportunity to read and copy
uals on behalf of an agency to accom- records at convenient locations; or (c)
plish an agency function, the agency upon request, providing a copy of a rea-
must apply the requirements of the Act sonably described record.
to the contractor and its employees
working on the contract. The system of 24.202 Prohibitions.
records operated under the contract is (a) A proposal in the possession or
deemed to be maintained by the agency control of the Government, submitted
and is subject to the Act. in response to a competitive solicita-
(d) Agencies, which within the limits tion, shall not be made available to
of their authorities, fail to require that any person under the Freedom of Infor-
systems of records on individuals oper- mation Act. This prohibition does not
ated on their behalf under contracts be apply to a proposal, or any part of a
operated in conformance with the Act proposal, that is set forth or incor-
may be civilly liable to individuals in- porated by reference in a contract be-
jured as a consequence of any subse- tween the Government and the con-
quent failure to maintain records in tractor that submitted the proposal.
conformance with the Act. (See 10 U.S.C. 2305(g) and 41 U.S.C.
253b(m).)
24.103 Procedures. (b) No agency shall disclose any in-
(a) The contracting officer shall re- formation obtained pursuant to 15.403
view requirements to determine wheth- 3(b) that is exempt from disclosure
er the contract will involve the design, under the Freedom of Information Act.
development, or operation of a system (See 10 U.S.C. 2306a(d)(2)(C) and 41
of records on individuals to accomplish U.S.C. 254b(d)(2)(C).)
an agency function. (c) A dispute resolution communica-
(b) If one or more of those tasks will tion that is between a neutral person
be required, the contracting officer and a party to alternative dispute reso-
shall lution proceedings, and that may not
462
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Federal Acquisition Regulation Pt. 25
463
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25.000 48 CFR Ch. 1 (10103 Edition)
25.903 Exempted supplies. materials in contracts for construction
in the United States (see Subpart 25.2).
Subpart 25.10Additional Foreign (b) The restrictions in the Buy Amer-
Acquisition Regulations ican Act are not applicable in acquisi-
25.1001 Waiver of right to examination of tions subject to certain trade agree-
records. ments (see Subpart 25.4). In these ac-
25.1002 Use of foreign currency. quisitions, end products and construc-
tion materials from certain countries
Subpart 25.11Solicitation Provisions and receive nondiscriminatory treatment
Contract Clauses in evaluation with domestic offers.
Generally, the dollar value of the ac-
25.1101 Acquisition of supplies.
quisition determines which of the trade
25.1102 Acquisition of construction.
25.1103 Other provisions and clauses.
agreements applies. Exceptions to the
applicability of the trade agreements
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap- are described in Subpart 25.4.
ter 137; and 42 U.S.C. 2473(c). (c) The test to determine the country
EFFECTIVE DATE NOTE: At 68 FR 56686, Oct. of origin for an end product under the
1, 2003, the authority citation for Part 25 was trade agreements is different from the
revised, effective Oct. 31, 2003. For the con- test to determine the country of origin
venience of the user, the revised text is set for an end product under the Buy
forth below:
American Act (see the various country
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
ter 137; and 42 U.S.C. 2473(c).
end product definitions in 25.003).
The Buy American Act uses a two-part
SOURCE: 64 FR 72419, Dec. 27, 1999, unless test to define a domestic end product
otherwise noted. (manufacture in the United States and
a formula based on cost of domestic
25.000 Scope of part.
components). Under the trade agree-
This part provides policies and proce- ments, the test to determine country
dures for acquiring foreign supplies, of origin is substantial trans-
services, and construction materials. It formation (i.e., transforming an arti-
implements the Buy American Act, cle into a new and different article of
trade agreements, and other laws and commerce, with a name, character, or
regulations. use distinct from the original article).
[64 FR 72419, Dec. 27, 1999, as amended at 67 (d) On April 22, 1992, the President
FR 21534, Apr. 30, 2002] made a determination under section 305
of the Trade Agreements Act to impose
25.001 General. sanctions against some European
(a) The Buy American Act Union countries for discriminating
(1) Restricts the purchase of supplies, against U.S. products and services (see
that are not domestic end products, for Subpart 25.6).
use within the United States. A foreign [64 FR 72419, Dec. 27, 1999, as amended at 67
end product may be purchased if the FR 21535, Apr. 30, 2002]
contracting officer determines that the
price of the lowest domestic offer is un- 25.002 Applicability of subparts.
reasonable or if another exception ap- The following table shows the appli-
plies (see Subpart 25.1); and cability of the subparts. Subpart 25.5
(2) Requires, with some exceptions, provides comprehensive procedures for
the use of only domestic construction offer evaluation and examples.
Supplies for use Construction Services
performed
Subpart Out- Out-
Inside Inside Out-
side side Inside
U.S. U.S. side
U.S. U.S. U.S. U.S.
25.1 ..... Buy American ActSupplies ............................................. X ............ ............ ............ ............ ............
25.2 ..... Buy American ActConstruction Materials ...................... ............ ............ X ............ ............ ............
25.3 ..... [Reserved] .......................................................................... ............ ............ ............ ............
25.4 ..... Trade Agreements ............................................................. X X X X X X
25.5 ..... Evaluating Foreign OffersSupply Contracts ................... X X ............ ............ ............ ............
25.6 ..... Trade Sanctions ................................................................. X X X X X X
464
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Federal Acquisition Regulation 25.003
[64 FR 72419, Dec. 27, 1999, as amended at 67 article or articles from which it was
FR 21535, Apr. 30, 2002] transformed; and
(ii) Is not excluded from duty-free
25.003 Definitions. treatment for Caribbean countries
As used in this part under 19 U.S.C. 2703(b).
Canadian end product means an arti- (A) For this reason, the following ar-
cle that ticles are not Caribbean Basin country
(1) Is wholly the growth, product, or end products:
manufacture of Canada; or (1) Tuna, prepared or preserved in
(2) In the case of an article that con- any manner in airtight containers.
sists in whole or in part of materials (2) Petroleum, or any product derived
from petroleum.
from another country, has been sub-
(3) Watches and watch parts (includ-
stantially transformed in Canada into
ing cases, bracelets, and straps) of
a new and different article of com-
whatever type including, but not lim-
merce with a name, character, or use
ited to, mechanical, quartz digital, or
distinct from that of the article or ar-
quartz analog, if such watches or watch
ticles from which it was transformed.
parts contain any material that is the
The term refers to a product offered for
product of any country to which the
purchase under a supply contract, but
Harmonized Tariff Schedule of the
for purposes of calculating the value of
United States (HTSUS) column 2 rates
the end product includes services (ex-
of duty apply (i.e., Afghanistan, Cuba,
cept transportation services) inci-
Laos, North Korea, and Vietnam).
dental to the article, provided that the
(4) Certain of the following: textiles
value of those incidental services does
and apparel articles; footwear, hand-
not exceed that of the article itself.
bags, luggage, flat goods, work gloves,
Caribbean Basin country means any of and leather wearing apparel; or
the following countries: Antigua and handloomed, handmade, and folklore
Barbuda, Aruba, Bahamas, Barbados, articles.
Belize, British Virgin Islands, Costa (B) Access to the HTSUS to deter-
Rica, Dominica, El Salvador, Grenada, mine duty-free status of articles of the
Guatemala, Guyana, Haiti, Honduras, types listed in paragraph (1)(ii)(A)(4) of
Jamaica, Montserrat, Netherlands An- this definition is available via the
tilles, Nicaragua, St. Kitts and Nevis, Internet at http://
St. Lucia, St. Vincent and the Grena- www.customs.ustreas.gov/impoexpo/
dines, Trinidad and Tobago. impoexpo.htm. In particular, see the
Caribbean Basin country end product following:
(1) Means an article that (1) General Note 3(c), Products Eligi-
(i)(A) Is wholly the growth, product, ble for Special Tariff treatment.
or manufacture of a Caribbean Basin (2) General Note 17, Products of
country; or Countries Designated as Beneficiary
(B) In the case of an article that con- Countries under the United States
sists in whole or in part of materials Caribbean Basin Trade Partnership Act
from another country, has been sub- of 2000.
stantially transformed in a Caribbean (3) Section XXII, Chapter 98, Sub-
Basin country into a new and different chapter II, Articles Exported and Re-
article of commerce with a name, char- turned, Advanced or Improved Abroad,
acter, or use distinct from that of the U.S. Note 7(b).
465
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25.003 48 CFR Ch. 1 (10103 Edition)
(4) Section XXII, Chapter 98, Sub- by the Government are supplies, not
chapter XX, Goods Eligible for Special construction material.
Tariff Benefits under the United Cost of components means
States-Caribbean Basin Trade Partner- (1) For components purchased by the
ship Act; and contractor, the acquisition cost, in-
(2) Refers to a product offered for cluding transportation costs to the
purchase under a supply contract, but place of incorporation into the end
for purposes of calculating the value of product or construction material
the acquisition, includes services (ex- (whether or not such costs are paid to
cept transportation services) inci- a domestic firm), and any applicable
dental to the article, provided that the duty (whether or not a duty-free entry
value of those incidental services does
certificate is issued); or
not exceed that of the article itself.
Civil aircraft and related articles (2) For components manufactured by
means the contractor, all costs associated
(1) All aircraft other than aircraft to with the manufacture of the compo-
be purchased for use by the Depart- nent, including transportation costs as
ment of Defense or the U.S. Coast described in paragraph (1) of this defi-
Guard; nition, plus allocable overhead costs,
(2) The engines (and parts and compo- but excluding profit. Cost of compo-
nents for incorporation into the en- nents does not include any costs asso-
gines) of these aircraft; ciated with the manufacture of the end
(3) Any other parts, components, and product.
subassemblies for incorporation into Designated country means any of the
the aircraft; and following countries:
(4) Any ground flight simulators, and Aruba, Austria, Bangladesh, Bel-
parts and components of these simula- gium, Benin, Bhutan, Botswana,
tors, for use with respect to the air- Burkina Faso, Burundi, Canada, Cape
craft, whether to be used as original or Verde, Central African Republic, Chad,
replacement equipment in the manu- Comoros, Denmark, Djibouti, Equa-
facture, repair, maintenance, rebuild- torial Guinea, Finland, France, Gam-
ing, modification, or conversion of the bia, Germany, Greece, Guinea, Guinea-
aircraft and without regard to whether Bissau, Haiti, Hong Kong, Iceland, Ire-
the aircraft or articles receive duty- land, Israel, Italy, Japan, Kiribati,
free treatment under section 601(a)(2) Korea, Republic of Lesotho, Liech-
of the Trade Agreements Act. tenstein, Luxembourg, Malawi,
Component means an article, mate- Maldives, Mali, Mozambique, Nepal,
rial, or supply incorporated directly Netherlands, Niger, Norway, Portugal,
into an end product or construction Rwanda, Sao Tome and Principe, Si-
material. erra Leone, Singapore, Somalia, Spain,
Construction material means an arti- Sweden, Switzerland, Tanzania U.R.,
cle, material, or supply brought to the Togo, Tuvalu, Uganda, United King-
construction site by a contractor or
dom, Vanuatu, Western Samoa, Yemen
subcontractor for incorporation into
Designated country end product means
the building or work. The term also in-
cludes an item brought to the site an article that
preassembled from articles, materials, (1) Is wholly the growth, product, or
or supplies. However, emergency life manufacture of a designated country;
safety systems, such as emergency or
lighting, fire alarm, and audio evacu- (2) In the case of an article that con-
ation systems, that are discrete sys- sists in whole or in part of materials
tems incorporated into a public build- from another country, has been sub-
ing or work and that are produced as stantially transformed in a designated
complete systems, are evaluated as a country into a new and different arti-
single and distinct construction mate- cle of commerce with a name, char-
rial regardless of when or how the indi- acter, or use distinct from that of the
vidual parts or components of those article or articles from which it was
systems are delivered to the construc- transformed. The term refers to a prod-
tion site. Materials purchased directly uct offered for purchase under a supply
466
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Federal Acquisition Regulation 25.003
contract, but for purposes of calcu- ican Act due to applicability of a trade
lating the value of the end product in- agreement to a particular acquisition.
cludes services (except transportation End product means those articles,
services) incidental to the article, pro- materials, and supplies to be acquired
vided that the value of those incidental for public use.
services does not exceed that of the ar- Foreign construction material means a
ticle itself. construction material other than a do-
Domestic construction material means mestic construction material.
(1) An unmanufactured construction Foreign contractor means a contractor
material mined or produced in the or subcontractor organized or existing
United States; or under the laws of a country other than
(2) A construction material manufac- the United States.
tured in the United States, if the cost Foreign end product means an end
of its components mined, produced, or product other than a domestic end
manufactured in the United States ex- product.
ceeds 50 percent of the cost of all its Foreign offer means any offer other
components. Components of foreign or- than a domestic offer.
igin of the same class or kind for which Israeli end product means an article
nonavailability determinations have that
been made are treated as domestic. (1) Is wholly the growth, product, or
Domestic end product means manufacture of Israel; or
(1) An unmanufactured end product (2) In the case of an article that con-
mined or produced in the United sists in whole or in part of materials
States; or from another country, has been sub-
(2) An end product manufactured in stantially transformed in Israel into a
the United States, if the cost of its new and different article of commerce
components mined, produced, or manu- with a name, character, or use distinct
factured in the United States exceeds from that of the article or articles
50 percent of the cost of all its compo- from which it was transformed.
nents. Components of foreign origin of Mexican end product means an article
the same class or kind as those that that
the agency determines are not mined, (1) Is wholly the growth, product, or
produced, or manufactured in suffi- manufacture of Mexico; or
cient and reasonably available com- (2) In the case of an article that con-
mercial quantities of a satisfactory sists in whole or in part of materials
quality are treated as domestic. Scrap from another country, has been sub-
generated, collected, and prepared for stantially transformed in Mexico into a
processing in the United States is con- new and different article of commerce
sidered domestic. with a name, character, or use distinct
Domestic offer means an offer of a do- from that of the article or articles
mestic end product. When the solicita- from which it was transformed. The
tion specifies that award will be made term refers to a product offered for
on a group of line items, a domestic purchase under a supply contract, but
offer means an offer where the pro- for purposes of calculating the value of
posed price of the domestic end prod- the end product includes services (ex-
ucts exceeds 50 percent of the total pro- cept transportation services) inci-
posed price of the group. dental to the article, provided that the
Eligible offer means an offer of an eli- value of those incidental services does
gible product. When the solicitation not exceed that of the article itself.
specifies that award will be made on a Noneligible offer means an offer of a
group of line items, an eligible offer noneligible product.
means a foreign offer where the com- Noneligible product means a foreign
bined proposed price of the eligible end product that is not an eligible
products and the domestic end prod- product.
ucts exceeds 50 percent of the total pro- North American Free Trade Agreement
posed price of the group. country means Canada or Mexico.
Eligible product means a foreign end North American Free Trade Agreement
product that is not subject to discrimi- country end product means an article
natory treatment under the Buy Amer- that
467
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25.100 48 CFR Ch. 1 (10103 Edition)
(1) Is wholly the growth, product, or U.S.-made end product means an arti-
manufacture of a North American Free cle that is mined, produced, or manu-
Trade Agreement (NAFTA) country; or factured in the United States or that is
(2) In the case of an article that con- substantially transformed in the
sists in whole or in part of materials United States into a new and different
from another country, has been sub- article of commerce with a name, char-
stantially transformed in a NAFTA acter, or use distinct from that of the
country into a new and different arti- article or articles from which it was
cle of commerce with a name, char- transformed.
acter, or use distinct from that of the [64 FR 72419, Dec. 27, 1999, as amended at 65
article or articles from which it was FR 24322, Apr. 25, 2000; 66 FR 65371, Dec. 18,
transformed. The term refers to a prod- 2001; 66 FR 65350, 65371, Dec. 18, 2001; 67 FR
uct offered for purchase under a supply 6117, Feb. 8, 2002; 67 FR 21535, Apr. 30, 2002; 67
contract, but for purposes of calcu- FR 70520, Nov. 22, 2002; 68 FR 28083, May 22,
lating the value of the end product in- 2003]
cludes services (except transportation EFFECTIVE DATE NOTE: At 68 FR 56685, Oct.
services) incidental to the article, pro- 1, 2003, 25.003 was amended by adding the
vided that the value of those incidental words Dominican Republic after the word
services does not exceed that of the ar- Dominica in the definition for Caribbean
Basin country, effective Oct. 31, 2003.
ticle itself.
Sanctioned European Union country
construction means construction to be Subpart 25.1Buy American
performed in a sanctioned European ActSupplies
Union member state.
25.100 Scope of subpart.
Sanctioned European Union country
end product means an article that This subpart implements the Buy
(1) Is wholly the growth, product, or American Act (41 U.S.C. 10a10d) and
manufacture of a sanctioned European Executive Order 10582, December 17,
Union (EU) member state; or 1954. It applies to supplies acquired for
(2) In the case of an article that con- use in the United States, including sup-
sists in whole or in part of materials plies acquired under contracts set aside
from another country, has been sub- for small business concerns, if
stantially transformed in a sanctioned (a) The supply contract exceeds the
EU member state into a new and dif- micro-purchase threshold; or
ferent article of commerce with a (b) The supply portion of a contract
name, character, or use distinct from for services that involves the fur-
that of the article or articles from nishing of supplies (e.g., lease) exceeds
which it was transformed. The term re- the micro-purchase threshold.
fers to a product offered for purchase [64 FR 72419, Dec. 27, 1999; 65 FR 4633, Jan. 31,
under a supply contract, but for pur- 2000]
poses of calculating the value of the
end product includes services (except 25.101 General.
transportation services) incidental to (a) The Buy American Act restricts
the article, provided that the value of the purchase of supplies that are not
these incidental services does not ex- domestic end products. For manufac-
ceed that of the article itself. tured end products, the Buy American
Sanctioned European Union country Act uses a two-part test to define a do-
services means services to be performed mestic end product.
in a sanctioned European Union mem- (1) The article must be manufactured
ber state. in the United States; and
Sanctioned European Union member (2) The cost of domestic components
state means Austria, Belgium, Den- must exceed 50 percent of the cost of
mark, Finland, France, Ireland, Italy, all the components.
Luxembourg, the Netherlands, Sweden, (b) The Buy American Act applies to
or the United Kingdom. small business set-asides. A manufac-
United States means the 50 States, the tured product of a small business con-
District of Columbia, and outlying cern is a U.S.-made end product, but is
areas. not a domestic end product unless it
468
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Federal Acquisition Regulation 25.104
meets the component test in paragraph (ii) The acquisition was synopsized in
(a)(2) of this section. accordance with 5.201.
(c) Exceptions that allow the pur- (iii) No offer for a domestic end prod-
chase of a foreign end product are list- uct was received.
ed at 25.103. The unreasonable cost ex- (c) Unreasonable cost. The contracting
ception is implemented through the officer may determine that the cost of
use of an evaluation factor applied to a domestic end product would be unrea-
low foreign offers that are not eligible sonable, in accordance with 25.105 and
offers. The evaluation factor is not Subpart 25.5.
used to provide a preference for one (d) Resale. The contracting officer
foreign offer over another. Evaluation may purchase foreign end products spe-
procedures and examples are provided cifically for commissary resale.
in Subpart 25.5.
25.104 Nonavailable articles.
25.102 Policy. (a) The following articles have been
Except as provided in 25.103, acquire determined to be nonavailable in ac-
only domestic end products for public cordance with 25.103(b):
use inside the United States. Acetylene, black.
Agar, bulk.
25.103 Exceptions. Anise.
Antimony, as metal or oxide.
When one of the following exceptions Asbestos, amosite, chrysotile, and crocid-
applies, the contracting officer may ac- olite.
quire a foreign end product without re- Bananas.
gard to the restrictions of the Buy Bauxite.
American Act: Beef, corned, canned.
(a) Public interest. The head of the Beef extract.
agency may make a determination Bephenium hydroxynapthoate.
Bismuth.
that domestic preference would be in- Books, trade, text, technical, or scientific;
consistent with the public interest. newspapers; pamphlets; magazines; peri-
This exception applies when an agency odicals; printed briefs and films; not print-
has an agreement with a foreign gov- ed in the United States and for which do-
ernment that provides a blanket excep- mestic editions are not available.
tion to the Buy American Act. Brazil nuts, unroasted.
(b) Nonavailability. (1) A nonavail- Cadmium, ores and flue dust.
Calcium cyanamide.
ability determination has been made Capers.
for the articles listed in 25.104. Cashew nuts.
(2)(i) The head of the contracting ac- Castor beans and castor oil.
tivity may make a determination that Chalk, English.
an article, material, or supply is not Chestnuts.
mined, produced, or manufactured in Chicle.
Chrome ore or chromite.
the United States in sufficient and rea-
Cinchona bark.
sonably available commercial quan- Cobalt, in cathodes, rondelles, or other pri-
tities of a satisfactory quality. mary ore and metal forms.
(ii) If the contracting officer con- Cocoa beans.
siders that the nonavailability of an Coconut and coconut meat, unsweetened, in
article is likely to affect future acqui- shredded, desiccated, or similarly prepared
sitions, the contracting officer may form.
Coffee, raw or green bean.
submit a copy of the determination and Colchicine alkaloid, raw.
supporting documentation to the ap- Copra.
propriate council identified in 1.2011 in Cork, wood or bark and waste.
accordance with agency procedures, for Cover glass, microscope slide.
possible addition to the list in 25.104. Crane rail (85-pound per foot).
(3) A written determination is not re- Cryolite, natural.
quired if all of the following conditions Dammar gum.
Diamonds, industrial, stones and abrasives.
are present: Emetine, bulk.
(i) The acquisition was conducted Ergot, crude.
through use of full and open competi- Erythrityl tetranitrate.
tion. Fair linen, altar.
469
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25.105 48 CFR Ch. 1 (10103 Edition)
Fibers of the following types: abaca, abace, Tea in bulk.
agave, coir, flax, jute, jute burlaps, pal- Thread, metallic (gold).
myra, and sisal. Thyme oil.
Goat and kidskins. Tin in bars, blocks, and pigs.
Graphite, natural, crystalline, crucible Triprolidine hydrochloride.
grade. Tungsten.
Hand file sets (Swiss pattern). Vanilla beans.
Handsewing needles. Venom, cobra.
Hemp yarn. Wax, carnauba.
Hog bristles for brushes. Wire glass.
Hyoscine, bulk. Woods; logs, veneer, and lumber of the fol-
Ipecac, root. lowing species: Alaskan yellow cedar,
Iodine, crude. angelique, balsa, ekki, greenheart, lignum
Kaurigum. vitae, mahogany, and teak.
Lac. Yarn, 50 Denier rayon.
Leather, sheepskin, hair type. (b) The determination in paragraph
Lavender oil.
Manganese. (a) of this section does not apply if the
Menthol, natural bulk. contracting officer learns before the
Mica. time designated for receipt of bids in
Microprocessor chips (brought onto a Gov- sealed bidding or final offers in nego-
ernment construction site as separate tiation that an article on the list is
units for incorporation into building sys- available domestically in sufficient and
tems during construction or repair and al- reasonably available quantities of a
teration of real property). satisfactory quality. The contracting
Nickel, primary, in ingots, pigs, shots, cath-
odes, or similar forms; nickel oxide and
officer must amend the solicitation if
nickel salts. purchasing the article, or if purchasing
Nitroguanidine (also known as picrite). an end product that could contain such
Nux vomica, crude. an article as a component, and must
Oiticica oil. specify in all new solicitations that the
Olive oil. article is available domestically and
Olives (green), pitted or unpitted, or stuffed, that offerors and contractors may not
in bulk. treat foreign components of the same
Opium, crude.
Oranges, mandarin, canned.
class or kind as domestic components.
Petroleum, crude oil, unfinished oils, and In addition, the contracting officer
finished products. must submit a copy of supporting docu-
Pine needle oil. mentation to the appropriate council
Platinum and related group metals, refined, identified in 1.2011 in accordance with
as sponge, powder, ingots, or cast bars. agency procedures, for possible re-
Pyrethrum flowers. moval of the article from the list.
Quartz crystals.
Quebracho. 25.105 Determining reasonableness of
Quinidine. cost.
Quinine.
Rabbit fur felt. (a) The contracting officer
Radium salts, source and special nuclear ma- (1) Must use the evaluation factors in
terials. paragraph (b) of this section unless the
Rosettes. head of the agency makes a written de-
Rubber, crude and latex. termination that the use of higher fac-
Rutile. tors is more appropriate. If the deter-
Santonin, crude.
mination applies to all agency acquisi-
Secretin.
Shellac. tions, the agency evaluation factors
Silk, raw and unmanufactured. must be published in agency regula-
Spare and replacement parts for equipment tions; and
of foreign manufacture, and for which do- (2) Must not apply evaluation factors
mestic parts are not available. to offers of eligible products if the ac-
Spices and herbs, in bulk. quisition is subject to a trade agree-
Sugars, raw. ment under Subpart 25.4.
Swords and scabbards.
(b) If there is a domestic offer that is
Talc, block, steatite.
Tantalum. not the low offer, and the restrictions
Tapioca flour and cassava. of the Buy American Act apply to the
Tartar, crude; tartaric acid and cream of tar- low offer, the contracting officer must
tar in bulk. determine the reasonableness of the
470
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Federal Acquisition Regulation 25.203
cost of the domestic offer by adding to blanket exception to the Buy American
the price of the low offer, inclusive of Act.
duty (2) Nonavailability. The head of the
(1) 6 percent, if the lowest domestic contracting activity may determine
offer is from a large business concern; that a particular construction material
or is not mined, produced, or manufac-
(2) 12 percent, if the lowest domestic tured in the United States in sufficient
offer is from a small business concern. and reasonably available commercial
The contracting officer must use this quantities of a satisfactory quality.
factor, or another factor established in The determinations of nonavailability
agency regulations, in small business of the articles listed at 25.104(a) and
set-asides if the low offer is from a the procedures at 25.104(b) also apply if
small business concern offering the any of those articles are acquired as
product of a small business concern construction materials.
that is not a domestic end product (see (3) Unreasonable cost. The contracting
Subpart 19.5). officer concludes that the cost of do-
(c) The price of the domestic offer is mestic construction material is unrea-
reasonable if it does not exceed the sonable in accordance with 25.204.
evaluated price of the low offer after
(b) Determination and findings. When a
addition of the appropriate evaluation
determination is made for any of the
factor in accordance with paragraph (a)
reasons stated in this section that cer-
or (b) of this section. (See evaluation
procedures at Subpart 25.5.) tain foreign construction materials
may be used, the contracting officer
must list the excepted materials in the
Subpart 25.2Buy American contract. The agency must make the
ActConstruction Materials findings justifying the exception avail-
able for public inspection.
25.200 Scope of subpart.
(c) Acquisitions under trade agreements.
This subpart implements the Buy For construction contracts with an es-
American Act (41 U.S.C. 10a10d) and timated acquisition value of $6,481,000
Executive Order 10582, December 17, or more, see 25.403. If the acquisition
1954. It applies to contracts for the con- value is $7,304,733 or more, also see
struction, alteration, or repair of any 25.405.
public building or public work in the
United States. [64 FR 72419, Dec. 27, 1999, as amended at 65
FR 36026, June 6, 2000; 67 FR 56123, Aug. 30,
25.201 Policy. 2002]
Except as provided in 25.202, use only 25.203 Preaward determinations.
domestic construction materials in
construction contracts performed in (a) For any acquisition, an offeror
the United States. may request from the contracting offi-
cer a determination concerning the in-
25.202 Exceptions. applicability of the Buy American Act
(a) When one of the following excep- for specifically identified construction
tions applies, the contracting officer materials. The time for submitting the
may acquire foreign construction ma- request is specified in the solicitation
terials without regard to the restric- in paragraph (b) of either 52.22510 or
tions of the Buy American Act: 52.22512, whichever applies. The infor-
(1) Impracticable or inconsistent with mation and supporting data that must
public interest. The head of the agency be included in the request are also
may determine that application of the specified in the solicitation in para-
restrictions of the Buy American Act graphs (c) and (d) of either 52.2259 or
to a particular construction material 52.22511, whichever applies.
would be impracticable or would be in- (b) Before award, the contracting of-
consistent with the public interest. ficer must evaluate all requests based
The public interest exception applies on the information provided and may
when an agency has an agreement with supplement this information with
a foreign government that provides a other readily available information.
471
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25.204 48 CFR Ch. 1 (10103 Edition)
472
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Federal Acquisition Regulation 25.401
473
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25.402 48 CFR Ch. 1 (10103 Edition)
(ii) Management and operation con- (1) Waives application of the Buy
tracts to certain Government or pri- American Act to the end products and
vately owned facilities used for Gov- construction materials of designated
ernment purposes, including Federally countries;
Funded Research and Development (2) Prohibits discriminatory prac-
Centers (FFRDCs). tices based on foreign ownership;
(2) Other services not covered by (3) Restricts purchases to end prod-
NAFTA are ucts identified in 25.403(c);
(i) ADP teleprocessing and (4) Requires certain procurement pro-
timesharing services (D305), tele- cedures designed to ensure fairness (see
communications network management 25.408).
services (D316), automated news serv- (b) Thresholds. (1) Except as provided
ices, data services or other information in 25.401, the Trade Agreements Act ap-
services (D317), and other ADP and plies to an acquisition for supplies or
telecommunications services (D399) services if the estimated value of the
(Federal Service Code from the Federal acquisition is $169,000 or more; the
Procurement Data System Product/ Trade Agreements Act applies to an ac-
Service Code Manual indicated in pa- quisition for construction if the esti-
rentheses); mated value of the acquisition is
(ii) Operation of all facilities by the $6,481,000 or more. These dollar thresh-
Department of Defense, Department of olds are subject to revision by the U.S.
Energy, or the National Aeronautics Trade Representative approximately
and Space Administration; and all Gov- every 2 years (see Executive Order
ernment-owned research and develop- 12260).
ment facilities or Government-owned (2) To determine whether the Trade
environmental laboratories; Agreements Act applies to the acquisi-
(iii) Maintenance, repair, modifica- tion of products by lease, rental, or
tion, rebuilding and installation of lease-purchase contract (including
equipment related to ships; and lease-to-ownership, or lease-with-op-
(iv) Nonnuclear ship repair. tion-to purchase), calculate the esti-
25.402 General. mated acquisition value as follows:
(i) If a fixed-term contract of 12
The trade agreements waive the ap- months or less is contemplated, use the
plicability of the Buy American Act for total estimated value of the acquisi-
some foreign supplies and construction tion.
materials from certain countries. The (ii) If a fixed-term contract of more
Trade Agreements Act and NAFTA than 12 months is contemplated, use
specify procurement procedures de- the total estimated value of the acqui-
signed to ensure fairness. The value of sition plus the estimated residual value
the acquisition is a determining factor of the leased equipment at the conclu-
in the applicability of the trade agree- sion of the contemplated term of the
ments. When the restrictions of the contract.
Buy American Act are waived for eligi- (iii) If an indefinite-term contract is
ble products, offers of those products contemplated, use the estimated
(eligible offers) receive equal consider- monthly payment multiplied by the
ation with domestic offers. Under the total number of months that ordering
Trade Agreements Act, only U.S.-made would be possible under the proposed
end products or eligible products may contract, i.e., the initial ordering pe-
be acquired (also see 25.403(c)). See riod plus any optional ordering periods.
Subpart 25.5 for evaluation procedures (iv) If there is any doubt as to the
for supply contracts subject to trade contemplated term of the contract, use
agreements. the estimated monthly payment multi-
[64 FR 72419, Dec. 27, 1999, as amended at 67 plied by 48.
FR 21535, Apr. 30, 2002] (3) The estimated value includes the
value of all options.
25.403 Trade Agreements Act. (4) If, in any 12-month period, recur-
(a) General. The Agreement on Gov- ring or multiple awards for the same
ernment Procurement of the Trade type of product or products are antici-
Agreements Act pated, use the total estimated value of
474
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Federal Acquisition Regulation 25.408
475
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25.501 48 CFR Ch. 1 (10103 Edition)
(1) Comply with the requirements of (1) Eliminate all offers or offerors
5.203, Publicizing and response time; that are unacceptable for reasons other
(2) Comply with the requirements of than price; e.g., nonresponsive,
5.207, Preparation and Transmittal of debarred or suspended, sanctioned (see
Synopses, including the appropriate Subpart 25.6), or a prohibited source
Numbered Note (5.207(e)) for con- (see Subpart 25.7).
tracts that are subject to the Trade (2) Rank the remaining offers by
Agreements Act; price.
(3) Not include technical require- (3) If the solicitation specifies award
ments in solicitations solely to pre- on the basis of factors in addition to
clude the acquisition of eligible prod- cost or price, apply the evaluation fac-
ucts; tors as specified in this section and use
(4) Specify in solicitations that
the evaluated cost or price in deter-
offerors must submit offers in the
mining the offer that represents the
English language and in U.S. dollars
best value to the Government.
(see 52.21434, Submission of Offers in
the English Language, and 52.21435, (b) For acquisitions subject to the
Submission of Offers in U.S. Currency, Trade Agreements Act (see 25.401 and
or paragraph (c)(5) of 52.2151, Instruc- 25.403(b))
tion to OfferorsCompetitive Acquisi- (1) Consider only offers of U.S.-made,
tions); and designated country, Caribbean Basin
(5) Provide unsuccessful offerors from country, or NAFTA country end prod-
designated or NAFTA countries notice ucts, unless no offers of such end prod-
in accordance with 14.4091 or 15.503. ucts were received;
(b) See Subpart 25.5 for evaluation (2) If the agency gives the same con-
procedures and examples. sideration given eligible offers to offers
[64 FR 72419, Dec. 27, 1999, as amended at 68
of U.S.-made end products that are not
FR 56679, Oct. 1, 2003] domestic end products, award on the
low offer. Otherwise, evaluate in ac-
cordance with agency procedures; and
Subpart 25.5Evaluating Foreign
(3) If there were no offers of U.S.-
OffersSupply Contracts made, designated country, Caribbean
25.501 General. Basin country, or NAFTA country end
products, make a nonavailability de-
The contracting officer
termination (see 25.103(b)(2)) and award
(a) Must apply the evaluation proce-
on the low offer (see 25.403(c)).
dures of this subpart to each line item
of an offer unless either the offer or the (c) For acquisitions not subject to
solicitation specifies evaluation on a the Trade Agreements Act, but subject
group basis (see 25.503); to the Buy American Act (NAFTA or
(b) May rely on the offerors certifi- the Israeli Trade Act also may apply),
cation of end product origin when eval- the following applies:
uating a foreign offer; (1) If the low offer is a domestic offer
(c) Must identify and reject offers of or an eligible offer under NAFTA or
end products that are prohibited or the Israeli Trade Act, award on that
sanctioned in accordance with Sub- offer.
parts 25.6 and 25.7; and (2) If the low offer is a noneligible
(d) Must not use the Buy American offer and there were no domestic offers
Act evaluation factors prescribed in (see 25.103(b)(3)), award on the low
this subpart to provide a preference for offer.
one foreign offer over another foreign (3) If the low offer is a noneligible
offer. offer and there is an eligible offer that
[64 FR 72419, Dec. 27, 1999, as amended at 67 is lower than the lowest domestic offer,
FR 21535, Apr. 30, 2002] award on the low offer. The Buy Amer-
ican Act provides an evaluation pref-
25.502 Application. erence only for domestic offers.
(a) Unless otherwise specified in (4) Otherwise, apply the appropriate
agency regulations, perform the fol- evaluation factor provided in 25.105 to
lowing steps in the order presented: the low offer.
476
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Federal Acquisition Regulation 25.5041
(i) If the evaluated price of the low applying the appropriate evaluation
offer remains less than the lowest do- factor on a line item basis.
mestic offer, award on the low offer. (3) Compute the total evaluated price
(ii) If the price of the lowest domes- for the tentative award pattern and the
tic offer is less than the evaluated offer that specified an award restric-
price of the low offer, award on the tion.
lowest domestic offer. (4) Unless the total evaluated price of
(d) Ties. (1) If application of an eval- the offer that specified an award re-
uation factor results in a tie between a striction is less than the total evalu-
domestic offer and a foreign offer, ated price of the tentative award pat-
award on the domestic offer. tern, award based on the tentative
(2) If no evaluation preference was award pattern.
applied (i.e., offers afforded nondiscrim- (c) If the solicitation specifies that
inatory treatment under the Buy award will be made only on a group of
American Act), resolve ties between line items or all line items contained
domestic and foreign offers by a wit- in the solicitation, determine the cat-
nessed drawing of lots by an impartial egory of end products on the basis of
individual. each line item, but determine whether
(3) Resolve ties between foreign of- to apply an evaluation factor on the
fers from small business concerns basis of the group of items (see 25.504
4, Example 2).
(under the Buy American Act, a small
(1) If the proposed price of domestic
business offering a manufactured arti-
end products exceeds 50 percent of the
cle that does not meet the definition of
total proposed price of the group,
domestic end product is a foreign
evaluate the entire group as a domestic
offer) or foreign offers from a small
offer. Evaluate all other groups as for-
business concern and a large business
eign offers.
concern in accordance with 14.4086(a).
(2) For foreign offers, if the proposed
[64 FR 72419, Dec. 27, 1999, as amended at 67 price of domestic end products and eli-
FR 21535, Apr. 30, 2002] gible products exceeds 50 percent of the
total proposed price of the group,
25.503 Group offers. evaluate the entire group as an eligible
(a) If the solicitation or an offer offer.
specifies that award can be made only (3) Apply the evaluation factor to the
on a group of line items or on all line entire group in accordance with 25.502.
items contained in the solicitation or
offer, reject the offer 25.504 Evaluation Examples.
(1) If any part of the award would The following examples illustrate the
consist of sanctioned or prohibited end application of the evaluation proce-
products (see Subparts 25.6 and 25.7); or dures in 25.502 and 25.503. The examples
(2) If the Trade Agreements Act ap- assume that the contracting officer has
plies and any part of the offer consists eliminated all offers that are unaccept-
of items restricted in accordance with able for reasons other than price or a
25.403(c). trade agreement (see 25.502(a)(1)). The
(b) If an offer restricts award to a evaluation factor may change as pro-
group of line items or to all line items vided in agency regulations.
contained in the offer, determine for [67 FR 21535, Apr. 30, 2002]
each line item whether to apply an
evaluation factor (see 25.5044, Example 25.5041 Buy American Act.
1). (a)(1) Example 1.
(1) First, evaluate offers that do not Offer A ..... $12,000 Domestic end prod-
specify an award restriction on a line uct, small business.
item basis in accordance with 25.502, Offer B ..... 11,700 Domestic end prod-
determining a tentative award pattern uct, small business.
by selecting for each line item the offer Offer C ..... 10,000 U.S.-made end prod-
with the lowest evaluated price. uct (not domestic),
small business.
(2) Evaluate an offer that specifies an
award restriction against the offered (2) Analysis: This acquisition is for
prices of the tentative award pattern, end products for use in the United
477
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25.5042 48 CFR Ch. 1 (10103 Edition)
States and is set aside for small busi- end product (see 25.502(c)(4)). Since
ness concerns. The Buy American Act Offer B is a domestic offer, apply the 12
applies. Since the acquisition value is percent factor to Offer C (see
less than $25,000 and the acquisition is 25.105(b)(2)). The resulting evaluated
set aside, none of the trade agreements price of $11,200 remains lower than
apply. Perform the steps in 25.502(a). Offer B. The cost of Offer B is therefore
Offer C is evaluated as a foreign end unreasonable (see 25.105(c)). Award on
product because it is the product of a Offer C at $10,000 (see 25.502(c)(4)(i)).
small business, but is not a domestic (b)(1) Example 2.
(2) Analysis: This acquisition is for the low remaining offer, Offer C (see
end products for use in the United 25.502(b)(2)).
States and is set aside for small busi-
ness concerns. The Buy American Act 25.5043 NAFTA/Israeli Trade Act.
applies. Perform the steps in 25.502(a). (a) Example 1.
Offer C is evaluated as a foreign end Offer A ..... $105,000 Domestic end prod-
product because it is the product of a uct, small business.
small business but is not a domestic Offer B ..... 100,000 Eligible product.
end product (see 25.502(c)(4)). After ap- Analysis: Since the low offer is an eli-
plying the 12 percent factor, the evalu- gible offer, award on the low offer (see
ated price of Offer C is $11,424. Award 25.502(c)(1)).
on Offer B at $10,700 (see 25.502(c)(4)(ii)). (b) Example 2.
[64 FR 72419, Dec. 27, 1999, as amended at 67 Offer A ..... $105,000 Eligible product.
FR 21535, Apr. 30, 2002] Offer B ..... 103,000 Noneligible product.
Analysis: Since the acquisition is not
25.5042 Trade Agreements Act/Carib- subject to the Trade Agreements Act,
bean Basin Trade Initiative/NAFTA.
the contracting officer can consider the
Example 1. noneligible offer. Since no domestic
Offer A ..... $204,000 U.S.-made end prod- offer was received, make a nonavail-
uct (not domestic). ability determination and award on
Offer B ..... 203,000 U.S.-made end prod- Offer B (see 25.502(c)(2)).
uct (domestic), (c) Example 3.
small business. Offer A ..... $105,000 Domestic end prod-
Offer C ..... 200,000 Eligible product. uct, large business.
Offer D ..... 195,000 Noneligible product Offer B ..... 103,000 Eligible product.
(not U.S.-made). Offer C ..... 100,000 Noneligible product.
Analysis: Eliminate Offer D because Analysis: Since the acquisition is not
the Trade Agreements Act applies and subject to the Trade Agreements Act,
there is an offer of a U.S.-made or an the contracting officer can consider the
eligible product (see 25.502(b)(1)). If the noneligible offer. Because the eligible
agency gives the same consideration offer (Offer B) is lower than the domes-
given eligible offers to offers of U.S.- tic offer (Offer A), no evaluation factor
made end products that are not domes- applies to the low offer (Offer C).
tic offers, it is unnecessary to deter- Award on the low offer (see 25.502(c)(3)).
mine if U.S.-made end products are do-
mestic (large or small business). No 25.5044 Group award basis.
further analysis is necessary. Award on (a) Example 1.
478
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Federal Acquisition Regulation 25.5044
Offers
Item
A B C
Problem: Offeror C specifies all-or- Item 3: Low offer A is noneligible and Offer
none award. Assume all offerors are B is a domestic offer. Apply a 6 percent fac-
large businesses. The Trade Agree- tor to Offer A. The evaluated price of Offer A
ments Act does not apply. is higher than Offer B; select B.
Item 4: Low offer A is noneligible. Since
Analysis: (see 25.503) neither offer is a domestic offer, no evalua-
STEP 1: Evaluate Offers A & B before con- tion factor applies; select A.
sidering Offer C and determine which offer Item 5: Low offer B is noneligible; apply a
has the lowest evaluated cost for each line 6 percent factor to Offer B. Offer A is still
item (the tentative award pattern): higher than Offer B; select B.
Item 1: Low offer A is domestic; select A. STEP 2: Evaluate Offer C against the ten-
Item 2: Low offer B is eligible; do not apply
tative award pattern for Offers A and B:
factor; select B.
Offers
Item Tentative award pattern
Low offer C
from A and B
111,600 112,000
* Offer + 6 percent.
On a line item basis, apply a factor to any ($10,000 plus 6 percent). Evaluate the remain-
noneligible offer if the other offer for that ing items without applying a factor.
line item is domestic. STEP 3: The tentative unrestricted award
For Item 1, apply a factor to Offer C be- pattern from Offers A and B is lower than
cause Offer A is domestic and the acquisition the evaluated price of Offer C. Award the
was not subject to the Trade Agreements combination of Offers A and B. Note that if
Act. The evaluated price of Offer C, Item 1, Offer C had not specified all-or-none award,
becomes $53,000 ($50,000 plus 6 percent). Apply
award would be made on Offer C for line
a factor to Offer B, Item 5, because it is a
items 1, 3, and 4, totaling an award of $82,000.
noneligible product and Offer C is domestic.
The evaluated price of Offer B is $10,600 (b) Example 2.
Offers
Item
A B C
Problem: The solicitation specifies award Act applies and the acquisition cannot be set
on a group basis. Assume the Buy American
479
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25.600 48 CFR Ch. 1 (10103 Edition)
aside for small business concerns. All (1) Sanctioned EU country end prod-
offerors are large businesses. ucts with an estimated acquisition
Analysis: (see 25.503(c)) value less than $169,000;
STEP 1: Determine which of the offers are (2) Sanctioned EU country construc-
domestic (see 25.503(c)(1)):
tion with an estimated acquisition
Domestic
value less than $6,481,000; or
Determination
[percent] (3) Sanctioned EU country services as
follows (Federal Service Code or Cat-
A 60,500/91,200=66.3% Domestic egory from the Federal Procurement
B 10,300/91,800=11.2% Foreign Data System Product/Service Code
C 10,400/90,800=11.5% Foreign
Manual is indicated in parentheses):
(i) Service contracts regardless of ac-
STEP 2: Determine whether foreign offers
are eligible or noneligible offers (see quisition value for
25.503(c)(2)): (A) All transportation services, in-
cluding launching services (all V codes,
Domestic + eligible Determination J019, J998, J999, and K019);
[percent]
(B) Dredging (Y216 and Z216);
A N/A ....................... Domestic (C) Management and operation of
B 81,800/91,800=89.1% Eligible certain Government or privately owned
C 20,600/90,800=22.7% Noneligible facilities used for Government pur-
poses, including federally funded re-
STEP 3: Determine whether to apply an search and development centers (all M
evaluation factor (see 25.503(c)(3)). The low codes);
offer (Offer C) is a foreign offer. There is no (D) Development, production or co-
eligible offer lower than the domestic offer. production of program material for
Therefore, apply the factor to the low offer. broadcasting, such as motion pictures
Addition of the 6 percent factor (use 12 per-
(T006 and T016);
cent if Offer A is a small business) to Offer C
yields an evaluated price of $96,248 ($90,800 + (E) Research and development (all A
6 percent). Award on Offer A (see codes);
25.502(c)(4)(ii)). Note that, if Offer A were (F) Airport concessions (S203);
greater than Offer B, an evaluation factor (G) Legal services (R418);
would not be applied and award would be on (H) Hotel and restaurant services
Offer C (see 25.502(c)(3)).
(S203);
[64 FR 72419, Dec. 27, 1999; 65 FR 4633, Jan. 31, (I) Placement and supply of personnel
2000] services (V241 and V251);
(J) Investigation and security serv-
Subpart 25.6Trade Sanctions ices (S206, S211, and R423);
(K) Education and training services
25.600 Scope of subpart. (all U codes and R419);
This subpart implements sanctions (L) Health and social services (all O
imposed by the President pursuant to and G codes);
Section 305(g)(1) of the Trade Agree- (M) Recreational, cultural, and sport-
ments Act of 1979 (19 U.S.C. 2515(g)(1)), ing services (G003); or
on European Union (EU) member states (N) Telecommunications services (en-
that discriminate against U.S. prod- compassing only voice telephony,
ucts or services (sanctioned EU mem- telex, radio telephony, paging, and sat-
ber states). This subpart does not apply ellite services) (S1, D304, D305, D316,
to contracts for supplies or services D317, and D399).
awarded and performed outside the (ii) All other service contracts with
United States, or to the Department of an estimated acquisition value less
Defense. For thresholds unique to indi- than $169,000.
vidual agencies, see agency regula- (b) Determine the applicability of
tions. sanction thresholds in the manner pro-
vided at 25.403(b).
25.601 Policy.
[64 FR 72419, Dec. 27, 1999, as amended at 65
(a) Except as provided in 25.602, agen- FR 36026, June 6, 2000; 67 FR 56124, Aug. 30,
cies shall not award contracts for 2002]
480
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Federal Acquisition Regulation 25.701
481
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25.702 48 CFR Ch. 1 (10103 Edition)
and Sudan are prohibited, as are most im- organizations through the American
ports from North Korea into the United Institute of Taiwan (AIT). AIT is under
States or its outlying areas. In addition,
contract to the Department of State.
lists of entities and individuals subject to
economic sanctions are included in OFACs
List of Specially Designated Nationals and Subpart 25.9Customs and Duties
Blocked Persons at http://www.epls.gov/
Terlist1.html. More information about these 25.900 Scope of subpart.
restrictions, as well as updates, is available
in OFACs regulations at 31 CFR chapter V This subpart provides policies and
and/or on OFACs Web site at http:// procedures for exempting from import
www.treas.gov/ofac. duties certain supplies purchased under
Government contracts.
25.702 Source of further information.
Refer questions concerning the re- 25.901 Policy.
strictions in 25.701 to the Department United States laws impose duties on
of the Treasury, Office of Foreign As- foreign supplies imported into the cus-
sets Control, Washington, D.C. 20220 toms territory of the United States.
(Telephone (202) 6222520). Certain exemptions from these duties
[65 FR 36028, June 6, 2000] are available to Government agencies.
EFFECTIVE DATE NOTE: At 68 FR 56686, Oct. Agencies must use these exemptions
1, 2003, 25.702 was amended by removing when the anticipated savings to appro-
6222520 and adding 6222490 in its place, priated funds will outweigh the admin-
effective Oct. 31, 2003. istrative costs associated with proc-
essing required documentation.
Subpart 25.8Other International
Agreements and Coordination 25.902 Procedures.
For regulations governing importa-
25.801 General. tions and duties, see the Customs Reg-
Treaties and agreements between the ulations issued by the U.S. Customs
United States and foreign governments Service, Department of the Treasury
affect the evaluation of offers from for- (19 CFR Chapter 1). Except as provided
eign entities and the performance of elsewhere in the Customs Regulations
contracts in foreign countries. (see 19 CFR 10.100), all shipments of im-
ported supplies purchased under Gov-
25.802 Procedures.
ernment contracts are subject to the
(a) When placing contracts with con- usual Customs entry and examination
tractors located outside the United requirements. Unless the agency ob-
States, for performance outside the tains an exemption (see 25.903), those
United States, contracting officers shipments are also subject to duty.
must
(1) Determine the existence and ap- 25.903 Exempted supplies.
plicability of any international agree-
ments and ensure compliance with (a) Subchapters VIII and X of Chap-
these agreements; and ter 98 of the Harmonized Tariff Sched-
(2) Conduct the necessary advance ac- ule of the United States (19 U.S.C. 1202)
quisition planning and coordination be- list supplies for which exemptions from
tween the appropriate U.S. executive duty may be obtained when imported
agencies and foreign interests as re- into the customs territory of the
quired by these agreements. United States under a Government
(b) The Department of State pub- contract. For certain of these supplies,
lishes many international agreements the contracting agency must certify to
in the United States Treaties and the Commissioner of Customs that
Other International Agreements se- they are for the purpose stated in the
ries. Copies of this publication nor- Harmonized Tariff Schedule (see 19
mally are available in overseas legal CFR 10.102104, 10.114, and 10.121 and 15
offices and U.S. diplomatic missions. CFR part 301 for requirements and for-
(c) Contracting officers must award mats).
all contracts with Taiwanese firms or
482
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Federal Acquisition Regulation 25.1002
483
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25.1101 48 CFR Ch. 1 (10103 Edition)
484
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Federal Acquisition Regulation 25.1103
(2) If the head of the agency deter- with a value exceeding $2,500, $7,500 for
mines that a higher percentage is ap- acquisitions as described in
propriate, substitute the higher evalua- 13.201(g)(1)(i), or $15,000 for acquisitions
tion percentage in paragraph (b)(3)(i) of as described in 13.201(g)(1)(ii), unless an
the clause. exception applies (see 25.701(a)(2)).
(b)(1) Insert the provision at 52.22510, (b) Translations. Insert the clause at
Notice of Buy American Act Require- 52.22514, Inconsistency Between
mentConstruction Materials, in so- English Version and Translation of
licitations containing the clause at Contract, in solicitations and contracts
52.2259. if anticipating translation into another
(2) If insufficient time is available to language.
process a determination regarding the (c) Sanctions. (1) Except as provided
inapplicability of the Buy American in paragraph (c)(2) of this section, in-
Act before receipt of offers, use the sert the clause at
provision with its Alternate I. (i) 52.22515, Sanctioned European
(c) Insert the clause at 52.22511, Buy Union Country End Products, in solici-
American Act Construction Mate- tations and contracts for supplies val-
rials under Trade Agreements, in so- ued at less than $169,000; or
licitations and contracts for construc- (ii) 52.22516, Sanctioned European
tion that is performed in the United Union Country Services, in solicita-
States valued at $6,481,000 or more. tions and contracts for services
(1) List in paragraph (b)(3) of the (A) Listed in 25.601(a)(3)(i); or
clause all foreign construction mate-
(B) Valued at less than $169,000.
rial excepted from the requirements of
(2) Do not insert the clauses in para-
the Buy American Act, other than des-
graph (c)(1) of this section in
ignated country or NAFTA country
construction material. (i) Solicitations issued and contracts
(2) If the head of the agency deter- awarded by
mines that a higher percentage is ap- (A) A contracting activity located
propriate, substitute the higher evalua- outside of the United States, provided
tion percentage in paragraph (b)(4)(i) of the supplies will be used or the services
the clause. will be performed outside of the United
(3) For acquisitions valued at States; or
$6,481,000 or more, but less than (B) The Department of Defense;
$7,304,733, use the clause with its Alter- (ii) Purchases at or below the sim-
nate I. plified acquisition threshold awarded
(d)(1) Insert the provision at 52.22512, using simplified acquisition proce-
Notice of Buy American Act Require- dures;
mentConstruction Materials under (iii) Total small business set-asides;
Trade Agreements, in solicitations con- (iv) Contracts in support of U.S. na-
taining the clause at 52.22511. tional security interests;
(2) If insufficient time is available to (v) Contracts for essential spare, re-
process a determination regarding the pair, or replacement parts available
inapplicability of the Buy American only from sanctioned EU member
Act before receipt of offers, use the states; or
provision with its Alternate I. (vi) Contracts for which the head of
(3) For acquisitions valued at the agency has made a determination
$6,481,000 or more, but less than in accordance with 25.602(b).
$7,304,733, use the clause with its Alter- (d) Foreign currency offers. Insert the
nate II. provision at 52.22517, Evaluation of
[64 FR 72419, Dec. 27, 1999, as amended at 65 Foreign Currency Offers, in solicita-
FR 36026, June 6, 2000; 67 FR 21536, Apr. 30, tions that permit the use of other than
2002; 67 FR 56124, Aug. 30, 2002] a specified currency. Insert in the pro-
vision the source of the rate to be used
25.1103 Other provisions and clauses. in the evaluation of offers.
(a) Restrictions on certain foreign pur- [64 FR 72419, Dec. 27, 1999, as amended at 65
chases. Insert the clause at 52.22513, FR 36026, 36028, June 6, 2000; 67 FR 21538, Apr.
Restrictions on Certain Foreign Pur- 30, 2002; 67 FR 56122, 56124, Aug. 30, 2002; 68 FR
chases, in solicitations and contracts 4051, Jan. 27, 2003]
485
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Pt. 26 48 CFR Ch. 1 (10103 Edition)
EFFECTIVE DATE NOTE: At 68 FR 56686, Oct. with 25 U.S.C. 1452(c) and any Native
1, 2003, 25.1103 was amended in paragraph (a) as defined in the Alaska Native Claims
by removing the words (see 25.701(a)(2), ef- Settlement Act (43 U.S.C. 1601).
fective Oct. 31, 2003.
Indian organization means the gov-
erning body of any Indian tribe or enti-
PART 26OTHER ty established or recognized by the
SOCIOECONOMIC PROGRAMS governing body of an Indian tribe for
the purposes of 25 U.S.C., chapter 17.
Subpart 26.1Indian Incentive Program Indian-owned economic enterprise
Sec. means any Indian-owned (as deter-
26.100 Scope of subpart. mined by the Secretary of the Interior)
26.101 Definitions. commercial, industrial, or business ac-
26.102 Policy. tivity established or organized for the
26.103 Procedures. purpose of profit, provided that Indian
26.104 Contract clause. ownership constitutes not less than 51
percent of the enterprise.
Subpart 26.2Disaster or Emergency
Indian tribe means any Indian tribe,
Assistance Activities
band, group, pueblo, or community, in-
26.200 Scope of subpart. cluding native villages and native
26.201 Policy. groups (including corporations orga-
nized by Kenai, Juneau, Sitka, and Ko-
Subpart 26.3Historically Black Colleges diak) as defined in the Alaska Native
and Universities and Minority Institutions Claims Settlement Act, that is recog-
26.300 Scope of subpart. nized by the Federal Government as el-
26.301 [Reserved] igible for services from BIA in accord-
26.302 General policy. ance with 25 U.S.C. 1452(c).
26.303 Data collection and reporting re- Interested party means a prime con-
quirements. tractor or an actual or prospective of-
26.304 Solicitation provision. feror whose direct economic interest
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap- would be affected by the award of a
ter 137; and 42 U.S.C. 2473(c). subcontract or by the failure to award
SOURCE: 56 FR 41737, Aug. 22, 1991, unless a subcontract.
otherwise noted. [56 FR 41737, Aug. 22, 1991, as amended at 61
NOTE: This part has been created to facili- FR 39210, July 26, 1996; 65 FR 24323, Apr. 25,
tate promulgation of additional FAR and 2000]
agency level socioeconomic coverage which
properly fall under FAR Subchapter DSo- 26.102 Policy.
cioeconomic Programs, but neither imple-
ments nor supplements existing FAR Parts Indian organizations and Indian-
19 or 22 through 25. owned economic enterprises shall have
the maximum practicable opportunity
Subpart 26.1Indian Incentive to participate in performing contracts
Program awarded by Federal agencies. In ful-
filling this requirement, the Indian In-
26.100 Scope of subpart. centive Program allows an incentive
payment equal to 5 percent of the
This subpart implements 25 U.S.C.
amount paid to a subcontractor in per-
1544, which provides an incentive to
forming the contract, if the contract so
prime contractors that use Indian or-
authorizes and the subcontractor is an
ganizations and Indian-owned eco-
Indian organization or Indian-owned
nomic enterprises as subcontractors.
economic enterprise.
26.101 Definitions. [61 FR 39211, July 26, 1996]
As used in this subpart
Indian means any person who is a 26.103 Procedures.
member of any Indian tribe, band, (a) Contracting officers and prime
group, pueblo, or community that is contractors, acting in good faith, may
recognized by the Federal Government rely on the representation of an Indian
as eligible for services from the Bureau organization or Indian-owned economic
of Indian Affairs (BIA) in accordance enterprise as to its eligibility, unless
486
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Federal Acquisition Regulation 26.201
an interested party challenges its sta- shall seek funding in accordance with
tus or the contracting officer has inde- agency procedures.
pendent reason to question that status. [56 FR 41737, Aug. 22, 1991, as amended at 57
(b) In the event of a challenge to the FR 20377, May 12, 1992; 61 FR 39211, July 26,
representation of a subcontractor, the 1996; 62 FR 40236, July 25, 1997; 64 FR 10532,
contracting officer shall refer the mat- Mar. 4, 1999]
ter to the U.S. Department of the Inte-
rior, Bureau of Indian Affairs (BIA), 26.104 Contract clause.
Attn: Chief, Division of Contracting Contracting officers in civilian agen-
and Grants Administration, 1849 C cies may insert the clause at 52.2261,
Street, NW., MS2626MIB, Wash- Utilization of Indian Organizations and
ington, DC 202404000. The BIA will de- Indian-Owned Economic Enterprises, in
termine the eligibility and notify the solicitations and contracts if
contracting officer. (a) In the opinion of the contracting
(c) The BIA will acknowledge receipt officer, subcontracting possibilities
of the request from the contracting of- exist for Indian organizations or In-
ficer within 5 working days. Within 45 dian-owned economic enterprises; and
(b) Funds are available for any in-
additional working days, BIA will ad-
creased costs as described in paragraph
vise the contracting officer, in writing,
(b)(2) of the clause at 52.2261.
of its determination.
(d) The contracting officer will notify [65 FR 24323, Apr. 25, 2000]
the prime contractor upon receipt of a
challenge. Subpart 26.2Disaster or
(1) To be considered timely, a chal- Emergency Assistance Activities
lenge shall
(i) Be in writing; SOURCE: 61 FR 39200, July 26, 1996, unless
(ii) Identify the basis for the chal- otherwise noted.
lenge;
26.200 Scope of subpart.
(iii) Provide detailed evidence sup-
porting the claim; and This subpart implements 42 U.S.C.
(iv) Be filed with and received by the 5150, which provides a preference for
contracting officer prior to award of local organizations, firms, and individ-
the subcontract in question. uals when contracting for major dis-
(2) If the notification of a challenge aster or emergency assistance activi-
is received by the prime contractor ties (see 6.3025).
prior to award, it shall withhold award 26.201 Policy.
of the subcontract pending the deter-
mination by BIA, unless the prime con- (a) When contracting under this sub-
tractor determines, and the con- part for major disaster or emergency
assistance activities, such as debris
tracting officer agrees, that award
clearance, distribution of supplies, or
must be made in order to permit time-
reconstruction, preference shall be
ly performance of the prime contract.
given, to the extent feasible and prac-
(3) Challenges received after award of ticable, to those organizations, firms,
the subcontract shall be referred to or individuals residing or doing busi-
BIA, but the BIA determination shall ness primarily in the area affected by
have prospective application only. such major disaster or emergency.
(e) If the BIA determination is not (b) The authority to provide pref-
received within the prescribed time pe- erence under this subpart applies only
riod, the contracting officer and the to those acquisitions, including those
prime contractor may rely on the rep- which do not exceed the simplified ac-
resentation of the subcontractor. quisition threshold, conducted during
(f) Subject to the terms and condi- the term of a major disaster or emer-
tions of the contract and the avail- gency declaration made by the Presi-
ability of funds, contracting officers dent of the United States under the au-
shall authorize an incentive payment thority of the Robert T. Stafford Dis-
of 5 percent of the amount paid to the aster Relief and Emergency Assistance
subcontractor. Contracting officers Act (42 U.S.C. 5121 et seq.).
487
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26.300 48 CFR Ch. 1 (10103 Edition)
488
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SUBCHAPTER EGENERAL CONTRACTING REQUIREMENTS
489
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27.101 48 CFR Ch. 1 (10103 Edition)
490
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Federal Acquisition Regulation 27.2022
491
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27.203 48 CFR Ch. 1 (10103 Edition)
492
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Federal Acquisition Regulation 27.2041
493
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27.2042 48 CFR Ch. 1 (10103 Edition)
494
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Federal Acquisition Regulation 27.2071
495
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27.2072 48 CFR Ch. 1 (10103 Edition)
496
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Federal Acquisition Regulation 27.302
(b) The contracting officer should Small business firm means a small
consult with legal counsel regarding business concern as defined at 15 U.S.C.
questions under this section. 632 and implementing regulations of
the Administrator of the Small Busi-
[61 FR 39212, July 26, 1996]
ness Administration. (For the purpose
of this definition, the size standard
Subpart 27.3Patent Rights Under contained in 13 CFR 121.38 for small
Government Contracts business contractors and in 13 CFR
121.312 for small business subcontrac-
27.300 Scope of subpart. tors will be used. See FAR part 19).
This subpart prescribes policies, pro- Subject invention means any invention
cedures, and contract clauses with re- of the contractor conceived or first ac-
spect to inventions made in the per- tually reduced to practice in the per-
formance of work under a Government formance of work under a Government
contract or subcontract thereunder if a contract; provided, that in the case of a
purpose of the contract or subcontract variety of plant, the date of determina-
is the conduct of experimental, devel- tion defined in section 41(d) of the
opmental, or research work, except to Plant Variety Protection Act, 7 U.S.C.
the extent statutory requirements ne- 2401(d), must also occur during the pe-
cessitate different agency policies, pro- riod of contract performance.
cedures, and clauses as specified in [49 FR 12974, Mar. 30, 1984, as amended at 54
agency supplemental regulations. FR 25063, June 12, 1989 and 55 FR 25525, June
21, 1990; 66 FR 2130, Jan. 10, 2001]
27.301 Definitions.
As used in this subpart 27.302 Policy.
Invention means any invention or dis- (a) Introduction. The policy of this
covery that is or may be patentable or section is based on Chapter 18 of title
otherwise protectable under title 35 of 35, U.S.C. (Pub. L. 95517, Pub. L. 98
the U.S. Code or any novel variety of 620, 37 CFR part 401), the Presidential
plant that is or may be protectable Memorandum on Government Patent
under the Plant Variety Protection Policy to the Heads of Executive De-
Act (7 U.S.C. 2321, et seq.). partments and Agencies dated Feb-
Made when used in relation to any in- ruary 18, 1983, and Executive Order
vention, means the conception or first 12591, which provides that, to the ex-
actual reduction to practice of such in- tent permitted by law, the head of each
vention. Executive Department and agency
Nonprofit organization means a do- shall promote the commercialization,
mestic university or other institution in accord with the Presidential Memo-
of higher education or an organization randum, of patentable results of feder-
of the type described in section ally funded research by granting to all
501(c)(3) of the Internal Revenue Code contractors, regardless of size, the title
of 1954 (26 U.S.C. 501(c)) and exempt to patents made in whole or in part
from taxation under section 501(a) of with Federal funds, in exchange for
the Internal Revenue Code (26 U.S.C. royalty-free use by or on behalf of the
501(a)), or any nonprofit scientific or Government. The objectives of this pol-
educational organization qualified icy are to use the patent system to pro-
under a State nonprofit organization mote the utilization of inventions aris-
statute. ing from federally supported research
Practical application means to manu- or development; to encourage max-
facture, in the case of a composition or imum participation of industry in fed-
product; to practice, in the case of a erally supported research and develop-
process or method; or to operate, in the ment efforts; to ensure that these in-
case of a machine or system; and, in ventions are used in a manner to pro-
each case, under such conditions as to mote free competition and enterprise;
establish that the invention is being to promote the commercialization and
utilized and that its benefits are, to the public availability of the inventions
extent permitted by law or Govern- made in the United States by United
ment regulations, available to the pub- States industry and labor; to ensure
lic on reasonable terms. that the Government obtains sufficient
497
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27.302 48 CFR Ch. 1 (10103 Edition)
498
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Federal Acquisition Regulation 27.302
(d) Government right to receive title. (1) the contractor. Contractors will con-
The Government has the right to re- tinue to provide confidential markings
ceive title to any invention if the con- to help prevent inadvertent release
tract so provides pursuant to a deter- outside the agency.
mination made in accordance with sub- (f) March-in rights. (1) With respect to
paragraph (b) (1), (2), (3), or (4) of this any subject invention in which a con-
section. In addition, to the extent pro- tractor has acquired title, contracts
vided in the patent rights clause, the provide that the agency shall have the
Government has the right to receive right (unless provided otherwise in ac-
title to an invention cordance with 27.3041(f)) to require the
(i) If the contractor has not disclosed contractor, an assignee, or exclusive li-
the invention within the time specified censee of a subject invention to grant a
in the clause; nonexclusive, partially exclusive, or
(ii) In any country where the con- exclusive license in any field of use to
tractor does not elect to retain rights a responsible applicant or applicants,
or fails to elect to retain rights to the upon terms that are reasonable under
invention within the time specified in the circumstances, and if the con-
the clause; tractor, assignee, or exclusive licensee
(iii) In any country where the con- refuses such request, to grant such a li-
tractor has not filed a patent applica- cense itself, if the agency determines
tion within the time specified in the that such action is necessary
clause; (i) Because the contractor or assignee
(iv) In any country where the con- has not taken, or is not expected to
tractor decides not to continue pros- take within a reasonable time, effec-
ecution of a patent application, pay tive steps to achieve practical applica-
maintenance fees, or defend in a reex- tion of the subject invention in such
amination or opposition proceeding on field of use;
the patent; and/or (ii) To alleviate health or safety
(v) In any country where the con- needs which are not reasonably satis-
tractor no longer desires to retain fied by the contractor, assignee, or
title. their licensees;
(2) For the purposes of this para- (iii) To meet requirements for public
graph, election or filing in a European use specified by Federal regulations
Patent Office Region or under the Pat- and such requirements are not reason-
ent Cooperation Treaty constitutes ably satisfied by the contractor, as-
election or filing in any country cov- signee, or licensees; or
ered therein to meet the times speci- (iv) Because the agreement required
fied in the clause, provided that the by paragraph (g) below has neither
Government has the right to receive been obtained nor waived, or because a
title in those countries not subse- licensee of the exclusive right to use or
quently designated by the contractor. sell any subject invention in the
(e) Utilization reports. The Govern- United States is in breach of its agree-
ment shall have the right to require ment obtained pursuant to paragraph
periodic reporting on the utilization or (g) below.
efforts at obtaining utilization that are (2) This right of the agency shall be
being made by the contractor or its li- exercised only after the contractor has
censees or assignees. Such reporting by been provided a reasonable time to
small business firms and nonprofit or- present facts and show cause why the
ganizations may be required in accord- proposed agency action should not be
ance with instructions as may be taken, and afforded an opportunity to
issued by the Department of Com- take appropriate action if the con-
merce. Agencies should protect the tractor wishes to dispute or appeal the
confidentiality or utilization reports proposed action, in accordance with
which are marked with restrictions to 27.3041(g).
the extent permitted by 35 U.S.C. 205 or (g) Preference for United States indus-
other applicable laws and 37 CFR part try. Unless provided otherwise in ac-
401. Agencies shall not disclose such cordance with 27.3041(f), contracts pro-
utilization reports to persons outside vide that no contractor which receives
the Government without permission of title to any subject invention and no
499
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27.302 48 CFR Ch. 1 (10103 Edition)
assignee of any such contractor shall clause. However, in no event will the
grant to any person the exclusive right Secretary of Commerce intervene in
to use or sell any subject invention in ongoing negotiations or contractor de-
the United States unless such person cisions concerning the licensing of a
agrees that any products embodying specific subject invention. All the
the subject invention or produced above investigations, discussions, and
through the use of the subject inven- negotiations of the Secretary of Com-
tion will be manufactured substan- merce will be in coordinations with
tially in the United States. However, in other interested agencies, including
individual cases, the requirement for the Small Business Administration;
such an agreement may be waived by and in the case of a contract for the op-
the agency upon a showing by the con- eration of a Government-owned, con-
tractor or assignee that reasonable but tractor-operated research or produc-
unsuccessful efforts have been made to
tion facility, the Secretary of Com-
grant licenses on similar terms to po-
merce will coordinate with the agency
tential licensees that would be likely
responsible for the facility prior to any
to manufacture substantially in the
discussions or negotiations with the
United States or that under the cir-
cumstances domestic manufacture is contractor.
not commercially feasible. (i) Minimum rights to contractor. (1)
(h) Small business preference. (1) Non- When the Government acquires title to
profit organization contractors are ex- a subject invention, the contractor is
pected to use efforts that are reason- normally granted a revocable, non-
able under the circumstances to at- exclusive, royalty-free license to that
tract small business licensees. They invention throughout the world. The
are also expected to give small busi- contractors license extends to its do-
ness firms that meet the standard out- mestic subsidiaries and affiliates, if
lined in the clause at 52.22711, Patent any, within the corporate structure of
RightsRetention by the Contractor which the contractor is a part and in-
(Short Form), a preference over other cludes the right to grant sublicenses of
applicants for licenses. What con- the same scope to the extent the con-
stitutes reasonable efforts to attract tractor was legally obligated to do so
small business licensees will vary with at the time the contract was awarded.
the circumstances and the nature, du- The license is transferable only with
ration, and expense of efforts needed to the approval of the contracting officer
bring the invention to the market. except when transferred to the suc-
Subparagraph (k)(4) of the clause is not cessor of that part of the contractors
intended, for example, to prevent non- business to which the invention per-
profit organizations from providing tains.
larger firms with a right of first refusal (2) The contractors domestic license
or other options in inventions that re- may be revoked or modified to the ex-
late to research being supported under
tent necessary to achieve expeditious
long-term or other arrangements with
practical application of the subject in-
larger companies. Under such cir-
vention pursuant to an application for
cumstances, it would not be reasonable
to seek and to give a preference to an exclusive license submitted in ac-
small business licensees. cordance with the applicable provisions
(2) Small business firms that believe in the Federal Property Management
a nonprofit organzations is not meet- Regulations and agency licensing regu-
ing its obligations under the clause lations. This license will not be re-
may report their concerns to the Sec- voked in that field of use or the geo-
retary of Commerce. To the extent graphical areas in which the contractor
deemed appropriate, the Secretary of has achieved practical application and
Commerce will undertake informal in- continues to make the benefits of the
vestigation of the concern, and, if ap- invention reasonably accessible to the
propriate, enter into discussions or ne- public. The license in any foreign coun-
gotiations with the nonprofit organiza- try may be revoked or modified to the
tion to the end of improving its efforts extent the contractor, its licensees, or
in meeting its obligations under the its domestic subsidiaries or affiliates
500
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Federal Acquisition Regulation 27.303
501
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27.303 48 CFR Ch. 1 (10103 Edition)
(5) If the contract is for the operation (2) Pursuant to their statutory re-
of a Government-owned facility, the quirements, DOE and NASA may speci-
contracting officer may include Alter- fy in their supplemental regulations
nate IV with the clause at 52.22711. use of a modified version of the clause
(b)(1) The contracting officer shall at 52.22713 in contracts with other
insert the clause at 52.22712, Patent than small business concerns or non-
RightsRetention by the Contractor profit organizations.
(Long Form), if all the following condi- (3) If the acquisition of patent rights
tions apply: for the benefit of a foreign government
(i) The contractor is other than a is required under a treaty or executive
small business firm or nonprofit orga- agreement or if the agency head or a
nization. designee determines at the time of con-
(ii) No alternative clause is used in tracting that it would be in the na-
accordance with paragraph (c) or (d) of tional interest to acquire the right to
this section or 237.3042. sublicense foreign governments or
(iii) The contracting agency is one of international organizations pursuant
those excepted under subdivision to any existing or future treaty or
(a)(1)(i) of this section. agreement, the contracting officer
(2) If the acquisition of patent rights shall use the clause with its Alternate
for the benefit of a foreign government I. If other rights are necessary to effec-
is required under a treaty or executive tuate the treaty or agreement, Alter-
agreement or if the agency head or a nate I may be appropriately modified.
designee determines at the time of con- In long term contracts, Alternate II
tracting that it would be in the na- shall be added if necessary to effec-
tional interest to acquire the right to tuate treaties or agreements to be en-
sublicense foreign governments or tered into.
international organizations pursuant (4) Section 401 of title 37 of the Code
to any existing or future treaty or
of Federal Regulations provides that in
agreement, the contracting officer
contracts with small business firms
shall use the clause at 52.22712, with
and nonprofit organizations, when an
its Alternate I. If other rights are nec-
agency exercises the exceptions at
essary to effectuate the treaty or
27.302(b) (2) or (3) it shall use the clause
agreement, Alternate I may be appro-
at 52.22711, with such modifications as
priately modified. In long term con-
are necessary to address the excep-
tracts, Alternate II shall be added if
tional circumstances or concerns which
necessary to effectuate treaties or
led to the use of the exception. The
agreements to be entered into.
(c)(1) The contracting officer shall in- greater rights determinations provi-
sert the clause at 52.22713, Patent sion of 52.22713(b)(2) shall be included
RightsAcquisition by the Govern- in the modified clause.
ment, if any of the following conditions (d)(1) If one of the following applies,
apply: the contracting officer may insert the
(i) No alternative clause is used in clause prescribed in paragraph (a) or
accordance with subparagraphs (c) (2) (b) of this section as otherwise applica-
and (4) or paragraph (d) of this section ble, agency supplemental regulations
or 27.3042. may provide another clause and specify
(ii) The work is to be performed out- its use, or the contracting officer shall
side the United States, its possessions, insert the clause prescribed in para-
and Puerto Rico by contractors that graph (c) of this section:
are not small business firms, nonprofit (i) The contractor is not located in
organizations as defined in 27.301, or the United States or does not have a
domestic firms. For purposes of this place of business located in the United
subparagraph, the contracting officer States or is subject to the control of a
may presume that a contractor is not a foreign government.
domestic firm unless it is known that (ii) There are exceptional cir-
the firm is not foreign owned, con- cumstances and the agency head deter-
trolled, or influenced. (See 27.3044(a) mines that restriction or elimination
regarding subcontracts with U.S. of the right to retain title to any sub-
firms.) ject invention will better promote the
502
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Federal Acquisition Regulation 27.3041
policy and objectives of chapter 18 of the case of contracts with small busi-
title 35 of the United States Code. ness concerns, copies will also be sent
(iii) It is determined by a Govern- to the Chief Counsel for Advocacy of
ment authority which is authorized by the Small Business Administration.
statute or executive order to conduct (e) For those agencies excepted under
foreign intelligence or counterintel- paragraph (a)(1)(i) of this section, only
ligence activities that restriction or small business firms or non-profit orga-
elimination of the right to retain any nizations qulaify for the clause at
subject invention is necessary to pro- 52.22711. If one of these agencies has
tect the security of such activities. reason to question the status of the
(iv) The contract includes the oper- prospective contractor, the agency
ation of a Government-owned, con- may file a protest in accordance with
tractor-operated facility of the Depart- 13 CFR 121.35 if small business firm
ment of Energy primarily dedicated to status is questioned, or require the pro-
that Departments naval nuclear pro- spective contractor to furnish evidence
pulsion or weapons related programs. of its status as a nonprofit organiza-
(2) Before using any of the exceptions tion.
under subparagraph (d)(1) of this sec- (f) Alternates I and II to the clauses
tion in a contract with a small busi- at 52.22711, 52.22712, and 5222713, as
ness firm or a nonprofit organization applicable, may be modified to make
and before using the exception of sub- clear that the rights granted to the for-
division (d)(1)(ii) of this section for any eign government or international orga-
contractor, the agency shall prepare a nization may be for additional rights
written determination, including a beyond a license or sublicense if so re-
statement of facts supporting the de- quired by the applicable treaty or
termination, that the conditions iden- international agreement. For example,
tified in the exception exist. A separate in some cases exclusive licenses or
statement of facts shall be prepared for even assignment of title in the foreign
each exceptional circumstances deter- country involved might be required. In
mination, except that in appropriate addition, an Alternate may be modified
cases a single determination may apply to provide for direct licensing by the
to both a contract and any subcontract contractor of the foreign government
issued under it, or to any contract to or international organization.
which an exception is applicable. In
cases when subdivision (d)(1)(ii) of this [54 FR 25065, June 12, 1989 and 55 FR 25525,
section is used, the determination shall June 21, 1990; 62 FR 236, Jan. 2, 1997]
also include an analysis justifying the
determination. This analysis should 27.304 Procedures.
address, with specificity, how the alter-
nate provisions will better achieve the 27.3041 General.
objectives set forth in 35 U.S.C. 200. For (a) Contractor appeals of exceptions. (1)
contracts with small business firms In accordance with 35 U.S.C. 202(b)(4), a
and nonprofit organizations, a copy of small business firm or nonprofit orga-
each determination, statement of facts, nization contractor has the right to an
and, if applicable, analysis shall be administrative review of a determina-
promptly provided to the contractor or tion to use one of the exceptions at
offeror along with a notification of its 27.303(d)(1)(i)(iv) if the contractor be-
appeal rights under 35 U.S.C. 202(b)(4) lieves that a determination is either (i)
in accordance with 27.3041(a). In the contrary to the policies and objectives
case of small business and nonprofit of this subsection or (ii) constitutes an
contractors, except for determination abuse of discretion by the agency. Sub-
under subdivision (d)(1)(iii) of this sec- paragraphs (a) (2) thru (7) of this sub-
tion, the agency shall, within 30 days section specify the procedures to be
after award of a contract, also provide followed by contractors and agencies in
copies of each determination, state- such cases. The assertion of such a
ment of fact, and analysis to the Sec- claim by the contractor shall not be
retary of Commerce. These shall be used as a basis for withholding or de-
sent within 30 days after the award of laying the award of a contract or for
the contract to which they pertain. In suspending performance under an
503
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27.3041 48 CFR Ch. 1 (10103 Edition)
award. However, pending final resolu- the facts found, together with any ar-
tion of the claim, the contract may be gument submitted by the contractor,
issued with the patent rights provision agency officials, or any other informa-
proposed by the agency; but should the tion in the administrative record. In
final decision be in favor of the con- cases referred for fact-finding, the
tractor, the contract will be amended agency head or designee may reject
accordingly and the amendment made only those facts that have been found
retroactive to the effective date of the to be clearly erroneous, but must ex-
contract. plicitly state the rejection and indicate
(2) A contractor may appeal a deter- the basis for the contrary finding. The
mination by providing written notice agency head or designee may hear oral
to the agency within 30 working days arguments after fact-finding provided
from the time it receives a copy of the that the contractor or contractors at-
agencys determination, or within such
torney or representative is present and
longer time as an agency may specify
given an opportunity to make argu-
in its regulations. The contractors no-
ments and rebuttal. The decision of the
tice should specifically identify the
agency head or designee shall be in
basis for the appeal.
(3) The appeal shall be decided by the writing and if it is unfavorable to the
head of the agency or designee who is contractor, include an explanation of
at a level above the person who made the basis of the decision. The decision
the determination. If the notice raises of the agency or designee shall be made
a genuine dispute over the material within 30 working days after fact-find-
facts, the head of the agency or des- ing or, if there was no fact-finding,
ignee shall undertake or refer the mat- within 45 working days from the date
ter for fact-finding. the agency received the contractors
(4) Fact-finding shall be conducted in written notice. In accordance with 35
accordance with procedures established U.S.C. 203, a small business firm or a
by the agency. Such procedures shall nonprofit organization contractor ad-
be as informal as practicable and be versely affected by a determination
consistent with principles of funda- under this section may, at any time
mental fairness. The procedures should within 60 days after the determination
afford the contractor the opportunity is issued, file a petition in the United
to appear with counsel, submit docu- States Claims Court, which shall have
mentary evidence, present witnesses, jurisdiction to determine the appeal on
and confront such persons as the agen- the record and to affirm, reverse, re-
cy may rely upon. A transcribed record mand, or modify, as appropriate, the
shall be made and shall be available at determination of the Federal agency.
cost to the contractor upon request. (b) Greater rights determination. When-
The requirement for a transcribed ever the contract contains the clause
record may be waived by mutual agree- at 52.22713, Patent RightsAcquisi-
ment of the contractor and the agency. tion by the Government, the con-
(5) The official conducting the fact-
tractor (or an employee-inventor of the
finding shall prepare or adopt written
contractor after consultation with the
findings of fact and transmit them to
contractor) may request greater rights
the head of the agency or designee
to an identified invention within the
promptly after the conclusion of the
fact-finding proceeding along with a period specified in such clause. Re-
recommended decision. A copy of the quests for greater rights may be grant-
findings of fact and recommended deci- ed if the agency head or designee deter-
sion shall be sent to the contractor by mines that the interests of the United
registered or certified mail. States and the general public will be
(6) Fact-finding should be completed better served thereby. In making such
within 45 working days from the date determinations, the agency head or
the agency receives the contractors designee shall consider at least the fol-
written notice. lowing objectives:
(7) When fact-finding has been con- (1) Promoting the utilization of in-
ducted, the head of the agency or des- ventions arising from federally-sup-
ignee shall base his or her decision on ported research and development.
504
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Federal Acquisition Regulation 27.3041
(2) Ensuring that inventions are used (iv) Furnish the Government an ir-
in a manner to promote full and open revocable power to inspect and make
competition and free enterprise. copies of the patent application file
(3) Promoting public availability of when a Federal Government employee
inventions made in the United States is a coinventor.
by United States industry and labor. (2) To the extent provided by such
(4) Ensuring that the Government ob- modification (and automatically under
tains sufficient rights in federally sup- the terms of the clauses at 52.22712,
ported inventions to meet the needs of Patent RightsRetention by the Con-
the Government and protect the public tractor (Long Form), and 52.22713, Pat-
against nonuse or unreasonable use of ent RightsAcquisition by the Govern-
inventions. ment), the contracting officer may re-
(c) Retention of rights by inventor. If quire the contractor to
the contractor does not elect to retain (i) Furnish a copy of each sub-
title to a subject invention, the agency contract containing a patent rights
may consider and, after consultation clause (but if a copy of a subcontract is
with the contractor, grant requests for furnished under another clause, a du-
retention or rights by the inventor. Re- plicate shall not be requested under the
tention of rights by the inventor will patent rights clause);
be subject to the conditions in para- (ii) Submit interim and final inven-
graph (d) (except subparagraphs (d)(1)),
tion reports listing subject inventions
(f)(4), and paragraphs (h), (i), and (j) of
and notifying the contracting officer of
the applicable Patent RightsReten-
all subcontracts awarded for experi-
tion by the Contractor clause.
mental, developmental, or research
(d) Government assignment to con-
work;
tractor of rights in Government employees
inventions. When a Government em- (iii) Submit information regarding
ployee is a coinventor of an invention the filing date, serial number and title,
made under a contract with a small and, upon request, a copy of the patent
business firm or nonprofit organiza- application, and patent number and
tion, the agency employing the co- issue date for any subject invention in
inventor may transfer or reassign any country for which the contractor
whatever right it may acquire in the has retained title; and
subject invention from its employee to (iv) Submit periodic reports on the
the contractor, subject at least to the utilization of a subject invention or on
conditions of 35 U.S.C. 202204. efforts at obtaining utilization that are
(e) Additional requirements. (1) If it is being made by the contractor or its li-
desired to have the right to require any censees or assignees.
of the following, when using the clause (3) The contractor is required to de-
at 52.22711, Patent RightsRetention liver to the contracting officer an in-
by the Contractor (Short Form), the strument confirmatory of all rights to
contract shall be modified to require which the Government is entitled and
the contractor to do one or more of the to furnish the Government an irrev-
following: ocable power to inspect and make cop-
(i) Provide periodic (but not more ies of the patent application file. Such
frequently than annually) listings of delivery should normally be made
all subject inventions required to be within 6 months after filing each pat-
disclosed during the period covered by ent application, or within 6 months
the report. after submitting the invention disclo-
(ii) Provide a report prior to the sure if the application has been pre-
closeout of the contract listing all sub- viously filed.
ject inventions or stating that there (f) Revocation or modification of con-
were none. tractors minimum rights. Before revoca-
(iii) Provide, upon request, the filing tion or modification of the contractors
date, serial number, and title; a copy of license in accordance with 27.302(i)(2),
the patent application; and patent the contracting officer will furnish the
number and issue date for any subject contractor a written notice of inten-
invention in any country in which the tion to revoke or modify the license,
contractor has applied for patents. and the contractor will be allowed 30
505
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27.3041 48 CFR Ch. 1 (10103 Edition)
days (or such other time as may be au- dures. The determination to exercise
thorized by the contracting officer for march-in rights shall be made by the
good cause shown by the contractor) head of the agency or designee.
after the notice to show cause why the (3) Within 30 days after the receipt of
license should not be revoked or modi- the written notice of march-in, the
fied. The contractor has the right to contractor, its assignee or exclusive li-
appeal, in accordance with applicable censee, may submit in person, in writ-
regulations in 37 CFR part 404 and ing, or through a representative infor-
agency licensing regulations, any deci- mation or argument in opposition to
sions concerning the revocation or the proposed march-in, including any
modification. additional specific information which
(g) Exercise of march-in rights. The fol- raises a genuine dispute over the mate-
lowing procedures shall govern the ex- rial facts upon which the march-in is
ercise of the march-in rights set forth based. If the information presented
in 35 U.S.C. 203, paragraph (j) of the raises a genuine dispute over the mate-
Patent RightsRetention by the Con- rial facts, the head of the agency or
tractor clauses, and subdivision designee shall undertake or refer the
(c)(1)(ii) of the Patent RightsAcquisi- matter to another official for fact-find-
tion by the Government clause: ing.
(1) When the agency receives infor-
(4) Fact-finding shall be conducted in
mation that it believes might warrant
accordance with the procedures estab-
the exercise of march-in rights, before
lished by the agency. Such procedures
initiating any march-in proceeding in
shall be as informal as practicable and
accordance with the procedures of sub-
be consistent with principles of funda-
paragraph (g)(2) of this section, it shall
mental fairness. The procedures should
notify the contractor in writing of the
information and request informal writ- afford the contractor the opportunity
ten or oral comments from the con- to appear with counsel, submit docu-
tractor. In the absence of any com- mentary evidence, present witnesses,
ments from the contractor within 30 and confront such persons as the agen-
days the agency may, at its discretion, cy may present. A transcribed record
initiate the procedures below. If a com- shall be made and shall be available at
ment is received, whether or not within cost to the contractor upon request.
30 days, then the agency shall, within The requirement for a transcribed
60 days after it receives the comment, record may be waived by mutual agree-
either initiate the procedures below or ment of the contractor and the agency.
notify the contractor, in writing, that Any portion of the march-in pro-
it will not pursue march-in rights ceeding, including a fact-finding hear-
based on the information about which ing that involves testimony or evi-
the contractor was notified. dence relating to the utilization or ef-
(2) A march-in proceeding shall be forts at obtaining utilization that are
initiated by the issuance of a written being made by the contractor, its as-
notice by the agency head or a designee signee, or licensees shall be closed to
to the contractor and its assignee or the public, including potential licens-
exclusive licensee, as applicable and if ees. In accordance with 35 U.S.C.
known to the agency, stating that the 202(c)(5), agencies shall not disclose
Government has determined to exercise any such information obtained during
march-in rights. The notice shall state a march-in proceeding to persons out-
the reasons for the proposed march-in, side the Government except when such
in terms sufficient to put the con- release is authorized by the contractor,
tractor on notice of the facts upon its assignee, or licensee.
which the action is based, and shall (5) The official conducting the fact-
specify the field or fields of use in finding shall prepare or adopt written
which the Government is considering findings of fact and transmit them to
requiring licensing. The notice shall the head of the agency or designee
advise the contractor, assignee, or ex- promptly after the conclusion of the
clusive licensee of its rights as set factfinding proceeding along with a
forth in this section and in any supple- recommended determination. A copy of
mental agency regulations or proce- the findings of fact shall be sent to the
506
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Federal Acquisition Regulation 27.3042
contractor, its assignee, or exclusive li- exclusive licensee shall be held in abey-
censee by registered or certified mail. ance pending the exhaustion of appeals
The contractor, its assignee or exclu- or petitions filed under 35 U.S.C. 203(2).
sive licensee, and agency representa- (h) Licenses and assignments under
tives will be given 30 days to submit contracts with nonprofit organizations. If
written arguments to the head of the the contractor is a nonprofit organiza-
agency or designee; and, upon request tion, the clause at 52.22711 provides
by the contractor, oral arguments will that certain contractor actions require
be held before the agency head or des- agency approval, as specified below.
ignee that will make the final deter- Agencies shall provide procedures for
mination. obtaining such approval.
(6) In case in which fact-finding has Rights to a subject invention in the
been conducted, the head of the agency United States may not be assigned
or designee shall base his or her deter- without the approval of the con-
mination on the facts found, together tracting agency, except where such as-
with any other information and writ- signment is made to an organization
ten or oral arguments submitted by the which has as one of its primary func-
contractor, its assignee or exclusive li- tions the management of inventions
censee and agency representatives, and (provided that such assignee will be
any other information in the adminis- subject to the same provisions as the
trative record. The consistency of the contractor).
exercise of march-in rights with the [54 FR 25066, June 12, 1989 and 55 FR 25525,
policy and objectives of 35 U.S.C. 200 June 21, 1990]
shall also be considered. In cases re-
ferred for fact-finding, the head of the 27.3042 Contracts placed by or for
agency or designee may reject only other Government agencies.
those facts that have been found to be The following procedures apply un-
clearly erroneous, but must explicitly less agency agreements provide other-
state the rejection and indicate the wise:
basis for the contrary finding. Written (a) When a Government agency re-
notice of the determination whether quests another Government agency to
march-in rights will be exercised shall award a contract on its behalf, the re-
be made by the head of the agency or quest should explain any special cir-
designee and sent to the contractor, its cumstances surrounding the contract
assignee, or exclusive licensee, by cer- and specify and furnish the patent
tified or registered mail within 90 days rights clause to be used. Normally, the
after the completion of fact-finding or clause will be in accordance with the
90 days after oral arguments, which- policies and procedures of this subpart.
ever is later, or the proceedings will be If, however, the request states that a
deemed to have been terminated and clause of the requesting agency is re-
thereafter no march-in based on the quired (e.g., because of statutory re-
facts and reasons upon which the pro- quirements, a deviation, or exceptional
ceeding was initiated may be exercised. circumstances) that clause shall be
(7) An agency may, at any time, ter- used rather than those of this subpart.
minate a march-in proceeding if it is (1) If the request states that an agen-
satisfied that it does not wish to exer- cy clause is required and the work to
cise march-in rights. be performed under the contract is not
(8) These procedures shall also apply severable and is funded wholly or in
to the exercise of march-in rights part by the agency, then that agency
against inventors receiving title to clause and no other patent rights
subject inventions under 35 U.S.C. clause shall be included in the con-
202(d) and, for that purpose, the term tract.
contractor, as used herein, shall be (2) If the request states that an agen-
deemed to include the inventory and cy clause is required, and the work to
the term exclusive licensee shall be be performed under the contract is sev-
deemed to include partially exclusive erable and is only in part for the re-
licensee. questing agency, then the work which
(9) An agency determination unfavor- is on behalf of the requesting agency
able to the contractor, its assignee, or shall be identified in the contract, and
507
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27.3043 48 CFR Ch. 1 (10103 Edition)
the agency clause shall be made appli- cility or of novel structures, machines,
cable to that portion. In such situa- products, materials, processes, or
tions, the remaining portion of the equipment (including construction
work (for the agency awarding the con- equipment), it shall include a patent
tract) shall likewise be identified and rights clause selected in accordance
the appropriate patent rights clause (if with the policies and procedures of this
required) shall be made applicable to subpart 27.3.
that remaining portion. (b) A solicitation or contract for con-
(3) If the request states that an agen- struction work or architect-engineer
cy clause is not required in any result- services that calls for or can be ex-
ing contract, then the appropriate pat- pected to involve only standard types of
ent rights clause shall be used, if a pat- construction to be built by previously
ent rights clause is required. developed equipment, methods, and
(b) Where use of the specified clause, processes shall not include a patent
or any modification, waiver, or omis- rights clause. The term standard types
sion of the Governments rights under of construction means construction in
any provisions therein, requires a writ- which the distinctive features, if any,
ten determination, the reporting of in all likelihood will amount to no
such determination, or a deviation, if more than
any such acts are required in accord- (1) Variations in size, shape, or ca-
ance with 27.303(d)(2), it shall be the re- pacity of otherwise structurally ortho-
sponsibility of the requesting agency dox and conventionally acting struc-
to make such determination, submit tures or structural groupings; or
the required reports, and obtain such (2) Purely artistic or esthetic (as dis-
deviations, in consultation with the tinguished from functionally signifi-
contracting agency, unless otherwise cant) architectural configurations and
agreed between the contracting and re- designs of both structural and non-
questing agencies. However, a devi- structural members or groupings,
ation to a specified clause of the re- which may or may not be sufficiently
questing agency shall not be made novel or meritorious to qualify for de-
without prior approval of that agency. sign protection under the design patent
(c) The requesting agency may re- or copyright laws.
quire, and provide instructions regard-
ing, the forwarding or handling of any 27.3044 Subcontracts.
invention disclosures or other report- (a) The policies and procedures cov-
ing requirements of the specified ered by this subpart apply to all con-
clauses. Normally the requesting agen- tracts at any tier. Hence, a contractor
cy shall be responsible for the handling awarding a subcontract and a subcon-
of any disclosed inventions, including tractor awarding a lower-tier sub-
the filing of patent applications where contract that has as a purpose the con-
the Government receives title, and the duct of experimental, developmental,
custody, control, and licensing thereof, or research work is required to deter-
unless provided otherwise in the in- mine the appropriate patent rights
structions or other agreements with clause to be included that is consistent
the contracting agency. with these policies and procedures.
[49 FR 12974, Mar. 30, 1984, as amended at 54 Generally, the clause at either 52.227
FR 25068, June 12, 1989 and 55 FR 25525, June 11, 52.22712, or 52.22713 is to be used
21, 1990] and will be so specified in the patent
rights clause contained in the higher-
27.3043 Contracts for construction tier contract, but the contracting offi-
work or architect-engineer services. cer may direct the use of a particular
(a) If a solicitation or contract for patent rights clause in any lower-tier
construction work or architect-engi- contract in accordance with the poli-
neer services has as a purpose the per- cies and procedures of this subpart. For
formance of experimental, develop- instance, when the clause at 52.22713 is
mental, or research work or test and in the prime contract because the work
evaluation studies involving such work is to be performed overseas, any sub-
and calls for, or can be expected to in- contract with a nonprofit organization
volve, the design of a Government fa- would contain the clause at 52.22711.
508
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Federal Acquisition Regulation 27.3051
509
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27.3052 48 CFR Ch. 1 (10103 Edition)
510
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Federal Acquisition Regulation 27.3055
511
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27.306 48 CFR Ch. 1 (10103 Edition)
512
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Federal Acquisition Regulation 27.403
513
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27.404 48 CFR Ch. 1 (10103 Edition)
514
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Federal Acquisition Regulation 27.404
515
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27.404 48 CFR Ch. 1 (10103 Edition)
with its Alternate III. Unless otherwise needs or any requirements for use of
agreed to (see paragraph (e)(2) of this the computer software from remote
section) the restricted rights obtained terminals. Also, in addressing such
by the Government are set forth in the needs, the scope of the restricted rights
Restricted Rights Notice contained in may be different for the documentation
subparagraph (g)(3) (Alternate III). Such accompanying the computer software
restricted computer software will not than for the programs and data bases.
be used or reproduced by the Govern- Any additions to, or limitations on, the
ment, or disclosed outside the Govern- restricted rights set forth in the Re-
ment, except that the computer soft- stricted Rights Notice of subparagraph
ware may be (g)(3) of the clause are to be expressly
(i) Used or copied for use in or with stated in the contract or in a collateral
the computer or computers for which it agreement incorporated in and made
was acquired, including use at any part of the contract, and the notice
Government installation to which such modified accordingly.
computer or computers may be trans- (3) As an aid in determining whether
ferred; the clause should be used with its Alter-
(ii) Used or copied for use in or with nate III, the provision at 52.22715, Rep-
a backup computer if any computer for
resentation of Limited Rights Data and
which it was acquired becomes inoper-
Restricted Computer Software, may be
ative;
included in any solicitation containing
(iii) Reproduced for safekeeping (ar-
the clause at 52.22714, Rights in Data
chives) or backup purposes;
General. This provision requests that
(iv) Modified, adapted, or combined
an offeror state, in response to a solici-
with other computer software, provided
tation, to the extent feasible, whether
that the modified, combined, or adapt-
ed portions of any derivative software restricted computer software is likely
incorporating restricted computer soft- to be used in meeting the data delivery
ware are made subject to the same re- requirements set forth in the solicita-
stricted rights; tion. In addition, the need for Alternate
(v) Disclosed to and reproduced for III should be considered during nego-
use by support service contractors, tiations or discussions with an offeror,
subject to the same restriction under particularly where negotiations are
which the Government acquired the based on an unsolicited proposal. How-
software; ever, use of the clause at 52.22714,
(vi) Used or copied for use in or Rights in DataGeneral, without Alter-
transferred to a replacement computer; nate III does not preclude this Alternate
and from being used subsequently by modi-
(vii) Used in accordance with subdivi- fication during contract performance,
sions (e)(1) (i) through (v) of this sec- should the need arise for the delivery
tion, without disclosure prohibitions, if of restricted computer software that
the computer software is published has been withheld or identified as
copyrighted computer software. withholdable.
(2) The restricted rights set forth in (f) Copyrighted data.(1) Data first
subparagraph (e)(1) of this section are produced in the performance of a con-
the minimum rights the Government tract. (i) In order to enhance the trans-
normally obtains with restricted com- fer or dissemination of information
puter software and will automatically produced at Government expense, con-
apply when such software is acquired tractors are normally authorized, with-
under the Restricted Rights Notice of out prior approval of the contracting
subparagraph (g)(3) (Alternate III) of the officer, to establish claim to copyright
clause. However, either greater or less- subsisting in technical or scientific ar-
er rights, consistent with the purposes ticles based on or containing data first
and needs for which the software is to produced in the performance of work
be acquired, may be specified by the under a contract containing the clause
contracting officer in a particular con- at 52.22714, Rights in DataGeneral
tract or prescribed in agency regula- and published in academic, technical or
tions. For example, consideration professional journals, symposia pro-
should be given to any networking ceedings and similar works. Otherwise,
516
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Federal Acquisition Regulation 27.404
the permission of the contracting offi- ernment facilities and in contracts and
cer is required in accordance with sub- subcontracts in support of programs
division (f)(1)(ii) of this section or any being conducted at such facilities or
applicable agency regulations, to es- where international agreements re-
tablish claim to copyright subsisting in quire otherwise) to be performed solely
data first produced in the performance by colleges and universities. Alternate
of a contract unless the clause is used IV will not be used in contracts with
with its Alternate IV in accordance with colleges and universities if a purpose of
subdivision (f)(1)(iii) of this section. the contract is for development of com-
Agencies may, however, restrict copy- puter software for distribution to the
right under certain circumstances in public (including use in solicitations)
accordance with subparagraph (g)(3) of by or on behalf of the Government. In
this section. addition, Alternate IV may be used in
(ii) Usually, permission for a con- other contracts if an agency deter-
tractor to establish claim to copyright mines to grant blanket permission for
subsisting in data first produced under contractors to establish claim to copy-
the contract will be granted when right subsisting in all data first pro-
copyright protection will enhance the duced in the performance of contract
appropriate transfer or dissemination without further request being made by
of such data and the commercialization the contractor. In any contract where
of products or processes to which it Alternate IV is used, the contract may
pertains. The request for permission exclude any data, items or categories
must be made in writing, and may be of data from the blanket permission
made either prior to contract award or granted, either by express provisions in
subsequently during contract perform- the contract or by the addition of a
ance. It should identify the data in- subparagraph (d)(3) to the clause, con-
volved or furnish copies of the data for sistent with subparagraph (g)(3) of this
which permission is requested, as well section.
as a statement as to the intended pub- (iv) Whenever a contractor estab-
lication or dissemination media or lishes claim to copyright subsisting in
other purpose for which copyright is data (other than computer software)
desired. The request normally will be first produced in the performance of a
granted unless(A) the data consist of contract, the Government is granted a
a report that represents the official paid-up nonexclusive, irrevocable,
views of the agency or that the agency worldwide license to reproduce, prepare
is required by statute to prepare; (B) derivative works, distribute to the pub-
the data are intended primarily for in- lic, perform publicly and display pub-
ternal use by the Government; (C) the licly by or on behalf of the Govern-
data are of the type that the agency ment, for all such data, as set forth in
itself distributes to the public under an subparagraph (c)(1) of the clause at
agency program; (D) the Government 52.22714, Rights in DataGeneral. For
determines that limitation on distribu- computer software the scope of the
tion of the data is in the national in- Governments license does not include
terest; (E) the Government determines the right to distribute to the public.
that the data should be disseminated Agencies may also, either on a case-by-
without restriction. case basis, or on a class basis if pro-
(iii) An Alternate IV is provided for vided in implementing regulations, ob-
use with the clause at 52.22714, Rights tain a license of different scope than
in DataGeneral, which Alternate pro- set forth in subparagraph (c)(1) of the
vides a substitute subparagraph (c)(1) clause if the agency determines that
in the clause granting blanket permis- such different license will substan-
sion for contractors to establish claim tially enhance the transfer or dissemi-
to copyright subsisting in all data first nation of any data first produced under
produced in the performance of the the contract, and will not interfere
contract without further request being with the Governments use of the data
made by the contractor. Alternate IV as contemplated by the contract or if
shall be used in all contracts for basic required for international agreements.
or applied research (other than those If an agency obtains such a different li-
for management or operation of Gov- cense, the scope of that license shall be
517
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27.404 48 CFR Ch. 1 (10103 Edition)
518
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Federal Acquisition Regulation 27.404
519
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27.405 48 CFR Ch. 1 (10103 Edition)
final agency decision or by final dis- (j) Inspection of data at the contractors
position of the matter by court deci- facility. Contracting officers may ob-
sion if suit is filed. The foregoing pro- tain the right to inspect data at the
cedures may be modified in accordance contractors facility by use of Alternate
with agency regulations implementing V, which adds paragraph (j) to provide
the Freedom of Information Act (5 that right in the clause at 52.22714,
U.S.C. 552) if necessary to respond to a Rights in DataGeneral. Agencies may
request thereunder. In addition, the also adopt Alternate V for general use.
contractor is not precluded from bring- The data subject to inspection may be
ing a claim under the Contract Dis- data withheld or withholdable under
putes Act, including pursuant to the subparagraph (g)(1) of the clause. Such
Disputes clause of this contract if ap- inspection may be made by the con-
plicable, that may arise as the result of tracting officer or designee (including
the Governments action to remove or nongovernmental personnel under the
ignore any markings on data, unless same conditions as the contracting of-
such action occurs as the result of a ficer) for the purpose of verifying a
final disposition of the matter by a contractors assertion regarding the
court of competent jurisdiction. limited rights or restricted rights sta-
(i) Omitted or incorrect notices. (1) tus of the data, or for evaluating work
Data delivered under a contract con- performance under the contract. This
taining the clause at 52.22714, Rights right may be exercised up to 3 years
in DataGeneral, without a limited after acceptance of all items to be de-
rights notice or restricted rights no- livered under the contract. The con-
tice, and without a copyright notice, tract may specify data items that are
will be presumed to have been deliv- not subject to inspection under para-
ered with unlimited rights, and the graph (j) (Alternate V). If the contractor
Government assumes no liability for demonstrates to the contracting officer
the disclosure, use, or reproduction of that there would be a possible conflict
such data. However, to the extent the of interest if inspection were made by a
data has not been disclosed without re- particular representative, the con-
striction outside the Government, the tracting officer shall designate an al-
contractor may within 6 months (or a ternate representative.
longer period approved by the con-
tracting officer for good cause shown) [52 FR 18140, May 13, 1987, as amended at 64
request permission of the contracting FR 10532, Mar. 4, 1999]
officer to have omitted limited rights
27.405 Other data rights provisions.
or restricted rights notices, as applica-
ble, placed on qualifying data at the (a) Production of special works. (1) The
contractors expense, and the con- clause at 52.22717, Rights in Data
tracting officer may agree to so permit Special Works, is to be used in con-
if the contractor (i) identifies the data tracts (or may be made applicable to
for which a notice is to be added or cor- portions thereof) that are primarily for
rected, (ii) demonstrates that the omis- the production or compilation of data
sion of the proposed notice was inad- (other than limited rights data or re-
vertent, (iii) establishes that use of the stricted computer software) for the
proposed notice is authorized, and (iv) Governments own use, or when there
acknowledges that the Government has is a specific need to limit distribution
no liability with respect to any disclo- and use of the data and/or to obtain in-
sure or use of any such data made prior demnity for liabilities that may arise
to the addition of the notice or result- out of the content, performance, or dis-
ing from the omission of the notice. closure of the data. Examples are con-
(2) The contracting officer may also tracts for
(i) permit correction, at the contrac- (i) The production of audiovisual
tors expense, of incorrect notices if works, including motion pictures or
the contractor identifies the data on television recordings with or without
which correction of the notice is to be accompanying sound, or for the prepa-
made, and demonstrates that the cor- ration of motion picture scripts, musi-
rect notice is authorized, or (ii) correct cal compositions, sound tracks, trans-
any incorrect notices. lation, adaptation, and the like;
520
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Federal Acquisition Regulation 27.405
(ii) Histories of the respective agen- incurred as the result of any violation
cies, departments, services, or units of trade secrets, copyrights, right of
thereof; privacy or publicity, or any libelous or
(iii) Surveys of Government estab- other unlawful matter arising out of or
lishments; contained in any production or com-
(iv) Works pertaining to the instruc- pilation of data that are subject to the
tion or guidance of Government offi- clause, may be deleted or limited in
cers and employees in the discharge of scope where the contracting officer de-
their official duties; termines that, because of the nature of
(v) The compilation of reports, books, the particular data involved, such li-
studies, surveys, or similar documents ability will not arise.
that do not involve research, develop- (5) When the audiovisual or other
ment, or experimental work; special works are produced to accom-
(vi) The collection of data containing plish a public purpose other than ac-
personally identifiable information quisition for the Governments own use
such that the disclosure thereof would (such as for production and distribu-
violate the right of privacy or publicity tion to the public of such works by
of the individual to whom the informa- other than a Federal agency) agencies
tion relates; are authorized to modify the Rights in
(vii) Investigatory reports; DataSpecial Works clause for use in
(viii) The development, accumula- such contracts, with rights in data pro-
tion, or compilation of data (other visions which meet agency mission
than that resulting from research, de-
needs yet protect free speech and free-
velopment, or experimental work per-
dom of expression, as well as the artis-
formed by the contractor), the early re-
tic license of the creator of the work.
lease of which could prejudice follow-
on acquisition activities or agency reg- (b) Rights relating to existing data other
ulatory or enforcement activities; or than limited rights data(1) Acquisition
(ix) The development of computer of existing audiovisual and similar works.
software programs, where the pro- The clause at 52.22718, Rights in
gram DataExisting Works, is for use in
(A) May give a commercial advan- contracts exclusively for the acquisi-
tage; or; tion (without modification) of existing
(B) Is agency mission sensitive, and motion pictures, television recordings,
release could prejudice agency mission, and other audiovisual works; sound re-
programs, or follow-on acquisitions. cordings; musical, dramatic, and lit-
(2) The contract may specify the pur- erary works; pantomimes and choreo-
poses and conditions (including time graphic works; pictorial, graphic, and
limitations) under which the data may sculptural works; and works of a simi-
be used, released, or reproduced other lar nature. The contract may set forth
than for contract performance. Con- limitations consistent with the pur-
tracts for the production of audiovisual poses for which the works covered by
works, sound recordings, etc., may in- the contract are being acquired. Exam-
clude limitations in connection with ples of these limitations are (i) means
talent releases, music licenses, and the of exhibition or transmission, (ii) time,
like that are consistent with the pur- (iii) type of audience, and (iv) geo-
poses for which the works are acquired. graphical location. If the contract re-
(3) Subdivision (c)(1)(ii) of the clause quires that works of the type indicated
at 52.22717, Rights in DataSpecial in subparagraph (b)(1) of this section
Works, which enables the Government are to be modified through editing,
to obtain assignment of copyright in translation, or addition of subject mat-
any data first produced in the perform- ter, etc. (rather than purchased in ex-
ance of the contract, may be deleted if isting form) the clause at 52.22717,
the contracting officer determines that Rights in DataSpecial Works, is to be
such assignment is not needed to fur- used. (See paragraph (a) of this sec-
ther the objectives of the contract. tion.)
(4) Paragraph (e) of the clause, which (2) Acquisition of existing computer soft-
requires the contractor to indemnify ware. (i) When contracting other than
the Government against any liability from GSAs Multiple Award Schedule
521
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27.405 48 CFR Ch. 1 (10103 Edition)
522
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Federal Acquisition Regulation 27.406
523
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27.406 48 CFR Ch. 1 (10103 Edition)
form, for reproduction, and for deliv- charts of the software if the contractor
ery. In order to minimize storage costs shows that this aids its efforts to dis-
for the retention of data, the con- seminate or market the software.
tractor may be relieved of retention re- (c) Acceptance of data. As required by
quirements for specified data items by 41 U.S.C. 418a(d)(7), acceptability of
the contracting officer at any time technical data delivered under a con-
during the retention period required by tract shall be in accordance with the
the clause. The contracting officer may appropriate contract clause as required
permit the contractor to identify and by subpart 46.3, and the clause at
specify in the contract data not to be 52.22721, Technical Data Declaration,
ordered for delivery under the Addi- Revision, and Withholding of Pay-
tional Data Requirements clause if mentMajor Systems, when it is in-
such data is not necessary to meet the cluded in the contract. (See paragraph
Governments requirements for data. (d) of this section.)
Also, the contracting officer may alter (d) Major system acquisition. (1) In
the Additional Data Requirements order to assure that technical data
clause by deleting the term or specifi- needed to support a major system ac-
cally used in paragraph (a) thereof if de- quisition are timely delivered and are
livery of such data is not necessary to complete, accurate, and satisfy the re-
meet the Governments requirements quirements of the contract concerning
for data. Any data ordered under this the data, the clause at 52.22721, Tech-
clause will be subject to the Rights in nical Data Declaration, Revision, and
DataGeneral clause (or other equiva- Withholding of PaymentMajor Sys-
lent clause setting forth the respective tems, is to be included in contracts for
rights of the Government and the con- or in support of a major system (as the
tractor) in the contract, and data au- term major system is defined in section
thorized to be withheld under such 4 of the Office of Federal Procurement
clause will not be required to be deliv- Policy Act, as amended by Pub. L. 98
ered under the Additional Data Re- 577), including every detailed design,
quirements clause, except as provided development, or production contract
in Alternate II or Alternate III, if in- for a major system acquisition and
cluded in the clause (see 27.404 (d) and contracts for any individual part, com-
(e)). ponent, subassembly, assembly, or sub-
(3) Agencies not having an estab- system integral to the major system,
lished program for dissemination of and other property which may be re-
computer software shall give consider- placed during the service life of the
ation to not ordering additional com- system, and including spare parts and
puter software under the clause at replenishment spare parts.
52.22716, Additional Data Require- (2) The clause at 52.22721, Technical
ments, for the sole purpose of dissemi- Data, Declaration, Revision, and With-
nating or marketing of the software to holding of PaymentMajor Systems,
the public especially if this will pro- requires the contractor, upon delivery
vide the contractor additional incen- of any technical data made subject to
tive to make improvements to the soft- the clause in the contract, to declare
ware at its own expense and dissemi- that to the best of its knowledge and
nate or market it. This should not pre- belief, such data are complete, accu-
clude an agency from including a sum- rate, and comply with contract re-
mary description of computer software quirements. It also provides for correc-
available from a contractor in any data tions of any deficiencies in the data, as
dissemination programs which it oper- well as for the ability of the con-
ates, with a statement as to how the tracting officer to request revisions of
potential user can obtain it through the data to reflect engineering design
the contractor, licensee, or assignee. In changes made during performance of
cases where the contracting officer or- the contract and affecting form, fit,
ders software for internal purposes, and function of the items the data de-
consideration shall be given, consistent pict. Further included is the authority
with the Governments needs, to not for the contracting officer to withhold
ordering particular source codes, algo- payment under the contract to assure
rithms, processes, formulae or flow timely delivery of the technical data
524
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Federal Acquisition Regulation 27.407
525
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27.408 48 CFR Ch. 1 (10103 Edition)
526
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Federal Acquisition Regulation 27.409
527
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27.409 48 CFR Ch. 1 (10103 Edition)
528
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Federal Acquisition Regulation Pt. 28
529
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28.000 48 CFR Ch. 1 (10103 Edition)
28.1064 Contract clause. 28.000 Scope of part.
28.1065 Consent of surety.
28.1066 Furnishing information. This part prescribes requirements for
28.1067 Withholding contract payments. obtaining financial protection against
28.1068 Payment to subcontractors or sup- losses under contracts that result from
pliers. the use of the sealed bid or negotiated
methods. It covers bid guarantees,
Subpart 28.2Sureties and Other Security bonds, alternative payment protec-
for Bonds tions, security for bonds, and insur-
28.200 Scope of subpart. ance.
28.201 Requirements for security. [67 FR 13056, Mar. 20, 2002]
28.202 Acceptability of corporate sureties.
28.203 Acceptability of individual sureties. 28.001 Definitions.
28.2031 Security interests by an individual
surety. As used in this part
28.2032 Acceptability of assets. Attorney-in-fact means an agent, inde-
28.2033 Acceptance of real property. pendent agent, underwriter, or any
28.2034 Substitution of assets. other company or individual holding a
28.2035 Release of lien. power of attorney granted by a surety
28.2036 Contract clause. (see also power of attorney at 2.101).
28.2037 Exclusion of individual sureties.
Bid means any response to a solicita-
28.204 Alternatives in lieu of corporate or
individual sureties.
tion, including a proposal under a ne-
28.2041 United States bonds or notes. gotiated acquisition. See the definition
28.2042 Certified or cashiers checks, bank of offer at 2.101.
drafts, money orders, or currency. Bidder means any entity that is re-
28.2043 Irrevocable letter of credit (ILC). sponding or has responded to a solicita-
28.2044 Contract clause. tion, including an offeror under a nego-
tiated acquisition.
Subpart 28.3Insurance Bid guarantee means a form of secu-
28.301 Policy. rity assuring that the bidder (1) will
28.302 Notice of cancellation or change. not withdraw a bid within the period
28.303 Insurance against loss of or damage specified for acceptance and (2) will
to Government property. execute a written contract and furnish
28.304 Risk-pooling arrangements. required bonds, including any nec-
28.305 Overseas workers compensation and essary coinsurance or reinsurance
war-hazard insurance. agreements, within the time specified
28.306 Insurance under fixed-price contracts. in the bid, unless a longer time is al-
28.307 Insurance under cost-reimbursement
contracts.
lowed, after receipt of the specified
28.3071 Group insurance plans. forms.
28.3072 Liability. Bond means a written instrument ex-
28.308 Self-insurance. ecuted by a bidder or contractor (the
28.309 Contract clauses for workers com- principal), and a second party (the
pensation insurance. surety or sureties) (except as pro-
28.310 Contract clause for work on a Gov- vided in 28.204), to assure fulfillment of
ernment installation. the principals obligations to a third
28.311 Solicitation provision and contract party (the obligee or Govern-
clause on liability insurance under cost-
reimbursement contracts.
ment), identified in the bond. If the
28.3111 Contract clause. principals obligations are not met, the
28.3112 Agency solicitation provisions and bond assures payment, to the extent
contract clauses. stipulated, of any loss sustained by the
28.312 Contract clause for insurance of obligee. The types of bonds and related
leased motor vehicles. documents are as follows:
28.313 Contract clauses for insurance of (1) An advance payment bond secures
transportation or transportation-related fulfillment of the contractors obliga-
services.
tions under an advance payment provi-
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap- sion.
ter 137; and 42 U.S.C. 2473(c). (2) An annual bid bond is a single
SOURCE: 48 FR 42286, Sept. 19, 1983, unless bond furnished by a bidder, in lieu of
otherwise noted. separate bid bonds, which secures all
530
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Federal Acquisition Regulation 28.1012
531
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28.1013 48 CFR Ch. 1 (10103 Edition)
(4) For use in service contracts con- quire the furnishing of the bid guar-
taining options for extended perform- antee before award;
ance. (2) The amount of the bid guarantee
(b) The contracting officer shall de- submitted is less than required, but is
termine the amount of the bid guar- equal to or greater than the difference
antee for insertion in the provision at between the offer price and the next
52.2281 (see 28.1022(a)). The amount higher acceptable offer;
shall be adequate to protect the Gov- (3) The amount of the bid guarantee
ernment from loss should the success- submitted, although less than that re-
ful bidder fail to execute further con- quired by the solicitation for the max-
tractual documents and bonds as re-
imum quantity offered, is sufficient for
quired. The bid guarantee amount shall
a quantity for which the offeror is oth-
be at least 20 percent of the bid price
erwise eligible for award. Any award to
but shall not exceed $3 million. When
the offeror shall not exceed the quan-
the penal sum is expressed as a per-
centage, a maximum dollar limitation tity covered by the bid guarantee;
may be stated. (4) The bid guarantee is received late,
and late receipt is waived under 14.304;
[61 FR 39213, July 26, 1996, as amended at 65 (5) A bid guarantee becomes inad-
FR 46070, July 26, 2000]
equate as a result of the correction of
28.1013 [Reserved] a mistake under 14.407 (but only if the
bidder will increase the bid guarantee
28.1014 Noncompliance with bid to the level required for the corrected
guarantee requirements. bid);
(a) In sealed bidding, noncompliance (6) A telegraphic offer modification is
with a solicitation requirement for a received without corresponding modi-
bid guarantee requires rejection of the fication of the bid guarantee, if the
bid, except in the situations described modification expressly refers to the
in paragraph (c) of this subsection previous offer and the offeror corrects
when the noncompliance shall be any deficiency in bid guarantee;
waived. (7) An otherwise acceptable bid bond
(b) In negotiation, noncompliance was submitted with a signed offer, but
with a solicitation requirement for a the bid bond was not signed by the of-
bid guarantee requires rejection of an feror;
initial proposal as unacceptable, if a (8) An otherwise acceptable bid bond
determination is made to award the is errroneously dated or bears no date
contract based on initial proposals at all; or
without discussion, except in the situa- (9) A bid bond does not list the
tions described in paragraph (c) of this United States as obligee, but correctly
subsection when noncompliance shall
identifies the offeror, the solicitation
be waived. (See 15.306(a)(2) for condi-
number, and the name and location of
tions regarding making awards based
the project involved, so long as it is ac-
on initial proposals.) If the conditions
ceptable in all other respects.
for awarding based on initial proposals
are not met, deficiencies in bid guaran- [54 FR 48985, Nov. 28, 1989, as amended at 60
tees submitted by offerors determined FR 34739, July 3, 1995; 62 FR 51271, Sept. 30,
to be in the competitive range shall be 1997]
addressed during discussions and the
offeror shall be given an opportunity to 28.102 Performance and payment
correct the deficiency. bonds and alternative payment pro-
(c) Noncompliance with a solicitation tections for construction contracts.
requirement for a bid guarantee shall
28.1021 General.
be waived in the following cir-
cumstances unless the contracting offi- (a) The Miller Act (40 U.S.C. 270a
cer determines in writing that accept- 270f) requires performance and pay-
ance of the bid would be detrimental to ment bonds for any construction con-
the Governments interest when tract exceeding $100,000, except that
(1) Only one offer is received. In this this requirement may be waived (1) by
case, the contracting officer may re- the contracting officer for as much of
532
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Federal Acquisition Regulation 28.1022
533
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28.1023 48 CFR Ch. 1 (10103 Edition)
534
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Federal Acquisition Regulation 28.1062
535
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28.1063 48 CFR Ch. 1 (10103 Edition)
536
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Federal Acquisition Regulation 28.202
has not been made or that the re- (c) For any withholding incident to
questor is being sued on such bond. The the labor standards provisions of the
person who makes the request shall be contract, see part 22.
required to pay such costs of prepara-
tion as determined by the head of the 28.1068 Payment to subcontractors or
agency or designee to be reasonable suppliers.
and appropriate (see 40 U.S.C. 270(c)). The contracting officer will only au-
(d) Section 806(a)(2) of Pub. L. 102190, thorize payment to subcontractors or
as amended by Sections 2091 and 8105 of suppliers from an ILC (or any other
Pub. L. 103355, requires that the Fed- cash equivalent security) upon a judi-
eral Government provide information cial determination of the rights of the
to subcontractors on payment bonds parties, a signed notarized statement
under contracts for other than com- by the contractor that the payment is
mercial items as defined in Subpart 2.1. due and owed, or a signed agreement
Upon the written or oral request of a between the parties as to amount due
subcontractor/supplier, or prospective and owed.
subcontractor/supplier, under a con- [62 FR 44807, Aug. 22, 1997]
tract with respect to which a payment
bond has been furnished pursuant to
the Miller Act, the contracting officer Subpart 28.2Sureties and Other
shall promptly provide to the re- Security for Bonds
quester, either orally or in writing, as
28.200 Scope of subpart.
appropriate, any of the following:
(1) Name and address of the surety or This subpart prescribes procedures
sureties on the payment bond. for the use of sureties and other secu-
(2) Penal amount of the payment rity to protect the Government from fi-
bond. nancial losses.
(3) Copy of the payment bond. The [62 FR 44807, Aug. 22, 1997]
contracting officer may impose reason-
able fees to cover the cost of copying 28.201 Requirements for security.
and providing a copy of the payment (a) Agencies shall obtain adequate se-
bond. curity for bonds (including coinsurance
[48 FR 42286, Sept. 19, 1983, as amended at 50 and reinsurance agreements) required
FR 26903, June 28, 1985; 60 FR 48273, Sept. 18, or used with a contract for supplies or
1995] services (including construction). Ac-
ceptable forms of security include (1)
28.1067 Withholding contract pay- corporate or individual sureties or (2)
ments. any of the types of security authorized
(a) During contract performance, in lieu of sureties by 28.204.
agencies shall not withhold payments (b) Solicitations shall not preclude
due contractors or assignees because offerors from using the types of surety
subcontractors or suppliers have not or other security permitted by this
been paid. subpart, unless prohibited by law or
(b) If, after completion of the con- regulation.
tract work, the Government receives [48 FR 42286, Sept. 19, 1983, as amended at 55
written notice from the surety regard- FR 25530, June 21, 1990; 62 FR 44807, Aug. 22,
ing the contractors failure to meet its 1997]
obligation to its subcontractors or sup-
pliers, the contracting officer shall 28.202 Acceptability of corporate sure-
withhold final payment. However, the ties.
surety must agree to hold the Govern- (a)(1) Corporate sureties offered for
ment harmless from any liability re- bonds furnished with contracts per-
sulting from withholding the final pay- formed in the United States or its out-
ment. The contracting officer will au- lying areas must appear on the list
thorize final payment upon agreement contained in the Department of the
between the contractor and surety or Treasury Circular 570, Companies
upon a judicial determination of the Holding Certificates of Authority as
rights of the parties. Acceptable Sureties on Federal Bonds
537
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28.203 48 CFR Ch. 1 (10103 Edition)
and Acceptable Reinsuring Compa- and (2) the termination of the author-
nies. ity of any specific corporate surety to
(2) The penal amount of the bond qualify as a surety on Federal bonds.
should not exceed the suretys under- Upon receipt of notification of termi-
writing limit stated in the Department nation of a companys authority to
of the Treasury circular. If the penal qualify as a surety on Federal bonds,
amount exceeds the underwriting the contracting officer shall review the
limit, the bond will be acceptable only outstanding contracts and take action
if (i) the amount which exceeds the necessary to protect the Government,
specified limit is coinsured or rein- including, where appropriate, securing
sured and (ii) the amount of coinsur- new bonds with acceptable sureties in
ance or reinsurance does not exceed the lieu of outstanding bonds with the
underwriting limit of each coinsurer or named company.
reinsurer.
(d) The Department of the Treasury
(3) Coinsurance or reinsurance agree-
Circular 570 may be obtained from the
ments shall conform to the Depart-
U.S. Department of the Treasury, Fi-
ment of the Treasury regulations in 31
CFR 223.10 and 223.11. When reinsurance nancial Management Service, Surety
is contemplated, the contracting office Bond Branch, 401 14th St., SW., 2nd
generally shall require reinsurance FloorWest Wing, Washington, DC
agreements to be executed and sub- 20227.
mitted with the bonds before making a [48 FR 42286, Sept. 19, 1983, as amended at 54
final determination on the bonds. FR 48986, Nov. 28, 1989; 68 FR 28083, May 22,
(4) When specified in the solicitation, 2003]
the contracting officer may accept a
bond from the direct writing company 28.203 Acceptability of individual
in satisfaction of the total bond re- sureties.
quirement of the contract. This is per- (a) An individual surety is acceptable
missible until necessary reinsurance for all types of bonds except position
agreements are executed, even though schedule bonds. The contracting officer
the total bond requirement may exceed shall determine the acceptability of in-
the insurers underwriting limitation. dividuals proposed as sureties, and
The contractor shall execute and sub- shall ensure that the suretys pledged
mit necessary reinsurance agreements assets are sufficient to cover the bond
to the contracting officer within the obligation. (See 28.2037 for informa-
time specified on the bid form, which tion on excluded individual sureties.)
may not exceed 45 calendar days after
(b) An individual surety must exe-
the execution of the bond. The con-
cute the bond, and the unencumbered
tractor shall use Standard Form 273,
Reinsurance Agreement for a Miller value of the assets (exclusive of all out-
Act Performance Bond, and Standard standing pledges for other bond obliga-
Form 274, Reinsurance Agreement for a tions) pledged by the individual surety,
Miller Act Payment Bond, when rein- must equal or exceed the penal amount
surance is furnished with Miller Act of each bond. The individual surety
bonds. Standard Form 275, Reinsurance shall execute the Standard Form 28 and
Agreement in Favor of the United provide a security interest in accord-
States, is used when reinsurance is fur- ance with 28.2031. One individual sur-
nished with bonds for other purposes. ety is adequate support for a bond, pro-
(b) For contracts performed in a for- vided the unencumbered value of the
eign country, sureties not appearing on assets pledged by that individual sur-
Treasury Department Circular 570 are ety equal or exceed the amount of the
acceptable if the contracting officer de- bond. An offeror may submit up to
termines that it is impracticable for three individual sureties for each bond,
the contractor to use Treasury listed in which case the pledged assets, when
sureties. combined, must equal or exceed the
(c) The Department of the Treasury penal amount of the bond. Each indi-
issues supplements to Circular 570, no- vidual surety must accept both joint
tifying all Federal agencies of (1) new and several liability to the extent of
approved corporate surety companies the penal amount of the bond.
538
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Federal Acquisition Regulation 28.2031
(c) If the contracting officer deter- the offeror is responsible for estab-
mines that no individual surety in sup- lishing the escrow account, the terms
port of a bid guarantee is acceptable, and conditions must be acceptable to
the offeror utilizing the individual sur- the contracting officer. At a minimum,
ety shall be rejected as nonresponsible, the escrow account shall provide for
except as provided in 28.1014. A finding the following:
of nonresponsibility based on (i) The account must provide the con-
unacceptability of an individual sur- tracting officer the sole and unre-
ety, need not be referred to the Small
stricted right to draw upon all or any
Business Administration for a com-
part of the funds deposited in the ac-
petency review. (See 19.6021(a)(2)(i)
and 61 Comp. Gen. 456 (1982).) count. A written demand for with-
(d) A contractor submitting an unac- drawal shall be sent to the financial in-
ceptable individual surety in satisfac- stitution by the contracting officer,
tion of a performance or payment bond after obtaining the concurrence of
requirement may be permitted a rea- legal counsel, with a copy to the offer-
sonable time, as determined by the or/contractor and to the surety. Within
contracting officer, to substitute an ac- the time period specified in the de-
ceptable surety for a surety previously mand, the financial institution would
determined to be unacceptable. pay the Government the amount de-
(e) When evaluating individual sure- manded up to the amount on deposit. If
ties, contracting officers may obtain any dispute should arise between the
assistance from the office identified in Government and the offeror/contractor,
28.202(d). the surety, or the subcontractors or
(f) Contracting officers shall obtain suppliers with respect to the offer or
the opinion of legal counsel as to the contract, the financial institution
adequacy of the documents pledging
would be required, unless precluded by
the assets prior to accepting the bid
order of a court of competent jurisdic-
guarantee and payment and perform-
tion, to disburse monies to the Govern-
ance bonds.
(g) Evidence of possible criminal or ment as directed by the contracting of-
fraudulent activities by an individual ficer.
surety shall be referred to the appro- (ii) The financial institution would
priate agency official in accordance be authorized to release to the indi-
with agency procedures. vidual surety all or part of the balance
of the escrow account, including any
[54 FR 48986, Nov. 28, 1989]
accrued interest, upon receipt of writ-
28.2031 Security interests by an indi- ten authorization from the contracting
vidual surety. officer.
(a) An individual surety may be ac- (iii) The Government would not be
cepted only if a security interest in as- responsible for any costs attributable
sets acceptable under 28.2032 is pro- to the establishment, maintenance, ad-
vided to the Government by the indi- ministration, or any other aspect of
vidual surety. The security interest the account.
shall be furnished with the bond. (iv) The financial institution would
(b) The value at which the con- not be liable or responsible for the in-
tracting officer accepts the assets terpretation of any provisions or terms
pledged must be equal to or greater and conditions of the solicitation or
than the aggregate penal amounts of contract.
the bonds required by the solicitation (v) The financial institution would
and may be provided by one or a com- provide periodic account statements to
bination of the following methods: the contracting officer.
(1) An escrow account with a feder- (vi) The terms of the escrow account
ally insured financial institution in the could not be amended without the con-
name of the contracting agency. (See sent of the contracting officer.
28.2032(b)(2) with respect to Govern- (2) A lien on real property, subject to
ment securities in book entry form.)
the restrictions in 28.2032 and 28.2033.
Acceptable securities for deposit in es-
crow are discussed in 28.2032. While [54 FR 48986, Nov. 28, 1989]
539
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28.2032 48 CFR Ch. 1 (10103 Edition)
540
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Federal Acquisition Regulation 28.2035
Natural Resource Division, Depart- tion, street address and other identifying de-
ment of Justice, Washington, DC 20530. scription)
This title evidence must show fee sim- IN WITNESS HEREOF, I/we have hereunto
affixed my/our hand(s) and seal(s) this
ple title vested in the surety along
DAY OF 19.
with any concurrent owners; whether
any real estate taxes are due and pay- llllllllllllllllllllllll
able; and any recorded encumbrances WITNESS:
against the property, including the lien
llllllllllllllllllllllll
filed in favor of the Government under
paragraph (d) of this subsection; (SEAL)
(2) Evidence of the amount due under I, lll, a Notary Public in and for the
any encumbrance shown in the evi- (CITY) lll, (STATE) lll, do hereby cer-
dence of title; tify that lll, a party or parties to a cer-
(3) A copy of the current real estate tain Agreement bearing the date lll day
tax assessment of the property or a of lll 19l, and hereunto annexed, person-
ally appeared before me, the said lll being
current appraisal dated no earlier than personally well known to me as the person(s)
6 months prior to the date of the bond, who executed said lien, and acknowledged
prepared by a professional appraiser the same to be his/her/their act and deed.
who certifies that the appraisal has GIVEN under my hand and seal this lll
been conducted in accordance with the day of lll 19l.
generally accepted appraisal standards llllllllllllllllllllllll
as reflected in the Uniform Standards
of Professional Appraisal Practice as NOTARY PUBLIC, STATE
promulgated by the Appraisal Founda- My Commission expires:
tion, 1029 Vermont Avenue NW., Wash- [54 FR 48987, Nov. 28, 1989]
ington, DC 20005.
(b) Failure to provide evidence that 28.2034 Substitution of assets.
the lien has been properly recorded will An individual surety may request the
render the offeror nonresponsible. Government to accept a substitute
(c) The individual surety is liable for asset for that currently pledged by sub-
the payment of all administrative costs mitting a written request to the re-
of the Government, including legal sponsible contracting officer. The con-
fees, associated with the liquidation of tracting officer may agree to the sub-
pledged real estate. stitution of assets upon determining,
(d) The following format, or any doc- after consultation with legal counsel,
ument substantially the same, shall be that the substitute assets to be pledged
used by the surety and recorded in the are adequate to protect the out-
local recorders office when a surety standing bond or guarantee
pledges real estate on Standard Form obiligations. If acceptable, the sub-
28, Affidavit of Individual Surety. stitute assets shall be pledged as pro-
LIEN ON REAL ESTATE vided for in subpart 28.2.
I/we agree that this instrument constitutes [54 FR 48988, Nov. 28, 1989]
a lien in the amount of $ on the prop-
erty described in this lien. The rights of the 28.2035 Release of lien.
United States Government shall take prece- (a) After consultation with legal
dence over any subsequent lien or encum-
counsel, the contracting officer shall
brance until the lien is formally released by
a duly authorized representative of the release the security interest on the in-
United States. I/we hereby grant the United dividual suretys assets using the Op-
States the power of sale of subject property, tional Form 90, Release of Lien on Real
including the right to satisfy its reasonable Property, or Optional Form 91, Release
administrative costs, including legal fees as- of Personal Property from Escrow, or a
sociated with any sale of subject property, in similar release as soon as possible con-
the event of contractor default if I/we other- sistent with the conditions in subpara-
wise fail to satisfy the underlying ( ) bid
graphs (a) (1) and (2) of this subsection.
guarantee, ( ) performance bond, ( ) or
payment bond obligations as an individual A suretys assets pledged in support of
surety on solicitation/contract number a payment bond may be released to a
. The lien is upon the real estate now owned subcontractor or supplier upon Govern-
by me/us described as follows: (legal descrip- ment receipt of a Federal district court
541
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28.2036 48 CFR Ch. 1 (10103 Edition)
542
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Federal Acquisition Regulation 28.2043
28.204 Alternatives in lieu of corporate ury Department Circular No. 154 dated
or individual sureties. July 1, 1978 (31 CFR part 225)). In addi-
(a) Any person required to furnish a tion, a duly executed power of attorney
bond to the Government may furnish and agreement authorizing the collec-
any of the types of security listed in tion or sale of such United States
28.2041 through 28.2043 instead of a bonds or notes in the event of default
of the principal on the bond shall ac-
corporate or individual surety for the
company the deposited bonds or notes.
bond. When any of those types of secu-
The contracting officer may (a) turn
rity are deposited, a statement shall be
securities over to the finance or other
incorporated in the bond form pledging
authorized agency official, or (b) de-
the security in lieu of execution of the
posit them with the Treasurer of the
bond form by corporate or individual
United States, a Federal Reserve Bank
sureties. The contractor shall execute
(or branch with requisite facilities), or
the bond forms as the principal. Agen-
other depository designated for that
cies shall establish safeguards to pro-
purpose by the Secretary of the Treas-
tect against loss of the security and ury, under procedures prescribed by the
shall return the security or its equiva- agency concerned and Treasury De-
lent to the contractor when the bond partment Circular No. 154 (exception:
obligation has ceased. The contracting officer shall deposit
(b) Upon written request by any con- all bonds and notes received in the Dis-
tractor securing a performance or pay- trict of Columbia with the Treasurer of
ment bond by any of the types of secu- the United States).
rity listed in 28.2041 through 28.2043,
the contracting officer may release a [48 FR 42286, Sept. 19, 1983. Redesignated and
portion of the security only when the amended at 54 FR 48986, 48989, Nov. 28, 1989]
conditions allowing the partial release 28.2042 Certified or cashiers checks,
of lien in 28.2035(c) are met. The con- bank drafts, money orders, or cur-
tractor shall, as a condition of the par- rency.
tial release, furnish an affidavit agree-
Any person required to furnish a
ing that the release of such security bond has an option to furnish a cer-
does not relieve the contractor of its tified or cashiers check, bank draft,
obligations under the bond(s). Post Office money order, or currency,
(c) The contractor may satisfy a re- in an amount equal to the penal sum of
quirement for bond security by fur- the bond, instead of furnishing surety
nishing a combination of the types of or sureties on the bonds. Those fur-
security listed in 28.2041 through nishing checks, drafts, or money orders
28.2043 or a combination of bonds sup- shall draw them to the order of the ap-
ported by these types of security and propriate Federal agency.
additional surety bonds under 28.202 or
28.203. During the period for which a [48 FR 42286, Sept. 19, 1983. Redesignated at
bond supported by security is required, 54 FR 48986, Nov. 28, 1989]
the contractor may substitute one type 28.2043 Irrevocable letter of credit
of security listed in 28.2041 through (ILC).
28.2043 for another, or may substitute,
in whole or combination, additional (a) Any person required to furnish a
surety bonds under 28.202 or 28.203. bond has the option to furnish a bond
secured by an ILC in an amount equal
[61 FR 31653, June 20, 1996, as amended at 62 to the penal sum required to be secured
FR 44807, Aug. 22, 1997] (see 28.204). A separate ILC is required
for each bond.
28.2041 United States bonds or notes. (b) The ILC shall be irrevocable, re-
Any person required to furnish a quire presentation of no document
bond to the Government has the op- other than a written demand and the
tion, instead of furnishing a surety or ILC (and letter of confirmation, if any),
sureties on the bond, of depositing cer- expire only as provided in paragraph (f)
tain United States bonds or notes in an of this subsection, and be issued/con-
amount equal at their par value to the firmed by an acceptable federally in-
penal sum of the bond (the Act of Feb- sured financial institution as provided
ruary 24, 1919 (31 U.S.C. 9303) and Treas- in paragraph (g) of this subsection.
543
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28.2043 48 CFR Ch. 1 (10103 Edition)
(c) To draw on the ILC, the con- (C) For payment bonds only, until
tracting officer shall use the sight resolution of all claims filed against
draft set forth in the clause at 52.228 the payment bond during the one-year
14, and present it with the ILC (includ- period following final payment.
ing letter of confirmation, if any) to (ii) For contracts not subject to the
the issuing financial institution or the Miller Act, the later of
confirming financial institution (if (A) 90 days following final payment;
any). or
(d) If the contractor does not furnish (B) For performance bonds only,
an acceptable replacement ILC, or until completion of any warranty pe-
other acceptable substitute, at least 30 riod.
days before an ILCs scheduled expira- (g) Only federally insured financial
tion, the contracting officer shall im- institutions rated investment grade or
mediately draw on the ILC. higher shall issue or confirm the ILC.
Unless the financial institution issuing
(e) If, after the period of performance
the ILC had letter of credit business of
of a contract where ILCs are used to
at least $25 million in the past year,
support payment bonds, there are out- ILCs over $5 million must be confirmed
standing claims against the payment by another acceptable financial insti-
bond, the contracting officer shall draw tution that had letter of credit busi-
on the ILC prior to the expiration date ness of at least $25 million in the past
of the ILC to cover these claims. year.
(f) The period for which financial se- (1) The offeror/contractor shall pro-
curity is required shall be as follows: vide the contracting officer a credit
(1) If used as a bid guarantee, the ILC rating from a recognized commercial
should expire no earlier than 60 days rating service as specified in Office of
after the close of the bid acceptance Federal Procurement Policy Pamphlet
period. No. 7 (see 28.2043(h)) that indicates the
(2) If used as an alternative to cor- financial institution has the required
porate or individual sureties as secu- rating(s) as of the date of issuance of
rity for a performance or payment the ILC.
bond, the offeror/contractor may sub- (2) If the contracting officer learns
mit an ILC with an initial expiration that a financial institutions rating has
date estimated to cover the entire pe- dropped below the required level, the
riod for which financial security is re- contracting officer shall give the con-
quired or an ILC with an initial expira- tractor 30 days to substitute an accept-
tion date that is a minimum period of able ILC or shall draw on the ILC using
one year from the date of issuance. The the sight draft in paragraph (g) of the
ILC shall provide that, unless the clause at 52.22814.
issuer provides the beneficiary written (h)(1) Additional information on
notice of non-renewal at least 60 days credit rating services and investment
in advance of the current expiration grade ratings is contained within Office
date, the ILC is automatically ex- of Federal Procurement Policy Pam-
tended without amendment for one phlet No. 7, Use of Irrevocable Letters
year from the expiration date, or any of Credit. This pamphlet may be ob-
future expiration date, until the period tained by calling the Office of Manage-
of required coverage is completed and ment and Budgets publications office
the contracting officer provides the fi- at (202) 3957332.
nancial institution with a written (2) A copy of the Uniform Customs
statement waiving the right to pay- and Practice (UCP) for Documentary
ment. The period of required coverage Credits, 1993 Revision, International
shall be: Chamber of Commerce Publication No.
(i) For contracts subject to the Miller 500, is available from: ICC Publishing,
Act, the later of Inc., 156 Fifth Avenue, New York NY,
(A) One year following the expected 10010, Telephone: (212) 2061150, Telefax:
date of final payment; (212) 6336025, E-mail:
(B) For performance bonds only, iccpub@interport.net
until completion of any warranty pe- [61 FR 31653, June 20, 1996, as amended at 62
riod; or FR 44807, Aug. 22, 1997]
544
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Federal Acquisition Regulation 28.305
545
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28.306 48 CFR Ch. 1 (10103 Edition)
of the United States or its allies, in- pensation coverage against the risk of
volving construction, alteration, re- work injury or death and assume liabil-
moval, or repair, including projects or ity toward the employees and their
operations under service contracts and beneficiaries for war-hazard injury,
projects in connection with the na- death, capture, or detention. The con-
tional defense or with war activities, tract shall provide either that the
dredging, harbor improvements, dams, costs of this liability or the reasonable
roadways, and housing, as well as pre- costs of insurance against this liability
paratory and ancillary work in connec- shall be allowed as a cost under the
tion therewith at the site or on the contract.
project.
(b) The Defense Base Act (42 U.S.C. 28.306 Insurance under fixed-price
1651 et seq.) extends the Longshore- contracts.
mens and Harbor Workers Compensa- (a) General. Although the Govern-
tion Act (33 U.S.C. 901) to various class- ment is not ordinarily concerned with
es of employees working outside the the contractors insurance coverage if
United States, including those engaged the contract is a fixed-price contract,
in performing in special circumstances agencies may
(1) Public-work contracts; or specify insurance requirements under
(2) Contracts approved or financed fixed-price contracts. Examples of such
under the Foreign Assistance Act of circumstances include the following:
1961 (Pub. L. 87195) other than (i) con- (1) The contractor isor has a sepa-
tracts approved or financed by the De- rate operationengaged principally in
velopment Loan Fund (unless the Sec- Government work.
retary of Labor, acting upon the rec-
(2) Government property is involved.
ommendation of a department or agen-
(3) The work is to be performed on a
cy, determines that such contracts
Government installation.
should be covered) or (ii) contracts ex-
clusively for materials or supplies. (4) The Government elects to assume
(c) When the Defense Base Act ap- risks for which the contractor ordi-
plies (see 42 U.S.C. 1651 et seq.) to these narily obtains commercial insurance.
employees, the benefits of the Long- (b) Work on a Government installation.
shoremens and Harbor Workers Com- (1) When the clause at 52.2285, Insur-
pensation Act are extended through op- anceWork on a Government Installa-
eration of the War Hazards Compensa- tion, is required to be included in a
tion Act (42 U.S.C. 1701 et seq.) to pro- fixed-price contract by 28.310, the cov-
tect the employees against the risk of erage specified in 28.307 is the min-
war hazards (injury, death, capture, or imum insurance required and shall be
detention). When, by means of an in- included in the contract Schedule or
surance policy or a self-insurance pro- elsewhere in the contract. The con-
gram, the contractor provides the tracting officer may require additional
workers compensation coverage re- coverage and higher limits.
quired by the Defense Base Act, the (2) When the clause at 52.2285, Insur-
contractors employees automatically anceWork on a Government Installa-
receive war-hazard risk protection. tion, is not required by 28.310 but is in-
(d) When the agency head rec- cluded because the contracting officer
ommends a waiver to the Secretary of considers it to be in the Governments
Labor, the Secretary may waive the interest to do so, any of the types of in-
applicability of the Defense Base Act surance specified in 28.307 may be omit-
to any contract, subcontract, work lo- ted or the limits may be lowered, if ap-
cation, or classification of employees. propriate.
(e) If the Defense Base Act is waived
for some or all of the contractors em- 28.307 Insurance under cost-reim-
ployees, the benefits of the War Haz- bursement contracts.
ards Compensation Act are automati- Cost-reimbursement contracts (and
cally waived with respect to those em- subcontracts, if the terms of the prime
ployees for whom the Defense Base Act contract are extended to the sub-
is waived. For those employees, the contract) ordinarily require the types
contractor shall provide workers com- of insurance listed in 28.3072, with the
546
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Federal Acquisition Regulation 28.308
547
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28.309 48 CFR Ch. 1 (10103 Edition)
548
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Federal Acquisition Regulation Pt. 29
549
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29.000 48 CFR Ch. 1 (10103 Edition)
29.301 [Reserved] thority for the purpose of (1) deter-
29.302 Application of State and local taxes mining whether or not a tax is valid or
to the Government. applicable or (2) obtaining exemption
29.303 Application of State and local taxes
from, or refund of, a tax.
to Government contractors and sub-
contractors. (c) When the constitutional immu-
29.304 Matters requiring special consider- nity of the Government from State or
ation. local taxation may reasonably be at
29.305 State and local tax exemptions. issue, contractors should be discour-
aged from negotiating independently
Subpart 29.4Contract Clauses with taxing authorities if the contract
29.401 Domestic contracts. involved is either (1) a cost-reimburse-
29.4011 Indefinite-delivery contracts for ment contract or (2) a fixed-price con-
leased equipment. tract containing a tax escalation
29.4012 Construction contracts performed clause.
in North Carolina. (d) Before purchasing goods or serv-
29.4013 Federal, State, and local taxes. ices from a foreign source, the con-
29.4014 New Mexico gross receipts and com-
pensating tax.
tracting officer should consult the
29.402 Foreign contracts. agency-designated counsel (1) for infor-
29.4021 Foreign fixed-price contracts. mation on foreign tax treaties and
29.4022 Foreign cost-reimbursement con- agreements in force and on the imple-
tracts. mentation of any foreign-tax-relief
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap- programs and (2) to resolve any other
ter 137; and 42 U.S.C. 2473(c). tax questions affecting the prospective
contract.
SOURCE: 48 FR 42293, Sept. 19, 1983, unless
otherwise noted.
Subpart 29.2Federal Excise
29.000 Scope of part. Taxes
This part prescribes policies and pro-
cedures for (a) using tax clauses in con- 29.201 General.
tracts (including foreign contracts), (b) (a) Federal excise taxes are levied on
asserting immunity or exemption from the sale or use of particular supplies or
taxes, and (c) obtaining tax refunds. It services. Subtitle D of the Internal
explains Federal, State, and local taxes Revenue Code of 1954, Miscellaneous
on certain supplies and services ac- Excise Taxes, 26 U.S.C. 4041 et seq., and
quired by executive agencies and the its implementing regulations, 26 CFR
applicability of such taxes to the Fed- parts 40 through 299, cover miscella-
eral Government. It is for the general neous federal excise tax requirements.
information of Government personnel Questions arising in this area should be
and does not present the full scope of directed to the agency-designated
the tax laws and regulations. counsel. The most common excise
taxes are
Subpart 29.1General (1) Manufacturers excise taxes im-
posed on certain motor-vehicle arti-
29.101 Resolving tax problems. cles, tires and inner tubes, gasoline, lu-
(a) Contract tax problems are essen- bricating oils, coal, fishing equipment,
tially legal in nature and vary widely. firearms, shells, and cartridges sold by
Specific tax questions must be resolved manufacturers, producers, or import-
by reference to the applicable contract ers; and
terms and to the pertinent tax laws (2) Special-fuels excise taxes imposed
and regulations. Therefore, when tax at the retail level on diesel fuel and
questions arise, contracting officers special motor fuels.
should request assistance from the (b) Sometimes the law exempts the
agency-designated legal counsel. Federal Government from these taxes.
(b) To keep treatment within an Contracting officers should solicit
agency consistent, contracting officers prices on a tax-exclusive basis when it
or other authorized personnel shall is known that the Government is ex-
consult the agency-designated counsel empt from these taxes, and on a tax-in-
before negotiating with any taxing au- clusive basis when no exemption exists.
550
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Federal Acquisition Regulation 29.302
(c) Executive agencies shall take 29.203 Other Federal tax exemptions.
maximum advantage of available Fed-
(a) Pursuant to 26 U.S.C. 4293, the
eral excise tax exemptions.
Secretary of the Treasury has exempt-
[48 FR 42293, Sept. 19, 1983, as amended at 55 ed the United States from the commu-
FR 52793, Dec. 21, 1990] nications excise tax imposed in 26
U.S.C. 4251, when the supplies and serv-
29.202 General exemptions. ices are for the exclusive use of the
No Federal manufacturers or spe- United States. (Secretarial Authoriza-
cial-fuels excise taxes are imposed in tion, June 20, 1947, Internal Revenue
many contracting situations as, for ex- Cumulative Bulletin, 19471, 205.)
ample, when the supplies are for any of (b) Pursuant to 26 U.S.C. 4483(b), the
the following: Secretary of the Treasury has exempt-
(a) The exclusive use of any State or ed the United States from the federal
political subdivision, including the Dis- highway vehicle users tax imposed in
trict of Columbia (26 U.S.C. 4041 and 26 U.S.C. 4481. The exemption applies
4221). whether the vehicle is owned or leased
(b) Shipment for export to a foreign by the United States. (Secretarial Au-
country or an outlying area of the thorization, Internal Revenue Cumu-
United States. Shipment must occur lative Bulletin, 19562, 1369.)
within 6 months of the time title [53 FR 662, Jan. 11, 1988]
passes to the Government. When the
exemption is claimed, the words for
export must appear on the contract or Subpart 29.3State and Local
purchase document, and the con- Taxes
tracting officer must furnish the seller
29.300 Scope of subpart.
proof of export (see 26 CFR 48.42213).
(c) Further manufacture, or resale This subpart prescribes the policies
for further manufacture (this exemp- and procedures regarding the exemp-
tion does not include tires and inner tion or immunity of Federal Govern-
tubes) (26 CFR 48.42212). ment purchases and property from
(d) Use as fuel supplies, ships or sea State and local taxation.
stores, or legitimate equipment on ves-
29.301 [Reserved]
sels of war, including (1) aircraft owned
by the United States and constituting 29.302 Application of State and local
a part of the armed forces and (2) guid- taxes to the Government.
ed missiles and pilotless aircraft owned
or chartered by the United States. (a) Generally, purchases and leases
When this exemption is to be claimed, made by the Federal Government are
the purchase should be made on a tax- immune from State and local taxation.
exclusive basis. The contracting officer Whether any specific purchase or lease
shall furnish the seller an exemption is immune, however, is a legal question
certificate for Supplies for Vessels of requiring advice and assistance of the
agency-designated counsel.
War (an example is given in 26 CFR
48.42214(d)(2); the IRS will accept one (b) When it is economically feasible
certificate covering all orders under a to do so, executive agencies shall take
single contract for a specified period of maximum advantage of all exemptions
up to 12 calendar quarters) (26 U.S.C. from State and local taxation that may
be available. If appropriate, the con-
4041 and 4221).
tracting officer shall provide a Stand-
(e) A nonprofit educational organiza-
ard Form 1094, U.S. Tax Exemption
tion (26 U.S.C. 4041 and 4221).
Form (see part 53), or other evidence
(f) Emergency vehicles (26 U.S.C. 4053
listed in 29.305(a) to establish that the
and 4064(b)(1)(c)).
purchase is being made by the Govern-
[48 FR 42293, Sept. 19, 1983, as amended at 53 ment.
FR 662, Jan. 11, 1988; 68 FR 28083, May 22,
[48 FR 42293, Sept. 19, 1983, as amended at 62
2003]
FR 237, Jan. 2, 1997]
551
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29.303 48 CFR Ch. 1 (10103 Edition)
29.303 Application of State and local actions with regard to payment, non-
taxes to Government contractors payment, refund, protest, or other
and subcontractors. treatment of a specified tax. Such spe-
(a) Prime contractors and sub- cial treatment may be appropriate
contractors shall not normally be des- when there is doubt as to the applica-
ignated as agents of the Government bility or allocability of the tax, or
for the purpose of claiming immunity when the applicability of the tax is
from State or local sales or use taxes. being litigated.
Before any activity contends that a (b) The applicability of State and
contractor is an agent of the Govern- local taxes to purchases by the Federal
ment, the matter shall be referred to Government may depend on the place
the agency head for review. The refer- and terms of delivery. When the con-
ral shall include all pertinent data on tract price will be substantial, alter-
which the contention is based, together native places and terms of delivery
with a thorough analysis of all rel- should be considered in light of pos-
evant legal precedents. sible tax consequences.
(b) When purchases are not made by (c) Indefinite-delivery contracts for
the Government itself, but by a prime equipment rental may require the con-
contractor or by a subcontractor under tractor to furnish equipment in any of
a prime contract, the right to an ex- the States. Since leased equipment re-
emption of the transaction from a sales mains the contractors property,
or use tax may not rest on the Govern- States and local governments impose a
ments immunity from direct taxation wide variety of property, use, or other
by States and localities. It may rest in- taxes on equipment leased to the Gov-
stead on provisions of the particular ernment. The amount of these taxes
State or local law involved, or, in some can vary considerably from jurisdiction
cases, the transaction may not in fact to jurisdiction. See 29.4011 for the pre-
be expressly exempt from the tax. The scription of the contract clause to be
Governments interest shall be pro- included in contracts when delivery
tected by using the procedures in points are not known at time of con-
29.101. tracting.
(c) Frequently, property (including (d) The North Carolina State and
property acquired under the progress local sales and use tax.
payments clause of fixed-price con- (1) The North Carolina Sales and Use
tracts or the Government property Tax Act authorizes counties and incor-
clause of cost-reimbursement con- porated cities and towns to obtain each
tracts) owned by the Government is in year from the Commissioner of Rev-
the possession of a contractor or sub- enue of the State of North Carolina a
contractor. Situations may arise in refund of sales and use taxes indirectly
which States or localities assert the paid on building materials, supplies,
right to tax Government property di- fixtures, and equipment that become a
rectly or to tax the contractors or sub- part of or are annexed to any building
contractors possession of, interest in, or structure erected, altered, or re-
or use of that property. In such cases, paired for such counties and incor-
the contracting officer shall seek re- porated cities and towns in North Caro-
view and advice from the agency-des- lina. In United States v. Clayton, 250 F.
ignated counsel on the appropriate Supp. 827 (1965), it was held that the
course of action. United States is entitled to the benefit
of the refund, but must follow the re-
29.304 Matters requiring special con- fund procedure of the Act and the regu-
sideration. lations to recover what it is due.
The imposition of State and local (2) The Act provides that, to receive
taxes may result in special contract the refund, claimants must file, within
considerations including the following: 6 months after the claimants fiscal
(a) With coordination of the agency- year closes, a written request substan-
designated counsel, a contract may (1) tiated by such records, receipts, and in-
state that the contract price includes formation as the Commissioner of Rev-
or excludes a specified tax or (2) re- enue may require. No refund will be
quire that the contractor take certain made on an application not filed within
552
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Federal Acquisition Regulation 29.305
the time allowed and in such manner grounds for the exemption claimed, the
as the Commissioner may require. The parties to the transaction, and the re-
requirements of the Commissioner are quirements of the taxing jurisdiction.
set forth in regulations that provide Such evidence may include the fol-
that, to substantiate a refund claim for lowing:
sales or use taxes paid on purchases of (1) A copy of the contract or relevant
building materials, supplies, fixtures, portion.
or equipment by a contractor, the Gov-
(2) Copies of purchase orders, ship-
ernment must secure from the con-
ping documents, credit-card-imprinted
tractor certified statements setting
forth the cost of the property pur- sales slips, paid or acknowledged in-
chased from each vendor and the voices, or similar documents that iden-
amount of sales or use taxes paid. In tify an agency or instrumentality of
the event the contractor makes several the United States as the buyer.
purchases from the same vendor, the (3) A U.S. Tax Exemption Form (SF
certified statement must indicate the 1094).
invoice numbers, the inclusive dates of (4) A State or local form indicating
the invoices, the total amount of the that the supplies or services are for the
invoices, and the sales and use taxes exclusive use of the United States.
paid. The statement must also include (5) Any other State or locally re-
the cost of any tangible personal prop- quired document for establishing gen-
erty withdrawn from the contractors eral or specific exemption.
warehouse stock and the amount of (6) Shipping documents indicating
sales or use tax paid by the contractor.
that shipments are in interstate or for-
Similar certified statements by sub-
contractors must be obtained by the eign commerce.
general contractor and furnished to the (b) Furnishing proof of exemption. If a
claimant. Any local sales or use taxes reasonable basis to sustain a claimed
included in the contractors statement exemption exists, the seller will be fur-
must be shown separately from the nished evidence of exemption, as fol-
State sales or use taxes. lows:
(3) The clause prescribed at 29.4012 (1) Under a contract containing the
requires contractors to submit to con- clause at 52.2293, Federal, State, and
tracting officers by November 30 of Local Taxes, or at 52.2294, Federal,
each year a certified statement dis- State, and Local Taxes (State and
closing North Carolina State and local Local Adjustments), in accordance
sales and use taxes paid during the 12- with the terms of those clauses.
month period that ended the preceding (2) Under a cost-reimbursement con-
September 30. The contracting officer tract, if requested by the contractor
shall ensure that contractors comply and approved by the contracting officer
with this requirement and shall obtain or at the discretion of the contracting
the annual refund to which the Govern- officer.
ment may be entitled. The application (3) Under a contract or purchase
for refund must be filed each year be-
order that contains no tax provision,
fore March 31 and in the manner and
if
form required by the Commissioner of
Revenue. Copies of the form may be ob- (i) Requested by the contractor and
tained from the State of North Caro- approved by the contracting officer or
lina, Department of Revenue, P.O. Box at the discretion of the contracting of-
25000, Raleigh, NC 27640. ficer; and
(ii) Either the contract price does not
[48 FR 42293, Sept. 19, 1983, as amended at 62
include the tax or, if the transaction or
FR 40237, July 25, 1997]
property is tax exempt, the contractor
29.305 State and local tax exemptions. consents to a reduction in the contract
price.
(a) Evidence of exemption. Evidence
needed to establish exemption from [48 FR 42293, Sept. 19, 1983, as amended at 62
State or local taxes depends on the FR 237, Jan. 2, 1997; 68 FR 13205, Mar. 18, 2003]
553
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29.401 48 CFR Ch. 1 (10103 Edition)
554
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Federal Acquisition Regulation Pt. 30
555
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30.000 48 CFR Ch. 1 (10103 Edition)
556
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Federal Acquisition Regulation 30.2014
557
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30.2015 48 CFR Ch. 1 (10103 Edition)
558
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Federal Acquisition Regulation 30.2028
559
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30.601 48 CFR Ch. 1 (10103 Edition)
accordance with 48 CFR 9903.2022 (FAR (a) The Government reserves the
appendix). right to make appropriate contract ad-
justments if, in the future, the ACO de-
[57 FR 39587, Aug. 31, 1992, as amended at 61
FR 18918, Apr. 29, 1996; 62 FR 40237, July 25, termines that the cost impact has be-
1997] come material and
(b) The contractor is not excused
from the obligation to comply with the
Subpart 30.3CAS Rules and applicable Standard or rules and regu-
Regulations [Reserved] lations involved.
NOTE: See 48 CFR 9903.3 (FAR appendix). [57 FR 39587, Aug. 31, 1992, as amended at 61
FR 18918, Apr. 29, 1996; 62 FR 40237, July 25,
1997]
Subpart 30.4Cost Accounting
Standards [Reserved] 30.6021 Equitable adjustments for
new or modified standards.
NOTE: See 48 CFR part 9904 (FAR appen-
dix). (a) New or modified standards. (1) The
provision at 52.2301, Cost Accounting
Subpart 30.5Cost Accounting Standards Notices and Certification,
requires offerors to state whether or
Standards for Educational In- not the award of the contemplated con-
stitutions [Reserved] tract would require a change to estab-
NOTE: See 48 CFR part 9905 (FAR appen-
lished cost accounting practices affect-
dix). ing existing contracts and sub-
contracts. The contracting officer shall
ensure that the contractors response
Subpart 30.6CAS Administration to the notice is made known to the
30.601 Responsibility. ACO.
(2) Contracts and subcontracts con-
(a) The cognizant ACO shall perform taining the clause at 52.2302, Cost Ac-
CAS administration for all contracts in counting Standards, or FAR 52.2305,
a business unit notwithstanding reten- Cost Accounting StandardsEdu-
tion of other administration functions cational Institution, may require equi-
by the contracting officer. table adjustments to comply with new
(b) Within 30 days after the award of or modified CAS. Such adjustments are
any new contract or subcontract sub- limited to contracts and subcontracts
ject to CAS, the contracting officer, awarded before the effective date of
contractor, or subcontractor making each new or modified standard. A new
the award shall request the cognizant or modified standard becomes applica-
ACO to perform administration for ble prospectively to these contracts
CAS matters (see subpart 42.2). and subcontracts when a new contract
[57 FR 39587, Aug. 31, 1992, as amended at 59 or subcontract containing the clause at
FR 67043, Dec. 28, 1994] 52.2302 or 52.2305 is awarded on or
after the effective date of the new or
30.602 Changes to disclosed or estab- modified standard.
lished cost accounting practices. (3) Contracting officers shall encour-
Adjustments to contracts and with- age contractors to submit to the ACO
holding amounts payable for CAS non- any change in accounting practice in
compliance, new standards, or vol- anticipation of complying with a new
untary changes are required only if the or modified standard as soon as prac-
amounts involved are material. In de- tical after the new or modified Stand-
termining materiality, the ACO shall ard has been promulgated by the
use the criteria in 48 CFR 9903.305 (FAR CASB.
appendix). The ACO may forego action (b) Accounting changes. (1) The clause
to require that a cost impact proposal at FAR 52.2306, Administration of Cost
be submitted or to adjust contracts, if Accounting Standards, requires the
the ACO determines the amount in- contractor to submit a description of
volved is immaterial. However, in the any change in cost accounting prac-
case of noncompliance issues, the ACO tices required to comply with a new or
shall inform the contractors that: modified CAS within 60 days (or other
560
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Federal Acquisition Regulation 30.6022
mutually agreed to date) after award of specified), the ACO, with the assistance
a contract requiring the change. of the auditor, shall estimate the gen-
(2) The ACO, with the assistance of eral dollar magnitude of the cost im-
the auditor, shall review the proposed pact on CAS-covered contracts and
change concurrently for adequacy and subcontracts. The ACO may then with-
compliance (see 30.2027). If the descrip- hold an amount not to exceed 10 per-
tion of the change meets both tests, cent of each subsequent amount deter-
the ACO shall notify the contractor mined payable related to the contrac-
and request submission of a cost im- tors CAS-covered prime contracts, up
pact proposal in accordance with FAR to the estimated general dollar mag-
30.602. nitude of the cost impact, until the re-
(c) Contract price adjustments. (1) The quired submission is furnished by the
ACO shall promptly analyze the cost contractor.
impact proposal with the assistance of (2) If the contractor has not sub-
the auditor, determine the impact, and mitted the cost impact proposal before
negotiate the contract price adjust- the total withheld amount reaches the
ment on behalf of all Government estimated general dollar magnitude
agencies. The ACO shall invite con- and the ACO determines that an ad-
tracting officers to participate in nego- justment is required (see 30.602), the
tiations of adjustments when the price ACO shall request the contractor to
of any of their contracts may be in- agree to the cost or price adjustment.
creased or decreased by $10,000 or more. The contractor shall also be advised
At the conclusion of negotiations, the that in the event no agreement on the
ACO shall cost or price adjustment is reached
(i) Execute supplemental agreements within 20 days, the ACO may make a
to contracts of the ACOs own agency unilateral adjustment, subject to con-
(and, if additional funds are required, tractor appeal as provided in the clause
request them from the appropriate con- at 52.2331, Disputes.
tracting officer); [57 FR 39587, Aug. 31, 1992, as amended at 59
(ii) Prepare a negotiation memo- FR 67043, Dec. 28, 1994; 61 FR 18918, Apr. 29,
randum and send copies to cognizant 1996]
auditors and contracting officers of
other agencies having prime contracts 30.6022 Noncompliance with CAS re-
affected by the negotiation (those quirements.
agencies shall execute supplemental (a) Determination of noncompliance. (1)
agreements in the amounts nego- Within 15 days of the receipt of a re-
tiated); and port of alleged noncompliance from the
(iii) Furnish copies of the memo- cognizant auditor, the ACO shall make
randum indicating the effect on costs an initial finding of compliance or non-
to the ACO of the next higher tier sub- compliance and advise the auditor.
contractor or prime contractor, as ap- (2) If an initial finding of noncompli-
propriate, if a subcontract is to be ad- ance is made, the ACO shall imme-
justed. This memorandum shall be the diately notify the contractor in writing
basis for negotiation between the sub- of the exact nature of the noncompli-
contractor and the next higher tier ance and allow the contractor 60 days
subcontractor or prime contractor and within which to agree or to submit rea-
for execution of a supplemental agree- sons why the existing practices are
ment to the subcontract. considered to be in compliance.
(2) If the parties fail to agree on the (3) If the contractor agrees with the
cost or price adjustment, the ACO may initial finding of noncompliance, the
make a unilateral adjustment, subject ACO shall review the contractor sub-
to contractor appeal as provided in the missions required by paragraph (a) of
clause at 52.2331, Disputes. the clause at FAR 52.2306, Administra-
(d) Remedies for contractor failure to tion of Cost Accounting Standards.
make required submissions. (1) If the con- (4) If the contractor disagrees with
tractor does not submit the accounting the initial noncompliance finding, the
change description or the general dol- ACO shall review the reasons why the
lar magnitude of the change or cost im- contractor considers the existing prac-
pact proposal (in the form and manner tices to be in compliance and make a
561
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30.6022 48 CFR Ch. 1 (10103 Edition)
562
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Federal Acquisition Regulation Pt. 31
563
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Pt. 31 48 CFR Ch. 1 (10103 Edition)
31.1062 Exceptions to general rules on al- 31.20529 Plant protection costs.
lowability and allocability. 31.20530 Patent costs.
31.1063 Contractors commercial items. 31.20531 Plant reconversion costs.
31.107 Contracts with State, local, and fed- 31.20532 Precontract costs.
erally recognized Indian tribal govern- 31.20533 Professional and consultant serv-
ments. ice costs.
31.108 Contracts with nonprofit organiza- 31.20534 Recruitment costs.
tions. 31.20535 Relocation costs.
31.109 Advance agreements. 31.20536 Rental costs.
31.110 Indirect cost rate certification and 31.20537 Royalties and other costs for use
penalties on unallowable costs. of patents.
31.20538 Selling costs.
Subpart 31.2Contracts With Commercial 31.20539 Service and warranty costs.
Organizations 31.20540 Special tooling and special test
equipment costs.
31.201 General. 31.20541 Taxes.
31.2011 Composition of total cost. 31.20542 Termination costs.
31.2012 Determining allowability. 31.20543 Trade, business, technical, and
31.2013 Determining reasonableness. professional activity costs.
31.2014 Determining allocability. 31.20544 Training and education costs.
31.2015 Credits. 31.20545 [Reserved]
31.2016 Accounting for unallowable costs. 31.20546 Travel costs.
31.2017 Construction and architect-engi- 31.20547 Costs related to legal and other
neer contracts. proceedings.
31.202 Direct costs.
31.20548 Research and development costs.
31.203 Indirect costs.
31.20549 Goodwill.
31.204 Application of principles and proce-
31.20550 [Reserved]
dures.
31.20551 Costs of alcoholic beverages.
31.205 Selected costs.
31.20552 Asset valuations resulting from
31.2051 Public relations and advertising
business combinations.
costs.
31.2052 [Reserved]
31.2053 Bad debts.
Subpart 31.3Contracts With Educational
31.2054 Bonding costs. Institutions
31.2055 [Reserved] 31.301 Purpose.
31.2056 Compensation for personal services. 31.302 General.
31.2057 Contingencies. 31.303 Requirements.
31.2058 Contributions or donations.
31.2059 [Reserved]
Subparts 31.431.5 [Reserved]
31.20510 Cost of money.
31.20511 Depreciation.
Subpart 31.6Contracts With State, Local,
31.20512 Economic planning costs.
31.20513 Employee morale, health, welfare, and Federally Recognized Indian Trib-
food service, and dormitory costs and al Governments
credits.
31.601 Purpose.
31.20514 Entertainment costs.
31.602 General.
31.20515 Fines, penalties, and mischarging
31.603 Requirements.
costs.
31.20516 Gains and losses on disposition or
impairment of depreciable property or
Subpart 31.7Contracts With Nonprofit
other capital assets. Organizations
31.20517 Idle facilities and idle capacity 31.701 Purpose.
costs. 31.702 General.
31.20518 Independent research and develop-
31.703 Requirements.
ment and bid and proposal costs.
31.20519 Insurance and indemnification. AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
31.20520 Interest and other financial costs. ter 137; and 42 U.S.C. 2473(c).
31.20521 Labor relations costs.
EFFECTIVE DATE NOTE: At 68 FR 56688, Oc-
31.20522 Lobbying and political activity
tober 1, 2003, the authority citation for Part
costs.
31 was revised, effective Oct. 31, 2003. For the
31.20523 Losses on other contracts.
convenience of the user, the revised text is
31.20524 Maintenance and repair costs.
set forth below:
31.20525 Manufacturing and production en-
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
gineering costs.
ter 137; and 42 U.S.C. 2473(c).
31.20526 Material costs.
31.20527 Organization costs. SOURCE: 48 FR 42301, Sept. 19, 1983, unless
31.20528 Other business expenses. otherwise noted.
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31.001 48 CFR Ch. 1 (10103 Edition)
Cost input means the cost, except accumulation system, is one of the
general and administrative (G&A) ex- final accumulation points.
penses, which for contract costing pur- Fiscal year means the accounting pe-
poses is allocable to the production of riod for which annual financial state-
goods and services during a cost ac- ments are regularly prepared, gen-
counting period. erally a period of 12 months, 52 weeks,
Cost objective means (except for sub- or 53 weeks.
part 31.6) a function, organizational Funded pension cost means the por-
subdivision, contract, or other work tion of pension cost for a current or
unit for which cost data are desired prior cost accounting period that has
and for which provision is made to ac- been paid to a funding agency.
cumulate and measure the cost of proc- Home office means an office respon-
esses, products, jobs, capitalized sible for directing or managing two or
projects, etc. more, but not necessarily all, segments
Deferred compensation means an of an organization. It typically estab-
award made by an employer to com- lishes policy for, and provides guidance
pensate an employee in a future cost to, the segments in their operations. It
accounting period or periods for serv- usually performs management, super-
ices rendered in one or more cost ac- visory, or administrative functions,
counting periods before the date of the and may also perform service functions
receipt of compensation by the em- in support of the operations of the var-
ployee. This definition shall not in- ious segments. An organization which
clude the amount of year end accruals has intermediate levels, such as
for salaries, wages, or bonuses that are groups, may have several home offices
to be paid within a reasonable period of which report to a common home office.
time after the end of a cost accounting An intermediate organization may be
period. both a segment and a home office.
Immediate-gain actuarial cost method
Defined-benefit pension plan means a
means any of the several actuarial cost
pension plan in which the benefits to
methods under which actuarial gains
be paid, or the basis for determining
and losses are included as part of the
such benefits, are established in ad-
unfunded actuarial liability of the pen-
vance and the contributions are in-
sion plan, rather than as part of the
tended to provide the stated benefits.
normal cost of the plan.
Defined-contribution pension plan Independent research and development
means a pension plan in which the con- (IR&D) cost means the cost of effort
tributions to be made are established which is neither sponsored by a grant,
in advance and the benefits are deter- nor required in performing a contract,
mined thereby. and which falls within any of the fol-
Directly associated cost means any lowing four areas: (a) basic research,
cost which is generated solely as a re- (b) applied research, (c) development,
sult of the incurrence of another cost, and (d) systems and other concept for-
and which would not have been in- mulation studies.
curred had the other cost not been in- Indirect cost pools means (except for
curred. subparts 31.3 and 31.6) groupings of in-
Estimating costs means the process of curred costs identified with two or
forecasting a future result in terms of more cost objectives but not identified
cost, based upon information available specifically with any final cost objec-
at the time. tive.
Expressly unallowable cost means a Insurance administration expenses
particular item or type of cost which, means the contractors costs of admin-
under the express provisions of an ap- istering an insurance program; e.g., the
plicable law, regulation, or contract, is costs of operating an insurance or risk-
specifically named and stated to be un- management department, processing
allowable. claims, actuarial fees, and service fees
Final cost objective means (except for paid to insurance companies, trustees,
subparts 31.3 and 31.6) a cost objective or technical consultants.
that has allocated to it both direct and Intangible capital asset means an asset
indirect costs and, in the contractors that has no physical substance, has
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31.002 48 CFR Ch. 1 (10103 Edition)
or may become eligible to receive a cluded as part of the current and future
benefit from a pension plan which cov- normal costs of the pension plan.
ers employees of such employer or Standard cost means any cost com-
members of such organization who puted with the use of preestablished
have satisfied the plans participation measures.
requirements, or whose beneficiaries Tangible capital asset means an asset
are receiving or may be eligible to re- that has physical substance, more than
ceive any such benefit. A participant minimal value, and is expected to be
whose employment status with the em- held by an enterprise for continued use
ployer has not been terminated is an or possession beyond the current ac-
active participant of the employers counting period for the services it
pension plan.
yields.
Profit center means (except for sub-
parts 31.3 and 31.6) the smallest organi- Termination of employment gain or loss
zationally independent segment of a means an actuarial gain or loss result-
company charged by management with ing from the difference between the as-
profit and loss responsibilities. sumed and actual rates at which pen-
Projected benefit cost method means ei- sion plan participants separate from
ther employment for reasons other than re-
(1) Any of the several actuarial cost tirement, disability, or death.
methods that distribute the estimated Variance means the difference be-
total cost of all of the employees pro- tween a preestablished measure and an
spective benefits over a period of years, actual measure.
usually their working careers; or Weighted average cost means an inven-
(2) A modification of the accrued ben- tory costing method under which an
efit cost method that considers pro- average unit cost is computed periodi-
jected compensation levels. cally by dividing the sum of the cost of
Proposal means any offer or other beginning inventory plus the cost of
submission used as a basis for pricing a acquisitions by the total number of
contract, contract modification, or ter- units included in these two categories.
mination settlement or for securing
payments thereunder. [48 FR 42301, Sept. 17, 1983, as amended at 54
Qualified pension plan means a pen- FR 13024, Mar. 29, 1989; 61 FR 39217, July 26,
1996; 61 FR 69288, Dec. 31, 1996; 63 FR 58596,
sion plan comprising a definite written
Oct. 30, 1998; 66 FR 2131, Jan. 10, 2001; 68 FR
program communicated to and for the 28091, May 22, 2003; 68 FR 43866, July 24, 2003]
exclusive benefit of employees that
meets the criteria deemed essential by 31.002 Availability of accounting
the Internal Revenue Service as set guide.
forth in the Internal Revenue Code for
preferential tax treatment regarding Contractors needing assistance in de-
contributions, investments, and dis- veloping or improving their accounting
tributions. Any other plan is a non- systems and procedures may request a
qualified pension plan. copy of the Defense Contract Audit
Self-insurance charge means a cost Agency Pamphlet No. 7641.90, Informa-
which represents the projected average tion for Contractors. The pamphlet is
loss under a self-insurance plan. available via the Internet at http://
Service life means the period of useful- www.dcaa.mil.
ness of a tangible capital asset (or [67 FR 6120, Feb. 8, 2002]
group of assets) to its current owner.
The period may be expressed in units of
time or output. The estimated service Subpart 31.1Applicability
life of a tangible capital asset (or group
31.100 Scope of subpart.
of assets) is a current forecast of its
service life and is the period over which This subpart describes the applica-
depreciation cost is to be assigned. bility of the cost principles and proce-
Spread-gain actuarial cost method dures in succeeding subparts of this
means any of the several projected ben- part to various types of contracts and
efit actuarial cost methods under subcontracts. It also describes the need
which actuarial gains and losses are in- for advance agreements.
568
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Federal Acquisition Regulation 31.104
569
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31.105 48 CFR Ch. 1 (10103 Edition)
(a) The contracting officer shall in- (3) Proposing, negotiating, or deter-
corporate the cost principles and proce- mining costs under terminated con-
dures in subpart 31.3 by reference in tracts;
cost-reimbursement contracts with (4) Price revision of fixed-price incen-
educational institutions as the basis tive contracts; and
for (5) Pricing changes and other con-
(1) Determining reimbursable costs tract modifications.
under the contracts and cost-reim- (d) Except as otherwise provided in
bursement subcontracts thereunder this paragraph (d), the allowability of
performed by educational institutions; costs for construction and architect-
engineer contracts shall be determined
(2) Negotiating indirect cost rates;
in accordance with subpart 31.2.
and
(1) Because of widely varying factors
(3) Settling costs of cost-reimburse- such as the nature, size, duration, and
ment terminated contracts (see sub- location of the construction project,
part 49.3 and 49.1097). advance agreements as set forth in
(b) The cost principles in this subpart 31.109, for such items as home office
are to be used as a guide in evaluating overhead, partners compensation, em-
costs in connection with negotiating ployment of consultants, and equip-
fixed-price contracts and termination ment usage costs, are particularly im-
settlements. portant in construction and architect-
engineer contracts. When appropriate
31.105 Construction and architect-en- they serve to express the parties un-
gineer contracts. derstanding and avoid possible subse-
(a) This category includes all con- quent disputes or disallowances.
tracts and contract modifications ne- (2) Construction equipment, as used in
gotiated on the basis of cost with orga- this section, means equipment (includ-
nizations other than educational insti- ing marine equipment) in sound work-
tutions (see 31.104), State and local able condition, either owned or con-
governments (see 31.107), and nonprofit trolled by the contractor or the sub-
organizations except those exempted contractor at any tier, or obtained
under OMB Circular A122 (see 31108) from a commercial rental source, and
for construction management or con- furnished for use under Government
struction, alteration or repair of build- contracts.
ings, bridges, roads, or other kinds of (i) Allowable ownership and oper-
real property. It also includes archi- ating costs shall be determined as fol-
tect-engineer contracts related to con- lows:
struction projects. It does not include (A) Actual cost data shall be used
contracts for vessels, aircraft, or other when such data can be determined for
kinds of personal property. both ownership and operating costs for
(b) Except as otherwise provided in each piece of equipment, or groups of
similar serial or series equipment,
(d) below, the cost principles and pro-
from the contractors accounting
cedures in subpart 31.2 shall be used in
records. When such costs cannot be so
the pricing of contracts and contract
determined, the contracting agency
modifications in this category if cost
may specify the use of a particular
analysis is performed as required by
schedule of predetermined rates or any
15.4041(c). part thereof to determine ownership
(c) In addition, the contracting offi- and operating costs of construction
cer shall incorporate the cost prin- equipment (see subdivisions (d)(2)(i)(B)
ciples and procedures in subpart 31.2 and (C) of this section). However, costs
(as modified by (d) below) by reference otherwise unallowable under this part
in contracts in this category as the shall not become allowable through the
basis for use of any schedule (see 31.109(c)). For
(1) Determining reimbursable costs example, schedules need to be adjusted
under cost-reimbursement contracts, for Government contract costing pur-
including cost-reimbursement sub- poses if they are based on replacement
contracts thereunder; cost, include unallowable interest
(2) Negotiating indirect cost rates; costs, or use improper cost of money
570
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Federal Acquisition Regulation 31.1061
571
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31.1062 48 CFR Ch. 1 (10103 Edition)
572
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Federal Acquisition Regulation 31.109
for a uniform approach to the problem (b) Advance agreements may be nego-
of determining costs and to promote ef- tiated either before or during a con-
ficiency and better relationships be- tract but should be negotiated before
tween State, local, and federally recog- incurrence of the costs involved. The
nized Indian tribal governments, and agreements must be in writing, exe-
Federal Government entities. They cuted by both contracting parties, and
apply to all programs that involve con- incorporated into applicable current
tracts with State, local, and federally and future contracts. An advance
recognized Indian tribal governments, agreement shall contain a statement of
except contracts with its applicability and duration.
(1) Publicly financed educational in- (c) The contracting officer is not au-
stitutions subject to subpart 31.3; or thorized by this 31.109 to agree to a
(2) Publicly owned hospitals and treatment of costs inconsistent with
other providers of medical care subject this part. For example, an advance
to requirements promulgated by the agreement may not provide that, not-
sponsoring Government agencies. withstanding 31.20520, interest is al-
(b) The Office of Management and lowable.
Budget will approve any other excep- (d) Advance agreements may be nego-
tions in particular cases when adequate tiated with a particular contractor for
justification is presented. a single contract, a group of contracts,
[48 FR 42301, Sept. 19, 1983, as amended at 52 or all the contracts of a contracting of-
FR 30076, Aug. 12, 1987] fice, an agency, or several agencies.
(e) The cognizant administrative con-
31.108 Contracts with nonprofit orga- tracting officer (ACO), or other con-
nizations. tracting officer established in part 42,
Subpart 31.7 provides principles and shall negotiate advance agreements ex-
standards for determining costs appli- cept that an advance agreement affect-
cable to contracts with nonprofit orga- ing only one contract, or class of con-
nizations other than educational insti- tracts from a single contracting office,
tutions, State and local governments, shall be negotiated by a contracting of-
and those nonprofit organizations ex- ficer in the contracting office, or an
empted under OMB Circular No. A122. ACO when delegated by the contracting
officer. When the negotiation authority
31.109 Advance agreements. is delegated, the ACO shall coordinate
the proposed agreement with the con-
(a) The extent of allowability of the
tracting officer before executing the
costs covered in this part applies
advance agreement.
broadly to many accounting systems in
varying contract situations. Thus, the (f) Before negotiating an advance
reasonableness, the allocability and agreement, the Government negotiator
the allowability under the specific cost shall
principles at subparts 31.2, 31.3, 31.6, (1) Determine if other contracting of-
and 31.7 of certain costs may be dif- fices inside the agency or in other
ficult to determine. To avoid possible agencies have a significant unliqui-
subsequent disallowance or dispute dated dollar balance in contracts with
based on unreasonableness, the same contractor;
unallocability or unallowability under (2) Inform any such office or agency
the specific cost principles at subparts of the matters under consideration for
31.2, 31.3, 31.6, and 31.7, contracting offi- negotiation; and
cers and contractors should seek ad- (3) As appropriate, invite the office or
vance agreement on the treatment of agency and the responsible audit agen-
special or unusual costs. However, an cy to participate in prenegotiation dis-
advance agreement is not an absolute cussions and/or in the subsequent nego-
requirement and the absence of an ad- tiations.
vance agreement on any cost will not, (g) Upon completion of the negotia-
in itself, affect the reasonableness, tion, the sponsor shall prepare and dis-
allocability or the allowability under tribute to other interested agencies
the specific cost principles at subparts and offices, including the audit agency,
31.2, 31.3, 31.6, and 31.7 of that cost. copies of the executed agreement and a
573
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31.110 48 CFR Ch. 1 (10103 Edition)
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Federal Acquisition Regulation 31.2015
generally accepted accounting prin- cific costs must be examined with par-
ciples and practices appropriate to the ticular care in connection with firms
particular circumstances. or their separate divisions that may
(4) Terms of the contract. not be subject to effective competitive
(5) Any limitations set forth in this restraints. No presumption of reason-
subpart. ableness shall be attached to the incur-
(b) Certain cost principles in this rence of costs by a contractor. If an
subpart incorporate the measurement, initial review of the facts results in a
assignment, and allocability rules of challenge of a specific cost by the con-
selected CAS and limit the allowability tracting officer or the contracting offi-
of costs to the amounts determined cers representative, the burden of
using the criteria in those selected proof shall be upon the contractor to
standards. Only those CAS or portions establish that such cost is reasonable.
of standards specifically made applica- (b) What is reasonable depends upon
ble by the cost principles in this sub- a variety of considerations and cir-
part are mandatory unless the contract cumstances, including
is CAS-covered (see 48 CFR 9903). Busi- (1) Whether it is the type of cost gen-
ness units that are not otherwise sub- erally recognized as ordinary and nec-
ject to these standards under a CAS essary for the conduct of the contrac-
clause are subject to the selected tors business or the contract perform-
standards only for the purpose of deter- ance;
mining allowability of costs on Govern- (2) Generally accepted sound business
ment contracts. Including the selected practices, arms length bargaining, and
standards in the cost principles does Federal and State laws and regula-
not subject the business unit to any tions;
other CAS rules and regulations. The (3) The contractors responsibilities
applicability of the CAS rules and reg- to the Government, other customers,
ulations is determined by the CAS the owners of the business, employees,
clause, if any, in the contract and the and the public at large; and
requirements of the standards them- (4) Any significant deviations from
selves. the contractors established practices.
(c) When contractor accounting prac- [52 FR 19804, May 27, 1987]
tices are inconsistent with this subpart
31.2, costs resulting from such incon- 31.2014 Determining allocability.
sistent practices shall not be allowed A cost is allocable if it is assignable
in excess of the amount that would or chargeable to one or more cost ob-
have resulted from using practices con- jectives on the basis of relative bene-
sistent with this subpart. fits received or other equitable rela-
(d) A contractor is responsible for ac- tionship. Subject to the foregoing, a
counting for costs appropriately and cost is allocable to a Government con-
for maintaining records, including sup- tract if it
porting documentation, adequate to (a) Is incurred specifically for the
demonstrate that costs claimed have contract;
been incurred, are allocable to the con- (b) Benefits both the contract and
tract, and comply with applicable cost other work, and can be distributed to
principles in this subpart and agency them in reasonable proportion to the
supplements. The contracting officer benefits received; or
may disallow all or part of a claimed (c) Is necessary to the overall oper-
cost which is inadequately supported. ation of the business, although a direct
[48 FR 42301, Sept. 19, 1983, as amended at 57 relationship to any particular cost ob-
FR 39590, Aug. 31, 1992; 61 FR 31656, June 20, jective cannot be shown.
1996]
31.2015 Credits.
31.2013 Determining reasonableness. The applicable portion of any in-
(a) A cost is reasonable if, in its na- come, rebate, allowance, or other cred-
ture and amount, it does not exceed it relating to any allowable cost and
that which would be incurred by a pru- received by or accruing to the con-
dent person in the conduct of competi- tractor shall be credited to the Govern-
tive business. Reasonableness of spe- ment either as a cost reduction or by
575
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31.2016 48 CFR Ch. 1 (10103 Edition)
cash refund. See 31.2056(j)(4) for rules (e)(1) In determining the materiality
governing refund or credit to the Gov- of a directly associated cost, consider-
ernment associated with pension ad- ation should be given to the signifi-
justments and asset reversions. cance of (i) the actual dollar amount,
[48 FR 42301, Sept. 19, 1983, as amended at 54 (ii) the cumulative effect of all directly
FR 34755, Aug. 21, 1989; 63 FR 58597, Oct. 30, associated costs in a cost pool, or (iii)
1998] the ultimate effect on the cost of Gov-
ernment contracts.
31.2016 Accounting for unallowable (2) Salary expenses of employees who
costs. participate in activities that generate
(a) Costs that are expressly unallow- unallowable costs shall be treated as
able or mutually agreed to be unallow- directly associated costs to the extent
able, including mutually agreed to be of the time spent on the proscribed ac-
unallowable directly associated costs, tivity, provided the costs are material
shall be identified and excluded from in accordance with subparagraph (e)(1)
any billing, claim, or proposal applica- above (except when such salary ex-
ble to a Government contract. A di- penses are, themselves, unallowable).
rectly associated cost is any cost which The time spent in proscribed activities
is generated solely as a result of incur- should be compared to total time spent
ring another cost, and which would not on company activities to determine if
have been incurred had the other cost the costs are material. Time spent by
not been incurred. When an unallow- employees outside the normal working
able cost is incurred, its directly asso- hours should not be considered except
ciated costs are also unallowable. when it is evident that an employee en-
(b) Costs which specifically become gages so frequently in company activi-
designated as unallowable or as unal- ties during periods outside normal
lowable directly associated costs of un- working hours as to indicate that such
allowable costs as a result of a written activities are a part of the employees
decision furnished by a contracting of-
regular duties.
ficer shall be identified if included in
or used in computing any billing, (3) When a selected item of cost
claim, or proposal applicable to a Gov- under 31.205 provides that directly as-
ernment contract. This identification sociated costs be unallowable, it is in-
requirement applies also to any costs tended that such directly associated
incurred for the same purpose under costs be unallowable only if deter-
like circumstances as the costs specifi- mined to be material in amount in ac-
cally identified as unallowable under cordance with the criteria provided in
either this paragraph or paragraph (a) paragraphs (e)(1) and (e)(2) above, ex-
above. cept in those situations where allow-
(c) The practices for accounting for ance of any of the directly associated
and presentation of unallowable costs costs involved would be considered to
will be those as described in 48 CFR be contrary to public policy.
9904.40550, Accounting for Unallowable
[48 FR 42301, Sept. 19, 1983, as amended at 59
Costs. FR 67045, Dec. 28, 1994]
(d) If a directly associated cost is in-
cluded in a cost pool which is allocated 31.2017 Construction and architect-
over a base that includes the unallow- engineer contracts.
able cost with which it is associated,
Specific principles and procedures for
the directly associated cost shall re-
main in the cost pool. Since the unal- evaluating and determining costs in
lowable costs will attract their allo- connection with contracts and sub-
cable share of costs from the cost pool, contracts for construction, and archi-
no further action is required to assure tect-engineer contracts related to con-
disallowance of the directly associated struction projects, are in 31.105. The
costs. In all other cases, the directly applicability of these principles and
associated costs, if material in amount, procedures is set forth in 31.000 and
must be purged from the cost pool as 31.100.
unallowable costs.
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Federal Acquisition Regulation 31.203
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31.204 48 CFR Ch. 1 (10103 Edition)
578
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Federal Acquisition Regulation 31.2051
(b) Advertising means the use of (ii) Communicating with the public,
media to promote the sale of products press, stockholders, creditors, and cus-
or services and to accomplish the ac- tomers; and
tivities referred to in paragraph (d) of (iii) Conducting general liaison with
this subsection, regardless of the me- news media and Government public re-
dium employed, when the advertiser lations officers, to the extent that such
has control over the form and content activities are limited to communica-
of what will appear, the media in which tion and liaison necessary to keep the
it will appear, and when it will appear. public informed on matters of public
Advertising media include but are not concern such as notice of contract
limited to conventions, exhibits, free awards, plant closings or openings, em-
goods, samples, magazines, newspapers, ployee layoffs or rehires, financial in-
trade papers, direct mail, dealer cards, formation, etc.
window displays, outdoor advertising, (3) Costs of participation in commu-
radio, and television. nity service activities (e.g., blood bank
(c) Public relations and advertising drives, charity drives, savings bond
costs include the costs of media time drives, disaster assistance, etc.).
and space, purchased services per- (4) Costs of plant tours and open
formed by outside organizations, as houses (but see subparagraph (f)(5) of
well as the applicable portion of sala- this subsection).
ries, travel, and fringe benefits of em- (5) Costs of keel laying, ship launch-
ployees engaged in the functions and ing, commissioning, and roll-out cere-
activities identified in paragraphs (a) monies, to the extent specifically pro-
and (b) of this subsection. vided for by contract.
(d) The only allowable advertising (f) Unallowable public relations and
costs are those that are advertising costs include the following:
(1) Specifically required by contract, (1) All public relations and adver-
or that arise from requirements of Gov- tising costs, other than those specified
ernment contracts, and that are exclu- in paragraphs (d) and (e) of this sub-
sively for section, whose primary purpose is to
(i) Acquiring scarce items for con- promote the sale of products or serv-
tract performance; or ices by stimulating interest in a prod-
(ii) Disposing of scrap or surplus ma- uct or product line (except for those
terials acquired for contract perform- costs made allowable under 31.205
ance; 38(b)(5)), or by disseminating messages
(2) Costs of activities to promote calling favorable attention to the con-
sales of products normally sold to the tractor for purposes of enhancing the
U.S. Government, including trade company image to sell the companys
shows, which contain a significant ef- products or services.
fort to promote exports from the (2) All costs of trade shows and other
United States. Such costs are allow- special events which do not contain a
able, notwithstanding paragraphs (f)(1), significant effort to promote the export
(f)(3), (f)(4)(ii), and (f)(5) of this sub- sales of products normally sold to the
section. However, such costs do not in- U.S. Government.
clude the costs of memorabilia (e.g., (3) Costs of sponsoring meetings, con-
models, gifts, and souvenirs), alcoholic ventions, symposia, seminars, and
beverages, entertainment, and physical other special events when the principal
facilities that are used primarily for purpose of the event is other than dis-
entertainment rather than product semination of technical information or
promotion; or stimulation of production.
(3) Allowable in accordance with (4) Costs of ceremonies such as (i)
31.20534. corporate celebrations and (ii) new
(e) Allowable public relations costs product announcements.
include the following: (5) Costs of promotional material,
(1) Costs specifically required by con- motion pictures, videotapes, brochures,
tract. handouts, magazines, and other media
(2) Costs of that are designed to call favorable at-
(i) Responding to inquiries on com- tention to the contractor and its ac-
pany policies and activities; tivities.
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31.2052 48 CFR Ch. 1 (10103 Edition)
(6) Costs of souvenirs, models, im- of prior years salaries or wages (but
printed clothing, buttons, and other see paragraphs (g), (h), (j), (k), (m), and
mementos provided to customers or the (o) of this subsection).
public. (2) The total compensation for indi-
(7) Costs of memberships in civic and vidual employees or job classes of em-
community organizations. ployees must be reasonable for the
[51 FR 12298, Apr. 9, 1986, as amended at 53 work performed; however, specific re-
FR 12130, Apr. 12, 1988; 53 FR 13274, Apr. 22, strictions on individual compensation
1988; 54 FR 34755, Aug. 21, 1989; 56 FR 15153, elements apply when prescribed.
Apr. 15, 1991; 60 FR 42660, Aug. 16, 1995; 61 FR (3) The compensation must be based
67423, Dec. 20, 1996; 62 FR 12704, Mar. 17, 1997;
64 FR 10547, Mar. 4, 1999; 68 FR 43872, July 24, upon and conform to the terms and
2003] conditions of the contractors estab-
lished compensation plan or practice
31.2052 [Reserved] followed so consistently as to imply, in
effect, an agreement to make the pay-
31.2053 Bad debts. ment.
Bad debts, including actual or esti- (4) No presumption of allowability
mated losses arising from uncollectible will exist where the contractor intro-
accounts receivable due from cus- duces major revisions of existing com-
tomers and other claims, and any di- pensation plans or new plans and the
rectly associated costs such as collec- contractor has not provided the cog-
tion costs, and legal costs are unallow- nizant ACO, either before implementa-
able. tion or within a reasonable period after
31.2054 Bonding costs. it, an opportunity to review the allow-
ability of the changes.
(a) Bonding costs arise when the Gov- (5) Costs that are unallowable under
ernment requires assurance against fi- other paragraphs of this Subpart 31.2
nancial loss to itself or others by rea-
are not allowable under this subsection
son of the act or default of the con-
31.2056 solely on the basis that they
tractor. They arise also in instances
constitute compensation for personal
where the contractor requires similar
assurance. Included are such bonds as services.
bid, performance, payment, advance (6)(i) Compensation costs for certain
payment, infringement, and fidelity individuals give rise to the need for
bonds. special consideration. Such individuals
(b) Costs of bonding required pursu- include:
ant to the terms of the contract are al- (A) Owners of closely held corpora-
lowable. tions, members of limited liability
(c) Costs of bonding required by the companies, partners, sole proprietors,
contractor in the general conduct of its or members of their immediate fami-
business are allowable to the extent lies; and
that such bonding is in accordance (B) Persons who are contractually
with sound business practice and the committed to acquire a substantial fi-
rates and premiums are reasonable nancial interest in the contractors en-
under the circumstances. terprise.
(ii) For these individuals, compensa-
31.2055 [Reserved]
tion must
31.2056 Compensation for personal (A) Be reasonable for the personal
services. services rendered; and
(a) General. Compensation for per- (B) Not be a distribution of profits
sonal services is allowable subject to (which is not an allowable contract
the following general criteria and addi- cost).
tional requirements contained in other (iii) For owners of closely held com-
parts of this cost principle: panies, compensation in excess of the
(1) Compensation for personal serv- costs that are deductible as compensa-
ices must be for work performed by the tion under the Internal Revenue Code
employee in the current year and must (26 U.S.C.) and regulations under it is
not represent a retroactive adjustment unallowable.
580
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581
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31.2056 48 CFR Ch. 1 (10103 Edition)
(g) Severance pay. (1) Severance pay is services in the same industry in the
a payment in addition to regular sala- United States. Further, under 10 U.S.C.
ries and wages by contractors to work- 2324(e)(1)(N) and 41 U.S.C. 256(e)(1)(N),
ers whose employment is being invol- all such costs of severance payments
untarily terminated. Payments for that are otherwise allowable are unal-
early retirement incentive plans are lowable if the termination of employ-
covered in paragraph (j)(7) of this sub- ment of the foreign national is the re-
section. sult of the closing of, or the curtail-
(2) Severance pay is allowable only to ment of activities at, a United States
the extent that, in each case, it is re- facility in that country at the request
quired by of the government of that country; this
(i) Law; does not apply if the closing of a facil-
(ii) Employer-employee agreement; ity or curtailment of activities is made
(iii) Established policy that con- pursuant to a status-of-forces or other
stitutes, in effect, an implied agree- country-to-country agreement entered
ment on the contractors part; or into with the government of that coun-
(iv) Circumstances of the particular try before November 29, 1989. 10 U.S.C.
employment. 2324(e)(3) and 41 U.S.C. 256(e)(2) permit
(3) Payments made in the event of the head of the agency to waive these
employment with a replacement con- cost allowability limitations under cer-
tractor where continuity of employ- tain circumstances (see 37.113 and the
ment with credit for prior length of solicitation provision at 52.2378).
service is preserved under substantially (h) Backpay. Backpay is a retroactive
equal conditions of employment, or adjustment of prior years salaries or
continued employment by the con- wages. Backpay is unallowable except
tractor at another facility, subsidiary, as follows:
affiliate, or parent company of the con- (1) Payments to employees resulting
tractor are not severance pay and are
from underpaid work actually per-
unallowable.
formed are allowable, if required by a
(4) Actual normal turnover severance
negotiated settlement, order, or court
payments shall be allocated to all work
decree.
performed in the contractors plant.
(2) Payments to union employees for
However, if the contractor uses the ac-
the difference in their past and current
crual method to account for normal
wage rates for working without a con-
turnover severance payments, that
tract or labor agreement during labor
method will be acceptable if the
management negotiation are allow-
amount of the accrual is
able.
(i) Reasonable in light of payments
actually made for normal severances (3) Payments to nonunion employees
over a representative past period; and based upon results of union agreement
(ii) Allocated to all work performed negotiation are allowable only if
in the contractors plant. (i) A formal agreement or under-
(5) Abnormal or mass severance pay standing exists between management
is of such a conjectural nature that ac- and the employees concerning these
cruals for this purpose are not allow- payments; or
able. However, the Government recog- (ii) An established policy or practice
nizes its obligation to participate, to exists and is followed by the contractor
the extent of its fair share, in any spe- so consistently as to imply, in effect,
cific payment. Thus, the Government an agreement to make such payments.
will consider allowability on a case-by- (i) Compensation based on changes in
case basis. the prices of corporate securities or
(6) Under 10 U.S.C. 2324(e)(1)(M) and corporate security ownership, such as
41 U.S.C. 256(e)(1)(M), the costs of sev- stock options, stock appreciation
erance payments to foreign nationals rights, phantom stock plans, and jun-
employed under a service contract per- ior stock conversions.
formed outside the United States are (1) Any compensation which is cal-
unallowable to the extent that such culated, or valued, based on changes in
payments exceed amounts typically the price of corporate securities is un-
paid to employees providing similar allowable.
582
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583
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31.2056 48 CFR Ch. 1 (10103 Edition)
cost method, allowable costs are lim- employee benefit plan fund, or transfer
ited to the amount allocable in accord- of assets to another account within the
ance with 48 CFR 9904.41250(d)(2). same fund, are unallowable except to
(C) For nonqualified pension plans the extent authorized by an advance
using the pay-as-you-go cost method, agreement. If the withdrawal of assets
allowable costs are limited to the from a pension fund is a plan termi-
amounts allocable in accordance with nation under ERISA, the provisions of
48 CFR 9904.41250(d)(3). paragraph (j)(4) of this subsection
(ii) Any amount funded in excess of apply. The advance agreement shall
the pension cost assigned to a cost ac- (A) State the amount of the Govern-
counting period is not allowable and ments equitable share in the gross
shall be accounted for as set forth at 48 amount withdrawn or transferred; and
CFR 9904.41250(a)(4), and shall be al- (B) Provide that the Government re-
lowable in the future period to which it ceive a credit equal to the amount of
is assigned, to the extent it is allo- the Governments equitable share of
cable, reasonable, and not otherwise the gross withdrawal or transfer.
unallowable. (4) Pension adjustments and asset rever-
(iii) Increased pension costs caused sions. (i) For segment closings, pension
by delay in funding beyond 30 days plan terminations, or curtailment of
after each quarter of the year to which benefits, the adjustment amount shall
they are assignable are unallowable. If be the amount measured, assigned, and
a composite rate is used for allocating allocated in accordance with 48 CFR
pension costs between the segments of 9904.41350(c)(12) for contracts and sub-
a company and if, because of dif- contracts that are subject to Cost Ac-
ferences in the timing of the funding counting Standards (CAS) Board rules
by the segments, an inequity exists, al- and regulations (48 CFR Chapter 99).
lowable pension costs for each segment For contracts and subcontracts that
will be limited to that particular seg- are not subject to CAS, the adjustment
ments calculation of pension costs as amount shall be the amount measured,
provided for in 48 CFR 9904.41350(c). assigned, and allocated in accordance
Determinations of unallowable costs with 48 CFR 9904.41350(c)(12), except
shall be made in accordance with the the numerator of the fraction at 48
actuarial cost method used in calcu- CFR 9904.41350(c)(12)(vi) shall be the
lating pension costs. sum of the pension plan costs allocated
(iv) Allowability of the cost of in- to all non-CAS-covered contracts and
demnifying the Pension Benefit Guar- subcontracts that are subject to Sub-
anty Corporation (PBGC) under ERISA part 31.2 or for which cost or pricing
Section 4062 or 4064 arising from termi- data were submitted.
nating an employee deferred compensa- (ii) For all other situations where as-
tion plan will be considered on a case- sets revert to the contractor, or such
by-case basis, provided that if insur- assets are constructively received by it
ance was required by the PBGC under for any reason, the contractor shall, at
ERISA Section 4023, it was so obtained the Governments option, make a re-
and the indemnification payment is fund or give a credit to the Govern-
not recoverable under the insurance. ment for its equitable share of the
Consideration under the foregoing cir- gross amount withdrawn. The Govern-
cumstances will be primarily for the ments equitable share shall reflect the
purpose of appraising the extent to Governments participation in pension
which the indemnification payment is costs through those contracts for
allocable to Government work. If a which cost or pricing data were sub-
beneficial or other equitable relation- mitted or that are subject to Subpart
ship exists, the Government will par- 31.2. Excise taxes on pension plan asset
ticipate, despite the requirements of reversions or withdrawals under this
31.20519(a)(3) and (b), in the indem- paragraph (j)(4)(ii) are unallowable in
nification payment to the extent of its accordance with 31.205-41(b)(6).
fair share. (5) Defined-contribution pension plans.
(v) Increased pension costs resulting This paragraph covers those pension
from the withdrawal of assets from a plans in which the contributions are
pension fund and transfer to another established in advance and the level of
584
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Federal Acquisition Regulation 31.2056
585
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31.2056 48 CFR Ch. 1 (10103 Edition)
586
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Federal Acquisition Regulation 31.2056
587
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31.2057 48 CFR Ch. 1 (10103 Edition)
588
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Federal Acquisition Regulation 31.20511
589
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31.20511 48 CFR Ch. 1 (10103 Edition)
590
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Federal Acquisition Regulation 31.20513
(2) Capital leases, as defined in FAS (c) Research and development and en-
13, for all real and personal property, gineering costs designed to lead to new
between any related parties are subject products for sale to the general public
to the requirements of this subpara- are not allowable under this principle.
graph 31.20511(m). If it is determined [48 FR 42301, Sept. 19, 1983, as amended at 68
that the terms of the lease have been FR 43872, July 24, 2003]
significantly affected by the fact that
EFFECTIVE DATE NOTE: At 68 FR 56688, Oct.
the lessee and lessor are related, depre- 1, 2003, 31.20512 was revised, effective Oct.
ciation charges shall not be allowed in 31, 2003. For the convenience of the user, the
excess of those which would have oc- revised text is set forth below:
curred if the lease contained terms
consistent with those found in a lease 31.20512 Economic planning costs.
between unrelated parties. Economic planning costs are the costs of
general long-range management planning
(3) Assets acquired under leases that that is concerned with the future overall de-
the contractor must capitalize under velopment of the contractors business and
FAS13 shall not be treated as pur- that may take into account the eventual
chased assets for contract purposes if possibility of economic dislocations or fun-
the leases are covered by 31.20536(b)(4). damental alterations in those markets in
(n) Whether or not the contract is which the contractor currently does busi-
ness. Economic planning costs are allowable.
otherwise subject to CAS, the require- Economic planning costs do not include or-
ments of 31.20552, which limit the al- ganization or reorganization costs covered
lowability of depreciation, shall be ob- by 31.20527. See 31.20538 for market plan-
served. ning costs other than economic planning
(o) In the event of a write-down from costs.
carrying value to fair value as a result
of impairments caused by events or 31.20513 Employee morale, health,
welfare, food service, and dor-
changes in circumstances, allowable mitory costs and credits.
depreciation of the impaired assets
shall be limited to the amounts that (a) Aggregate costs incurred on ac-
would have been allowed had the assets tivities designed to improve working
not been written down (see 31.205 conditions, employer-employee rela-
16(g)). However, this does not preclude tions, employee morale, and employee
a change in depreciation resulting from performance (less income generated by
other causes such as permissible these activities) are allowable, except
changes in estimates of service life, as limited by paragraphs (b), (c), and
consumption of services, or residual (d) of this subsection. Some examples
value. of allowable activities are house publi-
cations, health clinics, wellness/fitness
[48 FR 42301, Sept. 19, 1983, as amended at 55 centers, employee counseling services,
FR 25530, June 21, 1990; 57 FR 39591, Aug. 31, and food and dormitory services, which
1992; 60 FR 64255, Dec. 14, 1995; 61 FR 67424, include operating or furnishing facili-
Dec. 20, 1996]
ties for cafeterias, dining rooms, can-
teens, lunch wagons, vending ma-
31.20512 Economic planning costs.
chines, living accommodations, or
(a) This category includes costs of similar types of services for the con-
general long-range management plan- tractors employees at or near the con-
ning that is concerned with the future tractors facilities.
overall development of the contractors (b) Costs of gifts are unallowable.
business and that may take into ac- (Gifts do not include awards for per-
count the eventual possibility of eco- formance made pursuant to 31.2056(f)
nomic dislocations or fundamental al- or awards made in recognition of em-
terations in those markets in which ployee achievements pursuant to an es-
the contractor currently does business. tablished contractor plan or policy.)
Economic planning costs do not in- (c) Costs of recreation are unallow-
clude organization or reorganization able, except for the costs of employees
costs covered by 31.20527. participation in company sponsored
(b) Economic planning costs are al- sports teams or employee organiza-
lowable as indirect costs to be properly tions designed to improve company
allocated. loyalty, team work, or physical fitness.
591
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31.20513 48 CFR Ch. 1 (10103 Edition)
(d) Losses from operating food and 2003. For the convenience of the user, the re-
dormitory services may be included as vised text is set forth below:
costs only if the contractors objective 31.20513 Employee morale, health, welfare,
is to operate such services on a break- food service, and dormitory costs and
even basis. Losses sustained because credits.
food services or lodging accommoda- (a) Aggregate costs incurred on activities
tions are furnished without charge or designed to improve working conditions, em-
at prices or rates which obviously ployer-employee relations, employee morale,
would not be conducive to the accom- and employee performance (less income gen-
plishment of the above objective are erated by these activities) are allowable,
subject to the limitations contained in this
not allowable. A loss may be allowed, subsection. Some examples of allowable ac-
however, to the extent that the con- tivities are
tractor can demonstrate that unusual (1) House publications;
circumstances exist (e.g., where the (2) Health clinics;
contractor must provide food or dor- (3) Wellness/fitness centers;
mitory services at remote locations (4) Employee counseling services; and
where adequate commercial facilities (5) Food and dormitory services for the
are not reasonably available; or where contractors employees at or near the con-
charged but unproductive labor costs tractors facilities. These services include
would be excessive but for the services (i) Operating or furnishing facilities for
provided or where cessation or reduc- cafeterias, dining rooms, canteens, lunch
tion of food or dormitory operations wagons, vending machines, living accom-
will not otherwise yield net cost sav- modations; and
(ii) Similar types of services.
ings) such that even with efficient
management, operating the services on
a break-even basis would require charg- * * * * *
ing inordinately high prices, or prices (d)(1) The allowability of food and dor-
or rates higher than those charged by mitory losses are determined by the fol-
commercial establishments offering lowing factors:
the same services in the same geo- (i) Losses from operating food and dor-
graphical areas. Costs of food and dor- mitory services are allowable only if the
mitory services shall include an allo- contractors objective is to operate such
cable share of indirect expenses per- services on a break-even basis.
taining to these activities. (ii) Losses sustained because food services
or lodging accommodations are furnished
(e) When the contractor has an ar- without charge or at prices or rates which
rangement authorizing an employee as- obviously would not be conducive to the ac-
sociation to provide or operate a serv- complishment of the objective in paragraph
ice, such as vending machines in the (d)(1)(i) of this subsection are not allowable,
contractors plant, and retain the prof- except as described in paragraph (d)(1)(iii) of
its, such profits shall be treated in the this subsection.
same manner as if the contractor were (iii) A loss may be allowed to the extent
providing the service (but see para- that the contractor can demonstrate that
unusual circumstances exist such that even
graph (f) of this subsection).
with efficient management, operating the
(f) Contributions by the contractor to services on a break-even basis would require
an employee organization, including charging inordinately high prices, or prices
funds from vending machine receipts or or rates higher than those charged by com-
similar sources, may be included as mercial establishments offering the same
costs incurred under paragraph (a) of services in the same geographical areas. The
this subsection only to the extent that following are examples of unusual cir-
the contractor demonstrates that an cumstances:
(A) The contractor must provide food or
equivalent amount of the costs in-
dormitory services at remote locations
curred by the employee organization where adequate commercial facilities are not
would be allowable if directly incurred reasonably available.
by the contractor. (B) The contractors charged (but unpro-
ductive) labor costs would be excessive if the
[60 FR 42662, Aug. 16, 1995]
services were not available.
EFFECTIVE DATE NOTE: At 68 FR 56688, Oct. (C) If cessation or reduction of food or dor-
1, 2003, 31.20513 was amended by revising mitory operations will not otherwise yield
paragraphs (a), (d), and (f), effective Oct. 31, net cost savings.
592
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Federal Acquisition Regulation 31.20516
(2) Costs of food and dormitory services 31.20516 Gains and losses on disposi-
shall include an allocable share of indirect tion or impairment of depreciable
expenses pertaining to these activities. property or other capital assets.
(a) Gains and losses from the sale, re-
* * * * * tirement, or other disposition (but see
(f) Contributions by the contractor to an 31.20519) of depreciable property shall
employee organization, including funds from be included in the year in which they
vending machine receipts or similar sources, occur as credits or charges to the cost
are allowable only to the extent that the grouping(s) in which the depreciation
contractor demonstrates that an equivalent
or amortization applicable to those as-
amount of the costs incurred by the em-
ployee organization would be allowable if di- sets was included (but see paragraph
rectly incurred by the contractor. (d) of this subsection). However, no
gain or loss shall be recognized as a re-
31.20514 Entertainment costs. sult of the transfer of assets in a busi-
ness combination (see 31.20552).
Costs of amusement, diversions, so-
cial activities, and any directly associ- (b) Gains and losses on disposition of
ated costs such as tickets to shows or tangible capital assets, including those
sports events, meals, lodging, rentals, acquired under capital leases (see
transportation, and gratuities are un- 31.20511(m), shall be considered as ad-
allowable. Costs made specifically un- justments of depreciation costs pre-
allowable under this cost principle are viously recognized. The gain or loss for
not allowable under any other cost each asset disposed of is the difference
principle. Costs of membership in so- between the net amount realized, in-
cial, dining, or country clubs or other cluding insurance proceeds from invol-
organizations having the same pur- untary conversions, and its
poses are also unallowable, regardless undepreciated balance. The gain recog-
of whether the cost is reported as tax- nized for contract costing purposes
able income to the employees. shall be limited to the difference be-
tween the acquisition cost (or for as-
[60 FR 42663, Aug. 16, 1995] sets acquired under a capital lease, the
value at which the leased asset is cap-
31.20515 Fines, penalties, and italized) of the asset and its
mischarging costs. undepreciated balance (except see sub-
(a) Costs of fines and penalties result- divisions (c)(2)(i) or (ii) below).
ing from violations of, or failure of the (c) Special considerations apply to an
contractor to comply with, Federal, involuntary conversion which occurs
State, local, or foreign laws and regula- when a contractors property is de-
tions, are unallowable except when in- stroyed by events over which the owner
curred as a result of compliance with has no control, such as fire, windstorm,
specific terms and conditions of the flood, accident, theft, etc., and an in-
contract or written instructions from surance award is recovered. The fol-
the contracting officer. lowing govern involuntary conversions:
(b) Costs incurred in connection with, (1) When there is a cash award and
or related to, the mischarging of costs the converted asset is not replaced,
on Government contracts are unallow- gain or loss shall be recognized in the
able when the costs are caused by, or period of disposition. The gain recog-
result from, alteration or destruction nized for contract costing purposes
of records, or other false or improper shall be limited to the difference be-
charging or recording of costs. Such tween the acquisition cost of the asset
costs include those incurred to meas- and its undepreciated balance.
ure or otherwise determine the mag- (2) When the converted asset is re-
nitude of the improper charging, and placed, the contractor shall either
costs incurred to remedy or correct the (i) Adjust the depreciable basis of the
mischarging, such as costs to rescreen new asset by the amount of the total
and reconstruct records. realized gain or loss; or
[51 FR 12301, Apr. 9, 1986, as amended at 54 (ii) Recognize the gain or loss in the
FR 13024, Mar. 29, 1989; 55 FR 52793, Dec. 21, period of disposition, in which case the
1990] Government shall participate to the
593
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31.20517 48 CFR Ch. 1 (10103 Edition)
594
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Federal Acquisition Regulation 31.20518
31.20518 Independent research and ment, and (4) systems and other con-
development and bid and proposal cept formulation studies. The term
costs. does not include the costs of effort
(a) Definitions. As used in this sub- sponsored by a grant or required in the
section performance of a contract. IR&D effort
Applied research means that effort shall not include technical effort ex-
which (1) normally follows basic re- pended in developing and preparing
search, but may not be severable from technical data specifically to support
the related basic research, (2) attempts submitting a bid or proposal.
to determine and exploit the potential Systems and other concept formulation
of scientific discoveries or improve- studies means analyses and study ef-
ments in technology, materials, proc- forts either related to specific IR&D ef-
esses, methods, devices, or techniques, forts or directed toward identifying de-
and (3) attempts to advance the state sirable new systems, equipment or
of the art. Applied research does not components, or modifications and im-
include efforts whose principal aim is provements to existing systems, equip-
design, development, or test of specific ment, or components.
items or services to be considered for (b) Composition and allocation of costs.
sale; these efforts are within the defini- The requirements of 48 CFR 9904.420,
tion of the term development, defined in Accounting for independent research
this subsection. and development costs and bid and pro-
Basic research, (See 2.101). posal costs, are incorporated in their
Bid and proposal (B&P) costs means entirety and shall apply as follows
the costs incurred in preparing, sub- (1) Fully-CAS-covered contracts. Con-
mitting, and supporting bids and pro- tracts that are fully-CAS-covered shall
posals (whether or not solicited) on po- be subject to all requirements of 48
tential Government or non-Govern-
CFR 9904.420.
ment contracts. The term does not in-
(2) Modified CAS-covered and non-CAS-
clude the costs of effort sponsored by a
covered contracts. Contracts that are
grant or cooperative agreement, or re-
quired in the performance of a con- not CAS-covered or that contain terms
tract. or conditions requiring modified CAS
Company means all divisions, subsidi- coverage shall be subject to all require-
aries, and affiliates of the contractor ments of 48 CFR 9904.420 except 48 CFR
under common control. 9904.42050(e)(2) and 48 CFR 9904.420
Development means the systematic 50(f)(2), which are not then applicable.
use, under whatever name, of scientific However, non-CAS-covered or modified
and technical knowledge in the design, CAS-covered contracts awarded at a
development, test, or evaluation of a time the contractor has CAS-covered
potential new product or service (or of contracts requiring compliance with 48
an improvement in an existing product CFR 9904.420, shall be subject to all the
or service) for the purpose of meeting requirements of 48 CFR 9904.420. When
specific performance requirements or the requirements of 48 CFR 9904.420
objectives. Development includes the 50(e)(2) and 48 CFR 9904.42050(f)(2) are
functions of design engineering, proto- not applicable, the following apply:
typing, and engineering testing. Devel- (i) IR&D and B&P costs shall be allo-
opment excludes: (1) Subcontracted cated to final cost objectives on the
technical effort which is for the sole same basis of allocation used for the
purpose of developing an additional G&A expense grouping of the profit
source for an existing product, or (2) center (see 31.001) in which the costs
development effort for manufacturing are incurred. However, when IR&D and
or production materials, systems, proc- B&P costs clearly benefit other profit
esses, methods, equipment, tools, and centers or benefit the entire company,
techniques not intended for sale. those costs shall be allocated through
Independent research and development the G&A of the other profit centers or
(IR&D) means a contractors IR&D cost through the corporate G&A, as appro-
that consists of projects falling within priate.
the four following areas: (1) Basis re- (ii) If allocations of IR&D or B&P
search, (2) applied research, (3) develop- through the G&A base do not provide
595
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31.20519 48 CFR Ch. 1 (10103 Edition)
596
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Federal Acquisition Regulation 31.20519
general conduct of its business are al- 9904.416. For contracts subject to 48
lowable, subject to the following limi- CFR 9904.416, and for those made sub-
tations: ject to the self-insurance requirements
(i) Types and extent of coverage shall of that Standard as a result of the con-
follow sound business practice, and the tractors having established a self-in-
rates and premiums must be reason- surance program (see paragraph (a)
able. above), actual losses may be used as a
(ii) Costs allowed for business inter- basis for charges under a self-insurance
ruption or other similar insurance program when the actual amount of
must be limited to exclude coverage of losses will not differ significantly from
profit. the projected average losses for the ac-
(iii) The cost of property insurance counting period (see 48 CFR 9904.416
premiums for insurance coverage in ex- 50(a)(2)(ii)). In those instances where an
cess of the acquisition cost of the in- actual loss has occurred and the
sured assets is allowable only when the present value of the liability is deter-
contractor has a formal written policy mined under the provisions of 48 CFR
assuring that in the event the insured 9904.41650(a)(3)(ii), the allowable cost
property is involuntarily converted, shall be limited to an amount com-
the new asset shall be valued at the puted using as a discount rate the in-
book value of the replaced asset plus or terest rate determined by the Sec-
minus adjustments for differences be- retary of the Treasury pursuant to 50
tween insurance proceeds and actual U.S.C. App. 1215(b)(2) in effect at the
replacement cost. If the contractor time the loss is recognized. However,
does not have such a formal written the full amount of a lump-sum settle-
policy, the cost of premiums for insur- ment to be paid within a year of the
ance coverage in excess of the acquisi- date of settlement is allowable.
tion cost of the insured asset is unal- (ii) Minor losses, such as spoilage,
lowable. breakage, and disappearance of small
(iv) Costs of insurance for the risk of hand tools that occur in the ordinary
loss of or damage to Government prop- course of doing business and that are
erty are allowable only to the extent not covered by insurance are allowable.
that the contractor is liable for such (4) The cost of insurance to protect
loss or damage and such insurance does the contractor against the costs of cor-
not cover loss or damage that results recting its own defects in materials or
from willful misconduct or lack of good workmanship is unallowable. However,
faith on the part of any of the contrac- insurance costs to cover fortuitous or
tors directors or officers or other casualty losses resulting from defects
equivalent representatives. in materials or workmanship are allow-
(v) Contractors operating under a able as a normal business expense.
program of self-insurance must obtain (5) Premiums for retroactive or
approval of the program when required backdated insurance written to cover
by 28.308(a). occurred and known losses are unallow-
(vi) Costs of insurance on the lives of able.
officers, partners, or proprietors are al- (b) If purchased insurance is avail-
lowable only to the extent that the in- able, the charge for any self-insurance
surance represents additional com- coverage plus insurance administration
pensation (see 31.2056). expenses shall not exceed the cost of
(3) Actual losses are unallowable un- comparable purchased insurance plus
less expressly provided for in the con- associated insurance administration
tract, except expenses.
(i) Losses incurred under the nominal (c) Insurance provided by captive in-
deductible provisions of purchased in- surers (insurers owned by or under the
surance, in keeping with sound busi- control of the contractor) is considered
ness practice, are allowable for con- self-insurance, and charges for it must
tracts not subject to 48 CFR 9904.416 comply with the self-insurance provi-
and when the contractor did not estab- sions of 48 CFR 9904.416. However, if the
lish a self-insurance program. Such captive insurer also sells insurance to
contracts are not subject to the self-in- the general public in substantial quan-
surance requirements of 48 CFR tities and it can be demonstrated that
597
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31.20520 48 CFR Ch. 1 (10103 Edition)
the charge to the contractor is based tions, and other related activities, are
on competitive market forces, the in- allowable.
surance will be considered purchased [48 FR 42301, Sept. 19, 1983, as amended at 65
insurance. FR 80265, Dec. 20, 2000; 66 FR 66990, Dec. 27,
(d) The allowability of premiums for 2001]
insurance purchased from fronting in-
surance companies (insurance compa- 31.20522 Lobbying and political activ-
ity costs.
nies not related to the contractor but
who reinsure with a captive insurer of (a) Costs associated with the fol-
the contractor) shall not exceed the lowing activities are unallowable:
amount (plus reasonable fronting com- (1) Attempts to influence the out-
pany charges for services rendered) comes of any Federal, State, or local
which the contractor would have been election, referendum, initiative, or
allowed had it insured directly with similar procedure, through in kind or
the captive insurer. cash contributions, endorsements, pub-
licity, or similar activities;
(e) Self-insurance charges for risks of
(2) Establishing, administering, con-
catastrophic losses are not allowable tributing to, or paying the expenses of
(see 28.308(e)). a political party, campaign, political
(f) The Government is obligated to action committee, or other organiza-
indemnify the contractor only to the tion established for the purpose of in-
extent authorized by law, as expressly fluencing the outcomes of elections;
provided for in the contract, except as (3) Any attempt to influence (i) the
provided in paragraph (a)(3) above. introduction of Federal, state, or local
(g) Late premium payment charges legislation, or (ii) the enactment or
related to employee deferred com- modification of any pending Federal,
pensation plan insurance incurred pur- state, or local legislation through com-
suant to section 4007 (29 U.S.C. 1307) or munication with any member or em-
section 4023 (29 U.S.C. 1323) of the Em- ployee of the Congress or state legisla-
ployee Retirement Income Security ture (including efforts to influence
Act of 1974 are unallowable. state or local officials to engage in
similar lobbying activity), or with any
[48 FR 42301, Sept. 19, 1983, as amended at 50 government official or employee in
FR 23607, June 4, 1985; 51 FR 31426, Sept. 3,
connection with a decision to sign or
1986; 57 FR 39591, Aug. 31, 1992]
veto enrolled legislation;
31.20520 Interest and other financial (4) Any attempt to influence (i) the
costs. introduction of Federal, state, or local
legislation, or (ii) the enactment or
Interest on borrowings (however rep- modification of any pending Federal,
resented), bond discounts, costs of fi- state, or local legislation by preparing,
nancing and refinancing capital (net distributing or using publicity or prop-
worth plus long-term liabilities), legal aganda, or by urging members of the
and professional fees paid in connec- general public or any segment thereof
tion with preparing prospectuses, and to contribute to or participate in any
costs of preparing and issuing stock mass demonstration, march, rally, fund
rights are unallowable (but see 31.205 raising drive, lobbying campaign or
28). However, interest assessed by State letter writing or telephone campaign;
or local taxing authorities under the (5) Legislative liaison activities, in-
conditions specified in 31.20541(a)(3) is cluding attendance at legislative ses-
allowable. sions or committee hearings, gathering
information regarding legislation, and
[64 FR 51844, Sept. 24, 1999]
analyzing the effect of legislation,
when such activities are carried on in
31.20521 Labor relations costs.
support of or in knowing preparation
Costs incurred in maintaining satis- for an effort to engage in unallowable
factory relations between the con- activities; or
tractor and its employees, including (6) Costs incurred in attempting to
costs of shop stewards, labor manage- improperly influence (see 3.401), either
ment committees, employee publica- directly or indirectly, an employee or
598
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Federal Acquisition Regulation 31.20525
599
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31.20526 48 CFR Ch. 1 (10103 Edition)
600
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Federal Acquisition Regulation 31.20531
601
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31.20532 48 CFR Ch. 1 (10103 Edition)
602
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Federal Acquisition Regulation 31.20535
(3) The retainer fee is reasonable in (1) Does not describe specific posi-
comparison with maintaining an in- tions or classes of positions; or
house capability to perform the cov- (2) Includes material that is not rel-
ered services, when factors such as cost evant for recruitment purposes, such as
and level of expertise are considered; extensive illustrations or descriptions
and of the companys products or capabili-
(4) The actual services performed are ties.
documented in accordance with para-
graph (f) of this subsection. [48 FR 42301, Sept. 19, 1983, as amended at 64
(f) Fees for services rendered are al- FR 10547, Mar. 4, 1999]
lowable only when supported by evi-
31.20535 Relocation costs.
dence of the nature and scope of the
service furnished (see also 31.20538(c)). (a) Relocation costs are costs inci-
However, retainer agreements gen- dent to the permanent change of as-
erally are not based on specific state- signed work location (for a period of 12
ments of work. Evidence necessary to months or more) of an existing em-
determine that work performed is prop- ployee or upon recruitment of a new
er and does not violate law or regula- employee. The following types of relo-
tion shall include cation costs are allowable as noted,
(1) Details of all agreements (e.g., subject to the limitations in para-
work requirements, rate of compensa- graphs (b) and (f) of this subsection:
tion, and nature and amount of other (1) Costs of travel of the employee
expenses, if any) with the individuals and members of the employees imme-
or organizations providing the services
diate family (see 31.20546) and trans-
and details of actual services per-
portation of the household and per-
formed;
sonal effects to the new location.
(2) Invoices or billings submitted by
consultants, including sufficient detail (2) Costs of finding a new home, such
as to the time expended and nature of as advance trips by the employee or
the actual services provided; and the spouse, or both, to locate living
(3) Consultants work products and quarters, and temporary lodging during
related documents, such as trip reports the transition period for the employee
indicating persons visited and subjects and members of the employees imme-
discussed, minutes of meetings, and diate family.
collateral memoranda and reports. (3) Closing costs incident to the dis-
position of the actual residence owned
[55 FR 52793, Dec. 21, 1990; 57 FR 60610, Dec.
21, 1992; 62 FR 51271, Sept. 30, 1997, as amend- by the employee when notified of the
ed at 66 FR 2131; 68 FR 43872, July 24, 2003] transfer (e.g., brokerage fees, legal fees,
appraisal fees, points, and finance
31.20534 Recruitment costs. charges), except that these costs, when
(a) Subject to paragraph (b) of this added to the costs described in para-
subsection, the following costs are al- graph (a)(4) of this subsection, shall
lowable: not exceed 14 percent of the sales price
(1) Costs of help-wanted advertising. of the property sold.
(2) Costs of operating an employment (4) Continuing costs of ownership of
office needed to secure and maintain the vacant former actual residence
an adequate labor force. being sold, such as maintenance of
(3) Costs of operating an aptitude and building and grounds (exclusive of fix-
educational testing program. ing up expenses), utilities, taxes, prop-
(4) Travel costs of employees engaged erty insurance, and mortgage interest,
in recuiting personnel. after the settlement date or lease date
(5) Travel costs of applicants for of a new permanent residence, except
interviews. that these costs, when added to the
(6) Costs for employment agencies, costs described in paragraph (a)(3) of
not in excess of standard commercial this subsection, shall not exceed 14 per-
rates. cent of the sales price of the property
(b) Help-wanted advertising costs are sold.
unallowable if the advertising
603
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31.20535 48 CFR Ch. 1 (10103 Edition)
(5) Other necessary and reasonable (b) The costs described in paragraph
expenses normally incident to reloca- (a) of this subsection must also meet
tion, such as disconnecting and con- the following criteria to be considered
necting household appliances; auto- allowable:
mobile registration; drivers license (1) The move must be for the benefit
and use taxes; cutting and fitting rugs, of the employer.
draperies, and curtains; forfeited util- (2) Reimbursement must be in ac-
ity fees and deposits; and purchase of cordance with an established policy or
insurance against damage to or loss of practice that is consistently followed
personal property while in transit. by the employer and is designed to mo-
(6) Costs incident to acquiring a tivate employees to relocate promptly
home in the new work location, except and economically.
that (3) The costs must not be otherwise
(i) These costs are not allowable for unallowable under subpart 31.2.
existing employees or newly recruited (4) Amounts to be reimbursed shall
employees who were not homeowners not exceed the employees actual ex-
before the relocation; and penses, except that for miscellaneous
(ii) The total costs shall not exceed 5 costs of the type discussed in para-
percent of the purchase price of the graph (a)(5) of this subsection, a flat
new home. amount, not to exceed $5,000, may be
(7) Mortgage interest differential allowed in lieu of actual costs.
payments, except that these costs are (c) The following types of costs are
not allowable for existing or newly re- unallowable:
cruited employees who, before the relo- (1) Loss on the sale of a home.
cation, were not homeowners and the (2) Costs incident to acquiring a
total payments are limited to an home in the new location as follows:
amount determined as follows: (i) Real estate brokers fees and com-
(i) The difference between the mort- missions.
gage interest rates of the old and new (ii) Costs of litigation.
residences times the current balance of (iii) Real and personal property in-
the old mortgage times 3 years. surance against damage or loss of prop-
(ii) When mortgage differential pay- erty.
ments are made on a lump-sum basis (iv) Mortgage life insurance.
and the employee leaves or is trans- (v) Owners title policy insurance
ferred again in less than 3 years, the when such insurance was not pre-
amount initially recognized shall be viously carried by the employee on the
proportionately adjusted to reflect old residence. (However, the cost of a
payments only for the actual time of mortgage title policy is allowable.)
the relocation. (vi) Property taxes and operating or
(8) Rental differential payments cov- maintenance costs.
ering situations where relocated em- (3) Continuing mortgage principal
ployees retain ownership of a vacated payments on a residence being sold.
home in the old location and rent at (4) Costs incident to furnishing eq-
the new location. The rented quarters uity or nonequity loans to employees
at the new location must be com- or making arrangements with lenders
parable to those vacated, and the al- for employees to obtain lower-than-
lowable differential payments may not market rate mortgage loans.
exceed the actual rental costs for the (d) If relocation costs for an em-
new home, less the fair market rent for ployee have been allowed either as an
the vacated home times 3 years. allocable indirect or direct cost, and
(9) Costs of canceling an unexpired the employee resigns within 12 months
lease. for reasons within the employees con-
(10) Payments for increased employee trol, the contractor shall refund or
income or Federal Insurance Contribu- credit the relocation costs to the Gov-
tions Act (26 U.S.C. chapter 21) taxes ernment.
incident to allowable reimbursed relo- (e) Subject to the requirements of
cation costs. paragraphs (a) through (d) above, the
(11) Payments for spouse employment costs of family movements and of per-
assistance. sonnel movements of a special or mass
604
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Federal Acquisition Regulation 31.20537
nature are allowable. The cost, how- the type, life expectancy, condition,
ever, should be assigned on the basis of and value of the property leased; (iv)
work (contracts) or time period bene- alternatives available; and (v) other
fited. provisions of the agreement.
(f) Relocation costs (both outgoing (2) Rental costs under a sale and
and return) of employees who are hired leaseback arrangement only up to the
for performance on specific contracts amount the contractor would be al-
or long-term field projects are allow- lowed if the contractor retained title.
able if (3) Charges in the nature of rent for
(1) The term of employment is 12 property between any divisions, sub-
months or more; sidiaries, or organization under com-
(2) The employment agreement spe- mon control, to the extent that they do
cifically limits the duration of employ- not exceed the normal costs of owner-
ment to the time spent on the contract ship, such as depreciation, taxes, insur-
or field project for which the employee ance, facilities capital cost of money,
is hired; and maintenance (excluding interest or
(3) The employment agreement pro- other unallowable costs pursuant to
vides for return relocation to the em- part 31), provided that no part of such
ployees permanent and principal home costs shall duplicate any other allowed
immediately prior to the outgoing re- cost. Rental cost of personal property
location, or other location of equal or leased from any division, subsidiary, or
lesser cost; and affiliate of the contractor under com-
(4) The relocation costs are deter- mon control, that has an established
mined under the rules of paragraphs (a) practice of leasing the same or similar
through (d) above. However, the costs property to unaffiliated lessees shall be
to return employees, who are released allowed in accordance with subpara-
from employment upon completion of graph (b)(1) above.
field assignments pursuant to their em-
(4) Rental costs under leases entered
ployment agreements, are not subject
into before March 1, 1970 for the re-
to the refund or credit requirement of
maining term of the lease (excluding
paragraph (d).
options not exercised before March 1,
[48 FR 42301, Sept. 19, 1983, as amended at 52 1970) to the extent they would have
FR 9038, Mar. 20, 1987; 67 FR 43519, June 27, been allowable under Defense Acquisi-
2002] tion Regulation (Formerly ASPR) 15
205.34 or Federal Procurement Regula-
31.20536 Rental costs.
tions section 115.20534 in effect Janu-
(a) This subsection is applicable to ary 1, 1969.
the cost of renting or leasing real or (c) The allowability of rental costs
personal property acquired under op- under unexpired leases in connection
erating leases as defined in Statement with terminations is treated in 31.205
of Financial Accounting Standards No. 42(e).
13 (FAS13), Accounting for Leases.
Compliance with 31.20511(m) requires [48 FR 42301, Sept. 19, 1983, as amended at 51
that assets acquired by means of cap- FR 2665, Jan. 17, 1986; 61 FR 69288, Dec. 31,
ital leases, as defined in FAS13, shall 1996]
be treated as purchased assets; i.e., be
31.20537 Royalties and other costs for
capitalized and the capitalized value of use of patents.
such assets be distributed over their
useful lives as depreciation charges, or (a) Royalties on a patent or amorti-
over the lease term as amortization zation of the cost of purchasing a pat-
charges, as appropriate (but see sub- ent or patent rights necessary for the
paragraph (b)(4) below). proper performance of the contract and
(b) The following costs are allowable: applicable to contract products or
(1) Rental costs under operating processes are allowable unless
leases, to the extent that the rates are (1) The Government has a license or
reasonable at the time of the lease de- the right to a free use of the patent;
cision, after consideration of (i) rental (2) The patent has been adjudicated
costs of comparable property, if any; to be invalid, or has been administra-
(ii) market conditions in the area; (iii) tively determined to be invalid;
605
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31.20538 48 CFR Ch. 1 (10103 Edition)
(3) The patent is considered to be un- planning costs are subject to the allow-
enforceable; or ability provisions of 31.20512. Other
(4) The patent is expired. market planning costs are allowable.
(b) Care should be exercised in deter- (5) Direct selling. Direct selling efforts
mining reasonableness when the royal- are those acts or actions to induce par-
ties may have been arrived at as a re- ticular customers to purchase par-
sult of less-than-arms-length bar- ticular products or services of the con-
gaining; e.g., royalties tractor. Direct selling is characterized
(1) Paid to persons, including cor- by person-to-person contact and in-
porations, affiliated with the con- cludes such efforts as familiarizing a
tractor; potential customer with the contrac-
(2) Paid to unaffiliated parties, in- tors products or services, conditions of
cluding corporations, under an agree- sale, service capabilities, etc. It also
ment entered into in contemplation includes negotiation, liaison between
that a Government contract would be customer and contractor personnel,
awarded; or technical and consulting efforts, indi-
(3) Paid under an agreement entered vidual demonstrations, and any other
into after the contract award. efforts having as their purpose the ap-
(c) In any case involving a patent for- plication or adaptation of the contrac-
merly owned by the contractor, the tors products or services for a par-
royalty amount allowed should not ex- ticular customers use. The cost of di-
ceed the cost which would have been rect selling efforts is allowable.
allowed had the contractor retained
(c) Notwithstanding any other provi-
title.
sion of this subsection, sellers or
(d) See 31.109 regarding advance
agents compensation, fees, commis-
agreements.
sions, percentages, retainer or broker-
31.20538 Selling costs. age fees, whether or not contingent
upon the award of contracts, are allow-
(a) Selling is a generic term en-
able only when paid to bona fide em-
compassing all efforts to market the
ployees or established commercial or
contractors products or services, some
selling agencies maintained by the con-
of which are covered specifically in
tractor for the purpose of securing
other subsections of 31.205. The costs of
business.
any selling efforts other than those ad-
dressed in this cost principle are unal- [68 FR 43872, July 24, 2003]
lowable.
(b) Selling activity includes the fol- 31.20539 Service and warranty costs.
lowing broad categories: Service and warranty costs include
(1) Advertising. Advertising is defined those arising from fulfillment of any
at 31.205-1(b), and advertising costs are contractual obligation of a contractor
subject to the allowability provisions to provide services such as installation,
of 31.2051(d) and (f). training, correcting defects in the
(2) Corporate image enhancement. Cor- products, replacing defective parts, and
porate image enhancement activities, making refunds in the case of inad-
including broadly targeted sales ef- equate performance. When not incon-
forts, other than advertising, are in- sistent with the terms of the contract,
cluded within the definition of public service and warranty costs are allow-
relations at 31.2051(a), and the costs of able. However, care should be exercised
such efforts are subject to the allow- to avoid duplication of the allowance
ability provisions at 31.2051(e) and (f). as an element of both estimated prod-
(3) Bid and proposal costs. Bid and pro- uct cost and risk.
posal costs are defined at 31.20518 and
are subject to the allowability provi- [48 FR 42301, Sept. 19, 1983, as amended at 66
sions of that subsection. FR 2131, Jan. 10, 2001]
(4) Market planning. Market planning
involves market research and analysis 31.20540 Special tooling and special
and general management planning con- test equipment costs.
cerned with development of the con- (a) The terms special tooling and spe-
tractors business. Long-range market cial test equipment are defined in 45.101.
606
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Federal Acquisition Regulation 31.20541
(b) The cost of special tooling and non-payment of any tax at the direc-
special test equipment used in per- tion of the contracting officer or by
forming one or more Government con- reason of the failure of the contracting
tracts is allowable and shall be allo- officer to ensure timely direction after
cated to the specific Government con- a prompt request.
tract or contracts for which acquired, (4) The Environmental Tax found at
except that the cost of (1) items ac- section 59A of the Internal Revenue
quired by the contractor before the ef- Code, also called the Superfund Tax.
fective date of the contract (or replace- (b) The following types of costs are
ment of such items), whether or not al- not allowable:
tered or adapted for use in performing (1) Federal income and excess profits
the contract, and (2) items which the taxes.
contract schedule specifically excludes, (2) Taxes in connection with financ-
shall be allowable only as depreciation
ing, refinancing, refunding operations,
or amortization.
or reorganizations (see 31.20520 and
(c) When items are disqualified as
31.20527).
special tooling or special test equip-
ment because with relatively minor ex- (3) Taxes from which exemptions are
pense they can be made suitable for available to the contractor directly, or
general purpose use and have a value as available to the contractor based on an
such commensurate with their value as exemption afforded the Government,
special tooling or special test equip- except when the contracting officer de-
ment, the cost of adapting the items termines that the administrative bur-
for use under the contract and the cost den incident to obtaining the exemp-
of returning them to their prior con- tion outweighs the corresponding bene-
figuration are allowable. fits accruing to the Government. When
partial exemption from a tax is attrib-
31.20541 Taxes. utable to Government contract activ-
(a) The following types of costs are ity, taxes charged to such work in ex-
allowable: cess of that amount resulting from ap-
(1) Federal, State, and local taxes plication of the preferential treatment
(see part 29), except as otherwise pro- are unallowable. These provisions in-
vided in paragraph (b) below that are tend that tax preference attributable
required to be and are paid or accrued to Government contract activity be re-
in accordance with generally accepted alized by the Government. The term ex-
accounting principles. Fines and pen- emption means freedom from taxation
alties are not considered taxes. in whole or in part and includes a tax
(2) Taxes otherwise allowable under abatement or reduction resulting from
subparagraph (a)(1) above, but upon mode of assessment, method of calcula-
which a claim of illegality or erroneous tion, or otherwise.
assessment exists; provided the con- (4) Special assessments on land that
tractor, before paying such taxes represent capital improvements.
(i) Promptly requests instructions (5) Taxes (including excises) on real
from the contracting officer con- or personal property, or on the value,
cerning such taxes; and use, possession or sale thereof, which is
(ii) Takes all action directed by the used solely in connection with work
contracting officer arising out of sub- other than on Government contracts
paragraph (2)(i) above or an inde- (see paragraph (c) below).
pendent decision of the Government as (6) Any excise tax in subtitle D, chap-
to the existence of a claim of illegality ter 43 of the Internal Revenue Code of
or erroneous assessment, to (A) deter- 1986, as amended. That chapter in-
mine the legality of the assessment or cludes excise taxes imposed in connec-
(B) secure a refund of such taxes. tion with qualified pension plans, wel-
(3) Pursuant to subparagraph (a)(2) fare plans, deferred compensation
above, the reasonable costs of any ac- plans, or other similar types of plans.
tion taken by the contractor at the di- (7) Income tax accruals designed to
rection or with the concurrence of the account for the tax effects of dif-
contracting officer. Interest or pen- ferences between taxable income and
alties incurred by the contractor for pretax income as reflected by the
607
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31.20542 48 CFR Ch. 1 (10103 Edition)
608
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Federal Acquisition Regulation 31.20542
609
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31.20543 48 CFR Ch. 1 (10103 Edition)
610
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Federal Acquisition Regulation 31.20546
611
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31.20546 48 CFR Ch. 1 (10103 Edition)
612
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Federal Acquisition Regulation 31.20547
613
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31.20547 48 CFR Ch. 1 (10103 Edition)
614
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Federal Acquisition Regulation 31.20549
subsection shall be subject to this limi- tion or was found liable in a civil or ad-
tation. If, however, an agreement de- ministrative proceeding.
scribed in paragraph (c)(1) of this sub- (8) Protests of Federal Government
section explicitly states the amount of solicitations or contract awards, or the
otherwise allowable incurred legal fees defense against protests of such solici-
and limits the allowable recovery to 80 tations or contract awards, unless the
percent or less of the stated legal fees, costs of defending against a protest are
no additional limitation need be ap- incurred pursuant to a written request
plied. The amount of reimbursement from the cognizant contracting officer.
allowed for legal costs in connection (g) Costs which may be unallowable
with any proceeding described in para- under 31.20547, including directly asso-
graph (c)(2) of this subsection shall be ciated costs, shall be segregated and
determined by the cognizant con- accounted for by the contractor sepa-
tracting officer, but shall not exceed 80 rately. During the pendency of any pro-
percent of otherwise allowable legal ceeding covered by paragraph (b) and
costs incurred. subparagraphs (f)(4) and (f)(7) of this
(f) Costs not covered elsewhere in subsection, the contracting officer
this subsection are unallowable if in- shall generally withhold payment of
curred in connection with such costs. However, if in the best in-
(1) Defense against Federal Govern- terests of the Government, the con-
ment claims or appeals or the prosecu- tracting officer may provide for condi-
tion of claims or appeals against the tional payment upon provision of ade-
Federal Government (see 2.101). quate security, or other adequate as-
(2) Organization, reorganization, (in- surance, and agreement by the con-
cluding mergers and acquisitions) or tractor to repay all unallowable costs,
resisting mergers and acquisitions (see plus interest, if the costs are subse-
also 31.20527). quently determined to be unallowable.
(3) Defense of antitrust suits. [48 FR 42301, Sept. 19, 1983, as amended at 51
(4) Defense of suits brought by em- FR 12302, Apr. 9, 1986; 54 FR 13024, Mar. 29,
ployees or ex-employees of the con- 1989; 55 FR 52794, Dec. 21, 1990; 61 FR 41477,
tractor under section 2 of the Major Aug. 8, 1996; 63 FR 58600, Oct. 30, 1998; 65 FR
Fraud Act of 1988 where the contractor 80265, Dec. 20, 2000; 66 FR 17754, 17756, Apr. 3,
was found liable or settled. 2001; at 66 FR 2131, Jan. 10, 2001; 66 FR 17756,
(5) Costs of legal, accounting, and Apr. 3, 2001; 66 FR 66986, 66990, Dec. 27, 2001;
consultant services and directly associ- 67 FR 43514, June 27, 2002]
ated costs incurred in connection with 31.20548 Research and development
the defense or prosecution of lawsuits costs.
or appeals between contractors arising
from either (i) an agreement or con- Research and development, as used in
tract concerning a teaming arrange- this subsection, means the type of
ment, a joint venture, or similar ar- technical effort described in 31.20518
rangement of shared interest; or (ii) but sponsored by a grant or required in
dual sourcing, coproduction, or similar the performance of a contract. When
programs, are unallowable, except costs are incurred in excess of either
when (A) incurred as a result of compli- the price of a contract or amount of a
ance with specific terms and conditions grant for research and development ef-
of the contract or written instructions fort, the excess is unallowable under
from the contracting officer, or (B) any other Government contract.
when agreed to in writing by the con- [65 FR 46072, July 26, 2000, as amended at 68
tracting officer. FR 28092, May 22, 2003]
(6) Patent infringement litigation,
unless otherwise provided for in the 31.20549 Goodwill.
contract. Goodwill, an unidentifiable intan-
(7) Representation of, or assistance gible asset, originates under the pur-
to, individuals, groups, or legal entities chase method of accounting for a busi-
which the contractor is not legally ness combination when the price paid
bound to provide, arising from an ac- by the acquiring company exceeds the
tion where the participant was con- sum of the identifiable individual as-
victed of violation of a law or regula- sets acquired less liabilities assumed,
615
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31.20550 48 CFR Ch. 1 (10103 Edition)
based upon their fair values. The excess and development, training, and other
is commonly referred to as goodwill. work performed by educational institu-
Goodwill may arise from the acquisi- tions under contracts with the Govern-
tion of a company as a whole or a por- ment.
tion thereof. Any costs for amortiza-
tion, expensing, write-off, or write- 31.303 Requirements.
down of goodwill (however represented) (a) Contracts that refer to this sub-
are unallowable. part 31.3 for determining allowable
[49 FR 26743, June 29, 1984] costs under contracts with educational
institutions shall be deemed to refer
31.20550 [Reserved] to, and shall have the allowability of
costs determined by the contracting of-
31.20551 Costs of alcoholic beverages. ficer in accordance with, the revision
Costs of alcoholic beverages are unal- of OMB Circular A21 in effect on the
lowable. date of the contract.
(b) Agencies are not expected to
[51 FR 12302, Apr. 9, 1986]
place additional restrictions on indi-
31.20552 Asset valuations resulting vidual items of cost.
from business combinations.
(a) For tangible capital assets, when Subparts 31.431.5 [Reserved]
the purchase method of accounting for
a business combination is used, wheth- Subpart 31.6Contracts With
er or not the contract or subcontract is State, Local, and Federally
subject to CAS, the allowable deprecia- Recognized Indian Tribal Gov-
tion and cost of money shall be based ernments
on the capitalized asset values meas-
ured and assigned in accordance with 31.601 Purpose.
48 CFR 9904.40450(d), if allocable, rea-
sonable, and not otherwise unallow- This subpart provides the principles
able. for determining allowable cost of con-
(b) For intangible capital assets, tracts and subcontracts with State,
when the purchase method of account- local, and federally recognized Indian
ing for a business combination is used, tribal governments.
allowable amortization and cost of 31.602 General.
money shall be limited to the total of
the amounts that would have been al- Office of Management and Budget
lowed had the combination not taken (OMB) Circular No. A87, Cost Prin-
place. ciples for State and Local Govern-
ments, Revised, sets forth the prin-
[63 FR 9068, Feb. 23, 1998] ciples for determining the allowable
costs of contracts and subcontracts
Subpart 31.3Contracts With with State, local, and federally recog-
Educational Institutions nized Indian tribal governments. These
principles are for cost determination
31.301 Purpose. and are not intended to identify the
This subpart provides the principles circumstances or dictate the extent of
for determining the cost of research Federal and State or local participa-
and development, training, and other tion in financing a particular contract.
work performed by educational institu-
tions under contracts with the Govern- 31.603 Requirements.
ment. (a) Contracts that refer to this sub-
part 31.6 for determining allowable
31.302 General. costs under contracts with State, local
Office of Management and Budget and Indian tribal governments shall be
(OMB) Circular No. A21, Cost Prin- deemed to refer to, and shall have the
ciples for Educational Institutions, re- allowability of costs determined by the
vised, provides principles for deter- contracting officer in accordance with,
mining the costs applicable to research the revision of OMB Circular A87
616
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Federal Acquisition Regulation 31.701
which is in effect on the date of the (i) In an amount in excess of the nor-
contract. mal severance pay paid by the con-
(b) Agencies are not expected to tractor to an employee upon termi-
place additional restrictions on indi- nation of employment; and
vidual items of cost. However, under 10 (ii) Is paid to the employee contin-
U.S.C. 2324(e) and 41 U.S.C. 256(e), the gent upon, and following, a change in
following costs are unallowable: management control over, or owner-
(1) Costs of entertainment, including ship of, the contractor or a substantial
amusement, diversion, and social ac- portion of the contractors assets.
tivities, and any costs directly associ- (12) Costs of commercial insurance
ated with such costs (such as tickets to that protects against the costs of the
shows or sports events, meals, lodging, contractor for correction of the con-
rentals, transportation, and gratu- tractors own defects in materials or
ities). workmanship.
(2) Costs incurred to influence (di- (13) Costs of severance pay paid by
rectly or indirectly) legislative action the contractor to foreign nationals em-
on any matter pending before Congress, ployed by the contractor under a serv-
a State legislature, or a legislative ice contract performed outside the
body of a political subdivision of a United States, to the extent that the
State. amount of the severance pay paid in
(3) Costs incurred in defense of any
any case exceeds the amount paid in
civil or criminal fraud proceeding or
the industry involved under the cus-
similar proceeding (including filing of
tomary or prevailing practice for firms
any false certification) brought by the
in that industry providing similar serv-
United States where the contractor is
ices in the United States, as deter-
found liable or has pleaded nolo
mined by regulations in the FAR or in
contendere to a charge of fraud or simi-
an executive agency supplement to the
lar proceeding (including filing of a
FAR.
false certification).
(4) Payments of fines and penalties (14) Costs of severance pay paid by
resulting from violations of, or failure the contractor to a foreign national
to comply with, Federal, state, local, employed by the contractor under a
or foreign laws and regulations, except service contract performed in a foreign
when incurred as a result of compli- country if the termination of the em-
ance with specific terms and conditions ployment of the foreign national is the
of the contract or specific written in- result of the closing of, or curtailment
structions from the contracting officer of activities at, a United States facility
authorizing in advance such payments in that country at the request of the
in accordance with applicable regula- government of that country.
tions in the FAR or an executive agen- (15) Costs incurred by a contractor in
cy supplement to the FAR. connection with any criminal, civil, or
(5) Costs of any membership in any administrative proceedings commenced
social, dining, or country club or orga- by the United States or a State, to the
nization. extent provided in 10 U.S.C. 2324(k) or
(6) Costs of alcoholic beverages. 41 U.S.C. 256(k).
(7) Contributions or donations, re- [48 FR 42301, Sept. 19, 1983, as amended at
gardless of the recipient. 42660, Aug. 16, 1995]
(8) Costs of advertising designed to
promote the contractor or its products.
(9) Costs of promotional items and Subpart 31.7Contracts With
memorabilia, including models, gifts, Nonprofit Organizations
and souvenirs.
(10) Costs for travel by commercial 31.701 Purpose.
aircraft which exceed the amount of This subpart provides the principles
the standard commercial fare. for determining the cost applicable to
(11) Costs incurred in making any work performed by nonprofit organiza-
payment (commonly known as a tions under contracts with the Govern-
golden parachute payment) which ment. A nonprofit organization, for
is purpose of identification, is defined as
617
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31.702 48 CFR Ch. 1 (10103 Edition)
618
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Federal Acquisition Regulation Pt. 32
32.3045 Assignment of claims under con- 32.50310 Establishing alternate liquidation
tracts. rates.
32.3046 Other collateral security. 32.50311 Adjustments for price reduction.
32.3047 Contract surety bonds and loan 32.50312 Maximum unliquidated amount.
guarantees. 32.50313 [Reserved]
32.3048 Other borrowing. 32.50314 Protection of Government title.
32.305 Loan guarantees for terminated con- 32.50315 Application of Government title
tracts. terms.
32.306 Loan guarantees for subcontracts. 32.50316 Risk of loss.
32.504 Subcontracts under prime contracts
Subpart 32.4Advance Payments for Non- providing progress payments.
Commercial Items
Subpart 32.6Contract Debts
32.400 Scope of subpart.
32.401 Statutory authority. 32.600 Scope of subpart.
32.402 General. 32.601 Definition.
32.403 Applicability. 32.602 General.
32.404 Exclusions. 32.603 Applicability.
32.405 Applying Pub. L. 85804 to advance 32.604 Exclusions.
payments under sealed bid contracts. 32.605 Responsibilities and cooperation
32.406 Letters of credit. among Government officials.
32.407 Interest. 32.606 Debt determination and collection.
32.408 Application for advance payments. 32.607 Tax credit.
32.409 Contracting officer action.
32.608 Negotiation of contract debts.
32.4091 Recommendation for approval.
32.609 Memorandum of pricing agreement
32.4092 Recommendation for disapproval.
with refund.
32.4093 Security, supervision, and cov-
32.610 Demand for payment of contract
enants.
debt.
32.410 Findings, determination, and author-
ization. 32.611 Routine setoff.
32.411 Agreement for special account at a fi- 32.612 Withholding and setoff.
nancial insitution. 32.613 Deferment of collection.
32.412 Contract clause. 32.614 Interest.
32.6141 Interest charges.
Subpart 32.5Progress Payments Based on 32.6142 Interest credits.
Costs 32.615 Delays in receipt of notices or de-
mands.
32.500 Scope of subpart. 32.616 Compromise actions.
32.501 General. 32.617 Contract clause.
32.5011 Customary progress payment rates.
32.5012 Unusual progress payments. Subpart 32.7Contract Funding
32.5013 Contract price.
32.5014 [Reserved] 32.700 Scope of subpart.
32.5015 Other protective terms. 32.701 [Reserved]
32.502 Preaward matters. 32.702 Policy.
32.5021 Use of customary progress pay- 32.703 Contract funding requirements.
ments. 32.7031 General.
32.5022 Contract finance office clearance. 32.7032 Contracts conditioned upon avail-
32.5023 Solicitation provisions. ability of funds.
32.5024 Contract clauses. 32.7033 Contracts crossing fiscal years.
32.503 Postaward matters. 32.704 Limitation of cost or funds.
32.5031 Contractor requests. 32.705 Contract clauses.
32.5032 Supervision of progress payments. 32.7051 Clauses for contracting in advance
32.5033 Initiation of progress payments and of funds.
review of accounting system. 32.7052 Clauses for limitation of cost or
32.5034 Approval of progress payment re- funds.
quests.
32.5035 Administration of progress pay- Subpart 32.8Assignment of Claims
ments.
32.5036 Suspension or reduction of pay- 32.800 Scope of subpart.
ments. 32.801 Definitions.
32.5037 [Reserved] 32.802 Conditions.
32.5038 Liquidation ratesordinary meth- 32.803 Policies.
od. 32.804 Extent of assignees protection.
32.5039 Liquidation ratesalternate meth- 32.805 Procedure.
od. 32.806 Contract clauses.
619
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32.000 48 CFR Ch. 1 (10103 Edition)
620
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Federal Acquisition Regulation 32.002
621
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32.003 48 CFR Ch. 1 (10103 Edition)
(7) Subpart 32.11, Electronic Funds (2) Contract terms and conditions,
Transfer. other than price, that are more bene-
(b) Subpart 32.2, Commercial Item ficial to the Government than they
Purchase Financing, is applicable only would have been in the absence of the
to purchases of commercial items contract financing. Adequate new con-
under authority of part 12. sideration is required for changes to, or
(c) The following subparts of this the addition of, contract financing
part are applicable to all purchases after award.
made under any authority other than (b) Amount of new consideration. The
part 12: contractor may provide new consider-
(1) Subpart 32.1, Non-Commercial ation by monetary or nonmonetary
Item Purchase Financing. means, provided the value is adequate.
(2) Subpart 32.4, Advance Payments The fair and reasonable consideration
For Non-Commercial Items. should approximate the amount by
(3) Subpart 32.5, Progress Payments which the price would have been less
Based on Costs. had the contract financing terms been
(4) Subpart 32.10, Performance-Based contained in the initial contract. In
Payments. the absence of definite information on
[60 FR 49710, Sept. 26, 1995, as amended at 61 this point, the contracting officer
FR 45772, Aug. 29, 1996] should apply the following criteria in
evaluating whether the proposed new
32.003 Simplified acquisition proce- consideration is adequate:
dures financing. (1) The value to the contractor of the
Unless agency regulations otherwise anticipated amount and duration of the
permit, contract financing shall not be contract financing at the imputed fi-
provided for purchases made under the nancial costs of the equivalent working
authority of part 13. capital.
(2) The estimated profit rate to be
[60 FR 49710, Sept. 26, 1995] earned through contract performance.
(c) Interest. Except as provided in sub-
32.004 Contract performance in for-
eign countries. part 32.4, Advance Payments for Non-
Commercial Items, the contract shall
The enforceability of contract provi- not provide for any other type of spe-
sions for security of Government fi- cific charges, such as interest, for con-
nancing in a foreign jurisdiction is de- tract financing.
pendent upon local law and procedure.
Prior to providing contract financing [60 FR 49710, Sept. 26, 1995]
where foreign jurisdictions may be-
32.006 Reduction or suspension of con-
come involved, the contracting officer tract payments upon finding of
shall ensure the Governments security fraud.
is enforceable. This may require the
provision of additional or different se- 32.0061 General.
curity than that normally provided for (a) Under Title 10 of the United
in the standard contract clauses. States Code, the statutory authority
[60 FR 49710, Sept. 26, 1995] implemented by this section is avail-
able only to the Department of De-
32.005 Consideration for contract fi- fense; this statutory authority is not
nancing. available to the National Aeronautics
(a) Requirement. When a contract fi- and Space Administration or the
nancing clause is included at the incep- United States Coast Guard. Under the
tion of a contract, there shall be no Federal Property and Administrative
separate consideration for the contract Services Act (41 U.S.C. 255), this statu-
financing clause. The value of the con- tory authority is available to all agen-
tract financing to the contractor is ex- cies subject to that Act.
pected to be reflected in either (b) 10 U.S.C. 2307(h)(2) and 41 U.S.C.
(1) A bid or negotiated price that will 255, as amended by the Federal Acquisi-
be lower than such price would have tion Streamlining Act of 1994, Public
been in the absence of the contract fi- Law 103355, provide for a reduction or
nancing, or suspension of further payments to a
622
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Federal Acquisition Regulation 32.0064
contractor when the agency head de- tion official shall submit to the agency
termines there is substantial evidence head a written report setting forth the
that the contractors request for ad- remedy coordination officials findings
vance, partial, or progress payments is that support each recommendation.
based on fraud. This authority does not (b) Upon receiving a recommendation
apply to commercial interim payments from the remedy coordination official
under subpart 32.2, or performance- under paragraph (a) of this subsection,
based payments under subpart 32.10. the agency head shall determine
(c) The agency head may not delegate whether substantial evidence exists
his or her responsibilities under these that the request for payment under a
statutes below Level IV of the Execu- contract is based on fraud.
tive Schedule. (c) If the agency head determines
(d) Authority to reduce or suspend that substantial evidence exists, the
payments under these statutes is in ad- agency head may reduce or suspend
dition to other Government rights, further payments to the contractor
remedies, and procedures. under the affected contract(s). Such re-
(e) In accordance with these statutes, duction or suspension shall be reason-
agency head determinations and deci- ably commensurate with the antici-
sions under this section may be made pated loss to the Government resulting
for an individual contract or any group from the fraud.
of contracts affected by the fraud.
(d) In determining whether to reduce
[60 FR 49728, Sept. 26, 1995] or suspend further payment(s), as a
minimum, the agency head shall con-
32.0062 Definition. sider
Remedy coordination official, as used (1) A recommendation from inves-
in this section, means the person or en- tigating officers that disclosure of the
tity in the agency who coordinates allegations of fraud to the contractor
within that agency the administration may compromise an ongoing investiga-
of criminal, civil, administrative, and tion;
contractual remedies resulting from (2) The anticipated loss to the Gov-
investigations of fraud or corruption ernment as a result of the fraud;
related to procurement activities. (See (3) The contractors overall financial
10 U.S.C. 2307(h)(10) and 41 U.S.C. condition and ability to continue per-
255(g)(9).) formance if payments are reduced or
[60 FR 49729, Sept. 26, 1995, as amended at 66 suspended;
FR 2132, Jan. 10, 2001] (4) The contractors essentiality to
the national defense, or to the execu-
32.0063 Responsibilities. tion of the agencys official business;
(a) Agencies shall establish appro- and
priate procedures to implement the (5) Assessment of all documentation
policies and procedures of this section. concerning the alleged fraud, including
(b) Government personnel shall re- documentation submitted by the con-
port suspected fraud related to ad- tractor in its response to the notice re-
vance, partial, or progress payments in quired by paragraph (e) of this sub-
accordance with agency regulations. section.
[60 FR 49729, Sept. 26, 1995] (e) Before making a decision to re-
duce or suspend further payments, the
32.0064 Procedures. agency head shall, in accordance with
(a) In any case in which an agencys agency procedures
remedy coordination official finds sub- (1) Notify the contractor in writing
stantial evidence that a contractors of the action proposed by the remedy
request for advance, partial, or coordination official and the reasons
progress payments under a contract therefor (such notice must be suffi-
awarded by that agency is based on ciently specific to permit the con-
fraud, the remedy coordination official tractor to collect and present evidence
shall recommend that the agency head addressing the aforesaid reasons); and
reduce or suspend further payments to (2) Provide the contractor an oppor-
the contractor. The remedy coordina- tunity to submit information within a
623
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32.0065 48 CFR Ch. 1 (10103 Edition)
reasonable time, in response to the ac- ceives a proper contract financing re-
tion proposed by the remedy coordina- quest.
tion official. (2) If an audit or other review of a
(f) When more than one agency has specific financing request is required to
contracts affected by the fraud, the ensure compliance with the terms and
agencies shall consider designating one conditions of the contract, the des-
agency as the lead agency for making ignated payment office is not com-
the determination and decision. pelled to make payment by the speci-
(g) The agency shall retain in its files fied due date.
the written justification for each (3) Agency heads may prescribe
(1) Decision of the agency head shorter periods for payment based on
whether to reduce or suspend further contract pricing or administrative con-
payments; and siderations. For example, a shorter pe-
(2) Recommendation received by an riod may be justified by an agency if
agency head in connection with such the nature and extent of contract fi-
decision. nancing arrangements are integrated
(h) Not later than 180 calendar days with agency contract pricing policies.
after the date of the reduction or sus- (4) Agency heads must not prescribe
pension action, the remedy coordina- a period shorter than 7 days or longer
tion official shall than 30 days.
(1) Review the agency heads deter- (b) For advance payments, loans, or
mination on which the reduction or other arrangements that do not involve
suspension decision is based; and recurrent submission of contract fi-
(2) Transmit a recommendation to nancing requests, the designated pay-
the agency head as to whether the re- ment office will make payment in ac-
duction or suspension should continue. cordance with the applicable contract
financing terms or as directed by the
[60 FR 49729, Sept. 26, 1995] contracting officer.
(c) A proper contract financing re-
32.0065 Reporting. quest must comply with the terms and
(a) In accordance with 41 U.S.C. 255, conditions specified by the contract.
the head of an agency, other than the The contractor must correct any de-
Department of Defense, shall prepare a fects in requests submitted in the man-
report for each fiscal year in which a ner specified in the contract or as di-
recommendation has been received pur- rected by the contracting officer.
suant to 32.0064(a). Reports within the (d) The designated billing office and
Department of Defense shall be pre- designated payment office must anno-
pared in accordance with 10 U.S.C. 2307. tate each contract financing request
(b) In accordance with 41 U.S.C. 255 with the date their respective offices
and 10 U.S.C. 2307, each report shall received the request.
contain (e) The Government will not pay an
(1) Each recommendation made by interest penalty to the contractor as a
the remedy coordination official; result of delayed contract financing
(2) The actions taken on the rec- payments.
ommendation(s), with reasons for such [66 FR 65355, Dec. 18, 2001]
actions; and
(3) An assessment of the effects of 32.008 Notification of overpayment.
each action on the Government. If the contractor notifies the con-
[60 FR 49729, Sept. 26, 1995] tracting officer of a duplicate contract
financing or invoice payment or that
32.007 Contract financing payments. the Government has otherwise over-
paid on a contract financing or invoice
(a)(1) Unless otherwise prescribed in
payment, the contracting officer must
agency policies and procedures or oth-
promptly provide instructions to the
erwise specified in paragraph (b) of this
contractor, in coordination with the
section, the due date for making con-
cognizant payment office, regarding
tract financing payments by the des-
timely disposition of the overpayment.
ignated payment office is the 30th day
after the designated billing office re- [68 FR 56683, Oct. 1, 2003]
624
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Federal Acquisition Regulation 32.102
EFFECTIVE DATE NOTE: At 68 FR 56683, Oct. (4) Performance-based payments.
1, 2003, 32.008 was added, effective Oct. 31, (c) Loan guarantees are made by Fed-
2003.
eral Reserve banks, on behalf of des-
ignated guaranteeing agencies, to en-
Subpart 32.1Non-Commercial able contractors to obtain financing
Item Purchase Financing from private sources under contracts
for the acquisition of supplies or serv-
32.100 Scope of subpart.
ices for the national defense.
This subpart provides policies and (d) Payments for accepted supplies
procedures applicable to contract fi- and services that are only a part of the
nancing and payment for any pur- contract requirements (i.e., partial de-
chases other than purchases of com- liveries) are authorized under 41 U.S.C.
mercial items in accordance with part 255 and 10 U.S.C. 2307. In accordance
12. with 5 CFR 1315.4(k), agencies must pay
[60 FR 49710, Sept. 26, 1995] for partial delivery of supplies or par-
tial performance of services unless spe-
32.101 Authority. cifically prohibited by the contract.
The basic authority for the contract Although payments for partial deliv-
financing described in this part is con- eries generally are treated as a method
tained in section 305 of the Federal of payment and not as a method of con-
Property and Administrative Services tract financing, using partial delivery
Act of 1949 (41 U.S.C. 255), section 2307 payments can assist contractors to
of the Armed Services Procurement participate in contracts without, or
Act (10 U.S.C. 2307), and Title III of the with minimal, contract financing.
Defense Production Act of 1950 (50 When appropriate, contract statements
U.S.C. App. 2091), as amended. of work and pricing arrangements must
[48 FR 42328, Sept. 19, 1983, as amended at 60 permit acceptance and payment for
FR 49710, Sept. 26, 1995] discrete portions of the work, as soon
as accepted (see 32.906(c)).
32.102 Description of contract financ- (e)(1) Progress payments based on a
ing methods. percentage or stage of completion are
(a) Advance payments are advances authorized by the statutes cited in
of money by the Government to a 32.101.
prime contractor before, in anticipa- (2) This type of progress payment
tion of, and for the purpose of complete may be used as a payment method
performance under one or more con- under agency procedures. Agency pro-
tracts. They are expected to be liq- cedures must ensure that payments are
uidated from payments due to the con- commensurate with work accom-
tractor incident to performance of the plished, which meets the quality stand-
contracts. Since they are not measured ards established under the contract.
by performance, they differ from par- Furthermore, progress payments may
tial, progress, or other payments based not exceed 80 percent of the eligible
on the performance or partial perform- costs of work accomplished on
ance of a contract. Advance payments undefinitized contract actions.
may be made to prime contractors for (f) Performance-based payments are
the purpose of making advances to sub- contract financing payments made on
contractors. the basis of
(b) Progress payments based on costs
(1) Performance measured by objec-
are made on the basis of costs incurred
tive, quantifiable methods;
by the contractor as work progresses
under the contract. This form of con- (2) Accomplishment of defined
tract financing does not include events; or
(1) Payments based on the percentage (3) Other quantifiable measures of re-
or stage of completion accomplished; sults.
(2) Payments for partial deliveries [48 FR 42328, Sept. 19, 1987, as amended at 52
accepted by the Government; FR 30077, Aug. 12, 1987; 60 FR 49711, Sept. 26,
(3) Partial payments for a contract 1995; 62 FR 12706, Mar. 17, 1997; 66 FR 65355,
termination proposal; or Dec. 18, 2001]
625
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32.103 48 CFR Ch. 1 (10103 Edition)
32.103 Progress payments under con- (3) Avoid any undue risk of monetary
struction contracts. loss to the Government through the fi-
When satisfactory progress has not nancing;
been achieved by a contractor during (4) Include the form of contract fi-
any period for which a progress pay- nancing deemed to be in the Govern-
ment is to be made, a percentage of the ments best interest in the solicitation
progress payment may be retained. (see 32.106 and 32.113); and
Retainage should not be used as a sub- (5) Monitor the contractors use of
stitute for good contract management, the contract financing provided and
and the contracting officer should not the contractors financial status.
withhold funds without cause. Deter- (b) If the contractor is a small busi-
minations to retain and the specific ness concern, the contracting officer
amount to be withheld shall be made must give special attention to meeting
by the contracting officer on a case-by- the contractors contract financing
case basis. Such decisions will be based need. However, a contractors receipt
on the contracting officers assessment of a certificate of competency from the
of past performance and the likelihood Small Business Administration has no
that such performance will continue. bearing on the contractors need for or
The amount of retainage withheld shall entitlement to contract financing.
not exceed 10 percent of the approved (c) Subject to specific agency regula-
estimated amount in accordance with tions and paragraph (d) of this section,
the terms of the contract and may be the contracting officer
adjusted as the contract approaches (1) May provide customary contract
completion to recognize better than ex-
financing in accordance with 32.113;
pected performance, the ability to rely
and
on alternative safeguards, and other
factors. Upon completion of all con- (2) Must not provide unusual con-
tract requirements, retained amounts tract financing except as authorized in
shall be paid promptly. 32.114.
(d) Unless otherwise authorized by
[51 FR 19716, May 30, 1986, as amended at 60 agency procedures, the contracting of-
FR 49711, Sept. 26, 1995] ficer may provide contract financing in
32.104 Providing contract financing. the form of performance-based pay-
ments (see subpart 32.10) or customary
(a) Prudent contract financing can be progress payments (see subpart 32.5) if
a useful working tool in Government the following conditions are met:
acquisition by expediting the perform- (1) The contractor
ance of essential contracts. Con-
(i) Will not be able to bill for the first
tracting officers must consider the cri-
delivery of products for a substantial
teria in this part in determining
time after work must begin (normally 4
whether to include contract financing
months or more for small business con-
in solicitations and contracts. Resolve
cerns, and 6 months or more for oth-
reasonable doubts by including con-
tract financing in the solicitation. The ers), and will make expenditures for
contracting officer must contract performance during the
(1) Provide Government financing predelivery period that have a signifi-
only to the extent actually needed for cant impact on the contractors work-
prompt and efficient performance, con- ing capital; or
sidering the availability of private fi- (ii) Demonstrates actual financial
nancing and the probable impact on need or the unavailability of private fi-
working capital of the predelivery ex- nancing.
penditures and production lead-times (2) If the contractor is not a small
associated with the contract, or groups business concern
of contracts or orders (e.g., issued (i) For an individual contract, the
under indefinite-delivery contracts, contract price is $2 million or more; or
basic ordering agreements, or their (ii) For an indefinite-delivery con-
equivalent); tract, a basic ordering agreement or a
(2) Administer contract financing so similar ordering instrument, the con-
as to aid, not impede, the acquisition; tracting officer expects the aggregate
626
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Federal Acquisition Regulation 32.110
627
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32.111 48 CFR Ch. 1 (10103 Edition)
the contracting officer should accept (5) The clause at 52.2325, Payments
the financing payments as reimburs- under Fixed-Price Construction Con-
able costs of the prime contract only tracts, in solicitations and contracts
under the following conditions: for construction when a fixed-price
(a) The payments are made under the contract is contemplated; and
criteria in subpart 32.5 for customary (6) The clause at 52.2326, Payments
progress payments based on costs, under Communication Service Con-
32.2021 for commercial item purchase tracts with Common Carriers, in solici-
financing, or 32.1003 for performance- tations and contracts for regulated
based payments, as applicable.
communication services by common
(b) If customary progress payments
carriers.
are made, the payments do not exceed
the progress payment rate in 32.5011, (b) The contracting officer shall in-
unless unusual progress payments to sert the clause at 52.2327, Payments
the subcontractor have been approved under Time-and-Materials and Labor-
in accordance with 32.5012. Hour Contracts, appropriately modified
(c) If customary progress payments with respect to payment due dates in
are made, the subcontractor complies accordance with agency regulations, in
with the liquidation principles of solicitations and contracts when a
32.5038, 32.5039, and 32.50310. time-and-materials or labor-hour con-
(d) If performance-based payments tract is contemplated. If (i) the nature
are made, the subcontractor complies of the work to be performed requires
with the liquidation principles of the contractor to furnish material that
32.1004(d). is regularly sold to the general public
(e) The subcontract contains financ- in the normal course of business by the
ing payments terms as prescribed in contractor and (ii) the price is under
this part. the limitations prescribed in
[65 FR 16279, Mar. 27, 2000] 16.601(b)(3), the contracting officer
shall use the clause with its Alternate
32.111 Contract clauses for non- I. If a labor-hour contract is con-
commercial purchases. templated, and if no specific reim-
(a) The contracting officer shall in- bursement for materials furnished is
sert the following clauses, appro- intended, the contracting officer may
priately modified with respect to pay- use the clause with its Alternate II.
ment due dates, in accordance with (c) The contracting officer shall in-
agency regulations sert the following clauses, appro-
(1) The clause at 52.2321, Payments, priately modified with respect to pay-
in solicitations and contracts when a ment due dates in accordance with
fixed-price supply contract, a fixed- agency regulations:
price service contract, or a contract for
(1) The clause at 52.2328, Discounts
nonregulated communication services
is contemplated; for Prompt Payment, in solicitations
(2) The clause at 52.2322, Payment and contracts when a fixed-price supply
under Fixed-Price Research and Devel- contract or fixed-price service contract
opment Contracts, in solicitations and is contemplated.
contracts when a fixed-price research (2) A clause, substantially the same
and development contract is con- as the clause at 52.2329, Limitation on
templated; Withholding of Payments, in solicita-
(3) The clause at 52.2323, Payments tions and contracts when a supply con-
under Personal Services Contracts, in tract, research and development con-
solicitations and contracts for personal tract, service contract, time-and-mate-
services; rials contract, or labor-hour contract
(4) The clause at 52.2324, Payments is contemplated that includes two or
under Transportation Contracts and more terms authorizing the temporary
Transportation-Related Services Con- withholding of amounts otherwise pay-
tracts, in solicitations and contracts able to the contractor for supplies de-
for transportation or transportation- livered or services performed.
related services;
628
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Federal Acquisition Regulation 32.113
(d) The contracting officer shall in- panying its payment request to the
sert the following clauses, appro- Government is accurate.
priately modified with respect to pay- (b) If, in making the determination
ments due dates in accordance with in paragraphs (a)(1) and (2) of this sec-
agency regulations: tion, the contracting officer finds the
(1) The clause at 52.23210, Payments prime contractor is not in compliance,
under Fixed-Price Architect-Engineer the contracting officer may
Contracts, in fixed-price architect-en- (1) Encourage the contractor to make
gineer contracts. timely payment to the subcontractor
(2) The clause at 52.23211, Extras, in or supplier; or
solicitations and contracts when a (2) If authorized by the applicable
fixed-price supply contract, fixed-price payment clauses, reduce or suspend
service contract, or a transportation progress payments to the contractor.
contract is contemplated. (c) If the contracting officer deter-
mines that a certification referred to
[48 FR 42328, Sept. 19, 1983, as amended at 51 in paragraph (a)(3) of this section is in-
FR 2665, Jan. 17, 1986; 60 FR 49711, Sept. 26, accurate in any material respect, the
1995] contracting officer shall initiate ad-
ministrative or other remedial action.
32.112 Nonpayment of subcontractors
under contracts for noncommercial [60 FR 48274, Sept. 18, 1995]
items.
32.1122 Subcontractor requests for
32.1121 Subcontractor assertions of information.
nonpayment. (a) In accordance with Section
(a) In accordance with Section 806(a)(1) of Pub. L. 102190, as amended
806(a)(4) of Pub. L. 102190, as amended by Sections 2091 and 8105 of Pub. L. 103
by Sections 2091 and 8105 of Pub. L. 103 355, upon the request of a subcon-
355, upon the assertion by a subcon- tractor or supplier under a Federal
tractor or supplier of a Federal con- contract for a non-commercial item,
tractor that the subcontractor or sup- the contracting officer shall promptly
plier has not been paid in accordance advise the subcontractor or supplier as
with the payment terms of the sub- to
contract, purchase order, or other (1) Whether the prime contractor has
agreement with the prime contractor, submitted requests for progress pay-
the contracting officer may deter- ments or other payments to the Fed-
mine eral Government under the contract;
(1) For a construction contract, and
whether the contractor has made (2) Whether final payment under the
(i) Progress payments to the subcon- contract has been made by the Federal
tractor or supplier in compliance with Government to the prime contractor.
Chapter 39 of Title 31, United States (b) In accordance with 5 U.S.C.
Code (Prompt Payment Act); or 552(b)(1), this subsection does not apply
(ii) Final payment to the subcon- to matters that are
tractor or supplier in compliance with (1) Specifically authorized under cri-
the terms of the subcontract, purchase teria established by an Executive order
order, or other agreement with the to be kept classified in the interest of
prime contractor; national defense or foreign policy; and
(2) Properly classified pursuant to
(2) For a contract other than con-
such Executive order.
struction, whether the contractor has
made progress payments, final pay- [60 FR 48274, Sept. 18, 1995]
ments, or other payments to the sub-
contractor or supplier in compliance 32.113 Customary contract financing.
with the terms of the subcontract, pur- The solicitation must specify the
chase order, or other agreement with customary contract financing offerors
the prime contractor; or may propose. The following are cus-
(3) For any contract, whether the tomary contract financing when pro-
contractors certification of payment vided in accordance with this part and
of a subcontractor or supplier accom- agency regulations:
629
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32.114 48 CFR Ch. 1 (10103 Edition)
630
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Federal Acquisition Regulation 32.2024
(6) Prior to any performance of work 32.2022 Types of payments for com-
under the contract, the aggregate of mercial item purchases.
commercial advance payments shall These definitions incorporate the re-
not exceed 15 percent of the contract quirements of the statutory commer-
price; cial financing authority and the imple-
(7) The contract is awarded on the mentation of the Prompt Payment Act.
basis of competitive procedures or, if Commercial advance payment, as used
only one offer is solicited, adequate in this subsection, means a payment
consideration is obtained (based on the made before any performance of work
time value of the additional financing under the contract. The aggregate of
to be provided) if the financing is ex- these payments shall not exceed 15 per-
pected to be substantially more advan- cent of the contract price. These pay-
tageous to the offeror than the ments are contract financing payments
offerors normal method of customer fi- for prompt payment purposes (i.e., not
nancing; and subject to the interest penalty provi-
(8) The contracting officer obtains sions of the Prompt Payment Act in
concurrence from the payment office accordance with subpart 32.9). These
concerning liquidation provisions when payments are not subject to subpart
required by 32.206(e). 32.4, Advance Payments for Non-Com-
(c) Difference from non-commercial fi- mercial Items.
nancing. Government financing of com- Commercial interim payment (See
mercial purchases under this subpart is 32.001.)
expected to be different from that used Delivery payment (See 32.001).
for non-commercial purchases under
subpart 32.1 and its related subparts. [60 FR 49711, Sept. 26, 1995, as amended at 66
FR 2132, Jan. 10, 2001]
While the contracting officer may
adapt techniques and procedures from
32.2023 Conducting market research
the non-commercial subparts for use in about financing terms.
implementing commercial contract fi-
nancing arrangements, the contracting Contract financing may be a subject
officer must have a full understanding included in the market research con-
of effects of the differing contract envi- ducted in accordance with part 10. If
ronments and of what is needed to pro- market research for contract financing
tect the interests of the Government in is conducted, the contracting officer
commercial contract financing. should consider
(d) Unusual contract financing. Any (a) The extent to which other buyers
contract financing arrangement not in provide contract financing for pur-
accord with the requirements of agency chases in that market;
regulations or this part is unusual con- (b) The overall level of financing nor-
tract financing and requires advance mally provided;
approval in accordance with agency (c) The amount or percentages of any
procedures. If not otherwise specified, payments equivalent to commercial
such unusual contract financing shall advance payments (see 32.2022);
be approved by the head of the con- (d) The basis for any payments equiv-
tracting activity. alent to commercial interim payments
(e) Best interest of the Government. The (see 32.001), as well as the frequency,
statutes cited in 32.201 do not allow and amounts or percentages; and
contract financing by the Government (e) Methods of liquidation of contract
unless it is in the best interest of the financing payments and any special or
United States. Agencies may establish unusual payment terms applicable to
standards to determine whether con- delivery payments (see 32.001).
tract financing is in the best interest [60 FR 49711, Sept. 26, 1995, as amended at 66
of the Government. These standards FR 2132, Jan. 10, 2001]
may be for certain types of procure-
ments, certain types of items, or cer- 32.2024 Security for Government fi-
tain dollar levels of procurements. nancing.
[60 FR 49711, Sept. 26, 1995, as amended at 61 (a) Policy. (1) 10 U.S.C. 2307(f) and 41
FR 39190, July 26, 1996] U.S.C. 255(f) require the Government to
631
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32.203 48 CFR Ch. 1 (10103 Edition)
632
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Federal Acquisition Regulation 32.206
customary in the commercial market- to determine the total cost to the Gov-
place for the item, those terms may be ernment of that particular combina-
specified in the solicitation. tion of price and financing.
(2) Contract financing results in the
32.204 Procedures for contracting offi- Government making payments earlier
cer-specified commercial contract than it otherwise would. In order to de-
financing. termine the cost to the Government of
The financing terms shall be included making payments earlier, the con-
in the solicitation. Contract financing tracting officer must compute the im-
shall not be a factor in the evaluation puted cost of those financing payments
of resulting proposals, and proposals of and add it to the proposed price to de-
alternative financing terms shall not termine the evaluated price for each
be accepted (but see 14.208 and 15.206 offeror.
concerning amendments of solicita- (3) The imputed cost of a single fi-
tions). However, an offer stating that nancing payment is the amount of the
the contracting officer-specified con- payment multiplied by the annual in-
tract financing terms will not be used terest rate, multiplied by the number
by the offeror does not alter the eval- of years, or fraction thereof, between
uation of the offer, nor does it render the date of the financing payment and
the offer nonresponsive or otherwise the date the amount would have been
unacceptable. In the event of award to paid as a delivery payment. The im-
an offeror who declined the proposed puted cost of financing is the sum of
contract financing, the contract fi- the imputed costs of each of the financ-
nancing provisions shall not be in- ing payments.
cluded in the resulting contract. Con- (4) The contracting officer must cal-
tract financing shall not be a basis for culate the time value of proposal-speci-
adjusting offerors proposed prices, be- fied contract financing arrangements
cause the effect of contract financing using as the interest rate the nominal
is reflected in each offerors proposed discount rate specified in Appendix C
prices. of the Office of Management and Budg-
et (OMB) Circular A94, Guidelines
[60 FR 49711, Sept. 26, 1995, as amended at 62
and Discount Rates for Benefit-Cost
FR 51271, Sept. 30, 1997]
Analysis of Federal Programs, appro-
32.205 Procedures for offeror-pro- priate to the period of contract financ-
posed commercial contract financ- ing. Where the period of proposed fi-
ing. nancing does not match the periods in
(a) Under this procedure, each offeror the OMB Circular, the interest rate for
may propose financing terms. The con- the period closest to the finance period
tracting officer must then determine shall be used. Appendix C is updated
which offer is in the best interests of yearly, and is available from the Office
the United States. of Economic Policy in the Office of
(b) Solicitations. The contracting offi- Management and Budget (OMB).
cer must include in the solicitation the [60 FR 49711, Sept. 26, 1995, as amended at 65
provision at 52.23231, Invitation to FR 16279, Mar. 27, 2000]
Propose Financing Terms. The con-
tracting officer must also 32.206 Solicitation provisions and con-
(1) Specify the delivery payment (in- tract clauses.
voice) dates that will be used in the (a) The contract shall contain the
evaluation of financing proposals; and paragraph entitled Payment of the
(2) Specify the interest rate to be clause at 52.2124, Contract Terms and
used in the evaluation of financing pro- ConditionsCommercial Items. If the
posals (see paragraph (c)(4) of this sec- contract will provide for contract fi-
tion). nancing, the contracting officer shall
(c) Evaluation of proposals. (1) When construct a solicitation provision and
contract financing terms vary among contract clause. This solicitation pro-
offerors, the contracting officer must vision shall be constructed in accord-
adjust each proposed price for evalua- ance with 32.204 or 32.205. If the proce-
tion purposes to reflect the cost of pro- dure at 32.205 is used, the solicitation
viding the proposed financing in order provision at 52.23231, Invitation to
633
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32.206 48 CFR Ch. 1 (10103 Edition)
634
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Federal Acquisition Regulation 32.207
shall be liquidated against that line the 70 percent financing rate cited in
item. If liquidation is on a whole con- the clause or at a lower rate in accord-
tract basis, the contracting officer ance with agency procedures.
shall use a uniform liquidation per- (3) Calculating the amount of install-
centage as the liquidation method, un- ment financing payments. The con-
less the contracting officer obtains the tracting officer shall identify in the
concurrence of the cognizant payment contract schedule those items for
office that the proposed liquidation which installment payment financing
provisions can be executed by that of-
is authorized. Monthly installment
fice, or unless agency regulations pro-
payment amounts are to be calculated
vide alternative liquidation methods.
(f) Prompt payment for commercial pur- by the contractor pursuant to the in-
chase payments. The provisions of sub- structions in the contract clause only
part 32.9, Prompt Payment, apply to for items authorized to receive install-
contract financing and invoice pay- ment payment financing.
ments for commercial purchases in the (4) Liquidating installment payments. If
same manner they apply to non-com- installment payments have been made
mercial purchases. The contracting of- for an item, the amount paid to the
ficer is responsible for including in the contractor upon acceptance of the item
contract all the information necessary by the Government shall be reduced by
to implement prompt payment. In par- the amount of installment payments
ticular, contracting officers must be made for the item. The contractors re-
careful to clearly differentiate in the quest for final payment for each item
contract between contract financing is required to show this calculation.
and invoice payments and between
items having different prompt payment 32.207 Administration and payment of
times. commercial financing payments.
(g) Installment payment financing for (a) Responsibility. The contracting of-
commercial items. Contracting officers
ficer responsible for administration of
may insert the clause at 52.23230, In-
the contract shall be responsible for re-
stallment Payments for Commercial
Items, in solicitations and contracts in view and approval of contract financ-
lieu of constructing a specific clause in ing requests.
accordance with paragraphs (b) (b) Approval of financing requests. Un-
through (e) of this section, if the con- less otherwise provided in agency regu-
tract action qualifies under the criteria lations, or by agreement with the ap-
at 32.2021(b) and installment payments propriate payment official
for the item are either customary or (1) The contracting officer shall be
are authorized in accordance with responsible for receiving, approving,
agency procedures. and transmitting all contract financing
(1) Description. Installment payment requests to the appropriate payment
financing is payment by the Govern- office; and
ment to a contractor of a fixed number (2) Each approval shall specify the
of equal interim financing payments amount to be paid, necessary contrac-
prior to delivery and acceptance of a tual information, and the account(s)
contract item. The installment pay- (see 32.206(d)) to be charged for the pay-
ment arrangement is designed to re- ment.
duce administrative costs. However, if
(c) Management of security. After con-
a contract will have a large number of
tract award, the contracting officer re-
deliveries, the administrative costs
sponsible for approving requests for fi-
may increase to the point where in-
stallment payments are not in the best nancing payments shall be responsible
interests of the Government. for determining that the security con-
(2) Authorized types of installment pay- tinues to be adequate. If the contrac-
ment financing and rates. Installment tors financial condition is the Govern-
payments may be made using the ments security, this contracting offi-
clause at 52.23230, Installment Pay- cer is also responsible for monitoring
ments for Commercial Items, either at the contractors financial condition.
635
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32.300 48 CFR Ch. 1 (10103 Edition)
636
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Federal Acquisition Regulation 32.3042
(2) Rates of interest, guarantee and (2) Protect the Government against
commitment fees, and other charges monetary loss.
that may be made for loans, discounts, (e) The Federal Reserve Bank will
advances, or commitments guaranteed send its report and recommendation to
by the guaranteeing agencies through the Federal Reserve Board. The Board
the Federal Reserve Banks. These pre- will transmit them to the interested
scriptions may be in the form of spe- guaranteeing agency.
cific rates or limits, or in other forms.
(3) Uniform forms and procedures to 32.3042 Certificate of eligibility.
be used in connection with the guaran- (a) The contracting officer shall pre-
tees. pare the certificate of eligibility for a
(g) The guaranteeing agency is re- contract that the contracting officer
sponsible for certifying eligibility for deems to be of material consequence,
the guarantee and fixing the maximum when
dollar amount and maturity date of the (1) The contract financing office re-
guaranteed loan to meet the contrac- quests it;
tors requirement for financing per- (2) Another interested agency re-
formance of the defense production quests it; or
contract on hand at the time the guar- (3) The application for a loan guar-
antee application is submitted. antee relates to a contract or sub-
contract within the cognizance of the
32.304 Procedures. contracting officer.
(b) The agency shall evaluate the rel-
32.3041 Application for guarantee. evant data, including the certificate of
(a) A contractor, subcontractor, or eligibility, the accompanying data, and
supplier that needs operating funds to any other relevant information on the
perform a contract related to national contractors financial status and per-
defense may apply to a financing insti- formance, to determine whether au-
tution for a loan. If the financing insti- thorization of a loan guarantee would
tution is willing to extend credit, but be in the Governments interest.
considers a Government guarantee nec- (c) If the contractor has several
essary, the institution may apply to major national defense contracts, it is
the Federal Reserve Bank of its dis- normally not necessary to evaluate the
trict for the guarantee. Application eligibility of relatively minor con-
forms and guidance are available at all tracts. The determination of eligibility
Federal Reserve Banks. should be processed, without delay,
(b) The Federal Reserve Bank will based on the preponderance of the
promptly send a copy of the applica- amount of the contracts.
tion, including a list of the relevant de- (d) The certificate of eligibility shall
fense contracts held by the contractor, include the following determinations:
to the Federal Reserve Board. The (1) The supplies or services to be ac-
Board will transmit the application quired are essential to the national de-
and the list of contracts to the inter- fense.
ested guaranteeing agency, so that the (2) The contractor has the facilities
agency can determine the eligibility of and the technical and management
the contractor. ability required for contract perform-
(c) To expedite the process, the Fed- ance.
eral Reserve Bank may, pursuant to in- (3) There is no practicable alternate
structions of a guaranteeing agency, source for the acquisition without prej-
submit lists of the defense contracts to udice to the national defense. (This
the interested contracting officers. statement shall not be included if the
(d) While eligibility is being deter- contractor is a small business concern.)
mined, the Federal Reserve Bank will (e) The contracting officer shall con-
make any necessary credit investiga- sider the following factors in deter-
tions to supplement the information mining if a practicable alternate
furnished by the applicant financing source exists:
institution in order to (1) Prejudice to the national defense,
(1) Expedite necessary defense financ- because reletting of a contract with an-
ing; and other source would conflict with a
637
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32.3043 48 CFR Ch. 1 (10103 Edition)
638
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Federal Acquisition Regulation 32.3047
(a) If the contractor enters into addi- serves (1) the privilege of making pay-
tional defense production contracts ments directly to the assignor or to the
after the application for, but before au- assignor and assignee jointly, after no-
thorization of, a guarantee, the agency tice of the assignment, or (2) the right
may adjust the loan guarantee amount to reduce or set off assigned proceeds
or maturity date to meet any signifi- under defense production contracts by
cant increase in financing need. reason of claims against the borrower
(b) If the contractor enters into de- arising after notice of assignment and
fense production contracts during the independently of defense production
term of the guaranteed loan, the par- contracts under which the borrower is
ties may adjust the existing guarantee the seller.
agreement to provide for financing the
new contracts. Pertinent information 32.3046 Other collateral security.
and the Federal Reserve Bank reports The following are examples of other
will be submitted to the guaranteeing forms of security that, although sel-
agency under the procedures for the dom invoked under guaranteed loans,
original guarantee application, de- may be required when considered nec-
scribed in 32.3041. Normally, a new essary for protection of the Govern-
certificate of eligibility is required. ment interest:
32.3045 Assignment of claims under (a) Mortgages on fixed assets.
contracts. (b) Liens against inventories.
(c) Endorsements.
(a) The agency shall generally re-
quire a contractor that is provided a (d) Guarantees.
guaranteed loan to execute an assign- (e) Subordinations or standbys of
ment of claims under defense produc- other indebtedness.
tion contracts (including any contracts
32.3047 Contract surety bonds and
entered into during the term of the loan guarantees.
guaranteed loan that are eligible for fi-
nancing under the loan); however, the (a) Contract surety bonds are incom-
agency need not require assignment if patible with the Governments inter-
any of the following conditions are ests under guaranteed loans, unless the
present: interests of the surety are subordi-
(1) The contractors financial condi- nated to the guaranteed loan.
tion is so strong that the protection to (b) If a substantial share of the con-
the Government provided by an assign- tractors defense contracts are covered
ment of claims is unnecessary. by surety bonds, or the amount of the
(2) In connection with the assign- bond is substantial in relation to the
ment of claims under a major contract, contractors net worth, the agency
the increased protection of the loan shall not authorize the guarantee of a
that would be provided by the assign- loan on a bonded contract unless the
ments under additional, relatively surety enters into an agreement with
smaller contracts is not considered the financing institution to subordi-
necessary by the agency. nate the suretys rights and claims in
(3) The assignment of claims would favor of the guaranteed loan.
create an administrative burden dis- (c) The agency approval of a guar-
proportionate to the protection re- antee for a loan involving relatively
quired; e.g., if the contractor has a substantial subcontracts covered by
large number of contracts with individ- surety bonds shall also depend on the
ually small dollar amounts. establishment of a reasonable alloca-
(b) The contractor shall also execute tion agreement between the sureties
an assignment of claims if requested to and the financing institution. The
do so by the guarantor or the financing agreement should give the financing
institution. institution the benefit, with regard to
(c) A subcontract or purchase order payments to be made on the contract,
issued to a subcontractor shall not be of the portion of its loans fairly attrib-
considered eligible for financing under utable to expenditures made under the
guaranteed loans when the issuer of bonded subcontracts before notice of
the subcontract or purchase order re- default.
639
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32.3048 48 CFR Ch. 1 (10103 Edition)
640
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Federal Acquisition Regulation 32.403
Supp. pp. 7274) (see part 50 of the Fed- (C) To the extent possible, employ-
eral Acquisition Regulation (FAR) for ment of the contractors own working
other applications of this statute). capital;
(ii) The advance payments are nec-
[48 FR 42328, Sept. 19, 1983, as amended at 50 essary to supplement other funds or
FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
credit available to a contractor;
(iii) The recipient is otherwise quali-
32.402 General. fied as a responsible contractor;
(iv) The Government will benefit
(a) A limitation on authority to from performance prospects or there
grant advance payments under Pub. L. are other practical advantages; and
85804 (50 U.S.C. 14311435) is described (v) The case fits one or more of the
at FAR 50.203(b)(4). categories described in 32.403.
(b) Advance payments may be pro- (d) If necessary, the agency may au-
vided on any type of contract; however, thorize advance payments in addition
the agency shall authorize advance to progress or partial payments on the
payments sparingly. Except for the same contract (see 32.5011(c)).
contracts described in 32.403(a) and (b), (e) Each agency that provides ad-
advance payment is the least preferred vance payments shall
method of contract financing (see (1) Place the responsibility for mak-
32.106) and generally they should not be ing findings and determinations, and
authorized if other types of financing for approval of contract terms con-
are reasonably available to the con- cerning advance payments (see 32.410),
tractor in adequate amounts. Loans at an organizational level high enough
and credit at excessive interest rates or to ensure uniform application of this
other exorbitant charges, or loans from subpart (see the limitation at 50.201(b)
other Government agencies, are not which also applies to advance pay-
considered reasonably available financ- ments authorized under Pub. L. 85804
ing. (50 U.S.C. 14311435)); and
(c) If statutory requirements and (2) Establish procedures for coordina-
standards for advance payment deter- tion, before advance payment author-
minations are met, the contracting of- ization, with the activity that provides
ficer shall generally recommend that contract financing support.
the agency authorize advance pay- (f) If the contract provides for ad-
ments. vance payments under Pub. L. 85804,
the contracting officer shall ensure
(1) The statutory requirements are
conformance with the requirements of
that
FAR 50.307.
(i) The contractor gives adequate se-
curity; [48 FR 42328, Sept. 19, 1983, as amended at 59
(ii) The advance payments will not FR 67047, Dec. 28, 1994]
exceed the unpaid contract price (see 32.403 Applicability.
32.410(b), subparagraph (a)(2)); and
(iii) The agency head or designee de- Advance payments may be considered
termines, based on written findings, useful and appropriate for the fol-
that the advance payment lowing:
(a) Contracts for experimental, re-
(A) Is in the public interest (under
search, or development work with non-
32.401(a) or (b)); or
profit educational or research institu-
(B) Facilitates the national defense tions.
(under 32.401(c)). (b) Contracts solely for the manage-
(2) The standards for advance pay- ment and operation of Government-
ment determinations are that owned plants.
(i) The advance payments will not ex- (c) Contracts for acquisition at cost
ceed the contractors interim cash of facilities for Government ownership.
needs based on (d) Contracts of such a highly classi-
(A) Analysis of the cash flow required fied nature that the agency considers it
for contract performance; undesirable for national security to
(B) Consideration of the reimburse- permit assignment of claims under the
ment or other payment cycle; and contract.
641
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32.404 48 CFR Ch. 1 (10103 Edition)
(e) Contracts entered into with finan- (9) Other types of transactions ex-
cially weak contractors whose tech- cluded by agency procedures under
nical ability is considered essential to statutory authority.
the agency. In these cases, the agency (b) Agencies may issue their own in-
shall closely monitor the contractors structions to deal with advance pay-
performance and financial controls to ment items in paragraph (a) above au-
reduce the Governments financial thorized under statutes relevant to
risk. their agencies.
(f) Contracts for which a loan by a
private financial institution is not 32.405 Applying Pub. L. 85804 to ad-
practicable, whether or not a loan vance payments under sealed bid
guarantee under this part is issued; for contracts.
example, if (a) Actions that designated agencies
(1) Financing institutions will not as- may take to facilitate the national de-
sume a reasonable portion of the risk fense without regard to other provi-
under a guaranteed loan; sions of law relating to contracts, as
(2) Loans with reasonable interest explained in 50.101(a), also include
rates or finance charges are not avail- making advance payments. These ad-
able to the contractor; or vance payments may be made at or
(3) Contracts involve operations so after award of sealed bid contracts as
remote from a financial institution well as negotiated contracts.
that the institution could not be ex- (b) Bidders may request advance pay-
pected to suitably administer a guaran- ments before or after award, even if the
teed loan. invitation for bids does not contain an
(g) Contracts with small business advance payment provision. However,
concerns, under which circumstances the contracting officer shall reject any
that make advance payments appro- bid requiring that advance payments
priate often occur (but see 32.104(b)). be provided as a basis for acceptance.
(h) Contracts under which excep- (c) When advance payments are re-
tional circumstances make advance quested, the agency may
payments the most advantageous con- (1) Enter into the contract and pro-
tract financing method for both the vide for advance payments conforming
Government and the contractor. to this part 32;
(2) Enter into the contract without
32.404 Exclusions. providing for advance payments if the
(a) This subpart does not apply to ad- contractor does not actually need ad-
vance payments authorized by law vance payments; or
for (3) Deny award of the contract if the
(1) Rent; request for advance payments has been
(2) Tuition; disapproved under 32.4092 and funds
(3) Insurance premiums; adequate for performance are not oth-
(4) Expenses of investigations in for- erwise available to the offeror.
eign countries; [48 FR 42328, Sept. 19, 1983, as amended at 50
(5) Extension or connection of public FR 1744, Jan. 11, 1985; 50 FR 52429, Dec. 23,
utilities for Government buildings or 1985]
installations;
(6) Subscriptions to publications; 32.406 Letters of credit.
(7) Purchases of supplies or services (a) The Department of the Treasury
in foreign countries, if (Treasury) prescribes regulations and
(i) The purchase price does not ex- instructions covering the use of letters
ceed $10,000 (or equivalent amount of of credit for advance payments under
the applicable foreign currency); and contracts. See Treasury Department
(ii) The advance payment is required Circular 1075 (31 CFR part 205), and the
by the laws or government regulations implementing instructions in the
of the foreign country concerned; Treasury Financial Manual, available
(8) Enforcement of the customs or in offices providing financial advice
narcotics laws; or and assistance.
642
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Federal Acquisition Regulation 32.407
643
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32.408 48 CFR Ch. 1 (10103 Edition)
644
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Federal Acquisition Regulation 32.410