CFR 2003 Title48 Vol1

48
Chapter 1 (Parts 1 to 51)

Revised as of October 1, 2003
Federal Acquisition
Regulations System
Containing a codification of documents

of general applicability and future effect
As of October 1, 2003
With Ancillaries
Published by
Office of the Federal Register
National Archives and Records
Administration
A Special Edition of the Federal Register
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Table of Contents
Page
Explanation ................................................................................................ v
Title 48:
Chapter 1Federal Acquisition Regulation .................................... 3
Finding Aids:
Table of CFR Titles and Chapters ....................................................... 1043
Alphabetical List of Agencies Appearing in the CFR ......................... 1061
List of CFR Sections Affected ............................................................. 1071
iii
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Cite this Code: CFR
To cite the regulations in

this volume use title,
part and section num-
ber. Thus, 48 CFR
1.000 refers to title 48,
part 1, section 000.
iv
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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To determine whether a Code volume has been amended since its revision date
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given rule.
EFFECTIVE AND EXPIRATION DATES
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OMB CONTROL NUMBERS
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to display an OMB control number with their information collection request.
Many agencies have begun publishing numerous OMB control numbers as amend-
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close as possible to the applicable recordkeeping or reporting requirements.
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
is based on a consolidation of the Contents entries in the daily Federal Reg-
ister.
A List of CFR Sections Affected (LSA) is published monthly, keyed to the
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.
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contact the issuing agency. The issuing agencys name appears at the top of
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vi
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RAYMOND A. MOSLEY,
Director,
Office of the Federal Register.
October 1, 2003.
vii
THIS TITLE
Title 48FEDERAL ACQUISITION REGULATIONS SYSTEM is composed of seven vol-

umes. The chapters in these volumes are arranged as follows: Chapter 1 (parts
1 to 51), chapter 1 (parts 52 to 99), chapter 2 (parts 201 to 299), chapters 3 to
6, chapters 7 to 14, chapters 15 to 28 and chapter 29 to end. The contents of these
volumes represent all current regulations codified under this title of the CFR
as of October 1, 2003.
The Federal acquisition regulations in chapter 1 are those government-wide

acquisition regulations jointly issued by the General Services Administration,
the Department of Defense, and the National Aeronautics and Space Administra-
tion. Chapters 2 through 99 are acquisition regulations issued by individual gov-
ernment agencies. Parts 1 to 69 in each of chapters 2 through 99 are reserved
for agency regulations implementing the Federal acquisition regulations in chap-
ter 1 and are numerically keyed to them. Parts 70 to 99 in chapters 2 through
99 contain agency regulations supplementing the Federal acquisition regulations.
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).
The first volume, containing chapter 1 (parts 1 to 51), includes an index to

the Federal acquisition regulations.
ix
x
CFRORDR.FRM</GPH>
Title 48Federal
Acquisition Regulations
System
(This book contains chapter 1, parts 1 to 51)
Part
CHAPTER 1Federal Acquisition Regulation ......................... 1
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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
5 Publicizing contract actions ................................... 81

6 Competition requirements ...................................... 93
7 Acquisition planning ............................................... 104
8 Required sources of supplies and services ............... 119
9 Contractor qualifications ........................................ 136
10 Market research ...................................................... 168
11 Describing agency needs ......................................... 171
12 Acquisition of commercial items ............................ 184
SUBCHAPTER CCONTRACTING METHODS AND CONTRACT TYPES
13 Simplified acquisition procedures ........................... 197

14 Sealed bidding ......................................................... 214
15 Contracting by negotiation ..................................... 242
16 Types of contracts ................................................... 291
17 Special contracting methods ................................... 318
18 [Reserved]
SUBCHAPTER DSOCIOECONOMIC PROGRAMS
19 Small business programs ......................................... 332

2021 [Reserved]
22 Application of labor laws to Government acquisi-
tions ..................................................................... 390
23 Environment, energy and water efficiency, renew-
able energy technologies, occupational safety,
and drug-free workplace ....................................... 449
24 Protection of privacy and freedom of information 461
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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
27 Patents, data, and copyrights ................................. 489

28 Bonds and insurance ................................................ 529
29 Taxes ....................................................................... 549
30 Cost accounting standards administration ............. 555
31 Contract cost principles and procedures ................. 563
32 Contract financing .................................................. 618
33 Protests, disputes, and appeals ............................... 684
SUBCHAPTER FSPECIAL CATEGORIES OF CONTRACTING
34 Major system acquisition ........................................ 698

35 Research and development contracting .................. 701
36 Construction and architect-engineer contracts ...... 711
37 Service contracting ................................................. 731
38 Federal supply schedule contracting ...................... 743
39 Acquisition of information technology ................... 744
40 [Reserved]
41 Acquisition of utility services ................................. 748
SUBCHAPTER GCONTRACT MANAGEMENT
42 Contract administration and audit services ........... 758

43 Contract modifications ........................................... 792
44 Subcontracting policies and procedures .................. 797
45 Government property .............................................. 804
46 Quality assurance .................................................... 844
47 Transportation ........................................................ 862
48 Value engineering ................................................... 897
49 Termination of contracts ........................................ 905
50 Extraordinary contractual actions ......................... 947
51 Use of Government sources by contractors ............. 956
FAR Index ............................................................... 961
SUBCHAPTER AGENERAL
PART 1FEDERAL ACQUISITION Subpart 1.6Career Development,

REGULATIONS SYSTEM Contracting Authority, and Responsibilities
1.601 General.
Sec. 1.602 Contracting officers.
1.000 Scope of part. 1.6021 Authority.
1.6022 Responsibilities.
Subpart 1.1Purpose, Authority, Issuance 1.6023 Ratification of unauthorized com-
mitments.
1.101 Purpose. 1.603 Selection, appointment, and termi-
1.102 Statement of guiding principles for nation of appointment.
the Federal Acquisition System. 1.6031 General.
1.1021 Discussion. 1.6032 Selection.
1.1022 Performance standards. 1.6033 Appointment.
1.1023 Acquisition team. 1.6034 Termination.
1.1024 Role of the acquisition team.
1.103 Authority. Subpart 1.7Determinations and Findings
1.104 Applicability.
1.105 Issuance. 1.700 Scope of subpart.
1.1051 Publication and code arrangement. 1.701 Definition.
1.1052 Arrangement of regulations. 1.702 General.
1.1053 Copies. 1.703 Class determinations and findings.
1.704 Content.
1.106 OMB approval under the Paperwork
1.705 Supersession and modification.
Reduction Act.
1.706 Expiration.
1.107 Certifications.
1.707 Signatory authority.
1.108 FAR conventions.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
Subpart 1.2Administration ter 137; and 42 U.S.C. 2473(c).
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
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
Federal Acquisition Regulation 1.1024
acquisition cycle to help the Govern- ness require open communication

ment determine the capabilities avail- among team members, internal and ex-
able in the commercial marketplace. ternal customers, and the public.
The Government will maximize its use (2) To achieve efficient operations,
of commercial products and services in the System must shift its focus from
meeting Government requirements. risk avoidance to one of risk man-
(5) It is the policy of the System to agement. The cost to the taxpayer of
promote competition in the acquisition attempting to eliminate all risk is pro-
process. hibitive. The Executive Branch will ac-
(6) The System must perform in a cept and manage the risk associated
timely, high quality, and cost-effective with empowering local procurement of-
manner. ficials to take independent action
(7) All members of the Team are re- based on their professional judgment.
quired to employ planning as an inte- (3) The Government shall exercise
gral part of the overall process of ac- discretion, use sound business judg-
quiring products or services. Although ment, and comply with applicable laws
advance planning is required, each and regulations in dealing with con-
member of the Team must be flexible tractors and prospective contractors.
in order to accommodate changing or All contractors and prospective con-
unforeseen mission needs. Planning is a tractors shall be treated fairly and im-
tool for the accomplishment of tasks, partially but need not be treated the
and application of its discipline should same.
be commensurate with the size and na-
(d) Fulfill public policy objectives. The
ture of a given task.
System must support the attainment
(b) Minimize administrative operating
of public policy goals adopted by the
costs. (1) In order to ensure that max-
Congress and the President. In attain-
imum efficiency is obtained, rules, reg-
ing these goals, and in its overalll oper-
ulations, and policies should be pro-
ations, the process shall ensure the ef-
mulgated only when their benefits
ficient use of public resources.
clearly exceed the costs of their devel-
opment, implementation, administra- [60 FR 34734, July 3, 1995, as amended at 62
tion, and enforcement. This applies to FR 51229, Sept. 30, 1997]
internal administrative processes, in-
cluding reviews, and to rules and proce- 1.1023 Acquisition team.
dures applied to the contractor com- The purpose of defining the Federal
munity. Acquisition Team (Team) in the Guid-
(2) The System must provide uni- ing Principles is to ensure that partici-
formity where it contributes to effi- pants in the System are identifiedbe-
ciency or where fairness or predict- ginning with the customer and ending
ability is essential. The System should with the contractor of the product or
also, however, encourage innovation, service. By identifying the team mem-
and local adaptation where uniformity bers in this manner, teamwork, unity
is not essential. of purpose, and open communication
(c) Conduct business with integrity, among the members of the Team in
fairness, and openness. (1) An essential sharing the vision and achieving the
consideration in every aspect of the goal of the System are encouraged. In-
System is maintaining the publics dividual team members will participate
trust. Not only must the System have in the acquisition process at the appro-
integrity, but the actions of each mem- priate time.
ber of the Team must reflect integrity,
fairness, and openness. The foundation [60 FR 34734, July 3, 1995]
of integrity within the System is a
competent, experienced, and well- 1.1024 Role of the acquisition team.
trained, professional workforce. Ac- (a) Government members of the
cordingly each member of the Team is Team must be empowered to make ac-
responsible and accountable for the quisition decisions within their areas
wise use of public resources as well as of responsibility, including selection,
acting in a manner which maintains negotiation, and administration of con-
the publics trust. Fairness and open- tracts consistent with the Guiding
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
left of the dash, represent, in order, the 1.1053 Copies.

subpart (one or two digits), and the Copies of the FAR in Federal Reg-
section (two digits). The number to the ister, loose-leaf, CDROM and CFR
right of the dash represents the sub- form may be purchased from the Super-
section. Subdivisons may be used at intendent of Documents, Government
the section and subsection level to Printing Office (GPO), Washington, DC
identify individual paragraphs. The fol- 20402.
lowing example illustrates the make-
up of a FAR number citation (note that [48 FR 42103, Sept. 19, 1983. Redesignated at
60 FR 34733, July 3, 1995, as amended at 62 FR
subchapters are not used with cita- 40236, July 25, 1997]
tions):
1.106 OMB approval under the Paper-
work Reduction Act.
The Paperwork Reduction Act of 1980
(Pub. L. 96511) imposes a requirement
on Federal agencies to obtain approval
from the Office of Management and
Budget (OMB) before collecting infor-
mation from 10 or more members of the
public. The information collection and
(2) Subdivisions below the section or recordkeeping requirements contained
subsection level consist of parenthet- in this regulation have been approved
ical alpha numerics using the following by the OMB. The following OMB con-
sequence: (a)(1)(i)(A)(1)(i). trol numbers apply:
(c) References and citations. (1) Unless
otherwise stated, cross-references indi- OMB control
FAR segment No.
cate parts, subparts, sections, sub-
sections, paragraphs, subparagraphs, or 3.103 .................................................................. 90000018
3.4 ...................................................................... 90000003
subdivisions of this regulation. 4.102 .................................................................. 90000033
(2) This regulation may be referred to 4.7 ...................................................................... 90000034
as the Federal Acquisition Regulation 4.9 ...................................................................... 90000097
4.602 .................................................................. 90000145
or the FAR. 4.603 .................................................................. 90000145
(3) Using the FAR coverage at 9.106 5.405 .................................................................. 90000036
7.2 ...................................................................... 90000082
4(d) as a typical illustration, reference 8.5 ...................................................................... 90000113
to the 9.1 ...................................................................... 90000011
(i) Part would be FAR Part 9 out- 9.2 ...................................................................... 90000020
14.201 ................................................................ 90000034
side the FAR and Part 9 within the 14.2024 ............................................................ 90000040
FAR. 14.2025 ............................................................ 90000039
(ii) Subpart would be FAR Subpart 14.205 ................................................................ 90000037
14.214 ................................................................ 90000105
9.1 outside the FAR and Subpart 9.1 14.407 ................................................................ 90000038
within the FAR. 14.5 .................................................................... 90000041
(iii) Section would be FAR 9.106 15.2 .................................................................... 90000037
15.209 ................................................................ 90000034
outside the FAR and 9.106 within the 15.4 .................................................................... 90000013
FAR. 15.4041(f) ........................................................ 90000080
15.4072 ............................................................ 90000078
(iv) Subsection would be FAR 9.106 15.408 ................................................................ 90000115
4 outside the FAR and 9.1064 with- 19.7 .................................................................... 90000006
in the FAR. 19.12 .................................................................. 90000150
22.103 ................................................................ 90000065
(v) Paragraph would be FAR 9.106 22.8 .................................................................... 12150072
4(d) outside the FAR and 9.1064(d) 22.11 .................................................................. 90000066
within the FAR. 22.13 .................................................................. 12150072
22.14 .................................................................. 12150072
(4) Citations of authority (e.g., stat- 23.9 .................................................................... 90000139
utes or executive orders) in the FAR 23.602 ................................................................ 90000107
shall follow the Federal Register form 27.3 .................................................................... 90000095
27.4 .................................................................... 90000090
guides. 28.1 .................................................................... 90000045
28.2 .................................................................... 90000045
[48 FR 42103, Sept. 19, 1983. Redesignated at 29.304 ................................................................ 90000059
60 FR 34733, July 3, 1995, as amended at 65 FR 30.6 .................................................................... 90000129
36015, June 6, 2000] 31.20546 .......................................................... 90000079
9
EC03AP91.000</GPH>
1.106 48 CFR Ch. 1 (10103 Edition)
OMB control OMB control

FAR segment FAR segment
No. No.
31.20546(a)(3) ................................................. 90000088 52.21910 .......................................................... 90000006

32 ....................................................................... 90000035 52.21919 .......................................................... 90000100
32.000 ................................................................ 90000138 52.21920 .......................................................... 90000100
32.1 .................................................................... 90000070 52.21921 .......................................................... 90000100
and 52.21922 .......................................................... 90000150
90000138 52.21923 .......................................................... 90000150
32.2 .................................................................... 90000138 52.21925 .......................................................... 90000150
32.4 .................................................................... 90000073 52.2222 ............................................................ 90000065
32.5 .................................................................... 90000010 52.2224 ............................................................ 12150119
and 52.2226 ............................................................ 12150140
90000138 52.2228 ............................................................ 12150149
32.7 .................................................................... 90000074 and
32.9 .................................................................... 90000102 12150017
32.10 .................................................................. 90000138 52.22211 .......................................................... 90000014
33 ....................................................................... 90000035 52.22218 .......................................................... 90000127
34.1 .................................................................... 90000132 52.22221 .......................................................... 12150072
36.2132 ............................................................ 90000037 52.22222 .......................................................... 12150072
36.603 ................................................................ 90000004 52.22223 .......................................................... 12150072
and 52.22225 .......................................................... 12150072
90000005 52.22226 .......................................................... 12150072
36.701 ................................................................ 90000037 52.22227 .......................................................... 12150072
41.202(c) ............................................................ 90000125 52.22232 .......................................................... 90000154
42.7 .................................................................... 90000013 52.22235 .......................................................... 12150072
42.12 .................................................................. 90000076 52.22236 .......................................................... 12150072
42.13 .................................................................. 90000076 52.22241 .......................................................... 12150017
42.14 .................................................................. 90000056 and
43.205(f) ............................................................ 90000026 12150150
45 ....................................................................... 90000075 52.22246 .......................................................... 90000066
46 ....................................................................... 90000077 52.2234 ............................................................ 90000134
47 ....................................................................... 90000061 52.2235 ............................................................ 90000147
48 ....................................................................... 90000027 52.2236(b)(5) ................................................... 90000101
49 ....................................................................... 90000028 52.2337 ............................................................ 90000117
50 ....................................................................... 90000029 52.2239 ............................................................ 90000134
51.1 .................................................................... 90000031 52.22313 .......................................................... 90000139
51.2 .................................................................... 90000032 52.22314 .......................................................... 90000139
52.2032 ............................................................ 90000018 52.2252 ............................................................ 90000023
52.2037 ............................................................ 90000091 and
52.2043 ............................................................ 90000097 90000024
52.2046 ............................................................ 90000145 52.2254 ............................................................ 90000130
52.2047 ............................................................ 90000159 52.2256 ............................................................ 90000025
52.2073 ............................................................ 90000114 52.2258 ............................................................ 90000022
52.2121(k) ........................................................ 90000159 52.2259 ............................................................ 90000141
52.2123 ............................................................ 90000136 52.22511 .......................................................... 90000141
52.2124(t) ........................................................ 90000159 52.22714 .......................................................... 90000090
52.21414 .......................................................... 90000047 52.22715 .......................................................... 90000090
52.21415 .......................................................... 90000044 52.22716 .......................................................... 90000090
52.21416 .......................................................... 90000044 52.22717 .......................................................... 90000090
52.21421 .......................................................... 90000039 52.22718 .......................................................... 90000090
52.21426 .......................................................... 90000034 52.22719 .......................................................... 90000090
52.21428 .......................................................... 90000013 52.22720 .......................................................... 90000090
52.2151(c)(2)(iv) .............................................. 90000048 52.22721 .......................................................... 90000090
52.2151(d) ....................................................... 90000044 52.22722 .......................................................... 90000090
52.2152 ............................................................ 90000034 52.22723 .......................................................... 90000090
52.2156 ............................................................ 90000047 52.2281 ............................................................ 90000045
52.2159 ............................................................ 90000078 52.2282 ............................................................ 90000045
52.21512 .......................................................... 90000013 52.22812 .......................................................... 90000135
52.21513 .......................................................... 90000013 52.22813 .......................................................... 90000045
52.21514 .......................................................... 90000080 52.22815 .......................................................... 90000045
52.21519 .......................................................... 90000115 52.22816 .......................................................... 90000045
52.21520 .......................................................... 90000013 52.2292 ............................................................ 90000059
52.21521 .......................................................... 90000013 52.2306 ............................................................ 90000129
52.2162 ............................................................ 90000068 52.2321 ............................................................ 90000070
52.2163 ............................................................ 90000068 52.2322 ............................................................ 90000070
52.2164 ............................................................ 90000068 52.2323 ............................................................ 90000070
52.2165 ............................................................ 90000071 52.2324 ............................................................ 90000070
52.2166 ............................................................ 90000071 52.2325 ............................................................ 90000070
52.2167 ............................................................ 90000069 52.2326 ............................................................ 90000070
52.21610 .......................................................... 90000067 52.2327 ............................................................ 90000070
52.21613 .......................................................... 90000069 52.2328 ............................................................ 90000070
52.21615 .......................................................... 90000069 52.2329 ............................................................ 90000070
52.21616 .......................................................... 90000067 52.23210 .......................................................... 90000070
52.21617 .......................................................... 90000067 52.23211 .......................................................... 90000070
52.2199 ............................................................ 90000006 52.23212 .......................................................... 90000073
10
OMB control OMB control

FAR segment FAR segment
No. No.
52.23213 .......................................................... 90000010 52.24763 .......................................................... 90000054

52.23214 .......................................................... 90000010 52.24764 .......................................................... 90000061
52.23215 .......................................................... 90000010 52.2481 ............................................................ 90000027
52.23216 .......................................................... 90000010 52.2482 ............................................................ 90000027
52.23220 .......................................................... 90000074
52.2483 ............................................................ 90000027
52.23221 .......................................................... 90000074
52.23222 .......................................................... 90000074 52.2492 ............................................................ 90000028
52.23227 .......................................................... 90000102 52.2493 ............................................................ 90000028
52.23229 .......................................................... 90000138 52.2495 ............................................................ 90000028
52.23230 .......................................................... 90000138 52.2496 ............................................................ 90000028
52.23231 .......................................................... 90000138 52.24911 .......................................................... 90000028
52.23232 .......................................................... 90000138 52.2501 ............................................................ 90000029
52.2331 ............................................................ 90000035 53.2361(a) ....................................................... 90000037
52.2341 ............................................................ 90000133
SF 24 ................................................................. 90000045
52.2365 ............................................................ 90000062
52.23613 .......................................................... 12200029 SF 25 ................................................................. 90000045
and SF 25A ............................................................. 90000045
90000060 SF 28 ................................................................. 90000001
52.23615 .......................................................... 90000058 SF 34 ................................................................. 90000045
52.23619 .......................................................... 90000064 SF 35 ................................................................. 90000045
52.2411 ............................................................ 90000126 SF 254 ............................................................... 90000004
52.2413 ............................................................ 90000122 SF 255 ............................................................... 90000005
52.2417 ............................................................ 90000123
SF 273 ............................................................... 90000045
52.24113 .......................................................... 90000124
52.24212 .......................................................... 90000056 SF 274 ............................................................... 90000045
52.2431 ............................................................ 90000026 SF 275 ............................................................... 90000045
52.2432 ............................................................ 90000026 SF 294 ............................................................... 90000006
52.2433 ............................................................ 90000026 SF 295 ............................................................... 90000007
52.2434 ............................................................ 90000026 SF 312 ............................................................... 90000150
52.2436 ............................................................ 90000026 SF 1403 ............................................................. 90000011
52.2437 ............................................................ 90000026 SF 1404 ............................................................. 90000011
52.2452 ............................................................ 90000075
SF 1405 ............................................................. 90000011
52.2453 ............................................................ 90000075
SF 1406 ............................................................. 90000011
52.2455 ............................................................ 90000075
52.2457 ............................................................ 90000075 SF 1407 ............................................................. 90000011
52.2458 ............................................................ 90000075 SF 1408 ............................................................. 90000011
52.2459 ............................................................ 90000075 SF 1413 ............................................................. 90000014
52.24510 .......................................................... 90000075 SF 1416 ............................................................. 90000045
52.24511 .......................................................... 90000075 SF 1417 ............................................................. 90000037
52.24516 .......................................................... 90000075 SF 1418 ............................................................. 90000045
52.24517 .......................................................... 90000075 SF 1423 ............................................................. 90000015
52.24518 .......................................................... 90000075
SF 1424 ............................................................. 90000015
52.2462 ............................................................ 90000077
52.2463 ............................................................ 90000077 SF 1426 ............................................................. 90000015
52.2464 ............................................................ 90000077 SF 1427 ............................................................. 90000015
52.2465 ............................................................ 90000077 SF 1428 ............................................................. 90000015
52.2466 ............................................................ 90000077 SF 1429 ............................................................. 90000015
52.2467 ............................................................ 90000077 SF 1430 ............................................................. 90000015
52.2468 ............................................................ 90000077 SF 1431 ............................................................. 90000015
52.24610 .......................................................... 90000077 SF 1432 ............................................................. 90000015
52.24612 .......................................................... 90000077 SF 1433 ............................................................. 90000015
52.24615 .......................................................... 90000077
SF 1434 ............................................................. 90000015
52.2472 ............................................................ 90000053
52.24729 .......................................................... 90000061 SF 1435 ............................................................. 90000012
52.24730 .......................................................... 90000061 SF 1436 ............................................................. 90000012
52.24731 .......................................................... 90000061 SF 1437 ............................................................. 90000012
52.24732 .......................................................... 90000061 SF 1438 ............................................................. 90000012
52.24733 .......................................................... 90000061 SF 1439 ............................................................. 90000012
52.24734 .......................................................... 90000061 SF 1440 ............................................................. 90000012
52.24735 .......................................................... 90000061 SF 1443 ............................................................. 90000010
52.24736 .......................................................... 90000061 SF 1444 ............................................................. 90000089
52.24737 .......................................................... 90000061
SF 1445 ............................................................. 90000089
52.24738 .......................................................... 90000061
52.24739 .......................................................... 90000061 SF 1446 ............................................................. 90000089
52.24740 .......................................................... 90000061
52.24741 .......................................................... 90000061
52.24742 .......................................................... 90000061
52.24743 .......................................................... 90000061
52.24744 .......................................................... 90000061
52.24748 .......................................................... 90000061
52.24751 .......................................................... 90000057
52.24753 .......................................................... 90000055
52.24757 .......................................................... 90000061
11
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 consideration.
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
(3) Be funded by their respective operating the FAR Secretariat to

agencies. print, publish, and distribute the FAR
(b) The chairperson of the CAA Coun- through the Code of Federal Regula-
cil shall be the representative of the tions system (including a loose-leaf
Administrator of General Services. The edition with periodic updates).
other members of this council shall be (b) Additionally, the FAR Secretariat
one each representative from the (1) shall provide the two councils with
Departments of Agriculture, Com- centralized services for
merce, Energy, Health and Human (1) Keeping a synopsis of current
Services, Interior, Labor, State, Trans- FAR cases and their status;
portation, and Treasury, and (2) Envi- (2) Maintaining official files;
ronmental Protection Agency, Social (3) Assisting parties interested in re-
Security Administration, Small Busi- viewing the files on completed cases;
ness Administration, and Department and
of Veterans Affairs. (4) Performing miscellaneous admin-
(c) The Director of the DAR Council istrative tasks pertaining to the main-
shall be the representative of the Sec- tenance of the FAR.
retary of Defense. The operation of the
DAR Council will be as prescribed by
FR 40236, July 25, 1997]
the Secretary of Defense. Membership
shall include representatives of the 1.202 Agency compliance with the
military Departments, the Defense Lo- FAR.
gistics Agency, and the National Aero-
Agency compliance with the FAR
nautics and Space Administration.
(see 1.304) is the responsibility of the
(d) Responsibility for processing revi-
Secretary of Defense (for the military
sions to the FAR is apportioned by the
departments and defense agencies), the
two councils so that each council has
Administrator of General Services (for
cognizance over specified parts or sub-
civilian agencies other than NASA),
parts.
and the Administrator of NASA (for
(e) Each council shall be responsible
NASA activities).
for
(1) Agreeing on all revisions with the
other council; Subpart 1.3Agency Acquisition
(2) Submitting to the FAR Secre- Regulations
tariat (see 1.2012) the information re-
quired under paragraphs 1.5012(b) and 1.301 Policy.
(e) for publication in the FEDERAL REG- (a)(1) Subject to the authorities in
ISTER of a notice soliciting comments paragraph (c) below and other statu-
on a proposed revision to the FAR; tory authority, an agency head may
(3) Considering all comments re- issue or authorize the issuance of agen-
ceived in response to notice of proposed cy acquisition regulations that imple-
revisions; ment or supplement the FAR and in-
(4) Arranging for public meetings; corporate, together with the FAR,
(5) Preparing any final revision in the agency policies, procedures, contract
appropriate FAR format and language; clauses, solicitation provisions, and
and forms that govern the contracting
(6) Submitting any final revision to process or otherwise control the rela-
the FAR Secretariat for publication in tionship between the agency, including
the FEDERAL REGISTER and printing for any of its suborganizations, and con-
distribution. tractors or prospective contractors.
[48 FR 42103, Sept. 19, 1983, as amended at 50 (2) Subject to the authorities in (c)
FR 2269, Jan. 15, 1985; 50 FR 26903, June 28, below and other statutory authority,
1985; 51 FR 2649, Jan. 17, 1986; 54 FR 29280, an agency head may issue or authorize
July 11, 1989; 62 FR 64940, Dec. 9, 1997; 63 FR the issuance of internal agency guid-
9069, Feb. 23, 1998; 65 FR 16286, Mar. 27, 2000] ance at any organizational level (e.g.,
designations and delegations of author-
1.2012 FAR Secretariat. ity, assignments of responsibilities,
(a) The General Services Administra- work-flow procedures, and internal re-
tion is responsible for establishing and porting requirements).
13
1.302 48 CFR Ch. 1 (10103 Edition)
(b) Agency heads shall establish pro- 1.302 Limitations.

cedures to ensure that agency acquisi-
Agency acquisition regulations shall
tion regulations are published for com-
be limited to
ment in the FEDERAL REGISTER in con-
(a) Those necessary to implement
formance with the procedures in sub-
FAR policies and procedures within the
part 1.5 and as required by section 22 of agency; and
the Office of Federal Procurement Pol-
(b) Additional policies, procedures,
icy Act, as amended (41 U.S.C. 418b), solicitation provisions, or contract
and other applicable statutes, when clauses that supplement the FAR to
they have a significant effect beyond satisfy the specific needs of the agency.
the internal operating procedures of
the agency or have a significant cost or 1.303 Publication and codification.
administrative impact on contractors
(a) Agency-wide acquisition regula-
or offerors. However, publication is not
tions shall be published in the FEDERAL
required for issuances that merely im-
REGISTER as required by law, shall be
plement or supplement higher level codified under an assigned chapter in
issuances that have previously under- Title 48, Code of Federal Regulations,
gone the public comment process, un- and shall parallel the FAR in format,
less such implementation or sup- arrangement, and numbering system
plementation results in an additional (but see 1.1041(c)). Coverage in an
significant cost or administrative im- agency acquisition regulation that im-
pact on contractors or offerors or effect plements a specific part, subpart, sec-
beyond the internal operating proce- tion, or subsection of the FAR shall be
dures of the issuing organization. numbered and titled to correspond to
Issuances under 1.301(a)(2) need not be the appropriate FAR number and title.
publicized for public comment. Supplementary material for which
(c) When adopting acquisition regula- there is no counterpart in the FAR
tions, agencies shall ensure that they shall be codified using chapter, part,
comply with the Paperwork Reduction subpart, section, or subsection num-
Act (44 U.S.C. 3501, et seq.) as imple- bers of 70 and up (e.g., for the Depart-
mented in 5 CFR part 1320 (see 1.105) ment of Interior, whose assigned chap-
and the Regulatory Flexibility Act (5 ter number in Title 48 is 14, part 1470,
U.S.C. 601, et seq.). Normally, when a subpart 1401.70, section 1401.370, or sub-
law requires publication of a proposed section 1401.30170.)
regulation, the Regulatory Flexibility (b) Issuances under 1.301(a)(2) need
Act applies and agencies must prepare not be published in the FEDERAL REG-
ISTER.
written analyses or certifications as
provided in the law. [48 FR 42103, Sept. 19, 1983, as amended at 50
(d) Agency acquisition regulations FR 2269, Jan. 15, 1985]
implementing or supplementing the
FAR are, for 1.304 Agency control and compliance
procedures.
(1) The military departments and de-
fense agencies, issued subject to the (a) Under the authorities of 1.301(d),
authority of the Secretary of Defense; agencies shall control and limit
(2) NASA activities, issued subject to issuance of agency acquisition regula-
the authorities of the Administrator of tions and, in particular, local agency
NASA; and directives that restrain the flexibilities
found in the FAR, and shall establish
(3) The civilian agencies other than
formal procedures for the review of
NASA, issued by the heads of those
these documents to assure compliance
agencies subject to the overall author- with this part 1.
ity of the Administrator of General
(b) Agency acquisition regulations
Services or independent authority the shall not
agency may have.
(1) Unnecessarily repeat, paraphrase,
[48 FR 42103, Sept. 19, 1983, as amended at 50 or otherwise restate material con-
FR 2269, Jan. 15, 1985; 54 FR 5054, Jan. 31, tained in the FAR or higher-level agen-
1989] cy acquisition regulations; or
14
(2) Except as required by law or as (f) The issuance of policies or proce-

provided in subpart 1.4, conflict or be dures that govern the contracting proc-
inconsistent with FAR content. ess or otherwise control contracting re-
(c) Agencies shall evaluate all regu- lationships that are not incorporated
latory coverage in agency acquisition into agency acquisition regulations in
regulations to determine if it could accordance with 1.301(a).
apply to other agencies. Coverage that [48 FR 42103, Sept. 19, 1983, as amended at 66
is not peculiar to one agency shall be FR 2118, Jan. 10, 2001]
recommended for inclusion in the FAR.
1.402 Policy.
FR 39190, July 26, 1996; 65 FR 16286, Mar. 27, Unless precluded by law, executive
2000] order, or regulation, deviations from
the FAR may be granted as specified in
Subpart 1.4Deviations from the this subpart when necessary to meet
FAR the specific needs and requirements of
each agency. The development and
1.400 Scope of subpart. testing of new techniques and methods
of acquisition should not be stifled
This subpart prescribes the policies
simply because such action would re-
and procedures for authorizing devi-
quire a FAR deviation. The fact that
ations from the FAR. Exceptions per-
deviation authority is required should
taining to the use of forms prescribed
not, of itself, deter agencies in their de-
by the FAR are covered in part 53 rath-
velopment and testing of new tech-
er than in this subpart.
niques and acquisition methods. Refer
1.401 Definition. to 31.101 for instructions concerning de-
viations pertaining to the subject mat-
Deviation means any one or combina- ter of part 31, Contract Cost Principles
tion of the following: and Procedures. Deviations are not au-
(a) The issuance or use of a policy, thorized with respect to 30.2013 and
procedure, solicitation provision (see 30.2014, or the requirements of the
definition in 2.101), contract clause (see Cost Accounting Standards Board
definition in 2.101), method, or practice (CASB) rules and regulations (48 CFR
of conducting acquisition actions of Chapter 99 (FAR Appendix)). Refer to
any kind at any stage of the acquisi- 30.2015 for instructions concerning
tion process that is inconsistent with waivers pertaining to Cost Accounting
the FAR. Standards.
(b) The omission of any solicitation
provision or contract clause when its [48 FR 42103, Sept. 19, 1983, as amended at 52
FR 35612, Sept. 22, 1987; 62 FR 64914, Dec. 9,
prescription requires its use.
1997]
(c) The use of any solicitation provi-
sion or contract clause with modified 1.403 Individual deviations.
or alternate language that is not au-
Individual deviations affect only one
thorized by the FAR (see definition of
contract action, and, unless 1.405(e) is
modification in 52.101(a) and defini-
applicable, may be authorized by the
tion of alternate in 2.101(a)).
agency head. The contracting officer
(d) The use of a solicitation provision
must document the justification and
or contract clause prescribed by the
agency approval in the contract file.
FAR on a substantially as follows or sub-
stantially the same as basis (see defini- [67 FR 13053, Mar. 20, 2002]
tions in 2.101 and 52.101(a)), if such use
is inconsistent with the intent, prin- 1.404 Class deviations.
ciple, or substance of the prescription Class deviations affect more than one
or related coverage on the subject mat- contract action. When an agency
ter in the FAR. knows that it will require a class devi-
(e) The authorization of lesser or ation on a permanent basis, it should
greater limitations on the use of any propose a FAR revision, if appropriate.
solicitation provision, contract clause, Civilian agencies, other than NASA,
policy, or procedure prescribed by the must furnish a copy of each approved
FAR. class deviation to the FAR Secretariat.
15
1.405 48 CFR Ch. 1 (10103 Edition)
(a) For civilian agencies except FAR Secretariat through a central

NASA, class deviations may be author- agency control point.
ized by agency heads or their des- (e) For civilian agencies other than
ignees, unless 1.405(e) is applicable. NASA, if a deviation required to com-
Delegation of this authority shall not ply with a treaty or an executive
be made below the head of a con- agreement is not authorized by para-
tracting activity. Authorization of graph (b) or (c) of this section, then the
class deviations by agency officials is request for deviation shall be processed
subject to the following limitations: through the FAR Secretariat to the Ci-
(1) An agency official who may au- vilian Agency Acquisition Council.
thorize a class deviation, before doing [48 FR 42103, Sept. 19, 1983, as amended at 61
so, shall consult with the chairperson FR 67411, Dec. 20, 1996]
of the Civilian Agency Acquisition
Council (CAA Council), unless that Subpart 1.5Agency and Public
agency official determines that ur-
gency precludes such consultation.
Participation
(2) Recommended revisions to the
FAR shall be transmitted to the FAR SOURCE: 50 FR 2269, Jan. 15, 1985, unless
otherwise noted.
Secretariat by agency heads or their
designees for authorizing class devi- 1.501 Solicitation of agency and public
ations. views.
(b) For DOD, class deviations shall be
controlled, processed, and approved in 1.5011 Definition.
accordance with the Defense FAR Sup- Significant revisions, as used in this
plement. subpart, means revisions that alter the
(c) For NASA, class deviations shall substantive meaning of any coverage in
be controlled and approved by the As- the FAR System having a significant
sistant Administrator for Procure- cost or administrative impact on con-
ment. Deviations shall be processed in tractors or offerors, or a significant ef-
accordance with agency regulations. fect beyond the internal operating pro-
[48 FR 42103, Sept. 19, 1983, as amended at 56 cedures of the issuing agency. This ex-
FR 15148, Apr. 15, 1991; 59 FR 11387, March 10, pression, for example, does not include
1994; 61 FR 67411, Dec. 20, 1996; 67 FR 13053, editorial, stylistic, or other revisions
13068, Mar. 20, 2002] that have no impact on the basic mean-
ing of the coverage being revised.
1.405 Deviations pertaining to treaties
and executive agreements. 1.5012 Opportunity for public com-
(a) Executive agreements, as used in ments.
this section, means Government-to- (a) Views of agencies and nongovern-
Government agreements, including mental parties or organizations will be
agreements with international organi- considered in formulating acquisition
zations, to which the United States is a policies and procedures.
party. (b) The opportunity to submit writ-
(b) Any deviation from the FAR reten comments on proposed significant
quired to comply with a treaty to revisions shall be provided by placing a
which the United States is a party is notice in the FEDERAL REGISTER. Each
authorized, unless the deviation would of these notices shall include
be inconsistent with FAR coverage (1) The text of the revision or, if it is
based on a law enacted after the execu- impracticable to publish the full text,
tion of the treaty. a summary of the proposal;
(c) Any deviation from the FAR re- (2) The address and telephone number
quired to comply with an executive of the individual from whom copies of
agreement is authorized unless the de- the revision, in full text, can be re-
viation would be inconsistent with quested and to whom comments there-
FAR coverage based on law. on should be addressed; and
(d) For civilian agencies other than (3) When 1.5013(b) is applicable, a
NASA, a copy of the text deviation au- statement that the revision is effective
thorized under paragraph (b) or (c) of on a temporary basis pending comple-
this section shall be transmitted to the tion of the public comment period.
16
(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
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]
18
1.6032 Selection. Subpart 1.7Determinations and

In selecting contracting officers, the Findings
appointing official shall consider the
complexity and dollar value of the ac- SOURCE: 50 FR 1726, Jan. 11, 1985 (interim
quisitions to be assigned and the can- rule), and 50 FR 52429, Dec. 23, 1985 (final
didates experience, training, edu- rule), unless otherwise noted.
cation, business acumen, judgment,
character, and reputation. Examples of 1.700 Scope of subpart.
selection criteria include This subpart prescribes general poli-
(a) Experience in Government con- cies and procedures for the use of de-
tracting and administration, commer- terminations and findings (D&Fs). Re-
cial purchasing, or related fields; quirements for specific types of D&Fs
(b) Education or special training in can be found with the appropriate sub-
business administration, law, account- ject matter.
ing, engineering, or related fields;
(c) Knowledge of acquisition policies 1.701 Definition.
and procedures, including this and Determination and Findings (D&F)
other applicable regulations; means a special form of written ap-
(d) Specialized knowledge in the par- proval by an authorized official that is
ticular assigned field of contracting; required by statute or regulation as a
and prerequisite to taking certain contract
(e) Satisfactory completion of acqui- actions. The determination is a conclu-
sition training courses. sion or decision supported by the find-
ings. The findings are statements of
1.6033 Appointment.
fact or rationale essential to support
(a) Contracting officers shall be ap- the determination and must cover each
pointed in writing on an SF 1402, Cer- requirement of the statute or regula-
tificate of Appointment, which shall tion.
state any limitations on the scope of
[50 FR 1726, Jan. 11, 1985 (interim rule), and
authority to be exercised, other than
50 FR 52429, Dec. 23, 1985 (final rule), as
limitations contained in applicable law amended at 67 FR 13053, Mar. 20, 2002]
or regulation. Appointing officials
shall maintain files containing copies 1.702 General.
of all appointments that have not been
(a) A D&F shall ordinarily be for an
terminated.
individual contract action. Unless oth-
(b) Agency heads are encouraged to
erwise prohibited, class D&Fs may be
delegate micro-purchase authority to
executed for classes of contract action
individuals who are employees of an
(see 1.703). The approval granted by a
executive agency or members of the
D&F is restricted to the proposed con-
Armed Forces of the United States who
tract action(s) reasonably described in
will be using the supplies or services
that D&F. D&Fs may provided for a
being purchased. Individuals delegated
reasonable degree of flexibility. Fur-
this authority are not required to be
thermore, in their application, reason-
appointed on an SF 1402, but shall be
able variations in estimated quantities
appointed in writing in accordance
or prices are permitted, unless the D&F
with agency procedures.
specifies otherwise.
[61 FR 39190, July 26, 1996] (b) When an option is anticipated, the
D&F shall state the approximate quan-
1.6034 Termination. tity to be awarded initially and the ex-
Termination of a contracting officer tent of the increase to be permitted by
appointment will be by letter, unless the option.
the Certificate of Appointment con-
tains other provisions for automatic 1.703 Class determinations and find-
termination. Terminations may be for ings.
reasons such as reassignment, termi- (a) A class D&F provides authority
nation of employment, or unsatisfac- for a class of contract actions. A class
tory performance. No termination shall may consist of contract actions for the
operate retroactively. same or related supplies or services or
19
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
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.
20
(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
2.101 48 CFR Ch. 1 (10103 Edition)
methodologies, and related software ture, or incidental services, that mem-

supporting studies, analyses or evalua- bers of the architectural and engineer-
tions. ing professions (and individuals in
(3) Engineering and technical serv- their employ) may logically or justifi-
ices, i.e., contractual services used to ably perform, including studies, inves-
support the program office during the tigations, surveying and mapping,
acquisition cycle by providing such tests, evaluations, consultations, com-
services as systems engineering and prehensive planning, program manage-
technical direction (see 9.5051(b)) to ment, conceptual designs, plans and
ensure the effective operation and specifications, value engineering, con-
maintenance of a weapon system or struction phase services, soils engi-
major system as defined in OMB Cir- neering, drawing reviews, preparation
cular No. A109 or to provide direct of operating and maintenance manuals,
support of a weapon system that is es- and other related services.
sential to research, development, pro- Assignment of claims means the trans-
duction, operation or maintenance of fer or making over by the contractor to
the system. a bank, trust company, or other financ-
Affiliates means associated business ing institution, as security for a loan
concerns or individuals if, directly or to the contractor, of its right to be
indirectly paid by the Government for contract
(1) Either one controls or can control performance.
the other; or Basic research means that research di-
(2) A third party controls or can con- rected toward increasing knowledge in
trol both. science. The primary aim of basic re-
Agency head or head of the agency search is a fuller knowledge or under-
means the Secretary, Attorney Gen- standing of the subject under study,
eral, Administrator, Governor, Chair- rather than any practical application
person, or other chief official of an ex- of that knowledge.
ecutive agency, unless otherwise indi- Best value means the expected out-
cated, including any deputy or assist- come of an acquisition that, in the
ant chief official of an executive agen- Governments estimation, provides the
cy. greatest overall benefit in response to
Alternate means a substantive vari- the requirement.
ation of a basic provision or clause pre- Bid sample means a product sample
scribed for use in a defined cir- required to be submitted by an offeror
cumstance. It adds wording to, deletes to show characteristics of the offered
wording from, or substitutes specified products that cannot adequately be de-
wording for a portion of the basic proscribed by specifications, purchase de-
vision or clause. The alternate version scriptions, or the solicitation (e.g., bal-
of a provision or clause is the basic ance, facility of use, or pattern).
provision or clause as changed by the Broad agency announcement means a
addition, deletion, or substitution (see general announcement of an agencys
52.105(a)). research interest including criteria for
Architect-engineer services, as defined selecting proposals and soliciting the
in 40 U.S.C. 541, means participation of all offerors capable of
(1) Professional services of an archi- satisfying the Governments needs (see
tectural or engineering nature, as de- 6.102(d)(2)).
fined by State law, if applicable, that Bundled contract means a contract
are required to be performed or ap- where the requirements have been con-
proved by a person licensed, registered, solidated by bundling. (See the defini-
or certified to provide those services; tion of bundling.)
(2) Professional services of an archi- Bundling means
tectural or engineering nature per- (1) Consolidating two or more re-
formed by contract that are associated quirements for supplies or services,
with research, planning, development, previously provided or performed under
design, construction, alteration, or re- separate smaller contracts, into a so-
pair of real property; and licitation for a single contract that is
(3) Those other professional services likely to be unsuitable for award to a
of an architectural or engineering na- small business concern due to
22
(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
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 definition 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
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
25
2.101 48 CFR Ch. 1 (10103 Edition)
(1) Require that a duty be performed (2) Reflect a clear understanding of

at a particular office or activity; or the requirements; and
(2) Restrict in any way a contracting (3) Are consistent with the various
officer in the performance of any duty elements of the offerors technical pro-
properly assigned. posal.
Conviction means a judgment or con- Cost sharing means an explicit ar-
viction of a criminal offense by any rangement under which the contractor
court of competent jurisdiction, wheth- bears some of the burden of reasonable,
er entered upon a verdict or a plea, and allocable, and allowable contract cost.
includes a conviction entered upon a Customs territory of the United States
plea of nolo contendere. For use in sub- means the 50 States, the District of Co-
part 23.5, see the definition at 23.503. lumbia, and Puerto Rico.
Cost or pricing data (10 U.S.C. Data Universal Numbering System
2306a(h)(1) and 41 U.S.C. 254b) means all (DUNS) number means the 9-digit num-
facts that, as of the date of price agree- ber assigned by Dun and Bradstreet,
ment or, if applicable, an earlier date Inc. (D&B), to identify unique business
agreed upon between the parties that is entities.
as close as practicable to the date of Data Universal Numbering System +4
agreement on price, prudent buyers (DUNS+4) number means the DUNS
and sellers would reasonably expect to number assigned by D&B plus a 4-char-
affect price negotiations significantly. acter suffix that may be assigned by a
Cost or pricing data are data requiring business concern. (D&B has no affili-
certification in accordance with 15.406 ation with this 4-character suffix.) This
2. Cost or pricing data are factual, not 4-character suffix may be assigned at
judgmental; and are verifiable. While the discretion of the business concern
they do not indicate the accuracy of to establish additional CCR records for
the prospective contractors judgment identifying alternative Electronic
about estimated future costs or projec- Funds Transfer (EFT) accounts (see
tions, they do include the data forming subpart 32.11) for the same concern.
the basis for that judgment. Cost or Day means, unless otherwise speci-
pricing data are more than historical fied, a calendar day.
accounting data; they are all the facts Debarment means action taken by a
that can be reasonably expected to con- debarring official under 9.406 to exclude
tribute to the soundness of estimates a contractor from Government con-
of future costs and to the validity of tracting and Government-approved
determinations of costs already in- subcontracting for a reasonable, speci-
curred. They also include such factors fied period; a contractor that is ex-
as cluded is debarred.
(1) Vendor quotations; Delivery order means an order for sup-
(2) Nonrecurring costs; plies placed against an established con-
tract or with Government sources.
(3) Information on changes in produc-
Descriptive literature means informa-
tion methods and in production or pur-
tion provided by an offeror, such as
chasing volume;
cuts, illustrations, drawings, and bro-
(4) Data supporting projections of
chures, that shows a products charac-
business prospects and objectives and
teristics or construction of a product
related operations costs;
or explains its operation. The term in-
(5) Unit-cost trends such as those as- cludes only that information needed to
sociated with labor efficiency; evaluate the acceptability of the prod-
(6) Make-or-buy decisions; uct and excludes other information for
(7) Estimated resources to attain operating or maintaining the product.
business goals; and Design-to-cost means a concept that
(8) Information on management deci- establishes cost elements as manage-
sions that could have a significant ment goals to achieve the best balance
bearing on costs. between life-cycle cost, acceptable per-
Cost realism means that the costs in formance, and schedule. Under this
an offerors proposal concept, cost is a design constraint
(1) Are realistic for the work to be during the design and development
performed; phases and a management discipline
26
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.
27
2.101 48 CFR Ch. 1 (10103 Edition)
Environmentally preferable means financial support from the Govern-

products or services that have a lesser ment; and
or reduced effect on human health and (1) A long-term relationship is con-
the environment when compared with templated;
competing products or services that (2) Most or all of the facilities are
serve the same purpose. This compari- owned or funded by the Government;
son may consider raw materials acqui- and
sition, production, manufacturing, (3) The FFRDC has access to Govern-
packaging, distribution, reuse, oper- ment and supplier data, employees, and
ation, maintenance, or disposal of the facilities beyond that common in a
product or service. normal contractual relationship.
Executive agency means an executive Final indirect cost rate means the indi-
department, a military department, or rect cost rate established and agreed
any independent establishment within upon by the Government and the con-
the meaning of 5 U.S.C. 101, 102, and tractor as not subject to change. It is
104(1), respectively, and any wholly usually established after the close of
owned Government corporation within the contractors fiscal year (unless the
the meaning of 31 U.S.C. 9101. parties decide upon a different period)
Facilities capital cost of money means to which it applies. For cost-reimburse-
cost of money as an element of the ment research and development con-
cost of facilities capital as used at 48 tracts with educational institutions, it
CFR 9904.414Cost Accounting Stand- may be predetermined; that is, estab-
ardCost of Money as an Element of lished for a future period on the basis
the Cost of Facilities Capital. of cost experience with similar con-
Facsimile means electronic equipment tracts, together with supporting data.
that communicates and reproduces First article means a preproduction
both printed and handwritten material. model, initial production sample, test
If used in conjunction with a reference sample, first lot, pilot lot, or pilot
to a document; e.g., facsimile bid, the models.
terms refers to a document (in the ex- First article testing means testing and
ample given, a bid) that has been trans- evaluating the first article for con-
mitted to and received by the Govern- formance with specified contract re-
ment via facsimile. quirements before or in the initial
Federal Acquisition Computer Network stage of production.
(FACNET) Architecture is a Government F.o.b. means free on board. This term
system that provides user access, em- is used in conjunction with a physical
ploys nationally and internationally point to determine
recognized data formats, and allows (1) The responsibility and basis for
the electronic data interchange of ac- payment of freight charges; and
quisition information between the pri- (2) Unless otherwise agreed, the point
vate sector and the Federal Govern- where title for goods passes to the
ment. buyer or consignee.
Federal agency means any executive F.o.b. destination means free on board
agency or any independent establish- at destination; i.e., the seller or con-
ment in the legislative or judicial signor delivers the goods on sellers or
branch of the Government (except the consignors conveyance at destination.
Senate, the House of Representatives, Unless the contract provides otherwise,
the Architect of the Capitol, and any the seller or consignor is responsible
activities under the Architects direc- for the cost of shipping and risk of loss.
tion). For use in the clause at 52.24734, see
Federally Funded Research and Devel- the definition at 52.24734(a).
opment Centers (FFRDCs) means activi- F.o.b. origin means free on board at
ties that are sponsored under a broad origin; i.e., the seller or consignor
charter by a Government agency (or places the goods on the conveyance.
agencies) for the purpose of per- Unless the contract provides otherwise,
forming, analyzing, integrating, sup- the buyer or consignee is responsible
porting, and/or managing basic or ap- for the cost of shipping and risk of loss.
plied research and/or development, and For use in the clause at 52.24729, see
that receive 70 percent or more of their the definition at 52.24729(a).
28
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
2.101 48 CFR Ch. 1 (10103 Edition)
communicated, and includes electroni- (ii) To a significant extent, its use in

cally transmitted and stored informa- the performance of a service or the fur-
tion. nishing of a product.
Indirect cost means any cost not di- (2) The term information tech-
rectly identified with a single, final nology includes computers, ancillary
cost objective, but identified with two equipment, software, firmware and
or more final cost objectives or an in- similar procedures, services (including
termediate cost objective. support services), and related re-
Indirect cost rate means the percent- sources.
age or dollar factor that expresses the (3) The term information tech-
ratio of indirect expense incurred in a nology does not include any equip-
given period to direct labor cost, manu- ment that
facturing cost, or another appropriate (i) Is acquired by a contractor inci-
base for the same period (see also dental to a contract; or
final indirect cost rate). (ii) Contains imbedded information
Ineligible means excluded from Gov- technology that is used as an integral
ernment contracting (and subcon- part of the product, but the principal
tracting, if appropriate) pursuant to function of which is not the acquisi-
statutory, Executive order, or regu- tion, storage, manipulation, manage-
latory authority other than this regu- ment, movement, control, display,
switching, interchange, transmission,
lation (48 CFR chapter 1) and its imple-
or reception of data or information.
menting and supplementing regula-
For example, HVAC (heating, ventila-
tions; for example, pursuant to the
tion, and air conditioning) equipment,
Davis-Bacon Act and its related stat-
such as thermostats or temperature
utes and implementing regulations, the
control devices, and medical equipment
Service Contract Act, the Equal Em-
where information technology is inte-
ployment Opportunity Acts and Execu-
gral to its operation, are not informa-
tive orders, the Walsh-Healey Public
tion technology.
Contracts Act, the Buy American Act,
Inherently governmental function
or the Environmental Protection Acts
means, as a matter of policy, a func-
and Executive orders. tion that is so intimately related to
Information other than cost or pricing the public interest as to mandate per-
data means any type of information formance by Government employees.
that is not required to be certified in This definition is a policy determina-
accordance with 15.4062 and is nection, not a legal determination. An in-
essary to determine price reasonable- herently governmental function in-
ness or cost realism. For example, such cludes activities that require either the
information may include pricing, sales, exercise of discretion in applying Gov-
or cost information, and includes cost ernment authority, or the making of
or pricing data for which certification value judgments in making decisions
is determined inapplicable after sub- for the Government. Governmental
mission. functions normally fall into two cat-
Information technology means any egories: the act of governing, i.e., the
equipment, or interconnected sys- discretionary exercise of Government
tem(s) or subsystem(s) of equipment, authority, and monetary transactions
that is used in the automatic acquisi- and entitlements.
tion, storage, manipulation, manage- (1) An inherently governmental func-
ment, movement, control, display, tion involves, among other things, the
switching, interchange, transmission, interpretation and execution of the
or reception of data or information by laws of the United States so as to
the agency. (i) Bind the United States to take or
(1) For purposes of this definition, not to take some action by contract,
equipment is used by an agency if the policy, regulation, authorization,
equipment is used by the agency di- order, or otherwise;
rectly or is used by a contractor under (ii) Determine, protect, and advance
a contract with the agency that re- United States economic, political, ter-
quires ritorial, property, or other interests by
(i) Its use; or military or diplomatic action, civil or
30
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 attained, 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
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 replies 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
(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 solicitation 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
2.101 48 CFR Ch. 1 (10103 Edition)
power; in corporate suretyship, an in- by-products generated from, and com-

strument under seal that appoints an monly reused within, an original man-
attorney-in-fact to act in behalf of a ufacturing process. For use in subpart
surety company in signing bonds (see 11.3 for paper and paper products, see
also attorney-in-fact at 28.001). the definition at 11.301.
Preaward survey means an evaluation Registered in the CCR database means
of a prospective contractors capability that
to perform a proposed contract. (1) The contractor has entered all
Preponderance of the evidence means mandatory information, including the
proof by information that, compared DUNS number or the DUNS+4 number,
with that opposing it, leads to the con- into the CCR database; and
clusion that the fact at issue is more (2) The Government has validated
probably true than not. mandatory data fields and has marked
Pricing means the process of estab- the record Active.
lishing a reasonable amount or Renewable energy means energy pro-
amounts to be paid for supplies or serv- duced by solar, wind, geothermal, and
ices. biomass power.
Procurement (see acquisition). Renewable energy technology means
Procuring activity means a component (1) Technologies that use renewable
of an executive agency having a signifi- energy to provide light, heat, cooling,
cant acquisition function and des- or mechanical or electrical energy for
ignated as such by the head of the use in facilities or other activities; or
agency. Unless agency regulations
(2) The use of integrated whole-build-
specify otherwise, the term procuring
ing designs that rely upon renewable
activity is synonymous with con-
energy resources, including passive
tracting activity.
solar design.
Projected average loss means the esti-
Residual value means the proceeds,
mated long-term average loss per pe-
less removal and disposal costs, if any,
riod for periods of comparable exposure
realized upon disposition of a tangible
to risk of loss.
capital asset. It usually is measured by
Proper invoice means an invoice that
the net proceeds from the sale or other
meets the minimum standards speci-
disposition of the asset, or its fair
fied in 32.905(b).
value if the asset is traded in on an-
Purchase order, when issued by the
other asset. The estimated residual
Government, means an offer by the
value is a current forecast of the resid-
Government to buy supplies or serv-
ual value.
ices, including construction and re-
search and development, upon specified Responsible audit agency means the
terms and conditions, using simplified agency that is responsible for per-
acquisition procedures. forming all required contract audit
Qualification requirement means a services at a business unit.
Government requirement for testing or Responsible prospective contractor
other quality assurance demonstration means a contractor that meets the
that must be completed before award of standards in 9.104.
a contract. Segment means one of two or more di-
Qualified products list (QPL) means a visions, product departments, plants,
list of products that have been exam- or other subdivisions of an organiza-
ined, tested, and have satisfied all ap- tion reporting directly to a home of-
plicable qualification requirements. fice, usually identified with responsi-
Receiving report means written evi- bility for profit and/or producing a
dence that indicates Government ac- product or service. The term includes
ceptance of supplies delivered or serv- (1) Government-owned contractor-op-
ices performed (see subpart 46.6). Re- erated (GOCO) facilities; and
ceiving reports must meet the require- (2) Joint ventures and subsidiaries
ments of 32.905(c). (domestic and foreign) in which the or-
Recovered material means waste mate- ganization has
rials and by-products recovered or di- (i) A majority ownership; or
verted from solid waste, but the term (ii) Less than a majority ownership,
does not include those materials and but over which it exercises control.
34
Self-insurance means the assumption individual, indicates a present inten-

or retention of the risk of loss by the tion to authenticate the writing. This
contractor, whether voluntarily or in- includes electronic symbols.
voluntarily. Self-insurance includes Simplified acquisition procedures means
the deductible portion of purchased in- the methods prescribed in part 13 for
surance. making purchases of supplies or serv-
Senior procurement executive means ices.
the individual appointed pursuant to Simplified acquisition threshold means
section 16(3) of the Office of Federal $100,000, except that
Procurement Policy Act (41 U.S.C. (1) In the case of any contract to be
414(3)) who is responsible for manage- awarded and performed, or purchase to
ment direction of the acquisition sys- be made outside the United States in
tem of the executive agency, including support of a contingency operation or a
implementation of the unique acquisi- humanitarian or peacekeeping oper-
tion policies, regulations, and stand- ation, the term means $200,000; or
ards of the executive agency. (2) For acquisitions of supplies or
Service-disabled veteran-owned small services that, as determined by the
business concern head of the agency are to be used to fa-
(1) Means a small business concern cilitate defense against or recovery
(i) Not less than 51 percent of which from terrorism (defined at Public Law
is owned by one or more service-dis- 107296, Sec. 2) or nuclear, biological,
abled veterans or, in the case of any chemical, or radiological attack
publicly owned business, not less than (i) For any agency, in support of a
51 percent of the stock of which is humanitarian or peacekeeping or a
owned by one or more service-disabled contingency operation if initiated by a
veterans; and solicitation issued from January 24,
(ii) The management and daily busi- 2003, to November 24, 2003 (Public Law
ness operations of which are controlled 107296, Sec. 853(a)), the term means
by one or more service-disabled vet- (A) $200,000 for any contract to be
erans or, in the case of a veteran with awarded and performed, or purchase to
permanent and severe disability, the be made, inside the United States; and
spouse or permanent caregiver of such (B) $300,000 for any contract to be
veteran. awarded and performed, or purchase to
(2) Service-disabled veteran means a be made, outside the United States.
veteran, as defined in 38 U.S.C. 101(2), (ii) By or for the Department of De-
with a disability that is service-con- fense in support of a contingency oper-
nected, as defined in 38 U.S.C. 101(16). ation if award is made and funds are
Shall denotes the imperative. obligated on or before September 30,
Shipment means freight transported 2003 (Public Law 107107, Sec.
or to be transported. 836(a)(1)(B)), the term means
Shop drawings means drawings sub- (A) $250,000 for any contract to be
mitted by the construction contractor awarded and performed, or purchase to
or a subcontractor at any tier or re- be made, inside the United States; and
quired under a construction contract, (B) $500,000 for any contract to be
showing in detail either or both of the awarded and performed, or purchase to
following: be made, outside the United States.
(1) The proposed fabrication and as- Single, Governmentwide point of entry,
sembly of structural elements. means the one point of entry to be des-
(2) The installation (i.e., form, fit, ignated by the Administrator of OFPP
and attachment details) of materials or that will allow the private sector to
equipment. electronically access procurement op-
Should means an expected course of portunities Governmentwide.
action or policy that is to be followed Small business subcontractor means a
unless inappropriate for a particular concern, including affiliates, that for
circumstance. subcontracts valued at
Signature or signed means the dis- (1) $10,000 or less, does not have more
crete, verifiable symbol of an indi- than 500 employees; and
vidual which, when affixed to a writing (2) More than $10,000, does not have
with the knowledge and consent of the employees or average annual receipts
35
2.101 48 CFR Ch. 1 (10103 Edition)
exceeding the size standard in 13 CFR bids. Solicitations under negotiated

part 121 (see 19.102) for the product or procedures are called requests for pro-
service it is providing on the sub- posals. Solicitations under simplified
contract. acquisition procedures may require
Small disadvantaged business concern submission of either a quotation or an
(except for 52.2123(c)(2) and 52.219 offer.
1(b)(2) for general statistical purposes Solicitation provision or provision
and 52.2123(c)(7)(ii), 52.21922(b)(2), and means a term or condition used only in
52.21923(a) for joint ventures under the solicitations and applying only before
price evaluation adjustment for small contract award.
disadvantaged business concerns),
Source selection information means any
means an offeror that represents, as
part of its offer, that it is a small busi- of the following information that is
ness under the size standard applicable prepared for use by an agency for the
to the acquisition; and either purpose of evaluating a bid or proposal
(1) It has received certification as a to enter into an agency procurement
small disadvantaged business concern contract, if that information has not
consistent with 13 CFR part 124, sub- been previously made available to the
part B; and public or disclosed publicly:
(i) No material change in disadvan- (1) Bid prices submitted in response
taged ownership and control has oc- to an agency invitation for bids, or
curred since its certification; lists of those bid prices before bid open-
(ii) Where the concern is owned by ing.
one or more disadvantaged individuals, (2) Proposed costs or prices sub-
the net worth of each individual upon mitted in response to an agency solici-
whom the certification is based does tation, or lists of those proposed costs
not exceed $750,000 after taking into ac- or prices.
count the applicable exclusions set (3) Source selection plans.
forth at 13 CFR 124.104(c)(2); and
(4) Technical evaluation plans.
(iii) It is identified, on the date of its
representation, as a certified small dis- (5) Technical evaluations of pro-
advantaged business concern in the posals.
data base maintained by the Small (6) Cost or price evaluations of pro-
Business Administration (PRONet); or posals.
(2) For a prime contractor, it has (7) Competitive range determinations
submitted a completed application to that identify proposals that have a rea-
the Small Business Administration or sonable chance of being selected for
a private certifier to be certified as a award of a contract.
small disadvantaged business concern (8) Rankings of bids, proposals, or
in accordance with 13 CFR part 124, competitors.
subpart B, and a decision on that appli- (9) Reports and evaluations of source
cation is pending, and that no material selection panels, boards, or advisory
change in disadvantaged ownership and councils.
control has occurred since it submitted (10) Other information marked as
its application. In this case, a con- Source Selection InformationSee
tractor must receive certification as a FAR 2.101 and 3.104 based on a case-
small disadvantaged business by the
by-case determination by the head of
Small Business Administration prior to
the agency or the contracting officer,
contract award.
Sole source acquisition means a con- that its disclosure would jeopardize the
tract for the purchase of supplies or integrity or successful completion of
services that is entered into or pro- the Federal agency procurement to
posed to be entered into by an agency which the information relates.
after soliciting and negotiating with Special competency means a special or
only one source. unique capability, including quali-
Solicitation means any request to sub- tative aspects, developed incidental to
mit offers or quotations to the Govern- the primary functions of the Federally
ment. Solicitations under sealed bid Funded Research and Development
procedures are called invitations for Centers to meet some special need.
36
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
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
Federal Acquisition Regulation Pt. 3
Subpart 2.2Definitions Clause Subpart 3.3Reports of Suspected Antitrust

Violations
2.201 Contract clause.
3.301 General.
Insert the clause at 52.2021, Defini- 3.302 Definitions.
tions, in solicitations and contracts 3.303 Reporting suspected antitrust viola-
that exceed the simplified acquisition tions.
threshold. If the contract is for per-
sonal services, construction, architect- Subpart 3.4Contingent Fees
engineer services, or dismantling, dem- 3.400 Scope of subpart.
olition, or removal of improvements, 3.401 Definitions.
use the clause with its Alternate I. The 3.402 Statutory requirements.
contracting officer may include addi- 3.403 Applicability.
tional definitions, provided they are 3.404 Contract clause.
consistent with the clause and the 3.405 Misrepresentations or violations of the
FAR. Covenant Against Contingent Fees.
3.406 Records.
[66 FR 2127, Jan. 10, 2001]
Subpart 3.5Other Improper Business
PART 3IMPROPER BUSINESS Practices
PRACTICES AND PERSONAL 3.501 Buying-in.
CONFLICTS OF INTEREST 3.5011 Definition.
3.5012 General.
Sec. 3.502 Subcontractor kickbacks.
3.000 Scope of part. 3.5021 Definitions.
3.5022 Subcontractor kickbacks.
Subpart 3.1Safeguards 3.5023 Contract clause.
3.503 Unreasonable restrictions on subcon-
3.101 Standards of conduct. tractor sales.
3.1011 General. 3.5031 Policy.
3.1012 Solicitation and acceptance of gra- 3.5032 Contract clause.
tuities by Government personnel.
3.1013 Agency regulations. Subpart 3.6Contracts With Government
3.102 [Reserved] Employees or Organizations Owned or
3.103 Independent pricing. Controlled by Them
3.1031 Solicitation provision.
3.1032 Evaluating the certification. 3.601 Policy.
3.1033 The need for further certifications. 3.602 Exceptions.
3.104 Procurement integrity. 3.603 Responsibilities of the contracting of-
3.1041 Definitions. ficer.
3.1042 General.
3.1043 Statutory and related prohibitions, Subpart 3.7Voiding and Rescinding
restrictions, and requirements. Contracts
3.1044 Disclosure, protection, and marking
of contractor bid or proposal information 3.700 Scope of subpart.
and source selection information. 3.701 Purpose.
3.1045 Disqualification. 3.702 Definition.
3.1046 Ethics advisory opinions regarding 3.703 Authority.
prohibitions on a former officials ac- 3.704 Policy.
ceptance of compensation from a con- 3.705 Procedures.
tractor.
3.1047 Violations or possible violations. Subpart 3.8Limitation on the Payment of
3.1048 Criminal and civil penalties, and fur- Funds to Influence Federal Transactions
ther administrative remedies.
3.1049 Contract clauses. 3.800 Scope of subpart.
3.801 Definitions.
Subpart 3.2Contractor Gratuities to 3.802 Prohibitions.
Government Personnel 3.803 Certification and disclosure.
3.804 Policy.
3.201 Applicability. 3.805 Exemption.
3.202 Contract clause. 3.806 Processing suspected violations.
3.203 Reporting suspected violations of the 3.807 Civil penalties.
Gratuities clause. 3.808 Solicitation provision and contract
3.204 Treatment of violations. clause.
39
3.000 48 CFR Ch. 1 (10103 Edition)
Subpart 3.9Whistleblower Protections for terests that may be substantially af-

Contractor Employees fected by the performance or non-
performance of the employees official
3.900 Scope of subpart.
3.901 Definitions.
duties. Certain limited exceptions are
3.902 Applicability. authorized in agency regulations.
3.903 Policy.
3.904 Procedures for filing complaints. 3.1013 Agency regulations.
3.905 Procedures for investigating com- (a) Agencies are required by Execu-
plaints.
3.906 Remedies. tive Order 11222 of May 8, 1965, and 5
CFR part 735 to prescribe Standards of
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap- Conduct. These agency standards con-
ter 137; and 42 U.S.C. 2473(c).
tain
SOURCE: 48 FR 42108, Sept. 19, 1983, unless (1) Agency-authorized exceptions to
otherwise noted. 3.1012; and
3.000 Scope of part. (2) Disciplinary measures for persons
violating the standards of conduct.
This part prescribes policies and pro- (b) Requirements for employee finan-
cedures for avoiding improper business cial disclosure and restrictions on pri-
practices and personal conflicts of in- vate employment for former Govern-
terest and for dealing with their appar- ment employees are in Office of Per-
ent or actual occurrence. sonnel Management and agency regula-
tions implementing Public Law 95521,
Subpart 3.1Safeguards which amended 18 U.S.C. 207.
3.101 Standards of conduct. 3.102 [Reserved]
3.1011 General. 3.103 Independent pricing.
Government business shall be con-
ducted in a manner above reproach 3.1031 Solicitation provision.
and, except as authorized by statute or The contracting officer shall insert
regulation, with complete impartiality the provision at 52.2032, Certificate of
and with preferential treatment for Independent Price Determination, in
none. Transactions relating to the ex- solicitations when a firm-fixed-price
penditure of public funds require the contract or fixed-price contract with
highest degree of public trust and an economic price adjustment is con-
impeccable standard of conduct. The templated, unless
general rule is to avoid strictly any (a) The acquisition is to be made
conflict of interest or even the appear- under the simplified acquisition proce-
ance of a conflict of interest in Govern- dures in part 13;
ment-contractor relationships. While (b) [Reserved]
many Federal laws and regulations (c) The solicitation is a request for
place restrictions on the actions of technical proposals under two-step
Government personnel, their official sealed bidding procedures; or
conduct must, in addition, be such that
(d) The solicitation is for utility
they would have no reluctance to make
services for which rates are set by law
a full public disclosure of their actions.
or regulation.
3.1012 Solicitation and acceptance of [48 FR 42108, Sept. 19, 1983, as amended at 50
gratuities by Government per- FR 1727, Jan. 11, 1985; 50 FR 52429, Dec. 23,
sonnel. 1985; 55 FR 25526, June 21, 1990; 60 FR 34744,
As a rule, no Government employee July 3, 1995]
may solicit or accept, directly or indi-
rectly, any gratuity, gift, favor, enter- 3.1032 Evaluating the certification.
tainment, loan, or anything of mone- (a) Evaluation guidelines. (1) None of
tary value from anyone who (a) has or the following, in and of itself, con-
is seeking to btain Government busi- stitutes disclosure as it is used in sub-
ness with the employees agency, (b) paragraph (a)(2) of the Certificate of
conducts activities that are regulated Independent Price Determination
by the employees agency, or (c) has in- (hereafter, the certificate):
40
(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 resubmitted 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 proposal 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
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
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
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
(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 information;
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 consume 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
3.1045 48 CFR Ch. 1 (10103 Edition)
of contractor bid or proposal informa- promptly submit written notice of dis-

tion or source selection information qualification from further participa-
does not occur; or tion in the procurement to the con-
(4) The Governments use of technical tracting officer, the source selection
data in a manner consistent with the authority if other than the contracting
Governments rights in the data. officer, and the agency officials imme-
(f) This section does not authorize diate supervisor. As a minimum, the
(1) The withholding of any informa- notice must
tion pursuant to a proper request from (1) Identify the procurement;
the Congress, any committee or sub-
(2) Describe the nature of the agency
committee thereof, a Federal agency,
officials participation in the procure-
the Comptroller General, or an Inspec-
ment and specify the approximate
tor General of a Federal agency, except
as otherwise authorized by law or regu- dates or time period of participation;
lation. Any release containing con- and
tractor bid or proposal information or (3) Identify the offeror and describe
source selection information must its interest in the procurement.
clearly identify the information as (c) Resumption of participation in a
contractor bid or proposal information procurement. (1) The official must re-
or source selection information related main disqualified until such time as
to the conduct of a Federal agency pro- the agency, at its sole and exclusive
curement and notify the recipient that discretion, authorizes the official to re-
the disclosure of the information is resume participation in the procurement
stricted by section 27 of the Act; in accordance with 3.1043(c)(1)(ii).
(2) The withholding of information (2) After the conditions of 3.104
from, or restricting its receipt by, the 3(c)(1)(ii)(A) or (B) have been met, the
Comptroller General in the course of a head of the contracting activity (HCA),
protest against the award or proposed after consultation with the agency eth-
award of a Federal agency procurement ics official, may authorize the disquali-
contract; fied official to resume participation in
(3) The release of information after the procurement, or may determine
award of a contract or cancellation of a that an additional disqualification pe-
procurement if such information is riod is necessary to protect the integ-
contractor bid or proposal information rity of the procurement process. In de-
or source selection information that termining the disqualification period,
pertains to another procurement; or the HCA must consider any factors
(4) The disclosure, solicitation, or re-
that create an appearance that the dis-
ceipt of bid or proposal information or
qualified official acted without com-
source selection information after
plete impartiality in the procurement.
award if disclosure, solicitation, or re-
The HCAs reinstatement decision
ceipt is prohibited by law. (See 3.104
should be in writing.
2(b)(5) and subpart 24.2.)
(3) Government officer or employee
[67 FR 13059, Mar. 20, 2002] must also comply with the provisions
of 18 U.S.C. 208 and 5 CFR part 2635 re-
3.1045 Disqualification.
garding any resumed participation in a
(a) Contacts through agents or other procurement matter. Government offi-
intermediaries. Employment contacts cer or employee may not be reinstated
between the employee and the offeror, to participate in a procurement matter
that are conducted through agents, or affecting the financial interest of
other intermediaries, may require dis- someone with whom the individual is
qualification under 3.1043(c)(1). These seeking employment, unless the indi-
contacts may also require disqualifica- vidual receives
tion under other statutes and regula- (i) A waiver pursuant to 18 U.S.C.
tions. (See 3.1042(b)(2).) 208(b)(1) or (b)(3); or
(b) Disqualification notice. In addition (ii) An authorization in accordance
to submitting the contact report re-
with the requirements of subpart F of 5
quired by 3.1043(c)(1), an agency offi-
CFR part 2635.
cial who must disqualify himself or
herself pursuant to 3.1043(c)(1)(ii) must [67 FR 13059, Mar. 20, 2002]
46
3.1046 Ethics advisory opinions re- that the information is fraudulent,

garding prohibitions on a former of- misleading, or otherwise incorrect.
ficials acceptance of compensation (3) If the requester is advised in a
from a contractor. written opinion by the agency ethics
(a) An official or former official of a official that the requester may accept
Federal agency who does not know compensation from a particular con-
whether he or she is or would be pre- tractor, and accepts such compensation
cluded by subsection 27(d) of the Act in good faith reliance on that advisory
(see 3.1043(d)) from accepting com- opinion, then neither the requester nor
pensation from a particular contractor the contractor will be found to have
may request advice from the appro- knowingly violated subsection 27(d) of
priate agency ethics official before ac- the Act. If the requester or the con-
tractor has actual knowledge or reason
cepting such compensation.
to believe that the opinion is based
(b) The request for an advisory opin- upon fraudulent, misleading, or other-
ion must be in writing, include all rel- wise incorrect information, their reli-
evant information reasonably available ance upon the opinion will not be
to the official or former official, and be deemed to be in good faith.
dated and signed. The request must in-
clude information about the [67 FR 13059, Mar. 20, 2002]
(1) Procurement(s), or decision(s) on 3.1047 Violations or possible viola-
matters under 3.1043(d)(1)(iii), involv- tions.
ing the particular contractor, in which
the individual was or is involved, in- (a) A contracting officer who receives
cluding contract or solicitation num- or obtains information of a violation or
bers, dates of solicitation or award, a possible violation of subsection 27(a),
description of the supplies or services (b), (c), or (d) of the Act (see 3.1043)
procured or to be procured, and con- must determine if the reported viola-
tract amount; tion or possible violation has any im-
pact on the pending award or selection
(2) Individuals participation in the
of the contractor.
procurement or decision, including the
(1) If the contracting officer con-
dates or time periods of that participa-
cludes that there is no impact on the
tion, and the nature of the individuals
procurement, the contracting officer
duties, responsibilities, or actions; and
must forward the information con-
(3) Contractor, including a descrip- cerning the violation or possible viola-
tion of the products or services pro- tion and documentation supporting a
duced by the division or affiliate of the determination that there is no impact
contractor from whom the individual on the procurement to an individual
proposes to accept compensation. designated in accordance with agency
(c) Within 30 days after receipt of a procedures.
request containing complete informa- (i) If that individual concurs, the
tion, or as soon thereafter as prac- contracting officer may proceed with
ticable, the agency ethics official the procurement.
should issue an opinion on whether the (ii) If that individual does not con-
proposed conduct would violate sub- cur, the individual must promptly for-
section 27(d) of the Act. ward the information and documenta-
(d)(1) If complete information is not tion to the HCA and advise the con-
included in the request, the agency tracting officer to withhold award.
ethics official may ask the requester to (2) If the contracting officer con-
provide more information or request cludes that the violation or possible
information from other persons, in- violation impacts the procurement, the
cluding the source selection authority, contracting officer must promptly for-
the contracting officer, or the request- ward the information to the HCA.
ers immediate supervisor. (b) The HCA must review all informa-
(2) In issuing an opinion, the agency tion available and, in accordance with
ethics official may rely upon the accu- agency procedures, take appropriate
racy of information furnished by the action, such as
requester or other agency sources, un- (1) Advise the contracting officer to
less he or she has reason to believe continue with the procurement;
47
3.1048 48 CFR Ch. 1 (10103 Edition)
(2) Begin an investigation; in conduct constituting an offense pun-

(3) Refer the information disclosed to ishable under subsection 27(e)(1) of the
appropriate criminal investigative Act; or
agencies; (iii) Take any other appropriate ac-
(4) Conclude that a violation oc- tions in the best interests of the Gov-
curred; or ernment.
(5) Recommend that the agency head (3) Refer the matter to the agency
determine that the contractor, or suspending or debarring official.
someone acting for the contractor, has (e) The HCA should recommend or di-
engaged in conduct constituting an of- rect an administrative or contractual
fense punishable under subsection 27(e) remedy commensurate with the sever-
of the Act, for the purpose of voiding or ity and effect of the violation.
rescinding the contract. (f) If the HCA determines that urgent
(c) Before concluding that an offeror, and compelling circumstances justify
contractor, or person has violated the an award, or award is otherwise in the
Act, the HCA may consider that the in- interests of the Government, the HCA,
terests of the Government are best in accordance with agency procedures,
served by requesting information from may authorize the contracting officer
appropriate parties regarding the vio- to award the contract or execute the
lation or possible violation. contract modification after notifying
(d) If the HCA concludes that section the agency head.
27 of the Act has been violated, the (g) The HCA may delegate his or her
HCA may direct the contracting officer authority under this subsection to an
to individual at least one organizational
(1) If a contract has not been award- level above the contracting officer and
ed of General Officer, Flag, Senior Execu-
(i) Cancel the procurement; tive Service, or equivalent rank.
(ii) Disqualify an offeror; or [67 FR 13059, Mar. 20, 2002]
(iii) Take any other appropriate ac-
tions in the interests of the Govern- 3.1048 Criminal and civil penalties,
ment. and further administrative rem-
(2) If a contract has been awarded edies.
(i) Effect appropriate contractual Criminal and civil penalties, and ad-
remedies, including profit recapture ministrative remedies, may apply to
under the clause at 52.20310, Price or conduct that violates the Act (see
Fee Adjustment for Illegal or Improper 3.1043). See 33.102(f) for special rules
Activity, or, if the contract has been regarding bid protests. See 3.1047 for
rescinded under paragraph(d)(2)(ii) of administrative remedies relating to
this subsection, recovery of the contracts.
amount expended under the contract; (a) An official who knowingly fails to
(ii) Void or rescind the contract with comply with the requirements of 3.104
respect to which 3 is subject to the penalties and admin-
(A) The contractor or someone acting istrative action set forth in subsection
for the contractor has been convicted 27(e) of the Act.
for an offense where the conduct con- (b) An offeror who engages in em-
stitutes a violation of subsection 27(a) ployment discussion with an official
or (b) of the Act for the purpose of ei- subject to the restrictions of 3.1043,
ther knowing that the official has not com-
(1) Exchanging the information cov- plied with 3.1043(c)(1), is subject to the
ered by the subsections for anything of criminal, civil, or administrative pen-
value; or alties set forth in subsection 27(e) of
(2) Obtaining or giving anyone a com- the Act.
petitive advantage in the award of a (c) An official who refuses to termi-
Federal agency procurement contract; nate employment discussions (see
or 3.1045) may be subject to agency ad-
(B) The agency head has determined, ministrative actions under 5 CFR
based upon a preponderance of the evi- 2635.604(d) if the officials disqualifica-
dence, that the contractor or someone tion from participation in a particular
acting for the contractor has engaged procurement interferes substantially
48
with the individuals ability to perform 3.204 Treatment of violations.

assigned duties. (a) Before taking any action against
[67 FR 13059, Mar. 20, 2002] a contractor, the agency head or a des-
ignee shall determine, after notice and
3.1049 Contract clauses. hearing under agency procedures,
In solicitations and contracts for whether the contractor, its agent, or
other than commercial items that ex- another representative, under a con-
ceed the simplified acquisition thresh- tract containing the Gratuities
clause
old, insert the clauses at
(1) Offered or gave a gratuity (e.g., an
(a) 52.2038, Cancellation, Rescission,
entertainment or gift) to an officer, of-
and Recovery of Funds for Illegal or ficial, or employee of the Government;
Improper Activity; and and
(b) 52.20310, Price or Fee Adjustment (2) Intended by the gratuity to obtain
for Illegal or Improper Activity. a contract or favorable treatment
[67 FR 13059, Mar. 20, 2002] under a contract (intent generally
must be inferred).
(b) Agency procedures shall afford
Subpart 3.2Contractor Gratuities the contractor an opportunity to ap-
to Government Personnel pear with counsel, submit documentary
evidence, present witnesses, and con-
front any person the agency presents.
This subpart applies to all executive The procedures should be as informal
agencies, except that coverage con- as practicable, consistent with prin-
cerning exemplary damages applies ciples of fundamental fairness.
only to the Department of Defense (10 (c) When the agency head or designee
U.S.C. 2207). determines that a violation has oc-
curred, the Government may
3.202 Contract clause. (1) Terminate the contractors right
The contracting officer shall insert to proceed;
the clause at 52.2033, Gratuities, in so- (2) Initiate debarment or suspension
licitations and contracts with a value measures as set forth in subpart 9.4;
exceeding the simplified acquisition and
threshold, except those for personal (3) Assess exemplary damages, if the
services and those between military de- contract uses money appropriated to
partments or defense agencies and for- the Department of Defense.
eign governments that do not obligate
any funds appropriated to the Depart- Subpart 3.3Reports of Suspected
ment of Defense. Antitrust Violations
[61 FR 39200, July 26, 1996] 3.301 General.
3.203 Reporting suspected violations (a) Practices that eliminate competi-
of the Gratuities clause. tion or restrain trade usually lead to
excessive prices and may warrant
Agency personnel shall report sus- criminal, civil, or administrative ac-
pected violations of the Gratuities tion against the participants. Exam-
clause to the contracting officer or ples of anticompetitive practices are
other designated official in accordance collusive bidding, follow-the-leader
with agency procedures. The agency repricing, rotated low bids, collusive
porting procedures shall be published price estimating systems, and sharing
as an implementation of this section of the business.
3.203 and shall clearly specify (b) Contracting personnel are an im-
(a) What to report and how to report portant potential source of investiga-
it; and tive leads for antitrust enforcement
(b) The channels through which re- and should therefore be sensitive to in-
ports must pass, including the function dications of unlawful behavior by
and authority of each official des- offerors and contractors. Agency per-
ignated to review them. sonnel shall report, in accordance with
49
3.302 48 CFR Ch. 1 (10103 Edition)
agency regulations, evidence of sus- (4) Rotation of bids or proposals, so

pected antitrust violations in acquisi- that each competitor takes a turn in
tions for possible referral to (1) the At- sequence as low bidder, or so that cer-
torney General under 3.303 and (2) the tain competitors bid low only on some
agency office responsible for con- sizes of contracts and high on other
tractor debarment and suspension sizes;
under subpart 9.4. (5) Division of the market, so that
[48 FR 42108, Sept. 19, 1983, as amended at 50 certain competitors bid low only for
FR 1727, Jan. 11, 1985; 50 FR 52429, Dec. 23, contracts let by certain agencies, or for
1985] contracts in certain geographical
3.302 Definitions. areas, or on certain products, and bid
high on all other jobs;
As used in this subpart
(6) Establishment by competitors of a
Identical bids means bids for the same
collusive price estimating system;
line item that are determined to be
identical as to unit price or total line (7) The filing of a joint bid by two or
item amount, with or without the ap- more competitors when at least one of
plication of evaluation factors (e.g., the competitors has sufficient tech-
discount or transportation cost). nical capability and productive capac-
Line item means an item of supply or ity for contract performance;
service, specified in a solicitation, that (8) Any incidents suggesting direct
the offeror must separately price. collusion among competitors, such as
[49 FR 12974, Mar. 30, 1984, as amended at 66 the appearance of identical calculation
FR 2127, Jan. 10, 2001; 67 FR 13055, Mar. 20, or spelling errors in two or more com-
2002] petitive offers or the submission by one
firm of offers for other firms; and
3.303 Reporting suspected antitrust (9) Assertions by the employees,
violations.
former employees, or competitors of
(a) Agencies are required by 41 U.S.C. offerors, that an agreement to restrain
253b(i) and 10 U.S.C. 2305(b)(9) to report trade exists.
to the Attorney General any bids or (d) Identical bids shall be reported
proposals that evidence a violation of
under this section if the agency has
the antitrust laws. These reports are in
some reason to believe that the bids re-
addition to those required by subpart
9.4. sulted from collusion.
(b) The antitrust laws are intended to (e) For offers from foreign contrac-
ensure that markets operate competitors for contracts to be performed out-
tively. Any agreement or mutual un- side the United States and its outlying
derstanding among competing firms areas, contracting officers may refer
that restrains the natural operation of suspected collusive offers to the au-
market forces is suspect. Paragraph (c) thorities of the foreign government
below identifies behavior patterns that concerned for appropriate action.
are often associated with antitrust vio- (f) Agency reports shall be addressed
lations. Activities meeting the descrip- to the Attorney General, U.S. Depart-
tions in paragraph (c) are not nec- ment of Justice, Washington, DC 20530,
essarily improper, but they are suffi- Attention: Assistant Attorney General,
ciently questionable to warrant noti- Antitrust Division, and shall include
fying the appropriate authorities, in (1) A brief statement describing the
accordance with agency procedures. suspected practice and the reason for
(c) Practices or events that may evi- the suspicion; and
dence violations of the antitrust laws
(2) The name, address, and telephone
include
(1) The existence of an industry price number of an individual in the agency
list or price agreement to which contrac- who can be contacted for further infor-
tors refer in formulating their offers; mation.
(2) A sudden change from competitive (g) Questions concerning this report-
bidding to identical bidding; ing requirement may be communicated
(3) Simultaneous price increases or by telephone directly to the Office of
follow-the-leader pricing;
50
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
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
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
Subcontract, means a contract or such prohibited conduct and from any

contractural action entered into by a person whose employee, subcontractor,
prime contractor or subcontractor for or subcontractor employee provides,
the purpose of obtaining supplies, ma- accepts, or charges a kickback.
terials, equipment, or service of any (d) Provides that
kind under a prime contract. (1) The contracting officer may offset
Subcontractor, (1) means any person, the amount of a kickback against mon-
other than the prime contractor, who ies owed by the United States to the
offers to furnish or furnishes any sup- prime contractor under the prime con-
plies, materials, equipment, or services tract to which such kickback relates;
of any kind under a prime contract or (2) The contracting officer may di-
a subcontract entered into in connec- rect a prime contractor to withhold
tion with such prime contract, and (2) from any sums owed to a subcontract
includes any person who offers to fur- under a subcontractor of the prime
nish or furnishes general supplies to contract the amount of any kickback
the prime contractor or a higher tier which was or may be offset against the
subcontractor. prime contractor under subparagraph
Subcontractor employee, as used in this (d)(1) of this subsection; and
section, means any officer, partner, (3) An offset under subparagraph
employee, or agent of a subcontractor. (d)(1) or a direction under subpara-
[52 FR 6121, Feb. 27, 1987, as amended at 53 graph (d)(2) of this subsection is a
FR 34226, Sept. 2, 1988; 66 FR 2127, Jan. 10, claim by the Government for the pur-
2001] poses of the Contract Disputes Act of
1978.
EDITORIAL NOTE: At 66 FR 2127, Jan. 10,
2001, as amended at 66 FR 14260, Mar. 9, 2001, (e) Authorizes contracting officers to
3.5021 was amended by redesignating para- order that sums withheld under sub-
graphs (a) and (b) as (1) and (2). There are no paragraph (d)(2) of this subsection be
designated paragraphs (a) and (b) in 3.5021. paid to the contracting agency, or if
the sum has already been offset against
3.5022 Subcontractor kickbacks. the prime contractor, that it be re-
The Anti-Kickback Act of 1986 (41 tained by the prime contractor.
U.S.C. 5158) was passed to deter sub- (f) Requires the prime contractor to
contractors from making payments notify the contracting officer when the
and contractors from accepting pay- withholding under subparagraph (d)(2)
ments for the purpose of improperly of this subsection has been accom-
obtaining or rewarding favorable treat- plished unless the amount withheld has
ment in connection with a prime con- been paid to the Government.
tract or a subcontract relating to a (g) Requires a prime contractor or
prime contract. The Act subcontractor to report in writing to
(a) Prohibits any person from the inspector general of the con-
(1) Providing, attempting to provide, tracting agency, the head of the con-
or offering to provide any kickback; tracting agency if the agency does not
(2) Soliciting, accepting, or attempt- have an inspector general, or the De-
ing to accept any kickbacks; or partment of Justice any possible viola-
(3) Including, directly or indirectly, tion of the Act when the prime con-
the amount of any kickback in the tractor or subcontractor has reason-
contract price charged by a subcon- able grounds to believe such violation
tractor to a prime contractor or a may have occurred.
higher tier subcontractor or in the con- (h) Provides that, for the purpose of
tract price charged by a prime con- ascertaining whether there has been a
tractor to the United States. violation of the Act with respect to
(b) Imposes criminal penalties on any any prime contract, the General Ac-
person who knowingly and willfully en- counting Office and the inspector gen-
gages in the prohibited conduct ad- eral of the contracting agency, or a
dressed in paragraph (a) of this sub- representative of such contracting
section. agency designated by the head of such
(c) Provides for the recovery of civil agency if the agency does not have an
penalties by the United States from inspector general, shall have access to
any person who knowingly engages in and may inspect the facilities and
53
3.5023 48 CFR Ch. 1 (10103 Edition)
audit the books and records, including 3.503 Unreasonable restrictions on

any electronic data or records, of any subcontractor sales.
prime contractor or subcontractor
under a prime contract awarded by 3.5031 Policy.
such agency. 10 U.S.C. 2402 and 41 U.S.C. 253(g) re-
(i) Requires each contracting agency quire that subcontractors not be unrea-
to include in each prime contract ex- sonably precluded from making direct
ceeding $100,000 for other than commer-
sales to the Government of any sup-
cial items (see part 12), a requirement
plies or services made or furnished
that the prime contractor shall
under a contract. However, this does
(1) Have in place and follow reason-
able procedures designed to prevent not preclude contractors from assert-
and detect violations of the Act in its ing rights that are otherwise author-
own operations and direct business re- ized by law or regulation.
lationships (e.g., company ethics rules [50 FR 35475, Aug. 30, 1985, and 51 FR 27116,
prohibiting kickbacks by employees, July 29, 1986]
agents, or subcontractors; education
programs for new employees and sub- 3.5032 Contract clause.
contractors, explaining policies about The contracting officer shall insert
kickbacks, related company procedures
the clause at 52.2036, Restrictions on
and the consequences of detection; pro-
Subcontractor Sales to the Govern-
curement procedures to minimize the
ment, in solicitations and contracts ex-
opportunity for kickbacks; audit proce-
ceeding the simplified acquisition
dures designed to detect kickbacks;
threshold. For the acquisition of com-
periodic surveys of subcontractors to
elicit information about kickbacks; mercial items, the contracting officer
procedures to report kickbacks to law shall use the clause with its Alternate
enforcement officials; annual declara- I.
tions by employees of gifts or gratu- [60 FR 48235, Sept. 18, 1995, as amended at 61
ities received from subcontractors; an- FR 39190, July 26, 1996]
nual employee declarations that they
have violated no company ethics rules; Subpart 3.6Contracts With Gov-
personnel practices that document un-
ethical or illegal behavior and make
ernment Employees or Orga-
such information available to prospec- nizations Owned or Controlled
tive employers); and by Them
(2) Cooperate fully with any Federal
agency investigating a possible viola- 3.601 Policy.
tion of the Act. (a) Except as specified in 3.602, a con-
(j) Notwithstanding paragraph (i) of tracting officer shall not knowingly
this subsection, a prime contractor award a contract to a Government em-
shall cooperate fully with any Federal ployee or to a business concern or
government agency investigating a other organization owned or substan-
violation of Section 3 of the Anti-Kick- tially owned or controlled by one or
back Act of 1986 (41 U.S.C. 5158). more Government employees. This pol-
[52 FR 6121, Feb. 27, 1987; 52 FR 9989, Mar. 27, icy is intended to avoid any conflict of
1987, as amended at 53 FR 34226, Sept. 2, 1988; interest that might arise between the
60 FR 48235, Sept. 18, 1995; 61 FR 39191, July employees interests and their Govern-
26, 1996; 62 FR 235, Jan. 2, 1997] ment duties, and to avoid the appear-
ance of favoritism or preferential
treatment by the Government toward
The contracting officer shall insert its employees.
the clause at 52.2037, Anti-Kickback (b) For purposes of this subpart, spe-
Procedures, in solicitations and con- cial Government employees (as defined
tracts exceeding the simplified acquisi- in 18 U.S.C. 202) performing services as
tion threshold, other than those for experts, advisors, or consultants, or as
commercial items (see part 12). members of advisory committees, are
[60 FR 48235, Sept. 18, 1995, as amended at 61 not considered Government employees
FR 39190, July 26, 1996] unless
54
(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.
55
3.703 48 CFR Ch. 1 (10103 Edition)
3.703 Authority. cordance with subpart 9.4, Debarment,

Suspension, and Ineligibility, if debar-
(a) Section 1(e) of Pub. L. 87849, 18
ment has not been initiated or is not in
U.S.C. 218 (the Act), empowers the
effect at the time the final conviction
President or the heads of executive
is entered.
agencies acting under regulations pre-
(c) If there is a final conviction for an
scribed by the President, to declare
offense punishable under subsection
void and rescind contracts and other 27(e) of the OFPP Act, or if the head of
transactions enumerated in the Act, in the agency, or designee, has deter-
relation to which there has been a final mined, based upon a preponderance of
conviction for bribery, conflict of in- the evidence, that the contractor or
terest, or any other violation of Chap- someone acting for the contractor has
ter 11 of Title 18 of the United States engaged in conduct constituting such
Code (18 U.S.C. 201224). Executive an offense, then the head of the con-
Order 12448, November 4, 1983, delegates tracting activity shall consider, in ad-
the Presidents authority under the dition to any other penalty prescribed
Act to the heads of the executive agen- by law or regulation
cies and military departments. (1) Declaring void and rescinding con-
(b) Subsection 27(e)(3) of the Office of tracts, as appropriate, and recovering
Federal Procurement Policy Act (41 the amounts expended under the con-
U.S.C. 423) (the OFPP Act), as amend- tracts by using the procedures at 3.705
ed, requires a Federal agency, upon re- (see 3.1047); and
ceiving information that a contractor (2) Recommending the initiation of
or a person has engaged in conduct suspension or debarment proceedings
constituting a violation of subsection in accordance with subpart 9.4.
27 (a) or (b) of the OFPP Act, to con-
sider recission of a contract with re- [51 FR 27116, July 29, 1986, as amended at 62
FR 232, Jan. 2, 1997; 67 FR 13063, Mar. 20, 2002]
spect to which
(1) The contractor or someone acting 3.705 Procedures.
for the contractor has been convicted
for an offense punishable under sub- (a) Reporting. The facts concerning
section 27(e)(1) of the OFPP Act; or any final conviction for any violation
of 18 U.S.C. 201224 involving or relat-
(2) The head of the agency, or des-
ing to agency contracts shall be re-
ignee, has determined, based upon a
ported promptly to the agency head or
preponderance of the evidence, that the
designee for that officials consider-
contractor or someone acting for the
ation. The agency head or designee
contractor has engaged in conduct con-
shall promptly notify the Civil Divi-
stituting such an offense.
sion, Department of Justice, that an
[51 FR 27116, July 29, 1986, as amended at 62 action is being considered under this
FR 232, Jan. 2, 1997] subpart.
(b) Decision. Following an assessment
3.704 Policy. of the facts, the agency head or des-
(a) In cases in which there is a final ignee may declare void and rescind
conviction for any violation of 18 contracts with respect to which a final
U.S.C. 201224 involving or relating to conviction has been entered, and re-
contracts awarded by an agency, the cover the amounts expended and the
agency head or designee shall consider property transferred by the agency
the facts available and, if appropriate, under the terms of the contracts in-
may declare void and rescind con- volved.
tracts, and recover the amounts ex- (c) Decision-making process. Agency
pended and property transferred by the procedures governing the voiding and
agency in accordance with the policies rescinding decision-making process
and procedures of this subpart. shall be as informal as is practicable,
(b) Since a final conviction under 18 consistent with the principles of funda-
U.S.C. 201224 relating to a contract mental fairness. As a minimum, how-
also may justify the conclusion that ever, agencies shall provide the fol-
the party involved is not presently re- lowing:
sponsible, the agency should consider (1) A notice of the proposed action to
initiating debarment proceedings in ac- declare void and rescind the contract
56
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
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.
58
United States, an agency or instrumen- compensation made to an officer or

tality of a State, and multi-State, re- employee of a person requesting or re-
gional, or interstate entity having gov- ceiving a covered Federal action if the
ernmental duties and powers. payment is for agency and legislative
[55 FR 3190, Jan. 30, 1990, as amended at 68 liaison activities not directly related
FR 28080, May 22, 2003] to a covered Federal action.
(ii) For purposes of subdivision
3.802 Prohibitions. (c)(1)(i) of this section, providing any
(a) Section 1352 of title 31, United information specifically requested by
States Code, among other things, pro- an agency or Congress is permitted at
hibits a recipient of a Federal contract, any time.
grant, loan, or cooperative agreement (iii) The following agency and legis-
from using appropriated funds to pay lative liaison activities are permitted
any person for influencing or attempt- at any time where they are not related
ing to influence an officer or employee to a specific solicitation for any cov-
of any agency, a Member of Congress, ered Federal action:
an officer or employee of Congress, or (A) Discussing with an agency the
an employee of a Member of Congress qualities and characteristics (including
in connection with any of the following individual demonstrations) of the per-
covered Federal actions: the awarding sons products or services, conditions
of any Federal contract; the making of or terms of sale, and service capabili-
any Federal grant; the making of any ties;
Federal loan; the entering into of any (B) Technical discussions and other
cooperative agreement; or, the modi- activities regarding the application or
fication of any Federal contract, grant, adaptation of the persons products or
loan, or cooperative agreement. services for an agencys use.
(b) The Act also requires offerors to (iv) The following agency and legisla-
furnish a declaration consisting of both tive liaison activities are permitted
a certification and a disclosure. These where they are prior to formal solicita-
requirements are contained in the pro- tion of any covered Federal action:
vision at 52.20311, Certification and (A) Providing any information not
Disclosure Regarding Payments to In- specifically requested but necessary for
fluence Certain Federal Transactions, an agency to make an informed deci-
and the clause at 52.20312, Limitation sion about initiation of a covered Fed-
on Payments to Influence Certain Fed- eral action;
eral Transactions. (B) Technical discussions regarding
(1) By signing its offer, an offeror cer- the preparation of an unsolicited pro-
tifies that no appropriated funds have posal prior to its official submission;
been paid or will be paid in violation of and
the prohibitions in 31 U.S.C. 1352. (C) Capability presentations by per-
(2) The disclosure shall identify if sons seeking awards from an agency
any funds other than Federal appro- pursuant to the provisions of the Small
priated funds (including profit or fee Business Act, as amended by Pub. L.
received under a covered Federal ac- 95507, and subsequent amendments.
tion) have been paid, or will be paid, to (v) Only those activities expressly
any person for influencing or attempt- authorized by subparagraph (c)(1) of
ing to influence an officer or employee this section are permitted under this
of any agency, a Member of Congress, section.
an officer or employee of Congress, or (2) Professional and technical services.
an employee of a Member of Congress (i) The prohibition on the use of appro-
in connection with a Federal contract, priated funds, in paragraph (a) of this
grant, loan, or cooperative agreement. section, does not apply in the case of
(c) The prohibitions of the Act do not (A) Payment of reasonable compensa-
apply under the following conditions: tion made to an officer or employee of
(1) Agency and legislative liaison by a person requesting or receiving a cov-
own employees. (i) The prohibition on ered Federal action or an extension,
the use of appropriated funds, in para- continuation, renewal, amendment, or
graph (a) of this section, does not apply modification of a covered Federal ac-
in the case of a payment of reasonable tion, if payment is for professional or
59
3.803 48 CFR Ch. 1 (10103 Edition)
technical services rendered directly in neer providing an engineering analysis

the preparation, submission, or nego- prior to the preparation or submission
tiation of any bid, proposal, or applica- of a bid or proposal are not allowable
tion for that Federal action or for under this section since the engineer is
meeting requirements imposed by or providing technical services but not di-
pursuant to law as a condition for re- rectly in the preparation, submission
ceiving that Federal action; or negotiation of a covered Federal ac-
(B) Any reasonable payment to a per- tion.
son, other than an officer or employee (iii) Requirements imposed by or pur-
of a person requesting or receiving a suant to law as a condition for receiv-
covered Federal action, if the payment ing a covered Federal award include
is for professional or technical services those required by law or regulation and
rendered directly in the preparation, any other requirements in the actual
submission, r negotiation of any bid, award documents
proposal, or application for that Fed- (iv) Only those services expressly au-
eral action, or for meeting require- thorized by subdivisions (c)(2)(i) (A)
ments imposed by or pursuant to law and (B) of this section are permitted
as a condition for receiving that Fed- under this section.
eral action. Persons other than officers (v) The reporting requirements of
or employees of a person requesting or 3.803(a) shall not apply with respect to
receiving a covered Federal action in- payments of reasonable compensation
clude consultants and trade associa- made to regularly employed officers or
tions. employees of a person.
(ii) For purposes of subdivision
(c)(2)(i) of this section, professional 3.803 Certification and disclosure.
and technical services shall be limited (a) Any contractor who requests or
to advice and analysis directly apply- receives a Federal contract exceeding
ing any professional or technical dis- $100,000 shall submit the certification
cipline. For example, drafting of a and disclosures required by the provi-
legal document accompanying a bid or sion at 52.20311, Certification and Dis-
proposal by a lawyer is allowable. closure Regarding Payments to Influ-
Similarly, technical advice provided by ence Certain Federal Transactions,
an engineer on the performance or with its offer. Disclosures under this
operational capability of a piece of section shall be submitted to the con-
equipment rendered directly in the ne- tracting officer using OMB standard
gotiation of a contract is allowable. form LLL, Disclosure of Lobbying Ac-
However, communications with the in- tivities.
tent to influence made by a profes- (b) The contractor shall file a disclo-
sional (such as a licensed lawyer) or a sure form at the end of each calendar
technical person (such as a licensed ac- quarter in which there occurs any
countant) are not allowable under this event that materially affects the accu-
section unless they provide advice and racy of the information contained in
analysis directly applying their profes- any disclosure form previously filed by
sional or technical expertise and unless such person under paragraph (a) of this
the advice or analysis is rendered di- section. An event that materially af-
rectly and solely in the preparation, fects the accuracy of the information
submission or negotiation of a covered reported includes
Federal action. Thus, for example, (1) A cumulative increase of $25,000 or
communications with the intent to in- more in the amount paid or expected to
fluence made by a lawyer that do not be paid for influencing or attempting
provide legal advice or analysis di- to influence a covered Federal action;
rectly and solely related to the legal or
aspects of his or her clients proposal, (2) A change in the person(s) or indi-
but generally advocate one proposal vidual(s) influencing or attempting to
over another are not allowable under influence a covered Federal action; or
this section because the lawyer is not (3) A change in the officer(s), em-
providing professional legal services. ployee(s), or Member(s) of Congress
Similarly, communications with the contacted to influence or attempt to
intent to influence made by an engi- influence a covered Federal action.
60
(c) The contractor shall require the 3.807 Civil penalties.

submittal of a certification, and if re- Agencies shall impose and collect
quired, a disclosure form, by any per- civil penalties pursuant to the provi-
son who requests or receives any sub- sions of the Program Fraud and Civil
contract exceeding $100,000 under the Remedies Act, 31 U.S.C. 3803 (except
Federal contract. subsection (c)), 38043808, and 3812, inso-
(d) All subcontractor disclosure far as the provisions therein are not in-
forms (but not certifications), shall be consistent with the requirements of
forwarded from tier to tier until re- this subpart.
ceived by the prime contractor. The
[55 FR 3190, Jan. 30, 1990, as amended at 67
prime contractor shall submit all dis- FR 6120, Feb. 8, 2002]
closure forms to the contracting officer
at the end of the calendar quarter in 3.808 Solicitation provision and con-
which the disclosure form is submitted tract clause.
by the subcontractor. Each subcon- (a) The provision at 52.20311, Certifi-
tractor certification shall be retained cation and Disclosure Regarding Pay-
in the subcontract file of the awarding ments to Influence Certain Federal
contractor. Transactions, shall be included in so-
[55 FR 3190, Jan. 30, 1990, as amended at 55 licitations expected to exceed $100,000.
FR 38516, Sept. 18, 1990] (b) The clause at 52.20312, Limita-
tion on Payments to Influence Certain
3.804 Policy. Federal Transactions, shall be included
in solicitations and contracts expected
(a) The contracting officer shall ob-
to exceed $100,000.
tain certifications and disclosures as
required by the provision at 52.20311,
Certification and Disclosure Regarding Subpart 3.9Whistleblower Pro-
Payments to Influence Certain Federal tections for Contractor Em-
Transactions, prior to the award of any ployees
contract exceeding $100,000.
(b) The contracting officer shall for- SOURCE: 60 FR 37776, July 21, 1995, unless
ward a copy of all contractor disclo- otherwise noted.
sures furnished pursuant to the clause
at 52.20312, Limitation on Payments
to Influence Certain Federal Trans- This subpart implements 10 U.S.C.
actions, to the official designated in 2409 and 41 U.S.C. 251, et seq., as amend-
accordance with agency procedures, for ed by Sections 6005 and 6006 of the Fed-
subsequent submission to Congress. eral Acquisition Streamlining Act of
The original of the disclosure shall be 1994 (Pub. L. 103355).
retained in the contract file.
3.901 Definitions.
3.805 Exemption. As used in this supart
Authorized official of an agency means
The Secretary of Defense may ex-
an officer or employee responsible for
empt, on a case-by-case basis, a cov-
contracting, program management,
ered Federal action from the prohibi- audit, inspection, investigation, or en-
tions of this section whenever the Sec- forcement of any law or regulation re-
retary determines, in writing, that lating to Government procurement or
such an exemption is in the national the subject matter of the contract.
interest. The Secretary shall transmit Authorized official of the Department of
a copy of such exemption to Congress Justice means any person responsible
immediately after making such a de- for the investigation, enforcement, or
termination. prosecution of any law or regulation.
Inspector General means an Inspector
3.806 Processing suspected violations.
General appointed under the Inspector
Suspected violations of the require- General Act of 1978, as amended. In the
ments of the Act shall be referred to Department of Defense that is the DOD
the official designated in agency proce- Inspector General. In the case of an ex-
dures. ecutive agency that does not have an
61
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
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
agency or designee shall request the Subpart 4.6Contract Reporting

Department of Justice to file an action
for enforcement of such order in the 4.601 Record requirements.
United States district court for a dis- 4.602 Federal Procurement Data System.
trict in which the reprisal was found to 4.603 Solicitation provisions.
have occurred. In any action brought
under this section, the court may grant Subpart 4.7Contractor Records Retention
appropriate relief, including injunctive 4.700 Scope of subpart.
relief and compensatory and exemplary 4.701 Purpose.
damages. 4.702 Applicability.
(c) Any person adversely affected or 4.703 Policy.
aggrieved by an order issued under this 4.704 Calculation of retention periods.
section may obtain review of the or- 4.705 Specific retention periods.
4.7051 Financial and cost accounting
ders conformance with the law, and
records.
this subpart, in the United States 4.7052 Pay administration records.
Court of Appeals for a circuit in which 4.7053 Acquisition and supply records.
the reprisal is alleged in the order to 4.706 [Reserved]
have occurred. No petition seeking
such review may be filed more than 60 Subpart 4.8Government Contract Files
days after issuance of the order by the 4.800 Scope of subpart.
head of the agency or designee. Review 4.801 General.
shall conform to Chapter 7 of Title 5, 4.802 Contract files.
United States Code. 4.803 Contents of contract files.
4.804 Closeout of contract files.
4.8041 Closeout by the office administering
PART 4ADMINISTRATIVE MATTERS the contract.
4.8042 Closeout of the contracting office
Sec. files if another office administers the
4.000 Scope of part. contract.
4.8043 Closeout of paying office contract
Subpart 4.1Contract Execution files.
4.8044 Physically completed contracts.
4.101 Contracting officers signature. 4.8045 Procedures for closing out contract
4.102 Contractors signature. files.
4.103 Contract clause. 4.805 Storage, handling, and disposal of con-
tract files.
Subpart 4.2Contract Distribution
Subpart 4.9Taxpayer Identification
4.201 Procedures. Number Information
4.202 Agency distribution requirements.
4.203 Taxpayer identification information. 4.900 Scope of subpart.
4.901 Definition.
Subpart 4.3Paper Documents 4.902 General.
4.903 Reporting contract information to the
4.300 Scope of subpart. IRS.
4.301 Definition. 4.904 Reporting payment information to the
4.302 Policy. IRS.
4.303 Contract clause. 4.905 Solicitation provision.
Subpart 4.4Safeguarding Classified Subpart 4.10Administrative Matters

Information Within Industry
4.1001 Policy.
4.401 [Reserved]
4.402 General. Subpart 4.11Central Contractor
4.403 Responsibilities of contracting offi- Registration
cers.
4.1100 Scope.
4.1101 Definitions.
4.1102 Policy.
Subpart 4.5Electronic Commerce in 4.1103 Procedures.
Contracting 4.1104 Solicitation provision and contract
4.500 Scope of subpart. clauses.
4.501 [Reserved] AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
4.502 Policy. ter 137; and 42 U.S.C. 2473(c).
63
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
4.102 Contractors signature. 4.201 Procedures.

(a) Individuals. A contract with an in- Contracting officers shall distribute
dividual shall be signed by that indi- copies of contracts or modifications
vidual. A contract with an individual within 10 working days after execution
doing business as a firm shall be signed by all parties. As a minimum, the con-
by that individual, and the signature tracting officer shall
shall be followed by the individuals (a) Distribute simultaneously one
typed, stamped, or printed name and signed copy or reproduction of the
the words , an individual doing busi- signed contract to the contractor and
ness as ....................... [insert name of the paying office;
firm]. (b) When a contract is assigned to an-
(b) Partnerships. A contract with a other office for contract administra-
partnership shall be signed in the part- tion (see subpart 42.2), provide to that
nership name. Before signing for the office
Government, the contracting officer (1) One copy or reproduction of the
shall obtain a list of all partners and signed contract and of each modifica-
ensure that the individual(s) signing tion; and
for the partnership have authority to (2) A copy of the contract distribu-
bind the partnership. tion list, showing those offices that
(c) Corporations. A contract with a should receive copies of modifications,
corporation shall be signed in the cor- and any changes to the list as they
porate name, followed by the word occur;
by and the signature and title of the (c) Distribute one copy to each ac-
person authorized to sign. The con- counting and finance office (funding of-
tracting officer shall ensure that the fice) whose funds are cited in the con-
person signing for the corporation has tract;
authority to bind the corporation. (d) When the contract is not assigned
(d) Joint venturers. A contract with for administration but contains a Cost
joint venturers may involve any com- Accounting Standards clause, provide
64
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.
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 contract) 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
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
NISP or agency procedures, as appro- agency-prescribed clause as required by

priate; and agency procedures.
(2) Include (i) an appropriate Secu- [48 FR 42113, Sept. 19, 1983, as amended at 61
rity Requirements clause in the solici- FR 31617, June 20, 1996]
tation (see 4.404), and (ii) as appro-
priate, in solicitations and contracts
Subpart 4.5Electronic
when the contract may require access
to classified information, a require-
Commerce in Contracting
ment for security safeguards in addi-
tion to those provided in the clause AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. chap-
ter 137; and 42 U.S.C. 2473(c).
(52.2042, Security Requirements).
(c) Award phase. Contracting officers SOURCE: 63 FR 58592, Oct. 30, 1998, unless
shall inform contractors and sub- otherwise noted.
contractors of the security classifica-
tions and requirements assigned to the
various documents, materials, tasks, This subpart provides policy and pro-
subcontracts, and components of the cedures for the establishment and use
classified contract as follows: of electronic commerce in Federal ac-
(1) Agencies covered by the NISP quisition as required by Section 30 of
shall use the Contract Security Classi- the Office of Federal Procurement Pol-
fication Specification, DD Form 254. icy (OFPP) Act (41 U.S.C. 426).
The contracting officer, or authorized 4.501 [Reserved]
representative, is the approving official
for the form and shall ensure that it is 4.502 Policy.
prepared and distributed in accordance
with the ISR. (a) The Federal Government shall use
electronic commerce whenever prac-
(2) Contracting officers in agencies
ticable or cost-effective. The use of
not covered by the NISP shall follow terms commonly associated with paper
agency procedures. transactions (e.g., copy, docu-
[48 FR 42113, Sept. 19, 1983, as amended at 61 ment, page, printed, sealed en-
FR 31617, June 20, 1996] velope, and stamped) shall not be
interpreted to restrict the use of elec-
4.404 Contract clause. tronic commerce. Contracting officers
(a) The contracting officer shall in- may supplement electronic trans-
sert the clause at 52.2042, Security Re- actions by using other media to meet
quirements, in solicitations and con- the requirements of any contract ac-
tracts when the contract may require tion governed by the FAR (e.g., trans-
mit hard copy of drawings).
access to classified information, unless
the conditions specified in paragraph (b) Agencies may exercise broad dis-
cretion in selecting the hardware and
(d) below apply.
software that will be used in con-
(b) If a cost contract (see 16.302) for
ducting electronic commerce. However,
research and development with an edu- as required by Section 30 of the OFPP
cational institution is contemplated, Act (41 U.S.C. 426), the head of each
the contracting officer shall use the agency, after consulting with the Ad-
clause with its Alternate I. ministrator of OFPP, shall ensure that
(c) If a construction or architect-en- systems, technologies, procedures, and
gineer contract where employee identi- processes used by the agency to con-
fication is required for security reasons duct electronic commerce
is contemplated, the contracting offi- (1) Are implemented uniformly
cer shall use the clause with its Alter- throughout the agency, to the max-
nate II. imum extent practicable;
(d) If the contracting agency is not (2) Are implemented only after con-
covered by the NISP and has prescribed sidering the full or partial use of exist-
a clause and alternates that are sub- ing infrastructures, (e.g., the Federal
stantially the same as those at 52.204 Acquisition Computer Network
2, the contracting officer shall use the (FACNET));
67
4.600 48 CFR Ch. 1 (10103 Edition)
(3) Facilitate access to Government (5) Those procurements which result

acquisition opportunities by small in the submission of a single bid or pro-
business concerns, small disadvantaged posal so that they can be separately
business concerns, and women-owned categorized and designated non-
small business concerns; competitive procurements using com-
(4) Include a single means of pro- petitive procedures.
viding widespread public notice of ac- (c) In addition to paragraph (b) of
quisition opportunities through the this section with respect to each pro-
Governmentwide point of entry and a curement carried out using procedures
means of responding to notices or so- other than competitive procedures,
licitations electronically; and agencies shall be able to access from
(5) Comply with nationally and inter- the computer file
nationally recognized standards that (1) The reason under subpart 6.3 for
broaden interoperability and ease the the use of such procedures; and
electronic interchange of information, (2) The identity of the organization
such as standards established by the or activity which conducted the pro-
National Institute of Standards and curement.
Technology. (d) In addition to the information de-
(c) Before using electronic commerce, scribed in paragraphs (b) and (c) of this
the agency head shall ensure that the section, for procurements in excess of
agency systems are capable of ensuring $25,000, agencies shall be able to access
authentication and confidentiality information on the following from the
commensurate with the risk and mag- computer file:
nitude of the harm from loss, misuse, (1) Awards to small disadvantaged
or unauthorized access to or modifica- businesses using either set-asides or
tion of the information. full and open competition.
(d) Agencies may accept electronic (2) Awards to business concerns
signatures and records in connection owned and controlled by women.
with Government contracts. (3) The number of offers received in
[63 R 58592, Oct. 30, 1998, as amended at 66 FR response to a solicitation.
27409, May 16, 2001; 68 FR 28094, May 22, 2003] (4) Task or delivery order contracts.
(5) Contracts for the acquisition of
Subpart 4.6Contract Reporting commercial items.
(e) In addition to the information de-
4.600 Scope of subpart. scribed in paragraphs (b), (c), and (d) of
This subpart prescribes uniform re- this section, agencies must be able to
porting requirements for the Federal access information from the computer
Procurement Data System (FPDS). file to identify bundled contracts with
a total contract value, including all op-
4.601 Record requirements. tions, exceeding $5,000,000.
(a) Each executive agency shall es- (f) Agencies must transmit this infor-
tablish and maintain for a period of 5 mation to the Federal Procurement
years a computer file, by fiscal year, Data System in accordance with its
containing unclassified records of all procedures.
procurements exceeding $25,000. [50 FR 52429, Dec. 23, 1985, as amended at 52
(b) With respect to each procurement FR 19802, May 27, 1987; 60 FR 42653, Aug. 16,
carried out using competitive proce- 1995; 64 FR 72442, Dec. 27, 1999]
dures, agencies shall be able to access
from the computer file, as a minimum, 4.602 Federal Procurement Data Sys-
the following information: tem.
(1) The date of contract award. (a) The FPDS provides a comprehen-
(2) Information identifying the sive mechanism for assembling, orga-
source to whom the contract was nizing, and presenting contract place-
awarded. ment data for the Federal Government.
(3) The property or services obtained Federal agencies report data to the
by the Government under the procure- Federal Procurement Data Center
ment. (FPDC), which collects, processes, and
(4) The total cost of the procurement. disseminates official statistical data
68
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
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
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
71
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
72
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.
73
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.
74
(4) Other pertinent documents. 4.8042 Closeout of the contracting of-

[48 FR 42113, Sept. 19, 1983, as amended at 50 fice files if another office admin-
FR 1727, Jan. 11, 1985; 50 FR 52429, Dec. 23, isters the contract.
1985; 54 FR 5054, Jan. 31, 1989; 55 FR 36794, (a) Contract files for contracts using
Sept. 6, 1990; 60 FR 48211, Sept. 18, 1995; 61 FR simplified acquisition procedures
39188, July 26, 1996; 61 FR 67430, Dec. 20, 1996;
62 FR 232, Jan. 2, 1997; 63 FR 9052, Feb. 23, should be considered closed when the
1998; 65 FR 46074, July 26, 2000; 66 FR 27409, contracting officer receives evidence of
May 16, 2001] receipt of property and final payment,
unless otherwise specified by agency
4.804 Closeout of contract files. regulation.
4.8041 Closeout by the office admin- (b) All other contract files shall be
istering the contract. closed as soon as practicable after the
contracting officer receives a contract
(a) Except as provided in paragraph
completion statement from the con-
(c) below, time standards for closing
tract administration office. The con-
out contract files are as follows:
(1) Files for contracts using sim- tracting officer shall ensure that all
plified acquisition procedures should be contractual actions required have been
considered closed when the contracting completed and shall prepare a state-
officer receives evidence of receipt of ment to that effect. This statement is
property and final payment, unless authority to close the contract file and
otherwise specified by agency regula- shall be made a part of the official con-
tions. tract file.
(2) Files for firm-fixed-price con- [48 FR 42113, Sept. 19, 1983, as amended at 60
tracts, other than those using sim- FR 34746, July 3, 1995]
plified acquisition procedures, should
be closed within 6 months after the 4.8043 Closeout of paying office con-
date on which the contracting officer tract files.
receives evidence of physical comple-
tion. The paying office shall close the con-
(3) Files for contracts requiring set- tract file upon issuance of the final
tlement of indirect cost rates should be payment voucher.
closed within 36 months of the month
in which the contracting officer re- 4.8044 Physically completed con-
tracts.
ceives evidence of physical completion.
(4) Files for all other contracts (a) Except as provided in paragraph
should be closed within 20 months of (b) below, a contract is considered to be
the month in which the contracting of- physically completed when
ficer receives evidence of physical com- (1)(i) The contractor has completed
pletion. the required deliveries and the Govern-
(b) When closing out the contract ment has inspected and accepted the
files at 4.8041(a)(2), (3), and (4), the supplies;
contracting officer shall use the close- (ii) The contractor has performed all
out procedures at 4.8045. However,
services and the Government has ac-
these closeout actions may be modified
cepted these services; and
to reflect the extent of administration
that has been performed. Quick close- (iii) All option provisions, if any,
out procedures (see 42.708) should be have expired; or
used, when appropriate, to reduce ad- (2) The Government has given the
ministrative costs and to enable contractor a notice of complete con-
deobligation of excess funds. tract termination.
(c) A contract file shall not be closed (b) Facilities contracts and rental,
if (1) the contract is in litigation or use, and storage agreements are con-
under appeal, or (2) in the case of a ter- sidered to be physically completed
mination, all termination actions have when
not been completed. (1) The Government has given the
[48 FR 42113, Sept. 19, 1983, as amended at 54 contractor a notice of complete con-
FR 34752, Aug. 21, 1989; 60 FR 34746, July 3, tract termination; or
1995] (2) The contract period has expired.
75
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
76
paragraph (b) of this section may not Document Retention period

be destroyed before the times indi-
(iii) Related records or Same as contract file.
cated, and may be retained longer if documents, including
the responsible agency official deter- successful proposals,
mines that the files have future value except for contractors
payrolls (see (b)(4)(iv)).
to the Government. When original doc-
uments have been converted to alter- (iv) Contractors payrolls 3 years after contract com-
nate media for storage, the require- submitted in accord- pletion unless contract per-
ance with Department formance is the subject of
ments in paragraph (b) of this section of Labor regulations, an enforcement action on
also apply to the record copies in the with related certifi- that date.
alternate media. cations, anti-kickback
affidavits, and other re-
(b) If administrative records are lated papers.
mixed with program records and can-
not be economically segregated, the (5) Solicited and unsolicited
unsuccessful offers,
entire file should be kept for the period quotations, bids, and pro-
of time approved for the program posals:
records. Similarly, if documents de- (i) Relating to contracts If filed separately from con-
scribed in the following table are part above the simplified tract file, until contract is
acquisition threshold. completed. Otherwise, the
of a subject or case file that documents same as related contract
activities that are not described in the file.
table, they should be treated in the
(ii) Relating to contracts 1 year after date of award or
same manner as the files of which they at or below the sim- until final payment, which-
are a part. The retention periods for plified acquisition ever is later.
acquisitions at or below the simplified threshold.
acquisition threshold also apply to ac- (6) Files for canceled solicita- 5 years after cancellation.
quisitions conducted prior to July 3, tions.
1995, that used small purchase proce-
dures. The retention periods for acqui- (7) Other copies of procure- Upon termination or comple-
ment file records used by tion.
sitions above the simplified acquisition component elements of a
threshold also apply to acquisitions contracting office for ad-
conducted prior to July 3, 1995, that ministrative purposes.
used other than small purchase proce- (8) Documents pertaining Until superseded or obsolete.
dures. generally to the contractor
as described at 4.801(c)(3).
Document Retention period
(9) Data submitted to the 5 years after submittal to
(1) Records pertaining to 6 years and 3 months after Federal Procurement Data FPDS.
Contract Disputes Act ac- final action or decision for System (FPDS). Electronic
tions. files created prior to Octo- data file maintained by fis-
ber 1, 1979. 1 year after cal year, containing unclas-
final action or decision for sified records of all pro-
files created on or after Oc- curements other than sim-
tober 1, 1979. plified acquisitions, and in-
formation required under
(2) Contracts (and related 6 years and 3 months after 4.601.
records or documents, in- final payment.
cluding successful pro- (10) Investigations, cases Until final clearance or settle-
posals) exceeding the sim- pending or in litigation (in- ment, or, if related to a
plified acquisition threshold cluding protests), or similar document identified in
for other than construction. matters. (b)(1)(9), for the retention
period specified for the re-
(3) Contracts (and related 3 years after final payment. lated document, whichever
records or documents, in- is later.
cluding successful pro-
posals) at or below the
simplified acquisition [65 FR 36022, June 6, 2000]
threshold for other than
construction.
Subpart 4.9Taxpayer
(4) Construction contracts:
(i) Above $2,000 ............. 6 years and 3 months after
Identification Number Information
final payment.
(ii) $2,000 or less ........... 3 years after final payment.
ter 137; and 42 U.S.C. 2473(c).
77
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-
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
78
periods. Line items may be further sub- 101(a)(13) or humanitarian or peace-

divided or stratified for administrative keeping operations as defined in 10
purposes (e.g., to provide for traceable U.S.C. 2302(7); or
accounting classification citations). (ii) Contracting officers in the con-
[62 FR 51230, Sept. 30, 1997]
duct of emergency operations, such as
responses to natural or environmental
disasters or national or civil emer-
Subpart 4.11Central Contractor gencies, e.g., Robert T. Stafford Dis-
Registration aster Relief and Emergency Assistance
Act (42 U.S.C. 5121);
SOURCE: 68 FR 56672, Oct. 1, 2003, unless (4) Contracts to support unusual or
otherwise noted. compelling needs (see 6.3022);
(5) Awards made to foreign vendors
4.1100 Scope. for work performed outside the United
This subpart prescribes policies and States, if it is impractical to obtain
procedures for requiring contractor CCR registration; and
registration in the Central Contractor (6) Micro-purchases that do not use
Registration (CCR) database, a part of the electronic funds transfer (EFT)
the Business Partner Network (BPN) method for payment and are not re-
to quired to be reported (see subpart 4.6).
(a) Increase visibility of vendor (b) If practical, the contracting offi-
sources (including their geographical cer shall modify the contract or agree-
locations) for specific supplies and ment awarded under paragraph (a)(3) or
services; and (a)(4) of this section to require CCR
(b) Establish a common source of registration.
vendor data for the Government. (c)(1)(i) If a contractor has legally
changed its business name, doing
4.1101 Definitions. business as name, or division name
As used in this subpart (whichever is shown on the contract),
Agreement means basic agreement, or has transferred the assets used in
basic ordering agreement, or blanket performing the contract, but has not
purchase agreement. completed the necessary requirements
Business Partner Network means an in- regarding novation and change-of-
tegrated electronic infrastructure the name agreements in Subpart 42.12, the
Government uses to manage (i.e., col- contractor shall provide the respon-
lect, validate, access and maintain) the sible contracting officer a minimum of
information it needs to transact busi- one business days written notification
ness with its contractors. of its intention to change the name in
the CCR database; comply with the re-
4.1102 Policy. quirements of Subpart 42.12; and agree
(a) Prospective contractors shall be in writing to the timeline and proce-
registered in the CCR database prior to dures specified by the responsible con-
award of a contract or agreement, ex- tracting officer. The contractor must
cept for provide with the notification sufficient
(1) Purchases that use a Government- documentation to support the legally
wide commercial purchase card as both changed name.
the purchasing and payment mecha- (ii) If the contractor fails to comply
nism, as opposed to using the purchase with the requirements of paragraph
card only as a payment method; (g)(1)(i) of the clause at 52.2047, Cen-
(2) Classified contracts (see 2.101) tral Contractor Registration, or fails
when registration in the CCR database, to perform the agreement at 52.204
or use of CCR data, could compromise 7(g)(1)(i)(3), and, in the absence of a
the safeguarding of classified informa- properly executed novation or change-
tion or national security; of-name agreement, the CCR informa-
(3) Contracts awarded by tion that shows the contractor to be
(i) Deployed contracting officers in other than the contractor indicated in
the course of military operations, in- the contract will be considered to be
cluding, but not limited to, contin- incorrect information within the mean-
gency operations as defined in 10 U.S.C. ing of the Suspension of Payment
79
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.
80
SUBCHAPTER BACQUISITION PLANNING
PART 5PUBLICIZING CONTRACT 5.000 Scope of part.

ACTIONS This part prescribes policies and pro-
cedures for publicizing contract oppor-
Sec. tunities and award information.
5.001 Definition. 5.001 Definition.
5.002 Policy.
5.003 Governmentwide point of entry.
Contract action, as used in this part,
means an action resulting in a con-
Subpart 5.1Dissemination of Information tract, as defined in subpart 2.1, includ-
ing actions for additional supplies or
5.101 Methods of disseminating information. services outside the existing contract
5.102 Availability of solicitations. scope, but not including actions that
are within the scope and under the
Subpart 5.2Synopses of Proposed
terms of the existing contract, such as
Contract Actions
contract modifications issued pursuant
5.201 General. to the Changes clause, or funding and
5.202 Exceptions. other administrative changes.
5.203 Publicizing and response time.
5.204 Presolicitation notices. [67 FR 13053, Mar. 20, 2002]
5.205 Special situations.
5.206 Notice of subcontracting opportuni- 5.002 Policy.
ties. Contracting officers must publicize
5.207 Preparation and transmittal of syn- contract actions in order to
opses. (a) Increase competition;
(b) Broaden industry participation in
Subpart 5.3Synopses of Contract Awards meeting Government requirements;
5.301 General. and
5.302 Preparation and transmittal of syn- (c) Assist small business concerns,
opses of awards. veteran-owned small business concerns,
5.303 Announcement of contract awards. service-disabled veteran-owned small
business concerns, HUBZone small
Subpart 5.4Release of Information business concerns, small disadvantaged
5.401 General. business concerns, and women-owned
5.402 General public. small business concerns in obtaining
5.403 Requests from Members of Congress. contracts and subcontracts.
5.404 Release of long-range acquisition esti-
mates. [50 FR 52429, Dec. 23, 1985, as amended at 60
5.4041 Release procedures. FR 48259, Sept. 18, 1995; 65 FR 60544, Oct. 11,
5.4042 Announcements of long-range acqui- 2000]
sition estimates.
5.405 Exchange of acquisition information. 5.003 Governmentwide point of entry.
For any requirement in the FAR to
Subpart 5.5Paid Advertisements publish a notice, the contracting offi-
5.501 Definitions. cer must transmit the notices to the
5.502 Authority. GPE.
5.503 Procedures. [68 FR 56678, Oct. 1, 2003]
5.504 Use of advertising agencies.
Subpart 5.6Publicizing Multi-Agency Use Subpart 5.1Dissemination of

Contracts Information
5.601 Governmentwide database of con- 5.101 Methods of disseminating infor-
tracts. mation.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap- (a) As required by the Small Business
ter 137; and 42 U.S.C. 2473(c). Act (15 U.S.C. 637(e)) and the Office of
SOURCE: 48 FR 42119, Sept. 19, 1983, unless Federal Procurement Policy Act (41
otherwise noted. U.S.C. 416), contracting officers must
81
5.102 48 CFR Ch. 1 (10103 Edition)
disseminate information on proposed (2) Assisting local trade associations

contract actions as follows: in disseminating information to their
(1) For proposed contract actions ex- members.
pected to exceed $25,000, by synopsizing (3) Making brief announcements of
in the GPE (see 5.201). proposed contracts to newspapers,
(2) For proposed contract actions ex- trade journals, magazines, or other
pected to exceed $10,000, but not ex- mass communication media for publi-
pected to exceed $25,000, by displaying cation without cost to the Govern-
in a public place, or by any appropriate ment.
electronic means, an unclassified no- (4) Placing paid advertisements in
tice of the solicitation or a copy of the newspapers or other communications
solicitation satisfying the require- media, subject to the following limita-
ments of 5.207(c). The notice must in- tions:
clude a statement that all responsible (i) Contracting officers shall place
sources may submit a response which, paid advertisements of proposed con-
if timely received, must be considered tracts only when it is anticipated that
by the agency. The information must effective competition cannot be ob-
be posted not later than the date the tained otherwise (see 5.205(d)).
solicitation is issued, and must remain (ii) Contracting officers shall not
posted for at least 10 days or until after place advertisements of proposed con-
quotations have been opened, which- tracts in a newspaper published and
ever is later. printed in the District of Columbia un-
(i) If solicitations are posted instead less the supplies or services will be fur-
of a notice, the contracting officer may nished, or the labor performed, in the
employ various methods of satisfying District of Columbia or adjoining coun-
the requirements of 5.207(c). For exam- ties in Maryland or Virginia (44 U.S.C.
ple, the contracting officer may meet 3701).
the requirements of 5.207(c) by stamp- (iii) Advertisements published in
ing the solicitation, by a cover sheet to newspapers must be under proper writ-
the solicitation, or by placing a general ten authority in accordance with 44
U.S.C. 3702 (see 5.502(a)).
statement in the display room.
(ii) The contracting officer need not [48 FR 42119, Sept. 19, 1983, as amended at 50
comply with the display requirements FR 1728, Jan. 11, 1985; 50 FR 52429, Dec. 23,
of this section when the exemptions at 1985; 51 FR 27117, July 29, 1986; 52 FR 21885,
June 9, 1987; 56 FR 41731, Aug. 22, 1991; 60 FR
5.202(a)(1), (a)(4) through (a)(9), or
34736, 34746, July 3, 1995; 61 FR 39191, July 26,
(a)(11) apply, when oral or Federal Ac- 1996; 62 FR 12692, Mar. 17, 1997; 63 FR 58592,
quisition Computer Network Oct. 30, 1998; 66 FR 27409, May 16, 2001; 68 FR
(FACNET) solicitations are used, or 56678, Oct. 1, 2003]
when providing access to a notice of
proposed contract action and solicita- 5.102 Availability of solicitations.
tion through the GPE and the notice (a)(1) Except as provided in para-
permits the public to respond to the so- graph (a)(4) of this section, the con-
licitation electronically. tracting officer must make available
(iii) Contracting officers may use through the GPE solicitations synop-
electronic posting of requirements in a sized through the GPE, including speci-
place accessible by the general public fications and other pertinent informa-
at the Government installation to sat- tion determined necessary by the con-
isfy the public display requirement. tracting officer. Transmissions to the
Contracting offices using electronic GPE must be in accordance with the
systems for public posting that are not interface description available via the
accessible outside the installation Internet at http://www.fedbizopps.gov.
must periodically publicize the meth- (2) The contracting officer is encour-
ods for accessing the information. aged, when practicable and cost-effec-
(b) In addition, one or more of the tive, to make accessible through the
following methods may be used: GPE additional information related to
(1) Preparing periodic handouts list- a solicitation.
ing proposed contracts, and displaying (3) The contracting officer must en-
them as in 5.101(a)(2). sure that solicitations transmitted to
82
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
83
5.202 48 CFR Ch. 1 (10103 Edition)
situations in 5.205, the contracting offi- international agreement or treaty be-

cer must transmit a notice to the GPE, tween the United States and a foreign
for each proposed government or international organiza-
(i) Contract action meeting the tions, has the effect of requiring that
threshold in 5.101(a)(1); the acquisition shall be from specified
(ii) Modification to an existing con- sources;
tract for additional supplies or services (4) The proposed contract action is
that meets the threshold in 5.101(a)(1); expressly authorized or required by a
or statute to be made through another
(iii) Contract action in any amount Government agency, including acquisi-
when advantageous to the Government. tions from the Small Business Admin-
(2) When transmitting notices to istration (SBA) using the authority of
FACNET, contracting officers must en- section 8(a) of the Small Business Act
sure the notice is forwarded to the (but see 5.205(f)), or from a specific
GPE. source such as a workshop for the blind
(c) The primary purposes of the no- under the rules of the Committee for
tice are to improve small business ac- the Purchase from the Blind and Other
cess to acquisition information and en- Severely Handicapped;
hance competition by identifying con- (5) The proposed contract action is
tracting and subcontracting opportuni- for utility services other than tele-
ties. communications services and only one
(d) The GPE may be accessed via the source is available;
Internet at http://www.fedbizopps.gov. (6) The proposed contract action is an
[66 FR 27410, May 16, 2001, as amended at 68 order placed under Subpart 16.5;
FR 56678, Oct. 1, 2003] (7) The proposed contract action re-
sults from acceptance of a proposal
5.202 Exceptions. under the Small Business Innovation
The contracting officer need not sub- Development Act of 1982 (Pub. L. 97
mit the notice required by 5.201 when 219);
(a) The contracting officer deter- (8) The proposed contract action re-
mines that sults from the acceptance of an unso-
(1) The synopsis cannot be worded to licited research proposal that dem-
preclude disclosure of an agencys onstrates a unique and innovative con-
needs and such disclosure would com- cept (see 2.101) and publication of any
promise the national security (e.g., notice complying with 5.207 would im-
would result in disclosure of classified properly disclose the originality of
information). The fact that a proposed thought or innovativeness of the pro-
solicitation or contract action contains posed research, or would disclose pro-
classified information, or that access prietary information associated with
to classified matter may be necessary the proposal. This exception does not
to submit a proposal or perform the apply if the proposed contract action
contract does not, in itself, justify use results from an unsolicited research
of this exception to synopsis; proposal and acceptance is based solely
(2) The proposed contract action is upon the unique capability of the
made under the conditions described in source to perform the particular re-
6.3022 (or, for purchases conducted search services proposed (see 6.302
using simplified acquisition proce- 1(a)(2)(i);
dures, if unusual and compelling ur- (9) The proposed contract action is
gency precludes competition to the made for perishable subsistence sup-
maximum extent practicable) and the plies, and advance notice is not appro-
Government would be seriously injured priate or reasonable;
if the agency complies with the time (10) The proposed contract action is
periods specified in 5.203; made under conditions described in
(3) The proposed contract action is 6.3023, or 6.3025 with regard to brand
one for which either the written direc- name commercial items for authorized
tion of a foreign government reimburs- resale, or 6.3027, and advance notice is
ing the agency for the cost of the ac- not appropriate or reasonable;
quisition of the supplies or services for (11) The proposed contract action is
such government, or the terms of an made under the terms of an existing
84
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
85
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:
86
(1) Except when exempted by 5.202, developmental and transitional stages;

contracting officers must transmit to and
the GPE a synopsis of each proposed (4) Encouraging interested 8(a) firms
contract action for which the total fee to request a copy of the solicitation as
(including phases and options) is ex- expeditiously as possible since the so-
pected to exceed $25,000. licitation will be issued without fur-
(2) When the total fee is expected to ther notice upon SBA acceptance of the
exceed $10,000 but not exceed $25,000, requirement for the section 8(a) pro-
the contracting officer must comply gram.
with 5.101(a)(2). When the proposed con- [66 FR 27411, May 16, 2001, as amended at 68
tract action is not required to be syn- FR 43856, July 24, 2003; 68 FR 56678, Oct. 1,
opsized under paragraph (d)(1) of this 2003]
section, the contracting officer must
display a notice of the solicitation or a 5.206 Notices of subcontracting oppor-
copy of the solicitation in a public tunities.
place at the contracting office. Other (a) The following entities may trans-
optional publicizing methods are au- mit a notice to the GPE to seek com-
thorized in accordance with 5.101(b). petition for subcontracts, to increase
(e) Effort to locate commercial sources participation by qualified HUBZone
under OMB Circular A76. When deter- small business, small, small disadvan-
mining the availability of commercial taged, and small women-owned busi-
sources under the procedures pre- ness concerns, and to meet established
scribed in subpart 7.3 and OMB Circular subcontracting plan goals:
A76, the contracting officer must not (1) A contractor awarded a contract
arrive at a conclusion that there are no exceeding $100,000 that is likely to re-
commercial sources capable of pro- sult in the award of any subcontracts.
viding the required supplies or services (2) A subcontractor or supplier, at
until publicizing the requirement any tier, under a contract exceeding
through the GPE at least three times $100,000, that has a subcontracting op-
in a 90 calendar-day period, with a min- portunity exceeding $10,000.
imum of 30 calendar days between no- (b) The notices must describe
tices. When necessary to meet an ur- (1) The business opportunity;
gent requirement, this may be limited (2) Any prequalification require-
to a total of two notices through the ments; and
GPE in a 30 calendar-day period, with a (3) Where to obtain technical data
minimum of 15 calendar days between needed to respond to the requirement.
each. [64 FR 72442, Dec. 27, 1999, as amended at 65
(f) Section 8(a) competitive acquisition. FR 46054, July 26, 2000; 66 FR 27412, May 16,
When a national buy requirement is 2001; 68 FR 56678, Oct. 1, 2003]
being considered for competitive acqui-
sition limited to eligible 8(a) concerns 5.207 Preparation and transmittal of
under subpart 19.8, the contracting offi- synopses.
cer must transmit a synopsis of the (a) Content. Each synopsis trans-
proposed contract action to the GPE. mitted to the GPE must address the
The synopsis may be transmitted to following data elements, as applicable:
the GPE concurrent with submission of (1) Action Code.
the agency offering (see 19.8042) to the (2) Date.
Small Business Administration (SBA). (3) Year.
The synopsis should also include infor- (4) Government Printing Office (GPO)
mation Billing Account Code.
(1) Advising that the acquisition is (5) Contracting Office Zip Code.
being offered for competition limited (6) Classification Code.
to eligible 8(a) concerns; (7) Contracting Office Address.
(2) Specifying the North American (8) Subject.
Industry Classification System (9) Proposed Solicitation Number.
(NAICS) code; (10) Opening and Closing Response
(3) Advising that eligibility to par- Date.
ticipate may be restricted to firms in (11) Contact Point or Contracting Of-
either the developmental stage or the ficer.
87
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.
88
(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
89
5.401 48 CFR Ch. 1 (10103 Edition)
the simplified acquisition threshold, rectly or indirectly in any stage of the

they shall include acquisition cycle.
(1) For awards after sealed bidding, a
statement that the contract was 5.402 General public.
awarded after competition by sealed Contracting officers shall process re-
bidding, the number of offers solicited quests for specific information from
and received, and the basis for selec- the general public, including suppliers,
tion (e.g., the lowest responsible bid- in accordance with subpart 24.1 or 24.2,
der); or as appropriate.
(2) For awards after negotiation, the
information prescribed by 15.503(b), and 5.403 Requests from Members of Con-
after competitive negotiation (either gress.
price or design competition), a state- Contracting officers shall give Mem-
ment to this effect, and in general bers of Congress, upon their request,
terms the basis for selection. detailed information regarding any
[48 FR 42119, Sept. 19, 1983, as amended at 50 particular contract. When responsive-
FR 1729, Jan. 11, 1985; 50 FR 52429, Dec. 23, ness would result in disclosure of clas-
1985; 52 FR 30076, Aug. 12, 1987; 55 FR 3881, sified matter, business confidential in-
Feb. 5, 1990; 56 FR 67128, Dec. 27, 1991; 59 FR formation, or information prejudicial
67017, Dec. 28, 1994; 60 FR 34747, July 3, 1995; to competitive acquisition, the con-
60 FR 42653, Aug. 16, 1995; 61 FR 39190, July 26,
1996; 61 FR 69289, Dec. 31, 1996; 62 FR 51270,
tracting officer shall refer the proposed
Sept. 30, 1997; 68 FR 28080, May 22, 2003] reply, with full documentation, to the
agency head and inform the legislative
liaison office of the action.
Subpart 5.4Release of
Information [48 FR 42119, Sept. 19, 1983, as amended at 50
FR 1729, Jan. 11, 1985; 50 FR 52429, Dec. 23,
5.401 General. 1985; 68 FR 43856, July 24, 2003]
(a) A high level of business security 5.404 Release of long-range acquisition

must be maintained in order to pre- estimates.
serve the integrity of the acquisition
process. When it is necessary to obtain To assist industry planning and to lo-
information from potential contractors cate additional sources of supply, it
and others outside the Government for may be desirable to publicize estimates
use in preparing Government esti- of unclassified long-range acquisition
mates, contracting officers shall ensure requirements. Estimates may be pub-
that the information is not publicized licized as far in advance as possible.
or discussed with potential contrac-
5.4041 Release procedures.
tors.
(b) Contracting officers may make (a) Application. The agency head, or a
available maximum information to the designee, may release long-range ac-
public, except information quisition estimates if the information
(1) On plans that would provide will
undue or discriminatory advantage to (1) Assist industry in its planning and
private or personal interests; facilitate meeting the acquisition re-
(2) Received in confidence from an of- quirements;
feror; (2) Not encourage undesirable prac-
(3) Otherwise requiring protection tices (e.g., attempts to corner the mar-
under Freedom of Information Act (see ket or hoard industrial materials); and
subpart 24.2) or Privacy Act (see sub- (3) Not indicate the existing or poten-
part 24.1); or tial mobilization of the industry as a
(4) Pertaining to internal agency whole.
communications (e.g., technical re- (b) Conditions. The agency head shall
views, contracting authority or other ensure that
reasons, or recommendations referring (1) Classified information is released
thereto). through existing security channels in
(c) This policy applies to all Govern- accordance with agency security regu-
ment personnel who participate di- lations;
90
(2) The information is publicized as tracting activity within an agency, the

widely as practicable to all parties si- exchange and coordination of pertinent
multaneously by any of the means de- information, particularly cost and pric-
scribed in this part; ing data, between these agencies or
(3) Each release states that (i) the es- contracting activities is necessary to
timate is based on the best information promote uniformity of treatment of
available, (ii) the information is sub- major issues and the resolution of par-
ject to modification and is in no way ticularly difficult or controversial
binding on the Government, and (iii) issues. The exchange and coordination
more specific information relating to of information is particularly bene-
any individual item or class of items ficial during the period of acquisition
will not be furnished until the proposed planning, presolicitation, evaluation,
action is synopsized through the GPE and pre-award survey.
or the solicitation is issued; (b) When substantial acquisitions of
(4) Each release contains the name major items are involved or when the
and address of the contracting officer contracting activity deems it desir-
that will process the acquisition; able, the contracting activity shall re-
(5) Modifications to the original request appropriate information (on both
lease are publicized as soon as possible, the end item and on major subcon-
in the same manner as the original; tracted components) from other agen-
and cies or contracting activities respon-
(6) Each release sible for acquiring similar items. Each
(i) Is coordinated in advance with agency or contracting activity receiv-
small business, public information, and ing such a request shall furnish the in-
public relations personnel, as appro- formation requested. The contracting
priate; officer, early in a negotiation of a con-
(ii) Contains, if applicable, a state- tract, or in connection with the review
ment that small business set-asides of a subcontract, shall request the con-
may be involved, but that a determina- tractor to furnish information as to
tion can be made only when acquisition the contractors or subcontractors pre-
action is initiated; and vious Government contracts and sub-
(iii) Contains the name or description
contracts for the same or similar end
of the item, and the estimated quan-
items and major subcontractor compo-
tity to be acquired by calendar quarter,
nents.
fiscal year, or other period. It may also
contain such additional information as
the number of units last acquired, the Subpart 5.5Paid Advertisements
unit price, and the name of the last
supplier. 5.501 Definitions.
FR 48259, Sept. 18, 1995; 66 FR 27412, May 16, Advertisement, means any single mes-
2001] sage prepared for placement in commu-
nication media, regardless of the num-
5.4042 Announcements of long-range ber of placements.
acquisition estimates. Publication, means (1) the placement
Further publicizing, consistent with of an advertisement in a newspaper,
the needs of the individual case, may magazine, trade or professional jour-
be accomplished by announcing nal, or any other printed medium, or
through the GPE that long-range ac- (2) the broadcasting of an advertise-
quisition estimates have been pub- ment over radio or television.
lished and are obtainable, upon re- [48 FR 42119, Sept. 19, 1983, as amended at 66
quest, from the contracting officer. FR 2127, Jan. 10, 2001]
[66 FR 27412, May 16, 2001]
5.502 Authority.
5.405 Exchange of acquisition informa- (a) Newspapers. Authority to approve
tion. the publication of paid advertisements
(a) When the same item or class of in newspapers is vested in the head of
items is being acquired by more than each agency (44 U.S.C. 3702). This ap-
one agency, or by more than one con- proval authority may be delegated (5
91
5.503 48 CFR Ch. 1 (10103 Edition)
U.S.C. 302 (b)). Contracting officers eral publications and in national

shall obtain written authorization in media. Services of advertising agencies
accordance with agency procedures be- include, but are not limited to, coun-
fore advertising in newspapers. seling as to selection of the media for
(b) Other media. Unless the agency placement of the advertisement, con-
head determines otherwise, advance tacting the media in the interest of the
written authorization is not required Government, placing orders, selecting
to place advertisements in media other and ordering typography, copywriting,
than newspapers. and preparing rough layouts.
(b) Use of commission-paying media.
5.503 Procedures. The services of advertising agencies in
(a) General. (1) Orders for paid adver- placing advertising with media often
tisements may be placed directly with can be obtained at no cost to the Gov-
the media or through an advertising ernment, over and above the space
agency. Contracting officers shall give cost, as many media give advertising
small, small disadvantaged and agencies a commission or discount on
women-owned small business concerns the space cost that is not given to the
maximum opportunity to participate Government.
in these acquisitions. (c) Use of noncommission-paying media.
(2) The contracting officer shall use Some media do not grant advertising
the SF 1449 for paper solicitations. The agencies a commission or discount,
SF 1449 shall be used to make awards meaning the Government can obtain
or place orders unless the award/order the same rate as the advertising agen-
is made by using electronic commerce cy. If the advertising agency agrees to
or by using the Governmentwide com- place advertisements in noncommis-
mercial purchase card for micropur- sion-paying media as a no-cost service,
chases. the basic ordering agreement shall so
(b) Rates. Advertisements may be provide. If the advertising agency will
paid for at rates not over the commer- not agree to place advertisements at no
cial rates charged private individuals, cost, the agreement shall (1) provide
with the usual discounts (44 U.S.C. that the Government may place orders
3703). directly with the media, or (2) specify
(c) Proof of advertising. Every invoice an amount that the Government will
for advertising shall be accompanied pay if the agency places the orders.
by a copy of the advertisement or an (d) Art work, supplies, and incidentals.
affidavit of publication furnished by The basic ordering agreement also may
the publisher, radio or television sta- provide for the furnishing by the adver-
tion, or advertising agency concerned tising agency of art work, supplies, and
(44 U.S.C. 3703). Paying offices shall re- incidentals, including brochures and
tain the proof of advertising until the pamphlets, but not their printing.
General Accounting Office settles the Incidentals may include telephone calls,
paying offices account. telegrams, and postage incurred by the
(d) Payment. Upon receipt of an in- advertising agency on behalf of the
voice supported by proof of advertising, Government.
the contracting officer shall attach a
copy of the written authority (see Subpart 5.6Publicizing Multi-
5.502(a)) and submit the invoice for Agency Use Contracts
payment under agency procedures.
[48 FR 42119, Sept. 19, 1983, as amended at 54 SOURCE: 68 FR 43862, July 24, 2003, unless
FR 48982, Nov. 28, 1989; 60 FR 34747, July 3, otherwise noted.
1995; 60 FR 48259, Sept. 18, 1995; 61 FR 39192,
July 26, 1996; 63 FR 58593, Oct. 30, 1998] 5.601 Governmentwide database of
contracts.
5.504 Use of advertising agencies. (a) A Governmentwide database of
(a) General. Basic ordering agree- contracts and other procurement in-
ments may be placed with advertising struments intended for use by multiple
agencies for assistance in producing agencies is available via the Internet
and placing advertisements when a sig- at http://www.contractdirectory.gov. This
nificant number will be placed in sev- searchable database is a tool that may
92
be used to identify existing contracts 6.3022 Unusual and compelling urgency.

and other procurement instruments 6.3023 Industrial mobilization; engineering,
that may be used to fulfill Government developmental, or research capability; or
expert services.
needs.
6.3024 International agreement.
(b) The contracting activity shall 6.3025 Authorized or required by statute.
(1) Enter the information specified at 6.3026 National security.
http://www.contractdirectory.gov, in ac- 6.3027 Public interest.
cordance with the instructions on that 6.303 Justifications.
Web site, within ten days of award of a 6.3031 Requirements.
Governmentwide acquisition contract 6.3032 Content.
(GWAC), multi-agency contract, Fed- 6.304 Approval of the justification.
6.305 Availability of the justification.
eral Supply Schedule contract, or any
other procurement instrument in- Subpart 6.4Sealed Bidding and
tended for use by multiple agencies, in- Competitive Proposals
cluding blanket purchase agreements
(BPAs) under Federal Supply Schedule 6.401 Sealed bidding and competitive pro-
contracts. posals.
(2) Enter the information specified at
http://www.contractdirectory.gov in ac- Subpart 6.5Competition Advocates
cordance with the instructions on that 6.501 Requirement.
Web site by October 31, 2003, for all 6.502 Duties and responsibilities.
contracts and other procurement in- AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
struments intended for use by multiple ter 137; and 42 U.S.C. 2473(c).
agencies that were awarded before July
SOURCE: 50 FR 1729, Jan. 11, 1985 (interim
24, 2003.
rule), and 50 FR 52429, Dec. 23, 1985 (final
rule), unless otherwise noted.
PART 6COMPETITION
REQUIREMENTS 6.000 Scope of part.
This part prescribes policies and pro-
Sec. cedures to promote full and open com-
6.000 Scope of part. petition in the acquisition process and
to provide for full and open competi-
6.002 Limitations.
6.003 [Reserved] tion, full and open competition after
exclusion of sources, other than full
Subpart 6.1Full and Open Competition and open competition, and competition
advocates. This part does not deal with
6.100 Scope of subpart. the results of competition (e.g., ade-
6.101 Policy.
6.102 Use of competitive procedures.
quate price competition), that are ad-
dressed in other parts (e.g., part 15).
Subpart 6.2Full and Open Competition [66 FR 2127, Jan. 10, 2001]
After Exclusion of Sources
6.201 Policy. This part applies to all acquisitions
6.202 Establishing or maintaining alter- except
native sources. (a) Contracts awarded using the sim-
6.203 Set-asides for small business concerns. plified acquisition procedures of part 13
6.204 Section 8(a) competition.
(but see 13.501 for requirements per-
6.205 Set-asides for HUBZone small business
concerns. taining to sole source acquisition of
commercial items under subpart 13.5).
Subpart 6.3Other Than Full and Open (b) Contracts awarded using con-
Competition tracting procedures (other than those
addressed in this part) that are ex-
6.300 Scope of subpart. pressly authorized by statute;
6.301 Policy.
(c) Contract modifications, that are
6.302 Circumstances permitting other than
full and open competition. within the scope of the contract, in-
6.3021 Only one responsible source and no cluding the exercise of priced options
other supplies or services will satisfy that were evaluated as part of the
agency requirements. original competition (see 17.207(f));
93
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-
94
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
95
6.300 48 CFR Ch. 1 (10103 Edition)
for qualified HUBZone small business 6.302 Circumstances permitting other

concerns. than full and open competition.
[63 FR 70267, Dec. 18, 1998] The following statutory authorities
(including applications and limita-
tions) permit contracting without pro-
Subpart 6.3Other Than Full and viding for full and open competition.
Open Competition Requirements for justifications to sup-
port the use of these authorities are in
6.300 Scope of subpart. 6.303.
This subpart prescribes policies and [50 FR 52431, Dec. 23, 1985]
procedures, and identifies the statu-
tory authorities, for contracting with- 6.3021 Only one responsible source
out providing for full and open com- and no other supplies or services
petition. will satisfy agency requirements.
(a) Authority. (1) Citations: 10 U.S.C.
6.301 Policy. 2304(c)(1) or 41 U.S.C. 253(c)(1).
(a) 41 U.S.C. 253(c) and 10 U.S.C. (2) When the supplies or services re-
2304(c) each authorize, under certain quired by the agency are available
conditions, contracting without pro- from only one responsible source, or,
viding for full and open competition. for DoD, NASA, and the Coast Guard,
from only one or a limited number of
The Department of Defense, Coast
responsible sources, and no other type
Guard, and National Aeronautics and
of supplies or services will satisfy
Space Administration are subject to 10 agency requirements, full and open
U.S.C. 2304(c). Other executive agencies competiton need not be provided for.
are subject to 41 U.S.C. 253(c). Con- (i) Supplies or services may be con-
tracting without providing for full and sidered to be available from only one
open competition or full and open com- source if the source has submitted an
petition after exclusion of sources is a unsolicited research proposal that:
violation of statute, unless permitted (A) Demonstrates a unique and inno-
by one of the exceptions in 6.302. vative concept (see definition at 2.101),
(b) Each contract awarded without or, demonstrates a unique capability of
providing for full and open competition the source to provide the particular re-
shall contain a reference to the specific search services proposed;
authority under which it was so award- (B) Offers a concept or services not
ed. Contracting officers shall use the otherwise available to the Government;
U.S. Code citation applicable to their and
agency. (See 6.302.) (C) Does not resemble the substance
(c) Contracting without providing for of a pending competitive acquisition.
full and open competition shall not be (See 10 U.S.C. 2304(d)(1)(A) and 41
justified on the basis of (1) a lack of ad- U.S.C. 253(d)(1)(A).)
vance planning by the requiring activ- (ii) Supplies may be deemed to be
ity or (2) concerns related to the available only from the original source
in the case of a follow-on contract for
amount of funds available (e.g., funds
the continued development or produc-
will expire) to the agency or activity
tion of a major system or highly spe-
for the acquisition of supplies or serv-
cialized equipment, including major
ices. components thereof, when it is likely
(d) When not providing for full and that award to any other source would
open competition, the contracting offi- result in (A) substantial duplication of
cer shall solicit offers from as many cost to the Government that is not ex-
potential sources as is practicable pected to be recovered through com-
under the circumstances. petition, or (B) unacceptable delays in
(e) For contracts under this subpart, fulfilling the agencys requirements.
the contracting officer shall use the (See 10 U.S.C. 2304(d)(1)(B) or 41 U.S.C.
contracting procedures prescribed in 253(d)(1)(B).)
6.102 (a) or (b), if appropriate, or any (iii) For DoD, NASA, and the Coast
other procedures authorized by this Guard, services may be deemed to be
regulation. available only from the original source
96
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
97
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
any claim or request for adjustment to supported by written justifications and

contract terms and conditions, whether approvals described in 6.303 and 6.304.
asserted by a contractor or the Govern- [50 FR 52432, Dec. 23, 1985, as amended at 55
ment, which is in litigation or dispute, FR 52790, Dec. 21, 1990]
or is anticipated to result in dispute or
litigation before any court, administra- 6.3025 Authorized or required by
tive tribunal, or agency, or statute.
(B) Participating in any part of an al- (a) Authority. (1) Citations: 10 U.S.C.
ternative dispute resolution process, 2304(c)(5) or 41 U.S.C. 253(c)(5).
including but not limited to eval- (2) Full and open competition need
uators, fact finders, or witnesses, re- not be provided for when (i) a statute
gardless of whether the expert is ex- expressly authorizes or requires that
pected to testify; or the acquisition be made through an-
(ii) A neutral person, e.g., mediators other agency or from a specified
or arbitrators, to facilitate the resolu- source, or (ii) the agencys need is for a
tion of issues in an alternative dispute brand name commercial item for au-
resolution process. thorized resale.
(c) Limitations. Contracts awarded (b) Application. This authority may
using this authority shall be supported be used when statutes, such as the fol-
by the written justifications and ap- lowing, expressly authorize or require
provals described in 6.303 and 6.304. that acquisition be made from a speci-
fied source or through another agency:
[50 FR 52431, Dec. 23, 1985, as amended at 60
(1) Federal Prison Industries
FR 42654, Aug. 16, 1995; 60 FR 44548, Aug. 28,
1995; 62 FR 235, Jan. 2, 1997; 63 FR 58594, 58602, (UNICOR)18 U.S.C. 4124 (see subpart
Oct. 30, 1998; 66 FR 2128, Jan. 10, 2001; 68 FR 8.6);
28080, May 22, 2003] (2) Qualified Nonprofit Agencies for
the Blind or other Severely Disabled
6.3024 International agreement. 41 U.S.C. 4648c (see subpart 8.7);
(3) Government Printing and Bind-
(a) Authority. (1) Citations: 10 U.S.C.
ing44 U.S.C. 501504, 1121 (see subpart
2304(c)(4) or 41 U.S.C. 253(c)(4).
8.8);
(2) Full and open competition need
(4) Sole source awards under the 8(a)
not be provided for when precluded by
Program15 U.S.C. 637 (see subpart
the terms of an international agree-
19.8); or
ment or a treaty between the United (5) The Robert T. Stafford Disaster
States and a foreign government or Relief and Emergency Assistance Act
international organization, or the writ- 42 U.S.C. 5150 (see subpart 26.2).
ten directions of a foreign government (6) Sole source awards under the
reimbursing the agency for the cost of HUBZone Act of 199715 U.S.C. 657a
the acquisition of the supplies or serv- (see 19.1306).
ices for such government. (c) Limitations. (1) This authority
(b) Application. This authority may shall not be used when a provision of
be used in circumstances such as law requires an agency to award a new
(1) When a contemplated acquisition contract to a specified non-Federal
is to be reimbursed by a foreign coun- Government entity unless the provi-
try that requires that the product be sion of law specifically
obtained from a particular firm as (i) Identifies the entity involved;
specified in official written direction (ii) Refers to 10 U.S.C. 2304(j) for
such as a Letter of Offer and Accept- armed services acquisitions or section
ance; or 303(h) of the Federal Property and Ad-
(2) When a contemplated acquisition ministrative Services Act of 1949 for ci-
is for services to be performed, or sup- vilian agency acquisitions; and
plies to be used, in the sovereign terri- (iii) States that award to that entity
tory of another country and the terms shall be made in contravention of the
of a treaty or agreement specify or merit-based selection procedures in 10
limit the sources to be solicited. U.S.C. 2304(j) or section 303(h) of the
(c) Limitations. Except for DoD, Federal Property and Administrative
NASA, and the Coast Guard, contracts Services Act, as appropriate. However,
awarded using this authority shall be this limitation does not apply
99
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
unsolicited proposal, or award any (1) Identification of the agency and

other contract without providing for the contracting activity, and specific
full and open competition unless the identification of the document as a
contracting officer Justification for other than full and
(1) Justifies, if required in 6.302, the open competition.
use of such actions in writing; (2) Nature and/or description of the
(2) Certifies the accuracy and com- action being approved.
pleteness of the justification; and (3) A description of the supplies or
(3) Obtains the approval required by services required to meet the agencys
6.304. needs (including the estimated value).
(b) Technical and requirements per- (4) An identification of the statutory
sonnel are responsible for providing authority permitting other than full
and certifying as accurate and com- and open competition.
plete necessary data to support their (5) A demonstration that the pro-
recommendation for other than full posed contractors unique qualifica-
and open competition. tions or the nature of the acquisition
(c) Justifications required by para- requires use of the authority cited.
graph (a) above may be made on an in- (6) A description of efforts made to
dividual or class basis. Any justifica- ensure that offers are solicited from as
tion for contracts awarded under the many potential sources as is prac-
authority of 6.3027 shall only be made ticable, including whether a notice was
on an individual basis. Whenever a jus- or will be publicized as required by sub-
tification is made and approved on a part 5.2 and, if not, which exception
class basis, the contracting officer under 5.202 applies.
must ensure that each contract action (7) A determination by the con-
taken pursuant to the authority of the tracting officer that the anticipated
class justification and approval is with- cost to the Government will be fair and
in the scope of the class justification reasonable.
and approval and shall document the (8) A description of the market re-
contract file for each contract action search conducted (see part 10) and the
accordingly. results or a statement of the reason
(d) If the authority of 6.3023(a)(2)(i) market research was not conducted.
or 6.3027 is being cited as a basis for (9) Any other facts supporting the
not providing for full and open com- use of other than full and open com-
petition in an acquisition that would petition, such as:
otherwise be subject to the Trade (i) Explanation of why technical data
Agreements Act (see Subpart 25.4), the packages, specifications, engineering
contracting officer must forward a descriptions, statements of work, or
copy of the justification, in accordance purchase descriptions suitable for full
with agency procedures, to the agencys and open competition have not been de-
point of contact with the Office of the veloped or are not available.
United States Trade Representative. (ii) When 6.3021 is cited for follow-on
(e) The justifications for contracts acquisitions as described in 6.302
awarded under the authority cited in 1(a)(2)(ii), an estimate of the cost to
6.3022 may be prepared and approved the Government that would be dupli-
within a reasonable time after contract cated and how the estimate was de-
award when preparation and approval rived.
prior to award would unreasonably (iii) When 6.3022 is cited, data, esti-
delay the acquisitions. mated cost, or other rationale as to the
[50 FR 1729, Jan. 11, 1985, as amended at 50 extent and nature of the harm to the
FR 52433, Dec. 23, 1985; 55 FR 25526, June 21, Government.
1990; 64 FR 72418, Dec. 27, 1999] (10) A listing of the sources, if any,
that expressed, in writing, an interest
6.3032 Content. in the acquisition.
(a) Each justification shall contain (11) A statement of the actions, if
sufficient facts and rationale to justify any, the agency may take to remove or
the use of the specific authority cited. overcome any barriers to competition
As a minimum, each justification shall before any subsequent acquisition for
include the following information: the supplies or services required.
101
6.304 48 CFR Ch. 1 (10103 Edition)
(12) Contracting officer certification (b) Any justification for a contract

that the justification is accurate and awarded under the authority of 6.3027,
complete to the best of the contracting regardless of dollar amount, shall be
officers knowledge and belief. considered approved when the deter-
(b) Each justification shall include mination required by 6.3027(c)(1) is
evidence that any supporting data that made.
is the responsibility of technical or re- (c) A class justification for other
quirements personnel (e.g., verifying than full and open competition shall be
the Governments minimum needs or approved in writing in accordance with
schedule requirements or other ration- agency procedures. The approval level
ale for other than full and open com- shall be determined by the estimated
petition) and which form a basis for the total value of the class.
justification have been certified as (d) The estimated dollar value of all
complete and accurate by the technical options shall be included in deter-
or requirements personnel. mining the approval level of a jus-
tification.
FR 52433, Dec. 23, 1985; 60 FR 48236, Sept. 18, [50 FR 1729, Jan. 11, 1985, as amended at 50
1995; 66 FR 27412, May 16, 2001] FR 52433, Dec. 23, 1985; 54 FR 13023, Mar. 29,
1989; 55 FR 3881, Feb. 5, 1990; 55 FR 52790, Dec.
6.304 Approval of the justification. 21, 1990; 60 FR 42654, 42665, Aug. 16, 1995; 61 FR
(a) Except for paragraph (b) of this 31618, June 20, 1996; 65 FR 24325, Apr. 25, 2000]
section, the justification for other than 6.305 Availability of the justification.
full and open competition shall be ap-
proved in writing (a) The justification required by
(1) For a proposed contract not ex- 6.3031 and any related information
ceeding $500,000, the contracting offi- shall be made available for public in-
cers certification required by 6.303 spection as required by 10 U.S.C.
2(a)(12) will serve as approval unless a 2304(f)(4) and 41 U.S.C. 253(f)(4). Con-
higher approving level is established in tracting officers shall carefully screen
agency procedures. all justifications for contractor propri-
(2) For a proposed contract over etary data and remove all such data,
$500,000 but not exceeding $10,000,000, by and such references and citations as
the competition advocate for the pro- are necessary to protect the propri-
curing activity designated pursuant to etary data, before making the jus-
6.501 or an official described in para- tifications available for public inspec-
graph (a)(3) or (a)(4) of this section. tion. Contracting officers shall also be
This authority is not delegable. guided by the exemptions to disclosure
(3) For a proposed contract over of information contained in the Free-
$10,000,000, but not exceeding dom of Information Act (5 U.S.C. 552)
$50,000,000, by the head of the procuring and the prohibitions against disclosure
in 24.202 in determining whether other
activity, or a designee who
(i) If a member of the armed forces, is data should be removed.
(b) If a Freedom of Information re-
a general or flag officer; or
quest is received, contracting officers
(ii) If a civilian, is serving in a posi-
shall comply with subpart 24.2.
tion in grade GS 16 or above under the
General Schedule (or in a comparable [50 FR 1729, Jan. 11, 1985 and 50 FR 52429, Dec.
or higher position under another sched- 23, 1985, as amended at 62 FR 257, Jan. 2, 1997;
ule). 65 FR 16286, Mar. 27, 2000]
(4) For a proposed contract over
$50,000,000, by the senior procurement Subpart 6.4Sealed Bidding and
executive of the agency designated pur- Competitive Proposals
suant to the OFPP Act (41 U.S.C. 414(3))
in accordance with agency procedures. 6.401 Sealed bidding and competitive
This authority is not delegable except proposals.
in the case of the Under Secretary of Sealed bidding and competitive pro-
Defense for Acquisition, Technology, posals, as described in Parts 14 and 15,
and Logistics, acting as the senior pro- are both acceptable procedures for use
curement executive for the Depart- under Subparts 6.1, 6.2; and, when ap-
ment of Defense. propriate, under Subpart 6.3.
102
(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
Pt. 7 48 CFR Ch. 1 (10103 Edition)
to be performed, performance required 7.305 Solicitation provisions and contract

or essential physical characteristics; clause.
(v) Any barriers to the acquisition of 7.306 Evaluation.
commercial items or competition that 7.307 Appeals.
remain; and
(vi) Other ways in which the agency Subpart 7.4Equipment Lease or Purchase
has emphasized the acquisition of com- 7.400 Scope of subpart.
mercial items and competition in areas 7.401 Acquisition considerations.
such as acquisition training and re- 7.402 Acquisition methods.
search; 7.403 General Services Administration as-
(3) Recommend to the senior procure- sistance.
ment executive of the agency goals and 7.404 Contract clause.
plans for increasing competition on a
fiscal year basis; and Subpart 7.5Inherently Governmental
(4) Recommend to the senior procure- Functions
ment executive of the agency a system
of personal and organizational account-
7.501 [Reserved]
ability for competition, which may in- 7.502 Applicability.
clude the use of recognition and awards 7.503 Policy.
to motivate program managers, con-
tracting officers, and others in author- AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
ity to promote competition in acquisi- ter 137; and 42 U.S.C. 2473(c).
tion. SOURCE: 48 FR 42124, Sept. 19, 1983, unless
otherwise noted.
FR 13053, Mar. 20, 2002]
PART 7ACQUISITION PLANNING This part prescribes policies and pro-
cedures for
Sec. (a) Developing acquisition plans;
7.000 Scope of part. (b) Determining whether to use com-
mercial or Government resources for
Subpart 7.1Acquisition Plans acquisition of supplies or services;
7.101 Definitions. (c) Deciding whether it is more eco-
7.102 Policy. nomical to lease equipment rather
7.103 Agency-head responsibilities. than purchase it; and
7.104 General procedures. (d) Determining whether functions
7.105 Contents of written acquisition plans. are inherently governmental.
7.106 Additional requirements for major
systems. [48 FR 42124, Sept. 19, 1983, as amended at 61
7.107 Additional requirements for acquisi- FR 2628, Jan. 26, 1996]
tions involving bundling.
Subpart 7.2Planning for the Purchase of Subpart 7.1Acquisition Plans

Supplies in Economic Quantities 7.101 Definitions.
7.200 Scope of subpart. As used in this subpart
7.201 [Reserved]
Acquisition streamlining, means any
7.202 Policy.
7.203 Solicitation provision. effort that results in more efficient and
7.204 Responsibilities of contracting offi- effective use of resources to design and
cers. develop, or produce quality systems.
This includes ensuring that only nec-
Subpart 7.3Contractor Versus essary and cost-effective requirements
Government Performance are included, at the most appropriate
time in the acquisition cycle, in solici-
7.301 Policy.
tations and resulting contracts for the
7.302 General. design, development, and production of
7.303 Determining availability of private new systems, or for modifications to
commercial sources. existing systems that involve redesign
7.304 Procedures. of systems or subsystems.
104
Life-cycle cost means the total cost to 7.103 Agency-head responsibilities.

the Government of acquiring, oper-
The agency head or a designee shall
ating, supporting, and (if applicable)
prescribe procedures for
disposing of the items being acquired.
(a) Promoting and providing for full
Order means an order placed under
a and open competition (see part 6) or,
when full and open competition is not
(1) Federal Supply Schedule contract;
or required in accordance with part 6, for
obtaining competition to the max-
(2) Task-order contract or delivery-
imum extent practicable, with due re-
order contract awarded by another
agency, (i.e., Governmentwide acquisi- gard to the nature of the supplies and
tion contract or multi-agency con- services to be acquired (41 U.S.C.
tract). 253a(a)(1)).
Planner, means the designated person (b) Encouraging offerors to supply
or office responsible for developing and commercial items, or to the extent
maintaining a written plan, or for the that commercial items suitable to
planning function in those acquisitions meet the agency needs are not avail-
not requiring a written plan. able, nondevelopmental items in re-
sponse to agency solicitations (10
[48 FR 42124, Sept. 19, 1983, as amended at 50 U.S.C. 2377 and 41 U.S.C. 251, et seq.);
FR 1735, Jan. 11, 1985; 50 FR 52429, Dec. 23,
and
1985; 53 FR 34226, Sept. 2, 1988; 60 FR 48236,
Sept. 18, 1995; 66 FR 2128, Jan. 10, 2001; 67 FR (c) Ensuring that acquisition plan-
56118, Aug. 30, 2002] ners address the requirement to specify
needs, develop specifications, and to
7.102 Policy. solicit offers in such a manner to pro-
(a) Agencies shall perform acquisi- mote and provide for full and open
tion planning and conduct market re- competition with due regard to the na-
search (see part 10) for all acquisitions ture of the supplies and services to be
in order to promote and provide for acquired (10 U.S.C. 2305(a)(1)(A) and 41
(1) Acquisition of commercial items U.S.C. 253A(a)(1)). (See part 6 and
or, to the extent that commercial 10.002.)
items suitable to meet the agencys (d) Establishing criteria and thresh-
needs are not available, nondevelop- olds at which increasingly greater de-
mental items, to the maximum extent tail and formality in the planning proc-
practicable (10 U.S.C. 2377 and 41 U.S.C. ess is required as the acquisition be-
251, et seq.); and comes more complex and costly, speci-
(2) Full and open competition (see fying those cases in which a written
part 6) or, when full and open competi- plan shall be prepared;
tion is not required in accordance with (e) Writing plans either on a systems
part 6, to obtain competition to the basis, on an individual contract basis,
maximum extent practicable, with due or on an individual order basis, depend-
regard to the nature of the supplies or ing upon the acquisition.
services to be acquired (10 U.S.C. (f) Ensuring that the principles of
2301(a)(5) and 41 U.S.C. 253a(a)(1)). this subpart are used, as appropriate,
(b) This planning shall integrate the for those acquisitions that do not re-
efforts of all personnel responsible for quire a written plan as well as for
significant aspects of the acquisition. those that do;
The purpose of this planning is to en- (g) Designating planners for acquisi-
sure that the Government meets its tions;
needs in the most effective, economi- (h) Reviewing and approving acquisi-
cal, and timely manner. Agencies that tion plans and revisions to these plans;
have a detailed acquisition planning (i) Establishing criteria and thresh-
system in place that generally meets olds at which design-to-cost and life-
the requirements of 7.104 and 7.105 need cycle-cost techniques will be used;
not revise their system to specifically
(j) Establishing standard acquisition
meet all of these requirements.
plan formats, if desired, suitable to
[60 FR 48236, Sept. 18, 1995] agency needs; and
105
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 official 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
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
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 commission 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
(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
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
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
110
or price reduction, quality improve- (3) Specify actions designed to maxi-

ments that will save time or improve mize small business participation as
or enhance performance or efficiency, contractors, including provisions that
reduction in acquisition cycle times, encourage small business teaming;
better terms and conditions, and any (4) Specify actions designed to maxi-
other benefits. The agency must quan- mize small business participation as
tify the identified benefits and explain subcontractors (including suppliers) at
how their impact would be measurably any tier under the contract or con-
substantial. Except as provided in tracts that may be awarded to meet
paragraph (d) of this section, the agen- the requirements; and
cy may determine bundling to be nec- (5) Include a specific determination
essary and justified if, as compared to that the anticipated benefits of the
the benefits that it would derive from proposed bundled contract justify its
contracting to meet those require- use.
ments if not bundled, it would derive (f) The contracting officer must jus-
measurably substantial benefits equiv- tify bundling in acquisition strategy
alent to documentation.
(1) Ten percent of the estimated con- (g) In assessing whether cost savings
tract value (including options) if the would be achieved through bundling,
value is $75 million or less; or the contracting officer must consider
(2) Five percent of the estimated con- the cost that has been charged or,
tract value (including options) or $7.5 where data is available, could be
million, whichever is greater, if the charged by small business concerns for
value exceeds $75 million. the same or similar work.
(c) Without power of delegation, the (h) The requirements of this section,
service acquisition executive for the except for paragraph (e), do not apply if
military departments, the Under Sec- a cost comparison analysis will be per-
retary of Defense for Acquisition, formed in accordance with OMB Cir-
Technology and Logistics for the de- cular A76.
fense agencies, or the Deputy Sec-
retary or equivalent for the civilian FR 46054, July 26, 2000]
agencies may determine that bundling
is necessary and justified when
(1) The expected benefits do not meet Subpart 7.2Planning for the Pur-
the thresholds in paragraphs (b)(1) and chase of Supplies in Eco-
(b)(2) of this section but are critical to nomic Quantities
the agencys mission success; and
(2) The acquisition strategy provides SOURCE: 50 FR 35475, Aug. 30, 1985, unless
for maximum practicable participation otherwise noted.
by small business concerns.
(d) Reduction of administrative or 7.200 Scope of subpart.
personnel costs alone is not sufficient This subpart prescribes policies and
justification for bundling unless the procedures for gathering information
cost savings are expected to be at least from offerors to assist the Government
10 percent of the estimated contract in planning the most advantageous
value (including options) of the bun- quantities in which supplies should be
dled requirements. purchased.
(e) Substantial bundling is any bun-
dling that results in a contract with an 7.201 [Reserved]
average annual value of $10 million or
more. When the proposed acquisition 7.202 Policy.
strategy involves substantial bundling, (a) Agencies are required by 10 U.S.C.
the acquisition strategy must 2384(a) and 41 U.S.C. 253(f) to procure
(1) Identify the specific benefits an- supplies in such quantity as (1) will re-
ticipated to be derived from bundling; sult in the total cost and unit cost
(2) Include an assessment of the spe- most advantageous to the Government,
cific impediments to participation by where practicable, and (2) does not ex-
small business concerns as contractors ceed the quantity reasonably expected
that result from bundling; to be required by the agency.
111
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
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
112
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
113
7.305 48 CFR Ch. 1 (10103 Edition)
when conducting a cost comparison version from in-house performance to

under a new start. contract performance of work cur-
(2) Firm offers shall be required for rently being performed by the Govern-
the period covered by the cost compari- ment and in contracts that result from
son, by using (i) a base contract period the solicitations, whether or not a cost
and any applicable priced options to comparison is conducted. The 10day
total the amount of time represented period in the clause may be varied by
by the cost estimate for Government the contracting officer up to a period of
performance (see subpart 17.2), or (ii) a 90 days.
multiyear contract when appropriate [48 FR 42124, Sept. 19, 1983, as amended at 50
(see subpart 17.1). FR 1735, Jan. 11, 1985; 50 FR 52429, Dec. 23,
(3) Solicitations shall not, unless a 1985; 52 FR 9037, Mar. 20, 1987; 56 FR 55372,
proper determination to the contrary Oct. 25, 1991]
is made, limit award to U.S. offerors.
(d) Integrity of cost comparison. (1) The 7.306 Evaluation.
confidentiality of (i) the cost estimate The evaluation procedure to be fol-
for Government performance and (ii) lowed after the contracting officer re-
the bids in sealed bid cost comparisons ceives the cost estimate for Govern-
shall be maintained until the time of ment performance (see 7.304(b)) and the
bid opening, to ensure that they are responses to the solicitation differs
completely independent. from conventional contracting proce-
(2) For cost comparisons conducted dures as follows:
using the results of negotiation proce- (a) Sealed bidding. (1) At the public
dures, confidentiality and independ- bid opening, after recording of bids, the
ence shall be maintained until after ne- contracting officer shall
gotiations are completed and the most (i) Open the sealed cost comparison
advantageous offer has been selected. on which the cost estimate for Govern-
(3) Personnel who have knowledge of ment performance has been entered;
the cost figures in the cost estimate for (ii) Enter on the cost comparison
Government performance shall not par- form the price of the apparent low bid-
ticipate in the offer-evaluation process der;
unless the contract file is adequately (iii) Announce the result, based on
documented to show that no other the initial cost comparison form, stat-
qualified personnel were available. ing that this result is subject to re-
[48 FR 42124, Sept. 19, 1983, as amended at 50 quired agency processing, including
FR 1735, Jan. 11, 1985; 50 FR 52429, Dec. 23, evaluation for responsiveness and re-
1985; 55 FR 25526, June 21, 1990; 57 FR 60575, sponsibility, completion and audit of
Dec. 21, 1992; 60 FR 34737, July 3, 1995] the cost comparison form (see Supple-
ment, Part IV, Illustration 1), and reso-
7.305 Solicitation provisions and con- lution of any requests for review under
tract clause. the appeals procedure (see 7.307);
(a) The contracting officer shall, (iv) State that no final determination
when contracting by sealed bidding, infor performance by the Government or
sert in solicitations issued for the pur- under contract will be made during the
pose of comparing the costs of con- public review period specified in the so-
tractor and Government performance licitation (at least 15 working days, up
the provision at 52.2071, Notice of Cost to a maximum of 30 working days if the
Comparison (Sealed-Bid). contracting officer considers the action
(b) The contracting officer shall, to be complex; the public review period
when contracting by negotiation, in- begins when the documents identified
sert in requests for proposals issued for in (v) below are available to interested
the purpose of comparing the costs of parties), plus any additional time re-
contractor and Government perform- quired for the appeals procedure; and
ance the provision at 52.2072, Notice of (v) Make available for this public re-
Cost Comparison (Negotiated). view by interested parties the abstract
(c) The contracting officer shall in- of bids, completed cost comparison
sert the clause at 52.2073, Right of form, and detailed data supporting the
First Refusal of Employment, in all so- cost estimate for Government perform-
licitations which may result in a con- ance.
114
(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 completion, 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
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
7.400 48 CFR Ch. 1 (10103 Edition)
protect the rights of affected parties (7) Potential obsolescence of the

and to ensure that final agency deter- equipment because of imminent tech-
minations are fair, equitable, and in nological improvements.
accordance with established policy. (b) The following additional factors
(b) The Circular provides that the ap- should be considered, as appropriate,
peals procedure shall be used only to depending on the type, cost, com-
resolve questions concerning the cal- plexity, and estimated period of use of
culation of the cost comparison and the equipment:
shall not apply to questions concerning (1) Availability of purchase options.
selection of one contractor in pref- (2) Potential for use of the equipment
erence to another, which shall be treat- by other agencies after its use by the
ed as prescribed in subpart 33.1, Pro- acquiring agency is ended.
tests. Directly affected parties may re- (3) Trade-in or salvage value.
quest review of any discrepancy in the
(4) Imputed interest.
cost comparison. Any such requests
shall be made in writing to the con- (5) Availability of a servicing capa-
tracting officer, who shall forward bility, especially for highly complex
them in accordance with agency proce- equipment; e.g., can the equipment be
dures. Such requests shall be consid- serviced by the Government or other
ered only if based on specific objections sources if it is purchased?
and received within the public review
7.402 Acquisition methods.
period stated in the solicitation.
(a) Purchase method. (1) Generally,
the purchase method is appropriate if
FR 25527, June 21, 1990; 57 FR 60575, Dec. 21,
1992; 60 FR 34737, July 3, 1995; 62 FR 40236, the equipment will be used beyond the
July 25, 1997] point in time when cumulative leasing
costs exceed the purchase costs.
Subpart 7.4Equipment Lease or (2) Agencies should not rule out the
purchase method of equipment acquisi-
Purchase tion in favor of leasing merely because
7.400 Scope of subpart. of the possibility that future techno-
logical advances might make the se-
This subpart provides guidance per- lected equipment less desirable.
taining to the decision to acquire (b) Lease method. (1) The lease method
equipment by lease or purchase. It ap- is appropriate if it is to the Govern-
plies to both the initial acquisition of ments advantage under the cir-
equipment and the renewal or exten- cumstances. The lease method may
sion of existing equipment leases. also serve as an interim measure when
7.401 Acquisition considerations. the circumstances
(i) Require immediate use of equip-
(a) Agencies should consider whether ment to meet program or system goals;
to lease or purchase equipment based but
on a case-by-case evaluation of com- (ii) Do not currently support acquisi-
parative costs and other factors. The tion by purchase.
following factors are the minimum
(2) If a lease is justified, a lease with
that should be considered:
option to purchase is preferable.
(1) Estimated length of the period the
equipment is to be used and the extent (3) Generally, a long term lease
of use within that period. should be avoided, but may be appro-
(2) Financial and operating advan- priate if an option to purchase or other
tages of alternative types and makes of favorable terms are included.
equipment. (4) If a lease with option to purchase
(3) Cumulative rental payments for is used, the contract shall state the
the estimated period of use. purchase price or provide a formula
(4) Net purchase price. which shows how the purchase price
(5) Transportation and installation will be established at the time of pur-
costs. chase.
(6) Maintenance and other service [50 FR 35475, Aug. 30, 1985, as amended at 59
costs. FR 67026, Dec. 28, 1994]
116
7.403 General Services Administration tained through either personnel ap-

assistance. pointments, advisory committees, or
(a) When requested by an agency, the personal services contracts issued
General Services Administration (GSA) under statutory authority.
will assist in lease or purchase deci-
sions by providing information such 7.503 Policy.
as (a) Contracts shall not be used for
(1) Pending price adjustments to Fed- the performance of inherently govern-
eral Supply Schedule contracts; mental functions.
(2) Recent or imminent technological (b) Agency decisions which determine
developments;
whether a function is or is not an in-
(3) New techniques; and
herently governmental function may
(4) Industry or market trends.
(b) Agencies may request information be reviewed and modified by appro-
from the following GSA offices: priate Office of Management and Budg-
(1) Center for Strategic IT Analysis et officials.
(MKS), Washington, DC 20405, for infor- (c) The following is a list of examples
mation on acquisition of information of functions considered to be inher-
technology. ently governmental functions or which
(2) Federal Supply Service, Office of shall be treated as such. This list is not
Acquisition (FC), Washington, DC all inclusive:
20406, for information on other types of (1) The direct conduct of criminal in-
equipment. vestigations.
[48 FR 42124, Sept. 19, 1983, as amended at 54 (2) The control of prosecutions and
FR 29280, July 11, 1989; 61 FR 41468, Aug. 8, performance of adjudicatory functions
1996; 62 FR 40236, July 25, 1997] other than those relating to arbitra-
tion or other methods of alternative
dispute resolution.
The contracting officer shall insert a (3) The command of military forces,
clause substantially the same as the especially the leadership of military
clause in 52.2075, Option to Purchase personnel who are members of the com-
Equipment, in solicitations and con- bat, combat support, or combat service
tracts involving a lease with option to
support role.
purchase.
(4) The conduct of foreign relations
[59 FR 67026, Dec. 28, 1994] and the determination of foreign pol-
icy.
Subpart 7.5Inherently (5) The determination of agency pol-
Governmental Functions icy, such as determining the content
and application of regulations, among
SOURCE: 61 FR 2628, Jan. 26, 1996, unless other things.
otherwise noted. (6) The determination of Federal pro-
gram priorities for budget requests.
7.500 Scope of subpart. (7) The direction and control of Fed-
The purpose of this subpart is to pre- eral employees.
scribe policies and procedures to ensure (8) The direction and control of intel-
that inherently governmental func- ligence and counter-intelligence oper-
tions are not performed by contractors. ations.
It implements the policies of Office of (9) The selection or non-selection of
Federal Procurement Policy (OFPP) individuals for Federal Government
Policy Letter 921, Inherently Govern-
employment, including the inter-
mental Functions.
viewing of individuals for employment.
7.501 [Reserved] (10) The approval of position descrip-
tions and performance standards for
7.502 Applicability. Federal employees.
The requirements of this subpart (11) The determination of what Gov-
apply to all contracts for services. This ernment property is to be disposed of
subpart does not apply to services ob- and on what terms (although an agency
117
7.503 48 CFR Ch. 1 (10103 Edition)
may give contractors authority to dis- less authorized by statute, such as 31

pose of property at prices within speci- U.S.C. 952 (relating to private collec-
fied ranges and subject to other reason- tion contractors) and 31 U.S.C. 3718 (re-
able conditions deemed appropriate by lating to private attorney collection
the agency). services), but not including
(12) In Federal procurement activi- (i) Collection of fees, fines, penalties,
ties with respect to prime contracts costs, or other charges from visitors to
(i) Determining what supplies or or patrons of mess halls, post or base
services are to be acquired by the Gov- exchange concessions, national parks,
ernment (although an agency may give and similar entities or activities, or
contractors authority to acquire sup- from other persons, where the amount
plies at prices within specified ranges to be collected is easily calculated or
and subject to other reasonable condi- predetermined and the funds collected
tions deemed appropriate by the agen- can be easily controlled using standard
cy); case management techniques; and
(ii) Participating as a voting member (ii) Routine voucher and invoice ex-
on any source selection boards; amination.
(iii) Approving any contractual docu- (18) The control of the treasury ac-
ments, to include documents defining counts.
requirements, incentive plans, and (19) The administration of public
evaluation criteria; trusts.
(iv) Awarding contracts; (20) The drafting of Congressional
(v) Administering contracts (includ- testimony, responses to Congressional
ing ordering changes in contract per- correspondence, or agency responses to
formance or contract quantities, tak- audit reports from the Inspector Gen-
ing action based on evaluations of con- eral, the General Accounting Office, or
tractor performance, and accepting or other Federal audit entity.
rejecting contractor products or serv- (d) The following is a list of examples
ices); of functions generally not considered
(vi) Terminating contracts; to be inherently governmental func-
(vii) Determining whether contract tions. However, certain services and ac-
costs are reasonable, allocable, and al- tions that are not considered to be in-
lowable; and herently governmental functions may
(viii) Participating as a voting mem- approach being in that category be-
ber on performance evaluation boards. cause of the nature of the function, the
(13) The approval of agency responses manner in which the contractor per-
to Freedom of Information Act re- forms the contract, or the manner in
quests (other than routine responses which the Government administers
that, because of statute, regulation, or contractor performance. This list is
agency policy, do not require the exer- not all inclusive:
cise of judgment in determining wheth- (1) Services that involve or relate to
er documents are to be released or budget preparation, including workload
withheld), and the approval of agency modeling, fact finding, efficiency stud-
responses to the administrative appeals ies, and should-cost analyses, etc.
of denials of Freedom of Information (2) Services that involve or relate to
Act requests. reorganization and planning activities.
(14) The conduct of Administrative (3) Services that involve or relate to
hearings to determine the eligibility of analysis, feasibility studies, and strat-
any person for a security clearance, or egy options to be used by agency per-
involving actions that affect matters of sonnel in developing policy.
personal reputation or eligibility to (4) Services that involve or relate to
participate in Government programs. the development of regulations.
(15) The approval of Federal licensing (5) Services that involve or relate to
actions and inspections. the evaluation of another contractors
(16) The determination of budget pol- performance.
icy, guidance, and strategy. (6) Services in support of acquisition
(17) The collection, control, and dis- planning.
bursement of fees, royalties, duties, (7) Contractors providing assistance
fines, taxes, and other public funds, unin contract management (such as
118
where the contractor might influence none of the functions to be performed

official evaluations of other contrac- are inherently governmental. This as-
tors). sessment should place emphasis on the
(8) Contractors providing technical degree to which conditions and facts
evaluation of contract proposals. restrict the discretionary authority,
(9) Contractors providing assistance decision-making responsibility, or ac-
in the development of statements of countability of Government officials
work. using contractor services or work prod-
(10) Contractors providing support in ucts. Disagreements regarding the de-
preparing responses to Freedom of In- termination will be resolved in accord-
formation Act requests. ance with agency procedures before
(11) Contractors working in any situ- issuance of a solicitation.
ation that permits or might permit
them to gain access to confidential FR 40236, July 25, 1997]
business information and/or any other
sensitive information (other than situ-
ations covered by the National Indus- PART 8REQUIRED SOURCES OF
trial Security Program described in SUPPLIES AND SERVICES
4.402(b)).
(12) Contractors providing informa- Sec.
tion regarding agency policies or regu- 8.000 Scope of part.
lations, such as attending conferences 8.001 General.
on behalf of an agency, conducting 8.002 Priorities for use of Government sup-
ply sources.
community relations campaigns, or
8.003 Use of other Government supply
conducting agency training courses. sources.
(13) Contractors participating in any 8.004 Contract clause.
situation where it might be assumed
that they are agency employees or rep- Subpart 8.1Excess Personal Property
resentatives.
(14) Contractors participating as 8.101 Definition.
technical advisors to a source selection 8.102 Policy.
board or participating as voting or 8.103 Information on available excess per-
sonal property.
nonvoting members of a source evalua-
8.104 Obtaining nonreportable property.
tion board.
(15) Contractors serving as arbitra- Subparts 8.28.3 [Reserved]
tors or providing alternative methods
of dispute resolution. Subpart 8.4Federal Supply Schedules
(16) Contractors constructing build-
ings or structures intended to be secure 8.401 General.
from electronic eavesdropping or other 8.402 Applicability.
penetration by foreign governments. 8.4028.4034 [Reserved]
8.404 Using schedules.
(17) Contractors providing inspection
8.40418.4042 [Reserved]
services. 8.4043 Requests for waivers.
(18) Contractors providing legal ad- 8.405 Ordering office responsibilities.
vice and interpretations of regulations 8.4051 [Reserved]
and statutes to Government officials. 8.4052 Order placement.
(19) Contractors providing special 8.4053 Inspection and acceptance.
non-law enforcement, security activi- 8.4054 Delinquent performance.
ties that do not directly involve crimi- 8.4055 Termination for default.
nal investigations, such as prisoner de- 8.4056 Termination for convenience.
tention or transport and non-military 8.4057 Disputes.
national security details.
(e) Agency implementation shall in- Subpart 8.5Acquisition of Helium
clude procedures requiring the agency 8.500 Scope of subpart.
head or designated requirements offi- 8.501 Definitions.
cial to provide the contracting officer, 8.502 Policy.
concurrent with transmittal of the 8.503 Exception.
statement of work (or any modification 8.504 Procedures.
thereof), a written determination that 8.505 Contract clause.
119
8.000 48 CFR Ch. 1 (10103 Edition)
Subpart 8.6Acquisition From Federal 8.001 General.

Prison Industries, Inc.
Regardless of the source of supplies
8.601 General. or services to be acquired, information
8.602 Policy. technology acquisitions shall comply
8.603 Purchase priorities. with capital planning and investment
8.604 Ordering procedures. control requirements in 40 U.S.C. 1422
8.605 Clearances. and OMB Circular A130.
8.606 Exceptions.
8.607 Evaluating FPI performance. [67 FR 56119, Aug. 30, 2002]
Subpart 8.7Acquisition From Nonprofit 8.002 Priorities for use of Government

Agencies Employing People Who Are supply sources.
Blind or Severely Disabled (a) Except as required by 8.003, or as
8.700 Scope of subpart. otherwise provided by law, agencies
8.701 Definitions. shall satisfy requirements for supplies
8.702 General. and services from or through the
8.703 Procurement list. sources and publications listed below
8.704 Purchase priorities. in descending order of priority
8.705 Procedures. (1) Supplies. (i) Agency inventories;
8.7051 General.
(ii) Excess from other agencies (see
8.7052 Direct-order process.
8.7053 Allocation process. subpart 8.1);
8.7054 Compliance with orders. (iii) Federal Prison Industries, Inc.
8.706 Purchase exceptions. (see subpart 8.6);
8.707 Prices. (iv) Products available from the
8.708 Shipping. Committee for Purchase from People
8.709 Payments. Who Are Blind or Severely Disabled
8.710 Quality of merchandise. (see subpart 8.7);
8.711 Quality complaints.
(v) Wholesale supply sources, such as
8.712 Specification changes.
8.713 Optional acquisition of supplies and stock programs of the General Services
services. Administration (GSA) (see 41 CFR 101
8.714 Communications with the central non- 26.3), the Defense Logistics Agency (see
profit agencies and the Committee. 41 CFR 10126.6), the Department of
8.715 Replacement commodities. Veterans Affairs (see 41 CFR 10126.704),
8.716 Change-of-name and successor in in- and military inventory control points;
terest procedures. (vi) Mandatory Federal Supply
Subpart 8.8Acquisition of Printing and Schedules (see subpart 8.4);
Related Supplies (vii) Optional use Federal Supply
Schedules (see subpart 8.4); and
8.800 Scope of subpart. (viii) Commercial sources (including
8.801 Definitions. educational and nonprofit institu-
8.802 Policy. tions).
(2) Services. (i) Services available
Subparts 8.98.10 [Reserved]
from the Committee for Purchase from
Subpart 8.11Leasing of Motor Vehicles People Who Are Blind or Severely Dis-
abled (see subpart 8.7);
8.1100 Scope of subpart. (ii) Mandatory Federal Supply Sched-
8.1101 Definitions. ules (see subpart 8.4);
8.1102 Presolicitation requirements. (iii) Optional use Federal Supply
8.1103 Contract requirements.
Schedules (see subpart 8.4); and
8.1104 Contract clauses.
(iv) Federal Prison Industries, Inc.
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap- (see subpart 8.6), or commercial sources
ter 137; and 42 U.S.C. 2473(c). (including educational and nonprofit
SOURCE: 48 FR 42129, Sept. 19, 1983, unless institutions).
otherwise noted. (b) Sources other than those listed in
paragraph (a) may be used as pre-
8.000 Scope of part. scribed in 41 CFR 10126.301 and in an
This part deals with the acquisition unusual and compelling urgency as pre-
of supplies and services from or scribed in 6.3022 and in 41 CFR 101
through Government supply sources. 25.1015.
120
(c) The statutory obligation for Gov- Subpart 8.1Excess Personal

ernment agencies to satisfy their re- Property
quirements for supplies available from
the Committee for Purchase From Peo- 8.101 Definition.
ple Who Are Blind or Severely Disabled
also applies when contractors purchase Excess personal property means any
the supply items for Government use. personal property (see 45.601) under the
control of a Federal agency that the
[48 FR 42129, Sept. 19, 1983, as amended at 50 agency head or a designee determines
FR 1735, Jan. 11, 1985; 50 FR 52429, Dec. 23,
is not required for its needs and for the
1985; 54 FR 29280, July 11, 1989; 56 FR 15148,
Apr. 15, 1991; 59 FR 53716, Oct. 25, 1994; 59 FR discharge of its responsibilities.
67027, Dec. 28, 1994; 61 FR 2630, Jan. 26, 1996;
66 FR 65367, Dec. 1, 2001. Redesignated and 8.102 Policy.
amended at 67 FR 56119, Aug. 30, 2002] When practicable, agencies must use
excess personal property as the first
8.003 Use of other Government supply
sources. source of supply for agency and cost-re-
imbursement contractor requirements.
Agencies shall satisfy requirements Agency personnel must make positive
for the following supplies or services efforts to satisfy agency requirements
from or through specified sources, as
by obtaining and using excess personal
applicable:
property (including that suitable for
(a) Public utility services (see part
adaptation or substitution) before ini-
41);
tiating a contract action.
(b) Printing and related supplies (see
subpart 8.8); [67 FR 13053, Mar. 20, 2002]
(c) Leased motor vehicles (see sub-
part 8.11); 8.103 Information on available excess
(d) Strategic and critical materials personal property.
(e.g., metals and ores) from inventories Information regarding the avail-
exceeding National Defense Stockpile ability of excess personal property can
requirements (detailed information is be obtained through
available from the Defense National (a) Review of excess personal prop-
Stockpile Center, 8725 John J. King- erty catalogs and bulletins issued by
man Rd., Suite 4528, Fort Belvior, VA the General Services Administration
220606223; and
(GSA);
(e) Helium (see subpart 8.5Acquisi-
tion of Helium). (b) Personal contact with GSA or the
activity holding the property;
[48 FR 42129, Sept. 19, 1983, as amended at 57 (c) Submission of supply require-
FR 60576, Dec. 21, 1992; 59 FR 67018, Dec. 28, ments to the regional offices of GSA
1994; 59 FR 67030, Dec. 28, 1994; 61 FR 41468,
Aug. 8, 1996; 62 FR 235, Jan. 2, 1997. Redesig-
(GSA Form 1539, Request for Excess
nated at 67 FR 56119, Aug. 30, 2002] Personal Property, is available for this
purpose); and
8.004 Contract clause. (d) Examination and inspection of re-
Insert the clause at 52.2089, Con- ports and samples of excess personal
tractor Use of Mandatory Sources of property in GSA regional offices.
Supply and Services, in solicitations
and contracts that require a contractor 8.104 Obtaining nonreportable prop-
erty.
to provide supplies or services for Gov-
ernment use that are available from GSA will assist agencies in meeting
the Committee for Purchase from Peo- their requirements for supplies of the
ple Who Are Blind or Severely Dis- types excepted from reporting as excess
abled. The contracting officer shall by the Federal Property Management
identify in the contract schedule the Regulations (41 CFR 10143.312). Fed-
supplies or services that must be pur- eral agencies requiring such supplies
chased from a mandatory source and should contact the appropriate GSA re-
the specific source. gional office.
[66 FR 65368, Dec. 18, 2001.. Redesignated and
amended at 67 FR 56119, Aug. 30, 2002] Subparts 8.28.3 [Reserved]
121
8.401 48 CFR Ch. 1 (10103 Edition)
Subpart 8.4Federal Supply Internet e-mail address:

Schedules gsa.advantage@gsa.gov.
(d) For administrative convenience,
8.401 General. an ordering office contracting officer
may add items not on the Federal Sup-
(a) The Federal Supply Schedule pro- ply Schedule (also referred to as open
gram, directed and managed by the market items) to a Federal Supply
General Services Administration Schedule blanket purchase agreement
(GSA), provides Federal agencies with (BPA) or an individual task or delivery
a simplified process for obtaining com- order only if
monly used commercial supplies and (1) All applicable acquisition regula-
services at prices associated with vol- tions pertaining to the purchase of the
ume buying (also see 8.002). Indefinite items not on the Federal Supply Sched-
delivery contracts (including require- ule have been followed (e.g., publicizing
ments contracts) are established with (Part 5), competition requirements
commercial firms to provide supplies (Part 6), acquisition of commercial
and services at stated prices for given items (Part 12), contracting methods
periods of time. Similar systems of (Parts 13, 14, and 15), and small busi-
schedule-type contracting are used for ness programs (Part 19));
military items managed by the Depart- (2) The ordering office contracting of-
ment of Defense. These systems are not ficer has determined the price for the
included in the Federal Supply Sched- items not on the Federal Supply Sched-
ule program covered by this subpart. ule is fair and reasonable;
(b) The GSA schedule contracting of- (3) The items are clearly labeled on
fice issues publications, entitled Fed- the order as items not on the Federal
eral Supply Schedules, containing the Supply Schedule; and
information necessary for placing de- (4) All clauses applicable to items not
livery orders with schedule contrac- on the Federal Supply Schedule are in-
tors. Ordering offices issue delivery or- cluded in the order.
ders directly to the schedule contrac- [62 FR 44817, Aug. 22, 1997, as amended at 67
tors for the required supplies and serv- FR 43515, June 27, 2002; 67 FR 56119, Aug. 30,
ices. Ordering offices may request cop- 2002]
ies of schedules by completing GSA
Form 457, FSS Publications Mailing 8.402 Applicability.
List Application, and mailing it to the Procedures in this subpart apply to
GSA Centralized Mailing List Service orders placed against Federal Supply
(7CAFL), P.O. Box 6477, Fort Worth, TX Schedules. Occasionally, GSA may es-
76115. Copies of GSA Form 457 also may tablish special ordering procedures.
be obtained from this address. The affected Federal Supply Schedules
(c) GSA offers an on-line shopping will outline these procedures.
service called GSA Advantage! that [65 FR 36024, June 6, 2000]
enables ordering offices to search prod-
uct specific information (i.e., national 8.4028.4034 [Reserved]
stock number, part number, common
name), review delivery options, place 8.404 Using schedules.
orders directly with contractors (or (a) General. (1) Parts 13 and 19 do not
ask GSA to place orders on the agen- apply to orders placed against Federal
cys behalf), and pay contractors for or- Supply Schedules, except for the provi-
ders using the Governmentwide com- sion at 13.3032(c)(3). Orders placed
mercial purchase card (or pay GSA). against a Multiple Award Schedule
Ordering offices may access the GSA (MAS), using the procedures in this
Advantage! shopping service by con- subpart, are considered to be issued
necting to the Internet and using a web using full and open competition (see
browser to connect to the Acquisition 6.102(d)(3)).
Reform Network (http://www.arnet.gov) (i) Ordering offices need not seek fur-
or the GSA, Federal Supply Service ther competition, synopsize the re-
(FSS) Home Page (http:// quirement, make a separate determina-
www.fss.gsa.gov). For more information of fair and reasonable pricing, or
tion or assistance, contact GSA at consider small business programs.
122
(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
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]
124
8.405 Ordering office responsibilities. ance is needed (inspection assistance

may be based on the ordering volume,
8.4051 [Reserved] the complexity of items, or the past
performance of the supplier).
8.4052 Order placement. (b) When the schedule contracting
Ordering offices may use Optional agency performs the inspection, as
Form 347, an agency-prescribed form, specified in the schedule, the ordering
or an established electronic commu- office will provide two copies of the
nications format to order items from order specifying source inspection to
schedules and shall place orders di- the schedule contracting agency. The
rectly with the contractor within the schedule contracting agency will no-
limitations specified in each schedule. tify the ordering office of acceptance
Orders shall include, at a minimum, or rejection of the supplies.
the following information in addition (c) Material inspected at source by
to any information required by the the schedule contracting agency, and
schedule: determined to conform with the prod-
(a) Complete shipping and billing ad- uct description of the schedule, shall
dresses. not be reinspected for the same pur-
(b) Contract number and date. pose. The consignee shall limit inspec-
(c) Agency order number. tion to quantity and condition on re-
(d) F.o.b. delivery point; i.e., origin ceipt.
or destination. (d) Unless otherwise provided in the
(e) Discount terms. schedule, acceptance shall be conclu-
(f) Delivery time. sive except as regards latent defects,
(g) Special item number or national fraud, or such gross mistakes as
stock number. amount to fraud.
(h) Brief, complete description of
each item (when ordering by model 8.4054 Delinquent performance.
number, features and options such as
color, finish, and electrical character- If the contractor fails to perform on
istics, if available, must be specified). the order, the ordering office may ter-
(i) Quantity and any variation in minate the order for default or give the
quantity. contractor further opportunity to per-
(j) Number of units. form by modifying the order to estab-
(k) Unit price. lish a new delivery date (obtaining con-
(l) Total price of order. sideration as necessary).
(m) Points of inspection and accept- [48 FR 42129, Sept. 19, 1983, as amended at 59
ance. FR 53717, Oct. 25, 1994]
(n) Other pertinent data; e.g., deliv-
ery instructions or receiving hours and 8.4055 Termination for default.
size-of-truck limitation. (a)(1) An ordering office may termi-
(o) Marking requirements. nate any one or more orders for default
(p) Level of preservation, packaging, in accordance with part 49, Termi-
and packing. nation of Contracts. The schedule con-
[48 FR 42129, Sept. 19, 1983, as amended at 60 tracting office shall be notified of all
FR 34737, July 3, 1995] cases where an ordering office has de-
clared a Federal Supply Schedule con-
8.4053 Inspection and acceptance. tractor in default or fraud is suspected.
(a) Consignees shall inspect supplies (2) Should the contractor claim that
at destination except when the failure was excusable, the ordering
(1) The schedule provides for the office shall promptly refer the matter
schedule contracting agency to per- to the schedule contracting office. In
form source inspection (in this case, the absence of a decision by the sched-
the schedule will indicate that manda- ule contracting office (or by the head
tory source inspection is required); or of the schedule contracting agency, on
(2) A schedule item is covered by a appeal) excusing the failure, the order-
product description, and the ordering ing office may charge the contractor
office determines that the schedule with excess costs resulting from repur-
contracting agencys inspection assist- chase.
125
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
Contract Appeals servicing the agency 8.503 Exception.

that issued the final decision or the The requirements of this subpart do
U.S. Court of Federal Claims. not apply to contracts or subcontracts
(d) Alternative dispute resolution. The in which the helium was acquired by
contracting officer should use the al- the contractor prior to award of the
ternative dispute resolution (ADR) pro- contract or subcontract.
cedures, to the maximum extent prac-
ticable (see 33.204 and 33.214). 8.504 Procedures.
[67 FR 43515, June 27, 2002] The contracting officer must forward
the following information to the Bu-
Subpart 8.5Acquisition of Helium reau of Land Management within 45
days of the close of each fiscal quarter:
(a) The name of any company that
SOURCE: 67 FR 13064, Mar. 20, 2002, unless
otherwise noted. supplied a major helium requirement.
(b) The amount of helium purchased.
8.500 Scope of subpart. (c) The delivery date(s).
(d) The location where the helium
This subpart implements the require-
was used.
ments of the Helium Act (50 U.S.C. 167,
et seq.) concerning the acquisition of 8.505 Contract clause.
liquid or gaseous helium by Federal
Insert the clause at 52.2088, Required
agencies or by Government contractors
Sources for Helium and Helium Usage
or subcontractors for use in the per-
Data, in solicitations and contracts if
formance of a Government contract
it is anticipated that performance of
(also see 43 CFR part 3195).
the contract involves a major helium
8.501 Definitions. requirement.
Bureau of Land Management means Subpart 8.6Acquisition From
the Department of the Interior, Bureau Federal Prison Industries, Inc.
of Land Management, Amarillo Field
8.601 General.
Office, Helium Operations, 801 South
Fillmore Street, Suite 500, Amarillo, (a) Federal Prison Industries, Inc.
TX 791013545. (FPI), also referred to as UNICOR, is a
Federal helium supplier means a pri- self-supporting, wholly owned Govern-
vate helium vendor that has an in-kind ment corporation of the District of Co-
crude helium sales contract with the lumbia.
Bureau of Land Management (BLM) (b) FPI provides training and employ-
and that is on the BLM Amarillo Field ment for prisoners confined in Federal
Offices Authorized List of Federal He- penal and correctional institutions
lium Suppliers available via the Inter- through the sale of its supplies and
net at http://www.nm.blm.gov/www/ services to Government agencies (18
amfo/amfolhome.html. U.S.C. 41214128).
Major helium requirement means an es- (c) FPI diversifies its supplies and
timated refined helium requirement services to prevent private industry
greater than 200,000 standard cubic feet from experiencing unfair competition
(scf) (measured at 14.7 pounds per from prison workshops or activities.
square inch absolute pressure and 70 [48 FR 42129, Sept. 19, 1983, as amended at 56
degrees Fahrenheit temperature) of FR 15148, Apr. 15, 1991]
gaseous helium or 7510 liters of liquid
helium delivered to a helium use loca- 8.602 Policy.
tion per year. (a) Agencies shall purchase required
supplies of the classes listed in the
8.502 Policy. Schedule of Products made in Federal
Agencies and their contractors and Penal and Correctional Institutions
subcontractors must purchase major (referred to in this subpart as the
helium requirements from Federal he- Schedule) at prices not to exceed cur-
lium suppliers, to the extent that sup- rent market prices, using the proce-
plies are available. dures in this subpart.
127
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 institution.
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-
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
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
(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
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
129
8.704 48 CFR Ch. 1 (10103 Edition)
should be referred to the Committee of- JWOD participating nonprofit agen-

fices at the following address and tele- cies.
phone number: Committee for Pur-
chase from People Who Are Blind or FR 19713, May 30, 1986; 56 FR 15149, Apr. 15,
Severely Disabled, Crystal Square 3, 1991; 59 FR 67028, Dec. 28, 1994]
Room 403, 1735 Jefferson Davis High-
way, Arlington, VA 222023461, (703) 603 8.705 Procedures.
7740.
Many items on the Procurement List 8.7051 General.
are identified in the General Services (a) Ordering offices shall obtain sup-
Administration (GSA) Supply Catalog plies and services on the Procurement
and GSAs Customer Service Center List from the central nonprofit agency
Catalogs with a black square and the or its designated JWOD participating
words NIB/NISH Mandatory Source, nonprofit agencies, except that sup-
and in similar catalogs issued by the plies identified on the Procurement
Defense Logistics Agency (DLA) and List as available from DLA, GSA, or
the Department of Veterans Affairs VA supply distribution facilities shall
(VA). GSA, DLA, and VA are central be obtained through DLA, GSA, or VA
supply agencies from which other Fed- procedures. If a distribution facility
eral agencies are required to purchase cannot provide the supplies, it shall in-
certain supply items on the Procure- form the ordering office, which shall
ment List. then order from the JWOD partici-
[59 FR 67028, Dec. 28, 1994] pating nonprofit agency designated by
the Committee.
8.704 Purchase priorities. (b) Supply distribution facilities in
(a) The JWOD Act requires the Gov- DLA and GSA shall obtain supplies on
the Procurement List from the central
ernment to purchase supplies or serv-
nonprofit agency identified or its des-
ices on the Procurement List, at prices
ignated JWOD participating nonprofit
established by the Committee, from
agency.
JWOD participating nonprofit agencies
if they are available within the period [48 FR 42129, Sept. 19, 1983, as amended at 59
required. When identical supplies or FR 67028, 67029, Dec. 28, 1994]
services are on the Procurement List
and the Schedule of Products issued by 8.7052 Direct-order process.
Federal Prison Industries, Inc., order- Central nonprofit agencies may au-
ing offices shall purchase supplies and thorize ordering offices to transmit or-
services in the following priorities: ders for specific supplies or services di-
(1) Supplies: rectly to a JWOD participating non-
(i) Federal Prison Industries, Inc. (41 profit agency. The written authoriza-
U.S.C. 48). tion remains valid until it is revoked
(ii) JWOD participating nonprofit by the central nonprofit agency or the
agencies. Committee. The central nonprofit
(iii) Commercial sources. agency shall specify the normal deliv-
(2) Services: ery or performance lead time required
(i) JWOD participating nonprofit by the nonprofit agency. The ordering
agencies. office shall reflect this lead time in its
(ii) Federal Prison Industries, Inc., or orders.
commercial sources. [48 FR 42129, Sept. 19, 1983, as amended at 56
(b) No other provision of the FAR FR 67136, Dec. 27, 1991; 59 FR 67029, Dec. 28,
shall be construed as permitting an ex- 1994]
ception to the mandatory purchase of
items on the Procurement List. 8.7053 Allocation process.
(c) The Procurement List identifies (a) When the direct order process has
those supplies for which the ordering not been authorized, the ordering office
office must obtain a formal clearance shall submit a written request for allo-
(8.605) from Federal Prison Industries, cation (requesting the designation of
Inc., before making any purchases from the JWOD participating nonprofit
130
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
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
available on the commercial market; (4) Developing new items to replace

and items on the Procurement List.
(b) Services shall conform to good (c) For services, the contracting ac-
commercial practices. tivity shall notify the JWOD partici-
pating nonprofit agency and central
[48 FR 42129, Sept. 19, 1983, as amended at 59 nonprofit agency concerned at least 90
FR 67029, Dec. 28, 1994]
days prior to the date that any changes
8.711 Quality complaints. in the scope of work or other condi-
tions will be required.
(a) When the quality of supplies or (d) When, in order to meet its emer-
services received is unsatisfactory, the gency needs, a contracting activity is
using activity shall take the following unable to give the 90-day notification
actions: required in paragraphs (b) and (c) of
(1) For supplies received from DLA this section, the contracting activity
supply centers, GSA supply distribu- shall, at the time it places the order or
tion facilities, or Department of Vet- change notice, inform the JWOD par-
erans Affairs distribution division, no- ticipating nonprofit agency and the
tify the supplying agency. central nonprofit agency in writing of
(2) For supplies or services received the reasons that it cannot meet the 90-
from JWOD participating nonprofit day notification requirement.
agencies, address complaints to the in-
dividual nonprofit agency involved, FR 19714, May 30, 1986; 59 FR 67029, Dec. 28,
with a copy to the appropriate central 1994]
nonprofit agency.
(b) When quality problems cannot be 8.713 Optional acquisition of supplies
resolved by the JWOD participating and services.
nonprofit agency and the ordering of- (a) Ordering offices may acquire sup-
fice, the ordering office shall first con- plies and services not included on the
tact the central nonprofit agency and Procurement List from a JWOD par-
then, if necessary, the Committee for ticipating nonprofit agency that is the
resolution. low responsive, responsible offeror
[48 FR 42129, Sept. 19, 1983, as amended at 59 under a solicitation issued by other au-
FR 67029, Dec. 28, 1994] thorized acquisition methods.
(b) Ordering offices should forward
8.712 Specification changes. solicitations to JWOD participating
(a) The contracting activity shall no- nonprofit agencies that may be quali-
tify the JWOD participating nonprofit fied to provide the supplies or services
agency and appropriate central non- required.
profit agency of any change in speci- [48 FR 42129, Sept. 19, 1983, as amended at 59
fications or descriptions. In the ab- FR 67029, Dec. 28, 1994]
sence of such written notification, the
JWOD participating nonprofit agency 8.714 Communications with the cen-
shall furnish the supplies or services tral nonprofit agencies and the
Committee.
under the specification or description
cited in the order. (a) The addresses of the central non-
(b) The contracting activity shall profit agencies are:
provide 90-days advance notification to (1) National Industries for the Blind,
the Committee and the central non- 1901 N. Beauregard St., Suite 200, Alex-
profit agency on actions that affect andria, VA 223111727, (703) 9980770; and
supplies on the Procurement List and (2) NISH, 2235 Cedar Lane, Vienna,
shall permit them to comment before VA 221825200, (703) 5606800.
action is taken, particularly when it (b) Any matter requiring referral to
involves the Committee shall be addressed to
(1) Changes that require new national the Executive Director of the Com-
stock numbers or item designations; mittee at 1735 Jefferson-Davis High-
(2) Deleting items from the supply way, Crystal Square 3, Suite 403, Ar-
system; lington, VA 222023461.
(3) Standardization; or [59 FR 67029, Dec. 28, 1994]
133
8.715 48 CFR Ch. 1 (10103 Edition)
8.715 Replacement commodities. Government printing means printing,

binding, and blankbook work for the
When a commodity on the Procure-
use of an executive department, inde-
ment List is replaced by another com-
pendent agency, or establishment of
modity which has not been previously
the Government.
acquired, and a qualified JWOD partici-
pating nonprofit agency can furnish Related supplies, means supplies that
the replacement commodity in accord- are used and equipment that is usable
ance with the Governments quality in printing and binding operations.
standards and delivery schedules and [48 FR 42129, Sept. 19, 1983, as amended at 52
at a fair market price, the replacement FR 9037, Mar. 20, 1987; 66 FR 2128, Jan. 10,
commodity is automatically on the 2001]
Procurement List and shall be acquired
from the JWOD participating nonprofit 8.802 Policy.
agency designated by the Committee. (a) Government printing must be
The commodity being replaced shall done by or through the Government
continue to be included on the Procure- Printing Office (GPO) (44 U.S.C. 501),
ment List until there is no longer a re- unless
quirement for that commodity. (1) The GPO cannot provide the
[51 FR 19714, May 30, 1986, as amended at 59 printing service (44 U.S.C. 504);
FR 67029, Dec. 28, 1994] (2) The printing is done in field print-
ing plants operated by an executive
8.716 Change-of-name and successor agency (44 U.S.C. 501(2));
in interest procedures. (3) The printing is acquired by an ex-
When the Committee recognizes a ecutive agency from allotments for
name change or a successor in interest contract field printing (44 U.S.C.
for a JWOD participating nonprofit 501(2)); or
agency providing supplies or services (4) The printing is specifically au-
on the Procurement List thorized by statute to be done other
(a) The Committee will provide a no- than by the GPO.
tice of a change to the Procurement (b) The head of each agency shall des-
List to the cognizant contracting offi- ignate a central printing authority;
cers; and that central printing authority may
(b) Upon receipt of a notice of a serve as the liaison with the Congres-
change to the Procurement List from sional Joint Committee on Printing
the Committee, the contracting officer (JCP) and the Public Printer on mat-
must ters related to printing. Contracting
(1) Prepare a Standard Form (SF) 30, officers shall obtain approval from
Amendment of Solicitation/Modifica- their designated central printing au-
tion of Contract, incorporating a sum- thority before contracting in any man-
mary of the notice and attaching a list ner, whether directly or through con-
of contracts affected; and tracts for other supplies or services, for
(2) Distribute the SF 30, including a the items defined in 8.801 and for com-
copy to the Committee. position, platemaking, presswork,
binding, and micrographics (when used
[64 FR 51834, Sept. 24, 1999] as a substitute for printing).
(c)(1) Further, 44 U.S.C. 1121 provides
Subpart 8.8Acquisition of that the Public Printer may acquire
Printing and Related Supplies and furnish paper and envelopes (ex-
cluding envelopes printed in the course
8.800 Scope of subpart. of manufacture) in common use by two
This subpart provides policy for the or more Government departments, es-
acquisition of Government printing tablishments, or services within the
and related supplies. District of Columbia, and provides for
reimbursement of the Public Printer
[52 FR 9037, Mar. 20, 1987] from available appropriations or funds.
Paper and envelopes that are furnished
8.801 Definitions. by the Public Printer may not be ac-
As used in this subpart quired in any other manner.
134
(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;
(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
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
Sec. 9.400 Scope of subpart.

9.000 Scope of part. 9.401 Applicability.
9.402 Policy.
Subpart 9.1Responsible Prospective 9.403 Definitions.
Contractors 9.404 List of Parties Excluded from Federal
Procurement and Nonprocurement Pro-
9.100 Scope of subpart. grams.
9.101 Definition. 9.405 Effect of listing.
9.102 Applicability. 9.4051 Continuation of current contracts.
9.103 Policy. 9.4052 Restrictions on subcontracting.
9.104 Standards. 9.406 Debarment.
9.1041 General standards. 9.4061 General.
9.1042 Special standards. 9.4062 Causes for debarment.
9.1043 Application of standards. 9.4063 Procedures.
9.1044 Subcontractor responsibility. 9.4064 Period of debarment.
9.105 Procedures. 9.4065 Scope of debarment.
9.1051 Obtaining information. 9.407 Suspension.
9.1052 Determinations and documentation. 9.4071 General.
9.1053 Disclosure of preaward information. 9.4072 Causes for suspension.
9.106 Preaward surveys. 9.4073 Procedures.
136
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.
9.409 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.
9.101 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.
(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.
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
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-
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.
138
(b) Satisfactory performance record. A tracting at 52.21914 may be considered

prospective contractor that is or re- nonresponsible.
cently has been seriously deficient in
contract performance shall be pre- FR 27463, July 20, 1988; 53 FR 34226, Sept. 2,
sumed to be nonresponsible, unless the 1988; 56 FR 55378, Oct. 25, 1991; 60 FR 48260,
contracting officer determines that the Sept. 18, 1995; 61 FR 67410, Dec. 20, 1996; 62 FR
circumstances were properly beyond 44820, Aug. 22, 1997; 63 FR 70267, Dec. 18, 1998;
the contractors control, or that the 65 FR 80264, Dec. 20, 2000; 66 FR 66989, Dec. 27,
contractor has taken appropriate cor- 2001; 67 FR 13068, Mar. 20, 2002]
rective action. Past failure to apply
9.1044 Subcontractor responsibility.
sufficient tenacity and perseverance to
perform acceptably is strong evidence (a) Generally, prospective prime con-
of nonresponsibility. Failure to meet tractors are responsible for deter-
the quality requirements of the con- mining the responsibility of their pro-
tract is a significant factor to consider spective subcontractors (but see 9.405
in determining satisfactory perform- and 9.4052 regarding debarred, ineli-
ance. The contracting officer shall con- gible, or suspended firms). Determina-
sider the number of contracts involved tions of prospective subcontractor re-
and the extent of deficient performance sponsibility may affect the Govern-
in each contract when making this de- ments determination of the prospec-
termination. If the pending contract tive prime contractors responsibility.
requires a subcontracting plan pursu- A prospective contractor may be re-
ant to Subpart 19.7, The Small Busi- quired to provide written evidence of a
proposed subcontractors responsi-
ness Subcontracting Program, the con-
bility.
tracting officer shall also consider the
prospective contractors compliance (b) When it is in the Governments
interest to do so, the contracting offi-
with subcontracting plans under recent
cer may directly determine a prospec-
contracts.
tive subcontractors responsibility
(c) Affiliated concerns. Affiliated con-
(e.g., when the prospective contract in-
cerns (see Concern in 19.001 and Affili-
volves medical supplies, urgent re-
ates in 19.101) are normally considered quirements, or substantial subcon-
separate entities in determining tracting). In this case, the same stand-
whether the concern that is to perform ards used to determine a prime con-
the contract meets the applicable tractors responsibility shall be used by
standards for responsibility. However, the Government to determine subcon-
the contracting officer shall consider tractor responsibility.
the affiliates past performance and in-
tegrity when they may adversely affect 9.105 Procedures.
the prospective contractors responsi-
bility. 9.1051 Obtaining information.
(d)(1) Small business concerns. If a (a) Before making a determination of
small business concerns offer that responsibility, the contracting officer
would otherwise be accepted is to be re- shall possess or obtain information suf-
jected because of a determination of ficient to be satisfied that a prospec-
nonresponsibility, the contracting offi- tive contractor currently meets the ap-
cer shall refer the matter to the Small plicable standards in 9.104.
Business Administration, which will (b)(1) Generally, the contracting offi-
decide whether or not to issue a Cer- cer shall obtain information regarding
tificate of Competency (see subpart the responsibility of prospective con-
19.6). tractors, including requesting
(2) A small business that is unable to preaward surveys when necessary (see
comply with the limitations on subcon- 9.106), promptly after a bid opening or
139
9.1052 48 CFR Ch. 1 (10103 Edition)
receipt of offers. However, in nego- information on production equipment,

tiated contracting, especially when re- and personnel information.
search and development is involved, (4) Commercial sources of supplier in-
the contracting officer may obtain this formation of a type offered to buyers in
information before issuing the request the private sector.
for proposals. Requests for information (5) Preaward survey reports (see
shall ordinarily be limited to informa- 9.106).
tion concerning (i) the low bidder or (6) Other sources such as publica-
(ii) those offerors in range for award. tions; suppliers, subcontractors, and
(2) Preaward surveys shall be man- customers of the prospective con-
aged and conducted by the surveying tractor; financial institutions; Govern-
activity. ment agencies; and business and trade
(i) If the surveying activity is a con- associations.
tract administration office (7) If the contract is for construction,
(A) That office shall advise the con- the contracting officer may consider
tracting officer on prospective contrac- performance evaluation reports (see
tors financial competence and credit 36.201(c)(2)).
needs; and (d) Contracting offices and cognizant
(B) The administrative contracting contract administration offices that
officer shall obtain from the auditor become aware of circumstances casting
any information required concerning doubt on a contractors ability to per-
the adequacy of prospective contrac- form contracts successfully shall
tors accounting systems and these sys- promptly exchange relevant informa-
tems suitability for use in admin- tion.
istering the proposed type of contract. [48 FR 42142, Sept. 19, 1983, as amended at 51
(ii) If the surveying activity is not a FR 27119, July 29, 1986; 52 FR 9038, Mar. 20,
contract administration office, the 1987; 54 FR 19813, May 8, 1989; 60 FR 16718,
contracting officer shall obtain from Mar. 31, 1995; 60 FR 33065, June 26, 1995; 61 FR
the auditor any information required 39201, July 26, 1996]
concerning prospective contractors fi-
nancial competence and credit needs, 9.1052 Determinations and docu-
the adequacy of their accounting sys- mentation.
tems, and these systems suitability for (a) Determinations. (1) The con-
use in administering the proposed type tracting officers signing of a contract
of contract. constitutes a determination that the
(3) Information on financial resources prospective contractor is responsible
and performance capability shall be ob- with respect to that contract. When an
tained or updated on as current a basis offer on which an award would other-
as is feasible up to the date of award. wise be made is rejected because the
(c) In making the determination of prospective contractor is found to be
responsibility (see 9.1041(c)), the con- nonresponsible, the contracting officer
tracting officer shall consider relevant shall make, sign, and place in the con-
past performance information (see subtract file a determination of non-
part 42.15). In addition, the contracting responsibility, which shall state the
officer should use the following sources basis for the determination.
of information to support such deter- (2) If the contracting officer deter-
minations: mines and documents that a responsive
(1) The List of Parties Excluded from small business lacks certain elements
Federal Procurement and Nonprocure- of responsibility, the contracting offi-
ment Programs maintained in accord- cer shall comply with the procedures in
ance with subpart 9.4. subpart 19.6. When a certificate of com-
(2) Records and experience data, in- petency is issued for a small business
cluding verifiable knowledge of per- concern (see subpart 19.6), the con-
sonnel within the contracting office, tracting officer may accept the factors
audit offices, contract administration covered by the certificate without fur-
offices, and other contracting offices. ther inquiry.
(3) The prospective contractorin- (b) Support documentation. Documents
cluding bid or proposal information, and reports supporting a determination
questionnaire replies, financial data, of responsibility or nonresponsibility,
140
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 contain 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
9.107 48 CFR Ch. 1 (10103 Edition)
Survey of Prospective Contractor 9.107 Surveys of nonprofit agencies

Technical; SF 1405, Preaward Survey of serving people who are blind or
Prospective ContractorProduction; have other severe disabilities under
SF 1406, Preaward Survey of Prospec- the Javits-Wagner-ODay (JWOD)
Program.
tive ContractorQuality Assurance;
SF 1407, Preaward Survey of Prospec- (a) The Committee for Purchase
tive ContractorFinancial Capability; From People Who Are Blind or Se-
and SF 1408, Preaward Survey of Pro- verely Disabled (Committee), as au-
thorized by 41 U.S.C. 4648c, determines
spective ContractorAccounting Sys-
what supplies and services Federal
tem; and provide a narrative discussion
agencies are required to purchase from
sufficient to support both the evalua- JWOD participating nonprofit agencies
tion ratings and the recommendations. serving people who are blind or have
(b) When the contractor surveyed is a other severe disabilities (see subpart
small business that has received pref- 8.7). The Committee is required to find
erential treatment on an ongoing con- a JWOD participating nonprofit agency
tract under Section 8(a) of the Small capable of furnishing the supplies or
Business Act (15 U.S.C. 637) or has re- services before the nonprofit agency
ceived a Certificate of Competency dur- can be designated as a mandatory
ing the last 12 months, the surveying source under the JWOD Program. The
activity shall consult the appropriate Committee may request a contracting
Small Business Administration field office to assist in assessing the capa-
office before making an affirmative bilities of a nonprofit agency.
recommendation regarding the con- (b) The contracting office, upon re-
tractors responsibility or nonresponsi- quest from the Committee, shall re-
bility. quest a capability survey from the ac-
tivity responsible for performing
(c) When a preaward survey discloses
preaward surveys, or notify the Com-
previous unsatisfactory performance,
mittee that the JWOD participating
the surveying activity shall specify the
nonprofit agency is capable, with sup-
extent to which the prospective con- porting rationale, and that the survey
tractor plans, or has taken, corrective is waived. The capability survey will
action. Lack of evidence that past fail- focus on the technical and production
ure to meet contractual requirements capabilities and applicable preaward
was the prospective contractors fault survey elements to furnish specific sup-
does not necessarily indicate satisfac- plies or services being considered for
tory performance. The narrative shall addition to the Procurement List.
report any persistent pattern of need (c) The contracting office shall use
for costly and burdensome Government the Standard Form 1403 to request a
assistance (e.g., engineering, inspec- capability survey of organizations em-
tion, or testing) provided in the Gov- ploying people who are blind or have
ernments interest but not contrac- other severe disabilities.
tually required. (d) The contracting office shall fur-
(d) When the surveying activity pos- nish a copy of the completed survey, or
sesses information that supports a rec- notice that the JWOD participating
ommendation of complete award with- nonprofit agency is capable and the
out an on-site survey and no special survey is waived, to the Executive Di-
areas for investigation have been re- rector, Committee for Purchase from
People Who Are Blind or Severely Dis-
quested, the surveying activity may
abled.
provide a short-form preaward survey
report. The short-form report shall [59 FR 67029, Dec. 28, 1994]
consist solely of the Preaward Survey
of Prospective Contractor (General), Subpart 9.2Qualifications
SF 1403. Sections III and IV of this Requirements
form shall be completed and block 21
shall be checked to show that the re- SOURCE: 50 FR 35476, Aug. 30, 1985, unless
port is a short-form preaward report. otherwise noted.
142
9.200 Scope of subpart. onstrate their abilities to meet the

standards specified for qualification
This subpart implements 10 U.S.C.
2319 and 41 U.S.C. 253(e) and prescribes using qualified personnel and facilities
policies and procedures regarding qual- of the agency concerned, or of another
ification requirements and the acquisi- agency obtained through interagency
tions that are subject to such require- agreements, or under contract, or
ments. other methods approved by the agency
(including use of approved testing and
9.201 Definitions. evaluation services not provided under
contract to the agency).
Qualified bidders list (QBL) means a (3) If the services in (a)(2)(ii) above
list of bidders who have had their prod- are provided by contract, the contrac-
ucts examined and tested and who have tors selected to provide testing and
satisfied all applicable qualification re- evaluation services shall be
quirements for that product or have (i) Those that are not expected to
otherwise satisfied all applicable quali- benefit from an absence of additional
fication requirements. qualified sources; and
Qualified manufacturers list (QML) (ii) Required by their contracts to ad-
means a list of manufacturers who here to any restriction on technical
have had their products examined and data asserted by the potential offeror
tested and who have satisfied all appli- seeking qualification.
cable qualification requirements for (4) A potential offeror seeking quali-
that product. fication shall be promptly informed as
to whether qualification is attained
[50 FR 35476, Aug. 30, 1985, as amended at 53
FR 34227, Sept. 2, 1988; 66 FR 2128, Jan. 10, and, in the event it is not, promptly
2001] furnished specific reasons why quali-
fication was not attained.
9.202 Policy. (b) When justified under the cir-
(a)(1) The head of the agency or des- cumstances, the agency activity re-
ignee shall, before establishing a quali- sponsible for establishing a qualifica-
fication requirement, prepare a written tion requirement shall submit to the
justification competition advocate for the procuring
(i) Stating the necessity for estab- activity responsible for purchasing the
lishing the qualification requirement item subject to the qualification re-
and specifying why the qualification quirement, a determination that it is
requirement must be demonstrated be- unreasonable to specify the standards
fore contract award; for qualification which a prospective
(ii) Estimating the likely costs for offeror (or its product) must satisfy.
testing and evaluation which will be After considering any comments of the
incurred by the potential offeror to be- competition advocate reviewing the de-
come qualified; and termination, the head of the procuring
(iii) Specifying all requirements that activity may waive the requirements of
a potential offeror (or its product) 9.202(a)(1)(ii) through (4) above for up
must satisfy in order to become quali- to 2 years with respect to the item sub-
fied. Only those requirements which ject to the qualification requirement.
are the least restrictive to meet the A copy of the waiver shall be furnished
purposes necessitating the establish- to the head of the agency or other offi-
ment of the qualification requirements cial responsible for actions under
shall be specified. 9.202(a)(1). The waiver authority pro-
(2) Upon request to the contracting vided in this paragraph does not apply
activity, potential offerors shall be with respect to qualification require-
provided ments contained in a QPL, QML, or
(i) All requirements that they or QBL.
their products must satisfy to become (c) If a potential offeror can dem-
qualified; onstrate to the satisfaction of the con-
(ii) At their expense (but see tracting officer that the potential of-
9.204(a)(2) with regard to small busi- feror (or its product) meets the stand-
nesses), a prompt opportunity to dem- ards established for qualification or
143
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 rein 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 comment 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:
144
(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
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 qualification 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.
146
(2) Distribute solicitations to pro- (2) Indicate whether a means other

spective contractors whether or not than the qualification requirement is
they have been identified as meeting feasible for testing or demonstrating
applicable qualification requirements. quality assurance.
(3) When appropriate, request in ac- (b) Postsolicitation. The contracting
cordance with agency procedures that officer shall submit to the agency ac-
a qualification requirement not be en- tivity which established the qualifica-
forced in a particular acquisition and, tion requirement the names and ad-
if granted, so specify in the solicitation dresses of concerns which expressed in-
(see 9.2061(b)). terest in the acquisition but are not in-
(4) Forward requests from potential cluded on the applicable QPL, QML, or
suppliers for information on a quali- QBL or identified as meeting the quali-
fication requirement to the agency ac- fication requirement. The activity will
tivity responsible for establishing the then assist interested concerns in
requirement. meeting the standards specified for
(5) Allow the maximum time, con- qualification (see 9.202(a) (2) and (4)).
sistent with delivery requirements, be-
tween issuing the solicitation and the [50 FR 35476, Aug. 30, 1985, as amended at 60
contract award. As a minimum, con- FR 34737, July 3, 1995]
tracting officers shall comply with the
time frames specified in 5.203 when ap- 9.207 Changes in status regarding
plicable. qualification requirements.

(a) The contracting officer shall
FR 34227, Sept. 2, 1988] promptly report to the agency activity
which established the qualification re-
9.2062 Contract clause. quirement any conditions which may
The contracting officer shall insert merit removal or omission from a QPL,
the clause at 52.2091, Qualification Re- QML, or QBL or affect whether a
quirements, in solicitations and con- source should continue to be otherwise
tracts when the acquisition is subject identified as meeting the requirement.
to a qualification requirement. These conditions exist when
(1) Products or services are sub-
[53 FR 34227, Sept. 2, 1988] mitted for inspection or acceptance
9.2063 Competition. that do not meet the qualification re-
quirement;
(a) Presolicitation. If a qualification (2) Products or services were pre-
requirement applies to an acquisition, viously rejected and the defects were
the contracting officer shall review the not corrected when resubmitted for in-
applicable QPL, QML, or QBL or other spection or acceptance;
identification of those sources which
(3) A supplier fails to request reevalu-
have met the requirement before
ation following change of location or
issuing a solicitation to ascertain
ownership of the plant where the prod-
whether the number of sources is ade-
uct which met the qualification re-
quate for competition. (See 9.204(a) for
quirement was manufactured (see the
duties of the agency activity respon-
clause at 52.2091, Qualification Re-
sible for establishment of the qualifica-
quirements);
tion requirement.) If the number of
sources is inadequate, the contracting (4) A manufacturer of a product
officer shall request the agency activ- which met the qualification require-
ity which established the requirement ment has discontinued manufacture of
to the product;
(1) Indicate the anticipated date on (5) A source requests removal from a
which any sources presently under- QPL, QML, or QBL;
going evaluation will have dem- (6) A condition of meeting the quali-
onstrated their abilities to meet the fication requirement was violated; e.g.,
qualification requirement so that the advertising or publicity contrary to
solicitation could be rescheduled to 9.204(h)(5);
allow as many additional sources as (7) A revised specification imposes a
possible to qualify; or new qualification requirement;
147
9.301 48 CFR Ch. 1 (10103 Edition)
(8) Manufacturing or design changes 9.303 Use.

have been incorporated in the quali- Testing and approval may be appro-
fication requirement; priate when
(9) The source is on the List of Par- (a) The contractor has not previously
ties Excluded from Federal Procure- furnished the product to the Govern-
ment and Nonprocurement Programs ment;
(see subpart 9.4); or (b) The contractor previously fur-
(10) Performance of a contract sub- nished the product to the Government,
ject to a qualification requirement is but
otherwise unsatisfactory. (1) There have been subsequent
(b) After considering any of the above changes in processes or specifications;
or other conditions reasonably related (2) Production has been discontinued
to whether a product or source con- for an extended period of time; or
tinues to meet the standards specified (3) The product acquired under a pre-
for qualification, an agency may take vious contract developed a problem
appropriate action without advance no- during its life.
tification. The agency shall, however, (c) The product is described by a per-
promptly notify the affected parties if formance specification; or
(d) It is essential to have an approved
a product or source is removed from a
first article to serve as a manufac-
QPL, QML, or QBL, or will no longer be
turing standard.
identified as meeting the standards
specified for qualification. This notice 9.304 Exceptions.
shall contain specific information why
Normally, testing and approval is not
the product or source no longer meets
required in contracts for
the qualification requirement. (a) Research or development;
[50 FR 35476, Aug. 30, 1985, as amended at 53 (b) Products requiring qualification
FR 34227, Sept. 2, 1988; 56 FR 15149, Apr. 15, before award (e.g., when an applicable
1991; 60 FR 33065, June 26, 1995] qualified products list exists (see sub-
part 9.2));
Subpart 9.3First Article Testing (c) Products normally sold in the
commercial market; or
and Approval (d) Products covered by complete and
9.301 Definition. detailed technical specifications, un-
less the requirements are so novel or
Approval, as used in this subpart, exacting that it is questionable wheth-
means the contracting officers written er the products would meet the re-
notification to the contractor accept- quirements without testing and ap-
ing the test results of the first article. proval.
[48 FR 42142, Sept. 19, 1983, as amended at 66 9.305 Risk.
FR 2128, Jan. 10, 2001]
Before first article approval, the ac-
9.302 General. quisition of materials or components,
or commencement of production, is
First article testing and approval normally at the sole risk of the con-
(hereafter referred to as testing and ap- tractor. To minimize this risk, the con-
proval) ensures that the contractor can tracting officer shall provide sufficient
furnish a product that conforms to all time in the delivery schedule for acqui-
contract requirements for acceptance. sition of materials and components,
Before requiring testing and approval, and for production after receipt of first
the contracting officer shall consider article approval. When Government re-
the quirements preclude this action, the
(a) Impact on cost or time of deliv- contracting officer may, before ap-
ery; proval of the first article, authorize the
(b) Risk to the Government of fore- contractor to acquire specific mate-
going such test; and rials or components or commence pro-
(c) Availability of other, less costly, duction to the extent essential to meet
methods of ensuring the desired qual- the delivery schedule (see Alternate II
ity. of the clause at 52.2093, First Article
148
ApprovalContractor Testing, and Al- Government desires earlier delivery. In

ternate II of the clause at 52.2094, the latter case, any resulting difference
First Article ApprovalGovernment in delivery schedules shall not be a fac-
Testing. Costs incurred based on this tor in evaluation for award. The clause
authorization are allocable to the con- at 52.2094, First Article Approval
tract for (1) progress payments and (2) Government Testing, shall contain the
termination settlements if the con- delivery schedule for the first article;
tract is terminated for the convenience (g) Provide for the submission of con-
of the Government. tract numbers, if any, to document the
offerors eligibility under 9.306(c);
9.306 Solicitation requirements.
(h) State whether the approved first
Solicitations containing a testing article will serve as a manufacturing
and approval requirement shall standard; and
(a) Provide, in the circumstance (i) Include, when the Government is
where the contractor is to be respon- responsible for first article testing, the
sible for the first article approval test-
Governments estimated testing costs
ing
as a factor for use in evaluating offers
(1) The performance or other charac-
(when appropriate).
teristics that the first article must
meet for approval; (j) Inform offerors that the prices for
(2) The detailed technical require- first articles and first article tests in
ments for the tests that must be per- relation to production quantities shall
formed for approval; and not be materially unbalanced (see
(3) The necessary data that must be 15.4041(g)) if first article test items or
submitted to the Government in the tests are to be separately priced.
first article approval test report. [48 FR 42142, Sept. 19, 1983, as amended at 54
(b) Provide, in the circumstance FR 34753, Aug. 21, 1989; 55 FR 25527, June 21,
where the Government is to be respon- 1990; 60 FR 48237, Sept. 18, 1995; 62 FR 51270,
sible for the first article approval test- Sept. 30, 1997]
ing
(1) The performance or other charac- 9.307 Government administration pro-
teristics that the first article must cedures.
meet for approval; and (a) Before the contractor ships the
(2) The tests to which the first article first article, or the first article test re-
will be subjected for approval. port, to the Government laboratory or
(c) Inform offerors that the require- other activity responsible for approval
ment may be waived when supplies at the address specified in the contract,
identical or similar to those called for the contract administration office
have previously been delivered by the shall provide that activity with as
offeror and accepted by the Govern- much advance notification as is fea-
ment (see 52.2093(h) and 52.2094(i); sible of the forthcoming shipment,
(d) Permit the submission of alter- and
native offers, one including testing and
(1) Advise that activity of the con-
approval and the other excluding test-
tractual requirements for testing and
ing and approval (if eligible under
9.306(c)); approval, or evaluation, as appropriate;
(e) State clearly the first articles re- (2) Call attention to the notice re-
lationship to the contract quantity quirement in paragraph (b) of the
(see paragraph (e) of the clause at clause at 52.2093, First Article Ap-
52.2093, First Article ApprovalCon- proval Contractor Testing, or 52.209
tractor Testing, or 52.2094, First Arti- 4, First Article ApprovalGovernment
cle ApprovalGovernment Testing); Testing; and
(f) Contain a delivery schedule for (3) Request that the activity inform
the production quantity (see 11.404). the contract administration office of
The delivery schedule may the date when testing or evaluation
(1) Be the same whether or not test- will be completed.
ing and approval is waived; or (b) The Government laboratory or
(2) Provide for earlier delivery when other activity responsible for first arti-
testing and approval is waived and the cle testing or evaluation shall inform
149
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
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]
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
9.404 48 CFR Ch. 1 (10103 Edition)
or is awarded, or reasonably may be ex- the Secretary of the Department or the

pected to submit offers for or be award- head of the agency to which such cer-
ed, a Government contract, including a tificate was furnished.
contract for carriage under Govern-
ment or commercial bills of lading, or FR 19814, May 8, 1989; 56 FR 15149, Apr. 15,
a subcontract under a Government con- 1991; 59 FR 11372, Mar. 10, 1994; 60 FR 33065,
tract; or June 26, 1995; 66 FR 2128, Jan. 10, 2001]
(2) Conducts business, or reasonably
may be expected to conduct business, 9.404 List of Parties Excluded from
with the Government as an agent or Federal Procurement and Non-
representative of another contractor. procurement Programs.
Debarring official means (1) an agency (a) The General Services Administra-
head or (2) a designee authorized by the tion (GSA)
agency head to impose debarment. (1) Compiles and maintains a current
Indictment means indictment for a list of all parties debarred, suspended,
criminal offense. An information or proposed for debarment, or declared in-
other filing by competent authority eligible by agencies or by the General
charging a criminal offense is given the Accounting Office;
same effect as an indictment. (2) Periodically revises and distrib-
Legal proceedings means any civil ju- utes the list and issues supplements, if
dicial proceeding to which the Govern- necessary, to all agencies and the Gen-
ment is a party or any criminal pro- eral Accounting Office; and
ceeding. The term includes appeals (3) Includes in the list the name and
from such proceedings. telephone number of the official re-
Nonprocurement Common Rule means sponsible for its maintenance and dis-
the procedures used by Federal Execu- tribution.
tive Agencies to suspend, debar, or ex- (b) The List of Parties Excluded from
clude individuals or entities from par- Federal Procurement and Nonprocure-
ticipation in nonprocurement trans- ment Programs includes the
actions under Executive Order 12549. (1) Names and addresses of all con-
Examples of nonprocurement trans- tractors debarred, suspended, proposed
actions are grants, cooperative agree- for debarment, or declared ineligible,
ments, scholarships, fellowships, con- in alphabetical order, with cross-ref-
tracts of assistance, loans, loan guar- erences when more than one name is
antees, subsidies, insurance, payments involved in a single action;
for specified use, and donation agree-
(2) Name of the agency or other au-
ments.
thority taking the action;
Suspending official means (1) an agen-
(3) Cause for the action (see 9.4062
cy head or (2) a designee authorized by
and 9.4072 for causes authorized under
the agency head to impose suspension.
this subpart) or other statutory or reg-
Unfair trade practices means the com-
ulatory authority;
mission of any of the following acts by
a contractor: (4) Effect of the action;
(1) A violation of section 337 of the (5) Termination date for each listing;
Tariff Act of 1930 (19 U.S.C. 1337) as de- (6) DUNS No.; and
termined by the International Trade (7) Name and telephone number of
Commission. the point of contact for the action.
(2) A violation, as determined by the (c) Each agency must
Secretary of Commerce, of any agree- (1) Provide GSA with the information
ment of the group known as the Co- required by paragraph (b) of this sec-
ordination Committee for purposes of tion within 5 working days after the
the Export Administration Act of 1979 action becomes effective;
(50 U.S.C. App. 2401, et seq.) or any simi- (2) Notify GSA within 5 working days
lar bilateral or multilateral export after modifying or rescinding an ac-
control agreement. tion;
(3) A knowingly false statement re- (3) Notify GSA of the names and ad-
garding a material element of a certifi- dresses of agency organizations that
cation concerning the foreign content are to receive the list and the number
of an item of supply, as determined by of copies to be furnished to each;
152
(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
9.4051 48 CFR Ch. 1 (10103 Edition)
Programs to ensure that no award is (b) The Government suspends or

made to a listed contractor. debars contractors to protect the Gov-
ernments interests. By operation of
FR 9038, Mar. 20, 1987; 54 FR 19814, May 8, the clause at 52.2096, Protecting the
1989; 54 FR 48982, Nov. 28, 1989; 55 FR 21707, Governments Interests When Subcon-
May 25, 1990; 56 FR 29127, June 25, 1991; 59 FR tracting with Contractors Debarred,
67033, Dec. 28, 1994; 60 FR 33065, June 26, 1995; Suspended or Proposed for Debarment,
65 FR 16286, Mar. 27, 2000] contractors shall not enter into any
subcontract in excess of $25,000 with a
9.4051 Continuation of current con-
tracts. contractor that has been debarred, sus-
pended, or proposed for debarment un-
(a) Notwithstanding the debarment, less there is a compelling reason to do
suspension, or proposed debarment of a so. If a contractor intends to sub-
contractor, agencies may continue con- contract with a party that is debarred,
tracts or subcontracts in existence at suspended, or proposed for debarment
the time the contractor was debarred, as evidenced by the partys inclusion
suspended, or proposed for debarment on the List of Parties Excluded from
unless the agency head or a designee Federal Procurement and Nonprocure-
directs otherwise. A decision as to the ment Programs (see 9.404), a corporate
type of termination action, if any, to officer or designee of the contractor is
be taken should be made only after re- required by operation of the clause at
view by agency contracting and tech- 52.2096, Protecting the Governments
nical personnel and by counsel to en-
Interests when Subcontracting with
sure the propriety of the proposed ac-
Contractors Debarred, Suspended, or
tion.
Proposed for Debarment, to notify the
(b) Ordering activities may continue
contracting officer, in writing, before
to place orders against existing con-
entering into such subcontract. The
tracts, including indefinite delivery
notice must provide the following:
contracts, in the absence of a termi-
nation. (1) The name of the subcontractor;
(c) Agencies shall not renew or other- (2) The contractors knowledge of the
wise extend the duration of current reasons for the subcontractor being on
contracts, or consent to subcontracts, the List of Parties Excluded from Fed-
with contractors debarred, suspended, eral Procurement and Nonprocurement
or proposed for debarment, unless the Programs;
agency head or a designee authorized (3) The compelling reason(s) for doing
representative states, in writing, the business with the subcontractor not-
compelling reasons for renewal or ex- withstanding its inclusion on the List
tension. of Parties Excluded from Federal Pro-
curement and Nonprocurement Pro-
[54 FR 19815, May 8, 1989, as amended at 59 grams; and
FR 67033, Dec. 28, 1994]
(4) The systems and procedures the
9.4052 Restrictions on subcon- contractor has established to ensure
tracting. that it is fully protecting the Govern-
ments interests when dealing with
(a) When a contractor debarred, sus-
such subcontractor in view of the spe-
pended, or proposed for debarment is
cific basis for the partys debarment,
proposed as a subcontractor for any
subcontract subject to Government suspension, or proposed debarment.
consent (see subpart 44.2), contracting (c) The contractors compliance with
officers shall not consent to sub- the requirements of 52.2096 will be re-
contracts with such contractors unless viewed during Contractor Purchasing
the agency head or a designee states in System Reviews (see subpart 44.3).
writing the compelling reasons for this [54 FR 19815, May 8, 1989, as amended at 56
approval action. (See 9.405(b) con- FR 29127, June 25, 1991; 59 FR 67033, Dec. 28,
cerning declarations of ineligibility af- 1994; 60 FR 33066, June 26, 1995; 60 FR 48237,
fecting subcontracting.) Sept. 18, 1995]
154
9.406 Debarment. (8) Whether the contractor has insti-

tuted or agreed to institute new or re-
9.4061 General. vised review and control procedures
(a) It is the debarring officials re- and ethics training programs.
sponsibility to determine whether de- (9) Whether the contractor has had
barment is in the Governments inter- adequate time to eliminate the cir-
est. The debarring official may, in the cumstances within the contractors or-
public interest, debar a contractor for ganization that led to the cause for de-
any of the causes in 9.4062, using the barment.
procedures in 9.4063. The existence of a (10) Whether the contractors man-
cause for debarment, however, does not agement recognizes and understands
necessarily require that the contractor the seriousness of the misconduct giv-
be debarred; the seriousness of the con- ing rise to the cause for debarment and
tractors acts or omissions and any re- has implemented programs to prevent
medial measures or mitigating factors recurrence.
should be considered in making any de- The existence or nonexistence of any
barment decision. Before arriving at mitigating factors or remedial meas-
any debarment decision, the debarring ures such as set forth in this paragraph
official should consider factors such as (a) is not necessarily determinative of
the following: a contractors present responsibility.
(1) Whether the contractor had effec- Accordingly, if a cause for debarment
tive standards of conduct and internal exists, the contractor has the burden of
control systems in place at the time of demonstrating, to the satisfaction of
the activity which constitutes cause the debarring official, its present re-
for debarment or had adopted such pro- sponsibility and that debarment is not
cedures prior to any Government inves- necessary.
tigation of the activity cited as a cause (b) Debarment constitutes debarment
for debarment. of all divisions or other organizational
(2) Whether the contractor brought elements of the contractor, unless the
the activity cited as a cause for debar- debarment decision is limited by its
ment to the attention of the appro- terms to specific divisions, organiza-
priate Government agency in a timely tional elements, or commodities. The
manner. debarring official may extend the de-
(3) Whether the contractor has fully barment decision to include any affili-
investigated the circumstances sur- ates of the contractor if they are (1)
rounding the cause for debarment and, specifically named and (2) given writ-
if so, made the result of the investiga- ten notice of the proposed debarment
tion available to the debarring official. and an opportunity to respond (see
(4) Whether the contractor cooper- 9.4063(c)).
ated fully with Government agencies (c) A contractors debarment, or pro-
during the investigation and any court posed debarment, shall be effective
or administrative action. throughout the executive branch of the
(5) Whether the contractor has paid Government, unless the agency head or
or has agreed to pay all criminal, civil, a designee (except see 23.506(e)) states
and administrative liability for the im- in writing the compelling reasons justi-
proper activity, including any inves- fying continued business dealings be-
tigative or administrative costs in- tween that agency and the contractor.
curred by the Government, and has (d)(1) When the debarring official has
made or agreed to make full restitu- authority to debar contractors from
tion. both acquisition contracts pursuant to
(6) Whether the contractor has taken this regulation and contracts for the
appropriate disciplinary action against purchase of Federal personal property
the individuals responsible for the ac- pursuant to the Federal Property Man-
tivity which constitutes cause for de- agement Regulations (FPMR) 10145.6,
barment. that official shall consider simulta-
(7) Whether the contractor has imple- neously debarring the contractor from
mented or agreed to implement reme- the award of acquisition contracts and
dial measures, including any identified from the purchase of Federal personal
by the Government. property.
155
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
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
specifically named affiliates) an oppor- the decision shall be made within 30

tunity to submit, in person, in writing, working days after receipt of any infor-
or through a representative, informa- mation and argument submitted by the
tion and argument in opposition to the contractor, unless the debarring offi-
proposed debarment. cial extends this period for good cause.
(2) In actions not based upon a con- (2)(i) In actions in which additional
viction or civil judgment, if it is found proceedings are necessary as to dis-
that the contractors submission in op- puted material facts, written findings
position raises a genuine dispute over of fact shall be prepared. The debarring
facts material to the proposed debar- official shall base the decision on the
ment, agencies shall also
facts as found, together with any infor-
(i) Afford the contractor an oppor-
mation and argument submitted by the
tunity to appear with counsel, submit
documentary evidence, present wit- contractor and any other information
nesses, and confront any person the in the administrative record.
agency presents; and (ii) The debarring official may refer
(ii) Make a transcribed record of the matters involving disputed material
proceedings and make it available at facts to another official for findings of
cost to the contractor upon request, fact. The debarring official may reject
unless the contractor and the agency, any such findings, in whole or in part,
by mutual agreement, waive the re- only after specifically determining
quirement for a transcript. them to be arbitrary and capricious or
(c) Notice of proposal to debar. A no- clearly erroneous.
tice of proposed debarment shall be (iii) The debarring officials decision
issued by the debarring official advis- shall be made after the conclusion of
ing the contractor and any specifically the proceedings with respect to dis-
named affiliates, by certified mail, re- puted facts.
turn receipt requested (3) In any action in which the pro-
(1) That debarment is being consid- posed debarment is not based upon a
ered; conviction or civil judgment, the cause
(2) Of the reasons for the proposed de-
for debarment must be established by a
barment in terms sufficient to put the
preponderance of the evidence.
contractor on notice of the conduct or
transaction(s) upon which it is based; (e) Notice of debarring officials deci-
(3) Of the cause(s) relied upon under sion. (1) If the debarring official decides
9.4062 for proposing debarment; to impose debarment, the contractor
(4) That, within 30 days after receipt and any affiliates involved shall be
of the notice, the contractor may sub- given prompt notice by certified mail,
mit, in person, in writing, or through a return receipt requested
representative, information and argu- (i) Referring to the notice of proposed
ment in opposition to the proposed de- debarment;
barment, including any additional spe- (ii) Specifying the reasons for debar-
cific information that raises a genuine ment;
dispute over the material facts; (iii) Stating the period of debarment,
(5) Of the agencys procedures gov- including effective dates; and
erning debarment decisionmaking; (iv) Advising that the debarment is
(6) Of the effect of the issuance of the effective throughout the executive
notice of proposed debarment; and branch of the Government unless the
(7) Of the potential effect of an actual head of an agency or a designee makes
debarment. the statement called for by 9.4061(c).
(d) Debarring officials decision. (1) In
(2) If debarment is not imposed, the
actions based upon a conviction or
debarring official shall promptly notify
judgment, or in which there is no gen-
uine dispute over material facts, the the contractor and any affiliates in-
debarring official shall make a decision volved, by certified mail, return re-
on the basis of all the information in ceipt requested.
the administrative record, including [48 FR 42142, Sept. 19, 1983, as amended at 54
any submission made by the con- FR 19815, May 8, 1989; 59 FR 67033, Dec. 28,
tractor. If no suspension is in effect, 1994]
157
9.4064 48 CFR Ch. 1 (10103 Edition)
9.4064 Period of debarment. 9.4065 Scope of debarment.

(a)(1) Debarment shall be for a period (a) The fraudulent, criminal, or other
commensurate with the seriousness of seriously improper conduct of any offi-
the cause(s). Generally, debarment cer, director, shareholder, partner, em-
should not exceed 3 years, except ployee, or other individual associated
that with a contractor may be imputed to
(i) Debarment for violation of the the contractor when the conduct oc-
provisions of the Drug-Free Workplace curred in connection with the individ-
Act of 1988 (see 23.506) may be for a pe- uals performance of duties for or on
riod not to exceed 5 years; and behalf of the contractor, or with the
contractors knowledge, approval, or
(ii) Debarments under 9.4062(b)(2)
acquiescence. The contractors accept-
shall be for one year unless extended
ance of the benefits derived from the
pursuant to paragraph (b) of this sub-
conduct shall be evidence of such
section.
knowledge, approval, or acquiescence.
(2) If suspension precedes a debar- (b) The fraudulent, criminal, or other
ment, the suspension period shall be seriously improper conduct of a con-
considered in determining the debar- tractor may be imputed to any officer,
ment period. director, shareholder, partner, em-
(b) The debarring official may extend ployee, or other individual associated
the debarment for an additional period, with the contractor who participated
if that official determines that an ex- in, knew of, or had reason to know of
tension is necessary to protect the the contractors conduct.
Governments interest. However, a de- (c) The fraudulent, criminal, or other
barment may not be extended solely on seriously improper conduct of one con-
the basis of the facts and cir- tractor participating in a joint venture
cumstances upon which the initial de- or similar arrangement may be im-
barment action was based. Debarments puted to other participating contrac-
under 9.4062(b)(2) may be extended for tors if the conduct occurred for or on
additional periods of one year if the At- behalf of the joint venture or similar
torney General or designee determines arrangement, or with the knowledge,
that the contractor continues to be in approval, or acquiescence of these con-
violation of the employment provisions tractors. Acceptance of the benefits de-
of the Immigration and Nationality rived from the conduct shall be evi-
Act. If debarment for an additional pe- dence of such knowledge, approval, or
riod is determined to be necessary, the acquiescence.
procedures of 9.4063 shall be followed
to extend the debarment. 9.407 Suspension.
(c) The debarring official may reduce 9.4071 General.
the period or extent of debarment,
upon the contractors request, sup- (a) The suspending official may, in
ported by documentation, for reasons the public interest, suspend a con-
such as tractor for any of the causes in 9.4072,
(1) Newly discovered material evi- using the procedures in 9.4073.
(b)(1) Suspension is a serious action
dence;
to be imposed on the basis of adequate
(2) Reversal of the conviction or civil
evidence, pending the completion of in-
judgment upon which the debarment
vestigation or legal proceedings, when
was based;
it has been determined that immediate
(3) Bona fide change in ownership or action is necessary to protect the Gov-
management; ernments interest. In assessing the
(4) Elimination of other causes for adequacy of the evidence, agencies
which the debarment was imposed; or should consider how much information
(5) Other reasons the debarring is available, how credible it is given
offical deems appropriate. the circumstances, whether or not im-
[48 FR 42142, Sept. 19, 1983, as amended at 54 portant allegations are corroborated,
FR 4968, Jan. 31 ,1989; 54 FR 19815, May 8, and what inferences can reasonably be
1989; 55 FR 21707, May 25, 1990; 61 FR 41473, drawn as a result. This assessment
Aug. 8, 1996] should include an examination of basic
158
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.
159
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
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
of fact shall be prepared. The sus- partment an opportunity to request an

pending official shall base the decision extension.
on the facts as found, together with [48 FR 42142, Sept. 19, 1983, as amended at 51
any information and argument sub- FR 2649, Jan. 17, 1986]
mitted by the contractor and any other
information in the administrative 9.4075 Scope of suspension.
record. The scope of suspension shall be the
(ii) The suspending official may refer same as that for debarment (see 9.406
matters involving disputed material 5), except that the procedures of 9.407
facts to another official for findings of 3 shall be used in imposing suspension.
fact. The suspending official may re-
ject any such findings, in whole or in 9.408 Certification regarding debar-
part, only after specifically deter- ment, suspension, proposed debar-
mining them to be arbitrary and capri- ment, and other responsibility mat-
cious or clearly erroneous. ters.
(iii) The suspending officials deci- (a) When an offeror, in compliance
sion shall be made after the conclusion with the provision at 52.2095, Certifi-
of the proceedings with respect to dis- cation Regarding Debarment, Suspen-
puted facts. sion, Proposed Debarment, and Other
(3) The suspending official may mod- Responsibility Matters, indicates an
ify or terminate the suspension or indictment, charge, civil judgment,
leave it in force (for example, see 9.406 conviction, suspension, debarment,
4(c) for the reasons for reducing the pe- proposed debarment, ineligibility, or
riod or extent of debarment). However, default of a contract, the contracting
a decision to modify or terminate the officer shall
suspension shall be without prejudice (1) Request such additional informa-
to the subsequent imposition of (i) sus- tion from the offeror as the con-
pension by any other agency or (ii) de- tracting officer deems necessary in
barment by any agency. order to make a determination of the
(4) Prompt written notice of the sus- offerors responsibility (but see 9.405);
pending officials decision shall be sent and
to the contractor and any affiliates in- (2) Notify, prior to proceeding with
volved, by certified mail, return re- award, in accordance with agency pro-
ceipt requested. cedures (see 9.4063(a) and 9.4073(a)),
[48 FR 42142, Sept. 19, 1983, as amended at 51 the agency official responsible for ini-
FR 2649, Jan. 17, 1986] tiating debarment or suspension ac-
tion, where an offeror indicates the ex-
9.4074 Period of suspension. istence of an indictment, charge, con-
(a) Suspension shall be for a tem- viction, or civil judgment.
porary period pending the completion (b) Offerors who do not furnish the
of investigation and any ensuing legal certification or such information as
proceedings, unless sooner terminated may be requested by the contracting
by the suspending official or as pro- officer shall be given an opportunity to
vided in this subsection. remedy the deficiency. Failure to fur-
(b) If legal proceedings are not initi- nish the certification or such informa-
ated within 12 months after the date of tion may render the offeror nonrespon-
the suspension notice, the suspension sible.
shall be terminated unless an Assistant [54 FR 19816, May 8, 1989]
Attorney General requests its exten-
sion, in which case it may be extended 9.409 Solicitation provision and con-
for an additional 6 months. In no event tract clause.
may a suspension extend beyond 18 (a) The contracting officer shall in-
months, unless legal proceedings have sert the provision at 52.2095, Certifi-
been initiated within that period. cation Regarding Debarment, Suspen-
(c) The suspending official shall no- sion, Proposed Debarment, and Other
tify the Department of Justice of the Responsibility Matters, in solicitations
proposed termination of the suspen- where the contract value is expected to
sion, at least 30 days before the 12- exceed the simplified acquisition
month period expires, to give that De- threshold.
161
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
(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
9.5052 48 CFR Ch. 1 (10103 Edition)
all of the following activities: devel- velopment contractors can frequently

oping work statements, determining start production earlier and more
parameters, directing other contrac- knowledgeably than firms that did not
tors operations, and resolving tech- participate in the development, and
nical controversies. In performing this can affect the time and quality of
these activities, a contractor occupies production, both of which are impor-
a highly influential and responsible po- tant to the Government. In many in-
sition in determining a systems basic stances the Government may have fi-
concepts and supervising their execu- nanced the development. Thus, while
tion by other contractors. Therefore the development contractor has a com-
this contractor should not be in a posi- petitive advantage, it is an unavoidable
tion to make decisions favoring its own one that is not considered unfair; hence
products or capabilities. no prohibition should be imposed.
(b)(1) If a contractor prepares, or as-
9.5052 Preparing specifications or sists in preparing, a work statement to
work statements. be used in competitively acquiring a
(a)(1) If a contractor prepares and system or servicesor provides mate-
furnishes complete specifications cov- rial leading directly, predictably, and
ering nondevelopmental items, to be without delay to such a work state-
used in a competitive acquisition, that mentthat contractor may not supply
contractor shall not be allowed to fur- the system, major components of the
nish these items, either as a prime con- system, or the services unless
tractor or as a subcontractor, for a rea- (i) It is the sole source;
sonable period of time including, at (ii) It has participated in the develop-
least, the duration of the initial pro- ment and design work; or
duction contract. This rule shall not (iii) More than one contractor has
apply to been involved in preparing the work
(i) Contractors that furnish at Gov- statement.
ernment request specifications or data (2) Agencies should normally prepare
regarding a product they provide, even their own work statements. When con-
though the specifications or data may tractor assistance is necessary, the
have been paid for separately or in the contractor might often be in a position
price of the product; or to favor its own products or capabili-
(ii) Situations in which contractors, ties. To overcome the possibility of
acting as industry representatives, bias, contractors are prohibited from
help Government agencies prepare, re- supplying a system or services acquired
fine, or coordinate specifications, re- on the basis of work statements grow-
gardless of source, provided this assisting out of their services, unless ex-
ance is supervised and controlled by cepted in subparagraph (1) above.
(3) For the reasons given in 9.505
Government representatives.
2(a)(3), no prohibitions are imposed on
(2) If a single contractor drafts com-
development and design contractors.
plete specifications for nondevelop-
mental equipment, it should be elimi- 9.5053 Providing evaluation services.
nated for a reasonable time from com-
petition for production based on the Contracts for the evaluation of offers
specifications. This should be done in for products or services shall not be
order to avoid a situation in which the awarded to a contractor that will
contractor could draft specifications evaluate its own offers for products or
favoring its own products or capabili- services, or those of a competitor,
ties. In this way the Government can without proper safeguards to ensure
be assured of getting unbiased advice objectivity to protect the Govern-
as to the content of the specifications ments interests.
and can avoid allegations of favoritism [62 FR 12694, Mar. 17, 1997]
in the award of production contracts.
(3) In development work, it is normal 9.5054 Obtaining access to propri-
to select firms that have done the most etary information.
advanced work in the field. These firms (a) When a contractor requires pro-
can be expected to design and develop prietary information from others to
around their own prior knowledge. De- perform a Government contract and
164
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 unin 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
9.507 48 CFR Ch. 1 (10103 Edition)
9.507 Solicitation provisions and con- striction shall specify termination by a

tract clause. specific date or upon the occurrence of
an identifiable event.
[55 FR 42687, Oct. 22, 1990]
As indicated in the general rules in
9.505, significant potential organiza- 9.508 Examples.
tional conflicts of interest are nor- The examples in paragraphs (a)
mally resolved by imposing some re- through (i) following illustrate situa-
straint, appropriate to the nature of tions in which questions concerning or-
the conflict, upon the contractors ganizational conflicts of interest may
eligibilty for future contracts or sub- arise. They are not all inclusive, but
contracts. Therefore, affected solicita- are intended to help the contracting of-
tions shall contain a provision that ficer apply the general rules in 9.505 to
(a) Invites offerors attention to this individual contract situations.
subpart; (a) Company A agrees to provide sys-
(b) States the nature of the potential tems engineering and technical direc-
conflict as seen by the contracting offi- tion for the Navy on the powerplant for
cer; a group of submarines (i.e., turbines,
(c) States the nature of the proposed drive shafts, propellers, etc.). Company
restraint upon future contractor ac- A should not be allowed to supply any
tivities; and powerplant components. Company A
(d) Depending on the nature of the can, however, supply components of
acquisition, states whether or not the the submarine unrelated to the power-
terms of any proposed clause and the plant (e.g., fire control, navigation,
application of this subpart to the con- etc.). In this example, the system is the
tract are subject to negotiation. powerplant, not the submarine, and the
[55 FR 42687, Oct. 22, 1990, as amended at 56 ban on supplying components is lim-
FR 55377, Oct. 25, 1991; 60 FR 34748, July 3, ited to those for the system only.
1995; 60 FR 49721, Sept. 26, 1995; 62 FR 235, (b) Company A is the systems engi-
Jan. 2, 1997] neering and technical direction con-
tractor for system X. After some
progress, but before completion, the
(a) If, as a condition of award, the system is canceled. Later, system Y is
contractors eligibility for future developed to achieve the same purposes
prime contract or subcontract awards as system X, but in a fundamentally
will be restricted or the contractor different fashion. Company B is the
must agree to some other restraint, the systems engineering and technical di-
solicitation shall contain a proposed rection contractor for system Y. Com-
clause that specifies both the nature pany A may supply system Y or its
and duration of the proposed restraint. components.
The contracting officer shall include (c) Company A develops new elec-
the clause in the contract, first negoti- tronic equipment and, as a result of
ating the clauses final terms with the this development, prepares specifica-
successful offeror, if it is appropriate tions. Company A may supply the
to do so (see 9.5081(d) of this sub- equipment.
section). (d) XYZ Tool Company and PQR Ma-
(b) The restraint imposed by a clause chinery Company, representing the
shall be limited to a fixed term of rea- American Tool Institute, work under
sonable duration, sufficient to avoid Government supervision and control to
the circumstance of unfair competitive refine specifications or to clarify the
advantage or potential bias. This pe- requirements of a specific acquisition.
riod varies. It might end, for example, These companies may supply the item.
when the first production contract (e) Before an acquisition for informa-
using the contractors specifications or tion technology is conducted, Company
work statement is awarded, or it might A is awarded a contract to prepare data
extend through the entire life of a sys- system specifications and equipment
tem for which the contractor has per- performance criteria to be used as the
formed systems engineering and tech- basis for the equipment competition.
nical direction. In every case, the re- Since the specifications are the basis
166
for selection of commercial hardware, Subpart 9.6Contractor Team

a potential conflict of interest exists. Arrangements
Company A should be excluded from
the initial follow-on information tech- 9.601 Definition.
nology hardware acquisition.
Contractor team arrangement, as used
(f) Company A receives a contract to in this subpart, means an arrangement
define the detailed performance char- in which
acteristics an agency will require for (1) Two or more companies form a
purchasing rocket fuels. Company A partnership or joint venture to act as a
has not developed the particular fuels. potential prime contractor; or
When the definition contract is award- (2) A potential prime contractor
ed, it is clear to both parties that the agrees with one or more other compa-
agency will use the performance char- nies to have them act as its sub-
acteristics arrived at to choose com- contractors under a specified Govern-
petitively a contractor to develop or ment contract or acquisition program.
produce the fuels. Company A may not
be awarded this follow-on contract. [48 FR 42142, Sept. 19, 1983, as amended at 66
FR 2128, Jan. 10, 2001]
(g) Company A receives a contract to
prepare a detailed plan for scientific 9.602 General.
and technical training of an agencys
personnel. It suggests a curriculum (a) Contractor team arrangements
that the agency endorses and incor- may be desirable from both a Govern-
porates in its request for proposals to ment and industry standpoint in order
institutions to establish and conduct to enable the companies involved to (1)
the training. Company A may not be complement each others unique capa-
awarded a contract to conduct the bilities and (2) offer the Government
training. the best combination of performance,
cost, and delivery for the system or
(h) Company A is selected to study
product being acquired.
the use of lasers in communications.
The agency intends to ask that firms (b) Contractor team arrangements
may be particularly appropriate in
doing research in the field make pro-
complex research and development ac-
prietary information available to Com-
quisitions, but may be used in other
pany A. The contract must require
appropriate acquisitions, including
Company A to (1) enter into agree-
production.
ments with these firms to protect any
(c) The companies involved normally
proprietary information they provide
form a contractor team arrangement
and (2) refrain from using the informa-
before submitting an offer. However,
tion in supplying lasers to the Govern-
they may enter into an arrangement
ment or for any purpose other than
later in the acquisition process, includ-
that for which it was intended.
ing after contract award.
(i) An agency that regulates an in-
dustry wishes to develop a system for 9.603 Policy.
evaluating and processing license ap-
The Government will recognize the
plications. Contractor X helps develop
integrity and validity of contractor
the system and process the applica-
team arrangements; provided, the ar-
tions. Contractor X should be prohib-
rangements are identified and company
ited from acting as a consultant to any
relationships are fully disclosed in an
of the applicants during its period of offer or, for arrangements entered into
performance and for a reasonable pe- after submission of an offer, before the
riod thereafter. arrangement becomes effective. The
[48 FR 42142, Sept. 19, 1983. Redesignated at Government will not normally require
55 FR 42687, Oct. 22, 1990; 61 FR 41469, Aug. 8, or encourage the dissolution of con-
1996] tractor team arrangements.
167
9.604 48 CFR Ch. 1 (10103 Edition)
9.604 Limitations. as any other prospective or actual con-

Nothing in this subpart authorizes tractor.
(b) The contracting officer shall not
contractor team arrangements in vio-
award a contract to a pool unless the
lation of antitrust statutes or limits
offer leading to the contract is sub-
the Governments rights to
mitted by the pool in its own name or
(a) Require consent to subcontracts
by an individual pool member ex-
(see subpart 44.2);
pressly stating that the offer is on be-
(b) Determine, on the basis of the
half of the pool.
stated contractor team arrangement,
(c) Upon receipt of an offer submitted
the responsibility of the prime con-
by a group representing that it is a
tractor (see subpart 9.1);
pool, the contracting officer shall
(c) Provide to the prime contractor
verify its approved status with the
data rights owned or controlled by the
SBA District Office Director or other
Government;
approving agency and document the
(d) Pursue its policies on competitive
contract file that the verification was
contracting, subcontracting, and com-
made.
ponent breakout after initial produc- (d) Pools approved by the SBA under
tion or at any other time; and the Small Business Act are entitled to
(e) Hold the prime contractor fully the preferences and privileges accorded
responsible for contract performance, to small business concerns. Approval
regardless of any team arrangement under the Defense Production Act does
between the prime contractor and its not confer these preferences and privi-
subcontractors. leges.
(e) Before awarding a contract to an
Subpart 9.7Defense Production unincorporated pool, the contracting
Pools and Research and De- officer shall require each pool member
velopment Pools participating in the contract to furnish
a certified copy of a power of attorney
9.701 Definition. identifying the agent authorized to
Pool, as used in this subpart, means a sign the offer or contract on that mem-
group of concerns (see 19.001) that bers behalf. The contracting officer
have shall attach a copy of each power of at-
(1) Associated together in order to torney to each signed copy of the con-
obtain and perform, jointly or in contract retained by the Government.
junction with each other, defense pro- [48 FR 42142, Setp. 19, 1983, as amended at 61
duction or research and development FR 67410, Dec. 20, 1996]
contracts;
(2) Entered into an agreement gov- 9.703 Contracting with individual pool
erning their organization, relationship, members.
and procedures; and (a) Pool members may submit indi-
(3) Obtained approval of the agree- vidual offers, independent of the pool.
ment by either However, the contracting officer shall
(i) The Small Business Administra- not consider an independent offer by a
tion (SBA) under section 9 or 11 of the pool member if that pool member par-
Small Business Act (15 U.S.C. 638 or ticipates in a competing offer sub-
640) (see 13 CFR part 125); or mitted by the pool.
(ii) A designated official under Part (b) If a pool member submits an indi-
V of Executive Order 10480, August 14, vidual offer, independent of the pool,
1953 (18 FR 4939, August 20, 1953) and the contracting officer shall consider
section 708 of the Defense Production the pool agreement, along with other
Act of 1950 (50 U.S.C. App. 2158). factors, in determining whether that
[48 FR 42142, Sept. 19, 1983, as amended at 51 pool member is a responsible prospec-
FR 2649, Jan. 17, 1986; 66 FR 2128, Jan. 10, tive contractor under subpart 9.1.
2001]
9.702 Contracting with pools.

PART 10MARKET RESEARCH
(a) Except as specified in this sub- Sec.
part, a pool shall be treated the same 10.000 Scope of part.
168
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
169
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-
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,
170
part 12 shall not be used. When publica- Subpart 11.5Liquidated Damages

tion of the notice at 5.201 is required,
the contracting officer shall include a 11.500 Scope.
notice to prospective offerors that the 11.501 Policy.
11.502 Procedures.
Government does not intend to use
part 12 for the acquisition (see 5.207(e)).
(e) Agencies should document the re- Subpart 11.6Priorities and Allocations
sults of market research in a manner
appropriate to the size and complexity 11.600 Scope of subpart.
of the acquisition. 11.601 Definitions.
11.602 General.
FR 43863, July 24, 2003; 68 FR 56679, 56682, Oct. 11.603 Procedures.
1, 2003] 11.604 Solicitation provisions and contract
clauses.
PART 11DESCRIBING AGENCY Subpart 11.7Variation in Quantity

NEEDS
11.701 Supply contracts.
Sec. 11.702 Construction contracts.
11.000 Scope of part. 11.703 Contract clauses.
11.001 Definitions.
11.002 Policy. Subpart 11.8Testing
11.801 Preaward in-use evaluation.
Subpart 11.1Selecting and Developing
Requirements Documents AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
ter 137; and 42 U.S.C. 2473(c).
11.101 Order of precedence for requirements
documents. SOURCE: 60 FR 48238, Sept. 18, 1995, unless
11.102 Standardization program. otherwise noted.
11.103 Market acceptance.
11.104 Use of brand name or equal purchase 11.000 Scope of part.
descriptions. This part prescribes policies and pro-
11.105 Items peculiar to one manufacturer.
cedures for describing agency needs.
11.106 Purchase descriptions for service con-
tracts.
11.001 Definitions.
As used in this part
Subpart 11.2Using and Maintaining Reconditioned means restored to the
Requirements Documents original normal operating condition by
11.201 Identification and availability of readjustments and material replace-
specifications. ment.
11.202 Maintenance of standardization docu- Remanufactured means factory re-
ments. built to original specifications.
11.203 Customer satisfaction.
11.204 Solicitation provisions and contract [62 FR 44810, Aug. 22, 1997, as amended at 63
clauses. FR 9051, Feb. 23, 1998; 65 FR 36017, June 6,
2000]
Subpart 11.3Acceptable Material
11.002 Policy.
11.301 Definitions.
11.302 Policy. (a) In fulfilling requirements of 10
11.303 Special requirements for printing and U.S.C. 2305(a)(1), 10 U.S.C. 2377, 41
writing paper. U.S.C. 253a(a), and 41 U.S.C. 264b, agen-
11.304 Contract clause. cies shall
(1) Specify needs using market re-
Subpart 11.4Delivery or Performance search in a manner designed to
Schedules (i) Promote full and open competi-
11.401 General. tion (see part 6), or maximum prac-
11.402 Factors to consider in establishing ticable competition when using sim-
schedules. plified acquisition procedures, with due
11.403 Supplies or services. regard to the nature of the supplies or
11.404 Contract clauses. services to be acquired; and
171
11.002 48 CFR Ch. 1 (10103 Edition)
(ii) Only include restrictive provi- to recommend application and tai-

sions or conditions to the extent nec- loring of requirements documents and
essary to satisfy the needs of the agen- alternative approaches. Requiring
cy or as authorized by law. agencies should apply specifications,
(2) To the maximum extent prac- standards, and related documents ini-
ticable, ensure that acquisition offi- tially for guidance only, making final
cials decisions on the application and tai-
(i) State requirements with respect loring of these documents as a product
to an acquisition of supplies or services of the design and development process.
in terms of Requiring agencies should not dictate
(A) Functions to be performed; detailed design solutions prematurely
(B) Performance required; or (see 7.101 and 7.105(a)(8)).
(C) Essential physical characteris- (d)(1) The Resource Conservation and
tics; Recovery Act of 1976 (42 U.S.C. 6901, et
(ii) Define requirements in terms seq.), Executive Order 13101 of Sep-
that enable and encourage offerors to tember 14, 1998, Greening the Govern-
supply commercial items, or, to the ex- ment through Waste Prevention, Recy-
tent that commercial items suitable to cling, and Federal Acquisition, Execu-
meet the agencys needs are not avail- tive Order 13123 of June 3, 1999, Green-
able, nondevelopmental items, in re- ing the Government through Efficient
sponse to the agency solicitations; Energy Management, and Executive
(iii) Provide offerors of commercial Order 13221 of July 31, 2001, Energy-Ef-
items and nondevelopmental items an ficient Standby Power Devices, estab-
opportunity to compete in any acquisi- lish requirements for acquiring
tion to fill such requirements; (i) Products containing recovered
(iv) Require prime contractors and materials;
subcontractors at all tiers under the (ii) Environmentally preferable prod-
agency contracts to incorporate com- ucts and services;
mercial items or nondevelopmental (iii) Energy-efficient products and
items as components of items supplied services;
to the agency; and (iv) Products and services that utilize
(v) Modify requirements in appro- renewable energy technologies; and
priate cases to ensure that the require- (v) Products containing energy-effi-
ments can be met by commercial items cient standby power devices.
or, to the extent that commercial (2) Executive agencies shall consider
items suitable to meet the agencys use of recovered materials, energy- and
needs are not available, nondevelop- water-efficient products and services,
mental items. products containing energy-efficient
(b) The Metric Conversion Act of standby power devices, environ-
1975, as amended by the Omnibus Trade mentally preferable purchasing criteria
and Competitiveness Act of 1988 (15 developed by the EPA, and environ-
U.S.C. 205a, et seq.), designates the met- mental objectives (see Subparts 23.2
ric system of measurement as the pre- and 23.4, and 23.703(b)) when
ferred system of weights and measures (i) Developing, reviewing, or revising
for United States trade and commerce, Federal and military specifications,
and it requires that each agency use product descriptions (including com-
the metric system of measurement in mercial item descriptions) and stand-
its acquisitions, except to the extent ards;
that such use is impracticable or is (ii) Describing Government require-
likely to cause significant inefficien- ments for supplies and services; and
cies or loss of markets to United States (iii) Developing source-selection fac-
firms. Requiring activities are respon- tors.
sible for establishing guidance imple- (e) Some or all of the performance
menting this policy in formulating levels or performance specifications in
their requirements for acquisitions. a solicitation may be identified as tar-
(c) To the extent practicable and con- gets rather than as fixed or minimum
sistent with subpart 9.5, potential requirements.
offerors should be given an opportunity (f) In accordance with Section 508 of
to comment on agency requirements or the Rehabilitation Act of 1973 (29
172
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
(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, contained 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 recy 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
11.104 48 CFR Ch. 1 (10103 Edition)
commercial market acceptance, the thereby precluding consideration of a

contracting officer shall ensure the cri- product manufactured by another com-
teria in the solicitation pany, unless
(1) Reflect the minimum need of the (a) The particular brand name, prod-
agency and are reasonably related to uct, or feature is essential to the Gov-
the demonstration of an items accept- ernments requirements, and market
ability to meet the agencys minimum research indicates other companies
need; similar products, or products lacking
(2) Relate to an items performance the particular feature, do not meet, or
and intended use, not an offerors capa- cannot be modified to meet, the agen-
bility; cys minimum needs;
(3) Are supported by market re- (b) The authority to contract with-
search; out providing for full and open com-
(4) Include consideration of items petition is supported by the required
supplied satisfactorily under recent or justifications and approvals (see 6.302
current Government contracts, for the 1); and
same or similar items; and (c) The basis for not providing for
(5) Consider the entire relevant com- maximum practicable competition is
mercial market, including small busi- documented in the file when the acqui-
ness concerns. sition is awarded using simplified ac-
(d) Commercial market acceptance quisition procedures.
shall not be used as a sole criterion to [60 FR 48238, Sept. 18, 1995, as amended at 61
evaluate whether an item meets the FR 39192, July 26, 1996; 62 FR 263, Jan. 2, 1997;
Governments requirements. 62 FR 10710, Mar. 10, 1997. Redesignated and
(e) When commercial market accept- amended at 64 FR 32742, June 17, 1999]
ance is used, the contracting officer
shall document the file to 11.106 Purchase descriptions for serv-
(1) Describe the circumstances justi- ice contracts.
fying the use of commercial market ac- In drafting purchase descriptions for
ceptance criteria; and service contracts, agency requiring ac-
(2) Support the specific criteria being tivities shall ensure that inherently
used. governmental functions (see subpart
7.5) are not assigned to a contractor.
11.104 Use of brand name or equal These purchase descriptions shall
purchase descriptions. (a) Reserve final determination for
(a) While the use of performance Government officials;
specifications is preferred to encourage (b) Require proper identification of
offerors to propose innovative solu- contractor personnel who attend meet-
tions, the use of brand name or equal ings, answer Government telephones,
purchase descriptions may be advan- or work in situations where their ac-
tageous under certain circumstances. tions could be construed as acts of Gov-
(b) Brand name or equal purchase de- ernment officials unless, in the judg-
scriptions must include, in addition to ment of the agency, no harm can come
the brand name, a general description from failing to identify themselves;
of those salient physical, functional, or and
performance characteristics of the (c) Require suitable marking of all
brand name item that an equal item documents or reports produced by con-
must meet to be acceptable for award. tractors.
Use brand name or equal descriptions [61 FR 2629, Jan. 26, 1996. Redesignated at 64
when the salient characteristics are FR 32742, June 17, 1999]
firm requirements.
[64 FR 32742, June 17, 1999] 11.107 Solicitation provision.
(a) Insert the provision at 52.2116,
11.105 Items peculiar to one manufac- Brand Name or Equal, when brand
turer. name or equal purchase descriptions
Agency requirements shall not be are included in a solicitation.
written so as to require a particular (b) Insert the provision at 52.2117,
brand name, product, or a feature of a Alternatives to Government-Unique
product, peculiar to one manufacturer, Standards, in solicitations that use
174
Government-unique standards when (3) A prospective contractor requests

the agency uses the transaction-based a copy of a Government promulgated
reporting method to report its use of requirements document.
voluntary consensus standards to the (b) Contracting offices shall clearly
National Institute of Standards and identify in the solicitation any perti-
Technology (see OMB Circular A119, nent documents not listed in the GSA
Federal Participation in the Develop- Index of Federal Specifications, Stand-
ment and Use of Voluntary Consensus ards and Commercial Item Descrip-
Standards and in Conformity Assess- tions or DoDISS. Such documents shall
ment Activities). Use of the provision be furnished with the solicitation or
is optional for agencies that report specific instructions shall be furnished
for obtaining or examining such docu-
their use of voluntary consensus stand-
ments.
ards to the National Institute of Stand-
(c) When documents refer to other
ards and Technology using the categor-
documents, such references shall
ical reporting method. Agencies that (1) Be restricted to documents, or ap-
manage their specifications on a con- propriate portions of documents, that
tract-by-contract basis use the trans- apply in the acquisition;
action-based method of reporting. (2) Cite the extent of their applica-
Agencies that manage their specifica- bility;
tions centrally use the categorical (3) Not conflict with other documents
method of reporting. Agency regula- and provisions of the solicitation; and
tions regarding specification manage- (4) Identify all applicable first tier
ment describe which method is used. references.
[64 FR 51835, Sept. 24, 1999] (d)(1) The GSA Index of Federal Spec-
ifications, Standards and Commercial
Item Descriptions, FPMR Part 10129,
Subpart 11.2Using and Maintain- may be purchased from theGeneral
ing Requirements Documents Services Administration, Federal Sup-
ply Service, Specifications Section,
11.201 Identification and availability Suite 8100, 470 East LEnfant Plaza,
of specifications. SW, Washington, DC 20407, Telephone
(a) Solicitations citing requirements (202) 6198925.
documents listed in the General Serv- (2) The DoDISS may be obtained
ices Administration (GSA) Index of from the
Federal Specifications, Standards and (i) ASSIST database via the Internet
Commercial Item Descriptions, the at http://assist.daps.mil; or
DoD Index of Specifications and Stand- (ii) Department of Defense Single
ards (DoDISS), or other agency index Stock Point (DoDSSP), Building 4,
shall identify each documents ap- Section D 700 Robbins Avenue, Phila-
proval date and the dates of any appli- delphia, PA 191115094, Telephone (215)
cable amendments and revisions. Do 6972667/2179, Facsimile (215) 6971462.
not use general identification ref- (e) Agencies may purchase some non-
erences, such as the issue in effect on government standards, including vol-
untary consensus standards, from the
the date of the solicitation. Con-
National Technical Information Serv-
tracting offices will not normally fur-
ices Fedworld Information Network.
nish these cited documents with the so-
Agencies may also obtain nongovern-
licitation, except when
ment standards from the standards de-
(1) The requirements document must veloping organization responsible for
be furnished with the solicitation to the preparation, publication, or main-
enable prospective contractors to make tenance of the standard, or from an au-
a competent evaluation of the solicita- thorized document reseller. The Na-
tion; tional Institute of Standards and Tech-
(2) In the judgment of the con- nology can assist agencies in identi-
tracting officer, it would be impracti- fying sources for, and content of, non-
cable for prospective contractors to ob- government standards. DoD activities
tain the documents in reasonable time may obtain from the DoDSSP those
to respond to the solicitation; or nongovernment standards, including
175
11.202 48 CFR Ch. 1 (10103 Edition)
voluntary consensus standards, adopt- List, DoD 5010.12L, in solicitations

ed for use by defense activities. that cite specifications listed in the
[60 FR 48238, Sept. 18, 1995, as amended at 62 DoDISS or DoD 5010.12L that are not
FR 40236, July 25, 1997; 63 FR 34063, June 22, furnished with the solicitation.
1998; 64 FR 51835, Sept. 24, 1999; 64 FR 72446, (c) The contracting officer shall in-
Dec. 27, 1999] sert a provision substantially the same
as the provision at 52.2113, Avail-
11.202 Maintenance of standardization ability of Specifications Not Listed in
documents.
the GSA Index of Federal Specifica-
(a) Recommendations for changes to tions, Standards and Commercial Item
standardization documents listed in Descriptions, in solicitations that cite
the GSA Index of Federal Specifica- specifications that are not listed in the
tions, Standards and Commercial Item Index and are not furnished with the
Descriptions should be submitted to solicitation, but may be obtained from
the General Services Administration, a designated source.
Federal Supply Service, Office of Ac- (d) The contracting officer shall in-
quisition, Washington, DC 20406. Agen- sert a provision substantially the same
cies shall submit recommendations for as the provision at 52.2114, Avail-
changes to standardization documents ability for Examination of Specifica-
listed in the DoDISS to the cognizant tions Not Listed in the GSA Index of
preparing activity. Federal Specifications, Standards and
(b) When an agency cites an existing Commercial Item Descriptions, in so-
standardization document but modifies licitations that cite specifications that
it to meet its needs, the agency shall are not listed in the Index and are
follow the guidance in Federal Stand- available for examination at a specified
ardization Manual and, for Defense location.
components, DoD 4120.3M, Defense
Standardization Program Policies and [60 FR 48238, Sept. 18, 1995, as amended at 63
Procedures. FR 34063, June 22, 1998]
11.203 Customer satisfaction. Subpart 11.3Acceptable

Acquisition organizations shall com- Material
municate with customers to determine
how well the requirements document
SOURCE: 65 FR 36018, June 6, 2000, unless
reflects the customers needs and to ob- otherwise noted.
tain suggestions for corrective actions.
Whenever practicable, the agency may 11.301 Definitions.
provide affected industry an oppor-
tunity to comment on the require- As used in this subpart
ments documents. Postconsumer material means a mate-
rial or finished product that has served
11.204 Solicitation provisions and con- its intended use and has been discarded
tract clauses. for disposal or recovery, having com-
(a) The contracting officer shall in- pleted its life as a consumer item.
sert the provision at 52.2111, Avail- Postconsumer material is a part of the
ability of Specifications Listed in the broader category of recovered mate-
GSA Index of Federal Specifications, rial. For paper and paper products,
Standards and Commercial Item De- postconsumer material means
scriptions, FPMR Part 10129, in solici- postconsumer fiber defined by the
tations that cite specifications listed U.S. Environmental Protection Agency
in the Index that are not furnished (EPA) as
with the solicitation. (1) Paper, paperboard, and fibrous
(b) The contracting officer shall in- materials from retail stores, office
sert the provision at 52.2112, Avail- buildings, homes, and so forth, after
ability of Specifications Listed in the they have passed through their end-
DoD Index of Specifications and Stand- usage as a consumer item, including:
ards (DoDISS) and Descriptions Listed used corrugated boxes; old newspapers;
in the Acquisition Management Sys- old magazines; mixed waste paper; tab-
tems and Data Requirements Control ulating cards; and used cordage; or
176
(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 patent 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.
177
11.401 48 CFR Ch. 1 (10103 Edition)
Subpart 11.4Delivery or (b) Construction. When scheduling the

Performance Schedules time for completion of a construction
contract, the contracting officer shall
consider applicable factors such as
SOURCE: 48 FR 42159, Sept. 19, 1983, unless
otherwise noted. Redesignated at 60 FR 48241,
the
Sept. 18, 1995. (1) Nature and complexity of the
project;
11.401 General. (2) Construction seasons involved;
(a) The time of delivery or perform- (3) Required completion date;
ance is an essential contract element (4) Availability of materials and
and shall be clearly stated in solicita- equipment;
tions. Contracting officers shall ensure (5) Capacity of the contractor to per-
that delivery or performance schedules form; and
are realistic and meet the require- (6) Use of multiple completion dates.
ments of the acquisition. Schedules (In any given contract, separate com-
that are unnecessarily short or dif- pletion dates may be established for
ficult to attain separable items of work. When mul-
(1) Tend to restrict competition, tiple completion dates are used, re-
(2) Are inconsistent with small busi- quests for extension of time must be
ness policies, and evaluated with respect to each item,
(3) May result in higher contract and the affected completion dates
prices. modified when appropriate.)
(b) Solicitations shall, except when
[48 FR 42159, Sept. 19, 1983. Redesignated and
clearly unnecessary, inform bidders or
amended at 60 FR 48241, Sept. 18, 1995]
offerors of the basis on which their bids
or proposals will be evaluated with re- 11.403 Supplies or services.
spect to time of delivery or perform-
ance. (a) The contracting officer may ex-
(c) If timely delivery or performance press contract delivery or performance
is unusually important to the Govern- schedules in terms of
ment, liquidated damages clauses may (1) Specific calendar dates;
be used (see subpart 11.5). (2) Specific periods from the date of
the contract; i.e., from the date of
award or acceptance by the Govern-
amended at 60 FR 48241, Sept. 18, 1995]
ment, or from the date shown as the ef-
11.402 Factors to consider in estab- fective date of the contract;
lishing schedules. (3) Specific periods from the date of
(a) Supplies or services. When estab- receipt by the contractor of the notice
lishing a contract delivery or perform- of award or acceptance by the Govern-
ance schedule, consideration shall be ment (including notice by receipt of
given to applicable factors such as contract document executed by the
the Government); or
(1) Urgency of need; (4) Specific time for delivery after re-
(2) Industry practices; ceipt by the contractor of each indi-
(3) Market conditions; vidual order issued under the contract,
(4) Transportation time; as in indefinite delivery type contracts
(5) Production time; and GSA schedules.
(6) Capabilities of small business con- (b) The time specified for contract
cerns; performance should not be curtailed to
(7) Administrative time for obtaining the prejudice of the contractor because
and evaluating offers and for awarding of delay by the Government in giving
contracts; notice of award.
(8) Time for contractors to comply (c) If the delivery schedule is based
with any conditions precedent to con- on the date of the contract, the con-
tract performance; and tracting officer shall mail or otherwise
(9) Time for the Government to per- furnish to the contractor the contract,
form its obligations under the con- notice of award, acceptance of pro-
tract; e.g., furnishing Government posal, or other contract document not
property. later than the date of the contract.
178
(d) If the delivery schedule is based 8, Time of Delivery, if the Government

on the date the contractor receives the requires delivery by a particular time
notice of award, or if the delivery and the delivery schedule is to be based
schedule is expressed in terms of spe- on the date of the contract. If the de-
cific calendar dates on the assumption livery schedule is expressed in terms of
that the notice of award will be re- specific calendar dates or specific peri-
ceived by a specified date, the con- ods and is based on an assumed date of
tracting officer shall send the contract, award, the contracting officer may use
notice of award, acceptance of pro- the clause with its Alternate I. If the
posal, or other contract document by delivery schedule is expressed in terms
certified mail, return receipt re- of specific calendar dates or specific pe-
quested, or by any other method that riods and is based on an assumed date
will provide evidence of the date of re- the contractor will receive notice of
ceipt. award, the contracting officer may use
(e) In invitations for bids, if the de- the clause with its Alternate II. If the
livery schedule is based on the date of delivery schedule is to be based on the
the contract, and a bid offers delivery actual date the contractor receives a
based on the date the contractor re- written notice of award, the con-
ceives the contract or notice of award, tracting officer may use the clause
the contracting officer shall evaluate with its Alternate III.
the bid by adding 5 calendar days (as (3) The contracting officer may insert
representing the normal time for ar- in solicitations and contracts other
rival through ordinary mail). If the than those for construction and archi-
contract or notice of award will be tect-engineering, a clause substan-
transmitted electronically, (1) the so- tially the same as the clause at 52.211
licitation shall so state; and (2) the 9, Desired and Required Time of Deliv-
contracting officer shall evaluate de- ery, if the Government desires delivery
livery schedule based on the date of by a certain time but requires delivery
contract receipt or notice of award, by by a specified later time, and the deliv-
adding one working day. (The term ery schedule is to be based on the date
working day excludes weekends and of the contract. If the delivery schedule
U.S. Federal holidays.) If the offered is expressed in terms of specific cal-
delivery date computed with mailing endar dates or specific periods and is
or transmittal time is later than the based on an assumed date of award, the
delivery date required by the invita- contracting officer may use the clause
tion for bids, the bid shall be consid- with its Alternate I. If the delivery
ered nonresponsive and rejected. If schedule is expressed in terms of spe-
award is made, the delivery date will cific calendar dates or specific periods
be the number of days offered in the and is based on an assumed date the
bid after the contractor actually re- contractor will receive notice of award,
ceives the notice of award. the contracting officer may use the
clause with its Alternate II. If the de-
11.404 Contract clauses. livery schedule is to be based on the ac-
(a) Supplies or services. (1) The con- tual date the contractor receives a
tracting officer may use a time of de- written notice of award, the con-
livery clause to set forth a required de- tracting officer may use the clause
livery schedule and to allow an offeror with its Alternate III.
to propose an alternative delivery (b) Construction. The contracting offi-
schedule. The clauses and their alter- cer shall insert the clause at 52.21110,
nates may be used in solicitations and Commencement, Prosecution, and
contracts for other than construction Completion of Work, in solicitations
and architect-engineering substan- and contracts when a fixed-price con-
tially as shown, or they may be struction contract is contemplated.
changed or new clauses written. The clause may be changed to accom-
(2) The contracting officer may insert modate the issuance of orders under in-
in solicitations and contracts other definite-delivery contracts. If the com-
than those for construction and archi- pletion date is expressed as a specific
tect-engineering, a clause substan- calendar date, computed on the basis of
tially the same as the clause at 52.211 the contractor receiving the notice to
179
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
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
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
when the contracting officer deter- (including controlled materials) placed

mines that liquidated damages are ap- by a Delegate Agency under the provi-
propriate (see 11.501(a)). If the contract sions of the DPAS in support of an au-
specifies more than one completion thorized program and which requires
date for separate parts or stages of the preferential treatment, and includes
work, revise paragraph (a) of the clause subcontracts and purchase orders re-
to state the amount of liquidated dam- sulting under such contracts.
ages for delay of each separate part or [51 FR 19714, May 30, 1986. Redesignated at 60
stage of the work. FR 48241, Sept. 18, 1995; 66 FR 2128, Jan. 10,
(c) Use the clause at 52.21113, Time 2001]
Extensions, in solicitations and con-
tracts for construction that use the 11.602 General.
clause at 52.21112, Liquidated Dam- (a) Under Title I of the Defense Pro-
agesConstruction, when that clause duction Act of 1950, as amended (50
has been revised as provided in para- U.S.C. app. 2061, et seq.), the President
graph (b) of this section. is authorized (1) to require that con-
tracts in support of the national de-
Subpart 11.6Priorities and fense be accepted and performed on a
Allocations preferential or priority basis over all
other contracts, and (2) to allocate ma-
terials and facilities in such a manner
SOURCE: 51 FR 19714, May 30, 1986, unless
otherwise noted. Redesignated at 60 FR 48241,
as to promote the national defense.
Sept. 18, 1995. (b) The Office of Industrial Resource
Administration (OIRA), DOC, is respon-
11.600 Scope of subpart. sible for administering and enforcing a
This subpart implements the Defense system of priorities and allocations to
Priorities and Allocations System carry out Title I of the Defense Produc-
(DPAS), a Department of Commerce tion Act for industrial items. The
(DOC) regulation in support of author- DPAS has been established to promote
ized national defense programs (see 15 the timely availability of the nec-
CFR part 700). essary industrial resources to meet
current national defense requirements
[51 FR 19714, May 30, 1986, as amended at 56 and to provide a framework to facili-
FR 41744, Aug. 22, 1991] tate rapid industrial mobilization in
case of national emergency.
11.601 Definitions. (c) The Delegate Agencies (see Sched-
As used in this subpart ule I of the DPAS) have been given au-
Authorized program, means a program thority by DOC to place rated orders in
approved by the Federal Emergency support of authorized programs. Other
Management Agency (FEMA) for prior- government agencies, Canada, and
ities and allocations support under the other friendly foreign nations may
Defense Production Act of 1950, as apply for special rating authority in
amended (50 U.S.C. app. 2061, et seq.), to support of authorized programs (see 15
promote the national defense. Schedule CFR 700.55).
I of the DPAS lists currently author- (d) Rated orders shall be placed in ac-
ized programs. cordance with the procedures in the
Controlled materials, means the var- DPAS. Contracting officers responsible
ious shapes and forms of steel, copper, for acquisitions in support of author-
aluminum, and nickel alloys specified ized programs shall be familiar with
in Schedule II, and defined in Schedule the DPAS and should provide guidance
III, of the DPAS. on the DPAS to contractors and sup-
Delegate Agency, means an agency of pliers receiving rated orders. Agency
the U.S. Government authorized by heads shall ensure compliance with the
delegation from DOC to place priority DPAS by contracting activities within
ratings on contracts that support au- their agencies.
thorized programs. Schedule I of the (e) Under the Defense Production
DPAS lists the Delegate Agencies. Act, any willful violation of the Act,
Rated order means a prime contract the DPAS, or any official action taken
for any product, service, or material by DOC under the DPAS, is a crime
181
11.603 48 CFR Ch. 1 (10103 Edition)
punishable by a maximum fine of (3) Priority scheduling of production

$10,000, one year in prison, or both (see and delivery. Contractors and suppliers
15 CFR 700.70 and 15 CFR 700.74). receiving rated orders shall give the
[51 FR 19714, May 30, 1986, as amended at 56 rated orders priority over other con-
FR 41744, Aug. 22, 1991] tracts as needed to meet delivery re-
quirements (see 15 CFR 700.14).
11.603 Procedures. (e) Agencies shall provide con-
(a) There are two levels of priority tracting activities with specific guid-
for rated orders established by the ance on the issuance of rated orders in
DPAS, identified by the rating symbols support of agency programs.
DO and DX. All DO rated orders (f) Contracting officers shall follow
have equal priority with each other agency procedural instructions con-
and take preference over unrated or- cerning the use of rated orders in sup-
ders. All DX rated orders have equal port of agency programs.
priority with each other and take pref-
(g) Contracting officers, contractors,
erence over DO rated and unrated or-
ders. DX ratings are used for special or subcontractors at any tier, that ex-
defense programs designated by the perience difficulty placing rated or-
President to be of the highest national ders, obtaining timely delivery under
priority. rated orders, locating a contractor or
(b) DOC may issue a Directive to supplier to fill a rated order, ensuring
compel a contractor or supplier to ac- that rated orders receive preferential
cept a rated order, to rearrange produc- treatment by contractors or suppliers,
tion or delivery schedules, or to im- or require rating authority for items
prove shipments against particular not automatically ratable under the
rated orders. Directives issued by DOC DPAS, should promptly seek special
take precedence over all rated and priorities assistance in accordance
unrated orders as stated in the Direc- with agency procedures (see 15 CFR
tive. 700.50700.55).
(c) In addition to any other contrac- (h) Contracting officers shall report
tual requirements, a valid rated order promptly any violations of the DPAS
must contain (see 15 CFR 700.12) the to DOC in accordance with agency pro-
following: cedures.
(1) A priority rating consisting of the
appropriate DO or DX rating symbol [51 FR 19714, May 30, 1986, as amended at 56
and a program of identification symbol FR 41744, Aug. 22, 1991]
to indicate the authorized program (see
Schedule I of the DPAS). 11.604 Solicitation provisions and con-
(2) A required delivery date or deliv- tract clauses.
ery dates. (a) Contracting officers shall insert
(3) The signature of an individual au- the provision at 52.21114, Notice of Pri-
thorized by the agency to sign rated or- ority Rating for National Defense Use,
ders. in solicitations when the contract to be
(d) The DPAS has the following three awarded will be a rated order.
basic elements which are essential to
(b) Contracting officers shall insert
the operation of the system:
the clause at 52.21115, Defense Priority
(1) Mandatory acceptance of rated or-
ders. A rated order shall be accepted by and Allocation Requirements, in con-
a contractor or supplier unless rejected tracts that are rated orders.
for the reasons provided for mandatory [51 FR 19714, May 30, 1986. Redesignated and
rejection in 15 CFR 700.13(b), or for op- amended at 60 FR 48241, Sept. 18, 1995]
tional rejection in 15 CFR 700.13(c).
(2) Mandatory extension of priority rat- Subpart 11.7Variation in
ings throughout the acquisition chain.
Contractors and suppliers receiving Quantity
rated orders shall extend priority rat-
ings to subcontractors or vendors when SOURCE: 48 FR 42159, Sept. 19, 1983, unless
acquiring items to fill the rated orders otherwise noted. Redesignated at 60 FR 48241,
(see 15 CFR 700.15). Sept. 18, 1995.
182
11.701 Supply contracts. the contractors expense or retained

and paid for at the contract unit price.
(a) A fixed-price supply contract may
authorize Government acceptance of a [48 FR 42159, Sept. 19, 1983, as amended at 54
variation in the quantity of items FR 34753, Aug. 21, 1989; 62 FR 40236, July 25,
called for if the variation is caused by 1997]
conditions of loading, shipping, or
packing, or by allowances in manufac- 11.702 Construction contracts.
turing processes. Any permissible vari- Construction contracts may author-
ation shall be stated as a percentage ize a variation in estimated quantities
and it may be an increase, a decrease, of unit-priced items. When the vari-
or a combination of both; however, ation between the estimated quantity
contracts for subsistence items may and the actual quantity of a unit-
use other applicable terms of variation priced item is more than plus or minus
in quantity. 15 percent, an equitable adjustment in
(b) There should be no standard or the contract price shall be made upon
usual variation percentage. The over- the demand of either the Government
run or underrun permitted in each con- or the contractor. The contractor may
tract should be based upon the normal request an extension of time if the
commercial practices of a particular quantity variation is such as to cause
industry for a particular item, and the an increase in the time necessary for
permitted percentage should be no completion. The contracting officer
larger than is necessary to afford a must receive the request in writing
contractor reasonable protection. The within 10 days from the beginning of
permissible variation shall not exceed the period of delay. However, the con-
plus or minus 10 percent unless a dif- tracting officer may extend this time
ferent limitation is established in limit before the date of final settle-
agency regulations. Consideration shall ment of the contract. The contracting
be given to the quantity to which the officer shall ascertain the facts and
percentage variation applies. For ex- make any adjustment for extending the
ample, when delivery will be made to
completion date that the findings jus-
multiple destinations and it is desired
tify.
that the quantity variation apply to
the item quantity for each destination, 11.703 Contract clauses.
this requirement must be stated in the
contract. (a) The contracting officer shall in-
(c) Contractors are responsible for de- sert the clause at 52.21116, Variation
livery of the specified quantity of in Quantity, in solicitations and con-
items in a fixed-price contract, within tracts, if authorizing a variation in
allowable variations, if any. If a con- quantity in fixed-price contracts for
tractor delivers a quantity of items in supplies or for services that involve the
excess of the contract requirements furnishing of supplies.
plus any allowable variation in quan- (b) The contracting officer may in-
tity, particularly small dollar value sert the clause at 52.21117, Delivery of
overshipments, it results in unneces- Excess Quantities, in solicitations and
sary administrative costs to the Gov- contracts, when a fixed-price supply
ernment in determining disposition of contract is contemplated.
the excess quantity. Accordingly, the (c) The contracting officer shall in-
contract may include the clause at sert the clause at 52.21118, Variation
52.21117, Delivery of Excess Quantities, in Estimated Quantity, in solicitations
to provide that and contracts when a fixed-price con-
(1) Excess quantities of items total- struction contract is contemplated
ing up to $250 in value may be retained that authorizes a variation in the esti-
without compensating the contractor; mated quantity of unit-priced items.
and [48 FR 42159, Sept. 19, 1983, as amended at 54
(2) Excess quantities of items total- FR 34753, Aug. 21, 1989. Redesignated and
ing over $250 in value may, at the Gov- amended at 60 FR 48241, Sept. 18, 1995; 64 FR
ernments option, be either returned at 10538, Mar. 4, 1999]
183
11.801 48 CFR Ch. 1 (10103 Edition)
Subpart 11.8Testing 12.303 Contract format.
Subpart 12.4Unique Requirements Re-

SOURCE: 62 FR 51230, Sept. 30, 1997, unless garding Terms and Conditions for
otherwise noted. Commercial Items
11.801 Preaward in-use evaluation. 12.401 General.
12.402 Acceptance.
Supplies may be evaluated under 12.403 Termination.
comparable in-use conditions without a 12.404 Warranties.
further test plan, provided offerors are
so advised in the solicitation. The re- Subpart 12.5Applicability of Certain Laws
sults of such tests or demonstrations to the Acquisition of Commercial Items
may be used to rate the proposal, to de-
termine technical acceptability, or 12.500 Scope of subpart.
otherwise to evaluate the proposal (see 12.501 Applicability.
12.502 Procedures.
15.305). 12.503 Applicability of certain laws to Exec-
utive agency contracts for the acquisi-
PART 12ACQUISITION OF tion of commercial items.
COMMERCIAL ITEMS 12.504 Applicability of certain laws to sub-
contracts for the acquisition of commer-
cial items.
Sec.
12.000 Scope of part. Subpart 12.6Streamlined Procedures for
12.001 Definition. Evaluation and Solicitation for Com-
mercial Items
Subpart 12.1Acquisition of Commercial
ItemsGeneral 12.601 General.
12.602 Streamlined evaluation of offers.
12.101 Policy. 12.603 Streamlined solicitation for commer-
12.102 Applicability. cial items.
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.
12.301 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
subsidiaries, or affiliates of a con- (4) Using the Governmentwide com-

tractor or subcontractor. mercial purchase card; or
(5) Directly from another Federal
Subpart 12.1Acquisition of agency.
Commercial ItemsGeneral (f)(1) Contracting officers may treat
any acquisition of supplies or services
12.101 Policy. that, as determined by the head of the
Agencies shall agency, are to be used to facilitate de-
(a) Conduct market research to defense against or recovery from ter-
termine whether commercial items or rorism or nuclear, biological, chemical,
nondevelopmental items are available or radiological attack, as an acquisi-
that could meet the agencys require- tion of commercial items. This para-
ments; graph applies to solicitations issued by
(b) Acquire commercial items or non- any agency from January 24, 2003,
developmental items when they are through November 24, 2003 (Public Law
available to meet the needs of the 107296, Sec. 856).
agency; and (2) Acquisition of biotechnology sup-
(c) Require prime contractors and plies or services, for use to facilitate
subcontractors at all tiers to incor- the defense against terrorism or bio-
porate, to the maximum extent prac- logical attack against the United
ticable, commercial items or non- States, by or for the Department of De-
developmental items as components of fense shall be considered as an acquisi-
items supplied to the agency. tion of commercial items when award
is made and funds are obligated on or
12.102 Applicability. before September 30, 2003 (Public Law
(a) This part shall be used for the ac- 107107, Sec. 836(a)(2)). The authority of
quisition of supplies or services that this paragraph is in addition to and
meet the definition of commercial does not limit the authority of para-
items at section 2.101. graph (f)(1) of this section. Nothing in
(b) Contracting officers shall use the this paragraph shall preclude a con-
policies in this part in conjunction tracting officer from treating an acqui-
with the policies and procedures for so- sition described in this paragraph as
licitation, evaluation and award pre- one for a non-commercial item if a de-
scribed in part 13, Simplified Acquisi- termination is made by the contracting
tion Procedures; part 14, Sealed Bid- officer that the purchase cannot be
ding; or part 15, Contracting by Nego- made at a fair and reasonable price
tiation, as appropriate for the par- using the policies of this part.
ticular acquisition.
(c) Contracts for the acquisition of
FR 39192, July 26, 1996; 62 FR 64917, Dec. 9,
commercial items are subject to the 1997; 64 FR 32743, June 17, 1999; 66 FR 53484,
policies in other parts of this chapter. Oct. 22, 2001; 67 FR 56121, Aug. 30, 2002; 68 FR
When a policy in another part of this 4050, Jan. 27, 2003]
chapter is inconsistent with a policy in
this part, this part 12 shall take prece- Subpart 12.2Special Require-
dence for the acquisition of commer-
cial items. ments for the Acquisition of
(d) The definition of commercial item Commercial Items
in section 2.101 uses the phrase pur-
12.201 General.
poses other than governmental pur-
poses. These purposes are those that Public Law 103355 establishes special
are not unique to a government. requirements for the acquisition of
(e) This part shall not apply to the commercial items intended to more
acquisition of commercial items closely resemble those customarily
(1) At or below the micro-purchase used in the commercial marketplace.
threshold; This subpart identifies those special re-
(2) Using the Standard Form 44 (see quirements as well as other consider-
13.306); ations necessary for proper planning,
(3) Using the imprest fund (see solicitation, evaluation and award of
13.305); contracts for commercial items.
185
12.202 48 CFR Ch. 1 (10103 Edition)
12.202 Market research and descrip- including options, contracting activi-

tion of agency need. ties shall employ the simplified proce-
(a) Market research (see 10.001) is an dures authorized by subpart 13.5 to the
essential element of building an effec- maximum extent practicable.
tive strategy for the acquisition of [60 FR 48241, Sept. 18, 1995, as amended at 62
commercial items and establishes the FR 264, Jan. 2, 1997; 62 FR 64917, Dec. 9, 1997]
foundation for the agency description
of need (see part 11), the solicitation, 12.204 Solicitation/contract form.
and resulting contract. (a) The contracting officer shall use
(b) The description of agency need the Standard Form 1449, Solicitation/
must contain sufficient detail for po- Contract/Order for Commercial Items,
tential offerors of commercial items to if (1) the acquisition is expected to ex-
know which commercial products or ceed the simplified acquisition thresh-
services may be suitable. Generally, for old; (2) a paper solicitation or contract
acquisitions in excess of the simplified is being issued; and (3) procedures at
acquisition threshold, an agencys 12.603 are not being used. Use of the SF
statement of need for a commercial 1449 is nonmandatory but encouraged
item will describe the type of product for commercial acquisitions not ex-
or service to be acquired and explain ceeding the simplified acquisition
how the agency intends to use the threshold.
product or service in terms of function (b) Consistent with the requirements
to be performed, performance require- at 5.203 (a) and (h), the contracting offi-
ment or essential physical characteris- cer may allow fewer than 15 days be-
tics. Describing the agencys needs in fore issuance of the solicitation.
these terms allows offerors to propose
[62 FR 264, Jan. 2, 1997]
methods that will best meet the needs
of the Government. 12.205 Offers.
(c) Follow the procedures in subpart
11.2 regarding the identification and (a) Where technical information is
availability of specifications, standards necessary for evaluation of offers,
and commercial item descriptions. agencies should, as part of market re-
(d) Requirements documents for elec- search, review existing product lit-
tronic and information technology erature generally available in the in-
must comply with the applicable acces- dustry to determine its adequacy for
sibility standards issued by the Archi- purposes of evaluation. If adequate,
tectural and Transportation Barriers contracting officers shall request exist-
Compliance Board at 36 CFR part 1194 ing product literature from offerors of
(see subpart 39.2). commercial items in lieu of unique
technical proposals.
[60 FR 48241, Sept. 18, 1995, as amended at 62 (b) Contracting officers should allow
FR 264, Jan. 2, 1997; 66 FR 20897, Apr. 25, 2001]
offerors to propose more than one prod-
12.203 Procedures for solicitation, uct that will meet a Government need
evaluation, and award. in response to solicitations for com-
mercial items. The contracting officer
Contracting officers shall use the
shall evaluate each product as a sepa-
policies unique to the acquisition of
rate offer.
commercial items prescribed in this
(c) Consistent with the requirements
part in conjunction with the policies
at 5.203(b), the contracting officer may
and procedures for solicitation, evalua-
tion and award prescribed in part 13, allow fewer than 30 days response time
Simplified Acquisition Procedures; for receipt of offers for commercial
part 14, Sealed Bidding; or part 15, Con- items, unless the acquisition is subject
tracting by Negotiation, as appropriate to NAFTA or the Trade Agreements
for the particular acquisition. The con- Act (see 5.203(h)).
tracting officer may use the stream- [60 FR 48241, Sept. 18, 1995, as amended at 62
lined procedure for soliciting offers for FR 264, Jan. 2, 1997; 64 FR 72418, Dec. 27, 1999]
commercial items prescribed in 12.603.
For acquisitions of commercial items 12.206 Use of past performance.
exceeding the simplified acquisition Past performance should be an im-
threshold but not exceeding $5,000,000, portant element of every evaluation
186
and contract award for commercial quantities ordered, length of the per-
items. Contracting officers should conformance 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
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
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.
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
188
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 contracts 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]
189
12.302 48 CFR Ch. 1 (10103 Edition)
12.302 Tailoring of provisions and class of contracts for that specific

clauses for the acquisition of com- item.
mercial items. (d) Tailoring shall be by addenda to
(a) General. The provisions and the solicitation and contract. The con-
clauses established in this subpart are tracting officer shall indicate in Block
intended to address, to the maximum 27a of the SF 1449 if addenda are at-
extent practicable, commercial market tached. These addenda may include, for
practices for a wide range of potential example, a continuation of the sched-
Government acquisitions of commer- ule of supplies/services to be acquired
cial items. However, because of the from blocks 18 through 21 of the SF
broad range of commercial items ac- 1449; a continuation of the description
quired by the Government, variations of the supplies/services being acquired;
in commercial practices, and the rel- further elaboration of any other
ative volume of the Governments ac- item(s) on the SF 1449; any other terms
quisitions in the specific market, con- or conditions necessary for the per-
tracting officers may, within the limi- formance of the proposed contract
tations of this subpart, and after con- (such as options, ordering procedures
ducting appropriate market research, for indefinite-delivery type contracts,
tailor the provision at 52.2121, Instruc- warranties, contract financing arrange-
tions to Offerors-Commercial Items, ments, etc.).
and the clause at 52.2124, Contract [60 FR 48241, Sept. 18, 1995, as amended at 61
Terms and Conditions-Commercial FR 45772, Aug. 29, 1996; 61 FR 67430, Dec. 20,
Items, to adapt to the market condi- 1996; 62 FR 264, Jan. 2, 1997]
tions for each acquisition.
(b) Tailoring 52.2124, Contract Terms 12.303 Contract format.
and ConditionsCommercial Items. The Solicitations and contracts for the
following paragraphs of the clause at acquisition of commercial items pre-
52.2124, Contract Terms and Condi- pared using this part 12 shall be assem-
tionsCommercial Items, implement bled, to the maximum extent prac-
statutory requirements and shall not ticable, using the following format:
be tailored (a) Standard Form (SF) 1449;
(1) Assignments;
(b) Continuation of any block from
(2) Disputes;
SF 1449, such as
(3) Payment (except as provided in
(1) Block 10 if a price evaluation ad-
subpart 32.11);
(4) Invoice; justment for small disadvantaged busi-
(5) Other compliances; and ness concerns is applicable (the con-
(6) Compliance with laws unique to tracting officer shall indicate the per-
Government contracts. centage(s) and applicable line item(s)),
(c) Tailoring inconsistent with cus- if an incentive subcontracting clause is
tomary commercial practice. The con- used (the contracting officer shall indi-
tracting officer shall not tailor any cate the applicable percentage), or if
clause or otherwise include any addi- set aside for emerging small busi-
tional terms or conditions in a solicita- nesses, or set-aside for very small busi-
tion or contract for commercial items ness concerns;
in a manner that is inconsistent with (2) Block 18B for remittance address;
customary commercial practice for the (3) Block 19 for contract line item
item being acquired unless a waiver is numbers;
approved in accordance with agency (4) Block 20 for schedule of supplies/
procedures. The request for waiver services; or
must describe the customary commer- (5) Block 25 for accounting data;
cial practice found in the marketplace, (c) Contract clauses
support the need to include a term or (1) 52.2124, Contract Terms and Con-
condition that is inconsistent with ditionsCommercial Items, by ref-
that practice and include a determina- erence (see SF 1449, Block 27a);
tion that use of the customary com- (2) Any addendum to 52.2124; and
mercial practice is inconsistent with (3) 52.2125, Contract Terms and Con-
the needs of the Government. A waiver ditions Required to Implement Stat-
may be requested for an individual or utes and Executive Orders;
190
(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
191
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
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 proof 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.
12.503 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
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]
194
Subpart 12.6Streamlined Proce- performance shall be evaluated in ac-

dures for Evaluation and So- cordance with the procedures in sec-
licitation for Commercial tion 13.106 or subpart 15.3, as applica-
ble. The contracting officer shall en-
Items
sure the instructions provided in the
12.601 General. provision at 52.2121, Instructions to
OfferorsCommercial Items, and the
This subpart provides optional proce-
dures for evaluation criteria provided in the pro-
(a) Streamlined evaluation of offers vision at 52.2122, EvaluationCom-
for commercial items; and mercial Items, are in agreement.
(b) Streamlined solicitation of offers (c) Select the offer that is most ad-
for commercial items for use where ap- vantageous to the Government based
propriate. on the factors contained in the solici-
These procedures are intended to tation. Fully document the rationale
simplify the process of preparing and for selection of the successful offeror
issuing solicitations, and evaluating of- including discussion of any tradeoffs
fers for commercial items consistent considered.
with customary commercial practices.
12.602 Streamlined evaluation of of- FR 39192, July 26, 1996; 62 FR 264, Jan. 2, 1997;
fers. 62 FR 51270, Sept. 30, 1997; 62 FR 64917, Dec.
9, 1997]
(a) When evaluation factors are used,
the contracting officer may insert a 12.603 Streamlined solicitation for
provision substantially the same as the commercial items.
provision at 52.2122, EvaluationCom-
(a) When a written solicitation will
mercial Items, in solicitations for com-
mercial items or comply with the pro- be issued, the contracting officer may
cedures in 13.106 if the acquisition is use the following procedure to reduce
being made using simplified acquisi- the time required to solicit and award
tion procedures. When the provision at contracts for the acquisition of com-
52.2122 is used, paragraph (a) of the mercial items. This procedure com-
provision shall be tailored to the spe- bines the synopsis required by 5.203 and
cific acquisition to describe the evalua- the issuance of the solicitation into a
tion factors and relative importance of single document.
those factors. However, when using the (b) When using the combined syn-
simplified acquisition procedures in opsis/solicitation procedure, the SF
part 13, contracting officers are not re- 1449 is not used for issuing the solicita-
quired to describe the relative impor- tion.
tance of evaluation factors. (c) To use these procedures, the con-
(b) Offers shall be evaluated in ac- tracting officer shall
cordance with the criteria contained in (1) Prepare the synopsis as described
the solicitation. For many commercial at 5.207.
items, the criteria need not be more de- (2) In the Description, include the fol-
tailed than technical (capability of the lowing additional information:
item offered to meet the agency need),
(i) The following statement:
price and past performance. Technical
capability may be evaluated by how This is a combined synopsis/solicitation for
well the proposed products meet the commercial items prepared in accordance
Government requirement instead of with the format in FAR Subpart 12.6, as sup-
predetermined subfactors. Solicita- plemented with additional information in-
tions for commercial items do not have cluded in this notice. This announcement
constitutes the only solicitation; proposals
to contain subfactors for technical ca-
are being requested and a written solicita-
pability when the solicitation ade- tion will not be issued.
quately describes the items intended
use. A technical evaluation would nor- (ii) The solicitation number and a
mally include examination of such statement that the solicitation is
things as product literature, product issued as an invitation to bid (IFB), re-
samples (if requested), technical fea- quest for quotation (RFQ) or request
tures and warranty provisions. Past for proposal (RFP).
195
12.603 48 CFR Ch. 1 (10103 Edition)
(iii) A statement that the solicita- Or Executive OrdersCommercial

tion document and incorporated provi- Items, applies to this acquisition and a
sions and clauses are those in effect statement regarding which, if any, of
through Federal Acquisition Circular the additional FAR clauses cited in the
lll. clause are applicable to the acquisi-
(iv) A notice regarding any set-aside tion.
and the associated NAICS code and (xiii) A statement regarding any ad-
small business size standard. Also in- ditional contract requirement(s) or
clude a statement regarding the Small terms and conditions (such as contract
Business Competitiveness Demonstra- financing arrangements or warranty
tion Program, if applicable. requirements) determined by the con-
(v) A list of contract line item num- tracting officer to be necessary for this
ber(s) and items, quantities and units acquisition and consistent with cus-
of measure, (including option(s), if ap- tomary commercial practices.
plicable). (xiv) A statement regarding the De-
(vi) Description of requirements for fense Priorities and Allocations Sys-
the items to be acquired. tem (DPAS) and assigned rating, if ap-
(vii) Date(s) and place(s) of delivery plicable.
and acceptance and FOB point. (xv) A statement regarding any appli-
(viii) A statement that the provision cable Numbered Notes.
at 52.2121, Instructions to Offerors
(xvi) The date, time and place offers
Commercial, applies to this acquisition
are due.
and a statement regarding any addenda
(xvii) The name and telephone num-
to the provision.
(ix) A statement regarding the appli- ber of the individual to contact for in-
cability of the provision at 52.2122, formation regarding the solicitation.
EvaluationCommercial Items, if (3) Allow response time for receipt of
used, and the specific evaluation cri- offers as follows:
teria to be included in paragraph (a) of (i) Because the synopsis and solicita-
that provision. If this provision is not tion are contained in a single docu-
used, describe the evaluation proce- ment, it is not necessary to publicize a
dures to be used. separate synopsis 15 days before the
(x) A statement advising offerors to issuance of the solicitation.
include a completed copy of the provi- (ii) When using the combined syn-
sion at 52.2123, Offeror Representa- opsis and solicitation, contracting offi-
tions and CertificationsCommercial cers must establish a response time in
Items, with its offer. accordance with 5.203(b) (but see
(xi) A statement that the clause at 5.203(h)).
52.2124, Contract Terms and Condi- (4) Publicize amendments to solicita-
tionsCommercial Items, applies to tions in the same manner as the initial
this acquisition and a statement re- synopsis and solicitation.
garding any addenda to the clause. [60 FR 48241, Sept. 18, 1995, as amended at 61
(xii) A statement that the clause at FR 41469, Aug. 8, 1996; 62 FR 264, Jan. 2, 1997;
52.2125, Contract Terms and Condi- 65 FR 46056, July 26, 2000; 66 FR 27413, May 16,
tions Required To Implement Statutes 2001; 68 FR 56679, Oct. 1, 2003]
196
SUBCHAPTER CCONTRACTING METHODS AND CONTRACT
TYPES
PART 13SIMPLIFIED ACQUISITION 13.306 SF 44, Purchase OrderInvoice

Voucher.
PROCEDURES 13.307 Forms.
Sec. Subpart 13.4Fast Payment Procedure

13.001 Definitions. 13.401 General.
13.002 Purpose. 13.402 Conditions for use.
13.003 Policy. 13.403 Preparation and execution of orders.
13.004 Legal effect of quotations. 13.404 Contract clause.
13.005 Federal Acquisition Streamlining Act
of 1994 list of inapplicable laws. Subpart 13.5Test Program for Certain
13.006 Inapplicable provisions and clauses. Commercial Items
Subpart 13.1Procedures 13.500 General.

13.501 Special documentation requirements.
13.101 General.
13.102 Source list.
ter 137; and 42 U.S.C. 2473(c).
13.103 Use of standing price quotations.
13.104 Promoting competition. SOURCE: 62 FR 64917, Dec. 9, 1997, unless
13.105 Synopsis and posting requirements. otherwise noted.
13.106 Soliciting competition, evaluation of
quotations or offers, award and docu- 13.000 Scope of part.
mentation.
13.1061 Soliciting competition.
13.1062 Evaluation of quotations or offers. cedures for the acquisition of supplies
13.1063 Award and documentation. and services, including construction,
research and development, and com-
Subpart 13.2Actions at or Below the mercial items, the aggregate amount
Micro-Purchase Threshold of which does not exceed the simplified
acquisition threshold (see 2.101). Sub-
13.201 General.
13.202 Purchase guidelines.
part 13.5 provides special authority for
acquisitions of commercial items ex-
Subpart 13.3Simplified Acquisition ceeding the simplified acquisition
Methods threshold but not exceeding $5,000,000,
including options. See part 12 for poli-
13.301 Governmentwide commercial pur- cies applicable to the acquisition of
chase card. commercial items exceeding the micro-
13.302 Purchase orders.
13.3021 General.
purchase threshold. See 36.6025 for
13.3022 Unpriced purchase orders. simplified procedures to be used when
13.3023 Obtaining contractor acceptance acquiring architect-engineer services.
and modifying purchase orders.
13.3024 Termination or cancellation of pur- 13.001 Definitions.
chase orders. As used in this part
13.3025 Clauses. Authorized individual means a person
13.303 Blanket purchase agreements (BPAs).
13.3031 General.
who has been granted authority, in ac-
13.3032 Establishment of BPAs. cordance with agency procedures, to
13.3033 Preparation of BPAs. acquire supplies and services in accord-
13.3034 Clauses. ance with this part.
13.3035 Purchases under BPAs. Governmentwide commercial purchase
13.3036 Review procedures. card means a purchase card, similar in
13.3037 Completion of BPAs. nature to a commercial credit card,
13.3038 Optional clause. issued to authorized agency personnel
13.304 [Reserved]
13.305 Imprest funds and third party drafts.
to use to acquire and to pay for sup-
13.3051 General. plies and services.
13.3052 Agency responsibilities. Imprest fund means a cash fund of a
13.3053 Conditions for use. fixed amount established by an ad-
13.3054 Procedures. vance of funds, without charge to an
197
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 definitions 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
(g) Authorized individuals shall make indicate acceptance by furnishing the

purchases in the simplified manner supplies or services ordered or by pro-
that is most suitable, efficient, and ec- ceeding with the work to the point
onomical based on the circumstances where substantial performance has oc-
of each acquisition. For acquisitions curred.
not expected to exceed (c) If the Government issues an order
(1) The simplified acquisition thresh- resulting from a quotation, the Gov-
old for other than commercial items, ernment may (by written notice to the
use any appropriate combination of the supplier, at any time before acceptance
procedures in parts 13, 14, 15, 35, or 36,
occurs) withdraw, amend, or cancel its
including the use of Standard Form
offer. (See 13.3024 for procedures on
1442, Solicitation, Offer, and Award
termination or cancellation of pur-
(Construction, Alteration, or Repair),
for construction contracts (see chase orders.)
36.701(b)); or
13.005 Federal Acquisition Stream-
(2) $5 million for commercial items, lining Act of 1994 list of inappli-
use any appropriate combination of the cable laws.
procedures in parts 12, 13, 14, and 15
(see paragraph (d) of this section). (a) The following laws are inappli-
(h) In addition to other consider- cable to all contracts and subcontracts
ations, contracting officers shall (if otherwise applicable to sub-
(1) Promote competition to the max- contracts) at or below the simplified
imum extent practicable (see 13.104); acquisition threshold:
(2) Establish deadlines for the sub- (1) 41 U.S.C. 57 (a) and (b) (Anti-Kick-
mission of responses to solicitations back Act of 1986). (Only the require-
that afford suppliers a reasonable opment for the incorporation of the con-
portunity to respond (see 5.203); tractor procedures for the prevention
(3) Consider all quotations or offers and detection of violations, and the
that are timely received. For evalua- contractual requirement for contractor
tion of quotations or offers received cooperation in investigations are inap-
electronically, see 13.1062(b)(3); and plicable.).
(4) Use innovative approaches, to the
(2) 40 U.S.C. 270a (Miller Act). (Al-
maximum extent practicable, in award-
ing contracts using simplified acquisi- though the Miller Act does not apply
tion procedures. to contracts at or below the simplified
acquisition threshold, alternative
[62 FR 64917, Dec. 9, 1997, as amended at 63 forms of payment protection for sup-
FR 58593, Oct. 30, 1998; 63 FR 70267, Dec. 18,
1998; 67 FR 56121, Aug. 30, 2002; 68 FR 4050,
pliers of labor and material (see 28.102)
Jan. 27, 2003] are still required if the contract ex-
ceeds $25,000.).
13.004 Legal effect of quotations. (3) 40 U.S.C. 327333 (Contract Work
(a) A quotation is not an offer and, Hours and Safety Standards ActOver-
consequently, cannot be accepted by time Compensation).
the Government to form a binding con- (4) 41 U.S.C. 701(a)(1) (Section 5152 of
tract. Therefore, issuance by the Gov- the Drug-Free Workplace Act of 1988),
ernment of an order in response to a except for individuals.
suppliers quotation does not establish (5) 42 U.S.C. 6962 (Solid Waste Dis-
a contract. The order is an offer by the posal Act). (The requirement to provide
Government to the supplier to buy cer- an estimate of recovered material uti-
tain supplies or services upon specified lized in contract performance does not
terms and conditions. A contract is es- apply unless the contract value exceeds
tablished when the supplier accepts the $100,000.)
offer.
(6) 10 U.S.C. 2306(b) and 41 U.S.C.
(b) When appropriate, the con-
254(a) (Contract Clause Regarding Con-
tracting officer may ask the supplier to
tingent Fees).
indicate acceptance of an order by no-
tification to the Government, pref- (7) 10 U.S.C. 2313 and 41 U.S.C. 254(c)
erably in writing, as defined at 2.101. In (Authority to Examine Books and
other circumstances, the supplier may Records of Contractors).
199
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
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-
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
13.106 48 CFR Ch. 1 (10103 Edition)
permit suppliers to develop quotations orally to the maximum extent prac-

or offers. ticable, if
(i) The acquisition does not exceed
FR 58593, Oct. 30, 1998; 66 FR 27413, May 16, the simplified acquisition threshold;
2001; 68 FR 4050, Jan. 27, 2003] (ii) Oral solicitation is more efficient
than soliciting through available elec-
13.106 Soliciting competition, evalua- tronic commerce alternatives; and
tion of quotations or offers, award (iii) Notice is not required under
and documentation. 5.101.
(2) However, an oral solicitation may
13.1061 Soliciting competition. not be practicable for contract actions
(a) Considerations. In soliciting com- exceeding $25,000 unless covered by an
petition, the contracting officer shall exception in 5.202.
consider the guidance in 13.104 and the (d) Written solicitations. If obtaining
following before requesting quotations electronic or oral quotations is uneco-
or offers: nomical or impracticable, the con-
(1)(i) The nature of the article or tracting officer should issue paper so-
service to be purchased and whether it licitations for contract actions likely
is highly competitive and readily avail- to exceed $25,000. The contracting offi-
able in several makes or brands, or is cer shall issue a written solicitation
relatively noncompetitive. for construction requirements exceed-
(ii) Information obtained in making ing $2,000.
recent purchases of the same or similar (e) Use of options. Options may be in-
item. cluded in solicitations, provided the re-
(iii) The urgency of the proposed pur- quirements of subpart 17.2 are met and
chase. the aggregate value of the acquisition
(iv) The dollar value of the proposed and all options does not exceed the dol-
purchase. lar threshold for use of simplified ac-
(v) Past experience concerning spe- quisition procedures.
cific dealers prices. (f) Inquiries. An agency should re-
(2) When soliciting quotations or of- spond to inquiries received through
fers, the contracting officer shall no- any medium (including FACNET) if
tify potential quoters or offerors of the doing so would not interfere with the
basis on which award will be made efficient conduct of the acquisition.
(price alone or price and other factors, For an acquisition conducted through
e.g., past performance and quality). FACNET, an agency must respond to
Contracting officers are encouraged to telephonic or facsimile inquiries only if
use best value. Solicitations are not re- it is unable to receive inquiries
quired to state the relative importance through FACNET.
assigned to each evaluation factor and [62 FR 64917, Dec. 9, 1997, as amended at 63
subfactor, nor are they required to in- FR 58593, Oct. 30, 1998]
clude subfactors.
(b) Soliciting from a single source. (1) 13.1062 Evaluation of quotations or
For purchases not exceeding the sim- offers.
plified acquisition threshold, con- (a) General. (1) The contracting offi-
tracting officers may solicit from one cer shall evaluate quotations or of-
source if the contracting officer deter- fers
mines that the circumstances of the (i) In an impartial manner; and
contract action deem only one source (ii) Inclusive of transportation
reasonably available (e.g., urgency, ex- charges from the shipping point of the
clusive licensing agreements, or indus- supplier to the delivery destination.
trial mobilization). (2) Quotations or offers shall be eval-
(2) For sole source acquisitions of uated on the basis established in the
commercial items in excess of the sim- solicitation.
plified acquisition threshold conducted (3) All quotations or offers shall be
pursuant to subpart 13.5, the require- considered (see paragraph (b) of this
ments at 13.501(a) apply. subsection).
(c) Soliciting orally. (1) The con- (b) Evaluation procedures. (1) The con-
tracting officer shall solicit quotations tracting officer has broad discretion in
202
fashioning suitable evaluation proce- (2) If only one response is received,

dures. The procedures prescribed in include a statement of price reason-
parts 14 and 15 are not mandatory. At ableness in the contract file. The con-
the contracting officers discretion, tracting officer may base the state-
one or more, but not necessarily all, of ment on
the evaluation procedures in part 14 or (i) Market research;
15 may be used. (ii) Comparison of the proposed price
(2) If using price and other factors, with prices found reasonable on pre-
ensure that quotations or offers can be vious purchases;
evaluated in an efficient and mini- (iii) Current price lists, catalogs, or
mally burdensome fashion. Formal advertisements. However, inclusion of
evaluation plans and establishing a a price in a price list, catalog, or adver-
competitive range, conducting discus- tisement does not, in and of itself, es-
sions, and scoring quotations or offers tablish fairness and reasonableness of
are not required. Contracting offices
the price;
may conduct comparative evaluations
of offers. Evaluation of other factors, (iv) A comparison with similar items
such as past performance in a related industry;
(i) Does not require the creation or (v) The contracting officers personal
existence of a formal data base; and knowledge of the item being purchased;
(ii) May be based on information such (vi) Comparison to an independent
as the contracting officers knowledge Government estimate; or
of and previous experience with the (vii) Any other reasonable basis.
supply or service being acquired, cus- (3) Occasionally an item can be ob-
tomer surveys, or other reasonable tained only from a supplier that quotes
basis. a minimum order price or quantity
(3) For acquisitions conducted using that either unreasonably exceeds stat-
FACNET or a method that permits ed quantity requirements or results in
electronic response to the solicitation, an unreasonable price for the quantity
the contracting officer may required. In these instances, the con-
(i) After preliminary consideration of tracting officer should inform the re-
all quotations or offers, identify from quiring activity of all facts regarding
all quotations or offers received one the quotation or offer and ask it to
that is suitable to the user, such as the confirm or alter its requirement. The
lowest priced brand name product, and file shall be documented to support the
quickly screen all lower priced final action taken.
quotations or offers based on readily (b) File documentation and retention.
discernible value indicators, such as Keep documentation to a minimum.
past performance, warranty conditions, Purchasing offices shall retain data
and maintenance availability; or supporting purchases (paper or elec-
(ii) Where an evaluation is based only tronic) to the minimum extent and du-
on price and past performance, make ration necessary for management re-
an award based on whether the lowest view purposes (see subpart 4.8). The fol-
priced of the quotations or offers hav- lowing illustrate the extent to which
ing the highest past performance rat- quotation or offer information should
ing possible represents the best value be recorded:
when compared to any lower priced (1) Oral solicitations. The contracting
quotation or offer. office should establish and maintain
[62 FR 64917, Dec. 9, 1997, as amended at 63 records of oral price quotations in
FR 58593, Oct. 30, 1998] order to reflect clearly the propriety of
placing the order at the price paid with
13.1063 Award and documentation. the supplier concerned. In most cases,
(a) Basis for award. Before making this will consist merely of showing the
award, the contracting officer must de- names of the suppliers contacted and
termine that the proposed price is fair the prices and other terms and condi-
and reasonable. tions quoted by each.
(1) Whenever possible, base price rea- (2) Written solicitations (see 2.101). For
sonableness on competitive quotations acquisitions not exceeding the sim-
or offers. plified acquisition threshold, limit
203
13.201 48 CFR Ch. 1 (10103 Edition)
written records of solicitations or of- Subpart 13.2Actions at or Below

fers to notes or abstracts to show the Micro-Purchase Threshold
prices, delivery, references to printed
price lists used, the supplier or sup- 13.201 General.
pliers contacted, and other pertinent (a) Agency heads are encouraged to
data. delegate micro-purchase authority (see
(3) Special situations. Include addi- 1.6033).
tional statements (b) The Governmentwide commercial
(i) Explaining the absence of com- purchase card shall be the preferred
petition if only one source is solicited method to purchase and to pay for
and the acquisition does not exceed the micro-purchases (see 2.101).
simplified acquisition threshold (does (c) Purchases at or below the micro-
not apply to an acquisition of utility purchase threshold may be conducted
services available from only one using any of the methods described in
source); or subpart 13.3, provided the purchaser is
(ii) Supporting the award decision if authorized and trained, pursuant to
other than price-related factors were agency procedures, to use those meth-
considered in selecting the supplier. ods.
(c) Notification. For acquisitions that (d) Micro-purchases do not require
do not exceed the simplified acquisi- provisions or clauses, except as pro-
tion threshold and for which automatic vided at 4.1104 and 32.1110. This para-
graph takes precedence over any other
notification is not provided through
FAR requirement to the contrary, but
FACNET or an electronic commerce
does not prohibit the use of any clause.
method that employs widespread elec-
(e) The requirements in part 8 apply
tronic public notice, notification to un- to purchases at or below the micro-pur-
successful suppliers shall be given only chase threshold.
if requested or required by 5.301. (f) The procurement requirements in
(d) Request for information. If a sup- the Resource Conservation and Recov-
plier requests information on an award ery Act (42 U.S.C. 6962) and Executive
that was based on factors other than Order 13101 of September 14, 1998,
price alone, a brief explanation of the Greening the Government through
basis for the contract award decision Waste Prevention, Recycling, and Fed-
shall be provided (see 15.503(b)(2)). eral Acquisition, apply to purchases at
(e) Taxpayer Identification Number. If or below the micro-purchase threshold
an oral solicitation is used, the con- (see Subpart 23.4).
tracting officer shall ensure that the (g)(1) For acquisitions of supplies or
copy of the award document sent to the services that, as determined by the
payment office is annotated with the head of the agency, are to be used to
contractors Taxpayer Identification facilitate defense against or recovery
Number (TIN) and type of organization from terrorism or nuclear, biological,
(see 4.203), unless this information will chemical, or radiological attack, the
be obtained from some other source temporary micro-purchase thresholds
(e.g., centralized database). The con- are
tracting officer shall disclose to the (i) $7,500 for acquisitions by or for
contractor that the TIN may be used any agency if the award is made from
January 24, 2003, through November 24,
by the Government to collect and re-
2003; and
port on any delinquent amounts aris-
(ii) $15,000 for acquisitions by or for
ing out of the contractors relationship
the Department of Defense if award is
with the Government (31 U.S.C. made and funds are obligated on or be-
7701(c)(3)). fore September 30, 2003.
[62 FR 64917, Dec. 9, 1997, as amended at 63 (2) Purchases using this authority
FR 58589, 58593, Oct. 30, 1998; 64 FR 51836, must have a clear and direct relation-
Sept. 24, 1999] ship to defense against or recovery
204
from terrorism or nuclear, biological, cers and other individuals designated

chemical, or radiological attack. in accordance with 1.6033. The card
[62 FR 64917, Dec. 9, 1997, as amended at 64 may be used only for purchases that
FR 10539, Mar. 4, 1999; 65 FR 36018, June 6, are otherwise authorized by law or reg-
2000; 67 FR 56121, Aug. 30, 2002; 68 FR 4050, ulation.
Jan. 27, 2003; 68 FR 56672, Oct. 1, 2003] (b) Agencies using the Government-
wide commercial purchase card shall
13.202 Purchase guidelines. establish procedures for use and con-
(a) Solicitation, evaluation of trol of the card that comply with the
quotations, and award. (1) To the extent Treasury Financial Manual for Guid-
practicable, micro-purchases shall be ance of Departments and Agencies
distributed equitably among qualified (TFM 44500) and that are consistent
suppliers. with the terms and conditions of the
(2) Micro-purchases may be awarded current GSA credit card contract.
without soliciting competitive Agency procedures should not limit the
quotations if the contracting officer or use of the Governmentwide commercial
individual appointed in accordance purchase card to micro-purchases.
with 1.6033(b) considers the price to be Agency procedures should encourage
reasonable.
use of the card in greater dollar
(3) The administrative cost of
amounts by contracting officers to
verifying the reasonableness of the
price for purchases may more than off- place orders and to pay for purchases
set potential savings from detecting in- against contracts established under
stances of overpricing. Therefore, ac- part 8 procedures, when authorized;
tion to verify price reasonableness need and to place orders and/or make pay-
only be taken if ment under other contractual instru-
(i) The contracting officer or indi- ments, when agreed to by the con-
vidual appointed in accordance with tractor. See 32.1110(d) for instructions
1.6033(b) suspects or has information for use of the appropriate clause when
to indicate that the price may not be payment under a written contract will
reasonable (e.g., comparison to the pre- be made through use of the card.
vious price paid or personal knowledge (c) The Governmentwide commercial
of the supply or service); or purchase card may be used to
(ii) Purchasing a supply or service for (1) Make micro-purchases;
which no comparable pricing informa- (2) Place a task or delivery order (if
tion is readily available (e.g., a supply authorized in the basic contract, basic
or service that is not the same as, or is ordering agreement, or blanket pur-
not similar to, other supplies or serv- chase agreement); or
ices that have recently been purchased (3) Make payments, when the con-
on a competitive basis). tractor agrees to accept payment by
(b) Documentation. If competitive the card.
quotations were solicited and award
was made to other than the low quoter, [62 FR 64917, Dec. 9, 1997, as amended at 64
documentation to support the purchase FR 10539, Mar. 4, 1999; 67 FR 6120, Feb. 8, 2002]
may be limited to identification of the
solicited concerns and an explanation 13.302 Purchase orders.
for the award decision.
13.3021 General.
Subpart 13.3Simplified (a) Except as provided under the un-
Acquisition Methods priced purchase order method (see
13.3022), purchase orders generally are
13.301 Governmentwide commercial issued on a fixed-price basis. See 12.207
purchase card. for acquisition of commercial items.
(a) The Governmentwide commercial (b) Purchase orders shall
purchase card is authorized for use in (1) Specify the quantity of supplies or
making and/or paying for purchases of scope of services ordered;
supplies, services, or construction. The (2) Contain a determinable date by
Governmentwide commercial purchase which delivery of the supplies or per-
card may be used by contracting offi- formance of the services is required;
205
13.3022 48 CFR Ch. 1 (10103 Edition)
(3) Provide for inspection as pre- (i) Repairs to equipment requiring

scribed in part 46. Generally, inspec- disassembly to determine the nature
tion and acceptance should be at des- and extent of repairs;
tination. Source inspection should be (ii) Material available from only one
specified only if required by part 46. source and for which cost cannot read-
When inspection and acceptance will be ily be established; or
performed at destination, advance cop- (iii) Supplies or services for which
ies of the purchase order or equivalent prices are known to be competitive,
notice shall be furnished to the con- but exact prices are not known (e.g.,
signee(s) for material receipt purposes. miscellaneous repair parts, mainte-
Receiving reports shall be accom- nance agreements).
plished immediately upon receipt and (c) Unpriced purchase orders may be
acceptance of supplies; issued on paper or electronically. A re-
(4) Specify f.o.b. destination for sup- alistic monetary limitation, either for
plies to be delivered within the United each line item or for the total order,
States, except Alaska or Hawaii, unless shall be placed on each unpriced pur-
there are valid reasons to the contrary; chase order. The monetary limitation
and shall be an obligation subject to ad-
(5) Include any trade and prompt pay- justment when the firm price is estab-
ment discounts that are offered, con- lished. The contracting office shall fol-
sistent with the applicable principles low up on each order to ensure timely
at 14.4083. pricing. The contracting officer or the
(c) The contracting officers signa- contracting officers designated rep-
ture on purchase orders shall be in ac- resentative shall review the invoice
cordance with 4.101 and the definitions price and, if reasonable (see 13.1063(a)),
at 2.101. Facsimile and electronic sig- process the invoice for payment.
nature may be used in the production
of purchase orders by automated meth- 13.3023 Obtaining contractor accept-
ods. ance and modifying purchase or-
(d) Limit the distribution of copies of ders.
purchase orders and related forms to (a) When it is desired to consummate
the minimum deemed essential for ad- a binding contract between the parties
ministration and transmission of con- before the contractor undertakes per-
tractual information. formance, the contracting officer shall
(e) In accordance with 31 U.S.C. 3332, require written (see 2.101) acceptance of
electronic funds transfer (EFT) is re- the purchase order by the contractor.
quired for payments except as provided (b) Each purchase order modification
in 32.1110. See Subpart 32.11 for instruc- shall identify the order it modifies and
tions for use of the appropriate clause shall contain an appropriate modifica-
in purchase orders. When obtaining tion number.
oral quotes, the contracting officer (c) A contractors written acceptance
shall inform the quoter of the EFT of a purchase order modification may
clause that will be in any resulting be required only if
purchase order. (1) Determined by the contracting of-
[62 FR 64917, Dec. 9, 1997, as amended at 64 ficer to be necessary to ensure the con-
FR 10540, Mar. 4, 1999] tractors compliance with the purchase
order as revised; or
13.3022 Unpriced purchase orders. (2) Required by agency regulations.
(a) An unpriced purchase order is an
order for supplies or services, the price 13.3024 Termination or cancellation
of which is not established at the time of purchase orders.
of issuance of the order. (a) If a purchase order that has been
(b) An unpriced purchase order may accepted in writing by the contractor
be used only when is to be terminated, the contracting of-
(1) It is impractical to obtain pricing ficer shall process the termination in
in advance of issuance of the purchase accordance with
order; and (1) 12.403(d) and 52.2124(l) for com-
(2) The purchase is for mercial items; or
206
(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
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):
208
(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
13.3036 48 CFR Ch. 1 (10103 Edition)
elements) be used for the purpose of re- 13.304 [Reserved]

cording receipt and acceptance of the
supplies or services. However, if the 13.305 Imprest funds and third party
purchase is assigned to another activ- drafts.
ity for administration, the authorized 13.3051 General.
Government representative shall docu-
ment receipt and acceptance of sup- Imprest funds and third party drafts
may be used to acquire and to pay for
plies or services by signing and dating
supplies or services. Policies and regu-
the agency specified form after
lations concerning the establishment
verification and after notation of any
of and accounting for imprest funds
exceptions. and third party drafts, including the
responsibilities of designated cashiers
13.3036 Review procedures.
and alternates, are contained in Part
(a) The contracting officer placing IV of the Treasury Financial Manual
orders under a BPA, or the designated for Guidance of Departments and Agen-
representative of the contracting offi- cies, Title 7 of the General Accounting
cer, shall review a sufficient random Office Policy and Procedures Manual
sample of the BPA files at least annu- for Guidance of Federal Agencies, and
ally to ensure that authorized proce- the agency implementing regulations.
dures are being followed. Agencies also shall be guided by the
(b) The contracting officer that en- Manual of Procedures and Instructions
tered into the BPA shall for Cashiers, issued by the Financial
(1) Ensure that each BPA is reviewed Management Service, Department of
at least annually and, if necessary, up- the Treasury.
dated at that time; and 13.3052 Agency responsibilities.
(2) Maintain awareness of changes in
Each agency using imprest funds and
market conditions, sources of supply,
third party drafts shall
and other pertinent factors that may (a) Periodically review and determine
warrant making new arrangements whether there is a continuing need for
with different suppliers or modifying each fund or third party draft account
existing arrangements. established, and that amounts of those
(c) If an office other than the pur- funds or accounts are not in excess of
chasing office that established a BPA actual needs;
is authorized to make purchases under (b) Take prompt action to have im-
that BPA, the agency that has jurisdic- prest funds or third party draft ac-
tion over the office authorized to make counts adjusted to a level commensu-
the purchases shall ensure that the rate with demonstrated needs when-
procedures in paragraph (a) of this sub- ever circumstances warrant such ac-
section are being followed. tion; and
(c) Develop and issue appropriate im-
13.3037 Completion of BPAs. plementing regulations. These regula-
An individual BPA is considered com- tions shall include (but are not limited
to) procedures covering
plete when the purchases under it
(1) Designation of personnel author-
equal its total dollar limitation, if any,
ized to make purchases using imprest
or when its stated time period expires.
funds or third party drafts; and
13.3038 Optional clause. (2) Documentation of purchases using
imprest funds or third party drafts, in-
The clause at 52.2134, Terms and cluding documentation of
ConditionsSimplified Acquisitions (i) Receipt and acceptance of supplies
(Other Than Commercial Items), may and services by the Government;
be used in BPAs established under this (ii) Receipt of cash or third party
section. draft payments by the suppliers; and
210
(iii) Cash advances and reimburse- of this subsection annotated to re-

ments. flect
(i) That an imprest fund or third
13.3053 Conditions for use. party draft purchase has been made;
Imprest funds or third party drafts (ii) The unit prices and extensions;
may be used for purchases when and
(a) The imprest fund transaction does (iii) The suppliers name and address;
not exceed $500 or such other limits as and
have been approved by the agency (2) Require the supplier to include
head; with delivery of the supplies an in-
(b) The third party draft transaction voice, packing slip, or other sales in-
does not exceed $2,500, unless author- strument giving
ized at a higher level in accordance (i) The suppliers name and address;
with Treasury restrictions; (ii) List and quantity of items sup-
plied;
(c) The use of imprest funds or third
(iii) Unit prices and extensions; and
party drafts is considered to be advan-
(iv) Cash discount, if any.
tageous to the Government; and
(d) The use of imprest funds or third 13.306 SF 44, Purchase OrderIn-
party drafts for the transaction other- voiceVoucher.
wise complies with any additional con-
The SF 44, Purchase OrderInvoice
ditions established by agencies and
Voucher, is a multipurpose pocket-size
with the policies and regulations ref-
purchase order form designed primarily
erenced in 13.3051.
for on-the-spot, over-the-counter pur-
13.3054 Procedures. chases of supplies and nonpersonal
services while away from the pur-
(a) Each purchase using imprest chasing office or at isolated activities.
funds or third party drafts shall be It also can be used as a receiving re-
based upon an authorized purchase req- port, invoice, and public voucher.
uisition, contracting officer (a) This form may be used if all of the
verification statement, or other agency following conditions are satisfied:
approved method of ensuring that ade- (1) The amount of the purchase is at
quate funds are available for the pur- or below the micro-purchase threshold,
chase. except for purchases made under un-
(b) Normally, purchases should be usual and compelling urgency or in
placed orally and without soliciting support of contingency operations.
competition if prices are considered Agencies may establish higher dollar
reasonable. limitations for specific activities or
(c) Since there is, for all practical items;
purposes, simultaneous placement of (2) The supplies or services are imme-
the order and delivery of the items, diately available;
clauses are not required for purchases (3) One delivery and one payment will
using imprest funds or third party be made; and
drafts. (4) Its use is determined to be more
(d) Forms prescribed at 13.307(e) may economical and efficient than use of
be used if a written order is considered other simplified acquisition proce-
necessary (e.g., if required by the sup- dures.
plier for discount, tax exemption, or (b) General procedural instructions
other reasons). If a purchase order is governing the forms use are printed on
used, endorse it Payment to be made the form and on the inside front cover
from Imprest Fund (or Payment to of each book of forms.
be made from Third Party Draft, as (c) Since there is, for all practical
appropriate). purposes, simultaneous placement of
(e) The individual authorized to the order and delivery of the items,
make purchases using imprest funds or clauses are not required for purchases
third party drafts shall using this form.
(1) Furnish to the imprest fund or (d) Agencies shall provide adequate
third party draft cashier a copy of the safeguards regarding the control of
document required under paragraph (a) forms and accounting for purchases.
211
13.307 48 CFR Ch. 1 (10103 Edition)
13.307 Forms. ments verification that supplies have

(a) Commercial items. For use of the been received and accepted. The proce-
SF 1449, Solicitation/Contract/Order for dure provides for payment for supplies
Commercial Items, see 12.204. based on the contractors submission of
(b) Other than commercial items. an invoice that constitutes a certifi-
(1) Except when quotations are solic- cation that the contractor
ited via FACNET, electronically, or (1) Has delivered the supplies to a
orally, the SF 1449; SF 18, Request for post office, common carrier, or point of
Quotations; or an agency form/auto- first receipt by the Government; and
mated format may be used. Each agen- (2) Shall replace, repair, or correct
cy request for quotations form/auto- supplies not received at destination,
mated format should conform with the damaged in transit, or not conforming
SF 18 or SF 1449 to the maximum ex- to purchase agreements.
tent practicable. (b) The contracting officer shall be
(2) Both SF 1449 and OF 347, Order for primarily responsible for collecting
Supplies or Services, are multipurpose debts resulting from failure of contrac-
forms used for negotiated purchases of tors to properly replace, repair, or cor-
supplies or services, delivery or task rect supplies lost, damaged, or not con-
orders, inspection and receiving re- forming to purchase requirements (see
ports, and invoices. An agency form/ 32.605(b) and 32.606).
automated format also may be used.
(c) Forms used for both commercial and 13.402 Conditions for use.
other than commercial items.
(1) OF 336, Continuation Sheet, or an If the conditions in paragraphs (a)
agency form/automated format may be through (f) of this section are present,
used when additional space is needed. the fast payment procedure may be
(2) OF 348, Order for Supplies or Serv- used, provided that use of the proce-
ices ScheduleContinuation, or an dure is consistent with the other condi-
agency form/automated format may be tions of the purchase. The conditions
used for negotiated purchases when ad- for use of the fast payment procedure
ditional space is needed. Agencies may are as follows:
print on these forms the clauses con- (a) Individual purchasing instru-
sidered to be generally suitable for pur- ments do not exceed $25,000, except
chases. that executive agencies may permit
(3) SF 30, Amendment of Solicitation/ higher dollar limitations for specified
Modification of Contract, or a purchase activities or items on a case-by-case
order form may be used to modify a basis.
purchase order, unless an agency form/ (b) Deliveries of supplies are to occur
automated format is prescribed in at locations where there is both a geo-
agency regulations. graphical separation and a lack of ade-
(d) SF 44, Purchase OrderInvoice quate communications facilities be-
Voucher, is a multipurpose pocket-size tween Government receiving and dis-
purchase order form that may be used bursing activities that will make it im-
as outlined in 13.306. practical to make timely payment
(e) SF 1165, Receipt for CashSub- based on evidence of Government ac-
voucher, or an agency purchase order ceptance.
form may be used for purchases using (c) Title to the supplies passes to the
imprest funds or third party drafts. Government
[62 FR 64917, Dec. 9, 1997, as amended at 63 (1) Upon delivery to a post office or
FR 58593, Oct. 30, 1998] common carrier for mailing or ship-
ment to destination; or
Subpart 13.4Fast Payment (2) Upon receipt by the Government
Procedure if the shipment is by means other than
Postal Service or common carrier.
13.401 General. (d) The supplier agrees to replace, re-
(a) The fast payment procedure al- pair, or correct supplies not received at
lows payment under limited conditions destination, damaged in transit, or not
to a contractor prior to the Govern- conforming to purchase requirements.
212
(e) The purchasing instrument is a Subpart 13.5Test Program for

firm-fixed-price contract, a purchase Certain Commercial Items
order, or a delivery order for supplies.
(f) A system is in place to ensure 13.500 General.
(1) Documentation of evidence of con- (a) This subpart authorizes, as a test
tractor performance under fast pay- program, use of simplified procedures
ment purchases; for the acquisition of supplies and serv-
(2) Timely feedback to the con- ices in amounts greater than the sim-
tracting officer in case of contractor plified acquisition threshold but not
deficiencies; and exceeding $5,000,000, including options,
(3) Identification of suppliers that if the contracting officer reasonably
have a current history of abusing the expects, based on the nature of the sup-
fast payment procedure (also see sub- plies or services sought, and on market
part 9.1). research, that offers will include only
commercial items, except as provided
13.403 Preparation and execution of in paragraph (e) of this section. Under
orders. this test program, contracting officers
Priced or unpriced contracts, pur- may use any simplified acquisition pro-
chase orders, or BPAs using the fast cedure in this part, subject to any spe-
payment procedure shall include the cific dollar limitation applicable to the
particular procedure. The purpose of
following:
this test program is to vest contracting
(a) A requirement that the supplies officers with additional procedural dis-
be shipped transportation or postage cretion and flexibility, so that com-
prepaid. mercial item acquisitions in this dollar
(b) A requirement that invoices be range may be solicited, offered, evalu-
submitted directly to the finance or ated, and awarded in a simplified man-
other office designated in the order, or ner that maximizes efficiency and
in the case of unpriced purchase orders, economy and minimizes burden and ad-
to the contracting officer (see 13.302 ministrative costs for both the Govern-
2(c)). ment and industry (10 U.S.C. 2304(g)
(c) The following statement on the and 2305 and 41 U.S.C. 253(g) and 253a
consignees copy: and 253b).
(b) For the period of this test, con-
Consignees Notification to Purchasing tracting activities must employ the
Activity of Nonreceipt, Damage, or simplified procedures authorized by the
Nonconformance test to the maximum extent prac-
ticable.
The consignee shall notify the pur- (c) When acquiring commercial items
chasing office promptly after the speci- using the procedures in this part, the
fied date of delivery of supplies not re- requirements of part 12 apply subject
ceived, damaged in transit, or not con- to the order of precedence provided at
forming to specifications of the pur- 12.102(c). This includes use of the provi-
chase order. Unless extenuating cir- sions and clauses in subpart 12.3.
cumstances exist, the notification (d) The authority to issue solicita-
should be made not later than 60 days tions under this subpart expires on
after the specified date of delivery. January 1, 2004. Contracting officers
may award contracts after the expira-
tion of this authority for solicitations
The contracting officer shall insert issued before the expiration of the au-
the clause at 52.2131, Fast Payment thority.
Procedure, in solicitations and con- (e) The $5,000,000 limitation provided
tracts when the conditions in 13.402 are in this subpart 13.5 does not apply to
applicable and it is intended that the acquisitions of supplies or services
fast payment procedure be used in the using the authority provided by
contract (in the case of BPAs, the con- 12.102(f)(1). Notwithstanding the expira-
tracting officer may elect to insert the tion of the test program specified in
clause either in the BPA or in orders paragraph (d) of this section, authority
under the BPA). to use simplified procedures under this
213
13.501 48 CFR Ch. 1 (10103 Edition)
paragraph applies to an acquisition (iv) For a proposed contract exceed-

when the solicitation is issued by any ing $50,000,000 the official described in
agency from January 24, 2003, through 6.304(a)(4) must approve the justifica-
November 24, 2003. tion and approval. This authority is
not delegable except as provided in
6.304(a)(4).
FR 72448, Dec. 27, 1999; 67 FR 6115, Feb. 8,
2002; 67 FR 80321, Dec. 31, 2002; 68 FR 4050, (b) Contract file documentation. The
Jan. 27, 2003] contract file must include
(1) A brief written description of the
13.501 Special documentation require- procedures used in awarding the con-
ments. tract, including the fact that the test
procedures in FAR subpart 13.5 were
(a) Sole source acquisitions. (1) Acqui-
used;
sitions conducted under simplified ac-
(2) The number of offers received;
quisition procedures are exempt from
(3) An explanation, tailored to the
the requirements in part 6. However,
size and complexity of the acquisition,
contracting officers must
of the basis for the contract award de-
(i) Conduct sole source acquisitions,
cision; and
as defined in 2.101, under this subpart
(4) Any justification approved under
only if the need to do so is justified in
paragraph (a) of this section.
writing and approved at the levels
specified in paragraph (a)(2) of this sec- [62 FR 64917, Dec. 9, 1997, as amended at 64
tion; and FR 72448, Dec. 27, 1999; 66 FR 2128, Jan. 10,
2001; 68 FR 4050, Jan. 27, 2003]
(ii) Prepare sole source justifications
using the format at 6.3032, modified to
reflect an acquisition under the au- PART 14SEALED BIDDING
thority of the test program for com-
mercial items (section 4202 of the Sec.
Clinger-Cohen Act of 1996) or the au- 14.000 Scope of part.
thority of the Homeland Security Act
Subpart 14.1Use of Sealed Bidding
(Public Law 107296, section 856) as im-
plemented at 12.102(f)(1). 14.101 Elements of sealed bidding.
(2) Justifications and approvals are 14.102 [Reserved]
required under this subpart only for 14.103 Policy.
14.1031 General.
sole source acquisitions.
14.1032 Limitations.
(i) For a proposed contract exceeding 14.104 Types of contracts.
$100,000, but not exceeding $500,000, the 14.105 Solicitations for informational or
contracting officers certification that planning purposes.
the justification is accurate and com-
plete to the best of the contracting of- Subpart 14.2Solicitation of Bids
ficers knowledge and belief will serve 14.201 Preparation of invitations for bids.
as approval, unless a higher approval 14.2011 Uniform contract format.
level is established in accordance with 14.2012 Part IThe Schedule.
agency procedures. 14.2013 Part IIContract clauses.
(ii) For a proposed contract exceed- 14.2014 Part IIIDocuments, exhibits, and
ing $500,000 but not exceeding other attachments.
$10,000,000, the competition advocate 14.2015 Part IVRepresentations and in-
structions.
for the procuring activity, designated 14.2016 Solicitation provisions.
pursuant to 6.501, or an official de- 14.2017 Contract clauses.
scribed in 6.304(a)(3) or (a)(4) must ap- 14.2018 Price-related factors.
prove the justification and approval. 14.2019 Simplified contract format.
This authority is not delegable. 14.202 General rules for solicitation of bids.
(iii) For a proposed contract exceed- 14.2021 Bidding time.
ing $10,000,000 but not exceeding 14.2022 Telegraphic bids.
14.2023 Bid envelopes.
$50,000,000, the head of the procuring
14.2024 Bid samples.
activity or the official described in 14.2025 Descriptive literature.
6.304(a)(3) or (a)(4) must approve the 14.2026 Final review of invitations for bids.
justification and approval. This au- 14.2027 Facsimile bids.
thority is not delegable. 14.2028 Electronic bids.
214
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
14.102 48 CFR Ch. 1 (10103 Edition)
prospective bidders to prepare and sub- in the invitation, as provided in sub-

mit bids. part 14.4.
(c) Submission of bids. Bidders must [48 FR 42171, Sept. 19, 1983, as amended at 50
submit sealed bids to be opened at the FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
time and place stated in the solicita- 1985]
tion for the public opening of bids.
(d) Evaluation of bids. Bids shall be 14.104 Types of contracts.
evaluated without discussions. Firm-fixed-price contracts shall be
(e) Contract award. After bids are pub- used when the method of contracting is
licly opened, an award will be made sealed bidding, except that fixed-price
with reasonable promptness to that re- contracts with economic price adjust-
sponsible bidder whose bid, conforming ment clauses may be used if authorized
to the invitation for bids, will be most in accordance with 16.203 when some
advantageous to the Government, con- flexibility is necessary and feasible.
sidering only price and the price-re- Such clauses must afford all bidders an
lated factors included in the invitation. equal opportunity to bid.
[48 FR 42171, Sept. 19, 1983, as amended at 50 [48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23, FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985] 1985]
14.102 [Reserved] 14.105 Solicitations for informational

or planning purposes.
14.103 Policy.
See 15.201(e).
14.1031 General. [48 FR 42171, Sept. 19, 1983, as amended at 62
(a) Sealed bidding shall be used FR 51270, Sept. 30, 1997]
whenever the conditions in 6.401(a) are
met. This requirement applies to any Subpart 14.2Solicitation of Bids
proposed contract action under part 6.
(b) Sealed bidding may be used for 14.201 Preparation of invitations for
bids.
classified acquisitions if its use does
not violate agency security require- 14.2011 Uniform contract format.
ments.
(a) Contracting officers shall prepare
(c) The policy for pricing modifica-
invitations for bids and contracts using
tions of sealed bid contracts appears in
the uniform contract format outlined
15.4034(a)(1)(iii).
in Table 141 to the maximum prac-
[48 FR 42171, Sept. 19, 1983, as amended at 50 ticable extent. The use of the format
FR 1737, Jan. 11, 1985; 50 FR 52429, Dec. 23, facilitates preparation of the solicita-
1985; 62 FR 51270, Sept. 30, 1997; 67 FR 6114, tion and contract as well as reference
Feb. 8, 2002; 68 FR 43856, July 24, 2003] to, and use of, those documents by bid-
ders and contractors. It need not be
used for acquisition of the following:
No awards shall be made as a result (1) Construction (see part 36).
of sealed bidding unless (2) Shipbuilding (including design,
(a) Bids have been solicited as reconstruction, and conversion), ship
quired by subpart 14.2; overhaul, and ship repair.
(b) Bids have been submitted as re- (3) Subsistence items.
quired by subpart 14.3; (4) Supplies or services requiring spe-
(c) The requirements of 1.6021(b) and cial contract forms prescribed else-
part 6 have been met; and where in this regulation that are in-
(d) An award is made to the respon- consistent with the uniform contract
sible bidder (see 9.1) whose bid is re- format.
sponsive to the terms of the invitation (5) Firm-fixed-price or fixed-price
for bids and is most advantageous to with economic price adjustment acqui-
the Government, considering only price sitions that use the simplified contract
and the price-related factors included format (see 14.2019).
216
(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
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.
(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-
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
(j) Insert the provision at 52.21416, specification requirements of the cur-

Minimum Bid Acceptance Period, in in- rent solicitation.
vitations for bids, except for construc- (3) See 14.2025(d)(2) regarding
tion, if the contracting officer deter- waiving the requirement for all bid-
mines that a minimum acceptance pe- ders.
riod must be specified. (q) Insert the provision at 52.21422,
(k) [Reserved] Evaluation of Bids for Multiple
(l) Insert the provision at 52.21418, Awards, in invitations for bids if the
Preparation of BidsConstruction, in contracting officer determines that
invitations for bids for construction multiple awards might be made if
work.
doing so is economically advantageous
(m) Insert the provision at 52.21419,
to the Government.
Contract AwardSealed BiddingCon-
struction, in all invitations for bids for (r) Insert the provision at 52.21423,
construction work. Late Submissions, Modifications, Revi-
(n) [Reserved] sions, and Withdrawals of Technical
(o)(1) Insert the provision at 52.21420, Proposals under Two-Step Sealed Bid-
Bid Samples, in invitations for bids if ding, in solicitations for technical pro-
bid samples are required. posals in step one of two-step sealed
(2) If it appears that the conditions in bidding.
14.2024(e)(1) will apply and the con- (s) Insert the provision at 52.21424,
tracting officer anticipates granting Multiple Technical Proposals, in solici-
waivers and tations for technical proposals in step
(i) If the nature of the required prod- one of two-step sealed bidding if the
uct does not necessitate limiting the contracting officer permits the submis-
grant of a waiver to a product produced sion of multiple technical proposals.
at the same plant in which the product (t) Insert the provision at 52.21425,
previously acquired or tested was pro- Step Two of Two-Step Sealed Bidding,
duced, use the provision with its Alter- in invitations for bids issued under step
nate I; or two of two-step sealed bidding.
(ii) If the nature of the required prod- (u) Insert the provision at 52.21430,
uct necessitates limiting the grant of a Annual Representations and Certifi-
waiver to a product produced at the cations-Sealed Bidding, in invitations
same plant in which the product pre- for bids if annual representations and
viously acquired or tested was pro- certifications are used (see 14.213).
duced, use the provision with its Alter- (v) Insert the provision at 52.21431,
nate II.
Facsimile Bids, in solicitations if fac-
(3) See 14.2024(e)(2) regarding
simile bids are authorized (see 14.2027).
waiving the requirement for all bid-
(w) Insert the provision at 52.21434,
ders.
Submission of Offers in the English
(p)(1) Insert the provision at 52.21421,
Descriptive Literature, in invitations Language, in solicitations that include
for bids if (i) descriptive literature is any of the clauses prescribed in 25.1101
required to evaluate the technical ac- or 25.1102. It may be included in other
ceptability of an offered product and solicitations when the contracting offi-
(ii) the required information will not cer decides that it is necessary.
be readily available unless it is sub- (x) Insert the provision at 52.21435,
mitted by bidders. Submission of Offers in U.S. Currency,
(2) Use the basic clause with its Al- in solicitations that include any of the
ternate I if the possibility exists that clauses prescribed in 25.1101 or 25.1102,
the contracting officer may waive the unless the contracting officer includes
requirement for furnishing descriptive the clause at 52.22517, Evaluation of
literature for a bidder offering a pre- Foreign Currency Offers, as prescribed
viously supplied product that meets in 25.1103(d). It may be included in
219
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-
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
220
acquisitions of supplies and services, contract file. Award by acceptance of a

the contracting officer may use the bid on the award portion of SF 1447 in-
simplified contract format in lieu of corporates the representations, certifi-
the uniform contract format (see cations, and other statements of bid-
14.2011). The contracting officer has ders in the resultant contract even
flexibility in preparation and organiza- though not physically attached.
tion of the simplified contract format.
However, the following format should [54 FR 48983, Nov. 28, 1989, as amended at 56
FR 41733, Aug. 22, 1991]
be used to the maximum practical ex-
tent: 14.202 General rules for solicitation of
(a) Solicitation/contract form. Standard bids.
Form (SF) 1447, Solicitation/Contract,
shall be used as the first page of the so- 14.2021 Bidding time.
licitation.
(b) Contract schedule. Include the fol- (a) Policy. A reasonable time for pro-
lowing for each contract line item: spective bidders to prepare and submit
(1) Contract line item number. bids shall be allowed in all invitations,
(2) Description of supplies or services, consistent with the needs of the Gov-
or data sufficient to identify the re- ernment. (For construction contracts,
quirement. see 36.2133(a).) A bidding time (i.e., the
(3) Quantity and unit of issue. time between issuance of the solicita-
(4) Unit price and amount. tion and opening of bids) of at least 30
(5) Packaging and marking require- calendar days shall be provided when
ments. synopsis is required by subpart 5.2.
(6) Inspection and acceptance, qual- (b) Factors to be considered. Because of
ity assurance, and reliability require- unduly limited bidding time, some po-
ments. tential sources may be precluded from
(7) Place of delivery, performance bidding and others may be forced to in-
and delivery dates, period of perform- clude amounts for contingencies that,
ance, and f.o.b. point. with additional time, could be elimi-
(8) Other item-peculiar information nated. To avoid unduly restricting
as necessary (e.g., individual fund cita- competition or paying higher-than-nec-
tions). essary prices, consideration shall be
(c) Clauses. Include the clauses re- given to such factors as the following
quired by this regulation. Additional in establishing a reasonable bidding
clauses shall be incorporated only time: (1) degree of urgency; (2) com-
when considered absolutely necessary plexity of requirement; (3) anticipated
to the particular acquisition. extent of subcontracting; (4) whether
(d) List of documents and attachments. use was made of presolicitation no-
Include if necessary. tices; (5) geographic distribution of bid-
(e) Representations and instructions ders; and (6) normal transmittal time
(1) Representations and certifications. In- for both invitations and bids.
sert those solicitation provisions that
require representations, certifications, [48 FR 42171, Sept. 19, 1983, as amended at 50
FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23,
or the submission of other information
1985; 60 FR 34737, July 3, 1995; 62 FR 272, Jan.
by offerors. 2, 1997]
(2) Instructions, conditions, and notices.
Include the solicitation provisions re- 14.2022 Telegraphic bids.
quired by 14.2016. Include any other in-
formation/instructions necessary to (a) Telegraphic bids and mailgrams
guide offerors. shall be authorized only when
(3) Evaluation factors for award. Insert (1) The date for the opening of bids
all evaluation factors and any signifi- will not allow bidders sufficient time
cant subfactors for award. to submit bids in the prescribed for-
(4) Upon award, the contracting offi- mat; or
cer need not physically include the pro- (2) Prices are subject to frequent
visions in subparagraphs (e)(1), (2), and changes.
(3) of this subsection in the resulting (b) If telegraphic bids are to be au-
contract, but shall retain them in the thorized, see 14.2016(g). Unauthorized
221
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
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.
222
Small items may be returned by mail, requirements of the current invitation

postage prepaid. for bids. When the contracting officer
(4) Samples that are to be retained waives the requirement, see 14.201
for inspection purposes in connection 6(p)(2).
with deliveries shall be transmitted to (2) When descriptive literature is not
the inspecting activity concerned, with necessary and a waiver of literature re-
instructions to retain the sample until quirements of a specification has been
completion of the contract or until dis- authorized, the contracting officer
position instructions are furnished. must include a statement in the invita-
(5) Where samples are consumed or tion that, despite the requirements of
their usefulness is impaired by tests, the specifications, descriptive lit-
they will be disposed of as scrap unless erature will not be required.
the bidder requests their return. (3) If the solicitation provides for a
[48 FR 42171, Sept. 19, 1983, as amended at 50 waiver, a bidder may submit a bid on
FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23, the basis of either the descriptive lit-
1985; 67 FR 13055, Mar. 20, 2002] erature furnished with the bid or a pre-
viously furnished product. If the bid is
14.2025 Descriptive literature. submitted on one basis, the bidder may
(a) Policy. Contracting officers must not have it considered on the other
not require bidders to furnish descrip- basis after bids are opened.
tive literature unless it is needed be- (e) Unsolicited descriptive literature. If
fore award to determine whether the descriptive literature is furnished when
products offered meet the specification it is not required by the invitation for
and to establish exactly what the bid- bids, the procedures set forth in 14.202
der proposes to furnish. 4(f) must be followed.
(b) Justification. The contracting offi- [67 FR 13055, Mar. 20, 2002]
cer must document in the contract file
the reasons why product acceptability 14.2026 Final review of invitations for
cannot be determined without the sub- bids.
mission of descriptive literature, ex-
Each invitation for bids shall be
cept when the contract specifications
thoroughly reviewed before issuance to
require submission.
detect and correct discrepancies or am-
(c) Requirements of invitation for bids.
biguities that could limit competition
(1) The invitation must clearly state
or result in the receipt of nonrespon-
(i) What descriptive literature the
sive bids. Contracting officers are re-
bidders must furnish;
sponsible for the reviews.
(ii) The purpose for requiring the lit-
erature; 14.2027 Facsimile bids.
(iii) The extent of its consideration
in the evaluation of bids; and (a) Unless prohibited or otherwise re-
(iv) The rules that will apply if a bid- stricted by agency procedures, con-
der fails to furnish the literature be- tracting officers may authorize fac-
fore bid opening or if the literature simile bids (see 14.2016(v)). In deter-
provided does not comply with the re- mining whether or not to authorize
quirements of the invitation. facsimile bids, the contracting officer
(2) If bidders must furnish descriptive shall consider factors such as
literature, see 14.2016(p). (1) Anticipated bid size and volume;
(d) Waiver of requirement for descriptive (2) Urgency of the requirement;
literature. (1) The contracting officer (3) Frequency of price changes;
may waive the requirement for descrip- (4) Availability, reliability, speed,
tive literature if and capacity of the receiving facsimile
(i) The bidder states in the bid that equipment; and
the product being offered is the same (5) Adequacy of administrative proce-
as a product previously or currently dures and controls for receiving, identi-
being furnished to the contracting ac- fying, recording, and safeguarding fac-
tivity; and simile bids, and ensuring their timely
(ii) The contracting officer deter- delivery to the bids opening location.
mines that the product offered by the (b) If facsimile bids are authorized,
bidder complies with the specification contracting officers may, after the date
223
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
opened. It shall never be used as a sub- not be cancelled unless cancellation is

stitute for amending a defective or am- clearly in the public interest; e.g., (1)
biguous invitation. The conference where there is no longer a requirement
shall be conducted in accordance with for the supplies or services or (2) where
the procedure prescribed in 15.201. amendments to the invitation would be
of such magnitude that a new invita-
FR 51270, Sept. 30, 1997] tion is desirable.
(b) When an invitation issued other
14.208 Amendment of invitation for than electronically is cancelled, bids
bids. that have been received shall be re-
(a) If it becomes necessary to make turned unopened to the bidders and no-
changes in quantity, specifications, de- tice of cancellation shall be sent to all
livery schedules, opening dates, etc., or prospective bidders to whom invita-
to correct a defective or ambiguous in- tions were issued. When an invitation
vitation, such changes shall be accom- issued electronically is cancelled, a
plished by amendment of the invitation general notice of cancellation shall be
for bids using Standard Form 30, posted electronically, the bids received
Amendment of Solicitation/Modifica- shall not be viewed, and the bids shall
tion of Contract. The fact that a be purged from primary and backup
change was mentioned at a pre-bid con- data storage systems.
ference does not relieve the necessity (c) The notice of cancellation shall
for issuing an amendment. Amend- (1) identify the invitation for bids by
ments shall be sent, before the time for number and short title or subject mat-
bid opening, to everyone to whom invi- ter, (2) briefly explain the reason the
tations have been furnished and shall invitation is being cancelled, and (3)
be displayed in the bid room. where appropriate, assure prospective
(b) Before amending an invitation for bidders that they will be given an op-
bids, the period of time remaining until portunity to bid on any resolicitation
bid opening and the need to extend this of bids or any future requirements for
period shall be considered. When only a the type of supplies or services in-
short time remains before the time set volved. Cancellations shall be recorded
for bid opening, consideration should in accordance with 14.403(d).
be given to notifying bidders of an ex- [48 FR 42171, Sept. 19, 1983, as amended at 60
tension of time by telegrams or tele- FR 34737, July 3, 1995; 62 FR 12692, Mar. 17,
phone. Such extension must be con- 1997]
firmed in the amendment.
(c) Any information given to a pro- 14.210 Qualified products.
spective bidder concerning an invita- See subpart 9.2.
tion for bids shall be furnished prompt-
ly to all other prospective bidders as an 14.211 Release of acquisition informa-
amendment to the invitation (1) if such tion.
information is necessary for bidders to (a) Before solicitation. Information
submit bids or (2) if the lack of such in- concerning proposed acquisitions shall
formation would be prejudicial to unin- not be released outside the Govern-
formed bidders. The information shall ment before solicitation except for
be furnished even though a pre-bid con- presolicitation notices in accordance
ference is held. No award shall be made with 14.205 or 36.2132, or long-range ac-
on the invitation unless such amend- quisition estimates in accordance with
ment has been issued in sufficient time 5.404, or synopses in accordance with
to permit all prospective bidders to 5.201. Within the Government, such in-
consider such information in submit- formation shall be restricted to those
ting or modifying their bids. having a legitimate interest. Releases
of information shall be made (1) to all
14.209 Cancellation of invitations be- prospective bidders, and (2) as nearly as
fore opening. possible at the same time, so that one
(a) The cancellation of an invitation prospective bidder shall not be given
for bids usually involves a loss of time, unfair advantage over another. See
effort, and money spent by the Govern- 3.104 regarding requirements for propri-
ment and bidders. Invitations should etary and source selection information
225
14.212 48 CFR Ch. 1 (10103 Edition)
including access to and disclosure and certifications shall be effective for

thereof. a period of 1 year from date of signa-
(b) After solicitation. Discussions with ture.
prospective bidders regarding a solici- (c) The contracting officer shall not
tation shall be conducted and technical include in individual solicitations the
or other information shall be trans- full text of provisions that are con-
mitted only by the contracting officer tained in the annual representations
or superiors having contractual au- and certifications.
thority or by others specifically au-
(d) Offerors shall make changes that
thorized. Such personnel shall not fur-
affect only one solicitation by com-
nish any information to a prospective
bidder that alone or together with pleting the appropriate section of the
other information may afford an ad- provision at 52.21430, Annual Rep-
vantage over others. However, general resentations and CertificationsSealed
information that would not be preju- Bidding.
dicial to other prospective bidders may [54 FR 48983, Nov. 28, 1989]
be furnished upon request; e.g., expla-
nation of a particular contract clause 14.214 [Reserved]
or a particular condition of the sched-
ule in the invitation for bids, and more
specific information or clarifications
Subpart 14.3Submission of Bids
may be furnished by amending the so- 14.301 Responsiveness of bids.
licitation (see 14.208).
(a) To be considered for award, a bid
must comply in all material respects
FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 55 FR 36795, Sept. 6, 1990; 62 FR 272, Jan. with the invitation for bids. Such com-
2, 1997; 68 FR 43856, July 24, 2003] pliance enables bidders to stand on an
equal footing and maintain the integ-
14.212 Economic purchase quantities rity of the sealed bidding system.
(supplies). (b) Telegraphic bids shall not be con-
Contracting officers shall comply sidered unless permitted by the invita-
with the economic purchase quantity tion. The term telegraphic bids means
planning requirements for supplies in bids submitted by telegram or by
subpart 7.2. See 7.203 for instructions mailgram.
regarding use of the provision at 52.207 (c) Facsimile bids shall not be consid-
4, Economic Purchase QuantitySup- ered unless permitted by the solicita-
plies, and 7.204 for guidance on han- tion (see 14.2027).
dling responses to that provision.
(d) Bids should be filled out, exe-
[50 FR 35479, Aug. 30, 1985] cuted, and submitted in accordance
with the instructions in the invitation.
14.213 Annual submission of represen- If a bidder uses its own bid form or a
tations and certifications.
letter to submit a bid, the bid may be
(a) Submission of offeror representa- considered only if (1) the bidder accepts
tions and certifications on an annual all the terms and conditions of the in-
basis, as an alternative to submission vitation and (2) award on the bid would
in each solicitation, may be authorized result in a binding contract with terms
by agencies subject to the require-
and conditions that do not vary from
ments of this section. The decision to
the terms and conditions of the invita-
use annual representations and certifi-
tion.
cations shall be made in accordance
with agency procedures. (e) Bids submitted by electronic com-
(b) In accordance with agency proce- merce shall be considered only if the
dures, each contracting office utilizing electronic commerce method was spe-
annual representations and certifi- cifically stipulated or permitted by the
cations shall establish procedures and solicitation.
assign responsibilities for centrally re- [48 FR 42171, Sept. 19, 1983, as amended at 50
questing, receiving, storing, verifying FR 1738, Jan. 11, 1985; 50 FR 52429, Dec. 23,
and updating offerors annual submis- 1985; 54 FR 48983, Nov. 28, 1989; 60 FR 34738,
sions. Generally, the representations July 3, 1995]
226
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
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
only to Government employees. Such addition, deletion, or alteration in the

disclosure shall be only on a need to bid.
know basis. When bid samples are sub-
mitted, they shall be handled with suf- 14.4022 Classified bids.
ficient care to prevent disclosure of The general public may not attend
characteristics before bid opening. bid openings for classified acquisitions.
(b) Envelopes marked as bids but not A bidder or its representative may at-
identifying the bidder or the solicita- tend and record the results if the indi-
tion may be opened solely for the pur- vidual has the appropriate security
pose of identification, and then only by clearance. The contracting officer also
an official designated for this purpose. may make the bids available at a later
If a sealed bid is opened by mistake time to properly cleared individuals
(e.g., because it is not marked as being who represent bidders. No public record
a bid), the envelope shall be signed by shall be made of bids or bid prices re-
the opener, whose position shall also be ceived in response to classified invita-
written thereon, and delivered to the tions for bids.
designated official. This official shall [67 FR 6114, Feb. 8, 2002]
immediately write on the envelope (1)
an explanation of the opening, (2) the 14.4023 Postponement of openings.
date and time opened, and (3) the invi-
(a) A bid opening may be postponed
tation for bids number, and shall sign
even after the time scheduled for bid
the envelope. The official shall then
opening (but otherwise in accordance
immediately reseal the envelope.
with 14.208) and
[48 FR 42171, Sept. 19, 1983, as amended at 60 (1) The contracting officer has reason
FR 34738, July 3, 1995] to believe that the bids of an important
segment of bidders have been delayed
14.402 Opening of bids. in the mails, or in the communications
14.4021 Unclassified bids. system specified for transmission of
bids, for causes beyond their control
(a) The bid opening officer shall de- and without their fault or negligence
cide when the time set for opening bids (e.g., flood, fire, accident, weather con-
has arrived and shall inform those ditions, strikes, or Government equip-
present of that decision. The officer ment blackout or malfunction when
shall then (1) personally and publicly bids are due); or
open all bids received before that time, (2) Emergency or unanticipated
(2) if practical, read the bids aloud to events interrupt normal governmental
the persons present, and (3) have the processes so that the conduct of bid
bids recorded. The original of each bid openings as scheduled is impractical.
shall be carefully safeguarded, particu- (b) At the time of a determination to
larly until the abstract of bids required postpone a bid opening under subpara-
by 14.403 has been made and its accu- graph (a)(1) above, an announcement of
racy verified. the determination shall be publicly
(b) Performance of the procedure in posted. If practical before issuance of a
paragraph (a) above may be delegated formal amendment of the invitation,
to an assistant, but the bid opening of- the determination shall be otherwise
ficer remains fully responsible for the communicated to prospective bidders
actions of the assistant. who are likely to attend the scheduled
(c) Examination of bids by interested bid opening.
persons shall be permitted if it does (c) In the case of paragraph (a)(2) of
not interfere unduly with the conduct this section, and when urgent Govern-
of Government business. Original bids ment requirements preclude amend-
shall not be allowed to pass out of the ment of the solicitation as prescribed
hands of a Government official unless a in 14.208, the time specified for opening
duplicate bid is not available for public of bids will be deemed to be extended
inspection. The original bid may be ex- to the same time of day specified in the
amined by the public only under the solicitation on the first work day on
immediate supervision of a Govern- which normal Government processes
ment official and under conditions that resume. In such cases, the time of ac-
preclude possibility of a substitution, tual bid opening shall be deemed to be
229
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
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
14.4043 48 CFR Ch. 1 (10103 Edition)
meets applicable Government speci- not barred by 41 U.S.C. 15 or 31 U.S.C.

fications; or 3727.
(6) Limits rights of the Government [48 FR 42171, Sept. 19, 1983, as amended at 51
under any contract clause. FR 2649, Jan. 17, 1986; 55 FR 25527, June 21,
(e) A low bidder may be requested to 1990; 55 FR 36795, Sept. 6, 1990; 56 FR 29127,
delete objectionable conditions from a June 25, 1991; 62 FR 232, Jan. 2, 1997; 62 FR
bid provided the conditions do not go 51270, Sept. 30, 1997; 65 FR 80265, Dec. 20, 2000;
66 FR 17756, Apr. 3, 2001; 66 FR 66986, 66989,
to the substance, as distinguished from Dec. 27, 2001]
the form, of the bid, or work an injus-
tice on other bidders. A condition goes 14.4043 Notice to bidders of rejection
to the substance of a bid where it af- of all bids.
fects price, quantity, quality, or deliv- When it is determined necessary to
ery of the items offered. reject all bids, the contracting officer
(f) Any bid may be rejected if the shall notify each bidder that all bids
contracting officer determines in writ- have been rejected and shall state the
ing that it is unreasonable as to price. reason for such action.
Unreasonableness of price includes not
only the total price of the bid, but the 14.4044 Restrictions on disclosure of
descriptive literature.
prices for individual line items as well.
(g) Any bid may be rejected if the When a bid is accompanied by de-
prices for any line items or subline scriptive literature (as defined in 2.101),
and the bidder imposes a restriction
items are materially unbalanced (see
that prevents the public disclosure of
15.4041(g)).
such literature, the restriction may
(h) Bids received from any person or render the bid nonresponsive. The re-
concern that is suspended, debarred, striction renders the bid nonresponsive
proposed for debarment, or declared in- if it prohibits the disclosure of suffi-
eligible as of the bid opening date shall cient information to permit competing
be rejected unless a compelling reason bidders to know the essential nature
determination is made (see subpart and type of the products offered or
9.4). those elements of the bid that relate to
(i) Low bids received from concerns quantity, price, and delivery terms.
determined to be not responsible pursu- The provisions of this paragraph do not
ant to subpart 9.1 shall be rejected (but apply to unsolicited descriptive lit-
if a bidder is a small business concern, erature submitted by a bidder if such
see 19.6 with respect to certificates of literature does not qualify the bid (see
competency). 14.2025(e)).
(j) When a bid guarantee is required [48 FR 42171, Sept. 19, 1983, as amended at 67
and a bidder fails to furnish the guar- FR 13056, Mar. 20, 2002]
antee in accordance with the require-
ments of the invitation for bids, the bid 14.4045 All or none qualifications.
shall be rejected, except as otherwise Unless the solicitation provides oth-
provided in 28.1014. erwise, a bid may be responsive not-
(k) The originals of all rejected bids, withstanding that the bidder specifies
and any written findings with respect that award will be accepted only on all,
to such rejections, shall be preserved or a specified group, of the items. Bid-
with the papers relating to the acquisi- ders shall not be permitted to with-
tion. draw or modify all or none qualifica-
tions after bid opening since such
(l) After submitting a bid, if all of a
qualifications are substantive and af-
bidders assets or that part related to
fect the rights of other bidders.
the bid are transferred during the pe-
riod between the bid opening and the 14.405 Minor informalities or irreg-
award, the transferee may not be able ularities in bids.
to take over the bid. Accordingly, the A minor informality or irregularity
contracting officer shall reject the bid is one that is merely a matter of form
unless the transfer is effected by merg- and not of substance. It also pertains
er, operation of law, or other means to some immaterial defect in a bid or
232
variation of a bid from the exact reports, 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
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
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 infor 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
(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
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.
236
(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
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-
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 bidders 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 revising 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.
238
(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:
239
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.
(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
240
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
241
14.5032 48 CFR Ch. 1 (10103 Edition)
proposal, the acquisition may be con- 15.203 Requests for proposals.

tinued by negotiation. 15.204 Contract format.
15.2041 Uniform contract format.
FR 1739, Jan. 11, 1985; 50 FR 52429, Dec. 23, TABLE 151UNIFORM CONTRACT FORMAT
1985; 51 FR 2649, Jan. 17, 1986; 56 FR 41733, 15.2042 Part IThe Schedule.
Aug. 22, 1991; 60 FR 42654, Aug. 16, 1995; 61 FR 15.2043 Part IIContract Clauses.
69289, Dec. 31, 1996; 62 FR 51270, Sept. 30, 1997; 15.2044 Part IIIList of Documents, Exhib-
64 FR 51839, Sept. 24, 1999; 68 FR 43856, July its, and Other Attachments.
24, 2003] 15.2045 Part IVRepresentations and In-
structions.
14.5032 Step two. 15.205 Issuing solicitations.
(a) Sealed bidding procedures shall be 15.206 Amending the solicitation.
followed except that invitations for 15.207 Handling proposals and information.
bids shall 15.208 Submission, modification, revision,
(1) Be issued only to those offerors and withdrawal of proposals.
15.209 Solicitation provisions and contract
submitting acceptable technical pro- clauses.
posals in step one; 15.210 Forms.
(2) Include the provision prescribed in
14.2016(t); Subpart 15.3Source Selection
(3) Prominently state that the bidder
shall comply with the specifications 15.300 Scope of subpart.
15.301 [Reserved]
and the bidders technical proposal; 15.302 Source selection objective.
and 15.303 Responsibilities.
(4) Not be synopsized through the 15.304 Evaluation factors and significant
Governmentwide point of entry (GPE) subfactors.
as an acquisition opportunity nor pub- 15.305 Proposal evaluation.
licly posted (see 5.101(a)). 15.306 Exchanges with offerors after receipt
(b) The names of firms that sub- of proposals.
mitted acceptable proposals in step one 15.307 Proposal revisions.
15.308 Source selection decision.
will be listed through the GPE for the
benefit of prospective subcontractors Subpart 15.4Contract Pricing
(see 5.207).
[48 FR 42171, Sept. 19, 1983, as amended at 50 15.401 Definitions.
FR 1739, Jan. 11, 1985; 50 FR 52429, Dec. 23, 15.402 Pricing policy.
1985; 56 FR 15149, Apr. 15, 1991; 66 FR 27413, 15.403 Obtaining cost or pricing data.
May 16, 2001; 68 FR 56679, Oct. 1, 2003] 15.4031 Prohibition on obtaining cost or
pricing data (10 U.S.C. 2306a and 41 U.S.C.
PART 15CONTRACTING BY 254b).
NEGOTIATION 15.4032 Other circumstances where cost or
pricing data are not required.
15.4033 Requiring information other than
Sec. cost or pricing data.
15.4034 Requiring cost or pricing data (10
15.001 Definitions.
U.S.C. 2306a and 41 U.S.C. 254b).
15.002 Types of negotiated acquisition.
15.4035 Instructions for submission of cost
or pricing data or information other than
Subpart 15.1Source Selection Processes
cost or pricing data.
and Techniques 15.404 Proposal analysis.
15.100 Scope of subpart. 15.4041 Proposal analysis techniques.
15.101 Best value continuum. 15.4042 Information to support proposal
15.1011 Tradeoff process. analysis.
15.1012 Lowest price technically acceptable 15.4043 Subcontract pricing considerations.
source selection process. 15.4044 Profit.
15.102 Oral presentations. 15.405 Price negotiation.
15.406 Documentation.
Subpart 15.2Solicitation and Receipt of 15.4061 Prenegotiation objectives.
Proposals and Information 15.4062 Certificate of current cost or pric-
ing data.
15.200 Scope of subpart. 15.4063 Documenting the negotiation.
15.201 Exchanges with industry before re- 15.407 Special cost or pricing areas.
ceipt of proposals. 15.4071 Defective cost or pricing data.
15.202 Advisory multi-step process. 15.4072 Make-or-buy programs.
242
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.
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-
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).
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
243
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
244
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
245
15.202 48 CFR Ch. 1 (10103 Edition)
about future acquisitions. An early ex- offerors. When specific information

change of information among industry about a proposed acquisition that
and the program manager, contracting would be necessary for the preparation
officer, and other participants in the of proposals is disclosed to one or more
acquisition process can identify and re- potential offerors, that information
solve concerns regarding the acquisi- must be made available to the public as
tion strategy, including proposed con- soon as practicable, but no later than
tract type, terms and conditions, and the next general release of informa-
acquisition planning schedules; the fea- tion, in order to avoid creating an un-
sibility of the requirement, including fair competitive advantage. Informa-
performance requirements, statements tion provided to a potential offeror in
of work, and data requirements; the response to its request must not be dis-
suitability of the proposal instructions closed if doing so would reveal the po-
and evaluation criteria, including the tential offerors confidential business
approach for assessing past perform- strategy, and is protected under 3.104
ance information; the availability of or subpart 24.2. When conducting a
reference documents; and any other in- presolicitation or preproposal con-
dustry concerns or questions. Some ference, materials distributed at the
techniques to promote early exchanges conference should be made available to
of information are all potential offerors, upon request.
(1) Industry or small business con-
ferences; [62 FR 51230, Sept. 30, 1997, as amended at 67
(2) Public hearings; FR 13056, Mar. 20, 2002]
(3) Market research, as described in
15.202 Advisory multi-step process.
part 10;
(4) One-on-one meetings with poten- (a) The agency may publish a
tial offerors (any that are substantially presolicitation notice (see 5.204) that
involved with potential contract terms provides a general description of the
and conditions should include the con- scope or purpose of the acquisition and
tracting officer; also see paragraph (f) invites potential offerors to submit in-
of this section regarding restrictions formation that allows the Government
on disclosure of information); to advise the offerors about their po-
(5) Presolicitation notices; tential to be viable competitors. The
(6) Draft RFPs; presolicitation notice should identify
(7) RFIs; the information that must be sub-
(8) Presolicitation or preproposal mitted and the criteria that will be
conferences; and used in making the initial evaluation.
(9) Site visits. Information sought may be limited to
(d) The special notices of procure- a statement of qualifications and other
ment matters at 5.205(c), or electronic appropriate information (e.g., proposed
notices, may be used to publicize the technical concept, past performance,
Governments requirement or solicit and limited pricing information). At a
information from industry. minimum, the notice shall contain suf-
(e) RFIs may be used when the Gov- ficient information to permit a poten-
ernment does not presently intend to tial offeror to make an informed deci-
award a contract, but wants to obtain sion about whether to participate in
price, delivery, other market informa- the acquisition. This process should
tion, or capabilities for planning pur- not be used for multi-step acquisitions
poses. Responses to these notices are where it would result in offerors being
not offers and cannot be accepted by required to submit identical informa-
the Government to form a binding con- tion in response to the notice and in re-
tract. There is no required format for sponse to the initial step of the acqui-
RFIs. sition.
(f) General information about agency (b) The agency shall evaluate all re-
mission needs and future requirements sponses in accordance with the criteria
may be disclosed at any time. After restated in the notice, and shall advise
lease of the solicitation, the con- each respondent in writing either that
tracting officer must be the focal point it will be invited to participate in the
of any exchange with potential resultant acquisition or, based on the
246
information submitted, that it is un- (iii) Availability and suitability of

likely to be a viable competitor. The electronic commerce methods; and
agency shall advise respondents consid- (iv) Adequacy of administrative pro-
ered not to be viable competitors of the cedures and controls for receiving,
general basis for that opinion. The identifying, recording, and safe-
agency shall inform all respondents guarding facsimile proposals, and en-
that, notwithstanding the advice pro- suring their timely delivery to the des-
vided by the Government in response ignated proposal delivery location.
to their submissions, they may partici- (2) If facsimile proposals are author-
pate in the resultant acquisition. ized, contracting officers may request
offeror(s) to provide the complete,
15.203 Requests for proposals. original signed proposal at a later date.
(a) Requests for proposals (RFPs) are (e) Letter RFPs may be used in sole
used in negotiated acquisitions to com- source acquisitions and other appro-
municate Government requirements to priate circumstances. Use of a letter
prospective contractors and to solicit RFP does not relieve the contracting
proposals. RFPs for competitive acqui- officer from complying with other FAR
sitions shall, at a minimum, describe requirements. Letter RFPs should be
the as complete as possible and, at a min-
(1) Governments requirement; imum, should contain the following:
(2) Anticipated terms and conditions (1) RFP number and date;
that will apply to the contract: (2) Name, address (including elec-
(i) The solicitation may authorize tronic address and facsimile address, if
offerors to propose alternative terms appropriate), and telephone number of
and conditions, including the contract the contracting officer;
line item number (CLIN) structure; and (3) Type of contract contemplated;
(ii) When alternative CLIN structures (4) Quantity, description, and re-
are permitted, the evaluation approach quired delivery dates for the item;
should consider the potential impact (5) Applicable certifications and rep-
on other terms and conditions or the resentations;
requirement (e.g., place of performance (6) Anticipated contract terms and
or payment and funding requirements) conditions;
(see 15.206); (7) Instructions to offerors and eval-
(3) Information required to be in the uation criteria for other than sole
offerors proposal; and source actions;
(4) Factors and significant subfactors (8) Proposal due date and time; and
that will be used to evaluate the pro- (9) Other relevant information; e.g.,
posal and their relative importance. incentives, variations in delivery
(b) An RFP may be issued for OMB schedule, cost proposal support, and
Circular A76 studies. See subpart 7.3 data requirements.
for additional information regarding (f) Oral RFPs are authorized when
cost comparisons between Government processing a written solicitation would
and contractor performance. delay the acquisition of supplies or
(c) Electronic commerce may be used services to the detriment of the Gov-
to issue RFPs and to receive proposals, ernment and a notice is not required
modifications, and revisions. In this under 5.202 (e.g., perishable items and
case, the RFP shall specify the elec- support of contingency operations or
tronic commerce method(s) that other emergency situations). Use of an
offerors may use (see subpart 4.5). oral RFP does not relieve the con-
(d) Contracting officers may issue tracting officer from complying with
RFPs and/or authorize receipt of pro- other FAR requirements.
posals, modifications, or revisions by (1) The contract files supporting oral
facsimile. solicitations should include
(1) In deciding whether or not to use (i) A description of the requirement;
facsimiles, the contracting officer (ii) Rationale for use of an oral solic-
should consider factors such as itation;
(i) Anticipated proposal size and vol- (iii) Sources solicited, including the
ume; date, time, name of individuals con-
(ii) Urgency of the requirement; tacted, and prices offered; and
247
15.204 48 CFR Ch. 1 (10103 Edition)
(iv) The solicitation number provided TABLE 151UNIFORM CONTRACT FORMAT

to the prospective offerors. Continued
(2) The information furnished to po-
Section Title
tential offerors under oral solicitations
should include appropriate items from Part IIIList of Documents, Exhibits, and Other
paragraph (e) of this section. Attachments
J ......... List of attachments.

15.204 Contract format.
The use of a uniform contract format Part IVRepresentations and Instructions
facilitates preparation of the solicita- K ........ Representations, certifications, and other state-
tion and contract as well as reference ments of offerors or respondents.
to, and use of, those documents by L ......... Instructions, conditions, and notices to offerors or
offerors, contractors, and contract ad- respondents.
ministrators. The uniform contract M ........ Evaluation factors for award.
format need not be used for the fol-
lowing: 15.2042 Part IThe Schedule.
(a) Construction and architect-engi- The contracting officer shall prepare
neer contracts (see part 36).
the contract Schedule as follows:
(b) Subsistence contracts.
(a) Section A, Solicitation/contract form.
(c) Supplies or services contracts re-
(1) Optional Form (OF) 308, Solicita-
quiring special contract formats pre-
scribed elsewhere in this part that are tion and Offer-Negotiated Acquisition,
inconsistent with the uniform format. or Standard Form (SF) 33, Solicitation,
(d) Letter requests for proposals (see Offer and Award, may be used to pre-
15.203(e)). pare RFPs.
(e) Contracts exempted by the agency (2) When other than OF 308 or SF 33
head or designee. is used, include the following informa-
tion on the first page of the solicita-
15.2041 Uniform contract format. tion:
(a) Contracting officers shall prepare (i) Name, address, and location of
solicitations and resulting contracts issuing activity, including room and
using the uniform contract format out- building where proposals or informa-
lined in Table 151 of this subsection. tion must be submitted.
(b) Solicitations using the uniform (ii) Solicitation number.
contract format shall include Parts I, (iii) Date of issuance.
II, III, and IV (see 15.2042 through (iv) Closing date and time.
15.2045). Upon award, contracting offi- (v) Number of pages.
cers shall not physically include Part (vi) Requisition or other purchase au-
IV in the resulting contract, but shall thority.
retain it in the contract file. Section K (vii) Brief description of item or serv-
shall be incorporated by reference in ice.
the contract.
(viii) Requirement for the offeror to
TABLE 151UNIFORM CONTRACT FORMAT provide its name and complete address,
including street, city, county, state,
Section Title and zip code, and electronic address
Part IThe Schedule (including facsimile address), if appro-
priate.
A ........ Solicitation/contract form. (ix) Offer expiration date.
B ........ Supplies or services and prices/costs.
C ........ Description/specifications/statement of work. (b) Section B, Supplies or services and
D ........ Packaging and marking. prices/costs. Include a brief description
E ........ Inspection and acceptance. of the supplies or services; e.g., item
F ........ Deliveries or performance.
G ........ Contract administration data.
number, national stock number/part
H ........ Special contract requirements. number if applicable, nouns, nomen-
clature, and quantities. (This includes
Part IIContract Clauses incidental deliverables such as manu-
I .......... Contract clauses. als and reports.)
248
(c) Section C, Description/specifications/ 15.2045 Part IVRepresentations and

statement of work. Include any descrip- Instructions.
tion or specifications needed in addi- The contracting officer shall prepare
tion to Section B (see part 11, Describ- the representations and instructions as
ing Agency Needs). follows:
(d) Section D, Packaging and marking. (a) Section K, Representations, certifi-
Provide packaging, packing, preserva- cations, and other statements of offerors.
tion, and marking requirements, if Include in this section those solicita-
any. tion provisions that require representa-
(e) Section E, Inspection and accept- tions, certifications, or the submission
ance. Include inspection, acceptance, of other information by offerors.
quality assurance, and reliability re- (b) Section L, Instructions, conditions,
quirements (see part 46, Quality Assur- and notices to offerors or respondents. In-
ance). sert in this section solicitation provi-
(f) Section F, Deliveries or performance. sions and other information and in-
Specify the requirements for time, structions not required elsewhere to
place, and method of delivery or per- guide offerors or respondents in pre-
formance (see subpart 11.4, Delivery or paring proposals or responses to re-
Performance Schedules, and 47.3011). quests for information. Prospective
(g) Section G, Contract administration offerors or respondents may be in-
data. Include any required accounting structed to submit proposals or infor-
and appropriation data and any re- mation in a specific format or sever-
quired contract administration infor- able parts to facilitate evaluation. The
mation or instructions other than instructions may specify further orga-
nization of proposal or response parts,
those on the solicitation form. Include
such as
a statement that the offeror should in-
(1) Administrative;
clude the payment address in the pro-
(2) Management;
posal, if it is different from that shown
(3) Technical;
for the offeror.
(4) Past performance; and
(h) Section H, Special contract require-
(5) Cost or pricing data (see Table 15
ments. Include a clear statement of any
2 of 15.408) or information other than
special contract requirements that are
cost or pricing data.
not included in Section I, Contract
(c) Section M, Evaluation factors for
clauses, or in other sections of the uni-
award. Identify all significant factors
form contract format.
and any significant subfactors that will
15.2043 Part IIContract Clauses. be considered in awarding the contract
and their relative importance (see
Section I, Contract clauses. The con- 15.304(d)). The contracting officer shall
tracting officer shall include in this insert one of the phrases in 15.304(e).
section the clauses required by law or
by this part and any additional clauses 15.205 Issuing solicitations.
expected to be included in any result- (a) The contracting officer shall issue
ing contract, if these clauses are not solicitations to potential sources in ac-
required in any other section of the cordance with the policies and proce-
uniform contract format. An index dures in 5.102, 19.2024, and part 6.
may be inserted if this sections format (b) A master solicitation, as de-
is particularly complex. scribed in 14.2033, may also be used for
negotiated acquisitions.
15.2044 Part IIIList of Documents,
Exhibits, and Other Attachments. 15.206 Amending the solicitation.
Section J, List of attachments. The con- (a) When, either before or after re-
tracting officer shall list the title, ceipt of proposals, the Government
date, and number of pages for each at- changes its requirements or terms and
tached document, exhibit, and other conditions, the contracting officer
attachment. Cross-references to mate- shall amend the solicitation.
rial in other sections may be inserted, (b) Amendments issued before the es-
as appropriate. tablished time and date for receipt of
249
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
250
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
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
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
(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
15.305 48 CFR Ch. 1 (10103 Edition)
15.305 Proposal evaluation. (ii) The solicitation shall describe

the approach for evaluating past per-
(a) Proposal evaluation is an assess-
formance, including evaluating offerors
ment of the proposal and the offerors
with no relevant performance history,
ability to perform the prospective con-
and shall provide offerors an oppor-
tract successfully. An agency shall
tunity to identify past or current con-
evaluate competitive proposals and
tracts (including Federal, State, and
then assess their relative qualities
local government and private) for ef-
solely on the factors and subfactors
forts similar to the Government re-
specified in the solicitation. Evalua-
quirement. The solicitation shall also
tions may be conducted using any rat-
authorize offerors to provide informa-
ing method or combination of methods,
tion on problems encountered on the
including color or adjectival ratings,
identified contracts and the offeror
numerical weights, and ordinal
corrective actions. The Government
rankings. The relative strengths, defi-
shall consider this information, as well
ciencies, significant weaknesses, and
as information obtained from any
risks supporting proposal evaluation
other sources, when evaluating the of-
shall be documented in the contract
feror past performance. The source se-
file.
lection authority shall determine the
(1) Cost or price evaluation. Normally, relevance of similar past performance
competition establishes price reason- information.
ableness. Therefore, when contracting
(iii) The evaluation should take into
on a firm-fixed-price or fixed-price with
account past performance information
economic price adjustment basis, com-
regarding predecessor companies, key
parison of the proposed prices will usu-
personnel who have relevant experi-
ally satisfy the requirement to perform
ence, or subcontractors that will per-
a price analysis, and a cost analysis
form major or critical aspects of the
need not be performed. In limited situ-
requirement when such information is
ations, a cost analysis (see 15.403
relevant to the instant acquisition.
1(c)(1)(i)(B)) may be appropriate to es-
tablish reasonableness of the otherwise (iv) In the case of an offeror without
successful offerors price. When con- a record of relevant past performance
tracting on a cost-reimbursement or for whom information on past per-
basis, evaluations shall include a cost formance is not available, the offeror
realism analysis to determine what the may not be evaluated favorably or un-
Government should realistically expect favorably on past performance.
to pay for the proposed effort, the (v) The evaluation should include the
offerors understanding of the work, past performance of offerors in com-
and the offerors ability to perform the plying with subcontracting plan goals
contract. Cost realism analyses may for small disadvantaged business (SDB)
also be used on fixed-price incentive concerns (see Subpart 19.7), monetary
contracts or, in exceptional cases, on targets for SDB participation (see
other competitive fixed-price-type con- 19.1202), and notifications submitted
tracts (see 15.404-1(d)(3)). (See 37.115 for under 19.12024(b).
uncompensated overtime evaluation.) (3) Technical evaluation. When trade-
The contracting officer shall document offs are performed (see 15.1011), the
the cost or price evaluation. source selection records shall include
(2) Past performance evaluation. (i) (i) An assessment of each offerors
Past performance information is one ability to accomplish the technical re-
indicator of an offerors ability to per- quirements; and
form the contract successfully. The (ii) A summary, matrix, or quan-
currency and relevance of the informa- titative ranking, along with appro-
tion, source of the information, con- priate supporting narrative, of each
text of the data, and general trends in technical proposal using the evaluation
contractors performance shall be con- factors.
sidered. This comparative assessment (4) Cost information. Cost information
of past performance information is sep- may be provided to members of the
arate from the responsibility deter- technical evaluation team in accord-
mination required under subpart 9.1. ance with agency procedures.
254
(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
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
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.
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
15.403 48 CFR Ch. 1 (10103 Edition)
Government; second, on information port a determination of price reason-

obtained from sources other than the ableness or cost realism)
offeror; and, if necessary, on informa- (1) When the contracting officer de-
tion obtained from the offeror. When termines that prices agreed upon are
obtaining information from the offeror based on adequate price competition
is necessary, unless an exception under (see standards in paragraph (c)(1) of
15.4031(b) (1) or (2) applies, such infor- this subsection);
mation submitted by the offeror shall (2) When the contracting officer de-
include, at a minimum, appropriate in- termines that prices agreed upon are
formation on the prices at which the based on prices set by law or regulation
same or similar items have been sold (see standards in paragraph (c)(2) of
previously, adequate for evaluating the this subsection);
reasonableness of the price. (3) When a commercial item is being
(ii) Cost information, that does not acquired (see standards in paragraph
meet the definition of cost or pricing (c)(3) of this subsection);
data at 2.101. (4) When a waiver has been granted
(3) Cost or pricing data. The con- (see standards in paragraph (c)(4) of
tracting officer should use every means this subsection); or
available to ascertain whether a fair (5) When modifying a contract or sub-
and reasonable price can be determined contract for commercial items (see
before requesting cost or pricing data. standards in paragraph (c)(3) of this
Contracting officers must not require subsection).
unnecessarily the submission of cost or (c) Standards for exceptions from cost
pricing data, because it leads to in- or pricing data requirements(1) Ade-
creased proposal preparation costs, quate price competition. A price is based
generally extends acquisition lead on adequate price competition if
time, and consumes additional con- (i) Two or more responsible offerors,
tractor and Government resources. competing independently, submit
(b) Price each contract separately priced offers that satisfy the Govern-
and independently and not ments expressed requirement and if
(1) Use proposed price reductions (A) Award will be made to the offeror
under other contracts as an evaluation whose proposal represents the best
factor; or value (see 2.101) where price is a sub-
(2) Consider losses or profits realized stantial factor in source selection; and
or anticipated under other contracts. (B) There is no finding that the price
(c) Not include in a contract price of the otherwise successful offeror is
any amount for a specified contingency unreasonable. Any finding that the
to the extent that the contract pro- price is unreasonable must be sup-
vides for a price adjustment based upon ported by a statement of the facts and
the occurrence of that contingency. approved at a level above the con-
[62 FR 51230, Sept. 30, 1997, as amended at 66 tracting officer;
FR 2129, Jan. 10, 2001] (ii) There was a reasonable expecta-
tion, based on market research or
15.403 Obtaining cost or pricing data. other assessment, that two or more re-
sponsible offerors, competing independ-
15.4031 Prohibition on obtaining cost ently, would submit priced offers in re-
or pricing data (10 U.S.C. 2306a and sponse to the solicitations expressed
41 U.S.C. 254b). requirement, even though only one
(a) Cost or pricing data shall not be offer is received from a responsible of-
obtained for acquisitions at or below feror and if
the simplified acquisition threshold. (A) Based on the offer received, the
(b) Exceptions to cost or pricing data re- contracting officer can reasonably con-
quirements. The contracting officer clude that the offer was submitted with
shall not require submission of cost or the expectation of competition, e.g.,
pricing data to support any action circumstances indicate that
(contracts, subcontracts, or modifica- (1) The offeror believed that at least
tions) (but may require information one other offeror was capable of sub-
other than cost or pricing data to sup- mitting a meaningful offer; and
258
(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
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
(iii) The modification of any sealed or appropriate subcontractor tier) the

bid or negotiated contract (whether or following in support of any proposal:
not cost or pricing data were initially (1) The cost or pricing data.
required) or any subcontract covered (2) A certificate of current cost or
by paragraph (a)(1)(ii) of this sub- pricing data, in the format specified in
section. Price adjustment amounts 15.4062, certifying that to the best of
must consider both increases and de- its knowledge and belief, the cost or
creases (e.g., a $200,000 modification repricing data were accurate, complete,
sulting from a reduction of $400,000 and and current as of the date of agreement
an increase of $200,000 is a pricing ad- on price or, if applicable, an earlier
justment exceeding $550,000). This re- date agreed upon between the parties
quirement does not apply when unre- that is as close as practicable to the
lated and separately priced changes for date of agreement on price.
which cost or pricing data would not (c) If cost or pricing data are re-
otherwise be required are included for quested and submitted by an offeror,
administrative convenience in the but an exception is later found to
same modification. Negotiated final apply, the data must not be considered
pricing actions (such as termination cost or pricing data as defined in 2.101
settlements and total final price agree- and must not be certified in accordance
ments for fixed-price incentive and re- with 15.4062.
determinable contracts) are contract (d) The requirements of this sub-
modifications requiring cost or pricing
section also apply to contracts entered
data if
into by an agency on behalf of a foreign
(A) The total final price agreement government.
for such settlements or agreements ex-
ceeds the pertinent threshold set forth [62 FR 51230, Sept. 30, 1997, as amended at 65
at paragraph (a)(1) of this subsection; FR 60553, Oct. 11, 2000; 66 FR 2129, Jan. 10,
or 2001]
(B) The partial termination settle-
15.4035 Instructions for submission of
ment plus the estimate to complete the cost or pricing data or information
continued portion of the contract ex- other than cost or pricing data.
ceeds the pertinent threshold set forth
at paragraph (a)(1) of this subsection (a) Taking into consideration the pol-
(see 49.105(c)(15)). icy at 15.402, the contracting officer
(2) Unless prohibited because an ex- shall specify in the solicitation (see
ception at 15.4031(b) applies, the head 15.408 (l) and (m))
of the contracting activity, without (1) Whether cost or pricing data are
power of delegation, may authorize the required;
contracting officer to obtain cost or (2) That, in lieu of submitting cost or
pricing data for pricing actions below pricing data, the offeror may submit a
the pertinent threshold in paragraph request for exception from the require-
(a)(1) of this subsection, provided the ment to submit cost or pricing data;
action exceeds the simplified acquisi- (3) Any information other than cost
tion threshold. The head of the con- or pricing data that is required; and
tracting activity shall justify the re- (4) Necessary preaward or postaward
quirement for cost or pricing data. The access to offerors records.
documentation shall include a written (b)(1) Unless required to be submitted
finding that cost or pricing data are on one of the termination forms speci-
necessary to determine whether the fied in Subpart 49.6, the contracting of-
price is fair and reasonable and the ficer may require submission of cost or
facts supporting that finding. pricing data in the format indicated in
(b) When cost or pricing data are re- Table 152 of 15.408, specify an alter-
quired, the contracting officer shall re- native format, or permit submission in
quire the contractor or prospective the contractors format.
contractor to submit to the con- (2) Information other than cost or
tracting officer (and to have any sub- pricing data may be submitted in the
contractor or prospective subcon- offerors own format unless the con-
tractor submit to the prime contractor tracting officer decides that use of a
261
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.
262
(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.
263
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
264
(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.
265
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
an exception in 15.4031(b) applies to the Governments estimate of allow-

that action. able costs to be incurred in contract
(1) The contractor shall submit, or performance together equal the Gov-
cause to be submitted by the subcon- ernments total prenegotiation objec-
tractor(s), cost or pricing data to the tive. Just as actual costs may vary
Government for subcontracts that are from estimated costs, the contractors
the lower of either actual realized profit or fee may vary
(i) $10,000,000 or more; or from negotiated profit or fee, because
(ii) Both more than the pertinent of such factors as efficiency of perform-
cost or pricing data threshold and more ance, incurrence of costs the Govern-
than 10 percent of the prime contrac- ment does not recognize as allowable,
tors proposed price, unless the con- and the contract type.
tracting officer believes such submis- (2) It is in the Governments interest
sion is unnecessary. to offer contractors opportunities for
(2) The contracting officer may re- financial rewards sufficient to stimu-
quire the contractor or subcontractor late efficient contract performance, at-
to submit to the Government (or cause tract the best capabilities of qualified
submission of) subcontractor cost or large and small business concerns to
pricing data below the thresholds in Government contracts, and maintain a
paragraph (c)(1) of this subsection that viable industrial base.
the contracting officer considers nec- (3) Both the Government and con-
essary for adequately pricing the prime tractors should be concerned with prof-
contract. it as a motivator of efficient and effec-
(3) Subcontractor cost or pricing data tive contract performance. Negotia-
shall be submitted in the format pro- tions aimed merely at reducing prices
vided in Table 152 of 15.408 or the al- by reducing profit, without proper rec-
ternate format specified in the solicita- ognition of the function of profit, are
tion. not in the Governments interest. Ne-
(4) Subcontractor cost or pricing data gotiation of extremely low profits, use
shall be current, accurate, and com- of historical averages, or automatic ap-
plete as of the date of price agreement, plication of predetermined percentages
or, if applicable, an earlier date agreed to total estimated costs do not provide
upon by the parties and specified on proper motivation for optimum con-
the contractors Certificate of Current tract performance.
Cost or Pricing Data. The contractor (b) Policy. (1) Structured approaches
shall update subcontractors data, as (see paragraph (d) of this subsection)
appropriate, during source selection for determining profit or fee
and negotiations. prenegotiation objectives provide a dis-
(5) If there is more than one prospec- cipline for ensuring that all relevant
tive subcontractor for any given work, factors are considered. Subject to the
the contractor need only submit to the authorities in 1.301(c), agencies making
Government cost or pricing data for noncompetitive contract awards over
the prospective subcontractor most $100,000 totaling $50 million or more a
likely to receive the award. year
(i) Shall use a structured approach
15.4044 Profit. for determining the profit or fee objec-
(a) General. This subsection pre- tive in those acquisitions that require
scribes policies for establishing the cost analysis; and
profit or fee portion of the Government (ii) May prescribe specific exemp-
prenegotiation objective in price nego- tions for situations in which manda-
tiations based on cost analysis. tory use of a structured approach
(1) Profit or fee prenegotiation objec- would be clearly inappropriate.
tives do not necessarily represent net (2) Agencies may use another agen-
income to contractors. Rather, they cys structured approach.
represent that element of the potential (c) Contracting officer responsibilities.
total remuneration that contractors (1) When the price negotiation is not
may receive for contract performance based on cost analysis, contracting of-
over and above allowable costs. This ficers are not required to analyze prof-
potential remuneration element and it.
267
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
(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 concerns 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 prospective 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
269
15.405 48 CFR Ch. 1 (10103 Edition)
was recovered directly or indirectly (c) The Governments cost objective

from Government sources. and proposed pricing arrangement di-
(2) Additional factors. In order to fos- rectly affect the profit or fee objective.
ter achievement of program objectives, Because profit or fee is only one of sev-
each agency may include additional eral interrelated variables, the con-
factors in its structured approach or tracting officer shall not agree on prof-
take them into account in the profit it or fee without concurrent agreement
analysis of individual contract actions. on cost and type of contract.
[62 FR 51230, Sept. 30, 1997, as amended at 67 (d) If, however, the contractor insists
FR 6120, Feb. 8, 2002] on a price or demands a profit or fee
that the contracting officer considers
15.405 Price negotiation. unreasonable, and the contracting offi-
(a) The purpose of performing cost or cer has taken all authorized actions
price analysis is to develop a negotia- (including determining the feasibility
tion position that permits the con- of developing an alternative source)
tracting officer and the offeror an op- without success, the contracting offi-
portunity to reach agreement on a fair cer shall refer the contract action to a
and reasonable price. A fair and reason- level above the contracting officer.
able price does not require that agree- Disposition of the action should be doc-
ment be reached on every element of umented.
cost, nor is it mandatory that the
agreed price be within the contracting 15.406 Documentation.
officers initial negotiation position.
15.4061 Prenegotiation objectives.
Taking into consideration the advisory
recommendations, reports of contrib- (a) The prenegotiation objectives es-
uting specialists, and the current sta- tablish the Governments initial nego-
tus of the contractors purchasing sys- tiation position. They assist in the
tem, the contracting officer is respon- contracting officers determination of
sible for exercising the requisite judg- fair and reasonable price. They should
ment needed to reach a negotiated set- be based on the results of the con-
tlement with the offeror and is solely tracting officers analysis of the
responsible for the final price agree- offerors proposal, taking into consid-
ment. However, when significant audit eration all pertinent information in-
or other specialist recommendations cluding field pricing assistance, audit
are not adopted, the contracting officer reports and technical analysis, fact-
should provide rationale that supports finding results, independent Govern-
the negotiation result in the price ne- ment cost estimates and price his-
gotiation documentation. tories.
(b) The contracting officers primary (b) The contracting officer shall es-
concern is the overall price the Govern- tablish prenegotiation objectives be-
ment will actually pay. The con- fore the negotiation of any pricing ac-
tracting officers objective is to nego-
tion. The scope and depth of the anal-
tiate a contract of a type and with a
ysis supporting the objectives should
price providing the contractor the
be directly related to the dollar value,
greatest incentive for efficient and eco-
nomical performance. The negotiation importance, and complexity of the
of a contract type and a price are repricing action. When cost analysis is
lated and should be considered together required, the contracting officer shall
with the issues of risk and uncertainty document the pertinent issues to be ne-
to the contractor and the Government. gotiated, the cost objectives, and a
Therefore, the contracting officer profit or fee objective.
should not become preoccupied with
any single element and should balance 15.4062 Certificate of current cost or
pricing data.
the contract type, cost, and profit or
fee negotiated to achieve a total re- (a) When cost or pricing data are re-
sulta price that is fair and reasonable quired, the contracting officer must re-
to both the Government and the con- quire the contractor to execute a Cer-
tractor. tificate of Current Cost or Pricing
270
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.
271
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:
272
(i) The contractor or subcontractor (7)(i) In addition to the price adjust-

was a sole source supplier or otherwise ment, the Government is entitled to re-
was in a superior bargaining position; covery of any overpayment plus inter-
(ii) The contracting officer should est on the overpayments. The Govern-
have known that the cost or pricing ment is also entitled to penalty
data in issue were defective even amounts on certain of these overpay-
though the contractor or subcontractor ments. Overpayment occurs only when
took no affirmative action to bring the payment is made for supplies or serv-
character of the data to the attention ices accepted by the Government. Over-
of the contracting officer; payments do not result from amounts
(iii) The contract was based on an paid for contract financing, as defined
agreement about the total cost of the in 32.001.
contract and there was no agreement (ii) In calculating the interest
about the cost of each item procured amount due, the contracting officer
under such contract; or shall
(iv) Cost or pricing data were re- (A) Determine the defective pricing
quired; however, the contractor or sub- amounts that have been overpaid to
contractor did not submit a Certificate the contractor;
of Current Cost or Pricing Data relat- (B) Consider the date of each over-
ing to the contract. payment (the date of overpayment for
(4) Subject to paragraphs (b) (5) and this interest calculation shall be the
(6) of this subsection, the contracting date payment was made for the related
officer shall allow an offset for any uncompleted and accepted contract
derstated cost or pricing data sub- items; or for subcontract defective
mitted in support of price negotiations, pricing, the date payment was made to
up to the amount of the Governments the prime contractor, based on prime
claim for overstated pricing data aris- contract progress billings or deliveries,
ing out of the same pricing action (e.g., which included payments for a com-
the initial pricing of the same contract pleted and accepted subcontract item);
or the pricing of the same change and
order). (C) Apply the underpayment interest
(5) An offset shall be allowed only in rate(s) in effect for each quarter from
an amount supported by the facts and the time of overpayment to the time of
if the contractor repayment, utilizing rate(s) prescribed
(i) Certifies to the contracting officer by the Secretary of the Treasury under
that, to the best of the contractors 26 U.S.C. 6621(a)(2).
knowledge and belief, the contractor is (iii) In arriving at the amount due for
entitled to the offset in the amount re- penalties on contracts where the sub-
quested; and mission of defective cost or pricing
(ii) Proves that the cost or pricing data was a knowing submission, the
data were available before the as of contracting officer shall obtain an
date specified on the Certificate of Cur- amount equal to the amount of over-
rent Cost or Pricing Data but were not payment made. Before taking any con-
submitted. Such offsets need not be in tractual actions concerning penalties,
the same cost groupings (e.g., material, the contracting officer shall obtain the
direct labor, or indirect costs). advice of counsel.
(6) An offset shall not be allowed if (iv) In the demand letter, the con-
(i) The understated data were known tracting officer shall separately in-
by the contractor to be understated be- clude
fore the as of date specified on the (A) The repayment amount;
Certificate of Current Cost or Pricing (B) The penalty amount (if any);
Data; or (C) The interest amount through a
(ii) The Government proves that the specified date; and
facts demonstrate that the price would (D) A statement that interest will
not have increased in the amount to be continue to accrue until repayment is
offset even if the available data had made.
been submitted before the as of date (c) If, after award, the contracting of-
specified on the Certificate of Current ficer learns or suspects that the data
Cost or Pricing Data. furnished were not accurate, complete,
273
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
subcontract prices may be available
FR 65354, Dec. 18, 2001]
only from the Government. To the ex-
274
15.4072 Make-or-buy programs. schedules, control of technical and

(a) General. The prime contractor is schedule interfaces, proprietary proc-
responsible for managing contract per- esses, technical superiority or exclu-
formance, including planning, placing, siveness, and technical risks involved.
and administering subcontracts as nec- (e) Program requirements. To support a
essary to ensure the lowest overall cost make-or-buy program, the following
and technical risk to the Government. information shall be supplied by the
When make-or-buy programs are re- contractor in its proposal:
quired, the Government may reserve (1) Items and work included. The infor-
the right to review and agree on the mation required from a contractor in a
contractors make-or-buy program make-or-buy program shall be confined
when necessary to ensure negotiation to those major items or work efforts
of reasonable contract prices, satisfac- that normally would require company
tory performance, or implementation management review of the make-or-
of socioeconomic policies. Consent to buy decision because they are complex,
subcontracts and review of contractors costly, needed in large quantities, or
purchasing systems are separate ac- require additional facilities to produce.
tions covered in part 44. Raw materials, commercial items (see
(b) Definition. Make item, as used in
2.101), and off-the-shelf items (see
this subsection, means an item or work
46.101) shall not be included, unless
effort to be produced or performed by
the prime contractor or its affiliates, their potential impact on contract cost
subsidiaries, or divisions. or schedule is critical. Normally,
(c) Acquisitions requiring make-or-buy make-or-buy programs should not in-
programs. (1) Contracting officers may clude items or work efforts estimated
require prospective contractors to sub- to cost less than 1 percent of the total
mit make-or-buy program plans for ne- estimated contract price or any min-
gotiated acquisitions requiring cost or imum dollar amount set by the agency.
pricing data whose estimated value is (2) The offerors program should in-
$10 million or more, except when the clude or be supported by the following
proposed contract is for research or de- information:
velopment and, if prototypes or hard- (i) A description of each major item
ware are involved, no significant fol- or work effort.
low-on production is anticipated. (ii) Categorization of each major
(2) Contracting officers may require item or work effort as must make,
prospective contractors to submit must buy, or can either make or
make-or-buy programs for negotiated buy.
acquisitions whose estimated value is (iii) For each item or work effort cat-
under $10 million only if the con- egorized as can either make or buy,
tracting officer a proposal either to make or to
(i) Determines that the information buy.
is necessary; and
(iv) Reasons for categorizing items
(ii) Documents the reasons in the
and work efforts as must make or
contract file.
(d) Solicitation requirements. When must buy, and proposing to make
prospective contractors are required to or to buy those categorized as can
submit proposed make-or-buy pro- either make or buy. The reasons must
grams, the solicitation shall include include the consideration given to the
(1) A statement that the program and evaluation factors described in the so-
required supporting information must licitation and must be in sufficient de-
accompany the offer; and tail to permit the contracting officer
(2) A description of factors to be used to evaluate the categorization or pro-
in evaluating the proposed program, posal.
such as capability, capacity, avail- (v) Designation of the plant or divi-
ability of small, small disadvantaged, sion proposed to make each item or
and women-owned small business con- perform each work effort, and a state-
cerns for subcontracting, establishment as to whether the existing or pro-
ment of new facilities in or near labor posed new facility is in or near a labor
surplus areas, delivery or performance surplus area.
275
15.4073 48 CFR Ch. 1 (10103 Edition)
(vi) Identification of proposed subtract performance, the contract price

contractors, if known, and their loca- shall be subject to equitable reduction.
tion and size status (also see Subpart (g) Incorporating make-or-buy programs
19.7 for subcontracting plan require- in contracts. The contracting officer
ments). may incorporate the make-or-buy pro-
(vii) Any recommendations to defer gram in negotiated contracts for
make-or-buy decisions when cat- (1) Major systems (see part 34) or
egorization of some items or work ef- their subsystems or components, re-
forts is impracticable at the time of gardless of contract type; or
submission. (2) Other supplies and services if
(viii) Any other information the con- (i) The contract is a cost-reimburs-
tracting officer requires in order to able contract, or a cost-sharing con-
tract in which the contractors share of
evaluate the program.
the cost is less than 25 percent; and
(f) Evaluation, negotiation, and agree- (ii) The contracting officer deter-
ment. Contracting officers shall evalu- mines that technical or cost risks jus-
ate and negotiate proposed make-or- tify Government review and approval
buy programs as soon as practicable of changes or additions to the make-or-
after their receipt and before contract buy program.
award.
(1) When the program is to be incor- [62 FR 51230, Sept. 30, 1997, as amended at 66
FR 2129, Jan. 10, 2001]
porated in the contract and the design
status of the product being acquired 15.4073 Forward pricing rate agree-
does not permit accurate precontract ments.
identification of major items or work
(a) When cost or pricing data are re-
efforts, the contracting officer shall
quired, offerors are required to describe
notify the prospective contractor in
any forward pricing rate agreements
writing that these items or efforts, (FPRAs) in each specific pricing pro-
when identifiable, shall be added under posal to which the rates apply and to
the clause at 52.2159, Changes or Addi- identify the latest cost or pricing data
tions to Make-or-Buy Program. already submitted in accordance with
(2) Contracting officers normally the agreement. All data submitted in
shall not agree to proposed make connection with the agreement, up-
items when the products or services dated as necessary, form a part of the
are not regularly manufactured or pro- total data that the offeror certifies to
vided by the contractor and are avail- be accurate, complete, and current at
ablequality, quantity, delivery, and the time of agreement on price for an
other essential factors considered initial contract or for a contract modi-
from another firm at equal or lower fication.
prices, or when they are regularly man- (b) Contracting officers will use
ufactured or provided by the con- FPRA rates as bases for pricing all
tractor, but are availablequality, contracts, modifications, and other
quantity, delivery, and other essential contractual actions to be performed
factors considered from another firm during the period covered by the agree-
at lower prices. However, the con- ment. Conditions that may affect the
tracting officer may agree to these as agreements validity shall be reported
make items if an overall lower Gov- promptly to the ACO. If the ACO deter-
ernmentwide cost would result or it is mines that a changed condition invali-
otherwise in the best interest of the dates the agreement, the ACO shall no-
Government. If this situation occurs in tify all interested parties of the extent
any fixed-price incentive or cost-plus- of its effect and status of efforts to es-
incentive-fee contract, the contracting tablish a revised FPRA.
officer shall specify these items in the (c) Contracting officers shall not re-
contract and state that they are sub- quire certification at the time of agree-
ject to paragraph (d) of the clause at ment for data supplied in support of
52.2159, Changes or Additions to Make- FPRAs or other advance agreements.
or-Buy Program (see 15.408(a)). If the When a forward pricing rate agreement
contractor proposes to reverse the cat- or other advance agreement is used to
egorization of such items during con- price a contract action that requires a
276
certificate, the certificate supporting the case of a major system acquisition

that contract action shall cover the (see part 34), when
data supplied to support the FPRA or (i) Some initial production has al-
other advance agreement, and all other ready taken place;
data supporting the action. (ii) The contract will be awarded on a
sole source basis;
15.4074 Should-cost review. (iii) There are future year production
(a) General. (1) Should-cost reviews requirements for substantial quantities
are a specialized form of cost analysis. of like items;
Should-cost reviews differ from tradi- (iv) The items being acquired have a
tional evaluation methods because history of increasing costs;
they do not assume that a contractors (v) The work is sufficiently defined to
historical costs reflect efficient and ec- permit an effective analysis and major
onomical operation. Instead, these re- changes are unlikely;
views evaluate the economy and effi- (vi) Sufficient time is available to
ciency of the contractors existing plan and adequately conduct the
work force, methods, materials, facili- should-cost review; and
ties, operating systems, and manage- (vii) Personnel with the required
ment. These reviews are accomplished skills are available or can be assigned
by a multi-functional team of Govern- for the duration of the should-cost re-
ment contracting, contract administra- view.
tion, pricing, audit, and engineering (3) The contracting officer should de-
representatives. The objective of cide which elements of the contractors
should-cost reviews is to promote both operation have the greatest potential
short and long-range improvements in for cost savings and assign the avail-
the contractors economy and effi- able personnel resources accordingly.
ciency in order to reduce the cost of The expertise of on-site Government
performance of Government contracts. personnel should be used, when appro-
In addition, by providing rationale for priate. While the particular elements
any recommendations and quantifying to be analyzed are a function of the
their impact on cost, the Government contract work task, elements such as
will be better able to develop realistic manufacturing, pricing and account-
objectives for negotiation. ing, management and organization, and
(2) There are two types of should-cost subcontract and vendor management
reviewsprogram should-cost review are normally reviewed in a should-cost
(see paragraph (b) of this subsection) review.
and overhead should-cost review (see (4) In acquisitions for which a pro-
paragraph (c) of this subsection). These gram should-cost review is conducted,
should-cost reviews may be performed a separate program should-cost review
together or independently. The scope of team report, prepared in accordance
a should-cost review can range from a with agency procedures, is required.
large-scale review examining the con- The contracting officer shall consider
tractors entire operation (including the findings and recommendations con-
plant-wide overhead and selected major tained in the program should-cost re-
subcontractors) to a small-scale tai- view team report when negotiating the
lored review examining specific por- contract price. After completing the
tions of a contractors operation. negotiation, the contracting officer
(b) Program should-cost review. (1) A shall provide the ACO a report of any
program should-cost review is used to identified uneconomical or inefficient
evaluate significant elements of direct practices, together with a report of
costs, such as material and labor, and correction or disposition agreements
associated indirect costs, usually asso- reached with the contractor. The con-
ciated with the production of major tracting officer shall establish a fol-
systems. When a program should-cost low-up plan to monitor the correction
review is conducted relative to a con- of the uneconomical or inefficient
tractor proposal, a separate audit re- practices.
port on the proposal is required. (5) When a program should-cost re-
(2) A program should-cost review view is planned, the contracting officer
should be considered, particularly in should state this fact in the acquisition
277
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
278
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 exits 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
279
Pt. 15, Table 152 48 CFR Ch. 1 (10103 Edition)
Pricing DataModifications. Consid- proposal. That examination can take place

ering the hierarchy at 15.402, the con- at any time before award. It may include
tracting officer may insert the clause those books, records, documents, and other
types of factual information (regardless of
at 52.21521, Requirements for Cost or
form or whether the information is specifi-
Pricing Data or Information Other cally referenced or included in the proposal
Than Cost or Pricing DataModifica- as the basis for pricing) that will permit an
tions, in solicitations and contracts if adequate evaluation of the proposed price.
it is reasonably certain that cost or
pricing data or information other than I. General Instructions
cost or pricing data will be required for A. You must provide the following infor-
modifications. This clause also pro- mation on the first page of your pricing pro-
vides instructions to contractors on posal:
how to request an exception. The con- (1) Solicitation, contract, and/or modifica-
tion number;
tracting officer shall
(2) Name and address of offeror;
(1) Use the clause with its Alternate (3) Name and telephone number of point of
I to specify a format for cost or pricing contact;
data other than the format required by (4) Name of contract administration office
Table 152 of this section; (if available);
(2) Use the clause with its Alternate (5) Type of contract action (that is, new
II if copies of the proposal are to be contract, change order, price revision/rede-
sent to the ACO and contract auditor; termination, letter contract, unpriced order,
(3) Use the clause with its Alternate or other);
(6) Proposed cost; profit or fee; and total;
III if submission via electronic media (7) Whether you will require the use of
is required; and Government property in the performance of
(4) Replace the basic clause with its the contract, and, if so, what property;
Alternate IV if cost or pricing data are (8) Whether your organization is subject to
not expected to be required because an cost accounting standards; whether your or-
exception may apply, but information ganization has submitted a CASB Disclosure
other than cost or pricing data is re- Statement, and if it has been determined
quired as described in 15.4033. adequate; whether you have been notified
that you are or may be in noncompliance
TABLE 152 TO PART 15INSTRUCTIONS with your Disclosure Statement or CAS
(other than a noncompliance that the cog-
FOR SUBMITTING COST/PRICE PRO-
nizant Federal agency official has deter-
POSALS WHEN COST OR PRICING mined to have an immaterial cost impact),
DATA ARE REQUIRED and, if yes, an explanation; whether any as-
pect of this proposal is inconsistent with
This document provides instructions for
your disclosed practices or applicable CAS,
preparing a contract pricing proposal when
and, if so, an explanation; and whether the
cost or pricing data are required.
proposal is consistent with your established
NOTE 1: There is a clear distinction be- estimating and accounting principles and
tween submitting cost or pricing data and procedures and FAR Part 31, Cost Principles,
merely making available books, records, and and, if not, an explanation;
other documents without identification. The (9) The following statement: This proposal
requirement for submission of cost or pricing reflects our estimates and/or actual costs as
data is met when all accurate cost or pricing of this date and conforms with the instruc-
data reasonably available to the offeror have tions in FAR 15.4035(b)(1) and Table 152. By
been submitted, either actually or by spe- submitting this proposal, we grant the Con-
cific identification, to the Contracting Offi- tracting Officer and authorized representa-
cer or an authorized representative. As later tive(s) the right to examine, at any time be-
information comes into your possession, it fore award, those records, which include
should be submitted promptly to the Con- books, documents, accounting procedures
tracting Officer in a manner that clearly and practices, and other data, regardless of
shows how the information relates to the type and form or whether such supporting
offerors price proposal. The requirement for information is specifically referenced or in-
submission of cost or pricing data continues cluded in the proposal as the basis for pric-
up to the time of agreement on price, or an ing, that will permit an adequate evaluation
earlier date agreed upon between the parties of the proposed price.
if applicable. (10) Date of submission; and
NOTE 2: By submitting your proposal, you (11) Name, title, and signature of author-
grant the Contracting Officer or an authorized representative.
ized representative the right to examine B. In submitting your proposal, you must
records that formed the basis for the pricing include an index, appropriately referenced,
280
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 proposals. 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
281
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)
Cost Proposed contract Proposed contract Reference

elements estimatetotal cost estimateunit cost
(1) (2) (3) (4)
Column and Instruction cally requested to do so by the Contracting

Officer, provide a full identification and ex-
(1) Enter appropriate cost elements. planation of them.
(2) Enter those necessary and reasonable (3) Optional, unless required by the Con-
costs that, in your judgment, will properly tracting Officer.
be incurred in efficient contract perform- (4) Identify the attachment in which the
ance. When any of the costs in this column information supporting the specific cost ele-
have already been incurred (e.g., under a let- ment may be found. (Attach separate pages
ter contract), describe them on an attached as necessary.)
supporting page. When preproduction or
startup costs are significant, or when specifi- B. Change Orders, Modifications, and Claims
Estimated cost Cost of deleted

Cost Net cost to be Cost of work Net cost of
of all work de- work already Reference
elements deleted added change
leted performed
(1) (2) (3) (4) (5) (6) (7)
Column and Instruction (3) Include the incurred cost of deleted

work already performed, using actuals in-
(1) Enter appropriate cost elements.
curred if possible, or, if actuals are not avail-
(2) Include the current estimates of what
able, estimates from your accounting
the cost would have been to complete the de-
records. Attach a detailed inventory of work,
leted work not yet performed (not the origi-
materials, parts, components, and hardware
nal proposal estimates), and the cost of de-
already purchased, manufactured, or per-
leted work already performed.
formed and deleted by the change, indicating
282
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.
283
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
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
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
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.
286
(b) If a protest causes the agency, products, services, or potential capa-

within 1 year of contract award, to bilities, or designed to stimulate the
(1) Issue a new solicitation on the Governments interest in buying such
protested contract award, the con- products or services.
tracting officer shall provide the infor- Commercial item offer means an offer
mation in paragraph (c) of this section of a commercial item that the vendor
to all prospective offerors for the new wishes to see introduced in the Govern-
solicitation; or ments supply system as an alternate
(2) Issue a new request for revised or a replacement for an existing supply
proposals on the protested contract item. This term does not include inno-
award, the contracting officer shall vative or unique configurations or uses
provide the information in paragraph of commercial items that are being of-
(c) of this section to offerors that were fered for further development and that
in the competitive range and are re- may be submitted as an unsolicited
quested to submit revised proposals. proposal.
(c) The following information will be Contribution means a concept, sugges-
provided to appropriate parties: tion, or idea presented to the Govern-
(1) Information provided to unsuc- ment for its use with no indication
cessful offerors in any debriefings con- that the source intends to devote any
ducted on the original award regarding further effort to it on the Govern-
the successful offerors proposal; and ments behalf.
(2) Other nonproprietary information
that would have been provided to the FR 2129, Jan. 10, 2001]
original offerors.
15.602 Policy.
15.508 Discovery of mistakes.
It is the policy of the Government to
Mistakes in a contractors proposal
encourage the submission of new and
that are disclosed after award shall be
innovative ideas in response to Broad
processed substantially in accordance
Agency Announcements, Small Busi-
with the procedures for mistakes in
ness Innovation Research topics, Small
bids at 14.4074.
Business Technology Transfer Re-
15.509 Forms. search topics, Program Research and
Development Announcements, or any
Optional Form 307, Contract Award, other Government-initiated solicita-
Standard Form (SF) 26, Award/Con- tion or program. When the new and in-
tract, or SF 33, Solicitation, Offer and novative ideas do not fall under topic
Award, may be used to award nego- areas publicized under those programs
tiated contracts in which the signature or techniques, the ideas may be sub-
of both parties on a single document is mitted as unsolicited proposals.
appropriate. If these forms are not
used, the award document shall incor- 15.603 General.
porate the agreement and award lan-
guage from the OF 307. (a) Unsolicited proposals allow
unique and innovative ideas or ap-
proaches that have been developed out-
Subpart 15.6Unsolicited side the Government to be made avail-
Proposals able to Government agencies for use in
accomplishment of their missions. Un-
15.600 Scope of subpart. solicited proposals are offered with the
This subpart sets forth policies and intent that the Government will enter
procedures concerning the submission, into a contract with the offeror for re-
receipt, evaluation, and acceptance or search and development or other ef-
rejection of unsolicited proposals. forts supporting the Government mis-
sion, and often represent a substantial
15.601 Definitions. investment of time and effort by the
As used in this subpart offeror.
Advertising material means material (b) Advertising material, commercial
designed to acquaint the Government item offers, or contributions, as defined
with a prospective contractors present in 15.601, or routine correspondence on
287
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
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 contract without providing for full and
tractually; and open competition. The agency point of
289
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 ined 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
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
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,
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-
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.
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.
291
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.
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
(c) The cost-plus-a-percentage-of-cost (d) Each contract file shall include

system of contracting shall not be used documentation to show why the par-
(see 10 U.S.C. 2306(a) and 41 U.S.C. ticular contract type was selected. Ex-
254(b)). Prime contracts (including let- ceptions to this requirement are:
ter contracts) other than firm-fixed- (1) Fixed-price acquisitions made
price contracts shall, by an appropriate under simplified acquisition proce-
clause, prohibit cost- plus-a-percent- dures,
age-of-cost subcontracts (see clauses (2) Contracts on a firm fixed-price
prescribed in subpart 44.2 for cost-reim- basis other than those for major sys-
bursement contracts and subparts 16.2 tems or research and development, and
and 16.4 for fixed-price contracts). (3) Awards on the set-aside portion of
(d) No contract may be awarded be- sealed bid partial set-asides for small
fore the execution of any determina- business.
tion and findings (D&Fs) required by
this part. Minimum requirements for
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
the content of D&Fs required by this 1985; 54 FR 5054, Jan. 31, 1989; 60 FR 34756,
part are specified in 1.704. July 3, 1995; 60 FR 48260, Sept. 18, 1995; 61 FR
[48 FR 42219, Sept. 19, 1983, as amended at 50 39198, July 26, 1996]
FR 1741, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985] 16.104 Factors in selecting contract
types.
16.103 Negotiating contract type. There are many factors that the con-
(a) Selecting the contract type is tracting officer should consider in se-
generally a matter for negotiation and lecting and negotiating the contract
requires the exercise of sound judg- type. They include the following:
ment. Negotiating the contract type (a) Price competition. Normally, effec-
and negotiating prices are closely re- tive price competition results in real-
lated and should be considered to- istic pricing, and a fixed-price contract
gether. The objective is to negotiate a is ordinarily in the Governments in-
contract type and price (or estimated terest.
cost and fee) that will result in reason- (b) Price analysis. Price analysis with
able contractor risk and provide the or without competition, may provide a
contractor with the greatest incentive basis for selecting the contract type.
for efficient and economical perform- The degree to which price analysis can
ance. provide a realistic pricing standard
(b) A firm-fixed-price contract, which should be carefully considered. (See
best utilizes the basic profit motive of 15.4041(b).)
business enterprise, shall be used when (c) Cost analysis. In the absence of ef-
the risk involved is minimal or can be fective price competition and if price
predicted with an acceptable degree of analysis is not sufficient, the cost esti-
certainty. However, when a reasonable mates of the offeror and the Govern-
basis for firm pricing does not exist, ment provide the bases for negotiating
other contract types should be consid- contract pricing arrangements. It is es-
ered, and negotiations should be di- sential that the uncertainties involved
rected toward selecting a contract type in performance and their possible im-
(or combination of types) that will ap- pact upon costs be identified and evalu-
propriately tie profit to contractor per- ated, so that a contract type that
formance. places a reasonable degree of cost re-
(c) In the course of an acquisition sponsibility upon the contractor can be
program, a series of contracts, or a sin- negotiated.
gle long-term contract, changing cir- (d) Type and complexity of the require-
cumstances may make a different con- ment. Complex requirements, particu-
tract type appropriate in later periods larly those unique to the Government,
than that used at the outset. In par- usually result in greater risk assump-
ticular, contracting officers should tion by the Government. This is espe-
avoid protracted use of a cost-reim- cially true for complex research and
bursement or time-and-materials con- development contracts, when perform-
tract after experience provides a basis ance uncertainties or the likelihood of
for firmer pricing. changes makes it difficult to estimate
293
16.105 48 CFR Ch. 1 (10103 Edition)
performance costs in advance. As a re- 1, Type of Contract, in a solicitation

quirement recurs or as quantity pro- unless it is for
duction begins, the cost risk should (a) A fixed-price acquisition made
shift to the contractor, and a fixed- under simplified acquisition proce-
price contract should be considered. dures; or
(e) Urgency of the requirement. If ur- (b) Information or planning purposes.
gency is a primary factor, the Govern-
ment may choose to assume a greater [60 FR 34756, July 3, 1995, as amended at 61
proportion of risk or it may offer in- FR 39198, July 26, 1996]
centives to ensure timely contract per-
formance. Subpart 16.2Fixed-Price
(f) Period of performance or length of Contracts
production run. In times of economic
uncertainty, contracts extending over 16.201 General.
a relatively long period may require Fixed-price types of contracts pro-
economic price adjustment terms. vide for a firm price or, in appropriate
(g) Contractors technical capability cases, an adjustable price. Fixed-price
and financial responsibility. contracts providing for an adjustable
(h) Adequacy of the contractors ac- price may include a ceiling price, a tar-
counting system. Before agreeing on a
get price (including target cost), or
contract type other than firm-fixed-
both. Unless otherwise specified in the
price, the contracting officer shall en-
contract, the ceiling price or target
sure that the contractors accounting
system will permit timely development price is subject to adjustment only by
of all necessary cost data in the form operation of contract clauses providing
required by the proposed contract type. for equitable adjustment or other revi-
This factor may be critical when the sion of the contract price under stated
contract type requires price revision circumstances. The contracting officer
while performance is in progress, or shall use firm-fixed-price or fixed-price
when a cost-reimbursement contract is with economic price adjustment con-
being considered and all current or tracts when acquiring commercial
past experience with the contractor items.
has been on a fixed-price basis.
(i) Concurrent contracts. If perform- FR 48248, Sept. 18, 1995]
ance under the proposed contract in-
volves concurrent operations under 16.202 Firm-fixed-price contracts.
other contracts, the impact of those
contracts, including their pricing ar- 16.2021 Description.
rangements, should be considered.
A firm-fixed-price contract provides
(j) Extent and nature of proposed sub- for a price that is not subject to any
contracting. If the contractor proposes
adjustment on the basis of the contrac-
extensive subcontracting, a contract
tors cost experience in performing the
type reflecting the actual risks to the
prime contractor should be selected. contract. This contract type places
upon the contractor maximum risk and
(k) Acquisition history. Contractor
risk usually decreases as the require- full responsibility for all costs and re-
ment is repetitively acquired. Also, sulting profit or loss. It provides max-
product descriptions or descriptions of imum incentive for the contractor to
services to be performed can be defined control costs and perform effectively
more clearly. and imposes a minimum administra-
tive burden upon the contracting par-
[48 FR 42219, Sept. 19, 1983, as amended at 50 ties. The contracting officer may use a
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 62 FR 44814, Aug. 22, 1997; 62 FR 51270,
firm-fixed-price contract in conjunc-
Sept. 30, 1997] tion with an award-fee incentive (see
16.404) and performance or delivery in-
16.105 Solicitation provision. centives (see 16.4022 and 16.4023) when
The contracting officer shall com- the award fee or incentive is based
plete and insert the provision at 52.216 solely on factors other than cost. The
294
contract type remains firm-fixed-price (3) Adjustments based on cost indexes of

when used with these incentives. labor or material. These price adjust-
ments are based on increases or de-
FR 13201, Mar. 18, 2003] creases in labor or material cost stand-
ards or indexes that are specifically
16.2022 Application. identified in the contract.
A firm-fixed-price contract is suit- (b) The contracting officer may use a
able for acquiring commercial items fixed-price contract with economic
(see parts 2 and 12) or for acquiring price adjustment in conjunction with
other supplies or services on the basis an award-fee incentive (see 16.404) and
of reasonably definite functional or de- performance or delivery incentives (see
tailed specifications (see part 11) when 16.4022 and 16.4023) when the award
the contracting officer can establish fee or incentive is based solely on fac-
fair and reasonable prices at the out- tors other than cost. The contract type
set, such as when remains fixed-price with economic
(a) There is adequate price competi- price adjustment when used with these
tion; incentives.
(b) There are reasonable price com- [48 FR 42219, Sept. 19, 1983, as amended at 68
parisons with prior purchases of the FR 13201, Mar. 18, 2003]
same or similar supplies or services
made on a competitive basis or sup- 16.2032 Application.
ported by valid cost or pricing data;
A fixed-price contract with economic
(c) Available cost or pricing informa-
price adjustment may be used when (i)
tion permits realistic estimates of the
there is serious doubt concerning the
probable costs of performance; or
stability of market or labor conditions
(d) Performance uncertainties can be
that will exist during an extended pe-
identified and reasonable estimates of
riod of contract performance, and (ii)
their cost impact can be made, and the
contingencies that would otherwise be
contractor is willing to accept a firm
included in the contract price can be
fixed price representing assumption of
identified and covered separately in
the risks involved.
the contract. Price adjustments based
[48 FR 42219, Sept. 19, 1983, as amended at 60 on established prices should normally
FR 48248, Sept. 18, 1995] be restricted to industry-wide contin-
gencies. Price adjustments based on
16.203 Fixed-price contracts with eco- labor and material costs should be lim-
nomic price adjustment.
ited to contingencies beyond the con-
16.2031 Description. tractors control. For use of economic
price adjustment in sealed bid con-
(a) A fixed-price contract with eco- tracts, see 14.4084.
nomic price adjustment provides for
(a) In establishing the base level
upward and downward revision of the
from which adjustment will be made,
stated contract price upon the occur-
the contracting officer shall ensure
rence of specified contingencies. Eco-
that contingency allowances are not
nomic price adjustments are of three
duplicated by inclusion in both the
general types:
base price and the adjustment re-
(1) Adjustments based on established
quested by the contractor under eco-
prices. These price adjustments are
nomic price adjustment clause.
based on increases or decreases from an
agreed-upon level in published or oth- (b) In contracts that do not require
erwise established prices of specific submission of cost or pricing data, the
items or the contract end items. contracting officer shall obtain ade-
(2) Adjustments based on actual costs of quate information to establish the base
labor or material. These price adjust- level from which adjustment will be
ments are based on increases or de- made and may require verification of
creases in specified costs of labor or data submitted.
material that the contractor actually [48 FR 42219, Sept. 19, 1983, as amended at 50
experiences during contract perform- FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
ance. 1985; 60 FR 34739, July 3, 1995]
295
16.2033 48 CFR Ch. 1 (10103 Edition)
16.2033 Limitations. prices can be reasonably related to the

A fixed-price contract with economic prices of nearly equivalent standard
price adjustment shall not be used un- supplies that have an established cata-
less the contracting officer determines log or market price.
that it is necessary either to protect (iii) The contracting officer has made
the contractor and the Government the determination specified in 16.2033.
against significant fluctuations in (2) If all conditions in subparagraph
labor or material costs or to provide (b)(1) above apply and the contracting
for contract price adjustment in the officer determines that the use of the
event of changes in the contractors es- clause at 52.2163 is inappropriate, the
tablished prices. contracting officer may use an agency-
prescribed clause instead of the clause
16.2034 Contract clauses. at 52.2163.
(a) Adjustment based on established (3) If the negotiated unit price re-
pricesstandard supplies. (1) The con- flects a net price after applying a trade
tracting officer shall, when contracting discount from a catalog or list price,
by negotiation, insert the clause at the contracting officer shall document
52.2162, Economic Price Adjustment in the contract file both the catalog or
Standard Supplies, or an agency-pre- list price and the discount. (This does
scribed clause as authorized in sub- not apply to prompt payment or cash
paragraph (2) below, in solicitations discounts.)
and contracts when all of the following (4) Before entering into the contract,
conditions apply: the contracting officer and contractor
(i) A fixed-price contract is con- must agree in writing on the identity
templated. of the standard supplies and the cor-
(ii) The requirement is for standard responding contract line items to
supplies that have an established cata- which the clause applies.
log or market price. (5) If the supplies are standard, ex-
(iii) The contracting officer has made cept for preservation, packaging, and
the determination specified in 16.2033. packing requirements, the clause pre-
(2) If all the conditions in subpara- scribed in 16.2034(a), shall be used
graph (a)(1) above apply and the con- rather than this clause.
tracting officer determines that the (c) Adjustments based on actual cost of
use of the clause at 52.2162 is inappro- labor or material. (1) The contracting of-
priate, the contracting officer may use
ficer shall, when contracting by nego-
an agency-prescribed clause instead of
tiation, insert a clause that is substan-
the clause at 52.2162.
tially the same as the clause at 52.216
(3) If the negotiated unit price re-
4, Economic Price AdjustmentLabor
flects a net price after applying a trade
and Material, or an agency-prescribed
discount from a catalog or list price,
clause as authorized in subparagraph
the contracting officer shall document
(2) below, in solicitation and contracts
in the contract file both the catalog or
when all of the following conditions
list price and the discount. (This does
apply:
not apply to prompt payment or cash
discounts.) (i) A fixed-price contract is con-
(b) Adjustment based on established templated.
pricessemistandard supplies. (1) The (ii) There is no major element of de-
contracting officer shall, when con- sign engineering or development work
tracting by negotiation, insert the involved.
clause at 52.2163, Economic Price Ad- (iii) One or more identifiable labor or
justmentSemistandard Supplies, or material cost factors are subject to
an agency-prescribed clause as author- change.
ized in subparagraph (2) below, in so- (iv) The contracting officer has made
licitations and contracts when all of the determination specified in 16.2033.
the following conditions apply: (2) If all conditions in subparagraph
(i) A fixed price contract is con- (c)(1) above apply and the contracting
templated. officer determines that the use of the
(ii) The requirement is for clause at 52.2164 is inappropriate, the
semistandard supplies for which the contracting officer may use an agency-
296
prescribed clause instead of the clause 16.204 Fixed-price incentive contracts.

at 52.2164.
A fixed-price incentive contract is a
(3) The contracting officer shall de-
fixed-price contract that provides for
scribe in detail in the contract Sched-
adjusting profit and establishing the
ule
final contract price by a formula based
(i) The types of labor and materials
on the relationship of final negotiated
subject to adjustment under the clause;
total cost to total target cost. Fixed-
(ii) The labor rates, including fringe
price incentive contracts are covered
benefits (if any) and unit prices of ma-
in subpart 16.4, Incentive Contracts.
terials that may be increased or de-
See 16.403 for more complete descrip-
creased; and
tions, application, and limitations for
(iii) The quantities of the specified
these contracts. Prescribed clauses are
labor and materials allocable to each
unit to be delivered under the contract. found at 16.406.
(4) In negotiating adjustments under [48 FR 42219, Sept. 19, 1983, as amended at 59
the clause, the contracting officer FR 11387, Mar. 10, 1994; 62 FR 12695, Mar. 17,
shall 1997]
(i) Consider work in process and ma-
terials on hand at the time of changes 16.205 Fixed-price contracts with pro-
spective price redetermination.
in labor rates, including fringe benefits
(if any) or material prices; 16.2051 Description.
(ii) Not include in adjustments any
indirect cost (except fringe benefits as A fixed-price contract with prospec-
defined in 31.2056(m)) or profit; and tive price redetermination provides for
(iii) Consider only those fringe bene- (a) a firm fixed price for an initial pe-
fits specified in the contract Schedule. riod of contract deliveries or perform-
(d) Adjustments based on cost indexes of ance and (b) prospective redetermina-
labor or material. The contracting offi- tion, at a stated time or times during
cer should consider using an economic performance, of the price for subse-
price adjustment clause based on cost quent periods of performance.
indexes of labor or material under the
circumstances and subject to approval 16.2052 Application.
as described in subparagraphs (1) and A fixed-price contract with prospec-
(2) below. tive price redetermination may be used
(1) A clause providing adjustment in acquisitions of quantity production
based on cost indexes of labor or mate- or services for which it is possible to
rials may be appropriate when negotiate a fair and reasonable firm
(i) The contract involves an extended fixed price for an initial period, but not
period of performance with significant for subsequent periods of contract per-
costs to be incurred beyond 1 year after formance.
performance begins; (a) The initial period should be the
(ii) The contract amount subject to longest period for which it is possible
adjustment is substantial; and to negotiate a fair and reasonable firm
(iii) The economic variables for labor fixed price. Each subsequent pricing
and materials are too unstable to per- period should be at least 12 months.
mit a reasonable division of risk be- (b) The contract may provide for a
tween the Government and the con- ceiling price based on evaluation of the
tractor, without this type of clause. uncertainties involved in performance
(2) Any clause using this method and their possible cost impact. This
shall be prepared and approved under ceiling price should provide for as-
agency procedures. Because of the vari- sumption of a reasonable proportion of
ations in circumstances and clause the risk by the contractor and, once es-
wording that may arise, no standard tablished, may be adjusted only by op-
clause is prescribed. eration of contract clauses providing
[48 FR 42219, Sept. 19, 1983, as amended at 52 for equitable adjustment or other revi-
FR 19803, May 27, 1987; 60 FR 48217, Sept. 18, sion of the contract price under stated
1995; 62 FR 259, Jan. 2, 1997] circumstances.
297
16.2053 48 CFR Ch. 1 (10103 Edition)
16.2053 Limitations. may be adjusted only if required by the

This contract type shall not be used operation of contract clauses providing
unless for equitable adjustment or other revi-
(a) Negotiations have established sion of the contract price under stated
that (1) the conditions for use of a circumstances.
firm-fixed-price contract are not (b) The contract should be awarded
present (see 16.2022), and (2) a fixed- only after negotiation of a billing price
price incentive contract would not be that is as fair and reasonable as the
more appropriate; circumstances permit.
(b) The contractors accounting sys- (c) Since this contract type provides
tem is adequate for price redetermina- the contractor no cost control incen-
tion; tive except the ceiling price, the con-
(c) The prospective pricing periods tracting officer should make clear to
can be made to conform with operation the contractor during discussion before
of the contractors accounting system; award that the contractors manage-
and ment effectiveness and ingenuity will
(d) There is reasonable assurance be considered in retroactively redeter-
that price redetermination actions will mining the price.
take place promptly at the specified
times. 16.2063 Limitations.
This contract type shall not be used
16.2054 Contract clause. unless
The contracting officer shall, when (a) The contract is for research and
contracting by negotiation, insert the development and the estimated cost is
clause at 52.2165, Price Redetermina- $100,000 or less;
tionProspective, in solicitations and (b) The contractors accounting sys-
contracts when a fixed-price contract tem is adequate for price redetermina-
is contemplated and the conditions tion;
specified in 16.2052 and 16.2053(a) (c) There is reasonable assurance
through (d) apply. that the price redetermination will
take place promptly at the specified
16.206 Fixed-ceiling-price contracts
with retroactive price redetermina- time; and
tion. (d) The head of the contracting activ-
ity (or a higher-level official, if re-
16.2061 Description. quired by agency procedures) approves
A fixed-ceiling-price contract with its use in writing.
retroactive price redetermination pro-
vides for (a) a fixed ceiling price and (b) 16.2064 Contract clause.
retroactive price redetermination The contracting officer shall, when
within the ceiling after completion of contracting by negotiation, insert the
the contract. clause at 52.2166, Price Redetermina-
tionRetroactive, in solicitations and
16.2062 Application. contracts when a fixed-price contract
A fixed-ceiling-price contract with is contemplated and the conditions in
retroactive price redetermination is 16.2062 and 16.2063(a) through (d)
appropriate for research and develop- apply.
ment contracts estimated at $100,000 or
less when it is established at the outset 16.207 Firm-fixed-price, level-of-effort
that a fair and reasonable firm fixed term contracts.
price cannot be negotiated and that the
amount involved and short perform- 16.2071 Description.
ance period make the use of any other A firm-fixed-price, level-of-effort
fixed-price contract type impracti- term contract requires (a) the con-
cable. tractor to provide a specified level of
(a) A ceiling price shall be negotiated effort, over a stated period of time, on
for the contract at a level that reflects work that can be stated only in general
a reasonable sharing of risk by the con- terms and (b) the Government to pay
tractor. The established ceiling price the contractor a fixed dollar amount.
298
16.2072 Application. (2) Appropriate Government surveil-

A firm-fixed-price, level-of-effort lance during performance will provide
term contract is suitable for investiga- reasonable assurance that efficient
tion or study in a specific research and methods and effective cost controls are
development area. The product of the used.
contract is usually a report showing (b) The use of cost-reimbursement
the results achieved through applica- contracts is prohibited for the acquisi-
tion of the required level of effort. tion of commercial items (see parts 2
However, payment is based on the ef- and 12).
fort expended rather than on the re-
sults achieved. FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985; 59 FR 64785, Dec. 15, 1994; 60 FR 48248,
Sept. 18, 1995; 63 FR 34073, June 22, 1998]
This contract type may be used only
when 16.302 Cost contracts.
(a) The work required cannot other-
(a) Description. A cost contract is a
wise be clearly defined;
cost-reimbursement contract in which
(b) The required level of effort is
the contractor receives no fee.
identified and agreed upon in advance;
(c) There is reasonable assurance (b) Application. A cost contract may
that the intended result cannot be be appropriate for research and devel-
achieved by expending less than the opment work, particularly with non-
stipulated effort; and profit educational institutions or other
(d) The contract price is $100,000 or nonprofit organizations, and for facili-
less, unless approved by the chief of the ties contracts.
contracting office. (c) Limitations. See 16.3013.
Subpart 16.3Cost- 16.303 Cost-sharing contracts.

Reimbursement Contracts (a) Description. A cost-sharing con-
tract is a cost-reimbursement contract
16.301 General. in which the contractor receives no fee
and is reimbursed only for an agreed-
upon portion of its allowable costs.
Cost-reimbursement types of con- (b) Application. A cost-sharing con-
tracts provide for payment of allowable tract may be used when the contractor
incurred costs, to the extent prescribed agrees to absorb a portion of the costs,
in the contract. These contracts estab- in the expectation of substantial com-
lish an estimate of total cost for the
pensating benefits.
purpose of obligating funds and estab-
(c) Limitations. See 16.3013.
lishing a ceiling that the contractor
may not exceed (except at its own risk) 16.304 Cost-plus-incentive-fee con-
without the approval of the contracts.
tracting officer.
A cost-plus-incentive-fee contract is
16.3012 Application. a cost-reimbursement contract that
Cost-reimbursement contracts are provides for an initially negotiated fee
suitable for use only when uncertain- to be adjusted later by a formula based
ties involved in contract performance on the relationship of total allowable
do not permit costs to be estimated costs to total target costs. Cost-plus-
with sufficient accuracy to use any incentive-fee contracts are covered in
type of fixed-price contract. subpart 16.4, Incentive Contracts. See
16.4051 for a more complete descrip-
16.3013 Limitations. tion and discussion of application of
(a) A cost-reimbursement contract these contracts. See 16.3013 for limita-
may be used only when tions.
(1) The contractors accounting sys-
tem is adequate for determining costs
FR 12695, Mar. 17, 1997]
applicable to the contract; and
299
16.305 48 CFR Ch. 1 (10103 Edition)
16.305 Cost-plus-award-fee contracts. limitations in 15.4044(c)(4)(i) and

16.3013.
A cost-plus-award-fee contract is a
(d) Completion and term forms. A cost-
cost-reimbursement contract that pro-
plus-fixed-fee contract may take one of
vides for a fee consisting of (a) a base
two basic formscompletion or term.
amount (which may be zero) fixed at
(1) The completion form describes the
inception of the contract and (b) an scope of work by stating a definite goal
award amount, based upon a or target and specifying an end prod-
judgmental evaluation by the Govern- uct. This form of contract normally re-
ment, sufficient to provide motivation quires the contractor to complete and
for excellence in contract performance. deliver the specified end product (e.g.,
Cost-plus-award-fee contracts are cov- a final report of research accom-
ered in subpart 16.4, Incentive Con-
plishing the goal or target) within the
tracts. See 16.4052 for a more complete
estimated cost, if possible, as a condi-
description and discussion of applica-
tion for payment of the entire fixed fee.
tion of these contracts. See 16.3013 and
However, in the event the work cannot
16.4052(c) for limitations.
be completed within the estimated
[48 FR 42219, Sept. 19, 1983, as amended at 62 cost, the Government may require
FR 12695, Mar. 17, 1997] more effort without increase in fee,
provided the Government increases the
16.306 Cost-plus-fixed-fee contracts. estimated cost.
(a) Description. A cost-plus-fixed-fee (2) The term form describes the scope
contract is a cost-reimbursement con- of work in general terms and obligates
tract that provides for payment to the the contractor to devote a specified
contractor of a negotiated fee that is level of effort for a stated time period.
fixed at the inception of the contract. Under this form, if the performance is
The fixed fee does not vary with actual considered satisfactory by the Govern-
cost, but may be adjusted as a result of ment, the fixed fee is payable at the ex-
changes in the work to be performed piration of the agreed-upon period,
under the contract. This contract type upon contractor statement that the
permits contracting for efforts that level of effort specified in the contract
might otherwise present too great a has been expended in performing the
risk to contractors, but it provides the contract work. Renewal for further pe-
contractor only a minimum incentive riods of performance is a new acquisi-
to control costs. tion that involves new cost and fee ar-
(b) Application. (1) A cost-plus-fixed- rangements.
fee contract is suitable for use when (3) Because of the differences in obli-
the conditions of 16.3012 are present gation assumed by the contractor, the
and, for example completion form is preferred over the
(i) The contract is for the perform- term form whenever the work, or spe-
ance of research or preliminary explo- cific milestones for the work, can be
ration or study, and the level of effort defined well enough to permit develop-
required is unknown; or ment of estimates within which the
(ii) The contract is for development contractor can be expected to complete
and test, and using a cost-plus- incen- the work.
tive-fee contract is not practical. (4) The term form shall not be used
(2) A cost-plus-fixed-fee contract nor- unless the contractor is obligated by
mally should not be used in develop- the contract to provide a specific level
ment of major systems (see part 34) of effort within a definite time period.
once preliminary exploration, studies, [48 FR 42219, Sept. 19, 1983, as amended at 50
and risk reduction have indicated a FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23,
high degree of probability that the de- 1985; 60 FR 37777, July 21, 1995; 62 FR 236, Jan.
velopment is achievable and the Gov- 2, 1997; 63 FR 34073, June 22, 1998]
ernment has established reasonably
firm performance objectives and sched- 16.307 Contract clauses.
ules. (a)(1) The contracting officer shall
(c) Limitations. No cost-plus-fixed-fee insert the clause at 52.2167, Allowable
contract shall be awarded unless the Cost and Payment, in solicitations and
contracting officer complies with all contracts when a cost-reimbursement
300
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
16.402 48 CFR Ch. 1 (10103 Edition)
firm-fixed-price contract is not appro- No incentive contract may provide for

priate and the required supplies or other incentives without also providing
services can be acquired at lower costs a cost incentive (or constraint).
and, in certain instances, with im- (b) Except for award-fee contracts
proved delivery or technical perform- (see 16.404 and 16.4052), incentive con-
ance, by relating the amount of profit tracts include a target cost, a target
or fee payable under the contract to profit or fee, and a profit or fee adjust-
the contractors performance. Incen- ment formula that (within the con-
tive contracts are designed to obtain straints of a price ceiling or minimum
specific acquisition objectives by and maximum fee) provides that
(1) Establishing reasonable and at-
(1) Actual cost that meets the target
tainable targets that are clearly com-
municated to the contractor; and will result in the target profit or fee;
(2) Including appropriate incentive (2) Actual cost that exceeds the tar-
arrangements designed to (i) motivate get will result in downward adjustment
contractor efforts that might not oth- of target profit or fee; and
erwise be emphasized and (ii) discour- (3) Actual cost that is below the tar-
age contractor inefficiency and waste. get will result in upward adjustment of
(b) When predetermined, formula- target profit or fee.
type incentives on technical perform-
ance or delivery are included, increases FR 12696, Mar. 17, 1997; 62 FR 51379, Oct. 1,
in profit or fee are provided only for 1997]
achievement that surpasses the tar-
gets, and decreases are provided for to 16.4022 Performance incentives.
the extent that such targets are not
met. The incentive increases or de- (a) Performance incentives may be
creases are applied to performance tar- considered in connection with specific
gets rather than minimum perform- product characteristics (e.g., a missile
ance requirements. range, an aircraft speed, an engine
(c) The two basic categories of incen- thrust, or a vehicle maneuverability)
tive contracts are fixed-price incentive or other specific elements of the con-
contracts (see 16.403 and 16.404) and tractors performance. These incen-
cost-reimbursement incentive con- tives should be designed to relate profit
tracts (see 16.405). Since it is usually to or fee to results achieved by the con-
the Governments advantage for the tractor, compared with specified tar-
contractor to assume substantial cost gets.
responsibility and an appropriate share (b) To the maximum extent prac-
of the cost risk, fixed-price incentive ticable, positive and negative perform-
contracts are preferred when contract ance incentives shall be considered in
costs and performance requirements connection with service contracts for
are reasonably certain. Cost-reim- performance of objectively measurable
bursement incentive contracts are sub- tasks when quality of performance is
ject to the overall limitations in 16.301
critical and incentives are likely to
that apply to all cost-reimbursement
motivate the contractor.
contracts.
(d) Award-fee contracts are a type of (c) Technical performance incentives
incentive contract. may be particularly appropriate in
major systems contracts, both in devel-
[48 FR 42219, Sept. 19, 1983, as amended at 62 opment (when performance objectives
FR 12695, Mar. 17, 1997] are known and the fabrication of proto-
16.402 Application of predetermined, types for test and evaluation is re-
formula-type incentives. quired) and in production (if improved
performance is attainable and highly
16.4021 Cost incentives. desirable to the Government).
(a) Most incentive contracts include (d) Technical performance incentives
only cost incentives, which take the may involve a variety of specific char-
form of a profit or fee adjustment for- acteristics that contribute to the over-
mula and are intended to motivate the all performance of the end item. Ac-
contractor to effectively manage costs. cordingly, the incentives on individual
302
technical characteristics must be bal- (b) Compel trade-off decisions among

anced so that no one of them is exag- the incentive areas, consistent with
gerated to the detriment of the overall the Governments overall objectives for
performance of the end item. the acquisition. Because of the inter-
(e) Performance tests and/or assess- dependency of the Governments cost,
ments of work performance are gen- the technical performance, and the de-
erally essential in order to determine livery goals, a contract that empha-
the degree of attainment of perform- sizes only one of the goals may jeop-
ance targets. Therefore, the contract ardize control over the others. Because
must be as specific as possible in estab- outstanding results may not be attain-
lishing test criteria (such as testing able for each of the incentive areas, all
conditions, instrumentation precision, multiple-incentive contracts must in-
and data interpretation) and perform- clude a cost incentive (or constraint)
ance standards (such as the quality lev- that operates to preclude rewarding a
els of services to be provided). contractor for superior technical per-
(f) Because performance incentives formance or delivery results when the
present complex problems in contract cost of those results outweighs their
administration, the contracting officer value to the Government.
should negotiate them in full coordina-
tion with Government engineering and 16.403 Fixed-price incentive contracts.
pricing specialists. (a) Description. A fixed-price incen-
(g) It is essential that the Govern- tive contract is a fixed-price contract
ment and contractor agree explicitly that provides for adjusting profit and
on the effect that contract changes establishing the final contract price by
(e.g., pursuant to the Changes clause) application of a formula based on the
will have on performance incentives. relationship of total final negotiated
(h) The contracting officer must ex- cost to total target cost. The final
ercise care, in establishing perform- price is subject to a price ceiling, nego-
ance criteria, to recognize that the tiated at the outset. The two forms of
contractor should not be rewarded or fixed-price incentive contracts, firm
penalized for attainments of Govern- target and successive targets, are fur-
ment-furnished components. ther described in 16.4031 and 16.4032
[48 FR 42219, Sept. 19, 1983, as amended at 62 below.
FR 44815, Aug. 22, 1997] (b) Application. A fixed-price incen-
tive contract is appropriate when
16.4023 Delivery incentives. (1) A firm-fixed-price contract is not
(a) Delivery incentives should be con- suitable;
sidered when improvement from a re- (2) The nature of the supplies or serv-
quired delivery schedule is a signifi- ices being acquired and other cir-
cant Government objective. It is im- cumstances of the acquisition are such
portant to determine the Governments that the contractors assumption of a
primary objectives in a given contract degree of cost responsibility will pro-
(e.g., earliest possible delivery or ear- vide a positive profit incentive for ef-
liest quantity production). fective cost control and performance;
(b) Incentive arrangements on deliv- and
ery should specify the application of (3) If the contract also includes in-
the reward-penalty structure in the centives on technical performance and/
event of Government-caused delays or or delivery, the performance require-
other delays beyond the control, and ments provide a reasonable oppor-
without the fault or negligence, of the tunity for the incentives to have a
contractor or subcontractor. meaningful impact on the contractors
management of the work.
16.4024 Structuring multiple-incen- (c) Billing prices. In fixed-price incen-
tive contracts. tive contracts, billing prices are estab-
A properly structured multiple-in- lished as an interim basis for payment.
centive arrangement should These billing prices may be adjusted,
(a) Motivate the contractor to strive within the ceiling limits, upon request
for outstanding results in all incentive of either party to the contract, when it
areas; and becomes apparent that final negotiated
303
16.4031 48 CFR Ch. 1 (10103 Edition)
cost will be substantially different (d) Contract Schedule. The contracting

from the target cost. officer shall specify in the contract
[48 FR 42219, Sept. 19, 1983, as amended at 59 Schedule the target cost, target profit,
FR 64785, Dec. 15, 1994] and target price for each item subject
to incentive price revision.
16.4031 Fixed-price incentive (firm
target) contracts. [48 FR 42219, Sept. 19, 1983, as amended at 59
FR 64785, Dec. 15, 1994]
(a) Description. A fixed-price incen-
tive (firm target) contract specifies a 16.4032 Fixed-price incentive (succes-
target cost, a target profit, a price ceil- sive targets) contracts.
ing (but not a profit ceiling or floor),
(a) Description. (1) A fixed-price in-
and a profit adjustment formula. These
elements are all negotiated at the out- centive (successive targets) contract
set. The price ceiling is the maximum specifies the following elements, all of
that may be paid to the contractor, ex- which are negotiated at the outset:
cept for any adjustment under other (i) An initial target cost.
contract clauses. When the contractor (ii) An initial target profit.
completes performance, the parties ne- (iii) An initial profit adjustment for-
gotiate the final cost, and the final mula to be used for establishing the
price is established by applying the for- firm target profit, including a ceiling
mula. When the final cost is less than and floor for the firm target profit.
the target cost, application of the for- (This formula normally provides for a
mula results in a final profit greater lesser degree of contractor cost respon-
than the target profit; conversely, sibility than would a formula for estab-
when final cost is more than target lishing final profit and price.)
cost, application of the formula results (iv) The production point at which
in a final profit less than the target the firm target cost and firm target
profit, or even a net loss. If the final profit will be negotiated (usually be-
negotiated cost exceeds the price ceil- fore delivery or shop completion of the
ing, the contractor absorbs the dif- first item).
ference as a loss. Because the profit (v) A ceiling price that is the max-
varies inversely with the cost, this con- imum that may be paid to the con-
tract type provides a positive, cal- tractor, except for any adjustment
culable profit incentive for the con- under other contract clauses providing
tractor to control costs. for equitable adjustment or other revi-
(b) Application. A fixed-price incen-
sion of the contract price under stated
tive (firm target) contract is appro-
circumstances.
priate when the parties can negotiate
(2) When the production point speci-
at the outset a firm target cost, target
profit, and profit adjustment formula fied in the contract is reached, the par-
that will provide a fair and reasonable ties negotiate the firm target cost, giv-
incentive and a ceiling that provides ing consideration to cost experience
for the contractor to assume an appro- under the contract and other pertinent
priate share of the risk. When the con- factors. The firm target profit is estab-
tractor assumes a considerable or lished by the formula. At this point,
major share of the cost responsibility the parties have two alternatives, as
under the adjustment formula, the tar- follows:
get profit should reflect this responsi- (i) They may negotiate a firm fixed
bility. price, using the firm target cost plus
(c) Limitations. This contract type the firm target profit as a guide.
may be used only when (ii) If negotiation of a firm fixed
(1) The contractors accounting sys- price is inappropriate, they may nego-
tem is adequate for providing data to tiate a formula for establishing the
support negotiation of final cost and final price using the firm target cost
incentive price revision; and and firm target profit. The final cost is
(2) Adequate cost or pricing informa- then negotiated at completion, and the
tion for establishing reasonable firm final profit is established by formula,
targets is available at the time of ini- as under the fixed-price incentive (firm
tial contract negotiation. target) contract (see 16.4031 above).
304
(b) Application. A fixed-price incen- (2) Provide for periodic evaluation of

tive (successive targets) contract is ap- the contractors performance against
propriate when an award-fee plan.
(1) Available cost or pricing informa- (b) A solicitation contemplating
tion is not sufficient to permit the ne- award of a fixed-price contract with
gotiation of a realistic firm target cost award fee shall not be issued unless the
and profit before award; following conditions exist:
(2) Sufficient information is available (1) The administrative costs of con-
to permit negotiation of initial targets; ducting award-fee evaluations are not
and expected to exceed the expected bene-
(3) There is reasonable assurance fits;
that additional reliable information
(2) Procedures have been established
will be available at an early point in
for conducting the award-fee evalua-
the contract performance so as to per-
tion;
mit negotiation of either (i) a firm
fixed price or (ii) firm targets and a (3) The award-fee board has been es-
formula for establishing final profit tablished; and
and price that will provide a fair and (4) An individual above the level of
reasonable incentive. This additional the contracting officer approved the
information is not limited to experi- fixed-price-award-fee incentive.
ence under the contract, itself, but [62 FR 12696, Mar. 17, 1997]
may be drawn from other contracts for
the same or similar items. 16.405 Cost-reimbursement incentive
(c) Limitations. This contract type contracts.
may be used only when
See 16.301 for requirements applicable
(1) The contractors accounting sys-
to all cost-reimbursement contracts,
tem is adequate for providing data for
for use in conjunction with the fol-
negotiating firm targets and a realistic
lowing subsections.
profit adjustment formula, as well as
later negotiation of final costs; and [48 FR 42219, Sept. 19, 1983. Redesignated at
(2) Cost or pricing information ade- 62 FR 12696, Mar. 17, 1997]
quate for establishing a reasonable
firm target cost is reasonably expected 16.4051 Cost-plus-incentive-fee con-
to be available at an early point in contracts.
tract performance. (a) Description. The cost-plus-incen-
(d) Contract Schedule. The contracting tive-fee contract is a cost-reimburse-
officer shall specify in the contract ment contract that provides for the
Schedule the initial target cost, initial initially negotiated fee to be adjusted
target profit, and initial target price later by a formula based on the rela-
for each item subject to incentive price tionship of total allowable costs to
revision. total target costs. This contract type
[48 FR 42219, Sept. 19, 1983, as amended at 59 specifies a target cost, a target fee,
FR 64785, Dec. 15, 1994] minimum and maximum fees, and a fee
adjustment formula. After contract
16.404 Fixed-price contracts with performance, the fee payable to the
award fees. contractor is determined in accordance
(a) Award-fee provisions may be used with the formula. The formula pro-
in fixed-price contracts when the Gov- vides, within limits, for increases in fee
ernment wishes to motivate a con- above target fee when total allowable
tractor and other incentives cannot be costs are less than target costs, and de-
used because contractor performance creases in fee below target fee when
cannot be measured objectively. Such total allowable costs exceed target
contracts shall costs. This increase or decrease is in-
(1) Establish a fixed price (including tended to provide an incentive for the
normal profit) for the effort. This price contractor to manage the contract ef-
will be paid for satisfactory contract fectively. When total allowable cost is
performance. Award fee earned (if any) greater than or less than the range of
will be paid in addition to that fixed costs within which the fee-adjustment
price; and formula operates, the contractor is
305
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
16.406 Contract clauses. Subpart 16.5Indefinite-Delivery

(a) Insert the clause at 52.21616, In- Contracts
centive Price RevisionFirm Target,
in solicitations and contracts when a 16.500 Scope of subpart.
fixed-price incentive (firm target) con- (a) This subpart prescribes policies
tract is contemplated. If the contract and procedures for making awards of
calls for supplies or services to be or- indefinite-delivery contracts and estab-
dered under a provisioning document lishes a preference for making multiple
or Government option and the prices awards of indefinite-quantity con-
are to be subject to the incentive price tracts.
revision under the clause, the con- (b) This subpart does not limit the
tracting officer shall use the clause use of other than competitive proce-
with its Alternate I. dures authorized by part 6.
(b) Insert the clause at 52.21617, In- (c) Nothing in this subpart restricts
centive Price RevisionSuccessive the authority of the General Services
Targets, in solicitations and contracts Administration (GSA) to enter into
when a fixed-price incentive (succes- schedule, multiple award, or task or
sive targets) contract is contemplated. delivery order contracts under any
If the contract calls for supplies or other provision of law. Therefore, GSA
services to be ordered under a provi- regulations and the coverage for the
sioning document or Government op- Federal Supply Schedule program in
tion and the prices are to be subject to subpart 8.4 and part 38 take precedence
incentive price revision under the over this subpart.
clause, the contracting officer shall use (d) The statutory multiple award
the clause with its Alternate I. preference implemented by this sub-
(c) The clause at 52.2167, Allowable part does not apply to architect-engi-
Cost and Payment, is prescribed in neer contracts subject to the proce-
16.307(a) for insertion in solicitations dures in subpart 36.6. However, agen-
and contracts when a cost-plus-incen- cies are not precluded from making
tive-fee contract or a cost-plus-award- multiple awards for architect-engineer
fee contract is contemplated. services using the procedures in this
(d) The clause at 52.21610, Incentive subpart, provided the selection of con-
Fee, is prescribed in 16.307(d) for inser- tractors and placement of orders are
tion in solicitations and contracts consistent with subpart 36.6.
when a cost-plus-incentive-fee contract
[65 FR 24318, Apr. 25, 2000]
is contemplated.
(e) Insert an appropriate award-fee 16.5011 Definitions.
clause in solicitations and contracts
when an award-fee contract is con-
templated, provided that the clause Delivery order contract means a con-
tract for supplies that does not procure
(1) Is prescribed by or approved under
or specify a firm quantity of supplies
agency acquisition regulations;
(other than a minimum or maximum
(2) Is compatible with the clause at
quantity) and that provides for the
52.2167, Allowable Cost and Payment;
issuance of orders for the delivery of
and
supplies during the period of the con-
(3) Expressly provides that the award
tract.
amount and the award-fee determina-
Task order contract means a contract
tion methodology are unilateral deci-
for services that does not procure or
sions made solely at the discretion of
specify a firm quantity of services
the Government.
(other than a minimum or maximum
[48 FR 42219, Sept. 19, 1983. Redesignated and quantity) and that provides for the
amended at 62 FR 12696, Mar. 17, 1997; 64 FR issuance of orders for the performance
72449, Dec. 27, 1999]
307
16.5012 48 CFR Ch. 1 (10103 Edition)
of tasks during the period of the con- 16.502 Definite-quantity contracts.

tract.
(a) Description. A definite-quantity
[60 FR 49725, Sept. 26, 1995, as amended at 65 contract provides for delivery of a defi-
FR 24318, Apr. 25, 2000] nite quantity of specific supplies or
services for a fixed period, with deliv-
16.5012 General. eries or performance to be scheduled at
(a) There are three types of indefi- designated locations upon order.
nite-delivery contracts: Definite-quan- (b) Application. A definite-quantity
tity contracts, requirements contracts, contract may be used when it can be
and indefinite-quantity contracts. The determined in advance that (1) a defi-
appropriate type of indefinite-delivery nite quantity of supplies or services
contract may be used to acquire sup- will be required during the contract pe-
plies and/or services when the exact riod and (2) the supplies or services are
times and/or exact quantities of future regularly available or will be available
deliveries are not known at the time of after a short lead time.
contract award. Pursuant to 10 U.S.C.
2304d and section 303K of the Federal [48 FR 42219, Sept. 19, 1983, as amended at 60
Property and Administrative Services FR 49725, Sept. 26, 1995]
Act of 1949, requirements contracts and
16.503 Requirements contracts.
indefinite-quantity contracts are also
known as delivery order contracts or (a) Description. A requirements con-
task order contracts. tract provides for filling all actual pur-
(b) The various types of indefinite-de- chase requirements of designated Gov-
livery contracts offer the following ad- ernment activities for supplies or serv-
vantages: ices during a specified contract period,
(1) All three types permit (i) Govern- with deliveries or performance to be
ment stocks to be maintained at min- scheduled by placing orders with the
imum levels and (ii) direct shipment to contractor.
users. (1) For the information of offerors
(2) Indefinite-quantity contracts and and contractors, the contracting offi-
requirements contracts also permit (i) cer shall state a realistic estimated
flexibility in both quantities and deliv- total quantity in the solicitation and
ery scheduling and (ii) ordering of sup- resulting contract. This estimate is not
plies or services after requirements a representation to an offeror or con-
materialize. tractor that the estimated quantity
(3) Indefinite-quantity contracts will be required or ordered, or that con-
limit the Governments obligation to ditions affecting requirements will be
the minimum quantity specified in the stable or normal. The contracting offi-
contract. cer may obtain the estimate from
(4) Requirements contracts may per- records of previous requirements and
mit faster deliveries when production consumption, or by other means, and
lead time is involved, because contrac- should base the estimate on the most
tors are usually willing to maintain current information available.
limited stocks when the Government (2) The contract shall state, if fea-
will obtain all of its actual purchase sible, the maximum limit of the con-
requirements from the contractor. tractors obligation to deliver and the
(c) Indefinite-delivery contracts may Governments obligation to order. The
provide for any appropriate cost or contract may also specify maximum or
pricing arrangement under part 16. minimum quantities that the Govern-
Cost or pricing arrangements that pro- ment may order under each individual
vide for an estimated quantity of sup- order and the maximum that it may
plies or services (e.g., estimated num- order during a specified period of time.
ber of labor hours) must comply with (b) Application. A requirements con-
the appropriate procedures of this subtract may be appropriate for acquiring
part. any supplies or services when the Gov-
[48 FR 42219, Sept. 19, 1983. Redesignated and ernment anticipates recurring require-
amended at 60 FR 49725, Sept. 26, 1995] ments but cannot predetermine the
308
precise quantities of supplies or serv- tractor to furnish at least a stated

ices that designated Government ac- minimum quantity of supplies or serv-
tivities will need during a definite pe- ices. In addition, if ordered, the con-
riod. tractor must furnish any additional
(c) Government property furnished for quantities, not to exceed the stated
repair. When a requirements contract is maximum. The contracting officer
used to acquire work (e.g., repair, should establish a reasonable max-
modification, or overhaul) on existing imum quantity based on market re-
items of Government property, the search, trends on recent contracts for
contracting officer shall specify in the similar supplies or services, survey of
Schedule that failure of the Govern- potential users, or any other rational
ment to furnish such items in the basis.
amounts or quantities described in the (2) To ensure that the contract is
Schedule as estimated or maximum will binding, the minimum quantity must
not entitle the contractor to any equi- be more than a nominal quantity, but
table adjustment in price under the it should not exceed the amount that
Government Property clause of the the Government is fairly certain to
contract. order.
(d) Limitations on use of requirements (3) The contract may also specify
contracts for advisory and assistance maximum or minimum quantities that
services. (1) Except as provided in para- the Government may order under each
graph (d)(2) of this section, no solicita- task or delivery order and the max-
tion for a requirements contract for ad- imum that it may order during a spe-
visory and assistance services in excess cific period of time.
of three years and $10,000,000 (including (4) A solicitation and contract for an
all options) may be issued unless the indefinite quantity must
contracting officer or other official (i) Specify the period of the contract,
designated by the head of the agency including the number of options and
determines in writing that the services the period for which the Government
required are so unique or highly spe- may extend the contract under each
cialized that it is not practicable to option;
make multiple awards using the proce- (ii) Specify the total minimum and
dures in 16.504. maximum quantity of supplies or serv-
(2) The limitation in paragraph (d)(1) ices the Government will acquire under
of this section is not applicable to an the contract;
acquisition of supplies or services that (iii) Include a statement of work,
includes the acquisition of advisory specifications, or other description,
and assistance services, if the con- that reasonably describes the general
tracting officer or other official des- scope, nature, complexity, and purpose
ignated by the head of the agency de- of the supplies or services the Govern-
termines that the advisory and assist- ment will acquire under the contract in
ance services are necessarily incident a manner that will enable a prospective
to, and not a significant component of, offeror to decide whether to submit an
the contract. offer;
[48 FR 42219, Sept. 19, 1983, as amended at 56 (iv) State the procedures that the
FR 15150, Apr. 15, 1991; 60 FR 49725, Sept. 26, Government will use in issuing orders,
1995] including the ordering media, and, if
multiple awards may be made, state
16.504 Indefinite-quantity contracts. the procedures and selection criteria
(a) Description. An indefinite-quan- that the Government will use to pro-
tity contract provides for an indefinite vide awardees a fair opportunity to be
quantity, within stated limits, of sup- considered for each order (see
plies or services during a fixed period. 16.505(b)(1));
The Government places orders for indi- (v) Include the name, address, tele-
vidual requirements. Quantity limits phone number, facsimile number, and
may be stated as number of units or as e-mail address of the agency task and
dollar values. delivery order ombudsman (see
(1) The contract must require the 16.505(b)(5)) if multiple awards may be
Government to order and the con- made;
309
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 contracting 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
(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;
311
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
312
(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
16.602 48 CFR Ch. 1 (10103 Edition)
(b) Application. A time-and-materials contract type is suitable and (2) only if

contract may be used only when it is the contract includes a ceiling price
not possible at the time of placing the that the contractor exceeds at its own
contract to estimate accurately the ex- risk. The contracting officer shall doc-
tent or duration of the work or to an- ument the contract file to justify the
ticipate costs with any reasonable de- reasons for and amount of any subse-
gree of confidence. quent change in the ceiling price.
(1) Government surveillance. A time-
and-materials contract provides no 16.602 Labor-hour contracts.
positive profit incentive to the con- Description. A labor-hour contract is
tractor for cost control or labor effi- a variation of the time-and-materials
ciency. Therefore, appropriate Govern- contract, differing only in that mate-
ment surveillance of contractor per- rials are not supplied by the con-
formance is required to give reasonable tractor. See 16.601(b) and 16.601(c) for
assurance that efficient methods and application and limitations, respec-
effective cost controls are being used. tively.
(2) Material handling costs. When in-
cluded as part of material costs, mate- 16.603 Letter contracts.
rial handling costs shall include only
costs clearly excluded from the labor- 16.6031 Description.
hour rate. Material handling costs may A letter contract is a written pre-
include all appropriate indirect costs liminary contractual instrument that
allocated to direct materials in accord- authorizes the contractor to begin im-
ance with the contractors usual ac- mediately manufacturing supplies or
counting procedures consistent with performing services.
part 31.
(3) Optional method of pricing material. 16.6032 Application.
When the nature of the work to be per- (a) A letter contract may be used
formed requires the contractor to fur- when (1) the Governments interests
nish material that it regularly sells to demand that the contractor be given a
the general public in the normal course binding commitment so that work can
of its business, the contract may pro- start immediately and (2) negotiating a
vide for charging material on a basis definitive contract is not possible in
other than at cost if sufficient time to meet the require-
(i) The total estimated contract price ment. However, a letter contract
does not exceed $25,000 or the estimated should be as complete and definite as
price of material so charged does not feasible under the circumstances.
exceed 20 percent of the estimated con- (b) When a letter contract award is
tract price; based on price competition, the con-
(ii) The material to be so charged is tracting officer shall include an overall
identified in the contract; price ceiling in the letter contract.
(iii) No element of profit on material (c) Each letter contract shall, as re-
so charged is included as profit in the quired by the clause at 52.21625, Con-
fixed hourly labor rates; and tract Definitization, contain a nego-
(iv) The contract provides (A) that tiated definitization schedule including
the price to be paid for such material (1) dates for submission of the contrac-
shall be based on an established cata- tors price proposal, required cost or
log or list price in effect when material pricing data, and, if required, make-or-
is furnished, less all applicable dis- buy and subcontracting plans, (2) a
counts to the Government, and (B) that date for the start of negotiations, and
in no event shall the price exceed the (3) a target date for definitization,
contractors sales price to its most-fa- which shall be the earliest practicable
vored customer for the same item in date for definitization. The schedule
like quantity, or the current market will provide for definitization of the
price, whichever is lower. contract within 180 days after the date
(c) Limitations. A time-and-materials of the letter contract or before comple-
contract may be used (1) only after the tion of 40 percent of the work to be per-
contracting officer executes a deter- formed, whichever occurs first. How-
mination and findings that no other ever, the contracting officer may, in
314
extreme cases and according to agency 16.6034 Contract clauses.

procedures, authorize an additional pe-
(a) The contracting officer shall in-
riod. If, after exhausting all reasonable
clude in each letter contract the
efforts, the contracting officer and the clauses required by this regulation for
contractor cannot negotiate a defini- the type of definitive contract con-
tive contract because of failure to templated and any additional clauses
reach agreement as to price or fee, the known to be appropriate for it.
clause at 52.21625 requires the con- (b) In addition, the contracting offi-
tractor to proceed with the work and cer shall insert the following clauses in
provides that the contracting officer solicitations and contracts when a let-
may, with the approval of the head of ter contract is contemplated:
the contracting activity, determine a (1) The clause at 52.21623, Execution
reasonable price or fee in accordance and Commencement of Work, except
with subpart 15.4 and part 31, subject to that this clause may be omitted from
appeal as provided in the Disputes letter contracts awarded on SF 26;
clause. (2) The clause at 52.21624, Limitation
(d) The maximum liability of the of Government Liability, with dollar
Government inserted in the clause at amounts completed in a manner con-
52.21624, Limitation of Government Li- sistent with 16.6032(d); and
ability, shall be the estimated amount (3) The clause at 52.21625, Contract
necessary to cover the contractors re- Definitization, with its paragraph (b)
quirements for funds before completed in a manner consistent with
definitization. However, it shall not ex- 16.6032(c). If, at the time of entering
ceed 50 percent of the estimated cost of into the letter contract, the con-
the definitive contract unless approved tracting officer knows that the defini-
in advance by the official that author- tive contract will be based on adequate
ized the letter contract. price competition or will otherwise
(e) The contracting officer shall as- meet the criteria of 15.4031 for not re-
sign a priority rating to the letter con- quiring submission of cost or pricing
tract if it is appropriate under 11.604. data, the words and cost or pricing
data supporting its proposal may be
[48 FR 42219, Sept. 19, 1983, as amended at 60 deleted from paragraph (a) of the
FR 48248, Sept. 18, 1995; 62 FR 51270, Sept. 30, clause. If the letter contract is being
1997]
awarded on the basis of price competi-
tion, the contracting officer shall use
the clause with its Alternate I.
A letter contract may be used only (c) The contracting officer shall also
after the head of the contracting activ- insert the clause at 52.21626, Payments
ity or a designee determines in writing of Allowable Costs Before
that no other contract is suitable. Let- Definitization, in solicitations and con-
ter contracts shall not tracts if a cost-reimbursement defini-
(a) Commit the Government to a de- tive contract is contemplated, unless
finitive contract in excess of the funds the acquisition involves conversion, al-
available at the time the letter con- teration, or repair of ships.
tract is executed; [48 FR 42219, Sept. 19, 1983, as amended at 60
(b) Be entered into without competi- FR 48217, Sept. 18, 1995; 62 FR 51270, Sept. 30,
tion when competition is required by 1997]
part 6; or
(c) Be amended to satisfy a new re- Subpart 16.7Agreements
quirement unless that requirement is
inseparable from the existing letter 16.701 Scope.
contract. Any such amendment is sub- This subpart prescribes policies and
ject to the same requirements and lim- procedures for establishing and using
itations as a new letter contract. basic agreements and basic ordering
[48 FR 42219, Sept. 19, 1983, as amended at 50 agreements. (See 13.303 for blanket pur-
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23, chase agreements (BPAs) and see
1985; 51 FR 31426, Sept. 3, 1986] 35.015(b) for additional coverage of
315
16.702 48 CFR Ch. 1 (10103 Edition)
basic agreements with educational in- agreements of another agency to the

stitutions and nonprofit organiza- maximum practical extent.
tions.) (c) Limitations. A basic agreement
shall not
FR 64926, Dec. 9, 1997] (1) Cite appropriations or obligate
funds;
16.702 Basic agreements. (2) State or imply any agreement by
(a) Description. A basic agreement is a the Government to place future con-
written instrument of understanding, tracts or orders with the contractor; or
negotiated between an agency or con- (3) Be used in any manner to restrict
tracting activity and a contractor, competition.
that (1) contains contract clauses ap- (d) Contracts incorporating basic agree-
plying to future contracts between the ments. (1) Each contract incorporating
parties during its term and (2) con- a basic agreement shall include a scope
templates separate future contracts of work and price, delivery, and other
that will incorporate by reference or appropriate terms that apply to the
attachment the required and applicable particular contract. The basic agree-
clauses agreed upon in the basic agreement shall be incorporated into the
ment. A basic agreement is not a con- contract by specific reference (includ-
tract. ing reference to each amendment) or
(b) Application. A basic agreement by attachment.
should be used when a substantial (2) The contracting officer shall in-
number of separate contracts may be clude clauses pertaining to subjects not
awarded to a contractor during a par- covered by the basic agreement, but
ticular period and significant recurring applicable to the contract being nego-
negotiating problems have been experi- tiated, in the same manner as if there
enced with the contractor. Basic agree- were no basic agreement.
ments may be used with negotiated (3) If an existing contract is modified
fixed-price or cost-reimbursement con- to effect new acquisition, the modifica-
tracts. tion shall incorporate the most recent
(1) Basic agreements shall contain (i) basic agreement, which shall apply
clauses required for negotiated con- only to work added by the modifica-
tracts by statute, executive order, and tion, except that this action is not
this regulation and (ii) other clauses mandatory if the contract or modifica-
prescribed in this regulation or agency tion includes all clauses required by
acquisition regulations that the parties statute, executive order, and this regu-
agree to include in each contract as ap- lation as of the date of the modifica-
plicable. tion. However, if it is in the Govern-
(2) Each basic agreement shall pro- ments interest and the contractor
vide for discontinuing its future agrees, the modification may incor-
applicablity upon 30 days written no- porate the most recent basic agree-
tice by either party. ment for application to the entire con-
(3) Each basic agreement shall be re- tract as of the date of the modification.
viewed annually before the anniversary
of its effective date and revised as nec- 16.703 Basic ordering agreements.
essary to conform to the requirements (a) Description. A basic ordering
of this regulation. Basic agreements agreement is a written instrument of
may need to be revised before the an- understanding, negotiated between an
nual review due to mandatory statu- agency, contracting activity, or con-
tory requirements. A basic agreement tracting office and a contractor, that
may be changed only by modifying the contains (1) terms and clauses applying
agreement itself and not by a contract to future contracts (orders) between
incorporating the agreement. the parties during its term, (2) a de-
(4) Discontinuing or modifying a scription, as specific as practicable, of
basic agreement shall not affect any supplies or services to be provided, and
prior contract incorporating the basic (3) methods for pricing, issuing, and de-
agreement. livering future orders under the basic
(5) Contracting officers of one agency ordering agreement. A basic ordering
should obtain and use existing basic agreement is not a contract.
316
(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
proceed with pricing as soon as prac- Subpart 17.6Management and

tical. In no event shall an entire order Operating Contracts
be priced retroactively.
[48 FR 42219, Sept. 19, 1983, as amended at 50 17.601 Definition.
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23, 17.602 Policy.
1985; 61 FR 39198, July 26, 1996; 62 FR 64926, 17.603 Limitations.
Dec. 9, 1997] 17.604 Identifying management and oper-
ating contracts.
17.605 Award, renewal, and extension.
PART 17SPECIAL CONTRACTING
METHODS AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chap-
ter 137; and 42 U.S.C. 2473(c).
Sec. SOURCE: 48 FR 42231, Sept. 19, 1983, unless
17.000 Scope of part. otherwise noted.
Subpart 17.1Multiyear Contracting 17.000 Scope of part.

17.101 Authority.
cedures for the acquisition of supplies
17.103 Definitions. and services through special con-
17.104 General. tracting methods, including
17.105 Policy. (a) Multi-year contracting;
17.1051 Uses. (b) Options; and
17.1052 Objectives. (c) Leader company contracting.
17.106 Procedures.
17.1061 General. Subpart 17.1Multiyear
17.1062 Solicitations.
17.1063 Special procedures applicable to Contracting
DoD, NASA, and the Coast Guard.
17.107 Options. SOURCE: 61 FR 39204, July 26, 1996, unless
17.108 Congressional notification. otherwise noted.
17.101 Authority.
Subpart 17.2Options This subpart implements Section
17.200 Scope of subpart. 304B of the Federal Property and Ad-
17.201 [Reserved] ministrative Services Act of 1949 (41
17.202 Use of options. U.S.C. 254c) and 10 U.S.C. 2306b and pro-
17.203 Solicitations. vides policy and procedures for the use
17.204 Contracts. of multiyear contracting.
17.206 Evaluation. 17.102 Applicability.
17.207 Exercise of options.
17.208 Solicitation provisions and contract For DoD, NASA, and the Coast
clauses. Guard, the authorities cited in 17.101 do
not apply to contracts for the purchase
Subpart 17.3 [Reserved] of supplies to which 40 U.S.C. 759 ap-
plies (information resource manage-
Subpart 17.4Leader Company ment supply contracts).
Contracting
17.103 Definitions.
17.401 General.
17.402 Limitations. As used in this subpart
17.403 Procedures. Cancellation means the cancellation
(within a contractually specified time)
Subpart 17.5Interagency Acquisitions of the total requirements of all remain-
Under the Economy Act ing program years. Cancellation results
when the contracting officer
(1) Notifies the contractor of non-
17.501 Definition.
17.502 General. availability of funds for contract per-
17.503 Determinations and findings require- formance for any subsequent program
ments. year, or
17.504 Ordering procedures. (2) Fails to notify the contractor that
17.505 Payment. funds are available for performance of
318
the succeeding program year require- (b) Multiyear contracting is a flexi-

ment. ble contract method applicable to a
Cancellation ceiling means the max- wide range of acquisitions. The extent
imum cancellation charge that the to which cancellation terms are used in
contractor can receive in the event of multiyear contracts will depend on the
cancellation. unique circumstances of each contract.
Cancellation charge means the Accordingly, for multiyear contracts,
amount of unrecovered costs which the agency head may authorize modi-
would have been recouped through am- fication of the requirements of this
ortization over the full term of the subpart and the clause at 52.2172, Can-
contract, including the term canceled. cellation Under Multiyear Contracts.
Multiyear contract means a contract (c) Agency funding of multiyear con-
for the purchase of supplies or services tracts shall conform to the policies in
for more than 1, but not more than 5, OMB Circulars A11 (Preparation and
program years. A multiyear contract Submission of Budget Estimates) and
may provide that performance under A34 (Instructions on Budget Execu-
the contract during the second and tion) and other applicable guidance re-
subsequent years of the contract is garding the funding of multiyear con-
contingent upon the appropriation of tracts. As provided by that guidance,
funds, and (if it does so provide) may the funds obligated for multiyear con-
provide for a cancellation payment to tracts must be sufficient to cover any
be made to the contractor if appropria- potential cancellation and/or termi-
tions are not made. The key distin- nation costs; and multiyear contracts
guishing difference between multiyear for the acquisition of fixed assets
contracts and multiple year contracts should be fully funded or funded in
is that multiyear contracts, defined in stages that are economically or pro-
the statutes cited at 17.101, buy more grammatically viable.
than 1 years requirement (of a product (d) The termination for convenience
or service) without establishing and procedure may apply to any Govern-
having to exercise an option for each ment contract, including multiyear
program year after the first. contracts. As contrasted with cancella-
Nonrecurring costs means those costs tion, termination can be effected at
which are generally incurred on a one- any time during the life of the contract
time basis and include such costs as (cancellation is effected between fiscal
plant or equipment relocation, plant years) and can be for the total quantity
rearrangement, special tooling and spe- or partial quantity (where as cancella-
cial test equipment, preproduction en- tion must be for all subsequent fiscal
gineering, initial spoilage and rework, years quantities).
and specialized work force training. [61 FR 39204, July 26, 1996, as amended at 67
Recurring costs means costs that vary FR 13054, Mar. 20, 2002; 67 FR 43514, June 27,
with the quantity being produced, such 2002]
as labor and materials.
17.105 Policy.
FR 2129, Jan. 10, 2001; 67 FR 43514, June 27, 17.1051 Uses.
2002] (a) Except for DoD, NASA, and the
Coast Guard, the contracting officer
17.104 General. may enter into a multiyear contract if
(a) Multiyear contracting is a special the head of the contracting activity de-
contracting method to acquire known termines that
requirements in quantities and total (1) The need for the supplies or serv-
cost not over planned requirements for ices is reasonably firm and continuing
up to 5 years unless otherwise author- over the period of the contract; and
ized by statute, even though the total (2) A multiyear contract will serve
funds ultimately to be obligated may the best interests of the United States
not be available at the time of contract by encouraging full and open competi-
award. This method may be used in tion or promoting economy in adminis-
sealed bidding or contracting by nego- tration, performance, and operation of
tiation. the agencys programs.
319
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
average prime contractor or subcon- (f) Presolicitation or pre-bid con-

tractor, which would be applicable to, ferences. To ensure that all interested
and which normally would be amor- sources of supply are thoroughly aware
tized over, the items or services to be of how multiyear contracting is accom-
furnished under the multiyear require- plished, use of presolicitation or pre-
ments. Nonrecurring costs include such bid conferences may be advisable.
costs, where applicable, as plant or (g) Payment limit. The contracting of-
equipment relocation or rearrange- ficer shall limit the Governments pay-
ment, special tooling and special test ment obligation to an amount avail-
equipment, preproduction engineering, able for contract performance. The
initial rework, initial spoilage, pilot contracting officer shall insert the
runs, allocable portions of the costs of amount for the first program year in
facilities to be acquired or established the contract upon award and modify it
for the conduct of the work, costs infor successive program years upon
curred for the assembly, training, and availability of funds.
transportation to and from the job site (h) Termination payment. If the con-
of a specialized work force, and unreal- tract is terminated for the convenience
ized labor learning. They shall not in- of the Government in whole, including
clude any costs of labor or materials, requirements subject to cancellation,
or other expenses (except as indicated the Governments obligation shall not
above), which might be incurred for exceed the amount specified in the
performance of subsequent program Schedule as available for contract per-
year requirements. The total estimate formance, plus the cancellation ceiling.
of the above costs must then be com- [61 FR 39204, July 26, 1996, as amended at 62
pared with the best estimate of the FR 51270, Sept. 30, 1997]
contract cost to arrive at a reasonable
percentage or dollar figure. To perform 17.1062 Solicitations.
this calculation, the contracting offi- Solicitations for multiyear contracts
cer should obtain in-house engineering shall reflect all the factors to be con-
cost estimates identifying the detailed sidered for evaluation, specifically in-
recurring and nonrecurring costs, and cluding the following:
the effect of labor learning. (a) The requirements, by item of sup-
(3) The contracting officer shall es- ply or service, for the
tablish cancellation dates for each pro- (1) First program year; and
gram years requirements regarding (2) Multiyear contract including the
production lead time and the date by requirements for each program year.
which funding for these requirements (b) Criteria for comparing the lowest
can reasonably be established. The con- evaluated submission on the first pro-
tracting officer shall include these gram year requirements to the lowest
dates in the schedule, as appropriate. evaluated submission on the multiyear
(d) Cancellation ceilings. Cancellation requirements.
ceilings and dates may be revised after (c) A provision that, if the Govern-
issuing the solicitation if necessary. In ment determines before award that
sealed bidding, the contracting officer only the first program year require-
shall change the ceiling by amending ments are needed, the Governments
the solicitation before bid opening. In evaluation of the price or estimated
two-step sealed bidding, discussions cost and fee shall consider only the
conducted during the first step may in- first year.
dicate the need for revised ceilings and (d) A provision specifying a separate
dates which may be incorporated in cancellation ceiling (on a percentage or
step two. In a negotiated acquisition, dollar basis) and dates applicable to
negotiations with offerors may provide each program year subject to a can-
information requiring a change in cancellation (see 17.1061 (c) and (d)).
cellation ceilings and dates before final (e) A statement that award will not
negotiation and contract award. be made on less than the first program
(e) Payment of cancellation charges. If year requirements.
cancellation occurs, the Governments (f) The Governments administrative
liability will be determined by the costs of annual contracting may be
terms of the applicable contract. used as a factor in the evaluation only
321
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
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
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
supplies. These limitations do not option quantities is when there is a

apply to information technology con- reasonable certainty that funds will be
tracts. However, statutes applicable to unavailable to permit exercise of the
various classes of contracts, for exam- option.
ple, the Service Contract Act (see [53 FR 17858, May 18, 1988]
22.10021), may place additional restric-
tions on the length of contracts. 17.207 Exercise of options.
(f) Contracts may express options for
(a) When exercising an option, the
increased quantities of supplies or serv-
contracting officer shall provide writ-
ices in terms of (1) percentage of spe-
ten notice to the contractor within the
cific line items, (2) increase in specific
time period specified in the contract.
line items, or (3) additional numbered
(b) When the contract provides for
line items identified as the option.
economic price adjustment and the
(g) Contracts may express extensions
contractor requests a revision of the
of the term of the contract as an
price, the contracting officer shall de-
amended completion date or as addi-
termine the effect of the adjustment on
tional time for performance; e.g., days,
prices under the option before the op-
weeks, or months.
tion is exercised.
[48 FR 42231, Sept. 19, 1983, as amended at 54 (c) The contracting officer may exer-
FR 5055, Jan. 31, 1989; 61 FR 41470, Aug. 8, cise options only after determining
1996] that
(1) Funds are available;
(2) The requirement covered by the
(a) The contracting officer shall jus- option fulfills an existing Government
tify in writing the quantities or the need;
term under option, the notification pe- (3) The exercise of the option is the
riod for exercising the option, and any most advantageous method of fulfilling
limitation on option price under the Governments need, price and other
17.203(g); and shall include the jus- factors (see paragraphs (d) and (e)
tification document in the contract below) considered; and
file. (4) The option was synopsized in ac-
(b) Any justifications and approvals cordance with part 5 unless exempted
and any determination and findings re- by 5.202(a)(10) or other appropriate ex-
quired by part 6 shall specify both the emptions in 5.202.
basic requirement and the increase per- (d) The contracting officer, after con-
mitted by the option. sidering price and other factors, shall
[48 FR 42231, Sept. 19, 1983, as amended at 50 make the determination on the basis of
FR 1742, Jan. 11, 1985; 50 FR 52429, Dec. 23, one of the following:
1985] (1) A new solicitation fails to produce
a better price or a more advantageous
17.206 Evaluation. offer than that offered by the option. If
(a) In awarding the basic contract, it is anticipated that the best price
the contracting officer shall, except as available is the option price or that
provided in paragraph (b) of this sec- this is the more advantageous offer,
tion, evaluate offers for any option the contracting officer should not use
quantities or periods contained in a so- this method of testing the market.
licitation when it has been determined (2) An informal analysis of prices or
prior to soliciting offers that the Gov- an examination of the market indi-
ernment is likely to exercise the op- cates that the option price is better
tions. (See 17.208.) than prices available in the market or
(b) The contracting officer need not that the option is the more advan-
evaluate offers for any option quan- tageous offer.
tities when it is determined that eval- (3) The time between the award of
uation would not be in the best inter- the contract containing the option and
ests of the Government and this deter- the exercise of the option is so short
mination is approved at a level above that it indicates the option price is the
the contracting officer. An example of lowest price obtainable or the more ad-
a circumstance that may support a de- vantageous offer. The contracting offi-
termination not to evaluate offers for cer shall take into consideration such
325
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.)
326
(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.
327
17.500 48 CFR Ch. 1 (10103 Edition)
17.500 Scope of subpart. 17.503 Determinations and findings re-

quirements.
(a) This subpart prescribes policies
and procedures applicable to inter- (a) Each Economy Act order shall be
agency acquisitions under the Econ- supported by a Determination and
omy Act (31 U.S.C. 1535). The Economy Finding (D&F). The D&F shall state
Act also provides authority for place- that
ment of orders between major organi- (1) Use of an interagency acquisition
zational units within an agency; proce- is in the best interest of the Govern-
dures for such intra-agency trans- ment; and
actions are addressed in agency regula- (2) The supplies or services cannot be
tions. obtained as conveniently or economi-
(b) The Economy Act applies when cally by contracting directly with a
more specific statutory authority does private source.
not exist. Examples of interagency ac- (b) If the Economy Act order requires
quisitions to which the Economy Act contract action by the servicing agen-
does not apply include cy, the D&F must also include a state-
ment that at least one of the following
(1) Acquisitions from required or op-
circumstances applies:
tional sources of supplies prescribed in
(1) The acquisition will appropriately
Part 8, which have separate statutory
be made under an existing contract of
authority (e.g., Federal Supply Sched-
the servicing agency, entered into be-
ule contracts); and
fore placement of the order, to meet
(2) Acquisitions using Government- the requirements of the servicing agen-
wide acquisition contracts. cy for the same or similar supplies or
[60 FR 49721, Sept. 26, 1995, as amended at 67 services;
FR 56120, Aug. 30, 2002] (2) The servicing agency has capabili-
ties or expertise to enter into a con-
17.501 Definition. tract for such supplies or services
Interagency acquisition, as used in this which is not available within the re-
subpart, means a procedure by which questing agency; or
an agency needing supplies or services (3) The servicing agency is specifi-
(the requesting agency) obtains them cally authorized by law or regulation
from another agency (the servicing to purchase such supplies or services
agency). on behalf of other agencies.
(c) The D&F shall be approved by a
[60 FR 49721, Sept. 26, 1995, as amended at 66 contracting officer of the requesting
FR 2129, Jan. 10, 2001] agency with authority to contract for
the supplies or services to be ordered,
17.502 General. or by another official designated by the
(a) The Economy Act authorizes agency head, except that, if the serv-
agencies to enter into mutual agree- icing agency is not covered by the Fed-
ments to obtain supplies or services by eral Acquisition Regulation, approval
interagency acquisition. of the D&F may not be delegated below
(b) The Economy Act may not be the senior procurement executive of
used by an agency to circumvent condi- the requesting agency.
tions and limitations imposed on the [60 FR 49721, Sept. 26, 1995, as amended at 67
use of funds. FR 13054, Mar. 20, 2002]
(c) Acquisitions under the Economy
Act are not exempt from the require- 17.504 Ordering procedures.
ments of subpart 7.3, Contractor Versus (a) Before placing an Economy Act
Government Performance. order for supplies or services with an-
(d) The Economy Act may not be other Government agency, the request-
used to make acquisitions conflicting ing agency shall make the D&F re-
with any other agencys authority or quired in 17.503. The servicing agency
responsibility (for example, that of the may require a copy of the D&F to be
Administrator of General Services furnished with the order.
under the Federal Property and Admin- (b) The order may be placed on any
istrative Services Act). form or document that is acceptable to
328
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
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.
329
17.601 48 CFR Ch. 1 (10103 Edition)
17.601 Definition. (2) Functions involving the exercise

of police or regulatory powers in the
Management and operating contract
name of the Government, other than
means an agreement under which the
guard or plant protection services;
Government contracts for the oper-
(3) Functions of determining basic
ation, maintenance, or support, on its
Government policies;
behalf, of a Government-owned or -con-
(4) Day-to-day staff or management
trolled research, development, special
functions of the agency or of any of its
production, or testing establishment
elements; or
wholly or principally devoted to one or
(5) Functions that can more properly
more major programs of the con-
be accomplished in accordance with
tracting Federal agency.
subpart 45.3, Providing Government
17.602 Policy. Property to Contractors.
(b) Since issuance of an authorization
(a) Heads of agencies, with requisite under 17.602(a) is deemed sufficient
statutory authority, may determine in proof of compliance with paragraph (a)
writing to authorize contracting offi- immediately above, nothing in para-
cers to enter into or renew any man- graph (a) immediately above shall af-
agement and operating contract in ac- fect the validity or legality of such an
cordance with the agencys statutory authorization.
authority, or the Competition in Con- (c) For use of project labor agree-
tracting Act of 1984, and the agencys ments, see 36.202(d).
regulations governing such contracts.
This authority shall not be delegated. [61 FR 39204, July 26, 1996, as amended at 66
Every contract so authorized shall FR 27415, May 16, 2001]
show its authorization upon its face.
17.604 Identifying management and
(b) Agencies may authorize manage- operating contracts.
ment and operating contracts only in a
manner consistent with the guidance of A management and operating con-
this subpart and only if they are contract is characterized both by its pur-
sistent with the situations described in pose (see 17.601) and by the special rela-
17.604. tionship it creates between Govern-
(c) Within 2 years of the effective ment and contractor. The following
date of this regulation, agencies shall criteria can generally be applied in
review their current contractual ar- identifying management and operating
rangements in the light of the guidance contracts:
of this subpart, in order to (1) identify, (a) Government-owned or -controlled
modify as necessary, and authorize facilities must be utilized; for instance,
management and operating contracts (1) in the interest of national defense
and (2) modify as necessary or termi- or mobilization readiness, (2) to per-
nate contracts not so identified and au- form the agencys mission adequately,
thorized, except that any contract with or (3) because private enterprise is un-
less than 4 years remaining as of the able or unwilling to use its own facili-
effective date of this regulation need ties for the work.
not be terminated, nor need it be iden- (b) Because of the nature of the work,
tified, modified, or authorized unless it or because it is to be performed in Gov-
is renewed or its terms are substan- ernment facilities, the Government
tially renegotiated. must maintain a special, close rela-
tionship with the contractor and the
[48 FR 42163, Sept. 19, 1983, as amended at 50 contractors personnel in various im-
FR 52434, Dec. 23, 1985] portant areas (e.g., safety, security,
cost control, site conditions).
17.603 Limitations.
(c) The conduct of the work is wholly
(a) Management and operating con- or at least substantially separate from
tracts shall not be authorized for the contractors other business, if any.
(1) Functions involving the direction, (d) The work is closely related to the
supervision, or control of Government agencys mission and is of a long-term
personnel, except for supervision inci- or continuing nature, and there is a
dental to training; need (1) to ensure its continuity and (2)
330
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
SUBCHAPTER DSOCIOECONOMIC PROGRAMS
PART 19SMALL BUSINESS 19.503 Setting aside a class of acquisitions

for small business.
PROGRAMS 19.504 [Reserved]
19.505 Rejecting Small Business Adminis-
Sec. tration recommendations.
19.000 Scope of part. 19.506 Withdrawing or modifying small busi-
19.001 Definitions. ness set-asides.
19.507 Automatic dissolution of a small
Subpart 19.1Size Standards business set-aside.
19.101 Explanation of terms. clauses.
19.102 Size standards.
Subpart 19.6Certificates of Competency
Subpart 19.2Policies and Determinations of Responsibility
19.201 General policy. 19.601 General.
19.202 Specific policies. 19.602 Procedures.
19.2021 Encouraging small business partici- 19.6021 Referral.
pation in acquisitions. 19.6022 Issuing or denying a certificate of
19.2022 Locating small business sources. competency (COC).
19.2023 Equal low bids. 19.6023 Resolving differences between the
19.2024 Solicitation. agency and the Small Business Adminis-
19.2025 Data collection and reporting re- tration.
quirements. 19.6024 Awarding the contract.
19.2026 Determination of fair market price.
Subpart 19.7The Small Business
Subpart 19.3Determination of Small Subcontracting Program
Business Status for Small Business Programs
19.701 Definitions.
19.301 Representation by the offeror. 19.702 Statutory requirements.
19.302 Protesting a small business represen- 19.703 Eligibility requirements for partici-
tation. pating in the program.
19.303 Determining North American Indus- 19.704 Subcontracting plan requirements.
try Classification System (NAICS) codes 19.705 Responsibilities of the contracting of-
and size standards. ficer under the subcontracting assistance
19.304 Disadvantaged business status. program.
19.305 Protesting a representation of dis- 19.7051 General support of the program.
advantaged business status. 19.7052 Determining the need for a subcon-
19.306 Protesting a firms status as a tracting plan.
HUBZone small business concern. 19.7053 Preparing the solicitation.
19.307 Solicitation provisions. 19.7054 Reviewing the subcontracting plan.
19.7055 Awards involving subcontracting
Subpart 19.4Cooperation With the Small plans.
Business Administration 19.7056 Postaward responsibilities of the
contracting officer.
19.401 General. 19.7057 Liquidated damages.
19.402 Small Business Administration pro- 19.706 Responsibilities of the cognizant ad-
curement center representatives. ministrative contracting officer.
19.403 Small Business Administration 19.707 The Small Business Administrations
breakout procurement center representa- role in carrying out the program.
tives. 19.708 Contract clauses.
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
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.
19.8082 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.
19.812 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;
333
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
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
335
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, direction 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
includes revenues from sales of prod- Number of employees is a measure of

ucts and services, interest, rents, fees, the average employment of a business
commissions and/or whatever other concern and means its average employ-
sources derived, but less returns and ment, including the employees of its
allowances, sales of fixed assets, inter- domestic and foreign affiliates, based
affiliate transactions between a con- on the number of persons employed on
cern and its domestic and foreign affili- a full-time, part-time, temporary, or
ates, and taxes collected for remit- other basis during each of the pay peri-
tance (and if due, remitted) to a third ods of the preceding 12 months. If a
party. Such revenues shall be measured business has not been in existence for
as entered on the regular books of ac- 12 months, number of employees means
count of the concern whether on a the average employment of such con-
cash, accrual, or other basis of ac- cern and its affiliates during the period
counting acceptable to the U.S. Treas- that such concern has been in existence
ury Department for the purpose of sup- based on the number of persons em-
porting Federal income tax returns, ex- ployed during each of the pay periods
cept when a change in accounting of the period that such concern has
method from cash to accrual or accrual been in business. If a business has ac-
to cash has taken place during such 3- quired an affiliate during the applica-
year period, or when the completed ble 12-month period, it is necessary, in
contract method has been used. computing the applicants number of
employees, to include the affiliates
(i) In any case of a change in ac-
number of employees during the entire
counting method from cash to accrual
period, rather than only its employees
or accrual to cash, revenues for such 3-
during the period in which it has been
year period shall, prior to the calcula-
an affiliate. The employees of a former
tion of the annual average, be restated
affiliate are not included, even if such
to the accrual method. In any case,
concern had been an affiliate during a
where the completed contract method
portion of the period.
has been used to account for revenues
in such 3-year period, revenues must be [51 FR 2650, Jan. 17, 1986, as amended at 64
restated on an accrual basis using the FR 32743, June 17, 1999; 64 FR 72444, Dec. 27,
1999; 65 FR 46055, July 26, 2000; 66 FR 2129,
percentage of completion method.
Jan. 10, 2001; 68 FR 28081, May 22, 2003]
(ii) In the case of a concern which
does not keep regular books of ac- 19.102 Size standards.
counts, but which is subject to U.S. (a) The SBA establishes small busi-
Federal income taxation, annual re- ness size standards on an industry-by-
ceipts shall be measured as reported, or industry basis. (See 13 CFR part 121.)
to be reported to the U.S. Treasury De- (b) Small business size standards are
partment, Internal Revenue Service, applied by
for Federal income tax purposes, ex- (1) Classifying the product or service
cept that any return based on a change being acquired in the industry whose
in accounting method or on the com- definition, as found in the North Amer-
pleted contract method of accounting ican Industry Classification System
must be restated as provided for in the (NAICS) Manual (available via the
preceding paragraphs. Internet at http://www.census.gov/epcd/
(2) Annual receipts of a concern that www/naics.html), best describes the
has been in business for less than 3 principal nature of the product or serv-
complete fiscal years means its total ice being acquired;
receipts for the period it has been in (2) Identifying the size standard SBA
business, divided by the number of established for that industry; and
weeks including fractions of a week (3) Specifying the size standard in the
that it has been in business, and multi- solicitation, so that offerors can appro-
plied by 52. In calculating total re- priately represent themselves as small
ceipts, the definitions and adjustments or large.
related to a change of accounting (c) For size standard purposes, a
method and the completed contract product or service shall be classified in
method of paragraph (1) of this defini- only one industry, whose definition
tion, are applicable. best describes the principal nature of
337
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
(B) Is not anticipated to exceed tion System (NAICS) Industry Sub-

$25,000; and sector, and region, if any, the author-
(ii) The offeror supplies an end prod- ized small disadvantaged business
uct that is manufactured or produced (SDB) procurement mechanisms and
in the United States or its outlying applicable factors (percentages). The
areas. Department of Commerce determina-
(g) In the case of acquisitions set tion shall only affect solicitations that
aside for very small business in accord- are issued on or after the effective date
ance with 19.904, offerors may not have of the determination. The effective
more than 15 employees and may not date of the Department of Commerce
have average annual receipts that ex- determination shall be no less than 60
ceed $1 million. days after its publication date. The De-
(h) The industry size standards are partment of Commerce determination
published by the Small Business Ad- shall not affect ongoing acquisitions.
ministration and are available via the The SDB procurement mechanisms are
Internet at http://www.sba.gov/size. a price evaluation adjustment for SDB
concerns (see Subpart 19.11), an evalua-
[48 FR 42240, Sept. 19, 1983 as amended at 51
FR 2652, Jan. 17, 1986; 51 FR 27489, July 31, tion factor or subfactor for participa-
1986; 51 FR 31426, Sept. 3, 1986; 52 FR 21887, tion of SDB concerns (see 19.1202), and
June 9, 1987; 52 FR 30076, Aug. 12, 1987; 53 FR monetary subcontracting incentive
661, Jan. 11, 1988; 53 FR 34227, Sept. 2, 1988; 53 clauses for SDB concerns (see 19.1203).
FR 43390, Oct. 26, 1988; 54 FR 5055, Jan. 31, The Department of Commerce deter-
1989; 54 FR 13023, Mar. 29, 1989; 54 FR 25062, mination shall also include the appli-
June 12, 1989; 55 FR 3882, Feb. 5, 1990; 55 FR cable factors, by NAICS Industry Sub-
25529, June 21, 1990; 57 FR 60580, 60610, Dec. 21,
sector, to be used in the price evalua-
1992; 59 FR 11376, 11387, Mar. 10, 1994; 59 FR
17723, Apr. 14, 1994; 60 FR 34756, July 3, 1995; tion adjustment for SDB concerns (see
61 FR 31622, June 20, 1996; 61 FR 39208, July 19.1104). The General Services Adminis-
26, 1996; 61 FR 67410, Dec. 20, 1996; 63 FR 58602, tration shall post the Department of
Oct. 30, 1998; 63 FR 70292, Dec. 18, 1998; 64 FR Commerce determination at http://
10536, Mar. 4, 1999; 64 FR 51850, Sept. 24, 1999; www.arnet.gov/References/
65 FR 46056, July 26, 2000; 66 FR 65370, Dec. 18, sdbadjustments.htm. The authorized
2001; 68 FR 28081, May 22, 2003] procurement mechanisms shall be ap-
plied consistently with the policies and
Subpart 19.2Policies procedures in this subpart. The agen-
cies shall apply the procurement mech-
19.201 General policy. anisms determined by the Department
(a) It is the policy of the Government of Commerce. The Department of Com-
to provide maximum practicable oppor- merce, in making its determination, is
tunities in its acquisitions to small not limited to the SDB procurement
business, veteran-owned small busi- mechanisms identified in this section
ness, service-disabled veteran-owned where the Department of Commerce
small business, HUBZone small busi- has found substantial and persuasive
ness, small disadvantaged business, and evidence of
women-owned small business concerns. (1) A persistent and significant un-
Such concerns must also have the max- derutilization of minority firms in a
imum practicable opportunity to par- particular industry, attributable to
ticipate as subcontractors in the con- past or present discrimination; and
tracts awarded by any executive agen- (2) A demonstrated incapacity to al-
cy, consistent with efficient contract leviate the problem by using those
performance. The Small Business Ad- mechanisms.
ministration (SBA) counsels and as- (c) Heads of contracting activities
sists small business concerns and as- are responsible for effectively imple-
sists contracting personnel to ensure menting the small business programs
that a fair proportion of contracts for within their activities, including
supplies and services is placed with achieving program goals. They are to
small business. ensure that contracting and technical
(b) The Department of Commerce personnel maintain knowledge of small
will determine on an annual basis, by business program requirements and
North American Industry Classifica- take all reasonable action to increase
339
19.201 48 CFR Ch. 1 (10103 Edition)
participation in their activities con- (9) Cooperate and consult on a reg-

tracting processes by these businesses. ular basis with the SBA in carrying out
(d) The Small Business Act requires the agencys functions and duties in
each agency with contracting author- sections 8, 15, and 31 of the Small Busi-
ity to establish an Office of Small and ness Act;
Disadvantaged Business Utilization (10) Make recommendations in ac-
(see section (k) of the Small Business cordance with agency procedures as to
Act). Management of the office shall be whether a particular acquisition should
the responsibility of an officer or em- be awarded under subpart 19.5 as a
ployee of the agency who shall, in car- small business set-aside, under subpart
rying out the purposes of the Act 19.8 as a Section 8(a) award, or under
(1) Be known as the Director of Small subpart 19.13 as a HUBZone set-aside.
and Disadvantaged Business Utiliza- (e) Small Business Specialists must
tion; be appointed and act in accordance
(2) Be appointed by the agency head; with agency regulations.
(3) Be responsible to and report di- (f)(1) Each agency shall designate, at
rectly to the agency head or the deputy levels it determines appropriate, per-
to the agency head; sonnel responsible for determining
(4) Be responsible for the agency car- whether, in order to achieve the con-
rying out the functions and duties in tracting agencys goal for SDB con-
sections 8, 15, and 31 of the Small Busi- cerns, the use of the SDB mechanism
ness Act. in Subpart 19.11 has resulted in an
(5) Work with the SBA procurement undue burden on non-SDB firms in one
center representative to of the Industry subsectors and regions
(i) Identify proposed solicitations identified by Department of Commerce
that involve bundling; following paragraph (b) of this section,
(ii) Facilitate small business partici- or is otherwise inappropriate. Deter-
pation as contractors including small minations under this subpart are for
business contract teams, where appro- the purpose of determining future ac-
priate; and quisitions and shall not affect ongoing
(iii) Facilitate small business partici- acquisitions. Requests for a determina-
pation as subcontractors and suppliers tion, including supporting rationale,
where participation by small business may be submitted to the agency des-
concerns as contractors is unlikely; ignee. If the agency designee makes an
(6) Assist small business concerns in affirmative determination that the
obtaining payments under their con- SDB mechanism has an undue burden
tracts, late payment, interest pen- or is otherwise inappropriate, the de-
alties, or information on contractual termination shall be forwarded through
payment provisions; agency channels to the OFPP, which
(7) Have supervisory authority over shall review the determination in con-
agency personnel to the extent that sultation with the Department of Com-
their functions and duties relate to sec- merce and the Small Business Admin-
tions 8, 15, and 31 of the Small Business istration. At a minimum, the following
Act. information should be included in any
(8) Assign a small business technical submittal:
advisor to each contracting activity (i) A determination of undue burden
within the agency to which the SBA or other inappropriate effect, including
has assigned a representative (see proposed corrective action.
19.402) (ii) The Industry subsector affected.
(i) Who shall be a full-time employee (iii) Supporting information to jus-
of the contracting activity, well quali- tify the determination, including, but
fied, technically trained, and familiar not limited to, dollars and percentages
with the supplies or services con- of contracts awarded by the con-
tracted for by the activity; and tracting activity under the affected In-
(ii) Whose principal duty is to assist dustry subsector for the previous two
the SBAs assigned representative in fiscal years and current fiscal year to
performing functions and duties relat- date for
ing to sections 8, 15, and 31 of the (A) Total awards;
Small Business Act; (B) Total awards to SDB concerns;
340
(C) Awards to SDB concerns awarded 19.2021 Encouraging small business

contracts under the SDB price evalua- participation in acquisitions.
tion adjustment where the SDB con- Small business concerns shall be af-
cerns would not otherwise have been forded an equitable opportunity to
the successful offeror; compete for all contracts that they can
(D) Number of successful and unsuc- perform to the extent consistent with
cessful SDB offerors; and the Governments interest. When appli-
(E) Number of successful and unsuc- cable, the contracting officer shall
cessful non-SDB offerors. take the following actions:
(iv) A discussion of the pertinent (a) Divide proposed acquisitions of
findings, including any peculiarities re- supplies and services (except construc-
lated to the industry, regions or demo- tion) into reasonably small lots (not
graphics. less than economic production runs) to
(v) A discussion of other efforts the permit offers on quantities less than
agency has undertaken to ensure equal the total requirement.
opportunity for SDBs in contracting (b) Plan acquisitions such that, if
with the agency. practicable, more than one small busi-
ness concern may perform the work, if
(2) After consultation with OFPP, or
the work exceeds the amount for which
if the agency does not receive a re-
a surety may be guaranteed by SBA
sponse from OFPP within 90 days after
against loss under 15 U.S.C. 694b.
notice is provided to OFPP, the con-
(c) Ensure that delivery schedules are
tracting agency may limit the use of established on a realistic basis that
the SDB mechanism in Subpart 19.11 will encourage small business partici-
until the Department of Commerce de- pation to the extent consistent with
termines the updated price evaluation the actual requirements of the Govern-
adjustment, as required by this sec- ment.
tion. This limitation shall not apply to (d) Encourage prime contractors to
solicitations that already have been subcontract with small business con-
synopsized. cerns (see subpart 19.7).
[48 FR 42240, Sept. 19, 1983, as amended at 50 (e)(1) Provide a copy of the proposed
FR 27562, July 3, 1985; 51 FR 27116, July 29, acquisition package to the SBA pro-
1986; 54 FR 13333, Mar. 31, 1989; 54 FR 25062, curement center representative at
June 12, 1989; 60 FR 48260, Sept. 18, 1995; 62 FR least 30 days prior to the issuance of
44820, Aug. 22, 1997; 63 FR 35721, June 30, 1998; the solicitation if
63 FR 36122, July 1, 1998; 63 FR 52427, Sept. 30, (i) The proposed acquisition is for
1998; 63 FR 56738, Oct. 22, 1998; 63 FR 70268, supplies or services currently being
Dec. 18, 1998; 64 FR 72444, Dec. 27, 1999; 65 FR provided by a small business and the
46056, July 26, 2000; 65 FR 60544, Oct. 11, 2000] proposed acquisition is of a quantity or
estimated dollar value, the magnitude
19.202 Specific policies.
of which makes it unlikely that small
In order to further the policy in businesses can compete for the prime
19.201(a), contracting officers shall contract;
comply with the specific policies listed (ii) The proposed acquisition is for
in this section and shall consider rec- construction and seeks to package or
ommendations of the agency Director consolidate discrete construction
of Small and Disadvantaged Business projects and the magnitude of this con-
Utilization, or the Directors designee, solidation makes it unlikely that small
as to whether a particular acquisition businesses can compete for the prime
should be awarded under subpart 19.5, contract; or
19.8 or 19.13. The contracting officer (iii) The proposed acquisition is for a
shall document the contract file when- bundled requirement. (See 10.001(c)(2)(i)
ever the Directors recommendations for mandatory 30-day notice require-
are not accepted. ment to incumbent small business con-
cerns.)
[54 FR 25062, June 12, 1989, as amended at 60 (2) The contracting officer also must
FR 48260, Sept. 18, 1995; 63 FR 70268, Dec. 18, provide a statement explaining why
1998] the
341
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
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
small business, veteran-owned small Subpart 19.3Determination of

business, service-disabled veteran- Small Business Status for Small
owned small business, HUBZone small Business Programs
business, small disadvantaged business,
or women-owned small business con- 19.301 Representation by the offeror.
cern (see the provision at 52.2191, (a) To be eligible for award as a small
Small Business Program Representa- business, an offeror must represent in
tions). good faith that it is a small business at
(b) Accurately measure the extent of the time of its written representation.
participation by small business, vet- An offeror may represent that it is a
eran-owned small business, service-dis- small business concern in connection
abled veteran-owned small business, with a specific solicitation if it meets
HUBZone small business, small dis- the definition of a small business con-
advantaged business, and women- cern applicable to the solicitation and
owned small business concerns in Gov- has not been determined by the Small
ernment acquisitions in terms of the Business Administration (SBA) to be
total value of contracts placed during other than a small business.
(b) The contracting officer shall ac-
each fiscal year, and report data to the
cept an offerors representation in a
SBA at the end of each fiscal year (see
specific bid or proposal that it is a
subpart 4.6). small business unless (1) another offer-
[48 FR 42240, Sept. 19, 1983, as amended at 60 or or interested party challenges the
FR 48261, Sept. 18, 1995; 63 FR 70268, Dec. 18, concerns small business representa-
1998; 65 FR 60544, Oct. 11, 2000] tion or (2) the contracting officer has a
reason to question the representation.
19.2026 Determination of fair market Challenges of and questions concerning
price. a specific representation shall be re-
(a) The fair market price shall be the ferred to the SBA in accordance with
price achieved in accordance with the 19.302.
reasonable price guidelines in 15.404 (c) An offerors representation that it
is a small business is not binding on
1(b) for
the SBA. If an offerors small business
(1) Total and partial small business status is challenged, the SBA will
set-asides (see subpart 19.5); evaluate the status of the concern and
(2) HUBZone set-asides (see subpart make a determination, which will be
19.13); binding on the contracting officer, as
(3) Contracts utilizing the price eval- to whether the offeror is a small busi-
uation adjustment for small disadvan- ness. A concern cannot become eligible
taged business concerns (see subpart for a specific award by taking action to
19.11); and meet the definition of a small business
(4) Contracts utilizing the price eval- concern after the SBA has determined
uation preference for HUBZone small that it is not a small business.
business concerns (see subpart 19.13). (d) If the SBA determines that the
(b) For 8(a) contracts, both with re- status of a concern as a small business,
spect to meeting the requirement at veteran-owned small business,
HUBZone small business, small dis-
19.806(b) and in order to accurately es-
advantaged business, or women-owned
timate the current fair market price,
small business has been misrepresented
contracting officers shall follow the in order to obtain a set-aside contract,
procedures at 19.807. an 8(a) subcontract, a subcontract that
[52 FR 38189, Oct. 14, 1987, as amended at 53 is to be included as part or all of a goal
FR 43390, Oct. 26, 1988; 54 FR 46005, Oct. 31, contained in a subcontracting plan, or
1989; 62 FR 51270, Sept. 30, 1997; 63 FR 35722, a prime or subcontract to be awarded
June 30, 1998; 63 FR 70268, Dec. 18, 1998] as a result, or in furtherance of any
343
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 received, 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
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
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
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
19.306 48 CFR Ch. 1 (10103 Edition)
representation of disadvantaged status and whether it will be processed or dis-

at any time following bid opening or missed for lack of timeliness or speci-
notification of intended award. ficity. For protests that are not dis-
(1) If a contracting officers protest is missed, the SBA will, within 15 work-
based on information provided by a ing days after receipt of the protest,
party ineligible to protest directly or determine the disadvantaged status of
ineligible to protest under the timeli- the challenged offeror and will notify
ness standard, the contracting officer the contracting officer, the challenged
must be persuaded by the evidence pre- offeror, and the protestor. Award may
sented before adopting the grounds for be made on the basis of that deter-
protest as his or her own. mination. The determination is final
(2) The SBA may protest a concerns for purposes of the instant acquisition,
representation of disadvantaged status unless it is appealed and
by filing directly with its Assistant Ad- (1) The contracting officer receives
ministrator for Small Disadvantaged the SBAs decision on the appeal before
Business Certification and Eligibility award; or
and notifying the contracting officer. (2) The contracting officer has agreed
(d) The contracting officer shall re- to terminate the contract, as appro-
turn premature protests to the priate, based on the outcome of the ap-
protestor. A protest is considered to be peal (see 13 CFR 124, Subpart B).
premature if it is submitted before bid (h) If the contracting officer does not
opening or notification of intended receive an SBA determination within
award. SBA normally will not consider 15 working days after the SBAs receipt
a postaward protest. SBA may consider of the protest, the contracting officer
a postaward protest in its discretion shall presume that the challenged of-
where it determines that an SDB deter- feror is disadvantaged and may award
mination after award is meaningful the contract, unless the SBA requests
(e.g., where the contracting officer and the contracting officer grants an
agrees to terminate the contract if the extension to the 15-day response pe-
protest is sustained). riod.
(e) Upon receipt of a protest that is (i) An SBA determination may be ap-
not premature, the contracting officer pealed by
shall withhold award and forward the (1) The party whose protest has been
protest to Small Business Administra- denied;
tion, Assistant Administrator for (2) The concern whose status was pro-
SDBCE, 409 Third Street, SW, Wash- tested; or
ington, DC 20416. The contracting offi- (3) The contracting officer.
cer shall send to SBA (j) The appeal must be filed with the
(1) The written protest and any ac- SBAs Administrator or designee with-
companying materials; in five working days after receipt of
(2) The date the protest was received; the determination. If the contracting
(3) A copy of the protested concerns officer receives the SBAs decision on
representation as a small disadvan- the appeal before award, the decision
taged business, and the date of such shall apply to the instant acquisition.
representation; and If the decision is received after award,
(4) The date of bid opening or date on it will not apply to the instant acquisi-
which notification of the apparently tion (but see paragraph (g)(2) of this
successful offeror was sent to unsuc- section).
cessful offerors. [63 FR 35722, June 30, 1998, as amended at 63
(f) When the contracting officer FR 36122, July 1, 1998]
makes a written determination that
award must be made to protect the 19.306 Protesting a firms status as a
public interest, award may be made HUBZone small business concern.
notwithstanding the protest. (a) For sole source acquisitions, the
(g) The SBA Assistant Administrator SBA or the contracting officer may
for Small Disadvantaged Business Cer- protest the apparently successful
tification and Eligibility will notify offerors HUBZone small business sta-
the protestor and the contracting offi- tus. For all other acquisitions, an of-
cer of the date the protest was received feror, the contracting officer, or the
348
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/
349
19.307 48 CFR Ch. 1 (10103 Edition)
GC&8(a)BDs decision is the final deci- 19.402 Small Business Administration

sion. procurement center representa-
tives.
FR 51831, Sept. 24, 1999] (a) The SBA may assign one or more
procurement center representatives to
19.307 Solicitation provisions. any contracting activity or contract
(a)(1) Insert the provision at 52.2191, administration office to carry out SBA
Small Business Program Representa- policies and programs. Assigned SBA
tions, in solicitations exceeding the procurement center representatives are
micro-purchase threshold when the required to comply with the con-
contract will be performed in the tracting agencys directives governing
United States or its outlying areas. the conduct of contracting personnel
(2) Use the provision with its Alter- and the release of contract informa-
nate I in solicitations issued by DoD, tion. The SBA must obtain for its pro-
NASA, or the Coast Guard that the curement center representatives secu-
contracting officer expects will exceed rity clearances required by the con-
the threshold at 4.601(a). tracting agency.
(b) Insert the provision at 52.21922, (b) Upon their request and subject to
Small Disadvantaged Business Status, applicable acquisition and security reg-
in solicitations that include the clause ulations, contracting officers shall give
at 52.21923, Notice of Price Evaluation SBA procurement center representa-
Adjustment for Small Disadvantaged tives access to all reasonably obtain-
Business Concerns, or 52.21925, Small able contract information that is di-
Disadvantaged Business Participation rectly pertinent to their official duties.
ProgramDisadvantaged Status and (c) The duties assigned by SBA to its
Reporting. Use the provision with its procurement center representatives in-
Alternate I in solicitations for acquisi- clude the following:
tions for which a price evaluation ad- (1) Reviewing proposed acquisitions
justment for small disadvantaged busi- to recommend
ness concerns is authorized on a re-
(i) The setting aside of selected ac-
gional basis.
quisitions not unilaterally set aside by
(c) When contracting by sealed bid-
the contracting officer.
ding, insert the provision at 52.2192,
Equal Low Bids, in solicitations when (ii) New qualified small, veteran-
the contract will be performed in the owned small , service-disabled veteran-
United States or its outlying areas. owned small, HUBZone small, small
disadvantaged, and women-owned
[64 FR 51832, Sept. 24, 1999, as amended at 67 small business sources, and
FR 13066, Mar. 20, 2002; 68 FR 28081, May 22,
(iii) Breakout of components for
2003]
competitive acquisitions.
(2) Reviewing proposed acquisition
Subpart 19.4Cooperation With packages provided in accordance with
the Small Business Administration 19.2021(e). If the SBA procurement
center representative believes that the
19.401 General.
acquisition, as proposed, makes it un-
(a) The Small Business Act is the au- likely that small businesses can com-
thority under which the Small Busi- pete for the prime contract, the rep-
ness Administration (SBA) and agen- resentative shall recommend any alter-
cies consult and cooperate with each nate contracting method that the rep-
other in formulating policies to ensure resentative reasonably believes will in-
that small business interests will be crease small business prime con-
recognized and protected. tracting opportunities. The rec-
(b) The Director of Small and Dis- ommendation shall be made to the con-
advantaged Business Utilization serves tracting officer within 15 days after re-
as the agency focal point for inter- ceipt of the package.
facing with SBA. (3) Recommending concerns for inclu-
[48 FR 42240, Sept. 19, 1983, as amended at 60 sion on a list of concerns to be solicited
FR 48261, Sept. 18, 1995] in a specific acquisition.
350
(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
351
19.501 48 CFR Ch. 1 (10103 Edition)
(ii) Forward such proposals without Subpart 19.5Set-Asides for Small

analysis to personnel of the center re- Business
sponsible for reviewing them who shall
furnish the breakout procurement cen- 19.501 General.
ter representative with information re- (a) The purpose of small business set-
garding the proposals disposition; asides is to award certain acquisitions
(7) Review the systems that account exclusively to small business concerns.
for the acquisition and management of A set-aside for small business is the
technical data within the procurement reserving of an acquisition exclusively
center to ensure that such systems pro- for participation by small business con-
vide the maximum availability and ac- cerns. A small business set-aside may
cess to data needed for the preparation be open to all small businesses. A small
of offers to sell to the United States business set-aside of a single acquisi-
those supplies to which such data per- tion or a class of acquisitions may be
tain which potential offerors are enti- total or partial.
tled to receive; (b) The determination to make a
(8) Appeal the failure by the procure- small business set-aside may be unilat-
ment center to act favorably on any eral or joint. A unilateral determina-
recommendation made pursuant to tion is one that is made by the con-
subparagraphs (c) (1) through (7) of this tracting officer. A joint determination
section. Such appeal must be in writing is one that is recommended by the
and shall be filed and processed in ac- Small Business Administration (SBA)
cordance with the appeal procedures procurement center representative and
set out in 19.505; concurred in by the contracting officer.
(9) Conduct familiarization sessions (c) For acquisitions exceeding the
for contracting officers and other ap- simplified acquisition threshold, the
propriate personnel of the procurement requirement to set aside an acquisition
center to which assigned. Such sessions for HUBZone small business concerns
shall acquaint the participants with (see 19.1305) takes priority over the re-
the duties and objectives of the rep- quirement to set aside the acquisition
resentative and shall instruct them in for small business concerns.
the methods designed to further the (d) The contracting officer shall re-
breakout of items for procurement view acquisitions to determine if they
through full and open competition; and can be set aside for small business, giv-
ing consideration to the recommenda-
(10) Prepare and personally deliver an
tions of agency personnel having cog-
annual briefing and report to the head
nizance of the agencys small business
of the procurement center to which as-
programs. The contracting officer shall
signed. Such briefing and report shall
document why a small business set-
detail the past and planned activities
aside is inappropriate when an acquisi-
of the representative and shall contain
tion is not set aside for small business,
recommendations for improvement in
unless a HUBZone small business set-
the operation of the center as may be
aside or HUBZone small business sole
appropriate. The head of such center
source award is anticipated. If the ac-
shall personally receive the briefing
quisition is set aside for small business
and report and shall, within 60 calendar
based on this review, it is a unilateral
days after receipt, respond, in writing,
set-aside by the contracting officer.
to each recommendation made by the
Agencies may establish threshold lev-
representative.
els for this review depending upon their
(d) The duties of the SBA small busi- needs.
ness technical advisors are to assist (e) At the request of an SBA procure-
the SBA breakout procurement center ment center representative, the con-
representative in carrying out the ac- tracting officer shall make available
tivities described in (c) (1) through (7) for review at the contracting office (to
of this section and to assist the SBA the extent of the SBA representatives
procurement center representatives security clearance) all proposed acqui-
(see FAR 19.402). sitions in excess of the micro-purchase
[51 FR 19715, May 30, 1986, as amended at 54 threshold that have not been unilater-
FR 25062, June 12, 1989] ally set aside for small business.
352
(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
353
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 concerns 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
price because of the increased quan- (b) The item is on an established

tities of the award, nor shall negotia- planning list under the Industrial
tion be conducted with a view to ob- Readiness Planning Program. However,
taining such a lower price based solely a total small business set-aside shall
upon receipt of award of both portions not be made when the list contains a
of the acquisition. This does not pre- large business Planned Emergency Pro-
vent acceptance by the contracting of- ducer of the item(s) who has conveyed
ficer of voluntary reductions in the a desire to supply some or all of the re-
price from the low eligible offeror be- quired items.
fore award, acceptance of voluntary re- (c) The item is on a Qualified Prod-
funds, or the change of prices after ucts List. However, a total small busi-
award by negotiation of a contract ness set-aside shall not be made if the
modification. list contains the products of large busi-
(ii) If equal low offers are received on ness unless none of the large businesses
the non-set-aside portion from con- desires to participate in the acquisi-
cerns eligible for the set-aside portion, tion.
the concern that is awarded the non- (d) A period of less than 30 days is
set-aside part of the acquisition shall available for receipt of offers.
have first priority with respect to ne- (e) The acquisition is classified.
gotiations for the set-aside. (f) Small business concerns are al-
[48 FR 42240, Sept. 19, 1989, as amended at 53 ready receiving a fair proportion of the
FR 43390, Oct. 26, 1988; 60 FR 34757, July 3, agencys contracts for supplies and
1995] services.
(g) A class small business set-aside of
19.5024 Methods of conducting set-
asides. the item or service has been made by
another contracting activity.
(a) Total small business set-asides (h) A brand name or equal product
may be conducted by using simplified description will be used in the solicita-
acquisition procedures (see part 13), tion.
sealed bids (see part 14), or competitive
proposals (see part 15). Partial small [48 FR 42240, Sept. 19, 1989, as amended at 63
business set-asides may be conducted FR 70270, 70292, Dec. 18, 1998]
using sealed bids (see part 14), or com-
19.503 Setting aside a class of acquisi-
petitive proposals (see part 15). tions for small business.
(b) Except for offers on the non-set-
aside portion of partial set-asides, of- (a) A class of acquisitions of selected
fers received from concerns that do not products or services, or a portion of the
qualify as small business concerns acquisitions, may be set aside for ex-
shall be considered nonresponsive and clusive participation by small business
shall be rejected. However, before re- concerns if individual acquisitions in
jecting an offer otherwise eligible for the class will meet the criteria in
award because of questions concerning 19.5021, 19.5022, or 19.5023(a). The de-
the size representation, an SBA deter- termination to make a class small
mination must be obtained (see subpart business set-aside shall not depend on
19.3). the existence of a current acquisition if
future acquisitions can be clearly fore-
[50 FR 1743, Jan. 11, 1985, and 50 FR 52429,
seen.
Dec. 23, 1985, as amended at 59 FR 67037, Dec.
28, 1994; 60 FR 34757, July 3, 1995; 63 FR 70270, (b) The determination to set aside a
Dec. 18, 1998] class of acquisitions for small business
may be either unilateral or joint.
19.5025 Insufficient causes for not (c) Each class small business set-
setting aside an acquisition. aside determination shall be in writing
None of the following is, in itself, suf- and must
ficient cause for not setting aside an (1) Specifically identify the prod-
acquisition: uct(s) and service(s) it covers;
(a) A large percentage of previous (2) Provide that the set-aside does
contracts for the required item(s) has not apply to any acquisition automati-
been placed with small business con- cally reserved for small business con-
cerns. cerns under 19.5022(a).
355
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 conformance 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
contracting officer considers that the capabilities of small business con-

award would be detrimental to the pub- cerns.
lic interest (e.g., payment of more than
a fair market price), the contracting FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
officer may withdraw the small busi- 1985; 63 FR 70270, Dec. 18, 1998]
ness set-aside determination whether it
was unilateral or joint. The con- 19.508 Solicitation provisions and con-
tracting officer shall initiate a with- tract clauses.
drawal of an individual small business
(a)-(b) [Reserved]
set-aside by giving written notice to
the agency small business specialist (c) The contracting officer shall in-
and the SBA procurement center rep- sert the clause at 52.2196, Notice of
resentative, if one is assigned, stating Total Small Business Set-Aside, in so-
the reasons. In a similar manner, the licitations and contracts involving
contracting officer may modify a uni- total small business set-asides. The
lateral or joint class small business clause at 52.2196 with its Alternate I
set-aside to withdraw one or more indi- will be used when the acquisition is for
vidual acquisitions. a product in a class for which the
(b) If the agency small business spe- Small Business Administration has
cialist does not agree to a withdrawal waived the nonmanufacturer rule (see
or modification, the case shall be 19.102(f) (4) and (5)).
promptly referred to the SBA rep- (d) The contracting officer shall in-
resentative (if one is assigned) for re- sert the clause at 52.2197, Notice of
view. If an SBA representative is not Partial Small Business Set-Aside, in
assigned, disagreements between the solicitations and contracts involving
agency small business specialist and partial small business set-asides. The
the contracting officer shall be re- clause at 52.2197 with its Alternate I
solved using agency procedures. How- will be used when the acquisition is for
ever, the procedures are not applicable a product in a class for which the
to automatic dissolutions of small Small Business Administration has
business set-asides (see 19.507) or dis- waived the nonmanufacturer rule (see
solution of small business set-asides 19.102(f) (4) and (5)).
under $100,000. (e) The contracting officer shall in-
(c) The contracting officer shall pre- sert the clause at 52.21914, Limitations
pare a written statement supporting on Subcontracting, in solicitations and
any withdrawal or modification of a contracts for supplies, services, and
small business set-aside and include it construction, if any portion of the re-
in the contract file. quirement is to be set aside for small
business and the contract amount is
expected to exceed $100,000.
FR 70270, Dec. 18, 1998]
[48 FR 42240, June 9, 1987, as amended at 52
19.507 Automatic dissolution of a FR 21902, June 9, 1987; 52 FR 38189, Oct. 14,
small business set-aside. 1987; 53 FR 27464, July 20, 1988; 53 FR 43390,
(a) If a small business set-aside ac- Oct. 26, 1988; 54 FR 25063, June 12, 1989; 55 FR
quisition or portion of an acquisition is 25529, June 21, 1990; 55 FR 38516, Sept. 18, 1990;
60 FR 34757, July 3, 1995; 60 FR 48262, Sept. 18,
not awarded, the unilateral or joint de-
1995; 61 FR 39209, July 26, 1996; 61 FR 67430,
termination to set the acquisition Dec. 20, 1996; 62 FR 236, Jan. 2, 1997; 62 FR
aside is automatically dissolved for the 44820, Aug. 22, 1997]
unawarded portion of the set-aside. The
required supplies and/or services for
which no award was made may be ac-
Subpart 19.6Certificates of
quired by sealed bidding or negotia- Competency and Determina-
tion, as appropriate. tions of Responsibility
(b) Before issuing a solicitation for
the items called for in a small business 19.601 General.
set-aside that was dissolved, the con- (a) A Certificate of Competency
tracting officer shall ensure that the (COC) is the certificate issued by the
delivery schedule is realistic in the Small Business Administration (SBA)
light of all relevant factors, including stating that the holder is responsible
357
19.602 48 CFR Ch. 1 (10103 Edition)
(with respect to all elements of respon- perseverance, tenacity, and limitations

sibility, including, but not limited to, on subcontracting), the contracting of-
capability, competency, capacity, cred- ficer shall
it, integrity, perseverance, tenacity, (1) Withhold contract award (see
and limitations on subcontracting) for 19.6023); and
the purpose of receiving and per- (2) Refer the matter to the cognizant
forming a specific Government con- SBA Government Contracting Area Of-
tract. fice (Area Office) serving the area in
(b) The COC program empowers the which the headquarters of the offeror is
Small Business Administration (SBA)
located, in accordance with agency pro-
to certify to Government contracting
cedures, except that referral is not nec-
officers as to all elements of responsi-
bility of any small business concern to essary if the small business concern
receive and perform a specific Govern- (i) Is determined to be unqualified
ment contract. The COC program does and ineligible because it does not meet
not extend to questions concerning reg- the standard in 9.1041(g); provided,
ulatory requirements imposed and en- that the determination is approved by
forced by other Federal agencies. the chief of the contracting office; or
(c) The COC program is applicable to (ii) Is suspended or debarred under
all Government acquisitions. A con- Executive Order 11246 or subpart 9.4.
tracting officer shall, upon deter- (b) If a partial set-aside is involved,
mining an apparent successful small the contracting officer shall refer to
business offeror to be nonresponsible, the SBA the entire quantity to which
refer that small business to the SBA the concern may be entitled, if respon-
for a possible COC, even if the next ac- sible.
ceptable offer is also from a small busi- (c) The referral shall include
ness. (1) A notice that a small business
(d) When a solicitation requires a
concern has been determined to be non-
small business to adhere to the limita-
responsible, specifying the elements of
tions on subcontracting, a contracting
responsibility the contracting officer
officers finding that a small business
cannot comply with the limitation found lacking; and
shall be treated as an element of re- (2) If applicable, a copy of the fol-
sponsibility and shall be subject to the lowing:
COC process. When a solicitation re- (i) Solicitation.
quires a small business to adhere to the (ii) Final offer submitted by the con-
definition of a nonmanufacturer, a concern whose responsibility is at issue for
tracting officers determination that the procurement.
the small business does not comply (iii) Abstract of bids or the con-
shall be processed in accordance with tracting officers price negotiation
subpart 19.3. memorandum.
(e) Contracting officers, including (iv) Preaward survey.
those located overseas, are required to (v) Technical data package (including
comply with this subpart for U.S. small drawings, specifications and statement
business concerns. of work).
[48 FR 42240, Sept. 19, 1983, as amended at 51 (vi) Any other justification and docu-
FR 2664, Jan. 17, 1986; 54 FR 34754, Aug. 21, mentation used to arrive at the non-
1989; 59 FR 67036, Dec. 28, 1994; 61 FR 67410, responsibility determination.
Dec. 20, 1996; 62 FR 44820, Aug. 22, 1997]
(d) For any single acquisition, the
19.602 Procedures. contracting officer shall make only one
referral at a time regarding a deter-
19.6021 Referral. mination of nonresponsibility.
(a) Upon determining and docu- (e) Contract award shall be withheld
menting that an apparent successful by the contracting officer for a period
small business offeror lacks certain of 15 business days (or longer if agreed
elements of responsibility (including, to by the SBA and the contracting offi-
but not limited to, capability, com- cer) following receipt by the appro-
petency, capacity, credit, integrity, priate SBA Area Office of a referral
358
that includes all required documenta- Office to review all documentation con-
tion. tained in the case file and to attempt
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
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 requirements 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
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
361
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
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
19.705 48 CFR Ch. 1 (10103 Edition)
necessary and the offeror is submitting tiated acquisition by providing mone-

an individual contract plan, the plan tary incentives such as payments based
shall contain all the elements required on actual subcontracting achievement
by paragraph (a) of this section and or awardfee contracting (see the
shall contain separate statements and clause at 52.21910, Incentive Subcon-
goals for the basic contract and for tracting Program, and 19.708(c)). This
each option. subsection does not apply to SDB sub-
(d) A commercial plan (as defined in contracting (see 19.1203). When using
19.701) is the preferred type of subcon- any contractual incentive provision
tracting plan for contractors fur- based upon rewarding the contractor
nishing commercial items. The con- monetarily for exceeding goals in the
tractor shall subcontracting plan, the contracting
(1) Submit the commercial plan to ei- officer must ensure that (a) the goals
ther the first contracting officer are realistic and (b) any rewards for ex-
awarding a contract subject to the plan ceeding the goals are commensurate
during the contractors fiscal year, or, with the efforts the contractor would
if the contractor has ongoing contracts not have otherwise expended. Incentive
with commercial plans, to the con- provisions should normally be nego-
tracting officer responsible for the con- tiated after reaching final agreement
tract with the latest completion date. with the contractor on the subcon-
The contracting officer shall negotiate tracting plan.
the commercial plan for the Govern-
ment. The approved commercial plan [48 FR 42240, Sept. 19, 1983, as amended at 60
shall remain in effect during the con- FR 48262, Sept. 18, 1995; 63 FR 34065, June 22,
1998; 63 FR 36123, July 1, 1998]
tractors fiscal year for all Government
contracts in effect during that period; 19.7052 Determining the need for a
and subcontracting plan.
(2) Submit a new commercial plan, 30
working days before the end of the fis- The contracting officer must take
cal year, to the contracting officer re- the following actions to determine
sponsible for the uncompleted Govern- whether a proposed contractual action
ment contract with the latest comple- requires a subcontracting plan:
tion date. The contractor must provide (a) Determine whether the proposed
to each contracting officer responsible contractual action will meet the dollar
for an ongoing contract subject to the threshold in 19.702(a)(1) or (2). If the ac-
plan, the identity of the contracting of- tion includes options or similar provi-
ficer that will be negotiating the new sions, include their value in deter-
plan. When the new commercial plan is mining whether the threshold is met.
approved, the contractor shall provide (b) Determine whether subcon-
a copy of the approved plan to each tracting possibilities exist by consid-
contracting officer responsible for an ering relevant factors such as
ongoing contract that is subject to the (1) Whether firms engaged in the
plan. business of furnishing the types of
items to be acquired customarily con-
FR 2664, Jan. 17, 1986; 54 FR 29281, July 11, tract for performance of part of the
1989; 60 FR 48262, Sept. 18, 1995; 61 FR 31643, work or maintain sufficient in-house
June 20, 1996; 63 FR 34065, June 22, 1998; 63 FR capability to perform the work;
70271, Dec. 18, 1998; 65 FR 60545, Oct. 11, 2000; (2) Whether there are likely to be
66 FR 53493, Oct. 22, 2001; 67 FR 1858, Jan. 14, product prequalification requirements;
2002] and
19.705 Responsibilities of the con- (c) If it is determined that there are
tracting officer under the subcon- no subcontracting possibilities, the de-
tracting assistance program. termination must be approved at a
level above the contracting officer and
19.7051 General support of the pro- placed in the contract file.
gram. (d) In solicitations for negotiated ac-
The contracting officer may encour- quisitions, the contracting officer may
age the development of increased sub- require the submission of subcon-
contracting opportunities in nego- tracting plans with initial offers, or at
364
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
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:
365
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
(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
(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
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 subcontracting 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
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
would be 10 percent of $20 million, or $2 business, and women-owned small busi-

million. To continue the example, if ness concerns;
the contractor failed to achieve its (c) Information on whether the con-
small business goal by 1 percent, the tractors efforts to ensure the partici-
liquidated damages would be cal- pation of small business, veteran-
culated as 1 percent of $2 million, or owned small business, service-disabled
$20,000. The contracting officer shall veteran-owned small business,
make similar calculations for each cat- HUBZone small business, small dis-
egory of small business where the con- advantaged business, and women-
tractor failed to achieve its goal and owned small business concerns are in
the sum of the dollars for all of the cat- accordance with its subcontracting
egories equals the amount of the liq- plan;
uidated damages to be assessed. A copy (d) Information on whether the con-
of the contracting officers final deci- tractor is requiring its subcontractors
sion assessing liquidated damages shall to adopt similar subcontracting plans;
be provided to other contracting offi- (e) Immediate notice if, during per-
cers with contracts subject to the com- formance, the contractor is failing to
mercial plan. meet its commitments under the
(g) Liquidated damages shall be in clause prescribed in 19.708(b) or the
addition to any other remedies that subcontracting plan;
the Government may have. (f) Immediate notice and rationale if,
(h) Every contracting officer with a during performance, the contractor is
contract that is subject to a commer- failing to comply in good faith with the
cial plan shall include in the contract subcontracting plan; and
file a copy of the approved plan and a (g) Immediate notice that perform-
copy of the final decision assessing liq- ance under a contract is complete, that
uidating damages, if applicable. the goals were or were not met, and, if
not met, whether there is any indica-
FR 48263, Sept. 18, 1995; 63 FR 34066, June 22, tion of a lack of a good faith effort to
1998; 63 FR 70272, Dec. 18, 1998; 65 FR 60545, comply with the subcontracting plan.
Oct. 11, 2000; 66 FR 53493, Oct. 22, 2001] [48 FR 42240, Sept. 19, 1983, as amended at 54
FR 30710, July 21, 1989; 60 FR 48263, Sept. 18,
19.706 Responsibilities of the cog- 1995; 63 FR 34067, June 22, 1998; 63 FR 70272,
nizant administrative contracting Dec. 18, 1998; 65 FR 60545, Oct. 11, 2000; 66 FR
officer. 53493, Oct. 22, 2001]
The administrative contracting offi-
cer is responsible for assisting in evalu- 19.707 The Small Business Administra-
tions role in carrying out the pro-
ating subcontracting plans, and for gram.
monitoring, evaluating, and docu-
menting contractor performance under (a) Under the program, the SBA
the clause prescribed in 19.708(b) and may
any subcontracting plan included in (1) Assist both Government agencies
the contract. The contract administra- and contractors in carrying out their
tion office shall provide the necessary responsibilities with regard to subcon-
information and advice to support the tracting plans;
contracting officer, as appropriate, by (2) Review (within 5 working days)
furnishing any solicitation that meets the dollar
(a) Documentation on the contrac- threshold in 19.702(a)(1) or (2) before the
tors performance and compliance with solicitation is issued;
subcontracting plans under previous (3) Review (within 5 working days)
contracts; before execution any negotiated con-
(b) Information on the extent to tractual document requiring a subcon-
which the contractor is meeting the tracting plan, including the plan itself,
plans goals for subcontracting with el- and submit recommendations to the
igible small business, veteran-owned contracting officer, which shall be ad-
small business, service-disabled vet- visory in nature; and
eran-owned small business, HUBZone (4) Evaluate compliance with subcon-
small business, small disadvantaged tracting plans, either on a contract-by-
369
19.708 48 CFR Ch. 1 (10103 Edition)
contract basis, or, in the case of contracting 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 contracting 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
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
Subpart 19.8Contracting With and is based on the criteria established

the Small Business Administra- in 13 CFR 124.101112.
tion (the 8(a) Program) [48 FR 42240, Sept. 19, 1983, as amended at 64
FR 32744, June 17, 1999]
SOURCE: 54 FR 46005, Oct. 31, 1989, unless
otherwise noted. 19.803 Selecting acquisitions for the
8(a) Program.
19.800 General. Through their cooperative efforts,
(a) Section 8(a) of the Small Busines the SBA and an agency match the
Act (15 U.S.C. 637(a)) established a pro- agencys requirements with the capa-
gram that authorizes the Small Busi- bilities of 8(a) concerns to establish a
ness Administration (SBA) to enter basis for the agency to contract with
into all types of contracts with other the SBA under the program. Selection
agencies and let subcontracts for per- is initiated in one of three ways
forming those contracts to firms eligi- (a) The SBA advises an agency con-
ble for program participation. The tracting activity through a search let-
SBAs subcontractors are referred to as ter of an 8(a) firms capabilities and
8(a) contractors. asks the agency to identify acquisi-
(b) Contracts may be awarded to the tions to support the firms business
SBA for performance by eligible 8(a) plans. In these instances, the SBA will
firms on either a sole source or com- provide at least the following informa-
petitive basis. tion in order to enable the agency to
(c) When, acting under the authority match an acquisition to the firms ca-
of the program, the SBA certifies to an pabilities.
agency that the SBA is competent and (1) Identification of the concern and
responsible to perform a specific con- its owners.
tract, the contracting officer is author- (2) Background information on the
ized, in the contracting officers discre- concern, including any and all informa-
tion, to award the contract to the SBA tion pertaining to the concerns tech-
based upon mutually agreeable terms nical ability and capacity to perform.
and conditions. (3) The firms present production ca-
(d) The SBA refers to this program as pacity and related facilities.
the 8(a) Business Development (BD)
(4) The extent to which contracting
Program.
assistance is needed in the present and
(e) Before deciding to set aside an ac-
the future, described in terms that will
quisition in accordance with Subpart
19.5 or 19.13, the contracting officer enable the agency to relate the con-
should review the acquisition for offer- cerns plans to present and future agen-
ing under the 8(a) Program. If the ac- cy requirements.
quisition is offered to the SBA, SBA (5) If construction is involved, the re-
regulations (13 CFR 126.607(b)) give quest shall also include the following:
first priority to HUBZone 8(a) con- (i) The concerns capabilities in and
cerns. qualifications for accomplishing var-
(f) When SBA has delegated its 8(a) ious categories of maintenance, repair,
Program contract execution authority alteration, and construction work in
to an agency, the contracting officer specific categories such as mechanical,
must refer to its agency supplement or electrical, heating and air condi-
other policy directives for appropriate tioning, demolition, building, painting,
guidance. paving, earth work, waterfront work,
and general construction work.
[54 FR 46005, Oct. 31, 1989, as amended at 63
(ii) The concerns capacity in each
FR 70272, Dec. 18, 1998; 64 FR 32743, June 17,
1999; 64 FR 51832, Sept. 24, 1999] construction category in terms of esti-
mated dollar value (e.g., electrical, up
19.801 [Reserved] to $100,000).
(b) The SBA identifies a specific re-
19.802 Selecting concerns for the 8(a) quirement for a particular 8(a) firm or
Program. firms and asks the agency contracting
Selecting concerns for the 8(a) Pro- activity to offer the acquisition to the
gram is the responsibility of the SBA 8(a) Program for the firm(s). In these
371
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 acquire 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.
372
(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
373
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-
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
374
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
375
19.806 48 CFR Ch. 1 (10103 Edition)
challenged or protested by another 8(a) (c) In estimating a fair market price

firm or any other party as part of a so- for a repeat purchase, the contracting
licitation or proposed contract award. officer shall consider recent award
Any party with information concerning prices for the same items or work if
the eligibility of an 8(a) firm to con- there is comparability in quantities,
tinue participation in the 8(a) Program conditions, terms, and performance
may submit such information to the times. The estimated price should be
SBA in accordance with 13 CFR 124.517. adjusted to reflect differences in speci-
[54 FR 46005, Oct. 31, 1989, as amended at 61 fications, plans, transportation costs,
FR 67421, Dec. 20, 1996; 64 FR 32745, June 17, packaging and packing costs, and other
1999] circumstances. Price indices may be
used as guides to determine the
19.806 Pricing the 8(a) contract. changes in labor and material costs.
(a) The contracting officer shall price Comparison of commercial prices for
the 8(a) contract in accordance with similar items may also be used.
subpart 15.4. If required by subpart 15.4,
the SBA shall obtain cost or pricing 19.808 Contract negotiation.
data from the 8(a) contractor. If the
19.8081 Sole source.
SBA requests audit assistance to deter-
mine the reasonableness of the pro- (a) The SBA is responsible for initi-
posed price in a sole source acquisition, ating negotiations with the agency
the contracting activity shall furnish within the time established by the
it to the extent it is available. agency. If the SBA does not initiate ne-
(b) An 8(a) contract, sole source or gotiations within the agreed time and
competitive, may not be awarded if the the agency cannot allow additional
price of the contract results in a cost time, the agency may, after notifying
to the contracting agency which ex- the SBA, proceed with the acquisition
ceeds a fair market price. from other sources.
(c) If requested by the SBA, the con- (b) The SBA should participate,
tracting officer shall make available whenever practicable, in negotiating
the data used to estimate the fair mar- the contracting terms. When mutually
ket price within 10 working days. agreeable, the SBA may authorize the
(d) The negotiated contract price and contracting activity to negotiate di-
the estimated fair market price are rectly with the 8(a) contractor. Wheth-
subject to the concurrence of the SBA. er or not direct negotiations take
In the event of a disagreement between place, the SBA is responsible for ap-
the contracting officer and the SBA, proving the resulting contract before
the SBA may appeal in accordance award.
with 19.810.
[54 FR 46005, Oct. 31, 1989, as amended at 62 FR 3883, Feb. 5, 1990; 56 FR 55378, Oct. 25, 1991;
FR 51270, Sept. 30, 1997; 64 FR 32745, 32748, 61 FR 67421, Dec. 20, 1996]
June 17, 1999]
19.8082 Competitive.
19.807 Estimating the fair market
price. In competitive 8(a) acquisitions sub-
ject to part 15, the contracting officer
(a) The contracting officer shall esti- conducts negotiations directly with the
mate the fair market price of the work competing 8(a) firms. Conducting com-
to be performed by the 8(a) contractor. petitive negotiations among 8(a) firms
(b) In estimating the fair market prior to SBAs formal acceptance of the
price for an acquisition other than acquisition for the 8(a) Program may
those covered in paragraph (c) of this be grounds for SBAs not accepting the
section, the contracting officer shall acquisition for the 8(a) Program.
use cost or price analysis and consider
commercial prices for similar products [64 FR 32745, June 17, 1999]
and services, available in-house cost
estimates, data (including cost or pric- 19.809 Preaward considerations.
ing data) submitted by the SBA or the The contracting officer should re-
8(a) contractor, and data obtained from quest a preaward survey of the 8(a)
any other Government agency. contractor whenever considered useful.
376
If the results of the preaward survey or if appropriate. The decision shall be

other information available to the con- made a part of the contract file.
tracting officer raise substantial doubt
as to the firms ability to perform, the
FR 32745, June 17, 1999; 65 FR 46057, July 26,
contracting officer must refer the mat- 2000]
ter to SBA for Certificate of Com-
petency consideration under subpart 19.811 Preparing the contracts.
19.6.
[64 FR 32745, June 17, 1999] 19.8111 Sole source.
(a) The contract to be awarded by the
19.810 SBA appeals.
agency to the SBA shall be prepared in
(a) The SBA Administrator may sub- accordance with agency procedures and
mit the following matters for deter- in the same detail as would be required
mination to the agency head if the in a contract with a business concern.
SBA and the contracting officer fail to The contracting officer shall use the
agree on them: Standard Form 26 as the award form,
(1) The decision not to make a par- except for construction contracts, in
ticular acquisition available for award which case the Standard Form 1442
under the 8(a) Program. shall be used as required in 36.701(b).
(2) A contracting officers decision to
(b) The agency shall prepare the con-
reject a specific 8(a) firm for award of
tract that the SBA will award to the
an 8(a) contract after SBAs acceptance
of the requirement for the 8(a) Pro- 8(a) contractor in accordance with
gram. agency procedures, as if the agency
(3) The terms and conditions of a pro- were awarding the contract directly to
posed 8(a) contract, including the con- the 8(a) contractor, except for the fol-
tracting activitys NAICS code des- lowing.
ignation and estimate of the fair mar- (1) The award form shall cite 41
ket price. U.S.C. 253(c)(5) or 10 U.S.C. 2304(c)(5) (as
(b) Notification of a proposed appeal appropriate) as the authority for use of
to the agency head by the SBA must be other than full and open competition.
received by the contracting officer (2) Appropriate clauses shall be in-
within 5 working days after the SBA is cluded, as necessary, to reflect that the
formally notified of the contracting of- contract is between the SBA and the
ficers decision. The SBA will provide 8(a) contractor.
the agency Director for Small and Dis- (3) The following items shall be in-
advantaged Business Utilization a copy serted by the SBA
of this notification of the intent to ap- (i) The SBA contract number.
peal. The SBA must send the written (ii) The effective date.
appeal to the head of the contracting (iii) The typed name of the SBAs
activity within 15 working days of
contracting officer.
SBAs notification of intent to appeal
or the contracting activity may con- (iv) The signature of the SBAs con-
sider the appeal withdrawn. Pending tracting officer.
issuance of a decision by the agency (v) The date signed.
head, the contracting officer must sus- (4) The SBA will obtain the signature
pend action on the acquisition. The of the 8(a) contractor prior to signing
contracting officer need not suspend and returning the prime contract to
action on the acquisition if the con- the contracting officer for signature.
tracting officer makes a written deter- The SBA will make every effort to ob-
mination that urgent and compelling tain signatures and return the con-
circumstances that significantly affect tract, and any subsequent bilateral
the interests of the United States will modification, to the contracting officer
not permit waiting for a decision. within a maximum of 10 working days.
(c) If the SBA appeal is denied, the (c) Except in procurements where the
decision of the agency head shall speci- SBA will make advance payments to
fy the reasons for the denial, including its 8(a) contractor, the agency con-
the reasons why the selected firm was tracting officer may, as an alternative
determined incapable of performance, to the procedures in paragraphs (a) and
377
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
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
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-
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
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
district office as defined at 19.902. The 19.1001 General.

geographic areas served by the SBA
The Small Business Competitiveness
Los Angeles and Santa Ana District of-
fices will be treated as one designated Demonstration Program was estab-
SBA district for the purposes of this lished by the Small Business Competi-
subpart. tiveness Demonstration Program Act
(c) If no reasonable expectation ex- of 1988, Public Law 100656 (15 U.S.C. 644
ists under paragraphs (a)(1)(ii) and note). The program is implemented by
(a)(2)(ii) of this section, the con- a joint OFPP and SBA Policy Directive
tracting officer must document the file and Implementation Plan, dated May
and proceed with the acquisition in ac- 25, 1999. The program consists of two
cordance with Subpart 19.5. major components
(d) If the contracting officer receives (a) Unrestricted competition in four
only one acceptable offer from a redesignated industry groups; and
sponsible very small business concern (b) Enhanced small business partici-
in response to a very small business pation in 10 agency targeted industry
set-aside, the contracting officer categories.
should make an award to that firm. If
there is no offer received from a very [63 FR 9057, Feb. 23, 1998, as amended at 65
small business concern, the con- FR 16276, Mar. 27, 2000]
tracting officer must cancel the very
small business set-aside and proceed 19.1002 Definitions.
with the acquisition in accordance Emerging small business, as used in
with Subpart 19.5. this subpart, means a small business
[64 FR 10536, Mar. 4, 1999, as amended at 64 concern whose size is no greater than
FR 51830, Sept. 24, 1999] 50 percent of the numerical size stand-
ard applicable to the North American
19.905 Solicitation provision and con- Industry Classification System
tract clause. (NAICS) code assigned to a contracting
Insert the clause at 52.2195, Very opportunity.
Small Business Set-Aside, in solicita- Emerging small business reserve
tions and contracts if the acquisition is amount, for the designated groups de-
set aside for very small business con- scribed in 19.1005, means a threshold es-
cerns. tablished by the Office of Federal Pro-
(a) Insert the clause at 52.2195 with curement Policy of
its Alternate I
(1) $25,000 for construction, refuse
(1) In construction or service con-
systems and related services, and non-
tracts; or
(2) When the acquisition is for a prod- nuclear ship repair; and
uct in a class for which the Small Busi- (2) $50,000 for architectural and engi-
ness Administration has waived the neering services.
nonmanufacturer rule (see 19.102(f)(4) [54 FR 5055, Jan. 31, 1989, as amended at 65
and (5)). FR 16276, Mar. 27, 2000; 65 FR 46056, July 26,
(b) Insert the clause at 52.2195 with 2000]
its Alternate II when Alternate I does
not apply, the acquisition is processed 19.1003 Purpose.
under simplified acquisition proce- The purpose of the Program is to
dures, and the total amount of the con-
(a) Assess the ability of small busi-
tract does not exceed $25,000.
nesses to compete successfully in cer-
[64 FR 10536, Mar. 4, 1999, as amended at 64 tain industry categories without com-
FR 51830, Sept. 24, 1999] petition being restricted by the use of
small business set-asides. This portion
Subpart 19.10Small Business of the program is limited to the four
Competitiveness Demonstra- designated industry groups listed in
tion Program section 19.1005.
(b) Expand small business participa-
SOURCE: 54 FR 5055, Jan. 31, 1989, unless tion in 10 targeted industry categories
otherwise noted.
381
19.1004 48 CFR Ch. 1 (10103 Edition)
through continued use of set-aside pro- The Department of Defense, except

cedures, increased management atten- the National Imagery and Mapping
tion, and specifically tailored acquisi- Agency.
tion procedures, as implemented The Department of Energy.
through agency procedures. The Department of Health and
(c) Measure the extent to which Human Services.
awards are made to a new category of The Department of Interior.
small businesses (ESBs), and to pro- The Department of Transportation.
vide for certain acquisitions to be re-
The Department of Veterans Affairs.
served for ESB participation only. This
portion of the program is also limited The Environmental Protection Agen-
to the four designated industry groups cy.
listed in section 19.1005. The General Services Administra-
tion.
[54 FR 5055, Jan. 31, 1989, as amended at 55 The National Aeronautics and Space
FR 52792, Dec. 21, 1990; 63 FR 9057, Feb. 23,
Administration.
1998; 65 FR 16276, Mar. 27, 2000]
19.1004 Participating agencies. FR 29281, July 11, 1989; 55 FR 38516, Sept. 18,
The following agencies have been 1990; 63 FR 58602, Oct. 30, 1998]
identified as participants in the dem-
onstration program: 19.1005 Applicability.
The Department of Agriculture. (a) Designated industry groups.
NAICS code NAICS description
1. Construction (Except Dredging) Subsector 236Construction of Buildings

236115 ....................... New Single-Family Housing Construction (except Operative Builders).
236116 ....................... New Multi-Family Housing Construction (except Operative Builders).
236117 ....................... New Housing Operative Builders.
236118 ....................... Residential Remodelers.
236210 ....................... Industrial Building Construction.
236220 ....................... Commercial and Institutional Building Construction.
Subsector 237Heavy and Civil Engineering Construction
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).
Subsector 238Specialty Trade Contractors
238110 ....................... Poured Concrete Foundation and Structure Contractors.

238120 ....................... Structural Steel and Precast Concrete Contractors.
238130 ....................... Framing Contractors.
238140 ....................... Masonry Contractors.
238150 ....................... Glass and Glazing Contractors.
238160 ....................... Roofing Contractors.
238170 ....................... Siding Contractors.
238190 ....................... Other Foundation, Structure, and Building Exterior Contractors.
238210 ....................... Electrical Contractors.
238220 ....................... Plumbing, Heating, and Air-Conditioning Contractors.
238290 ....................... Other Building Equipment Contractors.
238310 ....................... Drywall and Insulation Contractors.
238320 ....................... Painting and Wall Covering Contractors.
238330 ....................... Flooring Contractors.
238340 ....................... Tile and Terrazzo Contractors.
238350 ....................... Finish Carpentry Contractors.
238390 ....................... Other Building Finishing Contractors.
238910 ....................... Site Preparation Contractors.
238990 ....................... All Other Specialty Trade Contractors.
2. Non-Nuclear Ship Repair
336611 ....................... Ship Building and Repairing.

PSC J998 ................... Non-nuclear Ship Repair (East) Ship Repair (including overhauls and conversions) performed on non-
nuclear propelled and nonpropelled ships east of the 108th meridian.
382
NAICS code NAICS description
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.
3. Architectural and Engineering Services (Including Surveying and Mapping)
541310 ....................... Architectural Services or;

541330 ....................... Engineering Services.
PSC C111 .................. Administrative and Service Buildings.
PSC C112 .................. Airfield, Communication and Missile Facilities.
PSC C113 .................. Educational Buildings.
PSC C114 .................. Hospital Buildings.
PSC C115 .................. Industrial Buildings.
PSC C116 .................. Residential Buildings.
PSC C117 .................. Warehouse Buildings.
PSC C118 .................. Research and Development Facilities.
PSC C119 .................. Other Buildings.
PSC C121 .................. Conservation and Development.
PSC C122 .................. Highways, Roads, Streets, Bridges and Railways.
PSC C123 .................. Electric Power Generation (EPG).
PSC C124 .................. Utilities.
PSC C129 .................. Other Non-Building Structures.
PSC C130 .................. Restoration.
PSC C211 .................. Architect-Engineering Services (including landscaping, interior layout, and designing).
PSC C212 .................. Engineering Drafting Services.
PSC C213 .................. A&E Inspection Services (non-construction).
PSC C214 .................. A&E Management Engineering Services.
PSC C215 .................. A&E Production Engineering Services (including Design and Control, and Building Programming).
PSC C216 .................. Marine Architect and Engineering Services.
PSC C219 .................. Other Architect and Engineering Services.
541360 ....................... Geophysical Surveying and Mapping Services or;
541370 ....................... Surveying and Mapping (except Geophysical) Services.
PSC T002 ................... Cartography Services.
PSC T004 ................... Charting Services.
PSC T008 ................... Photogrammetry Services.
PSC T009 ................... Aerial Photographic Services.
PSC T014 ................... Topography Services.
PSC R404 .................. Land Surveys, Cadastral Services (non-construction).
4. Refuse Systems and Related Services
562111 ....................... Solid Waste Collection or;

562119 ....................... Other Waste Collection or;
562219 ....................... Other Nonhazardous Waste Treatment and Disposal.
PSC S205 .................. Trash/Garbage Collection Servicesincluding Portable Sanitation Services.
(b) Targeted industry categories. Each 19.1007 Procedures.

participating agency, in consultation
(a) General. (1) All solicitations must
with the Small Business Administra-
include the applicable NAICS code and
tion, designates its own targeted indus-
size standards.
try categories for enhanced small busi-
ness participation. (2) The face of each award made pur-
suant to the program must contain a
[55 FR 52792, Dec. 21, 1990, as amended at 59 statement that the award is being
FR 67036, Dec. 28, 1994; 64 FR 16276, Mar. 27, issued pursuant to the Small Business
2000; 65 FR 46056, July 26, 2000; 66 FR 65370,
Competitiveness Demonstration Pro-
Dec. 18, 2001; 68 FR 43874, July 24, 2003]
gram.
19.1006 Exclusions. (b) Solicitations greater than the ESB
reserve amount. (1) Solicitations for ac-
This subpart does not apply to
quisitions in any of the four designated
(a) Orders placed against Federal
industry groups that have an antici-
Supply Schedules;
pated dollar value greater than the
(b) Contract awards to educational
emerging small business reserve
and nonprofit organizations; or
amount must not be considered for
(c) Contract awards to governmental
small business set-asides under subpart
entities.
19.5. However, agencies may reinstate
[65 FR 16276, Mar. 27, 2000] the use of small business set-asides as
383
19.1008 48 CFR Ch. 1 (10103 Edition)
necessary to meet their assigned goals, cause of lack of production capacity or

but only within organizational units capability.
that failed to meet the small business [65 FR 16276, Mar. 27, 2000, as amended at 65
participation goal. FR 46057, July 26, 2000]
(2) Acquisitions in the designated in-
dustry groups must continue to be con- 19.1008 Solicitation provisions.
sidered for placement under the 8(a) (a) Insert in full text the provision at
Program (see subpart 19.8) and the 52.21919, Small Business Concern Rep-
HUBZone Program (see subpart 19.13). resentation for the Small Business
(c) Solicitations equal to or less than Competitiveness Demonstration Pro-
the ESB reserve amount. (1) Solicitations gram, in all solicitations in the four
for acquisitions in the four designated designated industry groups.
industry groups with an estimated (b) Insert in full text the provision at
value equal to or less than the emerg- 52.21920, Notice of Emerging Small
ing small business reserve amount Business Set-Aside, in all solicitations
must be set aside for ESBs, provided for emerging small businesses in ac-
that the contracting officer determines cordance with 19.1007(c).
that there is a reasonable expectation (c) Insert in full text the provision at
of obtaining offers from two or more 52.21921, Small Business Size Rep-
responsible ESBs that will be competi- resentation for Targeted Industry Cat-
tive in terms of market price, quality, egories under the Small Business Com-
petitiveness Demonstration Program,
and delivery. If no such reasonable ex-
in all solicitations issued in each of the
pectation exists, the contracting offi-
targeted industry categories under the
cer must
Small Business Competitiveness Dem-
(i) For acquisitions $25,000 or less, onstration Program that are expected
proceed in accordance with subpart to result in a contract award in excess
19.5, 19.8, or 19.13; or of $25,000.
(ii) For acquisitions greater than
$25,000 and less than or equal to the [55 FR 52793, Dec. 21, 1990. Redesignated and
amended at 65 FR 16276, Mar. 27, 2000]
ESB reserve amount, proceed in ac-
cordance with paragraph (b) of this sec-
tion. Subpart 19.11Price Evaluation
(2) If the contracting officer proceeds Adjustment for Small Dis-
with the ESB set-aside and receives a advantaged Business Con-
quotation from only one ESB at a rea- cerns
sonable price, the contracting officer
must make the award. If there is no SOURCE: 63 FR 35724, June 30, 1998, unless
quote from an ESB, or the quote is not otherwise noted.
at a reasonable price, then the con-
19.1101 General.
tracting officer must cancel the ESB
set-aside and proceed in accordance A price evaluation adjustment for
with paragraph (c)(1)(i) or (ii) of this small disadvantaged business concerns
section. shall be applied as determined by the
(d) Expanding small business participa- Department of Commerce (see
tion in targeted industry categories. Each 19.201(b)). Joint ventures may qualify
provided the requirements set forth in
participating agency must develop and
13 CFR 124.1002(f) are met.
implement a time-phased strategy with
incremental goals, including reporting 19.1102 Applicability.
on goal attainment. To the extent
(a) Use the price evaluation adjust-
practicable, provisions that encourage
ment in competitive acquisitions in
and promote teaming and joint ven-
the authorized NAICS Industry Sub-
tures must be considered. These provi- sector.
sions should permit small business (b) Do not use the price evaluation
firms to effectively compete for con- adjustment in acquisitions
tracts that individual small businesses (1) That are less than or equal to the
would be ineligible to compete for be- simplified acquisition threshold;
384
(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
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
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.
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]
19.12021 General. 19.12023 Considerations in devel-

oping an evaluation factor or sub-
The extent of participation of SDB factor.
concerns in performance of the con- In developing an SDB participation
tract, in the NAICS Industry Subsector evaluation factor or subfactor for the
as determined by the Department of solicitation, agencies may consider
Commerce, and to the extent author- (a) The extent to which SDB con-
ized by law, shall be evaluated concerns are specifically identified;
sistent with this section. Participation (b) The extent of commitment to use
in performance of the contract includes SDB concerns (for example, enforceable
joint ventures, teaming arrangements, commitments are to be weighted more
and subcontracts. Credit under the heavily than non-enforceable ones);
evaluation factor or subfactor is not (c) The complexity and variety of the
available to SDB concerns that receive work SDB concerns are to perform;
a price evaluation adjustment under (d) The realism of the proposal;
(e) Past performance of offerors in
Subpart 19.11. If an SDB concern
complying with subcontracting plan
waives the price evaluation adjustment
goals for SDB concerns and monetary
at Subpart 19.11, participation in per- targets for SDB participation; and
formance of that contract includes the (f) The extent of participation of SDB
work expected to be performed by the concerns in terms of the value of the
SDB concern at the prime contract total acquisition.
level.
[63 FR 36123, July 1, 1998, as amended at 65 FR 36224, July 2, 1999]
FR 46057, July 26, 2000]
19.12024 Procedures.
19.12022 Applicability. (a) The solicitation shall describe the
(a) Except as provided in paragraph SDB participation evaluation factor or
(b) of this subsection, the extent of par- subfactor. The solicitation shall re-
ticipation of SDB concerns in perform- quire offerors to provide, with their of-
ance of the contract in the authorized fers, targets, expressed as dollars and
NAICS Industry Subsector shall be percentages of total contract value, in
each of the applicable, authorized
evaluated in competitive, negotiated
NAICS Industry Subsector, and a total
acquisitions expected to exceed $500,000
target for SDB participation by the
($1,000,000 for construction). contractor, including joint venture
(b) The extent of participation of partners, and team members, and a
SDB concerns in performance of the total target for SDB participation by
contract in the authorized NAICS In- subcontractors. The solicitation shall
dustry Subsector (see paragraph (a) of require an SDB offeror that waives the
this subsection) shall not be evaluated SDB price evaluation adjustment in
in the clause at 52.21923, Notice of Price
(1) Small business set-asides (see sub- Evaluation Adjustment for Small Dis-
part 19.5) and HUBZone set-asides (see advantaged Business Concerns, to pro-
subpart 19.13); vide with its offer a target for the work
(2) 8(a) acquisitions (see Subpart that it intends to perform as the prime
19.8); contractor. The solicitation shall state
(3) Negotiated acquisitions where the that any targets will be incorporated
lowest price technically acceptable into and become part of any resulting
source selection process is used (see contract. Contractors with SDB par-
15.1012); or ticipation targets shall be required to
report SDB participation.
386
(b) When an evaluation includes an solicitations and contracts containing

SDB participation evaluation factor or the clause at 52.21925, Small Disadvan-
subfactor that considers the extent to taged Business Participation Pro-
which SDB concerns are specifically gramDisadvantaged Status and Re-
identified, the SDB concerns consid- porting, a clause substantially the
ered in the evaluation shall be listed in same as the clause at 52.21926, Small
the contract, and the contractor shall Disadvantaged Business Participation
be required to notify the contracting ProgramIncentive Subcontracting,
officer of any substitutions of firms when authorized (see 19.1203). The con-
that are not SDB concerns. tracting officer may include an award
fee provision in lieu of the incentive; in
FR 46057, July 26, 2000] such cases, however, the contracting
officer shall not use the clause at
19.1203 Incentive subcontracting with 52.21926.
small disadvantaged business con-
cerns. Subpart 19.13Historically Under-
The contracting officer may encour- utilized Business Zone
age increased subcontracting opportu- (HUBZone) Program
nities in the NAICS Industry Subsector
as determined by the Department of
Commerce for SDB concerns in nego- ter 137; and 42 U.S.C. 2473(c).
tiated acquisitions by providing mone-
tary incentives (see the clause at SOURCE: 63 FR 70272, Dec. 18, 1998, unless
otherwise noted.
52.21926, Small Disadvantaged Busi-
ness Participation Program Incentive 19.1301 General.
Subcontracting, and 19.1204(c)). Mone-
tary incentives shall be based on actual (a) The Historically Underutilized
achievement as compared to proposed Business Zone (HUBZone) Act of 1997
monetary targets for SDB subcon- (15 U.S.C. 631 note) created the
tracting. The incentive subcontracting HUBZone Program (sometimes referred
program is separate and distinct from to as the HUBZone Empowerment
the establishment, monitoring, and en- Contracting Program).
forcement of SDB subcontracting goals (b) The purpose of the HUBZone Pro-
in a subcontracting plan. gram is to provide Federal contracting
assistance for qualified small business
[63 FR 36123, July 1, 1998, as amended at 65 concerns located in historically under-
FR 46057, July 26, 2000]
utilized business zones, in an effort to
19.1204 Solicitation provisions and increase employment opportunities, in-
contract clauses. vestment, and economic development
in those areas.
(a) The contracting officer may in-
sert a provision substantially the same 19.1302 Applicability.
as the provision at 52.21924, Small Dis-
advantaged Business Participation The procedures in this subpart apply
Program Targets, in solicitations that to all Federal agencies that employ
consider the extent of participation of one or more contracting officers.
SDB concerns in performance of the [67 FR 13066, Mar. 20, 2002]
contract. The contracting officer may
vary the terms of this provision con- 19.1303 Status as a qualified HUBZone
sistent with the policies in 19.12024. small business concern.
(b) The contracting officer shall in- (a) Status as a qualified HUBZone
sert the clause at 52.21925, Small Dis- small business concern is determined
advantaged Business Participation by the Small Business Administration
ProgramDisadvantaged Status and (SBA) in accordance with 13 CFR part
Reporting, in solicitations and con- 126.
tracts that consider the extent of par- (b) If the SBA determines that a con-
ticipation of SDB concerns in perform- cern is a qualified HUBZone small busi-
ance of the contract. ness concern, it will issue a certifi-
(c) The contracting officer may, when cation to that effect and will add the
contracting by negotiation, insert in concern to the List of Qualified
387
19.1304 48 CFR Ch. 1 (10103 Edition)
HUBZone Small Business Concerns on considering HUBZone sole source

its Internet website at http:// awards (see 19.1306) or small business
www.sba.gov/hubzone. A firm on the set-asides (see subpart 19.5).
list is eligible for HUBZone program (b) To set aside an acquisition for
preferences without regard to the place competition restricted to HUBZone
of performance. The concern must ap- small business concerns, the con-
pear on the list to be a HUBZone small tracting officer must have a reasonable
business concern. expectation that
(c) A joint venture (see 19.101) may be (1) Offers will be received from two or
considered a HUBZone small business if more HUBZone small business con-
the business entity meets all the cri- cerns; and
teria in 13 CFR 126.616. (2) Award will be made at a fair mar-
(d) Except for construction or serv- ket price.
ices, any HUBZone small business con- (c) A participating agency may set
cern (nonmanufacturer) proposing to aside acquisitions exceeding the micro-
furnish a product that it did not itself purchase threshold, but not exceeding
manufacture must furnish the product the simplified acquisition threshold,
of a HUBZone small business concern for competition restricted to HUBZone
manufacturer to receive a benefit small business concerns at the sole dis-
under this subpart. cretion of the contracting officer, pro-
[63 FR 70272, Dec. 18, 1998, as amended at 64 vided the requirements of paragraph (b)
FR 51832, Sept. 24, 1999] of this section can be satisfied.
(d) If the contracting officer receives
19.1304 Exclusions. only one acceptable offer from a quali-
This subpart does not apply to fied HUBZone small business concern
(a) Requirements that can be satis- in response to a set aside, the con-
fied through award to tracting officer should make an award
(1) Federal Prison Industries, Inc. to that concern. If the contracting offi-
(see subpart 8.6); or cer receives no acceptable offers from
(2) Javits-Wagner-ODay Act partici- HUBZone small business concerns, the
pating non-profit agencies for the blind HUBZone set-aside shall be withdrawn
or severely disabled (see subpart 8.7); and the requirement, if still valid, set
(b) Orders under indefinite delivery aside for small business concerns, as
contracts (see subpart 16.5); appropriate (see subpart 19.5).
(c) Orders against Federal Supply (e) The procedures at 19.2021 and, ex-
Schedules (see subpart 8.4); cept for acquisitions not exceeding the
(d) Requirements currently being simplified acquisition threshold, at
performed by an 8(a) participant or re- 19.402 apply to this section. When the
quirements SBA has accepted for per- SBA intends to appeal a contracting of-
formance under the authority of the ficers decision to reject a rec-
8(a) Program, unless SBA has con- ommendation of the SBA procurement
sented to release the requirements center representative to set aside an
from the 8(a) Program; acquisition for competition restricted
(e) Requirements that do not exceed to HUBZone small business concerns,
the micro-purchase threshold; or the SBA procurement center represent-
(f) Requirements for commissary or ative shall notify the contracting offi-
exchange resale items. cer, in writing, of its intent within 5
working days of receiving the con-
19.1305 HUBZone set-aside proce- tracting officers notice of rejection.
dures. Upon receipt of notice of SBAs intent
(a) A participating agency con- to appeal, the contracting officer shall
tracting officer shall set aside acquisi- suspend action on the acquisition un-
tions exceeding the simplified acquisi- less the head of the contracting activ-
tion threshold for competition re- ity makes a written determination
stricted to HUBZone small business that urgent and compelling cir-
concerns when the requirements of cumstances, which significantly affect
paragraph (b) of this section can be sat- the interests of the Government, exist.
isfied. The contracting officer shall Within 15 working days of SBAs notifi-
consider HUBZone set-asides before cation to the contracting officer, SBA
388
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.
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
19.1308 48 CFR Ch. 1 (10103 Edition)
(d) A concern that is both a HUBZone 22.1033 Procedures.

small business concern and a small dis- 22.1034 Approvals.
advantaged business concern shall re- 22.1035 Contract clauses.
ceive the benefit of both the HUBZone Subpart 22.2Convict Labor
small business price evaluation pref-
erence and the small disadvantaged 22.201 General.
business price evaluation adjustment 22.202 Contract clause.
(see subpart 19.11). Each applicable
price evaluation preference or adjust- Subpart 22.3Contract Work Hours and
ment shall be calculated independently Safety Standards Act
against an offerors base offer. These 22.300 Scope of subpart.
individual preference and adjustment 22.301 Statutory requirement.
amounts shall both be added to the 22.302 Liquidated damages and overtime
base offer to arrive at the total evalu- pay.
ated price for that offer. 22.303 Administration and enforcement.
22.304 Variations, tolerances, and exemp-
[63 FR 70272, Dec. 18, 1998, as amended at 64 tions.
FR 72419, Dec. 27, 1999] 22.305 Contract clause.
19.1308 Contract clauses. Subpart 22.4Labor Standards for

(a) The contracting officer shall in- Contracts Involving Construction
sert the clause 52.2193, Notice of Total
HUBZone Set-Aside, in solicitations 22.401 Definitions.
and contracts for acquisitions that are 22.402 Applicability.
set aside for HUBZone small business 22.403 Statutory and regulatory require-
concerns under 19.1305 or 19.1306. ments.
(b) The contracting officer shall in- 22.4031 Davis-Bacon Act.
sert the clause at 52.2194, Notice of 22.4032 Copeland Act.
Price Evaluation Preference for 22.4033 Contract Work Hours and Safety
HUBZone Small Business Concerns, in Standards Act.
22.4034 Department of Labor regulations.
solicitations and contracts for acquisi-
22.404 Davis-Bacon Act wage determina-
tions conducted using full and open tions.
competition. The clause shall not be 22.4041 Types of wage determinations.
used in acquisitions that do not exceed 22.4042 General requirements.
the simplified acquisition threshold. 22.4043 Procedures for requesting wage de-
terminations.
PARTS 2021 [RESERVED] 22.4044 Solicitations issued without wage
determinations.
22.4045 Expiration of project wage deter-
PART 22APPLICATION OF LABOR minations.
LAWS TO GOVERNMENT ACQUI- 22.4046 Modifications of wage determina-
SITIONS tions.
22.4047 Correction of wage determinations
containing clerical errors.
Sec. 22.4048 Notification of improper wage de-
22.000 Scope of part. termination before award.
22.001 Definition.
22.4049 Award of contract without required
wage determination.
Subpart 22.1Basic Labor Policies 22.40410 Posting wage determinations and
22.101 Labor relations. notice.
22.1011 General. 22.40411 Wage determination appeals.
22.1012 Contract pricing and administra- 22.40412 Labor standards for contracts con-
tion. taining construction requirements and
22.1013 Reporting labor disputes. option provisions that extend the term of
22.1014 Removal of items from contractors the contract.
facilities affected by work stoppages. 22.405 Labor standards for construction
22.102 Federal and State labor require- work performed under facilities con-
ments. tracts.
22.1021 Policy. 22.406 Administration and enforcement.
22.1022 Administration. 22.4061 Policy.
22.103 Overtime. 22.4062 Wages, fringe benefits, and over-
22.1031 Definition. time.
22.1032 Policy. 22.4063 Additional classifications.
390
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
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.
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.
22.1025 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.
22.1304 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
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
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
22.103 Overtime. 22.1034 Approvals.

(a) The contracting officer shall re-
22.1031 Definition.
view the contractors request for over-
Normal workweek, as used in this sub- time. Approval of the use of overtime
part, means, generally, a workweek of may be granted by an agency approv-
40 hours. Outside the United States and ing official after determining in writ-
its outlying areas, a workweek longer ing that overtime is necessary to
than 40 hours is considered normal if (1) Meet essential delivery or per-
(1) The workweek does not exceed the formance schedules;
norm for the area, as determined by (2) Make up for delays beyond the
local custom, tradition, or law; and control and without the fault or neg-
(2) The hours worked in excess of 40 ligence of the contractor; or
in the workweek are not compensated (3) Eliminate foreseeable extended
at a premium rate of pay. production bottlenecks that cannot be
eliminated in any other way.
[48 FR 42258, Sept. 19, 1983 as amended at 51
FR 12293, Apr. 9, 1986; 66 FR 2130, Jan. 10, (b) Approval by the designated offi-
2001; 68 FR 28082, May 22, 2003] cial of use and total dollar amount of
overtime is required before inclusion of
22.1032 Policy. an amount in paragraph (a) of the
clause at 52.2222, Payment for Over-
Contractors shall perform all con- time Premiums. This clause is to be in-
tracts, so far as practicable, without serted in cost-reimbursement contracts
using overtime, particularly as a reg- over $100,000, except for those exempted
ular employment practice, except when under 22.1035(b).
lower overall costs to the Government
(c) Contracting officer approval of
will result or when it is necessary to payment of overtime premiums is re-
meet urgent program needs. Any ap- quired for time-and-materials and
proved overtime, extra-pay shifts, and labor-hour contracts (see paragraph
multishifts should be scheduled to (a)(3) of the clause at 52.2327, Pay-
achieve these objectives. ments Under Time-and-Materials and
Labor-Hour Contracts).
22.1033 Procedures.
(d) No approvals are required for pay-
(a) Solicitations normally shall not ing overtime premiums under other
specify delivery or performance sched- types of contracts.
ules that may require overtime at Gov- (e) Approvals by the agency approv-
ernment expense. ing official (see 22.1034(a)) may be for
(b) In negotiating contracts, con- an individual contract, project, pro-
tracting officers should, consistent gram, plant, division, or company, as
with the Governments needs, attempt practical.
to (1) ascertain the extent that offers (f) During contract performance, con-
are based on the payment of overtime tractor requests for overtime exceeding
and shift premiums and (2) negotiate the amount authorized by paragraph
contract prices or estimated costs (a) of the clause at 52.2222, Payment
without these premiums or obtain the for Overtime Premiums, shall be sub-
requirement from other sources. mitted as stated in paragraph (b) of the
(c) When it becomes apparent during clause to the office administering the
negotiations of applicable contracts contract. That office will review the
(see 22.1035(b)) that overtime will be request and if it approves, send the re-
required in contract performance, the quest to the contracting officer. If the
contracting officer shall secure from contracting officer determines that the
the contractor a request for all over- requested overtime should be approved
time to be used during the life of the in whole or in part, the contracting of-
contract, to the extent that the over- ficer shall request the approval of the
time can be estimated with reasonable agencys designated approving official
certainty. The contractors request and modify paragraph (a) of the clause
shall contain the information required to reflect any approval.
by paragraph (b) of the clause at 52.222 (g) Overtime premiums at Govern-
2, Payment for Overtime Premiums. ment expense should not be approved
395
22.1035 48 CFR Ch. 1 (10103 Edition)
when the contractor is already obli- unfair competition between convict

gated, without the right to additional labor and free labor in the production
compensation, to meet the required de- of goods and services. The Executive
livery date. order does not prohibit the contractor,
(h) When the use of overtime is au- in performing the contract, from em-
thorized under a contract, the office ploying
administering the contract and the (1) Persons on parole or probation;
auditor should periodically review the (2) Persons who have been pardoned
use of overtime to ensure that it is al- or who have served their terms;
lowable in accordance with the criteria (3) Federal prisoners; or
in part 31. Only overtime premiums for (4) Nonfederal prisoners authorized to
work in those departments, sections, work at paid employment in the com-
etc., of the contractors plant that munity under the laws of a jurisdiction
have been individually evaluated and listed in the Executive order if
the necessity for overtime confirmed (i) The worker is paid or is in an ap-
shall be considered for approval. proved work training program on a vol-
(i) Approvals for using overtime shall untary basis;
ordinarily be prospective, but, if justi- (ii) Representatives of local union
fied by emergency circumstances, ap- central bodies or similar labor union
provals may be retroactive. organizations have been consulted;
(iii) Paid employment will not
22.1035 Contract clauses. (A) Result in the displacement of em-
(a) The contracting officer shall in- ployed workers;
sert the clause 52.2221, Notice to the (B) Be applied in skills, crafts, or
Government of Labor Disputes, in so- trades in which there is a surplus of
licitations and contracts that involve available gainful labor in the locality;
programs or requirements that have or
been designated under 22.1011(e). (C) Impair existing contracts for
(b) The contracting officer shall in- services;
clude the clause at 52.2222, Payment (iv) The rates of pay and other condi-
for Overtime Premiums, in solicitations of employment will not be less
tions and contracts when a cost-reim- than those for work of a similar nature
bursement contract is contemplated in the locality where the work is being
and the contract amount is expected to performed; and
be over $100,000; unless (a) a cost-reim- (v) The Attorney General of the
bursement contract for operation of United States has certified that the
vessels is contemplated, or (b) a cost- work-release laws or regulations of the
plus-incentive-fee contract that will jurisdiction involved are in conformity
provide a swing from the target fee of with the requirements of Executive
at least plus or minus 3 percent and a Order 11755, as amended.
contractors share of at least 10 percent (b) Department of Justice regulations
is contemplated. authorize the Director of the Bureau of
Justice Assistance to exercise the
Subpart 22.2Convict Labor power and authority vested in the At-
torney General by the Executive order
22.201 General. to certify and to revoke the certifi-
cation of work-release laws or regula-
(a) Executive Order 11755, December
tions (see 28 CFR 0.941(b)).
29, 1973, as amended by Executive Order
12608, September 9, 1987, and Executive [61 FR 31644, June 20, 1996]
Order 12943, December 13, 1994, states:
The development of the occupational 22.202 Contract clause.
and educational skills of prison in- Insert the clause at 52.2223, Convict
mates is essential to their rehabilita- Labor, in solicitations and contracts
tion and to their ability to make an ef- above the micro-purchase threshold,
fective return to free society. Meaning- when the contract will be performed in
ful employment serves to develop those the United States, Puerto Rico, the
skills. It is also true, however, that Northern Mariana Islands, American
care must be exercised to avoid either Samoa, Guam, or the U.S. Virgin Is-
the exploitation of convict labor or any lands; unless
396
(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
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
22.304 48 CFR Ch. 1 (10103 Edition)
22.304 Variations, tolerances, and ex- Subpart 22.4Labor Standards for

emptions. Contracts Involving Construction
(a) The Secretary of Labor under 40
U.S.C. 331, upon the Secretarys initia- SOURCE: 53 FR 4935, Feb. 18, 1988, unless
tive or at the request of any Federal otherwise noted.
agency, may provide reasonable limita-
tions and allow variations, tolerances, 22.400 Scope of subpart.
and exemptions to and from any or all This subpart implements the statutes
provisions of the Act (see 29 CFR 5.15). which prescribe labor standards re-
(b) The Secretary of Labor may make quirements for contracts in excess of
variations, tolerances, and exemptions $2,000 for construction, alteration, or
from the regulatory requirements of repair, including painting and deco-
applicable parts of 29 CFR when the rating, of public buildings and public
Secretary finds that such action is nec- works. (See definition of Construction,
essary and proper in the public interest alteration, or repair in section 22.401.)
Labor relations requirements pre-
or to prevent injustice and undue hard-
scribed in other subparts of part 22
ship (see 29 CFR 5.14).
may also apply.
[51 FR 12293, Apr. 9, 1986]
[53 FR 4935, Feb. 18, 1988; 65 FR 46074, July 26,
2000]
Insert the clause at 52.2224, Contract 22.401 Definitions.
Work Hours and Safety Standards As used in this subpart
ActOvertime Compensation, in solici- Building or work generally means
tations and contracts (including, for construction activity as distinguished
this purpose, basic ordering agree- from manufacturing, furnishing of ma-
ments) when the contract may require terials, or servicing and maintenance
or involve the employment of laborers work. The terms include, without limi-
or mechanics. However, do not include tation, buildings, structures, and im-
the clause in solicitations and con- provements of all types, such as
tracts bridges, dams, plants, highways, park-
(a) Valued at or below the simplified ways, streets, subways, tunnels, sew-
acquisition threshold; ers, mains, power lines, pumping sta-
tions, heavy generators, railways, air-
(b) For commercial items;
ports, terminals, docks, piers, wharves,
(c) For transportation or the trans-
ways, lighhouses, buoys, jetties, break-
mission of intelligence; waters, levees, canals, dredging, shor-
(d) To be performed outside the ing, rehabilitation and reactivation of
United States, Puerto Rico, American plants, scaffolding, drilling, blasting,
Samoa, Guam, the U.S. Virgin Islands, excavating, clearing, and landscaping.
Johnston Island, Wake Island, and The manufacture or furnishing of ma-
Outer Continental Shelf lands as de- terials, articles, supplies, or equipment
fined in the Outer Continental Shelf (whether or not a Federal or State
Lands Act (43 U.S.C. 1331) (29 CFR 5.15); agency acquires title to such mate-
(e) For work to be done solely in ac- rials, articles, supplies, or equipment
cordance with the Walsh-Healey Public during the course of the manufacture
Contracts Act (see subpart 22.6); or furnishing, or owns the materials
(f) For supplies that include inci- from which they are manufactured or
dental services that do not require sub- furnished) is not building or work with-
stantial employment of laborers or me- in the meaning of the regulations in
chanics; or this subpart unless conducted in con-
(g) Exempt under regulations of the nection with and at the site of such
building or work as is described in the
Secretary of Labor (29 CFR 5.15).
foregoing sentence, or under the United
[68 FR 28082, May 22, 2003] States Housing Act of 1937 and the
398
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 confined 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
22.402 48 CFR Ch. 1 (10103 Edition)
wholly without regard to a particular (ii) To dismantling, demolition, or

Federal contract or project. In addi- removal of improvements if a part of
tion, fabrication plants, batch plants, the construction contract, or if con-
borrow pits, job headquarters, yards, struction at that site is anticipated by
etc., of a commercial supplier or another contract as provided in sub-
materialman which are established by part 37.3;
a supplier of materials for the project (iii) To the manufacture or fabrica-
before opening of bids and not on the tion of construction materials and
project site, are not included in the site components conducted in connection
of the work. Such permanent, pre- with the construction and on the site
viously established facilities are not a of the work by the contractor or a sub-
part of the site of the work, even if the contractor under a contract otherwise
operations for a period of time may be subject to this subpart; and
dedicated exclusively, or nearly so, to (iv) To painting of public buildings or
the performance of a contract.
public works, whether performed in
Wages means the basic hourly rate of
connection with the original construc-
pay; any contribution irrevocably
tion or as alteration or repair of an ex-
made by a contractor or subcontractor
isting structure.
to a trustee or to a third person pursu-
ant to a bona fide fringe benefit fund, (2) The requirements of this subpart
plan, or program; and the rate of costs do not apply to
to the contractor or subcontractor (i) The manufacturing of components
which may be reasonably anticipated or materials off the site of the work or
in providing bona fide fringe benefits their subsequent delivery to the site by
to laborers and mechanics pursuant to the commercial supplier or
an enforceable commitment to carry materialman;
out a financially responsible plan or (ii) Contracts requiring construction
program, which was communicated in work that is so closely related to re-
writing to the laborers and mechanics search, experiment, and development
affected. The fringe benefits enumer- that it cannot be performed separately,
ated in the Davis-Bacon Act include or that is itself the subject of research,
medical or hospital care, pensions on experiment, or development (see para-
retirement or death, compensation for graph (b) of this section for applica-
injuries or illness resulting from occu- bility of this subpart to research and
pational activity, or insurance to pro- development contracts or portions
vide any of the foregoing; unemploy- thereof involving construction, alter-
ment benefits; life insurance, disability ation, or repair of a public building or
insurance, sickness insurance, or acci- public work);
dent insurance; vacation or holiday (iii) Employees of railroads operating
pay; defraying costs of apprenticeship under collective bargaining agreements
or other similar programs; or other that are subject to the Railway Labor
bona fide fringe benefits. Fringe bene- Act; or
fits do not include benefits required by (iv) Employees who work at contrac-
other Federal, State, or local law. tors or subcontractors permanent
[53 FR 4935, Feb. 18, 1988, as amended at 57 home offices, fabrication shops, or tool
FR 44263, Sept. 24, 1992; 59 FR 67038, Dec. 28, yards not located at the site of the
1994; 66 FR 2130, Jan. 10, 2001] work. However, if the employees go to
the site of the work and perform con-
22.402 Applicability. struction activities there, the require-
(a) Contracts for construction work. ments of this subpart are applicable for
(1) The requirements of this subpart the actual time so spent, not including
apply travel unless the employees transport
(i) Only if the construction work is, materials or supplies to or from the
or reasonably can be foreseen to be, site of the work.
performed at a particular site so that (b) Nonconstruction contracts involving
wage rates can be determined for the some construction work. (1) The require-
locality, and only to construction work ments of this subpart apply to con-
that is performed by laborers and me- struction work to be performed as part
chanics at the site of the work; of nonconstruction contracts (supply,
400
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 requires 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
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
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
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
22.4045 Expiration of project wage used in the contract, the contracting

determinations. officer may cancel the solicitation only
(a) The contracting officer shall in accordance with 14.4041. Otherwise
make every effort to ensure that con- the contracting officer shall award the
tract award is made before expiration contract and incorporate the new de-
of the project wage determination in- termination to be effective on the date
cluded in the solicitation. of contract award. The contracting of-
(b) The following procedure applies ficer shall equitably adjust the con-
when contracting by sealed bidding: tract price for any increased or de-
(1) If a project wage determination creased cost of performance resulting
expires before bid opening, or if it ap- from any changed wage rates.
pears before bid opening that a project (ii) If the new determination does not
wage determination may expire before change any wage rates, the contracting
award, the contracting officer shall re- officer shall award the contract and
quest a new determination early modify it to include the number and
enough to ensure its receipt before bid date of the new determination. (See
opening. If necessary, the contracting 43.103(b)(1).)
officer shall postpone the bid opening
(c) The following procedure applies
date to allow a reasonable time to ob-
when contracting by negotiation:
tain the determination, amend the so-
licitation to incorporate the new deter- (1) If a project wage determination
mination, and permit bidders to amend will or does expire before contract
their bids. If the new determination award, the contracting officer shall re-
does not change the wage rates and quest a new wage determination from
would not warrant amended bids, the the Department of Labor. If necessary,
contracting officer shall amend the so- the contracting officer shall delay
licitation to include the number and award while the new determination is
date of the new determination. obtained and processed.
(2) If a project wage determination (2) The contracting officer need not
expires after bid opening but before delay opening and reviewing proposals
award, the contracting officer shall re- or discussing them with the offerors
quest an extension of the project wage while a new determination is being ob-
determination expiration date from the tained. The contracting officer shall
Administrator, Wage and Hour Divi- request offerors to extend the period
sion. The request for extension shall be for acceptance of any proposal if that
supported by a written finding, which period expires or may expire before re-
shall include a brief statement of fac- ceipt and full processing of the new de-
tual support, that the extension is nec- termination.
essary and proper in the public interest (3) If the new determination changes
to prevent injustice or undue hardship any wage rates, the contracting officer
or to avoid serious impairment of the shall amend the solicitation to incor-
conduct of Government business. If
porate the new determination, and fur-
necessary, the contracting officer shall
nish the wage rate information to all
delay award to permit either receipt of
prospective offerors that were sent a
the extension or receipt and processing
solicitation if the closing date for re-
of a new determination. If the request
is granted, the contracting officer shall ceipt of proposals has not yet occurred,
award the contract and modify it to or to all offerors that submitted pro-
apply the extended expiration date to posals if the closing date has passed.
the already incorporated project wage All offerors to whom wage rate infor-
determination. (See 43.103(b)(1).) If the mation has been furnished shall be
request is denied, the Administrator given reasonable opportunity to amend
will proceed to issue a new project their proposals.
wage determination. Upon receipt, the (4) If the new determination does not
contracting officer shall process the change any wage rates, the contracting
new determination as follows: officer shall amend the solicitation to
(i) If the new determination changes include the number and date of the new
any wage rates for classifications to be determination and award the contract.
405
22.4046 48 CFR Ch. 1 (10103 Edition)
22.4046 Modifications of wage deter- contracting agency after bid opening,

minations. or modifications to general wage deter-
(a) General. (1) The Department of minations, notices of which are pub-
Labor may modify a wage determina- lished in the FEDERAL REGISTER after
tion to make it current by specifying bid opening, shall not be effective and
only the items being changed or by re- shall not be included in the solicitation
issuing the entire determination with (but see paragraph (b)(6) of this sec-
changes incorporated. tion).
(2) All project wage determination (3) If an effective modification is re-
modifications expire on the same day ceived by the contracting officer before
as the original determination. The bid opening, the contracting officer
need to include a modification of a shall postpone the bid opening, if nec-
project wage determination in a solici- essary, to allow a reasonable time to
tation is determined by the time of re- amend the solicitation to incorporate
ceipt of the modification by the con- the modification and permit bidders to
tracting agency. Therefore, the con- amend their bids. If the modification
tracting agency must annotate the
does not change the wage rates and
modification of the project wage deter-
would not warrant amended bids, the
mination with the date and time imme-
contracting officer shall amend the so-
diately upon receipt.
(3) The need for inclusion of the licitation to include the number and
modification of a general wage deter- date of the modification.
mination in a solicitation is deter- (4) If an effective modification is re-
mined by the publication date of the ceived by the contracting officer after
notice in the FEDERAL REGISTER, or by bid opening, but before award, the con-
the time of receipt of the modification tracting officer shall follow the proce-
(annotated with the date and time im- dures in 22.4045(b)(2)(i) or (ii).
mediately upon receipt) by the con- (5) If an effective modification is re-
tracting agency, whichever occurs ceived by the contracting officer after
first. (Note the distinction between re- award, the contracting officer shall
ceipt by the agency (modification is ef- modify the contract to incorporate the
fective) and receipt by the contracting wage modification retroactive to the
officer, which may occur later.) date of award and equitably adjust the
(b) The following applies when con- contract price for any increased or de-
tracting by sealed bidding: creased cost of performance resulting
(1) A written action modifying a from any changed wage rates. If the
wage determination shall be effective modification does not change any wage
if: rates and would not warrant contract
(i) It is received by the contracting price adjustment, the contracting offi-
agency, or notice of the modification is cer shall modify the contract to in-
published in the FEDERAL REGISTER, 10 clude the number and date of the modi-
or more calendar days before the date
fication.
of bid opening, or
(ii) It is received by the contracting (6) If an award is not made within 90
agency, or notice of the modification is days after bid opening, any modifica-
published in the FEDERAL REGISTER, tion to a general wage determination,
less than 10 calendar days before the notice of which is published in the FED-
date of bid opening, unless the con- ERAL REGISTER before award, shall be
tracting officer finds that there is not effective for any resultant contract un-
reasonable time available before bid less an extension of the 90-day period is
opening to notify the prospective bid- obtained from the Administrator, Wage
ders. (If the contracting officer finds and Hour Division. An agency head or a
that there is not reasonable time to no- designee may request such an exten-
tify bidders, a written report of the sion from the Administrator. The re-
finding shall be placed in the contract quest must be supported by a written
file and shall be made available to the finding, which shall include a brief
Department of Labor upon request.) statement of factual support, that the
(2) All written actions modifying extension is necessary and proper in
wage determinations received by the the public interest to prevent injustice,
406
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 contract. 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
22.4049 48 CFR Ch. 1 (10103 Edition)
be processed in accordance with 22.404 they may submit complaints or raise

5(b)(2)(i) or (ii). questions concerning labor standards.
(c) In negotiated acquisitions, the [53 FR 4935, Feb. 18, 1988, as amended at 66
contracting officer shall delay award, FR 53481, Oct. 22, 2001]
if necessary, and process the notifica-
tion in the manner prescribed for a new 22.40411 Wage determination appeals.
wage determination at 22.4045(c)(3). The Secretary of Labor has estab-
lished an Administrative Review Board
22.4049 Award of contract without re- which decides appeals of final decisions
quired wage determination. made by the Department of Labor con-
(a) If a contract is awarded without cerning Davis-Bacon Act wage deter-
the required wage determination (i.e., minations. A contracting agency or
incorporating no determination, con- other interested party may file a peti-
taining a clearly inapplicable general tion for review under the procedures in
29 CFR Part 7 if reconsideration by the
wage determination, or containing a
Administrator has been sought pursu-
project determination which is inappli-
ant to 29 CFR 1.8 and denied.
cable because of an inaccurate descrip-
tion of the project or its location), the [53 FR 4935, Feb. 18, 1988, as amended at 66
contracting officer shall initiate action FR 53481, Oct. 22, 2001]
to incorporate the required determina- 22.40412 Labor standards for con-
tion in the contract immediately upon tracts containing construction re-
discovery of the error. If a required quirements and option provisions
wage determination (valid determina- that extend the term of the con-
tion in effect on the date of award) is tract.
not available, the contracting officer (a) Each time the contracting officer
shall expeditiously request a wage de- exercises an option to extend the term
termination from the Department of of a contract for construction, or a
Labor, including a statement explain- contract that includes substantial and
ing the circumstances and giving the segregable construction work, the con-
date of the contract award. tracting officer must modify the con-
(b) The contracting officer shall tract to incorporate the most current
wage determination.
(1) Modify the contract to incor-
(b) If a contract with an option to ex-
porate the required wage determina- tend the term of the contract has in-
tion (retroactive to the date of award), definite-delivery or indefinite-quantity
and equitably adjust the contract price construction requirements, the con-
if appropriate; or tracting officer must incorporate the
(2) Terminate the contract. wage determination incorporated into
the contract at the exercise of the op-
22.40410 Posting wage determination into task orders issued during that
tions and notice. option period. The wage determination
The contractor must keep a copy of will be effective for the complete pe-
the applicable wage determination (and riod of performance of those task or-
any approved additional classifica- ders without further revision.
tions) posted at the site of the work in (c) The contracting officer must in-
a prominent place where the workers clude in fixed-price contracts a clause
can easily see it. The contracting offi- that specifies one of the following
cer shall furnish to the contractor, De- methods, suitable to the interest of the
partment of Labor Form WH1321, No- Government, to provide an allowance
tice to Employees Working on Federal for any increases or decreases in labor
and Federally Financed Construction costs that result from the inclusion of
the current wage determination at the
Projects, for posting with the wage
exercise of an option to extend the
rates. The name, address, and tele-
term of the contract:
phone number of the Government offi- (1) The contracting officer may pro-
cer responsible for the administration vide the offerors the opportunity to bid
of the contract shall be indicated in or propose separate prices for each op-
the poster to inform workers to whom tion period. The contracting officer
408
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
22.4062 48 CFR Ch. 1 (10103 Edition)
impartial enforcement of labor stand- the extent expressly approved by the

ards in the administration of construc- Secretary of Labor.
tion contracts. Contracting agencies (b)(1) The contractor may satisfy the
shall maintain an effective program obligation under the clause at 52.2226,
that shall include Davis-Bacon Act, by providing wages
(1) Ensuring that contractors and consisting of any combination of con-
subcontractors are informed, before tributions or costs as specified in para-
commencement of work, of their obli- graph (a) of this subsection, if the total
gations under the labor standards cost of the combination is not less than
clauses of the contract; the total of the basic hourly rate and
(2) Adequate payroll reviews, on-site fringe benefits payments prescribed in
inspections, and employee interviews the wage determination for the classi-
to determine compliance by the con- fication of laborer or mechanic con-
tractor and subcontractors, and cerned.
prompt initiation of corrective action (2) Wages provided by the contractor
when required; and fringe benefits payments required
(3) Prompt investigation and disposi- by the wage determination may in-
tion of complaints; and clude items that are not stated as
exact cash amounts. In these cases, the
(4) Prompt submission of all reports
hourly cash equivalent of the cost of
required by this subpart.
these items shall be determined by di-
(b) Preconstruction letters and con- viding the employers contributions or
ferences. Before construction begins, costs by the employees hours worked
the contracting officer shall inform the during the period covered by the costs
contractor of the labor standards or contributions. For example, if a con-
clauses and wage determination re- tractor pays a monthly health insur-
quirements of the contract and of the ance premium of $112 for a particular
contractors and any subcontractors employee who worked 125 hours during
responsibilities under the contract. Un- the month, the hourly cash equivalent
less it is clear that the contractor is is determined by dividing $112 by 125
fully aware of the requirements, the hours, which equals $0.90 per hour.
contracting officer shall issue an ex- Similarly, the calculation of hourly
planatory letter and/or arrange a con- cash equivalent for nine paid holidays
ference with the contractor promptly per year for an employee with an hour-
after award of the contract. ly rate of pay of $5.00 is determined by
22.4062 Wages, fringe benefits, and multiplying $5.00 by 72 (9 days at 8
overtime. hours each), and dividing the result of
$360 by the number of hours worked by
(a) In computing wages paid to a la- the employee during the year. If the in-
borer or mechanic, the contractor may terested parties (contractor, con-
include only the following items: tracting officer, and employees or their
(1) Amounts paid in cash to the la- representative) cannot agree on the
borer or mechanic, or deducted from cash equivalent, the contracting officer
payments under the conditions set shall submit the question for final de-
forth in 29 CFR 3.5. termination to the Department of
(2) Contributions (except those re- Labor as prescribed by agency proce-
quired by Federal, State, or local law) dures. The information submitted shall
the contractor makes irrevocably to a include
trustee or a third party under any bona (i) A comparison of the payments,
fide plan or program to provide for contributions, or costs in the wage de-
medical or hospital care, pensions, termination with those made or pro-
compensation for injuries or illness re- posed as equivalents by the contractor;
sulting from occupational activity, un- and
employment benefits, life insurance, (ii) The comments and recommenda-
disability and sickness insurance, acci- tions of the contracting officer.
dent insurance, or any other bona fide (c) In computing required overtime
fringe benefit. payments, (i.e., 112 times the basic
(3) Other contributions or anticipated hourly rate of pay) the contractor shall
costs for bona fide fringe benefits to use the basic hourly rate of pay in the
410
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
22.4065 48 CFR Ch. 1 (10103 Edition)
applicable to the classification of the particular weekly period involved and

work actually performed. are otherwise acceptable.
(d) Preservation. The contracting
22.4065 Subcontracts. agency shall retain payrolls and state-
In accordance with the requirements ments of compliance for 3 years after
of the clause at 52.22211, Subcontracts completion of the contract and make
(Labor Standards), the contractor and them available when requested by the
subcontractors at any tier are required Department of Labor at any time dur-
to submit a fully executed SF 1413, ing that period. Submitted payrolls
Statement and Acknowledgment, upon shall not be returned to a contractor or
award of each subcontract. subcontractor for any reasons, but cop-
ies thereof may be furnished to the
22.4066 Payrolls and statements. contractor or subcontractor who sub-
mitted them, or to a higher tier con-
(a) Submission. In accordance with the
tractor or subcontractor.
clause at 52.2228, Payrolls and Basic
(e) Disclosure of payroll records. Con-
Records, the contractor must submit
tractor payroll records in the Govern-
or cause to be submitted, within 7 cal-
ments possession must be carefully
endar days after the regular payment
protected from any public disclosure
date of the payroll week covered, for
which is not required by law, since pay-
the contractor and each subcontractor,
roll records may contain information
(1) copies of weekly payrolls applicable
in which the contractors employees
to the contract, and (2) weekly payroll
have a privacy interest, as well as in-
statements of compliance. The con-
formation in which the contractor may
tractor may use the Department of
have a proprietary interest that the
Labor Form WH347, Payroll (For Con-
Government may be obliged to protect.
tractors Optional Use), or a similar
Questions concerning release of this in-
form that provides the same data and
formation may involve the Freedom of
identical representation.
Information Act (FOIA).
(b) Withholding for nonsubmission. If
the contractor fails to submit copies of 22.4067 Compliance checking.
its or its subcontractors payrolls
(a) General. The contracting officer
promptly, the contracting officer shall,
shall make checks and investigations
from any payment due to the con-
on all contracts covered by this sub-
tractor, withhold approval of an
part as may be necessary to ensure
amount that the contracting officer
compliance with the labor standards
considers necessary to protect the in-
requirement of the contract.
terest of the Government and the em-
(b) Regular compliance checks. Regular
ployees of the contractor or any sub-
compliance checking includes the fol-
contractor.
lowing activities:
(c) Examination. (1) The contracting (1) Employee interviews to determine
officer shall examine the payrolls and correctness of classifications, rates of
payroll statements to ensure compli- pay, fringe benefits payments, and
ance with the contract and any statu- hours worked. (See Standard Form
tory or regulatory requirements. Par- 1445.)
ticular attention should be given to (2) On-site inspections to check type
(i) The correctness of classifications of work performed, number and classi-
and rates; fication of workers, and fulfillment of
(ii) Fringe benefits payments; posting requirements.
(iii) Hours worked; (3) Payroll reviews to ensure that
(iv) Deductions; and payrolls of prime contractors and sub-
(v) Disproportionate employment ra- contractors have been submitted on
tios of laborers, apprentices, or train- time and are complete and in compli-
ees, to journeymen. ance with contract requirements.
(2) Fringe benefits payments, con- (4) Comparison of the information in
tributions made, or costs incurred on this paragraph (b) with available data,
other than a weekly basis shall be con- including daily inspectors report and
sidered as a part of weekly payments daily logs of construction, to ensure
to the extent they are creditable to the consistency.
412
(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 consent 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
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
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
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 contracting 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
(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
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.
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
(5) Indefinite-delivery contracts, in- (c) The Region IV office located in

cluding basic ordering agreements and Atlanta, Georgia, has jurisdiction for
blanket purchase agreements, are sub- Alabama, Florida, Georgia, Kentucky,
ject to the Act unless it can be deter- Mississippi, North Carolina, South
mined in advance that the aggregate Carolina, and Tennessee.
amount of all orders estimated to be (d) The Region V and Region VII of-
placed thereunder for 1 year after the fice located in Chicago, Illinois, has ju-
effective date of the agreement will not risdiction for Illinois, Indiana, Iowa,
exceed $10,000. A determination shall be Kansas, Michigan, Minnesota, Mis-
made annually thereafter if the con- souri, Nebraska, Ohio, and Wisconsin.
tract or agreement is extended, and the (e) The Region VI and Region VIII of-
contract or agreement modified if nec- fice located in Dallas, Texas, has juris-
essary. diction for Arkansas, Colorado, Lou-
(b) [Reserved] isiana, Montana, New Mexico, North
Dakota, Oklahoma, South Dakota,
22.60622.607 [Reserved] Texas, Utah, and Wyoming.
(f) The Region IX and Region X office
22.608 Procedures. located in San Francisco, California,
(a) Award. When a contract subject to has jurisdiction for Alaska, Arizona,
the Act is awarded, the contracting of- California, Guam, Hawaii, Idaho, Ne-
ficer, in accordance with regulations or vada, Oregon, and Washington.
instructions issued by the Secretary of
[64 FR 32748, June 17, 1999]
Labor and individual agency proce-
dures, shall furnish to the contractor 22.610 Contract clause.
DOL publication WH1313, Notice to
Employees Working on Government The contracting officer shall insert
Contracts. the clause at 52.22220, Walsh-Healey
(b) Breach of stipulation. In the event Public Contracts Act, in solicitations
of a violation of a stipulation required and contracts covered by the Act (see
under the Act, the contracting officer 22.603, 22.604, and 22.605).
shall, in accordance with agency proce- [61 FR 67411, Dec. 20, 1996]
dures, notify the appropriate regional
office of the DOL, Wage and Hour Divi- Subpart 22.7 [Reserved]
sion (see 22.609), and furnish any infor-
mation available.
Subpart 22.8Equal Employment
[61 FR 67411, Dec. 20, 1996] Opportunity
22.609 Regional jurisdictions of the 22.800 Scope of subpart.
Department of Labor, Wage and
Hour Division. This subpart prescribes policies and
procedures pertaining to non-
Geographic jurisdictions of the fol- discrimination in employment by con-
lowing regional offices of the DoL, tractors and subcontractors.
Wage and Hour Division, are shown
here, and contracting officers should [48 FR 42258, Sept. 19, 1983, as amended at 63
contact them in all situations required FR 70283, Dec. 18, 1998]
by this subpart, unless otherwise speci-
fied: 22.801 Definitions.
(a) The Region I and Region II office As used in this subpart
located in New York, New York, has ju- Affirmative action program means a
risdiction for Connecticut, Maine, Mas- contractors program that complies
sachusetts, New Hampshire, New Jer- with Department of Labor regulations
sey, New York, Puerto Rico, Rhode Is- to ensure equal opportunity in employ-
land, Vermont, and the Virgin Islands. ment to minorities and women.
(b) The Region III office located in Compliance evaluation means any one
Philadelphia, Pennsylvania, has juris- or combination of actions that the Of-
diction for Delaware, the District of fice of Federal Contract Compliance
Columbia, Maryland, Pennsylvania, Programs (OFCCP) may take to exam-
Virginia, and West Virginia. ine a Federal contractors compliance
419
22.802 48 CFR Ch. 1 (10103 Edition)
with one or more of the requirements holding a subcontract with a prime

of E.O. 11246. contractor.
Contractor includes the terms prime United States means the 50 States, the
contractor and subcontractor. District of Columbia, Puerto Rico, the
Deputy Assistant Secretary means the Northern Mariana Islands, American
Deputy Assistant Secretary for Federal Samoa, Guam, the U.S. Virgin Islands,
Contract Compliance, U.S. Department and Wake Island.
of Labor, or a designee.
Equal Opportunity clause means the [63 FR 70283, Dec. 18, 1998, as amended at 68
FR 28082, May 22, 2003]
clause at 52.22226, Equal Opportunity,
as prescribed in 22.810(e). 22.802 General.
E.O. 11246 means Parts II and IV of
Executive Order 11246, September 24, (a) Executive Order 11246, as amend-
1965 (30 FR 12319), and any Executive ed, sets forth the Equal Opportunity
order amending or superseding this clause and requires that all agencies (1)
order (see 22.802). This term specifi- include this clause in all nonexempt
cally includes the Equal Opportunity contracts and subcontracts (see 22.807),
clause at 52.22226, and the rules, regu- and (2) act to ensure compliance with
lations, and orders issued pursuant to the clause and the regulations of the
E.O. 11246 by the Secretary of Labor or Secretary of Labor to promote the full
a designee. realization of equal employment oppor-
Prime contractor means any person tunity for all persons, regardless of
who holds, or has held, a Government race, color, religion, sex, or national
contract subject to E.O. 11246. origin.
Recruiting and training agency means (b) No contract or modification in-
any person who refers workers to any volving new acquisition shall be en-
contractor or provides or supervises ap- tered into, and no subcontract shall be
prenticeship or training for employ- approved by a contracting officer, with
ment by any contractor. a person who has been found ineligible
Site of construction means the general by the Deputy Assistant Secretary for
physical location of any building, high- reasons of noncompliance with the re-
way, or other change or improvement quirements of E.O. 11246.
to real property that is undergoing (c) No contracting officer or con-
construction, rehabilitation, alter- tractor shall contract for supplies or
ation, conversion, extension, demoli- services in a manner so as to avoid ap-
tion, or repair; and any temporary lo- plicability of the requirements of E.O.
cation or facility at which a contractor 11246.
or other participating party meets a (d) Contractor disputes related to
demand or performs a function relating compliance with its obligation shall be
to a Government contract or sub- handled according to the rules, regula-
contract. tions, and relevant orders of the Sec-
Subcontract means any agreement or retary of Labor (see 41 CFR 601.1).
arrangement between a contractor and
any person (in which the parties do not
FR 70283, 70285, Dec. 18, 1998]
stand in the relationship of an em-
ployer and an employee) 22.803 Responsibilities.
(1) For the purchase, sale, or use of
personal property or nonpersonal serv- (a) The Secretary of Labor is respon-
ices that, in whole or in part, are nec- sible for the
essary to the performance of any one (1) Administration and enforcement
or more contracts; or of prescribed parts of E.O. 11246; and
(2) Under which any portion of the (2) Adoption of rules and regulations
contractors obligation under any one and the issuance of orders necessary to
or more contracts is performed, under- achieve the purposes of E.O. 11246.
taken, or assumed. (b) The Secretary of Labor has dele-
Subcontractor means any person who gated authority and assigned responsi-
holds, or has held, a subcontract sub- bility to the Deputy Assistant Sec-
ject to E.O. 11246. The term first-tier retary for carrying out the responsibil-
subcontractor means a subcontractor ities assigned to the Secretary by E.O.
420
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 acter 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
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
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,
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
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
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
Ensure Equal Employment Oppor- Subpart 22.9Nondiscrimination

tunity for Construction, in solicita- Because of Age
tions for construction when a contract
is contemplated that will include the 22.901 Policy.
clause at 52.22226, Equal Opportunity, Executive Order 11141, February 12,
and the amount of the contract is ex- 1964 (29 FR 2477), states that the Gov-
pected to be in excess of $10,000. ernment policy is as follows:
(c) The contracting officer shall in- (a) Contractors and subcontractors
sert the provision at 52.22224, shall not, in connection with employ-
Preaward On-Site Equal Opportunity ment, advancement, or discharge of
Compliance Evaluation, in solicita- employees, or the terms, conditions, or
tions other than those for construction privileges of their employment, dis-
when a contract is contemplated that criminate against persons because of
will include the clause at 52.22226, their age except upon the basis of a
Equal Opportunity, and the amount of bona fide occupational qualification,
retirement plan, or statutory require-
the contract is expected be $10 million
ment.
or more.
(b) Contractors and subcontractors,
(d) The contracting officer shall in- or persons acting on their behalf, shall
sert the provision at 52.22225, Affirma- not specify in solicitations or adver-
tive Action Compliance, in solicita- tisements for employees to work on
tions, other than those for construc- Government contracts, a maximum age
tion, when a contract is contemplated limit for employment unless the speci-
that will include the clause at 52.22226, fied maximum age limit is based upon
Equal Opportunity. a bona fide occupational qualification,
(e) The contracting officer shall in- retirement plan, or statutory require-
sert the clause at 52.22226, Equal Op- ment.
portunity, in solicitations and con- (c) Agencies will bring this policy to
tracts (see 22.802) unless the contract is the attention of contractors. The use of
exempt from all of the requirements of contract clauses is not required.
E.O. 11246 (see 22.807(a)). If the contract
22.902 Handling complaints.
is exempt from one or more, but not
all, of the requirements of E.O. 11246, Agencies shall bring complaints re-
the contracting officer shall use the garding a contractors compliance with
clause with its Alternate I. this policy to that contractors atten-
(f) The contracting officer shall in- tion (in writing, if appropriate), stating
the policy, indicating that the contrac-
sert the clause at 52.22227, Affirmative
tors compliance has been questioned,
Action Compliance Requirements for
and requesting that the contractor
Construction, in solicitations and con-
take any appropriate steps that may be
tracts for construction that will in- necessary to comply.
clude the clause at 52.22226, Equal Op-
portunity, when the amount of the con-
tract is expected to be in excess of
Subpart 22.10Service Contract
$10,000.
Act of 1965, as Amended
(g) The contracting officer shall in-
sert the clause at 52.22229, Notifica-
otherwise noted.
tion of Visa Denial, in contracts that
will include the clause at 52.22226, 22.1000 Scope of subpart.
Equal Opportunity, if the contractor is This subpart prescribes policies and
required to perform in or on behalf of a procedures implementing the provi-
foreign country. sions of the Service Contract Act of
[48 FR 42258, Sept. 19, 1983, as amended at 50 1965, as amended (41 U.S.C. 351, et seq.),
FR 23606, June 4, 1985; 52 FR 19803, May 27, the applicable provisions of the Fair
1987; 63 FR 34060, June 22, 1998; 63 FR 70285, Labor Standards Act of 1938, as amend-
Dec. 18, 1998] ed (29 U.S.C. 201, et seq.), and related
425
22.1001 48 CFR Ch. 1 (10103 Edition)
Secretary of Labor regulations and in- base or possession in a foreign country

structions (29 CFR parts 4, 6, 8, and (29 CFR 4.112).
1925). Wage and Hour Division means the
unit in the Employment Standards Ad-
22.1001 Definitions. ministration of the Department of
As used in this subpart Labor to which is assigned functions of
Act or Service Contract Act means the the Secretary of Labor under the Act.
Service Contract Act of 1965. Wage determination means a deter-
Agency labor advisor means an indi- mination of minimum wages or fringe
vidual responsible for advising con- benefits made under sections 2(a) or
tracting agency officials on Federal 4(c) of the Act (41 U.S.C. 351(a) or
contract labor matters. 353(c)) applicable to the employment in
Contractor includes a subcontractor a given locality of one or more classes
at any tier whose subcontract is sub- of service employees.
ject to the provisions of the Act.
[54 FR 19816, May 8, 1989, as amended at 61
Multiple year contracts means con- FR 39207, July 26, 1996; 66 FR 2130, Jan. 10,
tracts having a term of more than 1 2001; 68 FR 28082, May 22, 2003]
year regardless of fiscal year funding.
The term includes multi-year contracts 22.1002 Statutory requirements.
(see 17.103).
Notice means Standard Form (SF) 98, 22.10021 General.
Notice of Intention to Make a Service Service contracts over $2,500 shall
Contract and Response to Notice, and SF contain mandatory provisions regard-
98a Attachment A. The term Notice is al- ing minimum wages and fringe bene-
ways capitalized in this subpart when fits, safe and sanitary working condi-
it means Standard Forms 98 and 98a.
tions, notification to employees of the
Service contract means any Govern- minimum allowable compensation, and
ment contract, the principal purpose of equivalent Federal employee classifica-
which is to furnish services in the tions and wage rates. Under 41 U.S.C.
United States through the use of serv-
353(d), service contracts may not ex-
ice employees, except as exempted
ceed 5 years.
under section 7 of the Act (41 U.S.C.
356; see 22.10033 and 22.10034), or any 22.10022 Wage determinations based
subcontract at any tier thereunder. See on prevailing rates.
22.10035 and 29 CFR 4.130 for a partial
list of services covered by the Act. Contractors performing on service
Service employee means any person en- contracts in excess of $2,500 to which
gaged in the performance of a service no predecessor contractors collective
contract other than any person em- bargaining agreement applies shall pay
ployed in a bona fide executive, admin- their employees at least the wages and
istrative, or professional capacity, as fringe benefits found by the Depart-
those terms are defined in part 541 of ment of Labor to prevail in the locality
title 29, Code of Federal Regulations. or, in the absence of a wage determina-
The term service employee includes all tion, the minimum wage set forth in
such persons regardless of any contrac- the Fair Labor Standards Act.
tual relationship that may be alleged
to exist between a contractor or sub- 22.10023 Wage determinations based
contractor and such persons. on collective bargaining agree-
ments.
United States means the 50 States, the
District of Columbia, Puerto Rico, the (a) Successor contractors performing
Northern Mariana Islands, American on contracts in excess of $2,500 for sub-
Samoa, Guam, the U.S. Virgin Islands, stantially the same services performed
Johnston Island, Wake Island, and in the same locality must pay wages
Outer Continental Shelf lands as de- and fringe benefits (including accrued
fined in the Outer Continental Shelf wages and benefits and prospective in-
Lands Act (43 U.S.C. 1331, et seq.,) but creases) at least equal to those con-
does not include any other place sub- tained in any bona fide collective bar-
ject to U.S. jurisdiction or any U.S. gaining agreement entered into under
426
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
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 performing 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
(iv) If the Department of Labor deter- tensive as to be equivalent to manufac-

mines after contract award that any of turing are subject to the Walsh-Healey
the requirements for exemption in sub- Public Contracts Act, rather than to
paragraph (b)(4) of this subsection have the Service Contract Act. Remanufac-
not been met, the exemption will be turing shall be deemed to be manufac-
deemed inapplicable, and the contract turing when the criteria in either sub-
shall become subject to the Service paragraphs (a)(1) or (a)(2) of this sub-
Contract Act, effective as of the date of section are met.
the Department of Labor determina- (1) Major overhaul of an item, piece
tion. of equipment, or materiel which is de-
[54 FR 19816, May 8, 1989, as amended at 61 graded or inoperable, and under which
FR 39198, July 26, 1996] all of the following conditions exist:
(i) The item or equipment is required
22.10035 Some examples of contracts
covered. to be completely or substantially torn
down into individual component parts.
The following examples, while not (ii) Substantially all of the parts are
definitive or exclusive, illustrate some reworked, rehabilitated, altered and/or
of the types of services that have been
replaced.
found to be covered by the Act (see 29
CFR 4.130 for additional examples): (iii) The parts are reassembled so as
(a) Motor pool operation, parking, to furnish a totally rebuilt item or
taxicab, and ambulance services. piece of equipment.
(b) Packing, crating, and storage. (iv) Manufacturing processes similar
(c) Custodial, janitorial, house- to those which were used in the manu-
keeping, and guard services. facturing of the item or piece of equip-
(d) Food service and lodging. ment are utilized.
(e) Laundry, dry-cleaning, linen-sup- (v) The disassembled components, if
ply, and clothing alteration and repair usable (except for situations where the
services. number of items or pieces of equipment
(f) Snow, trash, and garbage removal. involved are too few to make it prac-
(g) Aerial spraying and aerial recon- ticable) are commingled with existing
naissance for fire detection. inventory and, as such, lose their iden-
(h) Some support services at installa- tification with respect to a particular
tions, including grounds maintenance piece of equipment.
and landscaping. (vi) The items or equipment over-
(i) Certain specialized services re- hauled are restored to original life ex-
quiring specific skills, such as drafting, pectancy, or nearly so.
illustrating, graphic arts, stenographic
(vii) Such work is performed in a fa-
reporting, or mortuary services.
cility owned or operated by the con-
(j) Electronic equipment mainte-
tractor.
nance and operation and engineering
support services. (2) Major modification of an item,
(k) Maintenance and repair of all piece of equipment, or material which
types of equipment, for example, air- is wholly or partially obsolete, and
craft, engines, electrical motors, vehi- under which all of the following condi-
cles, and electronic, office and related tions exist:
business and construction equipment. (i) The item or equipment is required
(But see 22.10034(b)(4).) to be completely or substantially torn
(l) Operation, maintenance, or logis- down.
tics support of a Federal facility. (ii) Outmoded parts are replaced.
(m) Data collection, processing and (iii) The item or equipment is rebuilt
analysis services. or reassembled.
[48 FR 42258, Sept. 19, 1983, as amended at 56 (iv) The contract work results in the
FR 67136, Dec. 27, 1991] furnishing of a substantially modified
item in a usable and serviceable condi-
22.10036 Repair distinguished from tion.
remanufacturing of equipment. (v) The work is performed in a facil-
(a) Contracts principally for remanu- ity owned or operated by the con-
facturing of equipment which is so ex- tractor.
429
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
Service Contract ActPrice Adjust- under, the clauses prescribed in this

ment (Multiple Year and Option Con- paragraph 22.1006(c).
tracts), applies to both contracts sub- (d) The contracting officer shall in-
ject to area prevailing wage determina- sert the clause at 52.22247, Service
tions and contracts subject to the in- Contract Act (SCA) Minimum Wages
cumbent contractors collective bar- and Fringe Benefits, if
gaining agreement in effect during this (1) The clause at 52.22241 applies;
contracts preceding contract period (2) The contract resulting from the
(see 22.10022 and 22.10023). Contracting solicitation succeeds a contract for
officers shall ensure that contract substantially the same services to be
prices or contract unit price labor performed in the same locality;
rates are adjusted only to the extent (3) The incumbent contractor has ne-
that a contractors increases or de- gotiated or is negotiating a collective
creases in applicable wages and fringe bargaining agreement with some or all
benefits are made to comply with the of its service employees; and
requirements set forth in the clauses at (4) All applicable Department of
52.22243 (subparagraphs (c) (1), (2) and Labor wage determinations have been
(3)), or 52.22244 (subparagraphs (b) (1) requested but not received.
and (2)). (For example, the prior year (e)(1) The contracting officer shall in-
wage determination required a min- sert the clause at 52.22248, Exemption
imum wage rate of $4.00 per hour. The from Application of Service Contract
contractor actually paid $4.10. The new Act Provisions, in any solicitation and
wage determination increases the min- resulting contract calling for the main-
imum rate to $4.50. The contractor in- tenance, calibration, and/or repair of
creases the rate actually paid to $4.75 information technology, scientific and
per hour. The allowable price adjust- medical, and office and business equip-
ment is $.40 per hour.) ment if the contracting officer deter-
(2) The contracting officer shall in- mines that the resultant contract may
sert the clause at 52.22244, Fair Labor be exempt from Service Contract Act
Standards Act and Service Contract coverage as described at 22.10034(b)(4).
ActPrice Adjustment, in solicitations (2) If the successful offeror does not
and contracts if the contract is ex- certify that the exemption applies, the
pected to be a fixed-price service con- contracting officer shall not insert the
tract containing the clause at 52.22241, clause at 52.22248 and instead shall in-
Service Contract Act of 1965, as amend- sert in the contract (i) the applicable
ed, exceeds the simplified acquisition Service Contract Act clause(s) and (ii)
threshold, and is not a multiple year the appropriate Department of Labor
contract or is not a contract with op- wage determination if the contract ex-
tions to renew. The clause may be used ceeds $2,500.
in contracts that do not exceed the (f) The contracting officer shall in-
simplified acquisition threshold. The sert the clause at 52.22249, Service
clause at 52.22244, Fair Labor Stand- Contract ActPlace of Performance
ards Act and Service Contract Act Unknown, if using the procedures pre-
Price Adjustment, applies to both con- scribed in 22.10094.
tracts subject to area prevailing wage [54 FR 19816, May 8, 1989, as amended at 60
determinations and contracts subject FR 34758, July 3, 1995; 61 FR 41470, Aug. 8,
to contractor collective bargaining 1996]
agreements (see 22.10022 and 22.10023).
(3) The clauses prescribed in para- 22.1007 Requirement to submit Notice
graph 22.1006(c)(1) cover situations in (SF 98/98a).
which revised minimum wage rates are The contracting officer shall submit
applied to contracts by operation of Standard Forms 98 and 98a (see 53.301
law, or by revision of a wage deter- 98 and 53.30198a), Notice of Intention
mination in connection with (i) exer- to Make a Service Contract and Re-
cise of a contract option or (ii) exten- sponse to Notice and Attachment A
sion of a multiple year contract into a (both forms hereinafter referred to as
new program year. If a clause pre- Notice), together with any required
scribed in 16.2034(d) is used, it must supplemental information to the Ad-
not conflict with, or duplicate payment ministrator, Wage and Hour Division,
431
22.1008 48 CFR Ch. 1 (10103 Edition)
Employment Standards Administra- (ii) For other than subdivision

tion, U.S. Department of Labor, Wash- (a)(1)(i) of this subsection
ington, DC 20210, for the following serv- (A) Use the exact title shown in the
ice contracts: Wage and Hour Divisions Service Con-
(a) Each new solicitation and contract Act Directory of Occupations (see
tract in excess of $2,500. paragraph (b) of this subsection).
(b) Each contract modification which (B) Provide an appropriate job title
brings the contract above $2,500 and and job description if the Directory
(1) Extends the existing contract pur- cannot be used.
suant to an option clause or otherwise; (2) The estimated number of service
or employees in each class; and
(2) Changes the scope of the contract (3) The wage rate that would be paid
whereby labor requirements are af- each class if employed by the agency
fected significantly. and subject to the wage provisions of 5
(c) Each multiple year contract in U.S.C. 5341 or 5332 (see 22.1016).
excess of $2,500 upon (b)(1) The Wage and Hour Divisions
(1) Annual anniversary date if the Service Contract Act Directory of Occupa-
contract is subject to annual appro- tions (Directory) contains standard job
priations; or titles and definitions (descriptions) for
(2) Biennial anniversary date if the many commonly utilized service em-
contract is not subject to annual ap- ployee occupations. Contracting offi-
propriations and its proposed term ex- cers shall use this Directory to the
ceeds 2 yearsunless otherwise advised maximum extent possible in listing
by the Wage and Hour Division (see service employee classes on the SF 98a.
22.10085). This usage will enhance the timely
22.1008 Procedures for preparing and issuance of comprehensive wage deter-
submitting Notice (SF 98/98a). minations.
(2) If the job title contained in the
22.10081 Preparation of Notice (SF Directory differs from that contained
98/98a). in the statement of work but the job
The contracting officer shall com- definition (description) in the Direc-
plete and submit the Notice in accord- tory and the statement of work match
ance with the instructions on the SF 98 sufficiently, the contracting officer
and shall supplement it with informa- shall use the Directory job title.
tion required under this section. Care (3) The latest edition of the Directory
should be taken to ensure that all re- is available for sale by the Super-
quired information is provided to avert intendent of Documents and may be or-
return without action by the Depart- dered by calling (202) 7833238 or writ-
ment of Labor. The contracting officer ing to Superintendent of Documents,
shall retain a copy of the completed U.S. Government Printing Office,
Notice and any required supplementary Washington, DC 20402. Contracting
information until the signed and dated agencies, in accordance with agency
response to the Notice is received from procedures, are responsible for noti-
the Department of Labor and placed in fying their own personnel of a new edi-
the contract file. tion of the Directory.
22.10082 Preparation of SF 98a. 22.10083 Section 4(c) successorship
(a) The SF 98a shall contain the fol- with incumbent contractor collec-
tive bargaining agreement.
lowing information concerning the
service employees expected to be em- (a) Early in the acquisition cycle, the
ployed by the contractor and any contracting officer shall determine
known subcontractors in performing whether section 4(c) of the Act affects
the contract: the new acquisition. The contracting
(1) All classes of service employees to officer shall determine whether there
be utilized. is a predecessor contract and, if so,
(i) If a wage determination is to be whether the incumbent prime con-
based on a collective bargaining agree- tractor or its subcontractors and any
ment (CBA) (see 22.10023 and 22.10083), of their employees have a collective
use the exact title shown in the CBA. bargaining agreement.
432
(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
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
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
22.1010 48 CFR Ch. 1 (10103 Edition)
for a wage determination for additional contract, change in scope, or start of

places of performance does not pre- performance, as the case may be); or
clude the offerors competing for the (3) The forthcoming multiple year
proposed acquisition. contract anniversary date (annual an-
(e) If the contracting officer receives niversary date or biennial date, as the
any timely requests for wage deter- case may be).
minations for additional places of per- (b) This written notification must be
formance the contracting officer given at least 30 days in advance of the
shall earliest applicable acquisition date or
(1) Submit Notices for the additional the applicable annual or biennial anni-
places of performance to the Wage and versary date in order for the time-of-
Hour Division; and receipt limitations in 22.10123 (a) and
(2) Amend the solicitation to include (b) to apply. The contracting officer
all wage determinations and, if nec- shall retain a copy of the notification
essary, extend the time for submission in the contract file.
of final offers.
(f) If the successful offeror did not 22.1011 Response to Notice by Depart-
make a timely request for a wage de- ment of Labor.
termination and will perform in a place
of performance for which the con- 22.10111 Department of Labor action.
tracting officer therefore did not re- The Wage and Hour Division will
quest a wage determination, the con- mark, date, and sign the section of the
tracting officer shall SF 98 titled Response to Notice and re-
(1) Award the contract; turn the signed original together with
(2) Request a wage determination; appropriate additional material (wage
and determination, position/classification
(3) Incorporate the wage determina- descriptions, etc.). The Wage and Hour
tion in the contract, retroactive to the Division will take one of the following
date of contract award and with no ad- four actions:
justment in contract price, pursuant to (a) Issue and attach applicable wage
the clause at 52.22249, Service Con- determination(s); or
tractPlace of Performance Unknown. (b) Indicate that no wage determina-
[54 FR 19816, May 8, 1989, as amended at 64 tion is in effect for the locality of con-
FR 51840, Sept. 24, 1999; 66 FR 27414, May 16, tract performance; or
2001; 68 FR 56679, Oct. 1, 2003] (c) Indicate that the Service Contract
Act is not applicable based on informa-
22.1010 Notification to interested par- tion submitted; or
ties under collective bargaining (d) Return the Notice for additional
agreements. information (see 22.10081).
(a) The contracting officer should de-
termine whether the incumbent prime 22.10112 Requests for status or expe-
contractors or its subcontractors diting of response.
service employees performing on the Checking the status or the expediting
current contract are represented by a of wage determination responses shall
collective bargaining agent. If there is be made in accordance with con-
a collective bargaining agent, the contracting agency procedures.
tracting officer shall give both the in-
cumbent contractor and its employees 22.1012 Late receipt or nonreceipt of
collective bargaining agent written no- wage determination.
tification of
(1) The forthcoming successor con- 22.10121 General.
tract and the applicable acquisition The Wage and Hour Administrator,
dates (issuance of solicitation, opening generally, will issue a wage determina-
of bids, commencement of negotiation or revision to it in response to a
tions, award of contract, or start of Notice. The contracting officer shall
performance, as the case may be); or incorporate the determination or revi-
(2) The forthcoming contract modi- sion in the particular solicitation and
fication and applicable acquisition contract for which the wage determina-
dates (exercise of option, extension of tion was sought.
436
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 collection 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
22.10124 48 CFR Ch. 1 (10103 Edition)
Wages and Fringe Benefits. The contracting officers responsibility to

tracting officer may incorporate the make timely submissions as required
wage and fringe benefit terms of the in 22.10087.
collective bargaining agreement, or the
collective bargaining agreement itself, 22.10125 Response to late submission
in other contract actions such as the of Noticewith collective bar-
gaining agreement.
exercise of options in order to facili-
tate price adjustments in fixed-price If the contracting officer has not
type contracts (but see 22.10083(e) and filed the Notice within the time limits
22.1013(a)). in 22.10087, has not received a response
(2) The terms of a new or changed from the Department of Labor, and a
collective bargaining agreement, nego- successorship/same locality/incumbent
tiated by the predecessor contractor collective bargaining agreement situa-
during the period of performance of the tion exists, the contracting officer
predecessor contract, will not apply to shall contact the Wage and Hour Divi-
the successor contract under the condi- sion to determine when the wage deter-
tions set forth in paragraphs (a), (b), mination or revision can be expected.
and (c) of this subsection. If the Department of Labor is unable to
provide the wage determination or re-
vision by the latest date needed to
FR 67040, Dec. 28, 1994]
maintain the acquisition schedule, the
22.10124 Response to late submission contracting officer shall incorporate in
of Noticeno collective bargaining the solicitation the wage and fringe
agreement. benefit terms of the collective bar-
If the contracting officer has not gaining agreement, or the collective
filed the Notice within the time limits bargaining agreement itself, and the
in 22.10087, and thus has not received a clause at 52.22247, Service Contract
response from the Department of Act (SCA) Minimum Wages and Fringe
Labor, and a successorship/same local- Benefits. If the contract has been
ity/incumbent collective bargaining awarded, an equitable adjustment fol-
agreement situation does not exist, the lowing receipt of the wage determina-
contracting officer shall contact the tion or revision will not be required,
Wage and Hour Division to determine since the wage determination or revi-
when the wage determination or revision will be based on the economic
sion can be expected. If the Depart- terms of the collective bargaining
ment of Labor is unable to provide the agreement. The contracting officer
wage determination or revision by the may incorporate the wage and fringe
latest date needed to maintain the ac- benefit terms of the collective bar-
quisition schedule, the contracting of- gaining agreement, or the collective
ficer shall use the latest wage deter- bargaining agreement itself, in other
mination or revision, if any, incor- contract actions such as the exercise of
porated in the existing contract. If any options in order to facilitate price ad-
new or revised wage determination is justments for options in fixed-price
received later in response to the No- type contracts (but see 22.10083(e) and
tice, the contracting officer shall in- 22.1013(a)).
clude it in the solicitation or contract [54 FR 19816, May 8, 1989, as amended at 59
within 30 calendar days of receipt. If FR 67040, Dec. 28, 1994]
the contract has been awarded, the
contracting officer shall equitably ad- 22.1013 Review of wage determination.
just the contract price to reflect any (a) Based on incumbent collective bar-
changed cost of performance resulting gaining agreement. (1) If wages, fringe
from incorporating the wage deter- benefits, or periodic increases provided
mination or revision. The Adminis- for in a collective bargaining agree-
trator, Wage and Hour Division, may ment vary substantially from those
require retroactive application of the prevailing for similar services in the
wage determination for a contractual locality, the contracting officer shall
action over $2,500 using more than five immediately contact the agency labor
service employees. These provisions advisor to consider instituting the pro-
are not intended to alter the con- cedures in 22.1021.
438
(2) If the contracting officer believes failed to include an appropriate wage

that an incumbent or predecessor con- determination in a covered contract,
tractors agreement was not the result the contracting officer, within 30 days
of arms length negotiations, the con- of notification by the Department of
tracting officer shall contact the agen- Labor, shall include in the contract the
cy labor advisor to determine appro- clause at 52.22241 and any applicable
priate action. wage determination issued by the Ad-
(b) Based on other than incumbent col- ministrator. If the contract is subject
lective bargaining agreement. Upon re- to section 10 of the Act (41 U.S.C. 358),
ceiving a wage determination not the Administrator may require retro-
predicated upon a collective bargaining active application of that wage deter-
agreement, the contracting officer mination. The contracting officer shall
shall ascertain equitably adjust the contract price to
(1) If the wage determination does reflect any changed cost of perform-
not conform with wages and fringe ben- ance resulting from incorporating a
efits prevailing for similar services in wage determination or revision.
the locality; or
(2) If the wage determination con- 22.1016 Statement of equivalent rates
tains significant errors or omissions. If for Federal hires.
either subparagraph (b)(1) or (b)(2) of (a) The statement required under the
this section is evident, the contracting clause at 52.22242, Statement of Equiv-
officer shall contact the agency labor alent Rates for Federal Hires, (see
advisor to determine appropriate ac- 22.1006(b)) shall set forth those wage
tion. rates and fringe benefits that would be
paid by the contracting activity to the
22.1014 Delay of acquisition dates over various classes of service employees ex-
60 days. pected to be utilized under the contract
If any invitation for bids, request for if 5 U.S.C. 5332 (General Schedule
proposals, bid opening, or commence- white collar) and/or 5 U.S.C. 5341 (Wage
ment of negotiation for a proposed con- Boardblue collar) were applicable.
tract for which a wage determination (b) Procedures for computation of
was provided in response to a Notice these rates are as follows:
has been delayed, for whatever reason, (1) Wages paid blue collar employees
more than 60 days from such date as in- shall be the basic hourly rate for each
dicated on the submitted Notice, the class. The rate shall be Wage Board pay
contracting officer shall, in accordance schedule step two for nonsupervisory
with agency procedures, contact the service employees and step three for
Wage and Hour Division for the pur- supervisory service employees.
pose of determining whether the wage (2) Wages paid white collar employ-
determination issued under the initial ees shall be an hourly rate for each
submission is still current. Any revi- class. The rate shall be obtained by di-
sion of a wage determination received viding the general pay schedule step
by the contracting agency as a result one biweekly rate by 80.
of that communication, or upon dis- (3) Local civilian personnel offices
covery by the Department of Labor of can assist in determining and providing
a delay, shall supersede the earlier re- grade and salary data.
sponse as the wage determination ap-
plicable to the particular acquisition 22.1017 Notice of award.
subject to the time frames in 22.1012 Whenever an agency awards a service
2(a) and (b). contract subject to the Act which may
be in excess of $25,000 and that agency
22.1015 Discovery of errors by the De- does not report the award to the Fed-
partment of Labor. eral Procurement Data System, it shall
If the Department of Labor discovers furnish an original and one copy of
and determines, whether before or after Standard Form 99, Notice of Award of
a contract award, that a contracting Contract (see 53.30199) to the Wage and
officer made an erroneous determina- Hour Division, Employment Standards
tion that the Service Contract Act did Administration, Department of Labor,
not apply to a particular acquisition or unless it makes other arrangements
439
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
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
22.1023 48 CFR Ch. 1 (10103 Edition)
for disbursement to the underpaid em- award to an ineligible contractor ap-

ployees on order of the Secretary (or plies to both prime and subcontracts.
authorized representatives), an Admin- [54 FR 19816, May 8, 1989, as amended at 60
istrative Law Judge, or the Board of FR 33066, June 26, 1995]
Service Contract Appeals. In addition,
the Department of Labor has given 22.1026 Disputes concerning labor
blanket approval to forward withheld standards.
funds pending completion of an inves- Disputes concerning labor standards
tigation or other administrative pro- requirements of the contract are han-
ceeding when disposition of withheld dled under paragraph (t) of the con-
funds remains the final action nec- tract clause at 52.22241, Service Con-
essary to close out a contract. tract Act of 1965, as amended, and not
[54 FR 19816, May 8, 1989, as amended at 61 under the clause at 52.2331, Disputes.
FR 39198, July 26, 1996]
Subpart 22.11Professional
22.1023 Termination for default. Employee Compensation
As provided by the Act, any con-
tractor failure to comply with the re- 22.1101 Applicability.
quirements of the contract clauses re- The Service Contract Act of 1965 was
lated to the Act may be grounds for enacted to ensure that Government
termination for default (see paragraph contractors compensate their blue-col-
(k) of the clause at 52.22241, Service lar service workers and some white-
Contract Act of 1965, as amended). collar service workers fairly, but it
does not cover bona fide executive, ad-
22.1024 Cooperation with the Depart- ministrative, or professional employ-
ment of Labor. ees.
The contracting officer shall cooper- [48 FR 42258, Sept. 19, 1983, as amended at 51
ate with Department of Labor rep- FR 2665, Jan. 17, 1986; 57 FR 60582, Dec. 21,
resentatives in the examination of 1992; 65 FR 36014, June 6, 2000]
records, interviews with service em-
ployees, and all other aspects of inves- 22.1102 Definition.
tigations undertaken by the Depart- Professional employee, as used in this
ment. When asked, agencies shall fur- subpart, means any person meeting the
nish the Wage and Hour Administrator definition of employee employed in a
or a designee, any available informa- bona fide . . . professional capacity given
tion on contractors, subcontractors, in 29 CFR part 541. The term embraces
their contracts, and the nature of the members of those professions having a
contract services. The contracting offi- recognized status based upon acquiring
cer shall promptly refer, in writing to professional knowledge through pro-
the appropriate regional office of the longed study. Examples of these profes-
Department, apparent violations and sions include accountancy, actuarial
complaints received. Employee com- computation, architecture, dentistry,
plaints shall not be disclosed to the engineering, law, medicine, nursing,
employer. pharmacy, the sciences (such as biol-
ogy, chemistry, and physics), and
22.1025 Ineligibility of violators. teaching. To be a professional em-
A list of persons or firms found to be ployee, a person must not only be a
in violation of the Act is contained in professional but must be involved es-
the List of Parties Excluded from Fed- sentially in discharging professional
eral Procurement and Nonprocurement duties.
Programs (see 9.404). No Government [48 FR 42258, Sept. 19, 1983, as amended at 66
contract may be awarded to any viola- FR 2130, Jan. 10, 2001]
tor so listed because of a violation of
the Act, or to any firm, corporation, 22.1103 Policy, procedures, and solici-
partnership, or association in which tation provision.
the violator has a substantial interest, All professional employees shall be
without the approval of the Secretary compensated fairly and properly. Ac-
of Labor. This prohibition against cordingly, the contracting officer shall
442
insert the provision at 52.22246, Eval- 22.1302 Policy.

uation of Compensation for Profes-
(a) Contractors and subcontractors,
sional Employees, in solicitations for
when entering into contracts or sub-
negotiated service contracts when the
contracts subject to the Act, must
contract amount is expected to exceed
(1) List all employment openings,
$500,000 and the service to be provided
with the appropriate local employment
will require meaningful numbers of
service office except for
professional employees. This provision
requires that offerors submit for eval- (i) Executive and top management
uation a total compensation plan set- positions;
ting forth proposed salaries and fringe (ii) Positions to be filled from within
benefits for professional employees the contractors organization; and
working on the contract. Supporting (iii) Positions lasting three days or
information will include data, such as less.
recognized national and regional com- (2) Take affirmative action to em-
pensation surveys and studies of pro- ploy, and advance in employment,
fessional, public and private organiza- qualified special disabled veterans, vet-
tions, used in establishing the total erans of the Vietnam era, and other eli-
compensation structure. Plans indi- gible veterans without discrimination
cating unrealistically low professional based on their disability or veterans
employees compensation may be as- status.
sessed adversely as one of the factors (b) Except for contracts for commer-
considered in making an award. cial items or contracts that do not ex-
ceed the simplified acquisition thresh-
[57 FR 60582, Dec. 21, 1992] old, contracting officers must not obli-
gate or expend funds appropriated for
Subpart 22.12 [Reserved] the agency for a fiscal year to enter
into a contract for the procurement of
Subpart 22.13Special Disabled personal property and nonpersonal
services (including construction) with
Veterans, Veterans of the a contractor that has not submitted a
Vietnam Era, and Other Eligi- required annual Form VETS100, Fed-
ble Veterans eral Contractor Veterans Employment
Report (VETS100 Report), with re-
SOURCE: 66 FR 53488, Oct. 22, 2001, unless spect to the preceding fiscal year if the
otherwise noted. contractor was subject to the reporting
requirements of 38 U.S.C. 4212(d) for
22.1300 Scope of subpart. that fiscal year.
procedures for implementing the Viet- 22.1303 Applicability.
nam Era Veterans Readjustment As- (a) The Act applies to all contracts
sistance Act of 1972 (38 U.S.C. 4211 and and subcontracts for personal property
4212) (the Act); Executive Order 11701, and nonpersonal services (including
January 24, 1973 (3 CFR 19711975 construction) of $25,000 or more except
Comp., p. 752); the regulations of the as waived by the Secretary of Labor.
Secretary of Labor (41 CFR Part 60250 (b) The requirements of the clause at
and Part 61250); and the Veterans Em- 52.22235, Equal Opportunity for Special
ployment Opportunities Act of 1998, Disabled Veterans, Veterans of the
Public Law 105339. Vietnam Era, and Other Eligible Vet-
erans, in any contract with a State or
22.1301 Definition. local government (or any agency, in-
United States, as used in this subpart, strumentality, or subdivision) do not
means the States, the District of Co- apply to any agency, instrumentality,
lumbia, the Commonwealth of Puerto or subdivision of that government that
Rico, the Commonwealth of the North- does not participate in work on or
ern Mariana Islands, American Samoa, under the contract.
Guam, the Virgin Islands of the United (c) The Act requires submission of
States, and Wake Island. the VETS100 Report in all cases where
443
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
22.1308 Complaint procedures. the clause at 52.22235, Equal Oppor-

Following agency procedures, the tunity for Special Disabled Veterans,
contracting office must forward any Veterans of the Vietnam Era, and
complaints received about the adminis- Other Eligible Veterans.
tration of the Act to the Veterans (c) Insert the provision at 52.22238,
Employment and Training Service of Compliance with Veterans Employ-
the Department of Labor, or through ment Reporting Requirements, in so-
the local Veterans Employment Rep- licitations when it is anticipated the
resentative or designee, at the local contract award will exceed the sim-
State employment office. The Deputy plified acquisition threshold and the
Assistant Secretary of Labor is respon- contract is not for acquisition of com-
sible for investigating complaints. mercial items.
22.1309 Actions because of noncompli-

ance. Subpart 22.14Employment of
Workers with Disabilities
The contracting officer must take
necessary action as soon as possible 22.1400 Scope of subpart.
upon notification by the appropriate
agency official to implement any sanc- This subpart prescribes policies and
tions imposed on a contractor by the procedures for implementing Section
Department of Labor for violations of 503 of the Rehabilitation Act of l973, as
the clause at 52.22235, Equal Oppor- amended (29 U.S.C. 793) (the Act); Exec-
tunity for Special Disabled Veterans, utive Order 11758, January 15, 1974; and
Veterans of the Vietnam Era, and the regulations of the Secretary of
Other Eligible Veterans. These sanc- Labor (41 CFR part 60741). In this sub-
tions (see 41 CFR 60250.66) may in- part, the terms contract and contractor
clude include subcontract and subcontractor.
(a) Withholding payments;
(b) Termination or suspension of the 22.1401 Policy.
contract; or Government contractors, when enter-
(c) Debarment of the contractor. ing into contracts subject to the Act,
are required to take affirmative action
22.1310 Solicitation provision and con-
tract clauses. to employ, and advance in employ-
ment, qualified individuals with dis-
(a)(1) Insert the clause at 52.22235, abilities, without discrimination based
Equal Opportunity for Special Disabled on their physical or mental disability.
Veterans, Veterans of the Vietnam
Era, and Other Eligible Veterans, in so- [63 FR 34074, June 22, 1998]
licitations and contracts if the ex-
pected value is $25,000 or more, except 22.1402 Applicability.
when (a) Section 503 of the Act applies to
(i) Work is performed outside the all Government contracts in excess of
United States by employees recruited $10,000 for supplies and services (includ-
outside the United States; or ing construction) except as waived by
(ii) The Deputy Assistant Secretary the Secretary of Labor. The clause at
of Labor has waived, in accordance 52.22236, Affirmative Action for Work-
with 22.1305(a) or the head of the agen- ers with Disabilities, implements the
cy has waived, in accordance with Act.
22.1305(b) all of the terms of the clause. (b) The requirements of the clause at
(2) If the Deputy Assistant Secretary 52.22236, Affirmative Action for Work-
of Labor or the head of the agency ers with Disabilities, in any contract
waives one or more (but not all) of the with a State or local government (or
terms of the clause, use the basic any agency, instrumentality, or sub-
clause with its Alternate I. division) shall not apply to any agency,
(b) Insert the clause at 52.22237, Em- instrumentality, or subdivision of that
ployment Reports on Special Disabled
government that does not participate
Veterans, Veterans of the Vietnam
in work on or under the contract.
Era, and Other Eligible Veterans, in so-
licitations and contracts containing [63 FR 34074, June 22, 1998]
445
22.1403 48 CFR Ch. 1 (10103 Edition)
22.1403 Waivers. abilities. The contracting officer may

obtain these notices from the Office of
(a) The agency head, with the concur-
Federal Contract Compliance Pro-
rence of the Deputy Assistant Sec-
grams (OFCCP) regional office.
retary for Federal Contract Compli-
ance of the U.S. Department of Labor [63 FR 34074, June 22, 1998]
(Deputy Assistant Secretary), may
waive any or all of the terms of the 22.1405 Collective bargaining agree-
clause at 52.22236, Affirmative Action ments.
for Workers with Disabilities, for If performance under the clause at
(1) Any contract if a waiver is 52.22236, Affirmative Action for Work-
deemed to be in the national interest; ers with Disabilities, may necessitate a
or revision of a collective bargaining
(2) Groups or categories of contracts agreement, the contracting officer
if a waiver is in the national interest shall advise the affected labor unions
and it is that the Department of Labor will give
(i) Impracticable to act on each re- them appropriate opportunity to
quest individually; and present their views. However, neither
(ii) Determined that the waiver will the contracting officer nor any rep-
substantially contribute to conven- resentative of the contracting officer
ience in administering the Act. shall discuss with the contractor or
(b)(1) The head of a civilian agency, any labor representative any aspect of
with the concurrence of the Deputy As- the collective bargaining agreement.
sistant Secretary, or, (2) the Secretary
of Defense, may waive any requirement [48 FR 42258, Sept. 19, 1983, as amended at 63
FR 34074, June 22, 1998]
in this subpart when it is determined
that the contract is essential to the na- 22.1406 Complaint procedures.
tional security, and that its award
without complying with such require- Following agency procedures, the
ments is necessary to the national se- contracting office shall forward any
curity. Upon making such a determina- complaints received about the adminis-
tion, the head of a civilian agency shall tration of the Act to the Deputy As-
notify the Deputy Assistant Secretary sistant Secretary for Federal Contract
in writing within 30 days. Compliance, 200 Constitution Avenue,
(c) The contracting officer shall sub- NW., Washington, DC 20210, or to any
mit requests for waivers in accordance OFCCP regional or area office. The
with agency procedures. OFCCP shall institute investigation of
(d) A waiver granted for a particular each complaint and shall be respon-
class of contracts may be withdrawn sible for developing a complete case
for any contract within that class record.
whenever considered necessary by the [48 FR 42258, Sept. 19, 1983, as amended at 63
Deputy Assistant Secretary to achieve FR 34074, June 22, 1998]
the purposes of the Act. The with-
drawal shall not apply to contracts 22.1407 Actions because of noncompli-
awarded before the withdrawal. The ance.
withdrawal shall not apply to solicita- The contracting officer shall take
tions under any means of formal sealed necessary action, as soon as possible
bidding unless it is made more than 10 upon notification by the appropriate
days before the date set for bid open- agency official, to implement any sanc-
ing. tions imposed on a contractor by the
[48 FR 42258, Sept. 19, 1983, as amended at 52 Department of Labor for violations of
FR 19803, May 27, 1987; 63 FR 34074, June 22, the clause at 52.22236, Affirmative Ac-
1998] tion for Workers with Disabilities.
These sanctions (see 41 CFR 60741.66)
22.1404 Department of Labor notices. may include
The contracting officer shall furnish (a) Withholding from payments oth-
to the contractor appropriate notices erwise due;
that state the contractors obligations (b) Termination or suspension of the
and the rights of individuals with dis- contract; or
446
(c) Debarment of the contractor. with Executive Order 13126 of June 12,
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
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
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
22.1505 Solicitation provision and con- Subpart 23.3Hazardous Material

tract clause. Identification and Material Safety Data
(a) Except as provided in paragraph 23.300 Scope of subpart.
(b) of 22.1503, insert the provision at 23.301 Definition.
52.22218, Certification Regarding 23.302 Policy.
Knowledge of Child Labor for Listed 23.303 Contract clause.
End Products, in all solicitations that
are expected to exceed the micro-pur- Subpart 23.4Use of Recovered Materials
chase threshold and are for the acquisi- 23.400 Scope of subpart.
tion of end products (regardless of 23.401 Definition.
country of origin) of a type identified 23.402 Authorities.
by country of origin on the List of 23.403 Policy.
Products Requiring Contractor Certifi- 23.404 Agency affirmative procurement pro-
cation as to Forced or Indentured Child grams.
Labor, except solicitations for com- 23.405 Procedures.
mercial items that include the provi- 23.406 Solicitation provision and contract
clause.
sion at 52.2123, Offeror Representa-
tions and CertificationsCommercial Subpart 23.5Drug-Free Workplace
Items. The contracting officer must
identify in paragraph (b) of the provi- 23.500 Scope of subpart.
sion at 52.22218, Certification Regard- 23.501 Applicability.
ing Knowledge of Child Labor for List- 23.502 Authority.
23.503 Definitions.
ed End Products, or paragraph (i)(1) of
23.504 Policy.
the provision at 52.2123, any applicable 23.505 Contract clause.
end products and countries of origin 23.506 Suspension of payments, termination
from the List. For solicitations esti- of contract, and debarment and suspen-
mated to equal or exceed $25,000, the sion actions.
contracting officer must exclude from
the List in the solicitation end prod- Subpart 23.6Notice of Radioactive
ucts from any countries identified at Material
22.1503(b), in accordance with the speci- 23.601 Requirements.
fied thresholds. 23.602 Contract clause.
(b) Insert the clause at 52.22219,
Child LaborCooperation with Au- Subpart 23.7Contracting for Environ-
thorities and Remedies, in all solicita- mentally Preferable Products and
tions and contracts for the acquisition Services
of supplies that are expected to exceed
the micro-purchase threshold. 23.700 Scope.
23.701 Definition.
23.702 Authorities.
PART 23 ENVIRONMENT, ENERGY 23.703 Policy.
AND WATER EFFICIENCY, RENEW- 23.704 Application to Government-owned or
ABLE ENERGY TECHNOLOGIES, -leased facilities.
OCCUPATIONAL SAFETY, AND
DRUG-FREE WORKPLACE Subpart 23.8Ozone-Depleting
Substances
Sec.
23.000 Scope. 23.800 Scope of subpart.
23.001 Definition. 23.801 Authorities.
23.802 [Reserved]
Subpart 23.1 [Reserved] 23.803 Policy.
Subpart 23.2Energy and Water Efficiency
and Renewable Energy Subpart 23.9Contractor Compliance With
Toxic Chemical Release Reporting
23.200 Scope.
23.201 Authorities. 23.901 Purpose.
23.202 Policy. 23.902 General.
23.203 Energy-efficient products. 23.903 Applicability.
23.204 Energy-savings performance con- 23.904 Policy.
tracts. 23.905 Requirements.
449
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]
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
(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
23.303 48 CFR Ch. 1 (10103 Edition)
(b) To accomplish this objective, it is Subpart 23.4Use of Recovered

necessary to obtain certain informa- Materials
tion relative to the hazards which may
be introduced into the workplace by
the supplies being acquired. Accord- otherwise noted.
ingly, offerors and contractors are re-
quired to submit hazardous materials 23.400 Scope of subpart.
data whenever the supplies being ac-
quired are identified as hazardous ma-
procedures for acquiring Environ-
terials. The latest version of Federal mental Protection Agency (EPA)des-
Standard No. 313 (Material Safety Data ignated products through affirmative
Sheet, Preparation and Submission of) procurement programs required by the
includes criteria for identification of Resource Conservation and Recovery
hazardous materials. Act of 1976 (RCRA) (42 U.S.C. 6962) and
(c) Hazardous material data (Mate- Executive Order 13101 of September 14,
rial Safety Data Sheets (MSDSs)) are 1998, Greening the Government through
required Waste Prevention, Recycling, and Fed-
(1) As specified in the latest version eral Acquisition.
of Federal Standard No. 313 (including
[65 FR 36019, June 6, 2000]
revisions adopted during the term of
the contract); 23.401 Definition.
(2) For any other material designated
EPA-designated product, as used in
by a Government technical representa-
this subpart, means a product
tive as potentially hazardous and re-
(1) That is or can be made with recov-
quiring safety controls.
ered material;
(d) MSDSs must be submitted
(2) That is listed by EPA in a pro-
(1) By the apparent successful offeror curement guideline (40 CFR part 247);
prior to contract award if hazardous and
materials are expected to be used dur- (3) For which EPA has provided pur-
ing contract performance. chasing recommendations in a related
(2) For agencies other than the De- Recovered Materials Advisory Notice
partment of Defense, again by the con- (RMAN).
tractor with the supplies at the time of
delivery. [65 FR 36019, June 6, 2000]
(e) The contracting officer shall pro-
23.402 Authorities.
vide a copy of all MSDSs received to
the safety officer or other designated (a) The Resource Conservation and
individual. Recovery Act of 1976 (RCRA), 42 U.S.C.
6962, requires agencies responsible for
[48 FR 42275, Sept. 19, 1983, as amended at 56 drafting or reviewing specifications
FR 55374, Oct. 25, 1991; 62 FR 236, Jan. 2, 1997] used in agency acquisitions to
(1) Eliminate from those specifica-
tions any requirement excluding the
(a) The contracting officer shall in- use of recovered materials or requiring
sert the clause at 52.2233, Hazardous products to be manufactured from vir-
Material Identification and Material gin materials; and
Safety Data, in solicitations and con- (2) Require, for EPA-designated prod-
tracts if the contract will require the ucts, using recovered materials to the
delivery of hazardous materials as de- maximum extent practicable without
fined in 23.301. jeopardizing the intended end use of
(b) If the contract is awarded by an the item.
agency other than the Department of (b) RCRA also requires
Defense, the contracting officer shall (1) EPA to prepare guidelines on the
use the clause at 52.2233 with its Alter- availability, sources, and potential
nate I. uses of recovered materials and associ-
ated products, including solid waste
[56 FR 55374, Oct. 25, 1991] management services; and
452
(2) Agencies to develop and imple- (1) Competitively within a reasonable

ment affirmative procurement pro- time frame;
grams for EPA-designated products (2) Meeting appropriate performance
within 1 year after EPAs designation. standards; or
(c) Executive Order 13101 requires (3) At a reasonable price.
that the agency head (c) Agency affirmative procurement
(1) Work to increase and expand mar- programs must provide guidance for
kets for recovered materials through purchases of EPA-designated products
greater Government preference and de- at or below the micro-purchase thresh-
mand for such products consistent with old.
the demands of efficiency and cost-ef-
[65 FR 36019, June 6, 2000]
fectiveness; and
(2) Develop and implement affirma- 23.405 Procedures.
tive procurement programs in accord-
ance with direction in RCRA and the (a) These procedures apply to all
Executive order. agency acquisitions of EPA-designated
products, including micro-purchases,
[65 FR 36019, June 6, 2000] if
(1) The price of the product exceeds
23.403 Policy. $10,000; or
Government policy on the use of re- (2) The aggregate amount paid for
covered materials considers cost, avail- products, or for functionally equivalent
ability of competition, and perform- products, in the preceding fiscal year
ance. The objective is to acquire com- was $10,000 or more. RCRA requires
petitively, in a cost-effective manner, that an agency include micro-pur-
products that meet reasonable per- chases in determining if the aggregate
formance requirements and that are amount paid was $10,000 or more. How-
composed of the highest percentage of ever, it is not recommended that an
recovered materials practicable. agency track micro-purchases unless it
intends to claim an exemption from
[65 FR 36019, June 6, 2000] the requirement to establish an affirm-
ative procurement program in the fol-
23.404 Agency affirmative procure-
ment programs. lowing fiscal year.
(b) Contracting officers should refer
(a) For EPA-designated products, an to EPAs list of EPA-designated prod-
agency must establish an affirmative ucts (available via the Internet at
procurement program, if the agencys http://www.epa.gov/cpg/) and to their
purchases meet the threshold in agencies affirmative procurement pro-
23.405(a). Technical or requirements grams when purchasing supplies that
personnel and procurement personnel contain recovered material or services
are responsible for the preparation, im- that could include supplies that con-
plementation, and monitoring of af- tain recovered material.
firmative procurement programs. (c) The contracting officer shall place
Agency affirmative procurement pro- in the contract file a written justifica-
grams must include tion if an acquisition of EPA-des-
(1) A recovered materials preference ignated products above the micro-pur-
program; chase threshold does not meet applica-
(2) An agency promotion program; ble minimum recovered material con-
(3) A program for requiring reason- tent recommended by EPA guidelines.
able estimates, certification, and If the agency has designated an Envi-
verification of recovered material used ronmental Executive, the contracting
in the performance of contracts; and officer shall give a copy of the written
(4) Annual review and monitoring of justification to that official. The con-
the effectiveness of the program. tracting officer shall base the justifica-
(b) Agency affirmative procurement tion on the inability to acquire the
programs must require that 100 percent product
of purchases of EPA-designated prod- (1) Competitively within a reasonable
ucts contain recovered material, unless period of time;
the item cannot be acquired (2) At reasonable prices; or
453
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
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
Individual means an offeror/con- conviction. The notice shall include

tractor that has no more than one em- the postion title of the employee;
ployee including the offeror/contractor. (6) Within 30 days after receiving no-
[54 FR 4968, Jan. 31, 1989, as amended at 55 tice under subparagraph (a)(4) of this
FR 21707, May 25, 1990; 66 FR 2130, Jan. 10, section of a conviction, taking one of
2001] the following actions with respect to
any employee who is convicted of a
23.504 Policy. drug abuse violation occurring in the
(a) No offeror other than an indi- workplace:
vidual shall be considered a responsible (i) Taking appropriate personnel ac-
source (see 9.1041(g) and 19.602 tion against such employee, up to and
1(a)(2)(i)) for a contract that exceeds including termination; or
the simplified acquisition threshold, (ii) Requiring such employee to satis-
unless it agrees that it will provide a factorily participate in a drug abuse
drug-free workplace by assistance or rehabilitation program
(1) Publishing a statement notifying approved for such purposes by a Fed-
its employees that the unlawful manu- eral, State, or local health, law en-
facture, distribution, dispensing, pos- forcement, or other appropriate agen-
session, or use of a controlled sub- cy.
stance is prohibited in the contractors (7) Making a good faith effort to
workplace, and specifying the actions maintain a drug-free workplace
that will be taken against employees through implementation of subpara-
for violations of such prohibition; graphs (a)(1) through (a)(6) of this sec-
(2) Establishing an ongoing drug-free tion.
awareness program to inform its em- (b) No individual shall be awarded a
ployees about contract of any dollar value unless
(i) The dangers of drug abuse in the that individual agrees not to engage in
workplace; the unlawful manufacture, distribu-
(ii) The contractors policy of main- tion, dispensing, possession, or use of a
taining a drug-free workplace; controlled substance while performing
(iii) Any available drug counseling, the contract.
rehabilitation, and employee assist-
(c) For a contract of 30 days or more
ance programs; and
performance duration, the contractor
(iv) The penalties that may be im-
shall comply with the provisions of
posed upon employees for drug abuse
paragraph (a) of this section within 30
violations occurring in the workplace;
days after contract award, unless the
(3) Providing all employees engaged
contracting officer agrees in writing
in performance of the contract with a
that circumstances warrant a longer
copy of the statement required by
paragraph (a)(1) of this section; period of time to comply. Before grant-
(4) Notifying all employees in writing ing such an extension, the contracting
in the statement required by subpara- officer shall consider such factors as
graph (a)(1) of this section, that as a the number of contractor employees at
condition of employment on a covered the worksite, whether the contractor
contract, the employee will has or must develop a drug-free work-
(i) Abide by the terms of the state- place program, and the number of con-
ment; and tractor worksites. For contracts of less
(ii) Notify the employer in writing of than 30 days performance duration, the
the employees conviction under a contractor shall comply with the provi-
criminal drug statute for a violation sions of paragraph (a) of this section as
occurring in the workplace no later soon as possible, but in any case, by a
than 5 days after such conviction; date prior to when performance is ex-
(5) Notifying the contracting officer pected to be completed.
in writing within 10 days after receiv- [54 FR 4968, Jan. 31, 1989, as amended at 55
ing notice under subdivision (a)(4)(ii) of FR 21707, May 25, 1990; 55 FR 38517, Sept. 18,
this section, from an employee or oth- 1990; 60 FR 34758, July 3, 1995; 61 FR 69292,
erwise receiving actual notice of such Dec. 31, 1996]
455
23.505 48 CFR Ch. 1 (10103 Edition)
23.505 Contract clause. Subpart 23.6Notice of

Except as provided in 23.501, insert Radioactive Material
the clause at 52.223-6, Drug-Free Work-
place, in solicitations and contracts. SOURCE: 56 FR 55374, Oct. 25, 1991, unless
otherwise noted.
[68 FR 28082, May 22, 2003]
23.601 Requirements.
23.506 Suspension of payments, termi-
nation of contract, and debarment (a) The clause at 52.2237, Notice of
and suspension actions. Radioactive Materials, requires the
contractor to notify the contracting of-
(a) After determining in writing that ficer prior to delivery of radioactive
adequate evidence to suspect any of the material.
causes at paragraph (d) of this section (b) Upon receipt of the notice, the
exists, the contracting officer may sus- contracting officer shall notify receiv-
pend contract payments in accordance ing activities so that appropriate safe-
with the procedures at 32.5036(a)(1). guards can be taken.
(b) After determining in writing that (c) The clause permits the con-
any of the causes at paragraph (d) of tracting officer to waive the notifica-
this section exists, the contracting of- tion if the contractor states that the
ficer may terminate the contract for notification on prior deliveries is still
default. current. The contracting officer may
(c) Upon initiating action under para- waive the notice only after consulta-
graph (a) or (b) of this section, the con- tion with cognizant technical rep-
tracting officer shall refer the case to resentatives.
(d) The contracting officer is re-
the agency suspension and debarment
quired to specify in the clause at
official, in accordance with agency pro-
52.2237, the number of days in advance
cedures, pursuant to subpart 9.4. of delivery that the contractor will
(d) The specific causes for suspension provide notification. The determina-
of contract payments, termination of a tion of the number of days should be
contract for default, or suspension and done in coordination with the installa-
debarment are tion/facility radiation protection offi-
(1) The contractor has failed to com- cer (RPO). The RPO is responsible for
ply with the requirements of the clause insuring the proper license, authoriza-
at 52.2236, Drug-Free Workplace; or tion or permit is obtained prior to re-
(2) The number of contractor employ- ceipt of the radioactive material.
ees convicted of violations of criminal [56 FR 55374, Oct. 25, 1991, as amended at 62
drug statutes occurring in the work- FR 236, Jan. 2, 1997]
place indicates that the contractor has
failed to make a good faith effort to 23.602 Contract clause.
provide a drug-free workplace. The contracting officer shall insert
(e) A determination under this sec- the clause at 52.2237, Notice of Radio-
tion to suspend contract payments, active Materials, in solicitations and
terminate a contract for default, or contracts for supplies which are, or
debar or suspend a contractor may be which contain (a) radioactive mate-
waived by the agency head for a par- rial requiring specific licensing under
ticular contract, in accordance with regulations issued pursuant to the
agency procedures, only if such waiver Atomic Energy Act of 1954; or (b) radio-
is necessary to prevent a severe disrup- active material not requiring specific
tion of the agency operation to the det- licensing in which the specific activity
riment of the Federal Government or is greater than 0.002 microcuries per
the general public (see subpart 9.4). The gram or the activity per item equals or
waiver authority of the agency head exceeds 0.01 microcuries. Such supplies
cannot be delegated. include, but are not limited to, air-
craft, ammunition, missiles, vehicles,
[54 FR 4968, Jan. 31, 1989, as amended at 55 electronic tubes, instrument panel
FR 21708, May 25, 1990; 61 FR 69292, Dec. 31, gauges, compasses and identification
1996] markers.
456
Subpart 23.7Contracting for En- services (based on EPA-issued guid-

vironmentally Preferable Prod- ance).
ucts and Services (2) Promote energy-efficiency and
water conservation.
(3) Eliminate or reduce the genera-
SOURCE: 60 FR 28497, May 31, 1995, unless tion of hazardous waste and the need
otherwise noted.
for special material processing (includ-
23.700 Scope. ing special handling, storage, treat-
ment, and disposal).
This subpart prescribes policies for (4) Promote the use of nonhazardous
acquiring environmentally preferable and recovered materials.
products and services.
(5) Realize life-cycle cost savings.
[66 FR 65353, Dec. 18, 2001] (6) Promote cost-effective waste re-
duction when creating plans, drawings,
23.701 Definition. specifications, standards, and other
Biobased product, as used in this sub- product descriptions authorizing mate-
part, means a commercial or industrial rial substitutions, extensions of shelf-
product (other than food or feed) that life, and process improvements.
utilizes biological products or renew- (7) Consider the use of biobased prod-
able domestic agricultural (plant, ani- ucts.
mal, and marine) or forestry materials. [65 FR 36020, June 6, 2000, as amended at 66
[65 FR 36020, June 6, 2000] FR 65353, Dec. 18, 2001]
23.702 Authorities. 23.704 Application to Government-

owned or -leased facilities.
(a) Resource Conservation and Recov-
ery Act (RCRA) (42 U.S.C. 6901, et seq.). Executive Order 13101, Section 701,
(b) National Energy Conservation requires that contracts for contractor
Policy Act (42 U.S.C. 8262g). operation of a Government-owned or
(c) Pollution Prevention Act of 1990 -leased facility and contracts for sup-
(42 U.S.C. 13101, et seq.). port services at a Government-owned
(d) Executive Order 13148 of April 21, or -operated facility include provisions
2000, Greening the Government through that obligate the contractor to comply
Leadership in Environmental Manage- with the requirements of the order.
ment. Compliance includes developing pro-
(e) Executive Order 13101 of Sep- grams to promote and implement cost-
tember 14, 1998, Greening the Govern- effective waste reduction and affirma-
ment through Waste Prevention, Recy- tive procurement programs required by
cling, and Federal Acquisition. 42 U.S.C. 6962 for all products des-
(f) Executive Order 13123 of June 3, ignated in EPAs Comprehensive Pro-
1999, Greening the Government through curement Guideline (40 CFR part 247).
Efficient Energy Management. [65 FR 36020, June 6, 2000]
FR 36020, June 6, 2000; 66 FR 65353, Dec. 18, 23.705 Contract clause.
2001; 68 FR 43869, July 24, 2003] Insert the clause at 52.22310, Waste
Reduction Program, in all solicitations
23.703 Policy. and contracts for contractor operation
Agencies must of Government-owned or -leased facili-
(a) Implement cost-effective con- ties and all solicitations and contracts
tracting preference programs pro- for support services at Government-
moting energy-efficiency, water con- owned or -operated facilities.
servation, and the acquisition of envi-
[65 FR 36020, June 6, 2000]
ronmentally preferable products and
services; and
(b) Employ acquisition strategies Subpart 23.8Ozone-Depleting
that affirmatively implement the fol- Substances
lowing environmental objectives:
(1) Maximize the utilization of envi- SOURCE: 60 FR 28500, May 31, 1995, unless
ronmentally preferable products and otherwise noted.
457
23.800 48 CFR Ch. 1 (10103 Edition)
23.800 Scope of subpart. 23.804 Contract clauses.

This subpart sets forth policies and Except for contracts that will be per-
procedures for the acquisition of items formed outside the United States and
which contain, use, or are manufac- its outlying areas, insert the clause at:
tured with ozone-depleting substances. (a) 52.22311, Ozone-Depleting Sub-
[60 FR 28500, May 31, 1995, as amended at 61 stances, in solicitations and contracts
FR 31645, June 20, 1996] for ozone-depleting substances or for
supplies that may contain or be manu-
23.801 Authorities. factured with ozone-depleting sub-
stances.
(a) Title VI of the Clean Air Act (42
U.S.C. 7671, et seq.). (b) 52.22312, Refrigeration Equip-
(b) Executive Order 13148 of April 21, ment and Air Conditioners, in solicita-
2000, Greening the Government through tions and contracts for services when
Leadership in Environmental Manage- the contract includes the maintenance,
ment. repair, or disposal of any equipment or
appliance using ozone-depleting sub-
(c) Environmental Protection Agency
stances as a refrigerant, such as air
(EPA) regulations, Protection of Strat-
conditioners, including motor vehicles,
ospheric Ozone (40 CFR part 82).
refrigerators, chillers, or freezers.
FR 43869, July 24, 2003] [61 FR 31645, June 20, 1996, as amended at 68
FR 28083, May 22, 2003]
23.802 [Reserved]
Subpart 23.9Contractor Compli-
23.803 Policy. ance With Toxic Chemical Re-
(a) It is the policy of the Federal lease Reporting
Government that Federal agencies:
(1) Implement cost-effective pro- SOURCE: 60 FR 55307, Oct. 30, 1995, unless
grams to minimize the procurement of otherwise noted.
materials and substances that con-
tribute to the depletion of strato- 23.901 Purpose.
spheric ozone; and
This subpart implements the require-
(2) Give preference to the procure-
ments of Executive Order (E.O.) 13148 of
ment of alternative chemicals, prod-
April 21, 2000, Greening the Govern-
ucts, and manufacturing processes that
ment through Leadership in Environ-
reduce overall risks to human health
mental Management.
and the environment by lessening the
depletion of ozone in the upper atmos- [68 FR 43869, July 24, 2003]
phere.
(b) In preparing specifications and 23.902 General.
purchase descriptions, and in the ac- (a) The Emergency Planning and
quisition of supplies and services, agen- Community Right-to-Know Act of 1986
cies shall: (EPCRA) and the Pollution Prevention
(1) Comply with the requirements of Act of 1990 (PPA) established programs
Title VI of the Clean Air Act, Execu- to protect public health and the envi-
tive Order 13148, and 40 CFR 82.84(a) (2), ronment by providing the public with
(3), (4), and (5); and important information on the toxic
(2) Substitute safe alternatives to chemicals being released by manufac-
ozone-depleting substances, as identi- turing facilities into the air, land, and
fied under 42 U.S.C. 7671k, to the max- water in its communities.
imum extent practicable, as provided (b) Under EPCRA section 313 (42
in 40 CFR 82.84(a)(1), except in the case U.S.C. 11023), and PPA section 6607 (42
of Class I substances being used for U.S.C. 13106), the owner or operator of
specified essential uses, as identified certain manufacturing facilities is re-
under 40 CFR 82.4(r). quired to submit annual reports on
[60 FR 28500, May 31, 1995, as amended at 61 toxic chemical releases and waste man-
FR 31645, June 20, 1996; 68 FR 43869, July 24, agement activities to the Environ-
2003] mental Protection Agency (EPA) and
458
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
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
23.906 48 CFR Ch. 1 (10103 Edition)
when the provision at 52.22313, Certifi- Subpart 23.10Federal Compli-

cation of Toxic Chemical Release Re- ance With Right-To-Know
porting, is included in the solicitation. Laws and Pollution Prevention
If facilities to be used by the offeror in Requirements
the performance of the contract are
not subject to Form R filing and re-
porting requirements and the offeror otherwise noted.
fails to check the appropriate box(es)
in 52.22313, Certification of Toxic 23.1000 Scope.
Chemical Release Reporting, such fail- This subpart prescribes policies and
ure shall be considered a minor infor- procedures for obtaining information
mality or irregularity. needed for Government
(d) The contracting officer shall co- (a) Compliance with right-to-know
operate with EPA representatives and laws and pollution prevention require-
provide such advice and assistance as ments;
may be required to aid EPA in the per- (b) Implementation of an environ-
formance of its responsibilities under mental management system (EMS) at
E.O. 13148. a Federal facility; and
(e) EPA, upon determining that a (c) Completion of facility compliance
contractor is not filing the necessary audits (FCAs) at a Federal facility.
forms or is filing incomplete informa-
23.1001 Authorities.
tion, may recommend to the head of
the contracting activity that the con- (a) Emergency Planning and Commu-
tract be terminated for convenience. nity Right-to-Know Act of 1986, 42
The head of the contracting activity U.S.C. 1100111050 (EPCRA).
shall consider the EPA recommenda- (b) Pollution Prevention Act of 1990,
42 U.S.C. 1310113109 (PPA).
tion and determine if termination or
(c) Executive Order 13148 of April 21,
some other action is appropriate.
2000, Greening the Government through
[60 FR 55307, Oct. 30, 1995, as amended at 61 Leadership in Environmental Manage-
FR 41474, Aug. 8, 1996; 65 FR 46058, July 26, ment.
2000; 68 FR 28083, May 22, 2003. Redesignated
and amended at 68 FR 43869, July 24, 2003] 23.1002 Applicability.
The requirements of this subpart
23.906 Solicitation provision and con- apply to facilities owned or operated by
tract clause. an agency in the customs territory of
Except for acquisitions of commer- the United States.
cial items as defined in part 2, the con-
tracting officer shall 23.1003 Definitions.
(a) Insert the provision at 52.22313, As used in this subpart
Certification of Toxic Chemical Re- Federal agency means an executive
lease Reporting, in all solicitations for agency (see 2.101).
competitive contracts expected to ex- Priority chemical means a chemical
ceed $100,000 and competitive 8(a) con- identified by the Interagency Environ-
tracts, unless it has been determined in mental Leadership Workgroup or, al-
accordance with 23.905(b) that to do so ternatively, by an agency pursuant to
is not practicable; and section 503 of Executive Order 13148 of
April 21, 2000, Greening the Govern-
(b) When the solicitation contains
ment through Leadership in Environ-
the provision at 52.22313, Certification
mental Management.
of Toxic Chemical Release Reporting,
insert the clause at 52.22314, Toxic 23.1004 Requirements.
Chemical Release Reporting, in the re-
(a) E.O. 13148 requires Federal facili-
sulting contract, if the contract is ex- ties to comply with the provisions of
pected to exceed $100,000. EPCRA and PPA.
[60 FR 55307, Oct. 30, 1995, as amended at 61 (b) Pursuant to E.O. 13148, and any
FR 41474, Aug. 8, 1996. Redesignated and agency implementing procedures,
amended at 68 FR 43869, July 24, 2003] every new contract that provides for
460
performance on a Federal facility shall Subpart 24.2Freedom of Information Act

require the contractor to provide infor-
mation necessary for the Federal agen- 24.201 Authority.
cy to comply with the 24.202 Prohibitions.
24.203 Policy.
(1) Emergency planning and toxic re-
lease reporting requirements in AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap-
EPCRA, PPA, and E.O. 13148; ter 137; and 42 U.S.C. 2473(c).
(2) Toxic chemical, priority chemical, SOURCE: 48 FR 42277, Sept. 19, 1983, unless
and hazardous substance release and otherwise noted.
use reduction goals of sections 502 and
503 of Executive Order 13148; and 24.000 Scope of part.
(3) Requirements for EMSs and FCAs
if the place of performance is at a Fed-
cedures that apply requirements of the
eral facility designated by the agency.
Privacy Act of 1974 (5 U.S.C. 552a) (the
23.1005 Contract clause. Act) and OMB Circular No. A-130, De-
cember 12, 1985, to Government con-
(a) Insert the clause at 52.2235, Pol-
tracts and cites the Freedom of Infor-
lution Prevention and Right-to-Know
mation Act (5 U.S.C. 552, as amended.)
Information, in solicitations and con-
tracts that provide for performance, in [48 FR 42277, Sept. 19, 1983, as amended at 55
whole or in part, on a Federal facility. FR 38517, Sept. 18, 1990]
(b) Use the clause with its Alternate
I if the contract provides for con- Subpart 24.1Protection of
tractor Individual Privacy
(1) Operation or maintenance of a
Federal facility at which the agency 24.101 Definitions.
has implemented or plans to imple-
ment an EMS; or As used in this subpart
(2) Activities and operations Agency means any executive depart-
(i) To be performed at a Government- ment, military department, Govern-
operated Federal facility that has im- ment corporation, Government con-
plemented or plans to implement an trolled corporation, or other establish-
EMS; and ment in the executive branch of the
(ii) That the agency has determined Government (including the Executive
are covered within the EMS. Office of the President), or any inde-
(c) Use the clause with its Alternate pendent regulatory agency.
II if Individual means a citizen of the
(1) The contract provides for con- United States or an alien lawfully ad-
tractor activities on a Federal facility; mitted for permanent residence.
and Maintain means maintain, collect,
(2) The agency has determined that use, or disseminate.
the contractor activities should be in- Operation of a system of records means
cluded within the FCA or an environ- performance of any of the activities as-
mental management system audit. sociated with maintaining the system
of records, including the collection,
PART 24PROTECTION OF PRI- use, and dissemination of records.
VACY AND FREEDOM OF INFOR- Record means any item, collection, or
MATION grouping of information about an indi-
vidual that is maintained by an agen-
Sec. cy, including, but not limited to, edu-
24.000 Scope of part. cation, financial transactions, medical
history, and criminal or employment
Subpart 24.1Protection of Individual history, and that contains the individ-
Privacy uals name, or the identifying number,
24.101 Definitions. symbol, or other identifying particular
24.102 General. assigned to the individual, such as a
24.103 Procedures. fingerprint or voiceprint or a photo-
24.104 Contract clauses. graph.
461
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
and regulation implementing the Act.
FR 2130, Jan. 10, 2001]
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
be disclosed under 5 U.S.C. 574, is ex- 25.101 General.

empt from disclosure under the Free- 25.102 Policy.
dom of Information Act (5 U.S.C. 25.103 Exceptions.
25.104 Nonavailable articles.
552(b)(3)). 25.105 Determining reasonableness of cost.
[62 FR 257, Jan. 2, 1997, as amended at 62 FR
51270, Sept. 30, 1997; 63 FR 58594, Oct. 30, 1998; Subpart 25.2Buy American Act
68 FR 56689, Oct. 1, 2003] Construction Materials
24.203 Policy. 25.200 Scope of subpart.

25.201 Policy.
(a) The Act specifies, among other 25.202 Exceptions.
things, how agencies shall make their 25.203 Preaward determinations.
records available upon public request, 25.204 Evaluating offers of foreign construc-
imposes strict time standards for agen- tion material.
cy responses, and exempts certain 25.205 Postaward determinations.
25.206 Noncompliance.
records from public disclosure. Each
agencys implementation of these re- Subpart 25.3 [Reserved]
quirements is located in its respective
title of the Code of Federal Regula-
tions and referenced in subpart 24.2 of Subpart 25.4Trade Agreements
its implementing acquisition regula- 25.400 Scope of subpart.
tions. 25.401 Exceptions.
(b) Contracting officers may receive 25.402 General.
requests for records that may be ex- 25.403 Trade Agreements Act.
empted from mandatory public disclo- 25.404 Caribbean Basin Trade Initiative.
25.405 North American Free Trade Agree-
sure. The exemptions most often appli-
ment (NAFTA).
cable are those relating to classified 25.406 Israeli Trade Act.
information, to trade secrets and con- 25.407 Agreement on Trade in Civil Aircraft.
fidential commercial or financial infor- 25.408 Procedures.
mation, to interagency or intra-agency
memoranda, or to personal and medical Subpart 25.5Evaluating Foreign Offers
information pertaining to an indi- Supply Contracts
vidual. Since these requests often in-
25.501 General.
volve complex issues requiring an in- 25.502 Application.
depth knowledge of a large and increas- 25.503 Group offers.
ing body of court rulings and policy 25.504 Evaluation examples.
guidance, contracting officers are cau- 25.5041 Buy American Act.
tioned to comply with the imple- 25.5042 Trade Agreements Act/Caribbean
menting regulations of their agency Basin Trade Initiative/NAFTA.
and to obtain necessary guidance from 25.5043 NAFTA/Israeli Trade Act.
the agency officials having Freedom of 25.5044 Group award basis.
Information Act responsibility. If addi- Subpart 25.6Trade Sanctions
tional assistance is needed, authorized
agency officials may contact the De- 25.600 Scope of subpart.
partment of Justice, Office of Informa- 25.601 Policy.
tion and Privacy. 25.602 Exceptions.
[48 FR 42277, Sept. 19, 1983, as amended at 51 Subpart 25.7Prohibited Sources

FR 31426, Sept. 3, 1986. Redesignated at 62 FR
257, Jan. 2, 1997] 25.701 Restrictions.
25.702 Source of further information.
PART 25FOREIGN ACQUISITION Subpart 25.8Other International
Agreements and Coordination
Sec.
25.000 Scope of part. 25.801 General.
25.001 General. 25.802 Procedures.
25.002 Applicability of subparts.
25.003 Definitions. Subpart 25.9Customs and Duties
Subpart 25.1Buy American ActSupplies 25.900 Scope of subpart.
25.901 Policy.
25.100 Scope of subpart. 25.902 Procedures.
463
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
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
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]
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
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.
25.7 ..... Prohibited Sources ............................................................ X X X X X X

25.8 ..... Other International Agreements and Coordination ............ X X ............ X ............ X
25.9 ..... Customs and Duties .......................................................... X ............ ............ ............ ............ ............
25.10 ..... Additional Foreign Acquisition Regulations ....................... X X X X X X
25.11 ..... Solicitation Provisions and Contract Clauses .................... X X X X X X
[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
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
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
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.
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
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
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
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.
(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
25.204 48 CFR Ch. 1 (10103 Edition)
25.204 Evaluating offers of foreign mination regarding the inapplicability

construction material. of the Buy American Act made after
(a) Offerors proposing to use foreign contract award on information re-
construction material other than that quired by paragraphs (c) and (d) of the
listed by the Government in the appli- applicable clause at 52.2259 or 52.22511
cable clause at 52.2259, paragraph and/or other readily available informa-
(b)(2), or 52.22511, paragraph (b)(3), or tion.
excepted under the Trade Agreements (c) If a determination, under 25.202(a),
Act or NAFTA (paragraph (b)(2) of is made after contract award that an
52.22511), must provide the informa- exception to the Buy American Act ap-
tion required by paragraphs (c) and (d) plies, the contracting officer must ne-
of the respective clauses. gotiate adequate consideration and
(b) Unless the head of the agency modify the contract to allow use of the
specifies a higher percentage, the con- foreign construction material. When
tracting officer must add to the offered the basis for the exception is the un-
price 6 percent of the cost of any for- reasonable price of a domestic con-
eign construction material proposed struction material, adequate consider-
for exception from the requirements of ation is at least the differential estab-
the Buy American Act based on the un- lished in 25.202(a) or in accordance with
reasonable cost of domestic construc- agency procedures.
tion materials. In the case of a tie, the
contracting officer must give pref- 25.206 Noncompliance.
erence to an offer that does not include The contracting officer must
foreign construction material excepted (a) Review allegations of Buy Amer-
at the request of the offeror on the ican Act violations;
basis of unreasonable cost. (b) Unless fraud is suspected, notify
(c) Offerors also may submit alter- the contractor of the apparent unau-
nate offers based on use of equivalent thorized use of foreign construction
domestic construction material to material and request a reply, to in-
avoid possible rejection of the entire clude proposed corrective action; and
offer if the Government determines (c) If the review reveals that a con-
that an exception permitting use of a tractor or subcontractor has used for-
particular foreign construction mate- eign construction material without au-
rial does not apply. thorization, take appropriate action,
(d) If the contracting officer awards a including one or more of the following:
contract to an offeror that proposed (1) Process a determination con-
foreign construction material not list- cerning the inapplicability of the Buy
ed in the applicable clause in the solic- American Act in accordance with
itation (paragraph (b)(2) of 52.2259, or 25.205.
paragraph (b)(3) of 52.22511), the con- (2) Consider requiring the removal
tracting officer must add the excepted and replacement of the unauthorized
materials to the list in the contract foreign construction material.
clause. (3) If removal and replacement of for-
eign construction material incor-
25.205 Postaward determinations. porated in a building or work would be
(a) If a contractor requests a deter- impracticable, cause undue delay, or
mination regarding the inapplicability otherwise be detrimental to the inter-
of the Buy American Act after contract ests of the Government, the con-
award, the contractor must explain tracting officer may determine in writ-
why it could not request the deter- ing that the foreign construction mate-
mination before contract award or why rial need not be removed and replaced.
the need for such determination other- A determination to retain foreign con-
wise was not reasonably foreseeable. If struction material does not constitute
the contracting officer concludes that a determination that an exception to
the contractor should have made the the Buy American Act applies, and this
request before contract award, the con- should be stated in the determination.
tracting officer may deny the request. Further, a determination to retain for-
(b) The contracting officer must base eign construction material does not af-
evaluation of any request for a deter- fect the Governments right to suspend
472
or debar a contractor, subcontractor, signatories of the Agreement on Trade

or supplier for violation of the Buy in Civil Aircraft, as implemented in
American Act, or to exercise other con- the Trade Agreements Act of 1979 (19
tractual rights and remedies, such as U.S.C. 2513)).
reducing the contract price or termi- (b) For application of the trade
nating the contract for default. agreements that are unique to indi-
(4) If the noncompliance is suffi- vidual agencies, see agency regula-
ciently serious, consider exercising ap- tions.
propriate contractual remedies, such as
terminating the contract for default. [64 FR 72419, Dec. 27, 1999, as amended at 65
Also consider preparing and forwarding FR 24322, Apr. 25, 2000; 67 FR 6118, Feb. 8,
a report to the agency suspending or 2002; 67 FR 70520, Nov. 22, 2002]
debarring official in accordance with EFFECTIVE DATE NOTE: At 68 FR 56685, Oct.
Subpart 9.4. If the noncompliance ap- 1, 2003, 25.400 was amended by removing the
pears to be fraudulent, refer the matter words the Dominican Republic and in
to other appropriate agency officials, paragraph (a)(2), effective Oct. 31, 2003.
such as the officer responsible for
criminal investigation. 25.401 Exceptions.
(a) This subpart does not apply to
Subpart 25.3 [Reserved] (1) Acquisitions set aside for small
businesses;
Subpart 25.4Trade Agreements (2) Acquisitions of arms, ammuni-
tion, or war materials, or purchases in-
dispensable for national security or for
(a) This subpart provides policies and national defense purposes, including all
procedures applicable to acquisitions services purchased in support of mili-
that are subject to tary forces located overseas;
(1) The Trade Agreements Act (the (3) Acquisitions of end products for
Agreement on Government Procure- resale;
ment, as approved by Congress in the
(4) Acquisitions under Subpart 8.6,
Trade Agreements Act of 1979 (19 U.S.C.
2501, et seq.), and as amended by the Acquisition from Federal Prison Indus-
Uruguay Round Agreements Act (Pub. tries, Inc., and Subpart 8.7, Acquisition
L. 103-465)); from Nonprofit Agencies Employing
(2) The Caribbean Basin Trade Initia- People Who Are Blind or Severely Dis-
tive (the determination of the U.S. abled;
Trade Representative that end prod- (5) Other acquisitions not using full
ucts granted duty-free entry from and open competition, if authorized by
countries designated by the President Subpart 6.2 or 6.3, when the limitation
as beneficiaries under the Caribbean of competition would preclude use of
Basin Economic Recovery Act (19 the procedures of this subpart (but see
U.S.C. 2701, et seq.), with the exception 6.3031(d)); or sole source acquisitions
of the Dominican Republic and Panama justified in accordance with 13.501(a);
must be treated as eligible products and
under the Trade Agreements Act); (6) Acquisitions of the following ex-
(3) NAFTA (the North American Free cluded services:
Trade Agreement, as approved by Con- (i) Automatic data processing (ADP)
gress in the North American Free telecommunications and transmission
Trade Agreement Implementation Act services, except enhanced (i.e., value-
of 1993 (19 U.S.C. 3301 note));
added) telecommunications services.
(4) The Israeli Trade Act (the U.S.-
Israel Free Trade Area Agreement, as (ii) Research and development.
approved by Congress in the United (iii) Transportation services (includ-
States-Israel Free Trade Area Imple- ing launching services, but not includ-
mentation Act of 1985 (19 U.S.C. 2112 ing travel agent services).
note)); or (iv) Utility services.
(5) The Agreement on Trade in Civil (b)(1) Other services not covered by
Aircraft (U.S. Trade Representative the Trade Agreements Act are
waiver of the Buy American Act for (i) Dredging; and
473
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, modification 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
these projected awards to determine (c) The procedures in 25.408 apply to

whether the Trade Agreements Act ap- the acquisition of NAFTA country
plies. Do not divide any acquisition services, other than services identified
with the intent of reducing the esti- in 25.401. NAFTA country services are
mated value of the acquisition below services provided by a firm established
the dollar threshold of the Trade in a NAFTA country under service con-
Agreements Act. tracts with an estimated acquisition
(c) Purchase restriction. (1) In acquisi- value of $56,190 or more ($7,304,733 or
tions subject to the Trade Agreements more for construction).
Act, acquire only U.S.-made end prod- [64 FR 72419, Dec. 27, 1999, as amended at 65
ucts or eligible products (designated, FR 36026, June 6, 2000; 67 FR 21535, Apr. 30,
Caribbean Basin, or NAFTA country 2002; 67 FR 56124, Aug. 30, 2002]
end products) unless offers for such end
products are either not received or are 25.406 Israeli Trade Act.
insufficient to fulfill the requirements. Acquisitions of supplies by most
(2) This restriction does not apply to agencies are subject to the Israeli
purchases by the Department of De- Trade Act, if the estimated value of the
fense from a country with which it has acquisition is $50,000 or more but does
entered into a reciprocal agreement, as not exceed the Trade Agreements Act
provided in departmental regulations. threshold for supplies (see 25.403(b)(1)).
[64 FR 72419, Dec. 27, 1999, as amended at 65 Agencies other than the Department of
FR 36026, June 6, 2000; 67 FR 21535, Apr. 30, Defense, the Department of Energy,
2002; 67 FR 56123, Aug. 30, 2002] the Department of Transportation, the
Bureau of Reclamation of the Depart-
25.404 Caribbean Basin Trade Initia- ment of the Interior, the Federal Hous-
tive. ing Finance Board, and the Office of
Under the Caribbean Basin Trade Ini- Thrift Supervision must evaluate offers
tiative, the United States Trade Rep- of Israeli end products without regard
resentative has determined that, for to the restrictions of the Buy Amer-
acquisitions subject to the Trade ican Act. The Israeli Trade Act does
Agreements Act, Caribbean Basin not prohibit the purchase of other for-
country end products must be treated eign end products.
as eligible products. [64 FR 72419, Dec. 27, 1999, as amended at 67
[65 FR 24322, Apr. 25, 2000, as amended at 67 FR 21535, Apr. 30, 2002]
FR 6118, Feb. 8, 2002]
25.407 Agreement on Trade in Civil
25.405 North American Free Trade Aircraft.
Agreement (NAFTA). Under the authority of Section 303 of
(a) An acquisition of supplies is not the Trade Agreements Act, the U.S.
subject to NAFTA if the estimated Trade Representative has waived the
value of the acquisition is less than Buy American Act for civil aircraft and
$25,000. For acquisitions subject to related articles, that meet the substan-
NAFTA, evaluate offers of NAFTA tial transformation test of the Trade
country end products without regard to Agreements Act, from countries that
the restrictions of the Buy American are parties to the Agreement on Trade
Act, except that for acquisitions with in Civil Aircraft. Those countries are
an estimated value of less than $56,190, Austria, Belgium, Bulgaria, Canada,
only Canadian end products are eligible Denmark, Egypt, Finland, France, Ger-
products. Eligible products from many, Greece, Ireland, Italy, Japan,
NAFTA countries are entitled to the Luxembourg, Macao, the Netherlands,
nondiscriminatory treatment of the Norway, Portugal, Romania, Spain,
Trade Agreements Act. NAFTA does Sweden, Switzerland, and the United
not prohibit the purchase of other for- Kingdom.
eign end products.
(b) NAFTA applies to construction 25.408 Procedures.
materials if the estimated value of the (a) If the Trade Agreements Act or
construction contract is $7,304,733 or NAFTA applies (see 25.401), the con-
more. tracting officer must
475
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
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
(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
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.
Offer A .......................................... $11,000 Domestic end product, small busi-

ness
Offer B .......................................... $10,700 Domestic end product, small busi-
ness
Offer C .......................................... $10,200 U.S.-made end product (not do-
mestic), small business
(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
Offers
Item
A B C
1 ......................................................................... DO = $55,000 EL = $56,000 NEL = $50,000

2 ......................................................................... NEL = 13,000 EL = 10,000 EL = 13,000
3 ......................................................................... NEL = 11,500 DO = 12,000 DO = 10,000
4 ......................................................................... NEL = 24,000 EL = 28,000 NEL = 22,000
5 ......................................................................... DO = 18,000 NEL = 10,000 DO = 14,000
121,500 116,000 109,000

Key: DO = Domestic end product; EL = Eligible product; NEL = Noneligible product.
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
1 ......................................................................... A DO=$55,000 * NEL=$53,000

2 ......................................................................... B EL=10,000 EL=13,000
3 ......................................................................... B DO=12,000 DO=10,000
4 ......................................................................... A NEL=24,000 NEL=22,000
5 ......................................................................... B *NEL=10,600 DO=14,000
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
1 ......................................................................... DO=$50,000 EL=$50,500 NEL=$50,000

2 ......................................................................... NEL=10,300 NEL=10,000 EL=10,200
3 ......................................................................... EL=20,400 EL=21,000 NEL=20,200
4 ......................................................................... DO=10,500 DO=10,300 DO=10,400
91,200 91,800 90,800
Problem: The solicitation specifies award Act applies and the acquisition cannot be set
on a group basis. Assume the Buy American
479
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.
(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
25.602 Exceptions. (ii) Iran (31 CFR part 560);

(iii) Iraq (31 CFR part 575);
(a) The sanctions in 25.601 do not
(iv) Libya (31 CFR part 550);
apply to
(v) North Korea (31 CFR part 500);
(1) Purchases at or below the sim-
(vi) Sudan (31 CFR part 538);
plified acquisition threshold awarded
(vii) Territory of Afghanistan con-
using simplified acquisition proce-
trolled by the Taliban (Executive Order
dures;
13129 of July 4, 1999, Blocking Property
(2) Total small business set-asides in
and Prohibiting Transactions With the
accordance with 19.5022;
Taliban); or
(3) Contracts in support of U.S. na-
(viii) Serbia, excluding the territory
tional security interests; or
of Kosovo (Executive Order 13121 of
(4) Contracts for essential spare, re-
April 30, 1999, Blocking Property of the
pair, or replacement parts not other-
Governments of the Federal Republic
wise available from nonsanctioned
of Yugoslavia (Serbia and Montenegro),
countries.
the Republic of Serbia, and the Repub-
(b)(1) The head of the agency, with-
lic of Montenegro, and Prohibiting
out power of redelegation, may author-
Trade Transactions Involving the Fed-
ize the award of a contract or class of
eral Republic of Yugoslavia (Serbia and
contracts for sanctioned EU country
Montenegro) in Response to the Situa-
end products, services, and construc-
tion in Kosovo).
tion, the purchase of which is other-
(2)(i) Unless agency procedures re-
wise prohibited by 25.601(a), if the head
quire a higher level of approval, the
of the agency determines that such ac-
contracting officer may, in unusual cir-
tion is necessary
cumstances, acquire for use outside the
(i) In the public interest;
(ii) To avoid the restriction of com- United States supplies and services re-
petition in a manner that would limit stricted in paragraph (a)(1) of this sec-
the acquisition in question to, or would tion. Examples of unusual cir-
establish a preference for, the services, cumstances are an emergency or when
articles, materials, or supplies of a sin- the supplies or services are not other-
gle manufacturer or supplier; or wise available and a substitute is not
(iii) Because there would be or are an acceptable.
insufficient number of potential or ac- (ii) The contracting officer must pro-
tual offerors to ensure the acquisition vide documentation in the contract file
of services, articles, materials, or sup- whenever this exception is used.
(b) Agencies and their contractors
plies of requisite quality at competi-
and subcontractors must not acquire
tive prices.
(2) When the head of the agency any supplies or services from entities
makes a determination in accordance controlled by the Government of Iraq
with paragraph (b)(1) of this section, or other specially designated nationals
the agency must notify the U.S. Trade (31 CFR Chapter V, Appendix A).
Representative within 30 days after [64 FR 72419, Dec. 27, 1999, as amended at 65
contract award. FR 36028, June 6, 2000]
Subpart 25.7Prohibited Sources 1, 2003, 25.701 was revised, effective Oct. 31,
2003. For the convenience of the user, the re-
25.701 Restrictions. vised text is set forth below:
(a)(1) The Government generally does 25.701 Restrictions.
not acquire supplies or services that (a) Except as authorized by the Office of
cannot be imported lawfully into the Foreign Assets Control (OFAC) in the De-
United States. Therefore, except as partment of the Treasury, agencies and their
provided in paragraph (a)(2) of this sec- contractors and subcontractors must not ac-
tion, even for overseas use, agencies quire any supplies or services if any procla-
and their contractors and subcontrac- mation, Executive order, or statute adminis-
tered by OFAC, or if OFACs implementing
tors must not acquire any supplies or regulations at 31 CFR chapter V, would pro-
services originating from sources with- hibit such a transaction by a person subject
in, or that were located in or trans- to the jurisdiction of the United States.
ported from or through (b) Except as authorized by OFAC, most
(i) Cuba (31 CFR part 515); transactions involving Cuba, Iran, Libya,
481
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
(b) Supplies (excluding equipment) eign government or an agency of a for-

for Government-operated vessels or air- eign government;
craft may be withdrawn from any cus- (2) Describe the efforts to include the
toms-bonded warehouse, from contin- basic clause;
uous customs custody elsewhere than (3) State the reasons for the contrac-
in a bonded warehouse, or from a for- tors refusal to include the basic
eign-trade zone, free of duty and inter- clause;
nal revenue tax as provided in 19 U.S.C. (4) Describe the price and availability
1309 and 1317. The contracting activity of the supplies or services from the
must cite this authority on the appro- United States and other sources; and
priate customs form when making pur-
(5) Determine that it will best serve
chases (see 19 CFR 10.5910.65).
the interest of the United States to use
the appropriate alternate clause in
Subpart 25.10Additional Foreign paragraph (a)(2) of this section.
Acquisition Regulations
25.1002 Use of foreign currency.
25.1001 Waiver of right to examination
of records. (a) Unless an international agree-
ment or the Trade Agreements Act (see
(a) Policy. The clause at 52.2152, 25.408(a)(3)) requires a specific cur-
Audit and RecordsNegotiation, pre- rency, contracting officers must deter-
scribed at 15.209(b), and paragraph (d) mine whether solicitations for con-
of the clause at 52.2125, Contract tracts to be entered into and performed
Terms and Conditions Required to Im- outside the United States will require
plement Statutes or Executive Or-
submission of offers in U.S. currency or
dersCommercial Items, prescribed at
a specified foreign currency. In unusual
12.301(b)(4), implement 10 U.S.C. 2313
circumstances, the contracting officer
and 41 U.S.C. 254d. The basic clauses
may permit submission of offers in
authorize examination of records by
other than a specified currency.
the Comptroller General.
(1) Insert the appropriate basic (b) To ensure a fair evaluation of of-
clause, whenever possible, in nego- fers, solicitations generally should re-
tiated contracts with foreign contrac- quire all offers to be priced in the same
tors. currency. However, if the solicitation
(2) The contracting officer may use permits submission of offers in other
52.2152 with its Alternate III or 52.212 than a specified currency, the con-
5 with its Alternate I after tracting officer must convert the of-
(i) Exhausting all reasonable efforts fered prices to U.S. currency for eval-
to include the basic clause; uation purposes. The contracting offi-
(ii) Considering factors such as alter- cer must use the current market ex-
nate sources of supply, additional cost, change rate from a commonly used
and time of delivery; and source in effect as follows:
(iii) The head of the agency has exe- (1) For acquisitions conducted using
cuted a determination and findings in sealed bidding procedures, on the date
accordance with paragraph (b) of this of bid opening.
section, with the concurrence of the (2) For acquisitions conducted using
Comptroller General. However, concur- negotiation procedures
rence of the Comptroller General is not (i) On the date specified for receipt of
required if the contractor is a foreign offers, if award is based on initial of-
government or agency thereof or is pre- fers; otherwise
cluded by the laws of the country in- (ii) On the date specified for receipt
volved from making its records avail- of final proposal revisions.
able for examination. (c) If a contract is priced in foreign
(b) Determination and findings. The de- currency, the agency must ensure that
termination and findings must adequate funds are available to cover
(1) Identify the contract and its pur- currency fluctuations to avoid a viola-
pose, and identify if the contract is tion of the Anti-Deficiency Act (31
with a foreign contractor or with a for- U.S.C. 1341, 1342, 15111519).
483
25.1101 48 CFR Ch. 1 (10103 Edition)
Subpart 25.11Solicitation (ii) If the acquisition value is $25,000

Provisions and Contract Clauses or more but is less than $50,000, use the
provision with its Alternate I.
25.1101 Acquisition of supplies. (iii) If the acquisition value is $50,000
The following provisions and clauses or more but is less than $56,190, use the
apply to the acquisition of supplies and provision with its Alternate II.
the acquisition of services involving (c)(1) Insert the clause at 52.2255,
the furnishing of supplies. Trade Agreements, in solicitations and
(a)(1) Insert the clause at 52.2251, contracts valued at $169,000 or more, if
Buy American ActSupplies, in solici- the Trade Agreements Act applies (see
tations and contracts with a value ex- 25.401 and 25.403) and the agency has de-
ceeding $2,500 ($7,500 for acquisitions as termined that the restrictions of the
described in 13.201(g)(1)(i) or $15,000 for Buy American Act are not applicable
acquisitions as described in to U.S.-made end products. If the agen-
13.201(g)(1)(ii)) but not exceeding cy has not made such a determination,
$25,000; and in solicitations and con- the contracting officer must follow
tracts with a value exceeding $25,000, if agency procedures.
none of the clauses prescribed in para- (2) Insert the provision at 52.2256,
graphs (b) and (c) of this section apply, Trade Agreements Certificate, in so-
except if licitations containing the clause at
(i) The solicitation is restricted to 52.2255.
domestic end products in accordance (d) Insert the provision at 52.2257,
with Subpart 6.3; Waiver of Buy American Act for Civil
(ii) The acquisition is for supplies for Aircraft and Related Articles, in solici-
use within the United States and an ex- tations for civil aircraft and related ar-
ception to the Buy American Act ap- ticles (see 25.407), if the acquisition
plies (e.g., nonavailability or public in- value is less than $169,000.
terest); or (e) Insert the clause at 52.2258, Duty-
(iii) The acquisition is for supplies Free Entry, in solicitations and con-
for use outside the United States. tracts for supplies that may be im-
(2) Insert the provision at 52.2252, ported into the United States and for
Buy American Act Certificate, in so- which duty-free entry may be obtained
licitations containing the clause at in accordance with 25.903(a), if the
52.2251. value of the acquisition
(b)(1)(i) Insert the clause at 52.2253, (1) Exceeds $100,000; or
Buy American ActNorth American (2) Is $100,000 or less, but the savings
Free Trade AgreementIsraeli Trade from waiving the duty is anticipated to
Act, in solicitations and contracts if be more than the administrative cost
(A) The acquisition is for supplies, or of waiving the duty. When used for ac-
for services involving the furnishing of quisitions valued at $100,000 or less, the
supplies, for use within the United contracting officer may modify para-
States, and the acquisition value is graphs (b)(1) and (i)(2) of the clause to
$25,000 or more, but is less than reduce the dollar figure.
$169,000; and [64 FR 72419, Dec. 27, 1999, as amended at 65
(B) No exception in 25.401 applies. For FR 36026, June 6, 2000; 67 FR 21535, Apr. 30,
acquisitions of agencies not subject to 2002; 67 FR 56122, Aug. 30, 2002; 67 FR 56124,
the Israeli Trade Act (see 25.406), see Aug. 30, 2002; 68 FR 4051, Jan. 27, 2003]
agency regulations.
(ii) If the acquisition value is $25,000 25.1102 Acquisition of construction.
or more but is less than $50,000, use the (a) Insert the clause at 52.2259, Buy
clause with its Alternate I. American ActConstruction Mate-
(iii) If the acquisition value is $50,000 rials, in solicitations and contracts for
or more but is less than $56,190, use the construction that is performed in the
clause with its Alternate II. United States valued at less than
(2)(i) Insert the provision at 52.2254, $6,481,000.
Buy American ActNorth American (1) List in paragraph (b)(2) of the
Free Trade AgreementIsraeli Trade clause all foreign construction mate-
Act Certificate, in solicitations con- rial excepted from the requirements of
taining the clause at 52.2253. the Buy American Act.
484
(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
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]
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
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;
(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
26.300 48 CFR Ch. 1 (10103 Edition)
Subpart 26.3Historically Black 26.303 Data collection and reporting

Colleges and Universities and requirements.
Minority Institutions Executive Order 12928 requires peri-
odic reporting to the President on the
SOURCE: 62 FR 12703, Mar. 17, 1997, unless progress of departments and agencies
otherwise noted. in complying with the laws and re-
quirements mentioned in the Executive
26.300 Scope of subpart. order.
(a) This subpart implements Execu-
tive Order 12928 of September 16, 1994, 26.304 Solicitation provision.
which promotes participation of His- Insert the provision at 52.2262, His-
torically Black Colleges and Univer-
torically Black College or University
sities (HBCUs) and Minority Institu-
and Minority Institution Representa-
tions (MIs) in Federal procurement.
(b) This subpart does not pertain to tion, in solicitations exceeding the
contracts performed entirely outside micro-purchase threshold, for research,
the United States and its outlying studies, supplies, or services of the
areas. type normally acquired from higher
educational institutions. For DoD,
NASA, and Coast Guard acquisitions,
FR 28083, May 22, 2003]
also insert the provision in solicita-
26.301 [Reserved] tions that contain the clause at 52.219
23, Notice of Price Evaluation Adjust-
26.302 General policy. ment for Small Disadvantaged Busi-
It is the policy of the Government to ness Concerns.
promote participation of HBCUs and
[64 FR 36224, July 2, 1999]
MIs in Federal procurement.
488
SUBCHAPTER EGENERAL CONTRACTING REQUIREMENTS
PART 27PATENTS, DATA, AND 27.302 Policy.

COPYRIGHTS 27.304 Procedures.
27.3041 General.
Sec.
27.000 Scope of part. 27.3042 Contracts placed by or for other
Government agencies.
Subpart 27.1General 27.3043 Contracts for construction work or
architect-engineer services.
27.101 Applicability. 27.3044 Subcontracts.
27.102 [Reserved] 27.3045 Appeals.
27.103 Policy. 27.305 Administration of patent rights
27.104 General guidance.
clauses.
Subpart 27.2Patents 27.3051 Patent rights follow-up.
27.3052 Follow-up by contractor.
27.200 Scope of subpart. 27.3053 Follow-up by Government.
27.201 Authorization and consent. 27.3054 Conveyance of invention rights ac-
27.2011 General. quired by the Government.
27.2012 Clauses on authorization and con- 27.3055 Publication or release of invention
sent.
disclosures.
27.202 Notice and assistance.
27.2021 General. 27.306 Licensing background patent rights
27.2022 Clause on notice and assistance. to third parties.
27.203 Patent indemnification of Govern-
ment by contractor. Subpart 27.4Rights in Data and
27.2031 General. Copyrights
27.2032 Clauses for sealed bid contracts (ex-
cluding construction). 27.400 Scope of subpart.
27.2033 Negotiated contracts (excluding 27.401 Definitions.
construction). 27.402 Policy.
27.2034 Clauses for negotiated contracts 27.403 Data rightsgeneral.
(excluding construction). 27.404 Basic rights in data clause.
27.2035 Clause for construction contracts 27.405 Other data rights provisions.
and for dismantling, demolition, and re- 27.406 Acquisition of data.
moval of improvements contracts.
27.407 Rights to technical data in successful
27.2036 Clause for Government waiver of in-
demnity. proposals.
27.204 Reporting of royaltiesanticipated 27.408 Cosponsored research and develop-
or paid. ment activities.
27.2041 General. 27.409 Solicitation provisions and contract
27.2042 Solicitation provision for royalty clauses.
information.
27.2043 Patentsnotice of Government as a Subpart 27.5 [Reserved]
licensee.
27.205 Adjustment of royalties. Subpart 27.6Foreign License and
27.206 Refund of royalties. Technical Assistance Agreements
27.2061 General.
27.2062 Clause for refund of royalties. 27.601 General.
27.207 Classified contracts.
27.2071 General. AUTHORITY: 40 U.S.C. 486(c); 10 U.S.C. Chap-
27.2072 Clause for classified contracts. ter 137; and 42 U.S.C. 2473(c).
27.208 Use of patented technology under the SOURCE: 49 FR 12974, Mar. 30, 1984, unless
North American Free Trade Agreement.
otherwise noted.
27.209 Use of patented technology under the
General Agreement on Tariffs and Trade
(GATT). 27.000 Scope of part.
This part prescribes policies, proce-
Subpart 27.3Patent Rights Under dures, and contract clauses pertaining
Government Contracts to patents and directs agencies to de-
27.300 Scope of subpart. velop coverage for Rights in Data and
27.301 Definitions. Copyrights.
489
27.101 48 CFR Ch. 1 (10103 Edition)
Subpart 27.1General (f) The Government honors the rights

in data resulting from private develop-
27.101 Applicability. ments and limits its demands for such
rights to those essential for Govern-
The policies, procedures, and clauses
ment purposes.
prescribed by this part 27 are applica-
(g) The Government honors rights in
ble to all agencies. Agencies are au-
patents, data, and copyrights, and com-
thorized to adopt alternate policies, plies with the stipulations of law in
procedures, and clauses, but only to using or acquiring such rights.
the extent determined necessary to (h) Generally, the Government re-
meet the specific requirements of laws, quires that contractors obtain permis-
executive orders, treaties, or inter- sion from copyright owners before in-
national agreements. Any agency ac- cluding privately-owned copyrighted
tion adopting such alternate policies, works in data required to be delivered
procedures, and clauses shall be cov- under Government contracts.
ered in published agency regulations.
27.102 [Reserved] FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
1985]
27.103 Policy.
The policies pertaining to patents, Subpart 27.2Patents
data, and copyrights are set forth in 27.200 Scope of subpart.
this part 27 and the related clauses in
part 52. This subpart prescribes policy with
respect to
27.104 General guidance. (a) Patent infringement liability re-
sulting from work performed by or for
(a) The Government encourages the the Government;
maximum practical commercial use of (b) Royalties payable in connection
inventions made while performing Gov- with performing Government con-
ernment contracts. tracts; and
(b) Generally, the Government will (c) Security requirements covering
not refuse to award a contract on the patent applications containing classi-
grounds that the prospective con- fied subject matter filed by contrac-
tractor may infringe a patent. tors.
(c) Generally, the Government en-
courages the use of inventions in per- 27.201 Authorization and consent.
forming contracts and, by appropriate
contract clauses, authorizes and con- 27.2011 General.
sents to such use, even though the in- (a) In those cases where the Govern-
ventions may be covered by U.S. pat- ment has authorized or consented to
ents and indemnification against in- the manufacture or use of an invention
fringement may be appropriate. described in and covered by a patent of
(d) Generally, the Government should the United States, any suit for in-
be indemnified against infringement of fringement of the patent based on the
U.S. patents resulting from performing manufacture or use of the invention by
contracts when the supplies or services or for the United States by a con-
acquired under the contracts normally tractor (including a subcontractor at
are or have been sold or offered for sale any tier) can be maintained only
by any supplier to the public in the against the Government in the U.S.
commercial open market or are the Claims Court and not against the con-
same as such supplies or services with tractor or subcontractor (28 U.S.C.
relatively minor modifications. 1498). To ensure that work by a con-
(e) The Government acquires supplies tractor or subcontractor under a Gov-
or services on a competitive basis in ernment contract may not be enjoined
accordance with part 6, but it is impor- by reason of patent infringement, the
tant that the efforts directed toward Government shall give authorization
full and open competition not improp- and consent in accordance with this
erly demand or use data relating to pri- regulation. The liability of the Govern-
vate developments. ment for damages in any such suit
490
against it may, however, ultimately be supplies or services, the contracting of-

borne by the contractor or subcon- ficer shall use the basic clause. Also,
tractor in accordance with the terms of when a proposed contract involves ei-
any patent indemnity clause also in- ther R&D or supplies and materials, in
cluded in the contract, and an author- addition to construction or architect-
ization and consent clause does not de- engineer work, the contracting officer
tract from any patent indemnification shall use the basic clause.
commitment by the contractor or sub- (c) If the solicitation or contract is
contractor. Therefore, both a patent for communication services with a
indemnity clause and an authorization common carrier and the services are
and consent clause may be included in
unregulated and not priced by a tariff
the same contract.
schedule set by a regulatory body, the
(b) The contracting officer shall not
include in any solicitation or con- contracting officer shall use the clause
tract with its Alternate II.
(1) Any clause whereby the Govern- [49 FR 12974, Mar. 30, 1984, as amended at 60
ment expressly agrees to indemnify the FR 34758, July 3, 1995]
contractor against liability for patent
infringement; or 27.202 Notice and assistance.
(2) Any authorization and consent
clause when both complete perform- 27.2021 General.
ance and delivery are outside the The contractor is required to notify
United States, its possessions, and the contracting officer of all claims of
Puerto Rico. infringement that come to the contrac-
tors attention in connection with per-
27.2012 Clauses on authorization and
consent. forming a Government contract. The
contractor is also required, when re-
(a) The contracting officer shall in- quested, to assist the Government with
sert the clause at 52.2271, Authoriza-
any evidence and information in its
tion and Consent, in solicitations and
possession in connection with any suit
contracts (including those for con-
against the Government, or any claims
struction; architect-engineer services;
dismantling, demolition, or removal of against the Government made before
improvements; and noncommon carrier suit has been instituted, on account of
communication services), except when any alleged patent or copyright in-
using simplified acquisition procedures fringement arising out of or resulting
or both complete performance and de- from the contract performance.
livery are outside the United States,
its possessions, and Puerto Rico. Al- 27.2022 Clause on notice and assist-
though the clause is not required when ance.
simplified acquisition procedures are The contracting officer shall insert
used, it may be used with them. the clause at 52.2272, Notice and As-
(b) The contracting officer shall in- sistance Regarding Patent and Copy-
sert the clause with its Alternate I in right Infringement, in supply, service,
all R&D solicitations and contracts (in- or research and development solicita-
cluding those for construction and ar- tions and contracts (including con-
chitect-engineer services calling exclu- struction and architect-engineer con-
sively for R&D work or exclusively for tracts) which anticipate a contract
experimental work), unless both com- value above the simplified acquisition
plete performance and delivery are out- threshold, except when complete per-
side the United States, its possessions, formance and delivery are outside the
and Puerto Rico. When a proposed con- United States, its possessions, and
tract involves both R&D work and sup- Puerto Rico, unless the contracts indi-
plies or services, and the R&D work is cate that the supplies or other
the primary purpose of the contract, deliverables are ultimately to be
the contracting officer shall use this
shipped into one of those areas.
alternate. In all other proposed con-
tracts involving both R&D work and [60 FR 34758, July 3, 1995]
491
27.203 48 CFR Ch. 1 (10103 Edition)
27.203 Patent indemnification of Gov- (4) When the contract is awarded

ernment by contractor. using simplified acquisition proce-
dures.
27.2031 General. (5) When the contract is solely for ar-
(a) To the extent set forth in this sec- chitect-engineer work (see part 36).
tion, the Government requires reim- [49 FR 12974, Mar. 30, 1984, as amended at 50
bursement for liability for patent in- FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
fringement arising out of or resulting 1985; 60 FR 34759, July 3, 1995]
from performing construction con-
tracts or contracts for supplies or serv- 27.2032 Clauses for sealed bid con-
ices that normally are or have been tracts (excluding construction).
sold or offered for sale by any supplier (a) Except when prohibited by 27.203
to the public in the commercial open 1(b) above, the contracting officer shall
market or that are the same as such insert the clause at 52.2273, Patent In-
supplies or services with relatively demnity, in sealed bid contracts for
minor modifications. Appropriate supplies or services (excluding con-
clauses for indemnification of the Gov- struction and dismantling, demolition,
ernment are prescribed in the following and removal of improvements), if the
subsections. contracting officer determines that the
(b) A patent indemnity clause shall supplies or services (or such items with
not be used in the following situations: relatively minor modifications) nor-
(1) When the clause at 52.2271, Au- mally are or have been sold or offered
thorization and Consent, with its Al- for sale by any supplier to the public in
ternate I, is included in the contract, the commercial open market. Also the
except that in contracts calling also clause may be included as authorized
for supplies of the kind described in in 27.2031(b)(2)(i).
paragraph (a) above, a patent indem- (b) In solicitations and contracts (ex-
nity clause may be used solely with re- cluding those for construction) that
spect to such supplies. call in part for specific components,
(2) When the contract is for supplies spare parts, or services (or such items
or services (or such items with rel- with relatively minor modifications)
atively minor modifications) that that normally are or have been sold or
clearly are not or have not been sold or offered for sale by any supplier to the
offered for sale by any supplier to the public in the commercial open market,
public in the commercial open market. the contracting officer may use the
However, a patent indemnity clause clause with its Alternate I or II, as ap-
may be included in (i) sealed bid con- propriate. The choice between Alter-
tracts to obtain an indemnity regard- nate I (identification of excluded
ing specific components, spare parts, or items) and Alternate II (identification
services so sold or offered for sale (see of included items) should be based upon
27.2032(b) below), and (ii) contracts to simplicity, Government administrative
be awarded (either by sealed bid or ne- convenience and ease of identification
gotiation) if a patent owner contends of the items.
that the acquisition would result in (c) In solicitations and contracts for
patent infringement and the prospec- communication services and facilities
tive contractor, after responding to a where performance is by a common
solicitation that did not contain an in- carrier, and the services are unregu-
demnity clause, is willing to indemnify lated and are not priced by a tariff
the Government against such infringe- schedule set by a regulatory body, use
ment either (A) without increase in the basic clause with its Alternate III.
price on the basis that the patent is in- [49 FR 12974, Mar. 30, 1984, as amended at 50
valid or not infringed, or (B) for other FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23,
good reasons. 1985]
(3) When both performance and deliv-
ery are to be outside the United States, 27.2033 Negotiated contracts (exclud-
its possessions, and Puerto Rico, unless ing construction).
the contract indicates that the supplies A patent indemnity clause is not re-
or other deliverables are ultimately to quired in negotiated contracts, (except
be shipped into one of those areas. construction contracts covered at
492
27.2035), but may be used as discussed where performance is by a common

in 27.2034 below. A decision to omit a carrier, and the services are unregu-
patent indemnity clause in a nego- lated and are not priced by a tariff
tiated fixed-price contract described in schedule set by a regulatory body, the
this subsection should be based on a clause shall be used with its Alternate
price consideration to the Government III.
for forgoing the indemnification rights
normally received by commercial pur- 27.2035 Clause for construction con-
chasers of the same supplies or serv- tracts and for dismantling, demoli-
ices. tion, and removal of improvements
contracts.
FR 2665, Jan. 17, 1986] Except as prohibited by 27.2031(b),
the contracting officer shall insert the
27.2034 Clauses for negotiated con- clause at 52.2274, Patent Indemnity
tracts (excluding construction). Construction Contracts, in solicita-
(a) The contracting officer may in- tions and contracts for construction or
sert the clause at 52.2273, Patent In- that are fixed-price for dismantling,
demnity demolition, or removal of improve-
(1) As authorized in 27.2031(b)(2)(ii); ments. If it is determined that the con-
and struction will necessarily involve the
(2) Except as prohibited by 27.203 use of structures, products, materials,
1(b), in solicitations anticipating nego- equipment, processes, or methods that
tiated contracts (and such contracts) are nonstandard, noncommercial, or
for supplies or services (excluding con- special, the contracting officer may ex-
struction and dismantling, demolition, pressly exclude them from the patent
and removal of improvements), if the indemnification by using the basic
contracting officer determines that the clause with its Alternate I.
supplies or services (or such items with
relatively minor modifications) nor- 27.2036 Clause for Government waiv-
mally are or have been sold or offered er of indemnity.
for sale by any supplier to the public in If, in the Governments interest, it is
the commercial open market. Ordi- appropriate to exempt one or more spe-
narily, the contracting officer, in con- cific United States patents from the
sultation with the prospective con- patent indemnity clause, the con-
tractor, should be able to determine tracting officer shall obtain written ap-
whether the supplies or services being proval from the agency head or des-
purchased normally are or have been ignee and shall insert the clause at
sold or offered for sale by any supplier 52.2275, Waiver of Indemnity, in solici-
to the public in the commercial open tations and contracts in addition to
market. (For negotiated construction the appropriate patent indemnity
contracts, see 27.2035). clause. The contracting officer shall
(b) In solicitations and contracts document the contract file with a copy
that call in part for specific compo- of the written approval.
nents, spare parts, or services (or such
items with relatively minor modifica- 27.204 Reporting of royaltiesantici-
tions) that normally are or have been pated or paid.
sold or offered for sale by any supplier
to the public in the commercial open 27.2041 General.
market, the contracting officer may (a)(1) To determine whether royalties
use the clause with its Alternate I or anticipated or actually paid under Gov-
II, as appropriate. The choice between ernment contracts are excessive, im-
Alternate I (identification of excluded proper, or inconsistent with any Gov-
items) and Alternate II (identification ernment rights in particular inven-
of included items) should be based upon tions, patents, or patent applications,
simplicity, Government administrative contracting officers shall require pro-
convenience, and the ease of identifica- spective contractors to furnish certain
tion of the items. royalty information and shall require
(c) In solicitations and contracts for contractors to furnish certain royalty
communication services and facilities reports. Contracting officers shall take
493
27.2042 48 CFR Ch. 1 (10103 Edition)
appropriate action to reduce or elimi- 27.2042 Solicitation provision for roy-

nate excessive or improper royalties. alty information.
(2) Royalty information shall not be The contracting officer shall insert a
required (except for information under solicitation provision substantially as
27.2043) in sealed bid contracts unless shown in 52.2276, Royalty Information,
the need for such information is ap- in any solicitation that may result in a
proved at a level above that of the con- negotiated contract for which royalty
tracting officer as being necessary for information is desired or for which cost
proper protection of the Governments or pricing data is obtained under 15.403.
interests. If the solicitation is for communica-
(b) Any solicitations that may result tion services and facilities by a com-
in a negotiated contract for which roy- mon carrier, use the provision with its
alty information is desired or for which Alternate I.
cost or pricing data is obtained (see
15.403) should contain a provision re- [49 FR 12974, Mar. 30, 1984, as amended at 56
questing information relating to any FR 15153, Apr. 15, 1991; 62 FR 51271, Sept. 30,
1997]
proposed charge for royalties. If the re-
sponse to a solicitation includes a 27.2043 Patentsnotice of Govern-
charge for royalties, the contracting ment as a licensee.
officer shall, before award of the con-
(a) When the Government is obli-
tract, forward the information relating
gated to pay a royalty on a patent be-
to the proposed payments of royalties
cause of a license agreement between
to the office having cognizance of pat-
the Government and a patent owner
ent matters for the contracting activ-
and the contracting officer knows (or
ity concerned. The cognizant office
has reason to believe) that the licensed
shall promptly advise the contracting
patent will be applicable to a prospec-
officer of appropriate action. Before
tive contract, the Government should
award, the contracting officer shall
furnish information relating to the
take action to protect the Govern-
royalty to prospective offerors since it
ments interest with respect to such
serves the interest of both the Govern-
royalties, giving due regard to all per-
ment and the offerors. In such situa-
tinent factors relating to the proposed
tions, the contracting officer should in-
contract and the advice of the cog-
clude in the solicitation a notice of the
nizant office.
license, the number of the patent, and
(c) The contracting officer, when con- the royalty rate recited in the license.
sidering the approval of a subcontract,
(b) When the Government is obli-
shall require and obtain the same roy-
gated to pay such a royalty, the solici-
alty information and take the same ac-
tation should also require offerors to
tion with respect to such subcontracts furnish information indicating whether
in relation to royalties as required for or not each offeror is a licensee under
prime contracts under paragraph (b) of the patent or the patent owner. This
this subsection. However, consent need information is necessary so that the
not be withheld pending receipt of ad- Government may either (1) evaluate an
vice in regard to such royalties from offerors price by adding an amount
the office having cognizance of patent equal to the royalty, or (2) negotiate a
matters. price reduction with an offeror-licensee
(d) The contracting officer shall for- when the offeror is licensed under the
ward the royalty information and/or same patent at a lower royalty rate.
royalty reports received to the office (c) If the Government is obligated to
having cognizance of patent matters pay a royalty on a patent involved in
for the contracting activity concerned the prospective contract, the con-
for advice as to appropriate action. tracting officer shall insert in the so-
[49 FR 12974, Mar. 30, 1984, as amended at 52 licitation, substantially as shown, the
FR 19803, May 27, 1987; 56 FR 15152, Apr. 15, provision at 52.2277, PatentsNotice
1991; 62 FR 51271, Sept. 30, 1997] of Government Licensee.
494
27.205 Adjustment of royalties. Government anti-trust action or pro-

(a) If at any time the contracting of- spective litigation on the validity of a
ficer has reason to believe that any patent or patents or on the enforce-
royalties paid, or to be paid, under an ability of an agreement (upon which
existing or prospective contract or sub- the contractor or subcontractor bases
contract are inconsistent with Govern- the asserted obligation) to pay the roy-
ment rights, excessive, or otherwise alties to be included in the target or
improper, the facts shall be promptly contract price.
reported to the office having cog- 27.2062 Clause for refund of royalties.
nizance of patent matters for the con-
tracting activity concerned. The cog- The contracting officer shall insert
nizant office shall review the royalties the clause at 52.2279, Refund of Royal-
thus reported and such royalties as are ties, in negotiated fixed-price contracts
reported under 27.204 and 27.206 and, in and solicitations contemplating such
accordance with agency procedures, contracts if the contracting officer de-
shall either recommend appropriate ac- termines that circumstances make it
tion to the contracting officer or, if au- questionable whether or not substan-
thorized, shall take appropriate action. tial amounts of royalties will have to
(b) In coordination with the cog- be paid by the contractor or a subcon-
nizant office, the contracting officer tractor at any tier.
shall promptly act to protect the Gov-
ernment against payment of royalties 27.207 Classified contracts.
on supplies or services 27.2071 General.
(1) With respect to which the Govern-
ment has a royalty-free license; (a) Unauthorized disclosure of classi-
(2) At a rate in excess of the rate at fied subject matter, whether in patent
which the Government is licensed; or applications or resulting from the
(3) When the royalties in whole or in issuance of a patent, may be a viola-
part otherwise constitute an improper tion of 18 U.S.C. 792 et seq. (Espionage
charge. and Censorship), and related statutes,
(c) In appropriate cases, the con- and may be contrary to the interests of
tracting officer in coordination with national security.
the cognizant office shall obtain a re- (b) Upon receipt from the contractor
fund pursuant to any refund of royal- of a patent application, not yet filed,
ties clause in the contract (see 27.206) that has been submitted by the con-
or negotiate for a reduction of royal- tractor in compliance with paragraph
ties. (a) or (b) of the clause at 52.22710, Fil-
(d) For guidance in evaluating infor- ing of Patent ApplicationsClassified
mation furnished pursuant to 27.204 and Subject Matter, the contracting officer
27.205(a) above, see 31.20537 and 31.311 shall ascertain the proper security
34. See also 31.109 regarding advance classification of the patent application.
understandings on particular cost Upon a determination that the applica-
items, including royalties. tion contains classified subject matter,
the contracting officer shall inform the
27.206 Refund of royalties. contractor of any instructions deemed
necessary or advisable relating to
27.2061 General. transmittal of the application to the
When a fixed-price contract is nego- United States Patent Office in accord-
tiated under circumstances that make ance with procedures in the National
it questionable whether or not substan- Industrial Security Program Operating
tial amounts of royalties will have to Manual. If the material is classified Se-
be paid by the contractor or a subcon- cret or higher, the contracting officer
tractor, such royalties may be included shall make every effort to notify the
in the target or contract price, pro- contractor of the determination within
vided the contract specifies that the 30 days, pursuant to paragraph (a) of
Government will be reimbursed the the clause.
amount of such royalties if they are (c) In the case of all applications
not paid. Such circumstances might in- filed under the provisions of this sec-
clude, for example, either a pending tion 27.207, the contracting officer,
495
27.2072 48 CFR Ch. 1 (10103 Edition)
upon receiving the application serial (1) An invention used or manufac-

number, the filing date, and the infor- tured by or for the Federal Govern-
mation furnished by the contractor ment, except that the patent owner
under paragraph (d) of the clause at must be notified whenever the agency
52.22710, Filing of Patent Applica- or its contractor, without making a
tionsClassified Subject Matter, shall patent search, knows or has demon-
promptly submit that information to strable reasonable grounds to know
personnel having cognizance of patent that an invention described in and cov-
matters in order that the steps nec- ered by a valid U.S. patent is or will be
essary to ensure the security of the ap- used or manufactured without a li-
plication may be taken. cense; and
(d) A request for the approval re- (2) The existence of a national emer-
ferred to in paragraph (c) of the clause gency or other circumstances of ex-
at 52.22710, Filing of Patent Applica- treme urgency, except that the patent
tionsClassified Subject Matter, must owner must be notified as soon as it is
be considered and acted upon promptly reasonably practicable to do so.
by the contracting officer in order to (d) Section 6(c) of Executive Order
avoid the loss of valuable patent rights 12889 provides that the notice to the
of the Government or the contractor. patent owner does not constitute an
admission of infringement of a valid
privately owned patent.
FR 31617, June 20, 1996]
(e) When addressing issues regarding
27.2072 Clause for classified con- compensation for the use of patented
tracts. technology, Government personnel
The contracting officer shall insert should be advised that NAFTA uses the
the clause at 52.22710, Filing of Patent term adequate remuneration. Execu-
ApplicationsClassified Subject Mat- tive Order 12889 equates remunera-
ter, in all classified solicitations and tion to reasonable and entire com-
contracts and in all solicitations and pensation as used in 28 U.S.C. 1498, the
contracts where the nature of the work statute which gives jurisdiction to the
or classified subject matter involved in U.S. Court of Federal Claims to hear
the work reasonably might be expected patent and copyright cases involving
to result in a patent application con- infringement by the U.S. Government.
taining classified subject matter. (f) Depending on agency procedures,
either the technical/requiring activity
27.208 Use of patented technology or the contracting officer shall ensure
under the North American Free compliance with the notice require-
Trade Agreement. ments of NAFTA Article 1709(10). A
(a) The requirements of this section contract award should not be sus-
apply to the use of technology covered pended pending notification to the
by a valid patent when the patent hold- right holder.
er is from a country that is a party to (g) When questions arise regarding
the North American Free Trade Agree- the notice requirements or other mat-
ment (NAFTA). ters relating to this section, the con-
(b) Article 1709(10) of NAFTA gen- tracting officer should consult with
erally requires a user of technology legal counsel.
covered by a valid patent to make a [61 FR 31648, June 20, 1996]
reasonable effort to obtain authoriza-
tion prior to use of the patented tech- 27.209 Use of patented technology
nology. However, NAFTA provides that under the General Agreement on
this requirement for authorization may Tariffs and Trade (GATT).
be waived in situations of national (a) Article 31 of Annex 1C, Agreement
emergency or other circumstances of on Trade-Related Aspects of Intellec-
extreme urgency, or public non- tual Property Rights, to GATT (Uru-
commercial use. guay Round) addresses situations
(c) Section 6 of Executive Order 12889 where the law of a member country al-
of December 27, 1993, waives the re- lows for use of a patent without au-
quirement to obtain advance author- thorization from the patent holder, in-
ization for cluding use by the Government.
496
(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 intent 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
27.302 48 CFR Ch. 1 (10103 Edition)
rights in federally supported inven- ception at subparagraph (b)(2) of this

tions to meet the needs of the Govern- section on the basis of national secu-
ment and protect the public against rity, the contract shall provide the
nonuse or unreasonable use of inven- contractor with the right to elect own-
tions; and, to minimize the costs of ad- ership to any invention made under
ministering policies in this area. such contract as provided by the clause
(b) Contractor right to elect title. Under at 52.22711, Patent RightsRetention
the policy set forth in paragraph (a) of by the Contractor (Short Form), if the
this section, each contractor may, invention is not classified by the agen-
after disclosure to the Government as cy within 6 months of the date it is re-
required by the patent rights clause in- ported to the agency, or within the
cluded in the contract, elect to retain same time period the Department of
title to any invention made in the per- Energy (DOE) does not, as authorized
formance of work under the contract. by regulation, law or Executive order
To the extent an agencys statutory re- or implementing regulations thereto,
quirements necessitate a different pol- prohibit unauthorized dissemination of
icy, or different procedures and/or con- the invention. Contracts in support of
tract clauses to effectuate the policy DOEs naval nuclear propulsion pro-
set forth in paragraph (a) of this sec- gram are exempted from this para-
tion, such policy, procedures, and graph. When a contract involves a se-
clauses shall be contained in or ex- ries of separate task orders, an agency
pressly referred to in that agencys may apply the exceptions at subpara-
supplement to this subpart. In addi- graph (b) (2) or (3) of this section to in-
tion, a contract may provide otherwise dividual task orders, and it may struc-
(1) when the contractor is not located ture the contract so that modified pat-
in the United States or does not have a ent rights clauses will apply to the
place of business located in the United task order even though the clause at
States or is subject to the control of a 52.22711 is applicable to the remainder
foreign-government (see 27.303(c)), (2) of the work. In those instances when
in exceptional circumstances when it is the Government has the right to ac-
determined by the agency that restric- quire title at the time of contracting,
tion or elimination of the right to re- the contractor may, nevertheless, re-
tain title in any subject invention will quest greater rights to an identified
better promote the policy and objec- investion (see 27.3041(a)). The right of
tives of Chapter 18 of title 35, U.S.C. the contractor to retain title shall, in
and the Presidential Memorandum, (3) any event, be subject to the provisions
when it is determined by a Government of paragraphs (c) through (g) of this
authority which is authorized by stat- section.
ute or Executive order to conduct for- (c) Government license. The Govern-
eign intelligence or counterintelligence ment shall have at least a nonexclu-
activities that the restriction or elimi- sive, nontransferable, irrevocable,
nation of the right to retain title to paid-up license to practice, or have
any subject invention is necessary to practiced for or on behalf of the United
protect the security of such activities, States, any subject invention through-
or (4) when the contract includes the out the world; and may, if provided in
operation of a Government-owned, con- the contract (see Alernative I of the
tractor-operated facility of the Depart- applicable patent rights clause), have
ment of Energy primarily dedicated to additional rights to sublicense any for-
the Departments naval nuclear propul- eign government or international orga-
sion or weapons related programs and nization pursuant to existing treaties
all funding agreement limitations or agreements identified in the con-
under 35 U.S.C. 202(a)(iv) for agree- tract, or to otherwise effectuate such
ments with small business firms and treaties or agreements. In the case of
nonprofit organizations are limited to long term contracts, the contract may
inventions occurring under the above also provide (see Alternate II) such
two programs. rights with respect to treaties or agree-
In the case of small business firms ments to be entered into by the Gov-
and nonprofit organizations, when an ernment after the award of the con-
agency justifies and exercises the extract.
498
(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
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
have failed to achieve practical appli- (ii) No alternative patent rights

cation in that country. See the proce- clause is used in accordance with para-
dures at 27.3041(e). graph (c) or (d) of this section or 27.304
(j) Confidentiality of inventions. The 2.
publication of information disclosing (2) To the extent the information is
an invention by any party before the not required elsewhere in the contract,
filing of a patent application may cre- and unless otherwise specified by agen-
ate a bar to a valid patent. Accord- cy supplemental regulations, the con-
ingly, 35 U.S.C. 205 and 37 CFR part 40 tracting officer may modify 52.22711(f)
provide that Federal agencies are au- to require the contractor to do one or
thorized to withhold from disclosure to more of the following:
the public information disclosing any (i) Provide periodic (but not more
invention in which the Federal Govern- frequently than annually) listings of
ment owns or may own a right, title, or all subject inventions required to be
interest (including a nonexclusive li- disclosed during the period covered by
cense) for a reasonable time in order the report.
for a patent application to be filed. (ii) Provide a report prior to the
Furthermore, Federal agencies shall closeout of the contract listing all sub-
not be required to release copies of any ject inventions or stating that there
document which is part of an applica- were none.
tion for patent filed with the United (iii) Provide, upon request, the filing
States Patent and Trademark Office or date, serial number and title, a copy of
with any foreign patent office. The the patent application, and patent
Presidential Memorandum on Govern- number and issue date for any subject
ment Patent Policy specifies that invention in any country in which the
agencies should protect the confiden- contractor has applied for patents.
tiality of invention disclosures and (iv) Furnish the Government an ir-
patent applications required in per- revocable power to inspect and make
formance or in consequence of awards copies of the patent application file
to the extent permitted by 35 U.S.C. 205 when a Federal Government employee
or other applicable laws. is a coinventor.
(3) If the acquisition of patent rights
[49 FR 12974, Mar. 30, 1984, as amended at 50 for the benefit of a foreign government
FR 1743, Jan. 11, 1985; 50 FR 52429, Dec. 23, is required under a treaty or executive
1985; 51 FR 2665, Jan. 17, 1986; 54 FR 25063, agreement, or if the agency head or a
June 12, 1989 and 55 FR 25525, June 21, 1990; 62 designee determines at the time of con-
FR 40237, July 25, 1997]
tracting that it would be in the na-
27.303 Contract clauses. tional interest to acquire the right to
sublicense foreign governments or
In contracts (and solicitations there- international organizations pursuant
for) for experimental, developmental, to any existing or future treaty or
or research work (but see 27.3043 re- agreement, the contracting officer
garding contracts for construction shall use the clause at 52.22711, with
work or architect-engineer services), a its Alternate I. If other rights are nec-
patent rights clause shall be inserted essary to effectuate the treaty or
as follows: agreement, Alternate I may be appro-
(a)(1) The contracting officer shall priately modified. In long term con-
insert the clause at 52.22711, Patent tracts, Alternate II shall be added if
RightsRetention by the Contractor necessary to effectuate treaties or
(Short Form), if all the following con- agreements to be entered into.
ditions apply: (4) If the contracting officer includes
(i) The contractor is a small business the clause at 52.22711, Patent Rights
concern or nonprofit organization as Retention by the Contractor (Short
defined in 27.301 or, except for con- Form), in a contract with a nonprofit
tracts of the Department of Defense organization for the operation of a
(DOD), the Department of Energy Government-owned facility, the con-
(DOE), or the National Aeronautics and tracting officer will include Alternate
Space Administration (NASA), any III in lieu of subparagraph (k)(3) of the
other type of contractor. clause.
501
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
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 prospective 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
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
(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
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
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
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
(b) Whenever a prime contractor or a to whether or not an invention is a sub-

subcontractor considers the inclusion ject invention.
of a particular clause in a subcontract (d) To the extent that any of the ac-
to be inappropriate or a subcontractor tions described in paragraph (a) above
refuses to accept the proffered clause, are subject to appeal under the Con-
the matter shall be resolved by the tract Disputes Act, the procedures
agency contracting officer in consulta- under that Act will satisfy the require-
tion with counsel. ments of paragraphs (b) and (c) above.
(c) It is Government policy that con-
tractors shall not use their ability to [49 FR 12974, Mar. 30, 1984, as amended at 54
award subcontracts as economic lever- FR 25068, June 12, 1989 and 55 FR 25525, June
age to acquire rights for themselves in 21, 1990]
inventions resulting from sub-
contracts. 27.305 Administration of patent rights
clauses.
27.3045 Appeals.
27.3051 Patent rights follow-up.
(a) The agency official initially au-
thorized to take any of the following (a) It is important that the Govern-
actions shall provide the contractor ment and the contractor know and ex-
with a written statement of the basis ercise their rights in inventions con-
for the action at the time the action is ceived or first actually reduced to
taken, including any relevant facts practice in the course of or under Gov-
that were relied upon in taking the ac- ernment contracts in order to ensure
tion: their expeditious availability to the
(1) A refusal to grant an extension to public and to enable the Government,
the invention disclosure period under the contractor, and the public to avoid
subparagraph (c)(4) of the clauses at unnecessary payment of royalties and
52.22711 and 52.22712. to defend themselves against claims
(2) A request for a conveyance of title and suits for patent infringement. To
to the Government under 27.302(d)(1)(i) attain these ends, contracts having a
through (v). patent rights clause should be so ad-
(3) A refusal to grant a waiver under
ministered that
27.302(g), Preference for U.S. Industry.
(4) A refusal to approve an assign- (1) Inventions are identified, dis-
ment under 27.3041(h)(1). closed, and reported as required by the
(5) A refusal to approve an extension contract, and elections are made;
of the exclusive license period under (2) The rights of the Government in
27.3041(h)(2). such inventions are established;
(b) Each agency shall establish and (3) Where patent protection is appro-
publish procedures under which any of priate, patent applications are timely
the agency actions listed in paragraph filed and prosecuted by contractors or
(a) above may be appealed to the head by the Government;
of the agency or designee. Review at (4) The rights of the Government in
this level shall consider both the fac- filed patent applications are docu-
tual and legal basis for the action and mented by formal instruments such as
its consistency with the policy and ob- licenses or assignments; and
jectives of 35 U.S.C. 200206 and this (5) Expeditious commercial utiliza-
subpart.
tion of such inventions is achieved.
(c) Appeals procedures established
under paragraph (b) of this subsection (b) If a subject invention is made
shall include administrative due proc- under funding agreements of more than
ess procedures and standards for fact- one agency, at the request of the con-
finding at least comparable to those tractor or on their own initiative, the
set forth in 37 CFR part 401.6(e)(g) agencies shall designate one agency as
whenever there is a dispute as to the responsible for administration of the
factual basis for an agency request for rights of the Government in the inven-
a conveyance of title under 27.302(d)(1) tion.
(i) through (v) including any dispute as
509
27.3052 48 CFR Ch. 1 (10103 Edition)
27.3052 Follow-up by contractor. curement was made for appropriate ac-

tion.
(a) Contractor procedures. If required
by the applicable clause, the con- (c) Contracting activities shall estab-
tractor shall establish and maintain ef- lish appropriate procedures to detect
fective procedures to ensure its patent and correct failures by the contractor
rights obligations are met and that to comply with its obligations under
subject inventions are timely identi- the patent rights clauses, such as fail-
fied and disclosed, and when appro- ures to disclose and report subject in-
priate, patent applications are filed. ventions, both during and after con-
tract performance. Ordinarily a con-
(b) Contractor reports. Contractors
shall submit all reports required by the tractor should have written instruc-
patent rights clause to the contracting tions for its employees covering com-
officer or other representative des- pliance with these contract obliga-
ignated for such purpose in the con- tions. Government effort to review and
tract. Agencies may, in their imple- correct contractor compliance with its
menting instructions, provide specific patent rights obligations should be di-
forms for use on an optional basis for rected primarily towards contracts
such reporting. that, because of the nature of the re-
search, development, or experimental
27.3053 Follow-up by Government. work or the large dollar amount spent
on such work, are more likely to result
(a) Agencies shall maintain appro- in subject inventions significant in
priate follow-up procedures to protect number or quality, and towards con-
the Governments interest and to tracts when there is reason to believe
check that subject inventions are iden- the contractors may not be complying
tified and disclosed, and when appro- with their contractual obligations.
priate, patent applications are filed,
Other contracts may be reviewed using
and that the Governments rights
a spot-check method, as feasible. Ap-
therein are established and protected.
propriate follow-up procedures and ac-
Follow-up activities for contracts that
tivities may include the investigation
include a clause referenced in 27.3042
or review of selected contracts or con-
shall be coordinated with the appro-
tractors by those qualified in patent
priate agency.
and technical matters to detect fail-
(b) The contracting officer admin- ures to comply with contract obliga-
istering the contract (or other rep-
tions.
resentative specifically designated in
(d) Follow-up activities should in-
the contract for such purpose) is re-
clude, where appropriate, use of Gov-
sponsible for receiving invention dis-
closures, reports, confirmatory instru- ernment patent personnel
ments, notices, requests, and other (1) To interview agency technical
documents and information submitted personnel to identify novel develop-
by the contractor pursuant to a patent ments made in contracts;
rights clause. If the contractor fails to (2) To review technical reports sub-
furnish documents or information as mitted by contractors with cognizant
called for by the clause within the time agency technical personnel;
required, the contracting officer shall (3) To check the Official Gazette of
promptly request the contractor to the United States Patent and Trade-
supply the required documents or in- mark Office and other sources for pat-
formation and, if the failure persists, ents issued to the contractor in fields
shall take appropriate action to secure related to its Government contracts;
compliance. Invention disclosures, re- and
ports, confirmatory instruments, no- (4) If additional information is re-
tices, requests, and other documents quired, to have cognizant Government
and information relating to patent personnel interview contractor per-
rights clauses shall be promptly fur- sonnel regarding work under the con-
nished by the contracting officer ad- tract involved, observe the work on
ministering the contract (or other des- site, and inspect laboratory notebooks
ignee) to the procuring agency or con- and other records of the contractor re-
tracting activity for which the pro- lated to work under the contract.
510
(e) If it is determined that a con- must be legally sufficient to convey

tractor or subcontractor does not have the rights the contractor is required to
a clear understanding of the rights and convey to the Government. Agencies
obligations of the parties under a pat- may, by supplemental instructions, de-
ent rights clause, or that its proce- velop suitable assignments, licenses,
dures for complying with the clause are and other papers evidencing any rights
deficient, a post-award orientation con- of the Government in patents or patent
ference or letter should ordinarily be applications, including such instru-
used to explain these rights and obliga- ments as may be required to be re-
tions (see subpart 42.5). When a con- corded in the Statutory Register or
tractor fails to establish, maintain, or documented in the Government Reg-
follow effective procedures for identi- ister maintained by the U.S. Patent
fying, disclosing, and, when appro- and Trademark Office pursuant to Ex-
priate, filing patent applications on in- ecutive Order 9424, February 18, 1944.
ventions (if such procedures are re-
quired by the patent rights clause), or 27.3055 Publication or release of in-
after appropriate notice fails to correct vention disclosures.
any deficiency, the contracting officer (a) In accordance with the policy at
may require the contractor to make 27.302(i), to protect their mutual inter-
available for examination books, ests, contractors and the Government
records, and documents relating to the should cooperate in deferring the publi-
contractors inventions in the same cation or release of invention disclo-
field of technology as the contract ef- sures until the filing of the first patent
fort to enable a determination of application, and use their best efforts
whether there are such inventions and to achieve prompt filing when publica-
may invoke the withholding of pay- tion or release may be imminent. The
ments provision (if any) of the clause. Government will, on its part and to the
The withholding of payments provision extent authorized by 35 U.S.C. 205,
(if any) of the patent rights clause or of withhold from disclosure to the public
any other contract clause may also be any invention disclosures reported
invoked if the contractor fails to dis- under the patent rights clauses of
close a subject invention. Significant 52.22711, 52.22712, or 52.22713 for a rea-
or repeated failures by a contractor to sonable time in order for patent appli-
comply with the patent rights obliga- cations to be filed. The policy in
tion in its contracts shall be docu- 27.302(i) regarding protection of con-
mented and made a part of the general fidentiality shall be followed.
file (see 4.801(c)(3)). (b) The Government will also use rea-
sonable efforts to withhold from disclo-
27.3054 Conveyance of invention sure to the public for a reasonable time
rights acquired by the Government. other information disclosing a reported
(a) Agencies are responsible for those invention included in any data deliv-
procedures necessary to protect the ered pursuant to contract require-
Governments interest in subject in- ments; provided, that the contractor
ventions. When the Government ac- notifies the agency as to the identity
quires the entire right, title, and inter- of the data and the invention to which
est in an invention by contract, this is it relates at the time of delivery of the
normally accomplished by an assign- data. Such notification must be to both
ment either from each inventor to the the contracting officer and any patent
contractor and from the contractor to representative to which the invention
the Government, or from the inventor is reported, if other than the con-
to the Government with the consent of tracting officer.
the contractor, so that the chain of (c) As an additional protection for
title from the inventor to the Govern- small business firms and nonprofit or-
ment is clearly established. When the ganizations 37 CFR part 401 prescribes
Governments rights are limited to a li- that agencies shall not disclose or re-
cense, there should be a confirmatory lease, in accordance with 35 U.S.C. 205,
instrument to that effect. for a period of 18 months from the fil-
(b) The form of conveyance of title ing date of the application to third par-
from the inventor to the contractor ties pursuant to request under the
511
27.306 48 CFR Ch. 1 (10103 Edition)
Freedom of Information Act or other- Subpart 27.4Rights in Data and

wise copies of any document which the Copyrights
agency obtained under contract which
is part of an application for patent
with the U.S. Patent and Trademark
otherwise noted.
Office or any foreign patent office filed
by the contractor (or its assignees, li- 27.400 Scope of subpart.
censees, or employees) on a subject in-
vention to which the contractor has (a) The policy statement in 27.402 ap-
elected to retain title. This prohibition plies to all executive agencies. The re-
does not extend to disclosure to other mainder of the subpart sets forth civil-
Government agencies or contractors of ian agency and National Aeronautics
Government agencies under an obliga- and Space Administration (NASA) poli-
tion to maintain such information in cies, procedures, and instructions with
confidence. respect to (1) rights in data and copy-
rights and (2) acquisition of data. How-
[49 FR 12974, Mar. 30, 1984, as amended at 54 ever, these policies, procedures, and in-
FR 25069, June 12, 1989 and 55 FR 25525, June structions are not required to be appli-
21, 1990]
cable to NASA solicitations until De-
27.306 Licensing background patent cember 31, 1987 (or until such other
rights to third parties. date as the NASA FAR Supplement is
revised to accommodate the policies,
(a) A contract with a small business
procedures, and instructions contained
firm or nonprofit organization will not
in this subpart). Due to the special
contain a provision allowing the Gov-
mission needs of the Department of De-
ernment to require the licensing to
fense (DOD) and as required by 10
third parties of inventions owned by
U.S.C. 2320, the remainder of the DOD
the contractor that are not subject in-
policies, procedures, and instructions
ventions unless such provision has been
with respect to rights in data and copy-
approved by the agency head and writ-
rights and acquisition of data are con-
ten justification has been signed by the
tained in the DOD FAR Supplement
agency head. Any such provision will
(DFARS).
clearly state whether the licensing
(b) Civilian agencies other than
may be required in connection with the
NASA shall implement section 203 of
practice of a subject invention, a spe-
Public Law 98577 pertaining to valida-
cifically identified work object, or
tion of proprietary data restrictions.
both. The agency head may not dele-
gate the authority to approve such pro- [52 FR 18140, May 13, 1987, as amended at 54
visions or to sign justifications re- FR 34755, Aug. 21, 1989]
quired for such provisions.
(b) The Government will not require 27.401 Definitions.
the licensing of third parties under any As used in this subpart
such provision unless the agency head Data means recorded information, re-
determines that the use of the inven- gardless of form or the media on which
tion by others is necessary for the it may be recorded. The term includes
practice of a subject invention or for technical data and computer software.
the use of a work object of the contract The term does not include information
and that such action is necessary to incidental to contract administration,
achieve the practical application of the such as financial, administrative, cost
subject invention or work object. Any or pricing or management information.
such determination will be on the Form, fit, and function data means
record after an opportunity for a hear- data relating to items, components,
ing, and the contractor shall be given processes that are sufficient to enable
notification of the determination by physical and functional interchange-
certified or registered mail. The notifi- ability, as well as data identifying
cation shall include a statement that source, size, configuration, mating and
any action commenced for judicial re- attachment characteristics, functional
view of such determination must be characteristics, and performance re-
brought by the contractor within 60 quirements; except that for computer
days after the notification. software it means data identifying
512
source, functional characteristics, and performance of their contracts. Agen-

performance requirements, but specifi- cies require such data to: obtain com-
cally excludes the source code, algo- petition among suppliers; fulfill cer-
rithm, process, formulae, and flow tain responsibilities for disseminating
charts of the software. and publishing the results of their ac-
Limited rights means the rights of the tivities; ensure appropriate utilization
Government in limited rights data, as of the results of research, development,
set forth in a Limited Rights Notice if and demonstration activities including
included in a data rights clause of the the dissemination of technical infor-
contract. mation to foster subsequent techno-
Limited rights data means data, other logical developments; and meet other
than computer software, that embody programmatic and statutory require-
trade secrets or are commercial or fi- ments. Further, for defense purposes,
nancial and confidential or privileged, such data are also required by agencies
to the extent that such data pertain to to meet specialized acquisition needs
items, components, or processes devel- and ensure logistics support.
oped at private expense, including
(b) At the same time, the Govern-
minor modifications thereof. (Agencies
ment recognizes that its contractors
may, however, adopt the following al-
may have a legitimate proprietary in-
ternate definition:
Limited rights data means data devel- terest (e.g., a property right or other
oped at private expense that embody valid economic interest) in data result-
trade secrets or are commercial or fi- ing from private investment. Protec-
nancial and confidential or privileged tion of such data from unauthorized
(see 27.404(c).) use and disclosure is necessary in order
Restricted computer software means to prevent the compromise of such
computer software developed at private property right or economic interest,
expense and that is a trade secret; is avoid jeopardizing the contractors
commercial or financial and confiden- commercial position, and preclude im-
tial or privileged; or is published copy- pairment of the Governments ability
righted computer software; including to obtain access to or use of such data.
minor modifications of such computer The protection of such data by the
software. Government is also necessary to en-
Restricted rights means the rights of courage qualified contractors to par-
the Government in restricted computer ticipate in Government programs and
software as set forth in a Restricted apply innovative concepts to such pro-
Rights Notice, if included in a data grams. In light of the above consider-
rights clause of the contract, or as oth- ations, in applying these policies, agen-
erwise may be included or incorporated cies shall strike a balance between the
in the contract. Governments need and the contrac-
Technical data means data other than tors legitimate proprietary interest.
computer software, which are of a sci-
entific or technical nature. 27.403 Data rightsgeneral.
Unlimited rights means the rights of All contracts that require data to be
the Government to use, disclose, repro- produced, furnished, acquired or spe-
duce, prepare derivative works, dis- cifically used in meeting contract per-
tribute copies to the public, and performance requirements, must contain
form publicly and display publicly, in terms that delineate the respective
any manner and for any purpose, and rights and obligations of the Govern-
to have or permit others to do so. ment and the contractor regarding the
[52 FR 18140, May 13, 1987, as amended at 66 use, duplication, and disclosure of such
FR 2130, Jan. 10, 2001] data, except certain contracts result-
ing from sealed bidding or similar situ-
27.402 Policy. ations which require only existing data
(a) It is necessary for the depart- (other than limited rights data and re-
ments and agencies, in order to carry stricted computer software) to be de-
out their missions and programs, to ac- livered and reproduction rights are not
quire or obtain access to many kinds of needed for such data. As a general rule
data produced during or used in the the data rights clause at 52.22714,
513
27.404 48 CFR Ch. 1 (10103 Edition)
Rights in DataGeneral, including Al- puter software by withholding such

ternates I, II, III, IV, and V, where de- data from delivery to the Government
termined to be appropriate as discussed and delivering form, fit, and function
in 27.404, is to be used for that purpose. data in lieu thereof. However, when an
However, in certain contracts either agency has a need to obtain delivery of
the particular subject matter of the limited rights data or restricted com-
contract or the intended use of the puter software, the clause may be used
data may require the use of other pre- with its Alternates II or III, as set forth
scribed clauses, or may not require the in paragraphs (d) and (e) of this sec-
use of any prescribed clause, as dis- tion. These alternatives enable a con-
cussed in 27.405 and 27.408. Also, in se- tracting officer to selectively request
lecting a data rights clause, it is im- the delivery of such data with limited
portant to note that any such clause rights or restricted rights, either by
does not specify the data (in terms of specifying such delivery in the con-
type, quantity or quality) that is to be tract or by specific request.
delivered, but only the respective (c) Alternate definition of limited rights
rights of the Government and the con- data. In the clause at 52.22714, Rights
tractor to use, disclose, or reproduce in DataGeneral, in order for data to
such data. Accordingly, the contract qualify as limited rights data, in addi-
should also include appropriate terms tion to being data that either embody
to specify the data to be delivered. a trade secret or are data that are com-
mercial or financial and confidential or
27.404 Basic rights in data clause. privileged, such data must also pertain
(a) Unlimited rights data. Under the to items, components, or processes de-
clause at 52.22714, Rights in Data veloped at private expense, including
General, the Government acquires un- minor modifications thereof. However,
limited rights in the following data for contracts that do not require the
(except as provided in paragraph (f) of development, use or delivery of items,
this section for copyrighted data): (1) components or processes that are in-
Data first produced in the performance tended to be acquired by or for the
of a contract (except to the extent such Government, an agency may adopt for
data constitute minor modifications to general use or for use in specific cir-
data that are limited rights data or re- cumstances the alternate definition of
stricted computer software); (2) form, limited rights data set forth in Alter-
fit, and function data delivered under nate I. The alternate definition does
contract; (3) data (except as may be in- not require that such data pertain to
cluded with restricted computer soft- items, components, or processes devel-
ware) that constitute manuals or in- oped at private expense; but rather
structional and training material for that such data were developed at pri-
installation, operation, or routine vate expense and embody a trade secret
maintenance and repair of items, com- or are commercial or financial and con-
ponents, or processes delivered or fur- fidential or privileged.
nished for use under a contract; and (4) (d) Protection of limited rights data
all other data delivered under the con- specified for delivery. (1) Contracting of-
tract other than limited rights data or ficers are authorized to modify the
restricted computer software (see para- clause at 52.22714, Rights in Data
graph (b) of this section). If any of the General, by use of Alternate II, which
foregoing data are published copy- Alternate adds subparagraph (g)(2) to
righted data with the notice of 17 the clause to enable the Government to
U.S.C. 401 or 402, the Government ac- require delivery of limited rights data
quires them under a copyright license, rather than allowing the contractor to
as set forth in paragraph (f) of this sec- withhold such data. To obtain such de-
tion, rather than with unlimited livery, the contract may identify and
rights. specify data to be delivered, or the con-
(b) Limited rights data and restricted tracting officer may require, by writ-
computer software. The clause at 52.227 ten request during contract perform-
14, Rights in DataGeneral, enables ance, the delivery of data that has been
the contractor to protect qualifying withheld or identified as withholdable
limited rights data and restricted com- under subparagraph (g)(1) of the clause
514
at 52.22714 Rights in DataGeneral. In an offeror, particularly where negotia-

addition, if agreed to during negotiations are based on an unsolicited pro-
tions, the contract may specifically posal. However, use of the clause at
identify data that are not to be deliv- 52.22714, Rights in DataGeneral,
ered under Alternate II or which, if de- without Alternate II does not preclude
livered, will be delivered with limited this Alternate from being used subse-
rights. The limited rights obtained by quently by modification during con-
the Government are set forth in the tract performance, should the need
Limited Rights Notice contained in arise for delivery of limited rights data
subparagraph (g)(2) (Alternate II). Such that have been withheld or identified
limited rights data will not, without as withholdable.
permission of the contractor, be used (3) Whenever data that would qualify
by the Government for purposes of as limited rights data, if it were to be
manufacture, and will not be disclosed delivered in human readable form, is
outside the Government except for cer- formatted as a computer data base for
tain specific purposes as may be set the purpose of delivery under a con-
forth in the Notice, and then only if tract containing the clause at 52.22714,
the Government makes the disclosure Rights in DataGeneral, such data is
subject to prohibition against further to be treated as limited rights data,
use and disclosure by the recipient. rather than restricted computer soft-
The following are examples of specific ware, for the purposes of paragraph (g)
purposes which may be adopted by an of that clause.
agency in its supplement and added to (e) Protection of restricted computer
the Limited Rights Notice of subpara- software specified for delivery. (1) Con-
graph (g)(2) of the clause (Alternate II): tracting officers are authorized to mod-
(i) Use (except for manufacture) by ify the clause at 52.22714, Rights in
support service contractors. DataGeneral, by use of Alternate III,
(ii) Evaluation by nongovernment which Alternate adds subparagraph
evaluators. (g)(3) to the clause to enable the Gov-
(iii) Use (except for manufacture) by ernment to require delivery of re-
other contractors participating in the stricted computer software rather than
Governments program of which the allowing the contractor to withhold
specific contract is a part, for informa- such restricted computer software. To
tion and use in connection with the obtain such delivery, the contract may
work performed under each contract. identify and specify the computer soft-
(iv) Emergency repair or overhaul ware to be delivered, or the contracting
work. officer may require by written request
(v) Release to a foreign government, during contract performance, the deliv-
or instrumentality thereof, as the in- ery of computer software that has been
terests of the United States Govern- withheld or identified as withholdable
ment may require, for information or under subparagraph (g)(1) of the clause.
evaluation, or for emergency repair or In addition, if agreed to during nego-
overhaul work by such government. tiations, the contract may specifically
(2) As an aid in determining whether identify computer software that are
the clause at 52.22714 should be used not to be delivered under Alternate III
with its Alternate II, the provision at or which, if delivered, will be with re-
52.22715, Representation of Limited stricted rights. In considering whether
Rights Data and Restricted Computer to use the clause at 52.22714 with its
Software, may be included in any solic- Alternate III, it should be particularly
itation containing the clause at 52.227 noted that unlike other data, computer
14, Rights in DataGeneral. This pro- software is also an end item in itself,
vision requests that an offeror state in such that if withheld and form, fit, and
response to a solicitation, to the extent function data provided in lieu thereof,
feasible, whether limited rights data an operational program will not be ac-
are likely to be used in meeting the quired. Thus, if delivery of restricted
data delivery requirements set forth in computer software is anticipated to be
the solicitation. In addition, the need needed to meet contract performance
for Alternate II should be considered requirements, the contracting officer
during negotiations or discussion with should assure that the clause is used
515
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
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
27.404 48 CFR Ch. 1 (10103 Edition)
clearly stated in a conspicuous place 401, the Governments license will be as

on the medium on which the data is re- set forth in subparagraph (g)(3)
corded. That is, if a report, the scope of (Alternate III) if included in the clause
the different license shall be put on the at 52.22714, Rights in DataGeneral,
cover, or first page, of the report. If or as otherwise may be provided in a
computer software, the scope of the dif- collateral agreement incorporated in
ferent license shall be placed on the or made part of the contract.
most conspicuous place available. (ii) Contractors delivering data with
(v) Whenever a contractor establishes both an authorized limited rights or re-
claim to copyright in data first pro- stricted rights notice and the copy-
duced in the performance of a contract, right notice of 17 U.S.C. 401 or 402
irrespective of which Alternate is used should modify the copyright notice to
with the clause or the scope of the Gov- include the following (or similar) state-
ernments license, the contractor is re- ment: Unpublishedall rights reserved
quired to affix the applicable copyright under the copyright laws of the United
notices of 17 U.S.C. 401 or 402, and ac- States. If this statement is omitted, the
knowledgment of Government sponsor- contractor may be afforded an oppor-
ship (including the contract number) to tunity to correct it in accordance with
the data whenever such data are deliv- paragraph (h) of this section. Other-
ered to the Government, published, or wise, data delivered with a copyright
deposited for registration as a pub- notice of 17 U.S.C. 401 or 402 may be
lished work in the U.S. Copyright Of- presumed to be published copyrighted
fice. Failure to do so could result in data subject to the applicable license
such data being treated as unlimited rights set forth in subdivision (f)(2)(i)
rights data (see paragraph (i) of this of this section, without disclosure limi-
section). tations or restrictions.
(2) Data not first produced in the per- (iii) If contractor action causes lim-
formance of a contract. (i) Contractors ited rights or restricted rights data to
are not to incorporate in data delivered be published with the copyright notice
under a contract any data that is not of 17 U.S.C. 401 or 402 after its delivery
first produced under the contract and to the Government, the Government is
that is marked with the copyright no- relieved of disclosure and use limita-
tice of 17 U.S.C. 401 or 402, without ei- tions and restrictions regarding such
ther (A) acquiring for or granting to data, and the contractor should advise
the Government certain copyright li- the Government, request that a copy-
cense rights for the data, or (B) obtain- right notice be placed on the copies of
ing permission from the contracting of- the data delivered to the Government
ficer to do otherwise. The copyright li- and acknowledge that the applicable
cense the Government acquires for copyright license set forth in subdivi-
such data will normally be of the same sion (f)(2)(i) of this section applies.
scope as discussed in subdivision (g) Release, publication, and use of
(f)(1)(iv) of this section, and is set forth data. (1) In paragraph (d) of the clause
in subparagraph (c)(2) of the clause at at 52.22714, Rights in DataGeneral,
52.22714, Rights in DataGeneral. subparagraph (d)(1) recognizes the fact
However, agencies may, on a case-by- that normally the contractor has the
case basis, or on a class basis if pro- right to use, release to others, repro-
vided in implementing agency regula- duce, distribute, or publish data first
tions, obtain a license of different produced in the performance of a con-
scope if the agency determines that tract, except to the extent such data
such different license will not be incon- may be subject to Federal export con-
sistent with the purpose of acquiring trol or to national security laws or reg-
the data. If a license of a different ulations. In addition, to the extent the
scope is acquired, it must be so stated contractor receives or is given access
in the contract and clearly set forth in to data that is necessary for the per-
a conspicuous place on the data when formance of the contract from or by
delivered to the Government. In addi- the Government or others acting on be-
tion, if computer software not first half of the Government, and the data
produced under a contract is delivered contains restrictive markings, subpara-
with the copyright notice of 17 U.S.C. graph (d)(2) provides an agreement
518
with the contractor to treat the data or symposia proceedings or similar

in accordance with the markings, un- works.
less otherwise specifically authorized (h) Unauthorized marking of data. Ex-
by the contracting officer. cept for validation of restrictive mark-
(2) In contracts for basic or applied ings on technical data under contracts
research with universities or colleges, for major systems, or for support of
no restrictions may be placed upon the major systems, by agencies subject to
conduct of or reporting on the results the provisions of Title III of the Fed-
of unclassified basic or applied re- eral Property and Administrative Serv-
search, except as provided in applicable ices Act of 1949, the Government has,
U.S. Statutes. For the purposes of this in accordance with paragraph (e) of the
subparagraph, agency restrictions on clause at 52.22714, Rights in Data
the release or disclosure of computer General, the right to either return to
software that has been, readily can be, the contractor data containing mark-
or is intended to be, developed to the ings not authorized by that clause, or
point of practical application (includ- to cancel or ignore such markings.
ing for agency distribution under es- However, markings will not be can-
tablished programs) are not considered celed or ignored without making writ-
restrictions on the reporting of the reten inquiry of the contractor and af-
sults of basic or applied research. fording the contractor at least 30 days
Agencies may also restrict claim to to provide a written justification to
copyright in any computer software for substantiate the propriety of the mark-
purposes of established agency dis- ings. Failure of the contractor to re-
tribution programs, or where required spond, or failure to provide a written
to accomplish the purpose for which justification to substantiate the pro-
the software is produced. priety of the markings within the time
(3) Except for the results of basic or afforded, may result in the Govern-
applied research under contracts with ments action to cancel or ignore the
universities or colleges, agencies may, markings. If the contractor provides a
to the extent provided in their FAR written justification to substantiate
supplements, place limitations or re- the propriety of the markings, it will
strictions on the contractors right to
be considered by the contracting offi-
use, release to others, reproduce, dis-
cer and the contractor notified of any
tribute, or publish any data first pro-
determination based thereon. If the
duced in the performance of the con-
tract, including a requirement to as-
markings are authorized, the con-
sign copyright to the Government or
another party, either by adding a sub- tractor will be so notified in writing.
paragraph (d)(3) to the Rights in Further, if the contracting officer de-
DataGeneral clause at 52.22714, or by termines, with concurrence of the head
express limitations or restrictions in of the contracting activity, that the
the contract. In the latter case, the markings are not authorized, the con-
limitations or restrictions should be tractor will be furnished a written de-
referenced in the Rights in DataGen- termination which shall become the
eral clause. However, such regulatory final agency decision regarding the ap-
restrictions or limitations are not to propriateness of the markings and the
be imposed unless they are determined markings will be cancelled or ignored
by the agency to be necessary in the and the data will no longer be made
furtherance of agency mission objec- subject to disclosure prohibitions, un-
tives, needed to support specific agency less the contractor files suit within 90
programs, or necessary to meet statu- days in a court of competent jurisdic-
tory requirements. Notwithstanding tion. In any event, the markings will
the provisions of this subparagraph, not be cancelled or ignored unless the
agencies may obtain, if provided in contractor fails to respond within the
their FAR supplement, for information period provided, or, if the contractor
purposes only, advance copies of arti- does respond, until final resolution of
cles intended for publication in aca- the matter, either by the contracting
demic, scientific or technical journals officers determination becoming the
519
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
(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
27.405 48 CFR Ch. 1 (10103 Edition)
contracts for the acquisition of exist- consistent with subdivision (b)(2)(i) of

ing computer software (i.e., privately this section. Caution should be exer-
developed software normally vended cised in accepting a vendors terms and
commercially under a license or lease conditions, since they may be directed
agreement restricting its use, disclo- to commercial sales and may not be ap-
sure, or reproduction), no specific con- propriate for Government contracts.
tract clause prescribed in this subpart Any inconsistencies in a vendors
need be used, but the contract (or pur- standard commercial agreement shall
chase order) must specifically address be addressed in the contract and the
the Governments rights to use, dis- contract terms shall take precedence
close and reproduce the software, over the vendors standard commercial
which rights must be sufficient for the agreement. If the clause at 52.22719,
Government to fulfill the need for Commercial Computer SoftwareRe-
which the software is being acquired. stricted Rights, is used, inconsistencies
Such rights may be negotiated and set in the vendors standard commercial
forth in the contract using the guid- agreement regarding the Governments
ance concerning restricted rights as set right to use, duplicate or disclose the
forth in 27.404(e), or the clause at computer software are reconciled by
52.22719, Commercial Computer Soft- that clause.
wareRestricted Rights, may be used.
(iii) If a prime contractor under a
Restricted computer software acquired
contract containing the clause at
under GSA Multiple Award Schedule
52.22714, Rights in DataGeneral, with
contracts and orders are excluded from
subparagraph (g)(3) (Alternate III) in
this requirement. The guidance con-
the clause, acquires restricted com-
cerning rights set forth in 27.404(e), as
puter software from a subcontractor
well as those in the clause at 52.22719,
are the minimum rights the Govern- (at any tier) as a separate acquisition
ment usually should accept. Thus if for delivery to or for use on behalf of
greater rights than these minimum the Government, the contracting offi-
rights are needed, or lesser rights are cer may approve any additions to, or
to be acquired, they must be nego- limitations on the restricted rights in
tiated and set forth in the contract (or the Restricted Rights Notice of sub-
purchase order). This includes any ad- paragraph (g)(3) in a collateral agree-
ditions to, or limitations on, the rights ment incorporated in and made part of
set forth in paragraph (b) of the clause the contract.
at 52.22719 when used. Examples of (3) Other existing data and works. Ex-
greater rights may be those necessary cept for existing audiovisual and simi-
for networking purposes or use of the lar works pursuant to subparagraph
software from remote terminals com- (b)(1) of this section, and existing com-
municating with a host computer puter software pursuant to subpara-
where the software is located. If the graph (b)(2) of this section, no clause
computer software is to be acquired contained in this subpart is required to
with unlimited rights, the contract be included in (i) contracts solely for
must also so state. In addition, the the acquisition of books, periodicals,
contract must adequately describe the and other printed items in the exact
computer programs and/or data bases, form in which such items are to be ob-
the form (tapes, punch cards, disk tained unless reproduction rights are
pack, and the like), and all the nec- to be acquired; or (ii) other contracts
essary documentation pertaining (e.g., contracts resulting from sealed
thereto. If the acquisition is by lease or bidding) that require only existing data
license, the disposition of the computer (other than limited rights data) to be
software (by returning to the vendor or delivered and such data are available
destroying) at the end of the term of without disclosure prohibitions, unless
the lease or license must be addressed. reproduction rights to the data are to
(ii) If the contract incorporates, be obtained. If the reproduction rights
makes reference to, or uses a vendors to the data are to be obtained in any
standard commercial lease, license, or contract of the type described in sub-
purchase agreement, such agreement division (b)(3) (i) or (ii) of this section,
shall be reviewed to assure that it is such rights must be specifically set
522
forth in the contract. No clause con- produced, or specifically used in the

tained in this subpart is required to be performance of the contract.
included in contracts substantially for (3) Data delivery requirements should
on-line data base services in the same normally not require that a contractor
form as they are normally available to provide the Government, as a condition
the general public. of the procurement, unlimited rights in
(c) Contracts awarded under Small data that qualify as limited rights data
Business Innovative Research (SBIR) Pro- or restricted computer software. Rath-
gram. The clause at 52.22720, Rights in er, form, fit, and function data may be
DataSBIR Program, is for use in all furnished with unlimited rights in lieu
Phase I and Phase II contracts awarded of the qualifying data, or the quali-
under the Small Business Innovative fying data may be furnished with lim-
Research Program (SBIR) established ited rights or restricted rights if need-
pursuant to Pub. L. 97219 (the Small ed (see 27.404 (d) and (e)). If greater
Business Innovation Development Act rights are needed such need should be
of 1982). The clause is limited to use clearly set forth in the solicitation and
solely in contracts awarded under the the contractor fairly compensated for
SBIR Program, and is the only data such greater rights.
rights clause to be used in such con- (b) Additional data requirements. (1)
tracts. Recognizing that in some contracting
situations, such as experimental, devel-
[52 FR 18140, May 13, 1987, as amended at 63 opmental, research, or demonstration
FR 34077, June 22, 1998] contracts, it may not be feasible to as-
certain all the data requirements at
27.406 Acquisition of data.
the time of contracting, the clause at
(a) General. (1) It is the Governments 52.22716, Additional Data Require-
practice to determine, to the extent ments, may be used to enable the sub-
feasible, its data requirements in time sequent ordering by the contracting of-
for inclusion in solicitations. The data ficer of additional data first produced
requirements may be subject to revi- or specifically used in the performance
sion during contract negotiations. of such contracts as the actual require-
Since the preparation, reformatting, ments become known. The clause shall
maintenance and updating, cataloging, normally be used in solicitations and
and storage of data represents an ex- contracts involving experimental, de-
pense to both the Government and the velopmental, research or demonstra-
contractor, efforts should be made to tion work (other than basic or applied
keep the contract data requirements to research to be performed under a con-
a minimum, consistent with the pur- tract solely by a university or college
poses of the contract. when the contract amount will be
(2) To the extent feasible, all known $500,000 or less) unless all the require-
data requirements, including the time ments for data are believed to be
and place for delivery and any limita- known at the time of contracting and
tions and restrictions to be imposed on specified in the contract. If the con-
the contractor in the handling of the tract is for basic or applied research to
data, shall be specified in the contract. be performed by a university or col-
Further, and to the extent feasible, in lege, and the contracting officer be-
major system acquisitions, data relieves the contract effort will in the fu-
quirements shall be set out as separate ture exceed $500,000, even though the
contract line items. In establishing the initial award does not, the contracting
contract data requirements and in officer may include the clause in the
specifying data items to be delivered initial award.
by a contractor, agencies may, con- (2) Data may be ordered under the
sistent with subparagraph (a)(1) of this clause at 52.22716, Additional Data Re-
section, develop their own contract quirements, at any time during con-
schedule provisions in agency proce- tract performance or within a period of
dures (including data requirements 3 years after acceptance of all items to
lists) for listing, specifying, identifying be delivered under the contract. The
source, assuring delivery, and handling contractor is to be compensated for
any data required to be delivered, first converting the data into the prescribed
523
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 infor 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
and/or assure correction if the tech- system, procured or to be procured by

nical data are not complete, accurate, the Government and also relating to
and in compliance with contract re- the design, development, or manufac-
quirements. ture of products or processes offered or
(3) When the clause at 52.22721, Tech- to be offered for sale to the public (ex-
nical Data, Declaration, Revision and cept for such data as may be necessary
Withholding of PaymentMajor Sys- for the Government to operate or
tems, is used, the section of the con- maintain the product, or use the proc-
tract specifying data delivery require- ess if obtained by the United States as
ments (see subparagraph (a)(2) of this an element of performance under the
section) shall expressly identify those contract), shall not be required to be
line items of technical data to which provided to the Government from per-
the clause applies. Upon delivery of sons who have developed such products
such technical data, the contracting of- or processes as a condition for the pro-
ficer or designee shall review the tech- curement of such products or processes
nical data and the contractors declara- by the Government.
tion relating thereto to assure that the
data are complete, accurate, and com- [52 FR 18140, May 13, 1987, as amended at 62
FR 236, Jan. 2, 1997]
ply with contract requirements. If not,
the contractor is to be requested to
27.407 Rights to technical data in suc-
correct the deficiencies, and payment cessful proposals.
may be withheld until such is done.
Final payment should not be made (a) Contracting officers may, in con-
under the contract until it has been de- sideration of contract award, desire to
termined that the delivery require- acquire unlimited rights in technical
ments of those line items of data to data (but not commercial or financial
which the clause applies have been sat- information) contained in a successful
isfactorily met. proposal upon which a contract award
(4) In a contract for or in support of is based. However, before such unlim-
a major system awarded by a civilian ited rights are acquired, the prospec-
agency other than NASA or the U.S. tive contractor must be afforded the
Coast Guard the contracting officer opportunity either (1) to advise the
shall include contractual provisions re- contracting officer that the technical
quiring, as an element of performance data, or portions thereof (to be identi-
under the contract, the delivery of any fied by the prospective contractor), are
technical data, other than computer covered by any restrictive notice re-
software, relating to the major system garding the disclosure and use of pro-
or supplies for the major system proposal information authorized by sub-
cured or to be procured by the Govern- part 15.2 or 15.6 (or any agency supple-
ment, which are to be developed exclu- ment thereto), and request that such
sively with Federal funds in the per- protection be maintained by excluding
formance of the contract if the deliv- the data from the Governments rights;
ery of such technical data is needed to or (2) to establish to the contracting
ensure the competitive acquisition of officers satisfaction that identified
supplies or services that will be re- portions of the technical data do not
quired in substantial quantities in the relate directly to or will not be utilized
future. The clause at 52.22722, Major in the work to be performed under the
SystemMinimum Rights, is to be in- contract, and request that such por-
cluded in such contracts in addition to tions be excluded from the Govern-
the clause at 52.22714, Rights in Data ments rights.
General, and other required clauses, to (b) If unlimited rights to technical
ensure that the Government acquires data in successful proposals, as set
at least those rights required by Pub. forth in paragraph (a) of this section,
L. 98577 in technical data developed are to be acquired, it shall be by use of
exclusively with Federal funds. In any the clause at 52.22723, Rights to Pro-
contract to which this subparagraph posal Data (Technical). Any excluded
(d)(4) applies, technical data, other technical data will be identified by in-
than computer software, relating to a serting appropriate proposal page num-
major system or supplies for a major bers in the clause, which clause enables
525
27.408 48 CFR Ch. 1 (10103 Edition)
the identification of data to be ex- the legitimate proprietary interests of

cluded from the Governments rights, the contractor, the needs of the Gov-
as discussed in paragraph (a) of this ernment, and the respective contribu-
section. Such exclusion is not disposi- tions of both parties may vary, no spe-
tive of the protective status of the cific clauses are prescribed, but a
data, but any excluded technical data, clause providing less than unlimited
as well as any commercial and finan- rights in the Government for data de-
cial information contained in the pro- veloped and delivered under the con-
posal, will remain subject to the poli- tract (such as license rights) may be
cies in subpart 15.2 or 15.6 (or agency tailored to the circumstances con-
supplements thereto) relating to pro- sistent with the foregoing and the pol-
posal information (i.e., will be used for icy set forth in 27.402. As a guide, such
evaluation purposes only). If the clause clause may be appropriate when the
at 52.22723, Rights to Proposal Data contractor contributes money or re-
(Technical), is included in a contract, sources, or agrees to make repayment
the prospective contractor must be spe- of nonrecurring costs, of a value of ap-
cifically afforded the opportunity to proximately 50 percent of the total cost
exclude technical data as set forth in of the contract (i.e., Government, con-
paragraph (a) of this section, and the tractor, and/or third party paid costs),
contract file must reflect that fact. If and the respective contributions are
there is a need to have access to any of not readily segregable for any work
the excluded technical data during con- element to be performed under the con-
tract performance, consideration tract. Such clause may be used for all
should be given to their acquisition as or for only specifically identified tasks
limited rights data, if they so qualify, or work elements under the contract.
in accordance with27.404(d). In the latter instance, its use will be in
[52 FR 18140, May 13, 1987, as amended at 62 addition to whatever other data rights
FR 51271, Sept. 30, 1997] clause is prescribed under this subpart,
with the contract specifically identi-
27.408 Cosponsored research and de- fying which clause is to apply to which
velopment activities. tasks or work elements. Further, such
(a) In contracts involving cospon- clause may not be appropriate where
sored research and development where- the purpose of the contract is to
in the contractor is required to make produce data for dissemination to the
substantial contributions of funds or public, or to develop or demonstrate
resources (i.e., by cost-sharing or by re- technologies which will be available, in
payment of nonrecurring costs), and any event, to the public for their direct
the contractors and the Governments use.
respective contributions to any item, (b) Where the contractors contribu-
component, process, or computer soft- tions are readily segregable (by per-
ware, developed or produced under the formance requirements and the funding
contract are not readily segregable, the therefor) and so identified in the con-
contracting officer may limit the ac- tract, any data resulting therefrom
quisition of or acquire less than unlim- may be treated under such clause as
ited rights to any data developed and limited rights data or restricted com-
delivered under such contract. Agen- puter software in accordance with
cies may regulate the use of this au- 27.404 (d) or (e), as applicable; or if such
thority in their supplements. Basically treatment is inconsistent with the pur-
such rights should, at a minimum, as- pose of the contract, rights to such
sure use of the data for agreed-to Gov- data may, if so negotiated and stated
ernmental purposes (including rein the contract, be treated in a manner
procurement rights as appropriate), consistent with paragraph (a) of this
and will address any disclosure limita- section.
tions or restrictions to be imposed on
the data. Also, consideration may be 27.409 Solicitation provisions and con-
given to directed licensing provisions if tract clauses.
needed to carry out the objectives of (a)(1) The contracting officer shall
the contract. Since the purpose of the insert the clause at 52.22714, Rights in
cosponsored research and development, DataGeneral, including its use with
526
Alternate I through Alternate V as may is used, assure that the purposes, if

be required or authorized in accordance any, for which limited rights data are
with paragraphs (b) through (f) of this to be disclosed outside the Government
section, in solicitations and contracts are included in the Limited Rights Notice
if it is contemplated that data will be of subparagraph (g)(2) of the clause.
produced, furnished, or acquired under (d) In accordance with 27.404(e), if a
the contract, unless the contract is contracting officer determines it is
(i) For the production of special necessary to obtain the delivery of re-
works of the type set forth in 27.405(a), stricted computer software, the clause
but the clause at 52.22714, Rights in shall be used with its Alternate III. Any
Data General, shall be included in greater or lesser rights regarding the
the contract and made applicable to use, duplication, or disclosure of re-
data other than special works, as ap- stricted computer software than those
propriate; set forth in the Restricted Rights No-
(ii) For the acquisition of existing tice of subparagraph (g)(3) of the clause
data works, as described in 27.405(b); must be specified in the contract and
(iii) To be performed outside the the notice modified accordingly.
United States, its possessions, and (e) The clause shall be used with its
Puerto Rico, in which case agencies Alternate IV in contracts for basic or
may prescribe different clauses (see applied research (other than those for
paragraph (n) of this section); the management or operation of Gov-
(iv) For architect-engineer services ernment facilities or where inter-
or construction work, in which case
national agreements require other-
agencies may utilize the clause at
wise), to be performed solely by univer-
52.22717, Rights in DataSpecial
sities and colleges. The clause may be
Works, or may prescribe different
used with its Alternate IV in other con-
clauses;
tracts if in accordance with 27.404(f)(1)
(v) A Small Business Innovation Re-
an agency determines to grant blanket
search contract (see paragraph (l) of
permission for the contractor to estab-
this section);
lish claim to copyright subsisting in all
(vi) For the management, operation,
data first produced without further re-
design, or construction of a Govern-
quest being made by the contractor.
ment-owned facility to perform re-
search, development, or production When Alternate IV is used, the contract
work, in which case agencies may pre- may exclude items or categories of
scribe different clauses (see paragraph data from the blanket permission
(p) of this section); or granted, either by express provisions in
(vii) A contract involving cospon- the contract or by the addition of a
sored research and development in subparagraph (d)(3) to the clause (see
which a clause providing for less than 27.404(g)(2)).
unlimited right has been authorized. (f) In accordance with 27.404(i), if a
(See 27.408). contracting officer needs to have the
(2) Subparagraph (e)(3) of the clause right to inspect certain data at a con-
at 52.22714, Rights in DataGeneral, tractors facility or if by an agency,
may be deleted or reserved by an agen- generally the clause shall be used with
cy not subject to Title III of the Fed- its Alternate V.
eral Property and Administrative Serv- (g) In accordance with 27.404(d)(2), if
ices Act. the contracting officer desires to have
(b) If an agency determines, in ac- an offeror state in response to a solici-
cordance with 27.404(c), to adopt the al- tation, to the extent feasible, whether
ternate definition of Limited Rights limited rights data or restricted com-
Data in paragraph (a) of the clause, the puter software are likely to be used in
clause shall be used with its Alternate I. meeting the data delivery require-
(c) In accordance with 27.404(d), if a ments set forth in the solicitation, the
contracting officer determines it is contracting officer shall insert the pro-
necessary to obtain the delivery of lim- vision at 52.22715, Representation of
ited rights data, the clause shall be Limited Rights Data and Restricted
used with its Alternate II. The con- Computer Software, in any solicitation
tracting officer shall, when Alternate II containing the clause at 52.22714,
527
27.409 48 CFR Ch. 1 (10103 Edition)
Rights in DataGeneral. The contrac- are to be modified, as by editing, trans-

tors response will provide an aid in de- lation, addition of subject matter, etc.
termining whether the clause should be (k) In accordance with 27.405(b)(2),
used with Alternate II and/or Alternate when contracting (other than from
III. GSAs Multiple Award Schedule con-
(h) The contracting officer shall nor- tracts) for the acquisition of existing
mally insert the clause at 52.22716, Ad- computer software, the clause at
ditional Data Requirements, in solici- 52.22719, Commercial Computer Soft-
tations and contracts involving experi- ware-Restricted Rights, may be used in
mental, developmental, research, or the solicitation and contract. In any
demonstration work (other than basic event, the contracting officer shall as-
or applied research to be performed sure that the contract contains terms
solely by a university or college where to obtain sufficient rights for the Gov-
the contract amount will be $500,000 or ernment to fulfill the need for which
less) unless all the requirements for the software is being acquired and is
data are believed to be known at the otherwise consistent with 27.405(b)(2).
time of contracting and specified in the (l) If the contract is a Small Business
contract. (See 27.406(b).) This clause Innovation Research (SBIR) contract,
may also be used in other contracts the clause at 52.22720, Rights in Data
when considered appropriate. SBIR Program shall be used in all
Phase I and Phase II contracts awarded
(i) In accordance with 27.405(a), the
under the Small Business Innovation
contracting officer shall insert the
Research Program established pursu-
clause at 52.22717, Rights in Data
ant to Pub. L. 97219 (The Small Busi-
Special Works, in solicitations and
ness Innovation Development Act of
contracts primarily for the production
1982).
or compilation of data (other than lim- (m) While no specific clause of this
ited rights data or restricted computer subpart is required to be included in
software) for the Governments inter- contracts solely for the acquisition,
nal use, or when there is a specific need without disclosure prohibitions, of
to limit distribution and use of the books, publications and similar items
data and/or to obtain indemnity for li- in the exact form in which such items
abilities that may arise out of the con- exist prior to the request for purchase
tent, performance, or disclosure of the (i.e., the off-the-shelf purchase of such
data. Examples of such contracts are items), or in other contracts (e.g., con-
set forth in 27.405(a). The contract may tracts resulting from sealed bidding)
specify the purposes and conditions (in- where only existing data available
cluding time limitations) under which without disclosure prohibitions is to be
the data may be used, released or re- furnished, if reproduction rights are to
produced by the contractor for other be acquired the contract shall include
than contract performance. Contracts terms addressing such rights. (See
for the production of audiovisual 27.405(b)(3).)
works, sound recordings, etc. may in- (n) Agencies may prescribe in their
clude limitations in connection with procedures, as appropriate, a clause
talent releases, music licenses, and the consistent with the policy of 27.402 in
like that are consistent with the pur- contracts to be performed outside the
poses for which the data is acquired. United States, its possessions, and
(j) The contracting officer shall in- Puerto Rico.
sert the clause at 52.22718, Rights in (o) Agencies may prescribe in their
DataExisting Works, in solicitations procedures the clause at 52.22717,
and contracts exclusively for the acqui- Rights in DataSpecial Works, or pre-
sition, without modification, of exist- scribe, as appropriate, clauses con-
ing audiovisual and similar works of sistent with the policy in 27.402 in con-
the type set forth in 27.405(b)(1). The tracts for architect-engineer services
contract may set forth limitations con- and construction work.
sistent with the purposes for which the (p) Agencies may prescribe in their
work is being acquired. The clause at procedures, as appropriate, a clause
52.22717, Rights in DataSpecial consistent with the policy of 27.402 in
Works, shall be used if existing works contracts for management, operation,
528
design, or construction of Government- the U.S. Government has a royalty-free

owned research, development, or pro- license or of charges in agreements for
duction facilities, and in contracts and the use of data that the U.S. Govern-
subcontracts in support of programs ment has a right to use and disclose to
being conducted at such facilities. others, that is in the public domain, or
(q) In accordance with 27.406(d), the that was acquired by the U.S. Govern-
contracting officer shall insert the ment with the unrestricted right to
clause at 52.22721, Technical Data Dec- use, duplicate, or disclose and to have
laration, Revision, and Withholding of or permit others to do so;
PaymentMajor Systems, in contracts (b) Foreign license and technical as-
for major systems acquisitions or for sistance agreements between the U.S.
support of major systems acquisitions. Government and United States domes-
When used, this clause requires that tic concerns;
the technical data to which it applies (c) Guidance on negotiating contract
be specified in the contract. (See prices and terms concerning patents
27.406(d).) and data, including royalties, in con-
(r) In the case of civilian agencies ex- tracts between the U.S. Government
cept NASA and the U.S. Coast Guard, and a foreign government or foreign
the contracting officer shall insert the concern; and
clause at 52.22722, Major SystemMin- (d) Regulations and guidance on con-
imum Rights, in contracts for major trols on the exportation of data relat-
systems or contracts in support of ing to certain designated items, such
major systems. as arms or munitions of war, and guid-
(s) In accordance with 27.407, if a con- ance on reviews of agreements involv-
tracting officer desires to acquire un- ing such data (see 22 CFR part l24).
limited rights in technical data con-
tained in a successful proposal upon PART 28BONDS AND INSURANCE
which a contract award is based, the
contracting officer shall insert the Sec.
clause at 52.22723, Rights to Proposed 28.000 Scope of part.
Data (Technical). Rights to technical 28.001 Definitions.
data in a proposal are not acquired by
mere incorporation by reference of the Subpart 28.1Bonds and Other Financial
proposal in the contract, and if a pro- Protections
posal is incorporated by reference, 28.100 Scope of subpart.
27.404 must be followed to assure that 28.101 Bid guarantees.
such rights are appropriately ad- 28.1011 Policy on use.
dressed. 28.1012 Solicitation provision or contract
clause.
[52 FR 18140, May 13, 1987, as amended at 55 28.1013 [Reserved]
FR 38517, Sept. 18, 1990; 62 FR 236, Jan. 2, 28.1014 Noncompliance with bid guarantee
1997; 64 FR 10532, Mar. 4, 1999] requirements.
28.102 Performance and payment bonds and
Subpart 27.5 [Reserved] alternative payment protections for con-
struction contracts.
28.1021 General.
Subpart 27.6Foreign License 28.1022 Amount required.
and Technical Assistance 28.1023 Contract clauses.
Agreements 28.103 Performance and payment bonds for
other than construction contracts.
27.601 General. 28.1031 General.
28.1032 Performance bonds.
Agencies shall provide all necessary 28.1033 Payment bonds.
rules and regulations as are required 28.1034 Contract clause.
for the proper application of the laws 28.104 Annual performance bonds.
and policies of the U.S. Government re- 28.105 Other types of bonds.
28.1051 Advance payment bonds.
garding
28.1052 Patent infringement bonds.
(a) Elimination in agreements be- 28.106 Administration.
tween domestic concerns and foreign 28.1061 Bonds and bond related forms.
governments or foreign concerns of 28.1062 Substitution of surety bonds.
charges for the use of patents in which 28.1063 Additional bond and security.
529
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
bids (on other than construction con- 28.101 Bid guarantees.

tracts) requiring bonds submitted dur-
ing a specific Government fiscal year. 28.1011 Policy on use.
(3) An annual performance bond is a (a) A contracting officer shall not re-
single bond furnished by a contractor, quire a bid guarantee unless a perform-
in lieu of separate performance bonds, ance bond or a performance and pay-
to secure fulfillment of the contrac- ment bond is also required (see 28.102
tors obligations under contracts (other and 28.103). Except as provided in para-
than construction contracts) requiring graph (c) of this subsection, bid guar-
bonds entered into during a specific antees shall be required whenever a
Government fiscal year. performance bond or a performance and
(4) A patent infringement bond se- payment bond is required.
cures fulfillment of the contractors (b) All types of bid guarantees are ac-
obligations under a patent provision. ceptable for supply or service contracts
(5) A payment bond assures payments (see annual bid bonds and annual per-
as required by law to all persons sup- formance bonds coverage in 28.001).
plying labor or material in the prosecu- Only separate bid guarantees are ac-
tion of the work provided for in the ceptable in connection with construc-
contract. tion contracts. Agencies may specify
(6) A performance bond secures per- that only separate bid bonds are ac-
formance and fulfillment of the con- ceptable in connection with construc-
tractors obligations under the con- tion contracts.
tract. (c) The chief of the contracting office
Consent of surety means an acknowl- may waive the requirement to obtain a
edgment by a surety that its bond bid guarantee when a performance
given in connection with a contract bond or a performance and payment
continues to apply to the contract as bond is required if it is determined that
modified. a bid guarantee is not in the best inter-
est of the Government for a specific ac-
Penal sum or penal amount means the
quisition (e.g., overseas construction,
amount of money specified in a bond
emergency acquisitions, sole-source
(or a percentage of the bid price in a
contracts). Class waivers may be au-
bid bond) as the maximum payment for
thorized by the agency head or des-
which the surety is obligated or the
ignee.
amount of security required to be
pledged to the Government in lieu of a [48 FR 42286, Sept. 19, 1983, as amended at 51
corporate or individual surety for the FR 2665, Jan. 17, 1986; 52 FR 19803, May 27,
bond. 1987; 52 FR 30076, Aug. 12, 1987; 54 FR 34755,
Aug. 21, 1989; 61 FR 39213, July 26, 1996]
Reinsurance means a transaction
which provides that a surety, for a con- 28.1012 Solicitation provision or con-
sideration, agrees to indemnify another tract clause.
surety against loss which the latter
(a) The contracting officer shall in-
may sustain under a bond which it has
sert a provision or clause substantially
issued.
the same as the provision at 52.2281,
[48 FR 42286, Sept. 19, 1983, as amended at 61 Bid Guarantee, in solicitations or con-
FR 31652, June 20, 1996; 62 FR 44806, Aug. 22, tracts that require a bid guarantee or
1997; 66 FR 2130, Jan. 10, 2001; 67 FR 13056, similar guarantee. For example, the
Mar. 20, 2002] contracting officer may modify this
provision
Subpart 28.1Bonds and Other (1) To set a period of time that is
Financial Protections other than 10 days for the return of ex-
ecuted bonds;
28.100 Scope of subpart. (2) For use in connection with con-
struction solicitations when the agen-
This subpart prescribes requirements
cy has specified that only separate bid
and procedures for the use of bonds, al-
bonds are acceptable in accordance
ternative payment protections, and all
with 28.1011(b);
types of bid guarantees.
(3) For use in solicitations for nego-
[62 FR 44806, Aug. 22, 1997] tiated contracts; or
531
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
the work as is to be performed in a for- Original contract price means the

eign country upon finding that it is im- award price of the contract; or, for re-
practicable for the contractor to fur- quirements contracts, the price pay-
nish such bond, or (2) as otherwise au- able for the estimated total quantity;
thorized by the Miller Act or other law. or, for indefinite-quantity contracts,
(b)(1) Pursuant to Section 4104(b)(2) the price payable for the specified min-
of the Federal Acquisition Stream- imum quantity. Original contract price
lining Act of 1994 (Public Law 103355), does not include the price of any op-
for construction contracts greater than tions, except those options exercised at
$25,000, but not greater than $100,000, the time of contract award.
the contracting officer shall select two (b) Contracts exceeding $100,000 (Mil-
or more of the following payment pro- ler Act).
tections, giving particular consider- (1) Performance bonds. Unless the con-
ation to inclusion of an irrevocable let- tracting officer determines that a less-
ter of credit as one of the selected al- er amount is adequate for the protec-
ternatives: tion of the Government, the penal
(i) A payment bond. amount of performance bonds must
(ii) An irrevocable letter of credit equal
(ILC).
(i) 100 percent of the original con-
(iii) A tripartite escrow agreement. The
tract price; and
prime contractor establishes an escrow
account in a federally insured financial (ii) If the contract price increases, an
institution and enters into a tripartite additional amount equal to 100 percent
escrow agreement with the financial of the increase.
institution, as escrow agent, and all of (2) Payment bonds. (i) Unless the con-
the suppliers of labor and material. tracting officer makes a written deter-
The escrow agreement shall establish mination supported by specific findings
the terms of payment under the con- that a payment bond in this amount is
tract and of resolution of disputes impractical, the amount of the pay-
among the parties. The Government ment bond must equal
makes payments to the contractors es- (A) 100 percent of the original con-
crow account, and the escrow agent tract price; and
distributes the payments in accordance (B) If the contract price increases, an
with the agreement, or triggers the dis- additional amount equal to 100 percent
putes resolution procedures if required. of the increase.
(iv) Certificates of deposit. The con- (ii) The amount of the payment bond
tractor deposits certificates of deposit must be no less than the amount of the
from a federally insured financial insti- performance bond.
tution with the contracting officer, in (c) Contracts exceeding $25,000 but not
an acceptable form, executable by the exceeding $100,000. Unless the con-
contracting officer. tracting officer determines that a less-
(v) A deposit of the types of security er amount is adequate for the protec-
listed in 28.2041 and 28.2042. tion of the Government, the penal
(2) The contractor shall submit to amount of the payment bond or the
the Government one of the payment amount of alternative payment protec-
protections selected by the contracting tion must equal
officer. (1) 100 percent of the original con-
(c) The contractor shall furnish all tract price; and
bonds or alternative payment protec- (2) If the contract price increases, an
tion, including any necessary reinsur- additional amount equal to 100 percent
ance agreements, before receiving a no- of the increase.
tice to proceed with the work or being (d) Securing additional payment protec-
allowed to start work. tion. If the contract price increases, the
[48 FR 42286, Sept. 19, 1983, as amended at 61 Government must secure any needed
FR 31652, June 20, 1996] additional protection by directing the
contractor to
28.1022 Amount required. (1) Increase the penal sum of the ex-
(a) Definition. As used in this sub- isting bond;
section (2) Obtain an additional bond; or
533
28.1023 48 CFR Ch. 1 (10103 Edition)
(3) Furnish additional alternative not specifically required in the con-

payment protection. tract, except as may be determined
(e) Reducing amounts. The con- necessary for a contract modification.
tracting officer may reduce the amount
of security to support a bond, subject 28.1032 Performance bonds.
to the conditions of 28.2035(c) or (a) Performance bonds may be re-
28.204(b). quired for contracts exceeding the sim-
[65 FR 46070, July 26, 2000] plified acquisition threshold when nec-
essary to protect the Governments in-
28.1023 Contract clauses. terest. The following situations may
(a) Insert a clause substantially the warrant a performance bond:
same as the clause at 52.22815, Per- (1) Government property or funds are
formance and Payment BondsCon- to be provided to the contractor for use
struction, in solicitations and con- in performing the contract or as par-
tracts for construction that contain a tial compensation (as in retention of
requirement for performance and pay- salvaged material).
ment bonds if the resultant contract is (2) A contractor sells assets to or
expected to exceed $100,000. The con- merges with another concern, and the
tracting officer may revise paragraphs Government, after recognizing the lat-
(b)(1) and/or (b)(2) of the clause to es- ter concern as the successor in inter-
tablish a lower percentage in accord- est, desires assurance that it is finan-
ance with 28.1022(b). If the provision at cially capable.
52.2281 is not included in the solicita- (3) Substantial progress payments
tion, the contracting officer must set a are made before delivery of end items
period of time for return of executed starts.
bonds. (4) Contracts are for dismantling,
(b) Insert the clause at 52.22813, Al- demolition, or removal of improve-
ternative Payment Protections, in so- ments.
licitations and contracts for construc- (b) The Government may require ad-
tion, when the estimated or actual ditional performance bond protection
value exceeds $25,000 but does not ex- when a contract price is increased.
ceed $100,000. Complete the clause by (c) The contracting officer must de-
specifying the payment protections se- termine the contractors responsibility
lected (see 28.1021(b)(1)) and the dead- (see subpart 9.1) even though a bond
line for submission. The contracting of- has been or can be obtained.
ficer may revise paragraph (b) of the [48 FR 42286, Sept. 19, 1983, as amended at 60
clause to establish a lower percentage FR 34759, July 3, 1995; 61 FR 39213, July 26,
in accordance with 28.1022(c). 1996]
28.1033 Payment bonds.
FR 31652, June 20, 1996; 61 FR 39213, July 26,
1996; 62 FR 44806, Aug. 22, 1997; 65 FR 46070, (a) A payment bond is required only
July 26, 2000] when a performance bond is required,
and if the use of payment bond is in the
28.103 Performance and payment Governments interest.
bonds for other than construction
contracts. (b) When a contract price is in-
creased, the Government may require
28.1031 General. additional bond protection in an
amount adequate to protect suppliers
(a) Generally, agencies shall not re-
of labor and material.
quire performance and payment bonds
for other than construction contracts. [48 FR 42286, Sept. 19, 1983, as amended at 61
However, performance and payment FR 39213, July 26, 1996]
bonds may be used as permitted in
28.1032 and 28.1033. 28.1034 Contract clause.
(b) The contractor shall furnish all The contracting officer shall insert a
bonds before receiving a notice to pro- clause substantially the same as the
ceed with the work. clause at 52.22816, Performance and
(c) No bond shall be required after Payment BondsOther than Construc-
the contract has been awarded if it was tion, in solicitations and contracts
534
that contain a requirement for both 28.106 Administration.

payment and performance bonds. The
contracting officer shall determine the 28.1061 Bonds and bond related
amount of each bond for insertion in forms.
the clause. The amount shall be ade- The following Standard Forms (SFs)
quate to protect the interest of the and Optional Forms (OFs) shown in
Government. The contracting officer 53.301 and 53.302 shall be used, except in
shall also set a period of time (nor- foreign countries, when a bid bond, per-
mally 10 days) for return of executed formance or payment bond, or an indi-
bonds. Alternate I shall be used when vidual surety is required. The bond
only performance bonds are required. forms shall be used as indicated in the
instruction portion of each form.
[61 FR 39213, July 26, 1996] (a) SF 24, Bid Bond (see 28.101).
(b) SF 25, Performance Bond (see
28.104 Annual performance bonds. 28.1021 and 28.1063(b)).
(a) Annual performance bonds only (c) SF 25A, Payment Bond (see
apply to non-construction contracts. 28.1021 and 28.1063(b)).
They shall provide a gross penal sum (d) SF 25B, Continuation Sheet (for
applicable to the total amount of all SFs 24, 25, and 25A).
covered contracts. (e) SF 28, Affidavit of Individual Sur-
(b) When the penal sums obligated by ety (see 28.203).
contracts are approximately equal to (f) SF 34, Annual Bid Bond (see
or exceed the penal sum of the annual 28.001).
(g) SF 35, Annual Performance Bond
performance bond, an additional bond
(see 28.104).
will be required to cover additional
(h) SF 273, Reinsurance Agreement
contracts.
for a Miller Act Performance Bond (see
28.105 Other types of bonds. 28.202(a)(4)).
(i) SF 274, Reinsurance Agreement
The head of the contracting activity for a Miller Act Payment Bond (see
may approve using other types of bonds 28.202(a)(4)).
in connection with acquiring particular (j) SF 275, Reinsurance Agreement in
supplies or services. These types in- Favor of the United States (see
clude advance payment bonds and pat- 28.202(a)(4)).
ent infringement bonds. (k) SF 1414, Consent of Surety (see
28.1065).
28.1051 Advance payment bonds. (l) SF 1415, Consent of Surety and In-
Advance payment bonds may be re- crease of Penalty (see 28.1063).
quired only when the contract contains (m) SF 1416, Payment Bond for Other
an advance payment provision and a Than Construction Contracts (see
performance bond is not furnished. The 28.1033 and 28.1063(b)).
(n) SF 1418, Performance Bond for
contracting officer shall determine the
Other Than Construction Contracts
amount of the advance payment bond
(see 28.1032 and 28.1063(b)).
necessary to protect the Government. (o) OF 90, Release of Lien on Real
28.1052 Patent infringement bonds. Property (see 28.2035).
(p) OF 91, Release of Personal Prop-
(a) Contracts providing for patent in- erty from Escrow (see 28.2035).
demnity may require these bonds only
if FR 48986, Nov. 28, 1989; 61 FR 39213, July 26,
(1) A performance bond is not fur- 1996]
nished; and
(2) The financial responsibility of the 28.1062 Substitution of surety bonds.
contractor is unknown or doubtful. (a) A new surety bond covering all or
(b) The contracting officer shall depart of the obligations on a bond pre-
termine the penal sum. viously approved may be substituted
535
28.1063 48 CFR Ch. 1 (10103 Edition)
for the original bond if approved by the 28.1065 Consent of surety.

head of the contracting activity, or as (a) When any contract is modified,
otherwise specified in agency regula- the contracting officer shall obtain the
tion. consent of surety if
(b) When a new surety bond is ap- (1) An additional bond is obtained
proved, the contracting officer shall from other than the original surety;
notify the principal and surety of the (2) No additional bond is required
original bond of the effective date of and
the new bond. (i) The modification is for new work
[48 FR 42286, Sept. 19, 1983, as amended at 61 beyond the scope of the original con-
FR 39213, July 26, 1996] tract; or
(ii) The modification does not change
28.1063 Additional bond and security. the contract scope but changes the
contract price (upward or downward)
(a) When additional bond coverage is
by more than 25 percent or $50,000; or
required and is secured in whole or in
(3) Consent of surety is required for a
part by the original surety or sureties,
novation agreement (See subpart 42.12).
agencies shall use Standard Form 1415,
(b) When a contract for which per-
Consent of Surety and Increase of Pen-
formance or payment is secured by any
alty. Standard Form 1415 is authorized of the types of security listed in 28.204
for local reproduction, and a copy of is modified as described in paragraph
the form is furnished for this purpose (a) of this subsection, no consent of
in part 53 of the looseleaf edition of the surety is required.
FAR. (c) Agencies shall use Standard Form
(b) When additional bond coverage is 1414, Consent of Surety, for all types of
required and is secured in whole or in contracts.
part by a new surety or by one of the
alternatives described in 28.204 in lieu [48 FR 42286, Sept. 19, 1983, as amended at 61
FR 31652, June 20, 1996]
of corporate or individual surety, agen-
cies shall use Standard Form 25, Per- 28.1066 Furnishing information.
formance Bond; Standard Form 1418,
Performance Bond for Other Than Con- (a) The surety on the bond, upon its
struction Contracts; Standard Form written request, may be furnished in-
formation on the progress of the work,
25A, Payment Bond; or Standard
payments, and the estimated percent-
Form 1416, Payment Bond for Other
age of completion, concerning the con-
Than Construction Contracts.
tract for which the bond was furnished.
[63 FR 44806, Aug. 22, 1997] (b) When a payment bond has been
provided, the contracting officer shall,
28.1064 Contract clause. upon request, furnish the name and ad-
(a) The contracting officer shall in- dress of the surety or sureties to any
sert the clause at 52.2282, Additional subcontractor or supplier who has fur-
Bond Security, in solicitations and nished or been requested to furnish
contracts when bonds are required. labor or material for the contract. In
(b) In accordance with Section addition, general information con-
cerning the work progress, payments,
806(a)(3) of Pub. L. 102190, as amended
and the estimated percentage of com-
by Sections 2091 and 8105 of Pub. L. 103
pletion may be furnished to persons
355, the contracting officer shall insert
who have provided labor or materials
the clause at 52.22812, Prospective
and have not been paid.
Subcontractor Requests for Bonds, in
(c) When a payment bond has been
solicitations and contracts with re-
provided for a contract, the head of the
spect to which a payment bond will be
agency or designee shall furnish a cer-
furnished pursuant to the Miller Act
tified copy of the bond and the con-
(see 28.1021), except for contracts for
tract for which it was given to any per-
the acquisition of commercial items as
son who makes a request therefor and
defined in Subpart 2.1. who furnishes an affidavit that the re-
[48 FR 42286, Sept. 19, 1983, as amended at 60 questor has supplied labor or materials
FR 48273, Sept. 18, 1995] for such work and payment therefor
536
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
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
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
(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
28.2032 48 CFR Ch. 1 (10103 Edition)
28.2032 Acceptability of assets. States or its outlying areas. These as-

(a) The Government will accept only sets will be accepted at 100 percent of
cash, readily marketable assets, or ir- the most current tax assessment value
revocable letters of credit from a feder- (exclusive of encumbrances) or 75 per-
ally insured financial institution from cent of the properties unencumbered
individual sureties to satisfy the un- market value provided a current ap-
derlying bond obligations. praisal is furnished (see 28.2033).
(b) Acceptable assets include (5) Irrevocable letters of credit (ILC)
(1) Cash, or certificates of deposit, or issued by a federally insured financial
other cash equivalents with a federally institution in the name of the con-
insured financial institution; tracting agency and which identify the
(2) United States Government securi- agency and solicitation or contract
ties at market value. (An escrow ac- number for which the ILC is provided.
count is not required if an individual (c) Unacceptable assets include but
surety offers Government securities are not limited to
held in book entry form at a depository (1) Notes or accounts receivable;
institution. In lieu thereof, the indi- (2) Foreign securities;
vidual shall provide evidence that the (3) Real property as follows:
depository institution has (i) placed a (i) Real property located outside the
notation against the individuals book United States and its outlying areas.
entry account indicating that the secu- (ii) Real property which is a principal
rity has been pledged in favor of the re- residence of the surety.
spective agency; (ii) agreed to notify (iii) Real property owned concur-
the agency prior to maturity of the se- rently regardless of the form of co-ten-
curity; and (iii) agreed to hold the pro- ancy (including joint tenancy, tenancy
ceeds of the security subject to the by the entirety, and tenancy in com-
pledge in favor of the agency until a mon) except where all co-tenants agree
substitution of securities is made or to act jointly.
the security interest is formally re- (iv) Life estates, leasehold estates, or
leased by the agency); future interests in real property.
(3) Stocks and bonds actively traded (4) Personal property other than that
on a national U.S. security exchange listed in paragraph (b) of this sub-
with certificates issued in the name of section (e.g., jewelry, furs, antiques);
the individual surety. National secu- (5) Stocks and bonds of the individual
rity exchanges are(i) the New York surety in a controlled, affiliated, or
Stock Exchange; (ii) the American closely held concern of the offeror/con-
Stock Exchange; (iii) the Boston Stock tractor;
Exchange; (iv) the Cincinnati Stock (6) Corporate assets (e.g., plant and
Exchange; (v) the Midwest Stock Ex- equipment);
change; (vi) the Philadelphia Stock Ex- (7) Speculative assets (e.g., mineral
change; (vii) the Pacific Stock Ex- rights);
change; and (viii) the Spokane Stock (8) Letters of credit, except as pro-
Exchange. These assets will be accept- vided in 28.2032(b)(5).
ed at 90 percent of their 52-week low, as
reflected at the time of submission of [54 FR 48987, Nov. 28, 1989, as amended at 68
the bond. Stock options and stocks on FR 28083, May 22, 2003]
the over-the-counter (OTC) market or
NASDQ Exchanges will not be accept- 28.2033 Acceptance of real property.
ed. Assistance in evaluating the ac- (a) Whenever a bond with a security
ceptability of securities may be ob- interest in real property is submitted,
tained from the Securities and Ex- the individual surety shall provide
change Commission, Division of En- (1) Evidence of title in the form of a
forcement, 450 Fifth Street NW., Wash- certificate of title prepared by a title
ington, DC 20549. insurance company approved by the
(4) Real property owned in fee simple United States Department of Justice.
by the surety without any form of con- This list entitled List of Approved At-
current ownership, except as provided torneys, Abstracters, and Title Compa-
in paragraph (c)(3)(iii) of this sub- nies is available from the Title Unit,
section, and located in the United Land Acquisition Section, Land and
540
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
28.2036 48 CFR Ch. 1 (10103 Edition)
judgment, or a sworn statement by the 28.2036 Contract clause.

subcontractor or supplier that the
Insert the clause at 52.22811 in solici-
claim is correct along with a notarized
authorization of the release by the sur- tations and contracts which require
ety stating that it approves of such re- the submission of bid guarantees, per-
lease. formance, or payment bonds.
(1) Contracts subject to the Miller Act. [54 FR 48988, Nov. 28, 1989]
The security interest shall be main-
tained for the later of (i) 1 year fol- 28.2037 Exclusion of individual sure-
lowing final payment, (ii) until comple- ties.
tion of any warranty period (applicable
only to performance bonds), or (iii) (a) An individual may be excluded
pending resolution of all claims filed from acting as a surety on bonds sub-
against the payment bond during the 1- mitted by offerors on procurement by
year period following final payment. the executive branch of the Federal
(2) Contracts subject to alternative pay- Government, by the acquiring agencys
ment protection (28.1021(b)(1)). The secu- head or designee utilizing the proce-
rity interest shall be maintained for dures in subpart 9.4. The exclusion
the full contract performance period shall be for the purpose of protecting
plus one year. the Government.
(3) Other contracts not subject to the (b) An individual may be excluded for
Miller Act. The security interest shall any of the following causes:
be maintained for 90 days following (1) Failure to fulfill the obligations
final payment or until completion of under any bond.
any warranty period (applicable only (2) Failure to disclose all bond obli-
to performance bonds), whichever is gations.
later.
(3) Misrepresentation of the value of
(b) Upon written request, the con-
tracting officer may release the secu- available assets or outstanding liabil-
rity interest on the individual suretys ities.
assets in support of a bid guarantee (4) Any false or misleading state-
based upon evidence that the offer sup- ment, signature or representation on a
ported by the individual surety will not bond or affidavit of individual
result in contract award. suretyship.
(c) Upon written request by the indi- (5) Any other cause affecting respon-
vidual surety, the contracting officer sibility as a surety of such serious and
may release a portion of the security compelling nature as may be deter-
interest on the individual suretys as- mined to warrant exclusion.
sets based upon substantial perform- (c) An individual surety excluded
ance of the contractors obligations pursuant to this subsection shall be in-
under its performance bond. Release of cluded on the List of Parties Excluded
the security interest in support of a from Federal Procurement and Non-
payment bond must comply with the procurement Programs. (See 9.404.)
subparagraphs (a) (1) through (3) of this (d) Contracting officers shall not ac-
subsection. In making this determina- cept the bonds of individual sureties
tion, the contracting officer will give
whose names appear on the List of Par-
consideration as to whether the
ties Excluded from Federal Procure-
unreleased portion of the lien is suffi-
ment and Nonprocurement Programs
cient to cover the remaining contract
obligations, including payments to sub- (see 9.404) unless the acquiring agencys
contractors and other potential liabil- head or a designee states in writing the
ities. The individual surety shall, as a compelling reasons justifying accept-
condition of the partial release, furnish ance.
an affidavit agreeing that the release (e) An exclusion of an individual sur-
of such assets does not relieve the indi- ety under this subsection will also pre-
vidual surety of its obligations under clude such party from acting as a con-
the bond(s). tractor in accordance with subpart 9.4.
[54 FR 48988, Nov. 28, 1989, as amended at 61 [54 FR 48988, Nov. 28, 1989, as amended at 60
FR 31652, June 20, 1996] FR 33066, June 26, 1995]
542
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 rein 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
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
28.2044 Contract clause. ices are required to maintain medical

Insert the clause at 52.22814, Irrev- liability insurance and indemnify the
ocable Letter of Credit, in solicitations Government for liability producing
and contracts for services, supplies, or acts or omissions by the contractor, its
construction, when a bid guarantee, or employees and agents (see 37.400).
performance bonds, or performance and [48 FR 42286, Sept. 19, 1983, as amended at 54
payment bonds are required. FR 5056, Jan. 31, 1989; 59 FR 67043, Dec. 28,
1994; 68 FR 28083, May 22, 2003]
[61 FR 31653, June 20, 1996]
28.302 Notice of cancellation or
Subpart 28.3Insurance change.
28.301 Policy. When the Government requires the
contractor to provide insurance cov-
Contractors shall carry insurance
under the following circumstances: erage, the policies shall contain an en-
(a)(1) The Government requires any dorsement that any cancellation or
contractor subject to Cost Accounting material change in the coverage ad-
Standard (CAS) 416 (48 CFR 9004.416 (ap- versely affecting the Governments in-
pendix B, FAR loose-leaf edition)) to terest shall not be effective unless the
obtain insurance, by purchase or self- insurer or the contractor gives written
coverage, for the perils to which the notice of cancellation or change as re-
contractor is exposed, except when (i) quired by the contracting officer. When
the Government, by providing in the the coverage is provided by self-insur-
contract in accordance with law, ance, the contractor shall not change
agrees to indemnify the contractor or decrease the coverage without the
under specified circumstances or (ii) administrative contracting officers
the contract specifically relieves the prior approval (see 28.308(c)).
contractor of liability for loss of or
damage to Government property. 28.303 Insurance against loss of or
(2) The Government reserves the damage to Government property.
right to disapprove the purchase of any When the Government requires or ap-
insurance coverage not in the Govern- proves insurance to cover loss of or
ments interest. damage to Government property (see
(3) Allowability of the insurance pro- 45.103, Responsibility and liability for
grams cost shall be determined in ac- Government property), it may be pro-
cordance with the criteria in 31.20519. vided by specific insurance policies or
(b) Contractors, whether or not their by inclusion of the risks in the con-
contracts are subject to CAS 416, are tractors existing policies. The policies
required by law and this regulation to shall disclose the Governments inter-
provide insurance for certain types of est in the property.
perils (e.g., workers compensation). In-
surance is mandatory also when com- 28.304 Risk-pooling arrangements.
mingling of property, type of oper-
ation, circumstances of ownership, or Agencies may establish risk-pooling
condition of the contract make it nec- arrangements. These arrangements are
essary for the protection of the Gov- designed to use the services of the in-
ernment. The minimum amounts of insurance industry for safety engineering
surance required by this regulation and the handling of claims at min-
(see 28.3072) may be reduced when a imum cost to the Government. The
contract is to be performed outside the agency responsible shall appoint a sin-
United states and its outlying areas. gle manager or point of contact for
When more than one agency is in- each arrangement.
volved, the agency responsible for re-
view and approval of a contractors in- 28.305 Overseas workers compensa-
tion and war-hazard insurance.
surance program shall coordinate with
other interested agencies before acting (a) Public-work contract, as used in
on significant insurance matters. this subpart, means any contract for a
(c) Contractors awarded nonpersonal fixed improvement or for any other
services contracts for health care serv- project, fixed or not, for the public use
545
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, rework 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
minimum amounts of liability indi- the comprehensive form of policy. The

cated. (See 28.308 for self-insurance.) policy shall provide for bodily injury
and property damage liability covering
28.3071 Group insurance plans. the operation of all automobiles used
(a) Prior approval requirement. Under in connection with performing the con-
cost-reimbursement contracts, before tract. Policies covering automobiles
buying insurance under a group insur- operated in the United States shall
ance plan, the contractor must submit provide coverage of at least $200,000 per
the plan for approval, in accordance person and $500,000 per occurrence for
with agency regulations. Any change bodily injury and $20,000 per occurrence
in benefits provided under an approved for property damage. The amount of li-
plan that can reasonably be expected ability coverage on other policies shall
to increase significantly the cost to the be commensurate with any legal re-
Government requires similar approval. quirements of the locality and suffi-
(b) Premium refunds or credits. The cient to meet normal and customary
plan shall provide for the Government claims.
to share in any premium refunds or (d) Aircraft public and passenger liabil-
credits paid or otherwise allowed to the ity. When aircraft are used in connec-
contractor. In determining the extent tion with performing the contract, the
of the Governments share in any pre- contracting officer shall require air-
mium refunds or credits, any special craft public and passenger liability in-
reserves and other refunds to which the surance. Coverage shall be at least
contractor may be entitled in the fu- $200,000 per person and $500,000 per oc-
ture shall be taken into account. currence for bodily injury, other than
passenger liability, and $200,000 per oc-
28.3072 Liability. currence for property damage. Cov-
(a) Workers compensation and employ- erage for passenger liability bodily in-
ers liability. Contractors are required jury shall be at least $200,000 multi-
to comply with applicable Federal and plied by the number of seats or pas-
State workers compensation and occu- sengers, whichever is greater.
pational disease statutes. If occupa- (e) Vessel liability. When contract per-
tional diseases are not compensable formance involves use of vessels, the
under those statutes, they shall be cov- contracting officer shall require, as de-
ered under the employers liability sec- termined by the agency, vessel colli-
tion of the insurance policy, except sion liability and protection and in-
when contract operations are so com- demnity liability insurance.
mingled with a contractors commer-
cial operations that it would not be 28.308 Self-insurance.
practical to require this coverage. Em- (a) When it is anticipated that 50 per-
ployers liability coverage of at least cent or more of the self-insurance costs
$100,000 shall be required, except in to be incurred at a segment of a con-
States with exclusive or monopolistic tractors business will be allocable to
funds that do not permit workers com- negotiated Government contracts, and
pensation to be written by private car- the self-insurance costs at the segment
riers. (See 28.305(c) for treatment of for the contractors fiscal year are ex-
contracts subject to the Defense Base pected to be $200,000 or more, the con-
Act.) tractor shall submit, in writing, infor-
(b) General liability. (1) The con- mation on its proposed self-insurance
tracting officer shall require bodily in- program to the administrative con-
jury liability insurance coverage writ- tracting officer and obtain that offi-
ten on the comprehensive form of pol- cials approval of the program. The
icy of at least $500,000 per occurrence. submission shall be by segment or seg-
(2) Property damage liability insur- ments of the contractors business to
ance shall be required only in special which the program applies and shall in-
circumstances as determined by the clude
agency. (1) A complete description of the pro-
(c) Automobile liability. The con- gram, including any resolution of the
tracting officer shall require auto- board of directors authorizing and
mobile liability insurance written on adopting coverage, including types of
547
28.309 48 CFR Ch. 1 (10103 Edition)
risks, limits of coverage, assignments part and/or the criteria at 31.20519 or

of safety and loss control, and legal (2) conditions or situations existing at
service responsibilities; the time of approval that were a basis
(2) If available, the corporate insur- for original approval of the program
ance manual and organization chart have changed to the extent that a pro-
detailing fiscal responsibilities for in- gram change is necessary.
surance; (d) To qualify for a self-insurance
(3) The terms regarding insurance program, a contractor must dem-
coverage for any Government property; onstrate ability to sustain the poten-
(4) The contractors latest financial tial losses involved. In making the de-
statements; termination, the contracting officer
(5) Any self-insurance feasibility shall consider the following factors:
studies or insurance market surveys (1) The soundness of the contractors
reporting comparative alternatives; financial condition, including available
(6) Loss history, premiums history, lines of credit.
and industry ratios; (2) The geographic dispersion of as-
(7) A formula for establishing re- sets, so that the potential of a single
serves, including percentage variations loss depleting all the assets is unlikely.
between losses paid and losses reserved; (3) The history of previous losses, in-
(8) Claims administration policy, cluding frequency of occurrence and
practices, and procedures; the financial impact of each loss.
(9) The method of calculating the (4) The type and magnitude of risk,
projected average loss; and such as minor coverage for the deduct-
(10) A disclosure of all captive insur- ible portion of purchased insurance or
ance company and re-insurance agree- major coverage for hazardous risks.
ments, including methods of computing (5) The contractors compliance with
cost. Federal and State laws and regula-
(b) Programs of self-insurance cov- tions.
ering a contractors insurable risks, in- (e) Agencies shall not approve a pro-
cluding the deductible portion of pur- gram of self-insurance for catastrophic
chased insurance, may be approved risks (e.g., see 50.403, Special proce-
when examination of a program indi- dures for unusually hazardous or nu-
cates that its application is in the Gov- clear risks). Should performance of
ernments interest. Agencies shall not Government contracts create the risk
approve a program of self-insurance for of catastrophic losses, the Government
workers compensation in a jurisdic- may, to the extent authorized by law,
tion where workers compensation does agree to indemnify the contractor or
not completely cover the employers li- recognize an appropriate share of pre-
ability to employees, unless the con- miums for purchased insurance, or
tractor both.
(1) Maintains an approved program of
(f) Self-insurance programs to pro-
self-insurance for any employers li-
tect a contractor against the costs of
ability not so covered; or
correcting its own defects in materials
(2) Shows that the combined cost to
or workmanship shall not be approved.
the Government of self-insurance for
For these purposes, normal rework es-
workers compensation and commer-
timates and warranty costs will not be
cial insurance for employers liability
considered self-insurance.
will not exceed the cost of covering
both kinds of risk by commercial in- [48 FR 42286, Sept. 19, 1983, as amended at 55
surance. FR 3883, Feb. 5, 1990; 66 FR 2131, Jan. 10, 2001]
(c) Once the administrative con-
tracting officer has approved a pro- 28.309 Contract clauses for workers
gram, the contractor must submit to compensation insurance.
that official for approval any major (a) The contracting officer shall in-
proposed changes to the program. Any sert the clause at 52.2283, Workers
program approval may be withdrawn if Compensation Insurance (Defense Base
a contracting officer finds that either Act), in solicitations and contracts
(1) any part of a program does not com- when the Defense Base Act applies (see
ply with the requirements of this sub- 28.305) and
548
(1) The contract will be a public-work ices, when a cost-reimbursement con-

contract performed outside the United tract is contemplated.
States; or [55 FR 52793, Dec. 21, 1990. Redesignated and
(2) The contract will be approved or amended at 61 FR 2639, Jan. 26, 1996]
financed under the Foreign Assistance
Act of 1961 (Pub. L. 87195) and is not 28.3112 Agency solicitation provi-
excluded by 28.305(b)(2). sions and contract clauses.
(b) The contracting officer shall in- Agencies may prescribe their own so-
sert the clause at 52.2284, Workers licitation provisions and contract
Compensation and War-Hazard Insur- clauses to implement the basic policies
ance Overseas, in solicitations and con- contained in this subpart 28.3.
tracts when the contract will be a pub- [55 FR 52793, Dec. 21, 1990. Redesignated at 61
lic-work contract performed outside FR 2639, Jan. 26, 1996]
the United States and the Secretary of
Labor waives the applicability of the 28.312 Contract clause for insurance
Defense Base Act (see 28.305(d)). of leased motor vehicles.
The contracting officer shall insert
28.310 Contract clause for work on a the clause at 52.2288, Liability and In-
Government installation.
suranceLeased Motor Vehicles, in so-
(a) Insert the clause at 52.2285, In- licitations and contracts for the leas-
suranceWork on a Government In- ing of motor vehicles (see subpart 8.11).
stallation, in solicitations and con-
tracts if a fixed-price contract is con- 28.313 Contract clauses for insurance
templated, the contract amount is ex- of transportation or transportation-
related services.
pected to exceed the simplified acquisi-
tion threshold, and the contract will (a) The contracting officer shall in-
require work on a Government instal- sert the clause at 52.2289, Cargo Insur-
lation, unless ance, in solicitations and contracts for
(1) Only a small amount of work is transportation or for transportation-
required on the Government installa- related services, except when freight is
tion (e.g., a few brief visits per month); shipped under rates subject to released
or or declared value.
(2) All work on the Government in- (b) The contracting officer shall in-
stallation will be performed outside sert a clause substantially the same as
the United States and its outlying that at 52.22810, Vehicular and General
areas. Public Liability Insurance, in solicita-
tions and contracts for transportation
(b) The contracting officer may in-
or for transportation-related services
sert the clause at 52.2285 in solicita-
when the contracting officer deter-
tions and contracts described in (a)(1)
mines that vehicular liability or gen-
and (2) above if it is in the Govern-
eral public liability insurance required
ments interest to do so.
by law is not sufficient.
FR 34759, July 3, 1995; 61 FR 39190, July 26, PART 29TAXES
1996; 68 FR 28083, May 22, 2003]
Sec.
28.311 Solicitation provision and con- 29.000 Scope of part.
tract clause on liability insurance
under cost-reimbursement con- Subpart 29.1General
tracts.
29.101 Resolving tax problems.
Subpart 29.2Federal Excise Taxes
In accordance with agency acquisi-
tion regulations, the contracting offi- 29.201 General.
cer shall insert the clause at 52.2287, 29.202 General exemptions.
InsuranceLiability to Third Persons, 29.203 Other Federal tax exemptions.
in solicitations and contracts, other
Subpart 29.3State and Local Taxes
than those for construction contracts
and those for architect-engineer serv- 29.300 Scope of subpart.
549
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.
otherwise noted.
Subpart 29.2Federal Excise
29.000 Scope of part. Taxes
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
(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
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,
2003]
FR 237, Jan. 2, 1997]
551
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 subpart 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
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
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
29.401 48 CFR Ch. 1 (10103 Edition)
Subpart 29.4Contract Clauses 29.4014 New Mexico gross receipts

and compensating tax.
29.401 Domestic contracts. (a) Definition. Services, as used in this
subsection, is as defined in the Gross
29.4011 Indefinite-delivery contracts Receipts and Compensating Tax Act of
for leased equipment. the State of New Mexico, Sec. 793(k)
Insert the clause at 52.2291, State NM SA 1978, and means all activities
and Local Taxes, in solicitations and engaged in for other persons for a con-
contracts for leased equipment when sideration, which activities involve
(a) A fixed-price indefinite-delivery predominately the performance of a
contract is contemplated; service as distinguished from selling or
(b) The contract will be performed leasing property. Services includes ac-
wholly or partly in the United States tivities performed by a person for its
or its outlying areas; and members of shareholders. In deter-
mining what is a service, the intended
(c) The place or places of delivery are
use, principal objective or ultimate ob-
not known at the time of contracting. jective of the contracting parties shall
[68 FR 28083, May 22, 2003] not be controlling. Services also in-
cludes construction activities and all
29.4012 Construction contracts per- tangible personal property that will be-
formed in North Carolina. come an ingredient or component part
The contracting officer shall insert of a construction project. Such tan-
the clause at 52.2292, North Carolina gible personal property retains its
State and Local Sales and Use Tax, in character as tangible personal property
solicitations and contracts for con- until it is installed as an ingredient or
struction to be performed in North component part of a construction
Carolina. If the requirement is for ves- project in New Mexico. However, sales
of tangible personal property that will
sel repair to be performed in North
become an ingredient or component
Carolina, the clause shall be used with
part of a construction project to per-
its Alternate I.
sons engaged in the construction busi-
29.4013 Federal, State, and local ness are sales of tangible personal
taxes. property.
(b) Contract clause. The contracting
(a) Except as provided in paragraph officer shall insert the clause at 52.229
(b) of this section, insert the clause at 10, State of New Mexico Gross Receipts
52.2293, Federal, State, and Local and Compensating Tax, in solicitations
Taxes, in solicitations and contracts and contracts issued by the agencies
if identified in paragraph (c) of this sub-
(1) The contract is to be performed section when all three of the following
wholly or partly in the United States conditions exist:
or its outlying areas; (1) The contractor will be performing
(2) A fixed-price contract is con- a cost-reimbursement contract.
templated; and (2) The contract directs or authorizes
(3) The contract is expected to exceed the contractor to acquire tangible per-
the simplified acquisition threshold. sonal property as a direct cost under a
(b) In a noncompetitive contract that contract and title to such property
meets all the conditions in paragraph passes directly to and vests in the
(a) of this section, the contracting offi- United States upon delivery of the
cer may insert the clause at 52.2294, property by the vendor.
Federal, State, and Local Taxes (State (3) The contract will be for services
and Local Adjustments), instead of the to be performed in whole or in part
within the State of New Mexico.
clause at 52.2293, if the price would
(c) Participating agencies. (1) The
otherwise include an inappropriate
agencies listed below have entered into
contingency for potential postaward
an agreement with the State of New
change(s) in State or local taxes.
Mexico to eliminate the double tax-
[68 FR 13205, Mar. 18, 2003, as amended at 68 ation of Government cost-reimburse-
FR 28083, May 22, 2003] ment contracts when contractors and
554
their subcontractors purchase tangible tract with a foreign government is con-

personal property to be used in per- templated.
forming services in whole or in part in [48 FR 42293, Sept. 19, 1983, as amended at 55
the State of New Mexico and for which FR 52793, Dec. 21, 1990; 61 FR 39198, July 26,
title to such property will pass to the 1996]
United States upon delivery of the
property to the contractor and its sub- 29.4022 Foreign cost-reimbursement
contractors by the vendor. Therefore, contracts.
the clause applies only to solicitations (a) The contracting officer shall in-
and contracts issued by the sert the clause at 52.2298, TaxesFor-
eign Cost-Reimbursement Contracts, in
United States Defense Special Weapons
Agency; solicitations and contracts when a
United States Department of Agriculture; cost-reimbursement contract is con-
United States Department of the Air Force; templated and the contract is to be
United States Department of the Army; performed wholly or partly in a foreign
United States Department of Energy; country, unless it is contemplated that
United States Department of Health and the contract will be with a foreign gov-
Human Services; ernment.
United States Department of Interior; (b) The contracting officer shall in-
United States Department of Labor; sert the clause at 52.2299, TaxesCost-
United States Department of the Navy; Reimbursement Contracts with For-
United States Department of Transpor- eign Governments, in solicitations and
tation; contracts when a cost-reimbursement
United States General Services Administra- contract with a foreign government is
tion; and contemplated.
United States National Aeronautics and
Space Administration.
PART 30COST ACCOUNTING
(2) Any other Federal agency which STANDARDS ADMINISTRATION
expects to award cost-reimbursement
contracts to be performed in New Mex- Sec.
ico should contact the New Mexico 30.000 Scope of part.
Taxation and Revenue Department to
execute a similar agreement. Subpart 30.1General
30.101 Cost Accounting Standards.
30.102 Cost Accounting Standards Board
FR 3883, Feb. 5, 1990; 55 FR 38517, Sept. 18,
publication.
1990; 62 FR 64930, Dec. 9, 1997. Redesignated
at 68 FR 13205, Mar. 18, 2003] Subpart 30.2CAS Program Requirements
29.402 Foreign contracts. 30.201 Contract requirements.
30.2011 CAS applicability.
29.4021 Foreign fixed-price contracts. 30.2012 Types of CAS coverage.
(a) The contracting officer shall in- 30.2014 Contract clauses.
sert the clause at 52.2296, TaxesFor- 30.2015 Waiver.
eign Fixed-Price Contracts, in solicita- 30.2016 Findings.
tions and contracts expected to exceed 30.2017 Cognizant Federal agency respon-
the simplified acquisition threshold sibilities.
30.202 Disclosure requirements.
when a fixed-price contract is con- 30.2021 General requirements.
templated and the contract is to be 30.2022 Impracticality of submission.
performed wholly or partly in a foreign 30.2023 Amendments and revisions.
country, unless it is contemplated that 30.2024 Privileged and confidential infor-
the contract will be with a foreign gov- mation.
ernment. 30.2025 Filing disclosure statements.
(b) The contracting officer shall in-
30.2027 Determinations.
sert the clause at 52.2297, Taxes 30.2028 Subcontractor disclosure state-
Fixed-Price Contracts With Foreign ments.
Governments, in solicitations and con-
tracts that exceed the simplified acqui- Subpart 30.3CAS Rules and Regulations
sition threshold when a fixed-price con- [Reserved]
555
30.000 48 CFR Ch. 1 (10103 Edition)
Subpart 30.4Cost Accounting Standards the Cost Accounting Standards Board

[Reserved] at 48 CFR Chapter 99; and
(2) The following preambles:
Subpart 30.5Cost Accounting Standards (i) Part IPreambles to the Cost Ac-
for Educational Institutions [Reserved] counting Standards Published by the
Cost Accounting Standards Board.
Subpart 30.6CAS Administration
(ii) Part IIPreambles to the Related
30.601 Responsibility. Rules and Regulations Published by
30.602 Changes to disclosed or established the Cost Accounting Standards Board.
cost accounting practices. (iii) Part IIIPreambles Published
30.6021 Equitable adjustments for new or under the FAR System.
modified standards. (d) The preambles are not regulatory
30.6022 Noncompliance with CAS require-
but are intended to explain why the
ments.
30.6023 Voluntary changes.
Standards and related Rules and Regu-
30.603 Subcontract administration. lations were written, and to provide ra-
tionale for positions taken relative to
SOURCE: 57 FR 39587, Aug. 31, 1992, unless issues raised in the public comments.
otherwise noted.
The preambles are printed in chrono-
30.000 Scope of part. logical order to provide an administra-
tive history.
This part describes policies and pro-
cedures for applying the Cost Account- [57 FR 39587, Aug. 31, 1992, as amended at 62
FR 40237, July 25, 1997; 63 FR 9060, Feb. 23,
ing Standards Board (CASB) rules and
1998]
regulations (48 CFR chapter 99 (FAR
appendix)) to negotiated contracts and 30.102 Cost Accounting Standards
subcontracts. This part does not apply Board publication.
to sealed bid contracts or to any con-
tract with a small business concern Copies of the CASB Standards and
(see 48 CFR 9903.2011(b) (FAR appen- Regulations are printed in title 48 of
dix) for these and other exemptions). the Code of Federal Regulations, chap-
ter 99, and may be obtained by writing
[57 FR 39587, Aug. 31, 1992, as amended at 61 the Superintendent of Documents, U.S.
FR 18916, Apr. 29, 1996; 62 FR 40237, July 25, Government Printing Office, Wash-
1997] ington, DC 20402, or by calling the
Washington, DC, ordering desk at area
Subpart 30.1General code (202) 5121800.
30.101 Cost Accounting Standards. [57 FR 39587, Aug. 31, 1992, as amended at 62
FR 40237, July 25, 1997]
(a) Public Law 100679 (41 U.S.C. 422)
requires certain contractors and sub-
contractors to comply with Cost Ac-
Subpart 30.2CAS Program
counting Standards (CAS) and to dis- Requirements
close in writing and follow consistently
30.201 Contract requirements.
their cost accounting practices.
(b) Contracts that refer to this part Title 48 CFR 9903.2011 (FAR appen-
30 for the purpose of applying the poli- dix) describes the rules for determining
cies, procedures, standards and regula- whether a proposed contract or sub-
tions promulgated by the CASB pursu- contract is exempt from CAS. Nego-
ant to Public Law 100679, shall be tiated contracts not exempt in accord-
deemed to refer to the CAS, and any ance with 48 CFR 9903.2011(b) shall be
other regulations promulgated by the subject to CAS. A CAS-covered con-
CASB (see 48 CFR chapter 99), all of tract may be subject to either full or
which are hereby incorporated in this modified coverage. The rules for deter-
part 30. mining whether full or modified cov-
(c) The appendix to the FAR loose- erage applies are in 48 CFR 9903.2012
leaf edition contains (FAR appendix).
(1) Cost Accounting Standards and [57 FR 39587, Aug. 31, 1992, as amended at 61
Cost Accounting Standards Board FR 18916, Apr. 29, 1996; 62 FR 40237, July 25,
Rules and Regulations Recodified by 1997]
556
30.2011 CAS applicability. certifies it is eligible for and elects to

See 48 CFR 9903.2011 (FAR appendix). use modified CAS coverage (see 48 CFR
9903.2012 (FAR Appendix)), unless the
[61 FR 18916, Apr. 29, 1996 as amended at 62 clause prescribed in paragraph (c) of
FR 40237, July 25, 1997] this subsection is used.
30.2012 Types of CAS coverage. (2) The clause at FAR 52.2303 re-
quires the contractor to comply with 48
See 48 CFR 9903.2012 (FAR appendix). CFR 9904.401, 9904.402, 9904.405, and
[61 FR 18916, Apr. 29, 1996, as amended at 62 9904.406 (FAR appendix) to disclose (if
FR 40237, July 25, 1997] it meets certain requirements) actual
cost accounting practices, and to fol-
30.2013 Solicitation provisions. low consistently its established cost
(a) The contracting officer shall in- accounting practices.
sert the provision at 52.2301, Cost Ac- (c) Consistency in Cost Accounting
counting Standards Notices and Cer- Practices. The contracting officer shall
tification, in solicitations for proposed insert the clause at FAR 52.2304, Con-
contracts subject to CAS as specified in sistency in Cost Accounting Practices,
48 CFR 9903.201 (FAR appendix). in negotiated contracts that are ex-
(b) If an award to an educational in- empt from CAS requirements solely on
stitution is contemplated prior to July the basis of the fact that the contract
1, 1997, the contracting officer shall in-
is to be awarded to a United Kingdom
sert the basic provision set forth at
contractor and is to be performed sub-
52.2301 with its Alternate I, unless the
contract is to be performed by a Feder- stantially in the United Kingdom (see
ally Funded Research and Development 48 CFR 9903.2011(b)(12) (FAR appen-
Center (FFRDC) (see 48 CFR 9903.201 dix)).
2(c)(5) (FAR appendix)), or the provi- (d) Administration of Cost Accounting
sion at 48 CFR 9903.2012(c)(6) (FAR ap- Standards. (1) The contracting officer
pendix) applies. shall insert the clause at FAR 52.2306,
Administration of Cost Accounting
[61 FR 18917, Apr. 29, 1996, as amended at 62
FR 40237, July 25, 1997]
Standards, in contracts containing any
of the clauses prescribed in paragraphs
30.2014 Contract clauses. (a), (b), or (e) of this subsection.
(a) Cost Accounting Standards. (1) The (2) The clause at FAR 52.2306 speci-
contracting officer shall insert the fies rules for administering CAS re-
clause at FAR 52.2302, Cost Account- quirements and procedures to be fol-
ing Standards, in negotiated contracts, lowed in cases of failure to comply.
unless the contract is exempted (see 48 (e) Cost Accounting StandardsEdu-
CFR 9903.2011 (FAR appendix)), the cational Institutions. (1) The contracting
contract is subject to modified cov- officer shall insert the clause at FAR
erage (see 48 CFR 9903.2012 (FAR ap- 52.2305, Cost Accounting Standards
pendix)), or the clause prescribed in Educational Institution, in negotiated
paragraph (c) of this subsection is used. contracts awarded to educational insti-
(2) The clause at FAR 52.2302 re- tutions, unless the contract is exempt-
quires the contractor to comply with ed (see 48 CFR 9903.2011 (FAR appen-
all CAS specified in 48 CFR part 9904 dix)), the contract is to be performed
(FAR appendix), to disclose actual cost by an FFRDC (see 48 CFR 9903.201
accounting practices (applicable to 2(c)(5) (FAR appendix)), or the provi-
CAS-covered contracts only), and to sion at 48 CFR 9903.2012(c)(6) (FAR ap-
follow disclosed and established cost pendix) applies.
accounting practices consistently.
(2) The clause at FAR 52.2305 re-
(b) Disclosure and consistency of cost
quires the educational institution to
accounting practices. (1) Insert the
comply with all CAS specified in 48
clause at FAR 52.2303, Disclosure and
Consistency of Cost Accounting Prac- CFR part 9905 (FAR appendix), to dis-
tices, in negotiated contracts when the close actual cost accounting practices
contract amount is over $500,000, but as required by 48 CFR 9903.2021(f) (FAR
less than $50 million, and the offeror appendix), and to follow disclosed and
557
30.2015 48 CFR Ch. 1 (10103 Edition)
established cost accounting practices (5) When the contractor or subcon-

consistently. tractor will not accept the contract or
subcontract if CAS applies, a state-
FR 40237, July 25, 1997; 65 FR 36029, June 6, ment to that effect.
2000] (6) Whether cost or pricing data will
be obtained, and if so, a discussion of
30.2015 Waiver. how the data will be used in negoti-
(a) The head of the agency ating the contract or subcontract
(1) May waive the applicability of price.
CAS for a particular contract or sub- (7) The benefits to the Government of
contract under the conditions listed in waiving CAS.
paragraph (b) of this subsection; and (8) The potential risk to the Govern-
(2) Must not delegate this waiver au- ment of waiving CAS.
thority to any official in the agency (9) The date by which the waiver is
below the senior contract policy- needed.
making level. (10) Any other information that may
(b) The head of the agency may grant be useful in evaluating the request.
a waiver when one of the following con- (d) When neither of the conditions in
ditions exists:
paragraph (b) of this subsection exists,
(1) The contract or subcontract value
the waiver request must be prepared in
is less than $15,000,000, and the head of
accordance with 48 CFR 9903.2015(e)
the agency determines, in writing, that
the segment of the contractor or sub- (FAR Appendix) and submitted to the
contractor that will perform the con- CAS Board.
tract or subcontract (e) Each agency must report any
(i) Is primarily engaged in the sale of waivers granted under paragraph (a) of
commercial items; and this subsection to the CAS Board, on a
(ii) Has no contracts or subcontracts fiscal year basis, not later than 90 days
that are subject to CAS. after the close of the Governments fis-
(2) The head of the agency deter- cal year.
mines that exceptional circumstances [65 FR 36030, June 6, 2000]
exist whereby a waiver of CAS is nec-
essary to meet the needs of the agency. 30.2016 Findings.
Exceptional circumstances exist only
when the benefits to be derived from See 48 CFR 9903.2016 (FAR appendix).
waiving the CAS outweigh the risk as- [61 FR 18917, Apr. 29, 1996, as amended at 62
sociated with the waiver. The deter- FR 40237, July 25, 1997]
mination that exceptional cir-
cumstances exist must 30.2017 Cognizant Federal agency re-
(i) Be set forth in writing; and sponsibilities.
(ii) Include a statement of the spe- See 48 CFR 9903.2017 (FAR appendix).
cific circumstances that justify grant-
ing the waiver. [61 FR 18917, Apr. 29, 1996, as amended at 62
(c) When one of the conditions in FR 40237, July 25, 1997]
paragraph (b) of this subsection exists,
30.202 Disclosure requirements.
the request for waiver should include
the following: 30.2021 General requirements.
(1) The amount of the proposed
award. See 48 CFR 9903.2021 (FAR appendix).
(2) A description of the contract or [61 FR 18917, Apr. 29, 1996, as amended at 62
subcontract type (e.g., firm-fixed-price, FR 40237, July 25, 1997]
cost-reimbursement).
(3) Whether the segment(s) that will 30.2022 Impracticality of submission.
perform the contract or subcontract
See 48 CFR 9903.2022 (FAR appendix).
has CAS-covered contracts or sub-
contracts. [61 FR 18917, Apr. 29, 1996, as amended at 62
(4) A description of the item(s) being FR 40237, July 25, 1997]
procured.
558
30.2023 Amendments and revisions. Statement to ascertain whether it is

See 48 CFR 9903.2023 (FAR appendix). current, accurate, and complete and
shall report the results to the cog-
[61 FR 18917, Apr. 29, 1996, as amended at 62 nizant ACO, who shall determine
FR 40237, July 25, 1997] whether or not it adequately describes
the offerors cost accounting practices.
30.2024 Privileged and confidential
information. If the ACO identifies any areas of inad-
equacy, the ACO shall request a revised
See 48 CFR 9903.2024 (FAR appendix). Disclosure Statement. If the Disclosure
[61 FR 18917, Apr. 29, 1996, as amended at 62 Statement is adequate, the ACO shall
FR 40237, July 25, 1997] notify the offeror in writing, with cop-
ies to the cognizant auditor and con-
30.2025 Filing disclosure statements. tracting officer. The notice of ade-
See 48 CFR 9903.2025 (FAR appendix). quacy shall state that a disclosed prac-
tice shall not, by virtue of such disclo-
FR 40237, July 25, 1997]
sure, be considered an approved prac-
tice for pricing proposals or accumu-
30.2026 Responsibilities. lating and reporting contract perform-
ance cost data. Generally, the ACO
(a) The contracting officer is respon-
shall furnish the contractor notifica-
sible for determining when a proposed
contract may require CAS coverage tion of adequacy or inadequacy within
and for including the appropriate no- 30 days after the Disclosure Statement
tice in the solicitation. The con- has been received by the ACO.
tracting officer must then ensure that (b) Compliance determination. After
the offeror has made the required solic- the notification of adequacy, the cog-
itation certifications and that required nizant auditor shall conduct a detailed
Disclosure Statements are submitted. compliance review to ascertain wheth-
(Also see 48 CFR 9903.2013 and 9903.202 er or not the disclosed practices com-
(FAR appendix).) ply with Part 31 and the CAS and shall
(b) The contracting officer shall not advise the ACO of the results. The ACO
award a CAS-covered contract until shall take action regarding noncompli-
the ACO has made a written deter- ance with CAS under FAR 30.6022. The
mination that a required Disclosure ACO may require a revised Disclosure
Statement is adequate unless, in order Statement and adjustment of the
to protect the Governments interest, prime contract price or cost allowance.
the contracting officer waives the re- Noncompliance with part 31 shall be
quirement for an adequacy determina- processed separately, in accordance
tion before award. In this event, a de- with normal administrative practices.
termination of adequacy shall be re- [57 FR 39587, Aug. 31, 1992, as amended at 61
quired as soon as possible after the FR 18917, Apr. 29, 1996; 62 FR 40237, July 25,
award. 1997]
(c) The cognizant auditor is respon-
sible for conducting reviews of Disclo- 30.2028 Subcontractor disclosure
sure Statements for adequacy and com- statements.
pliance. (a) When the Government requires
(d) The cognizant ACO is responsible determinations of adequacy or inad-
for determinations of adequacy and equacy, the ACO cognizant of the sub-
compliance of the Disclosure State- contractor shall provide such deter-
ment. mination to the ACO cognizant of the
[57 FR 39587, Aug. 31, 1992, as amended at 61 prime contractor or next higher tier
FR 18917, Apr. 29, 1996; 62 FR 40237, July 25, subcontractor. The ACO cognizant of
1997] higher tier subcontractors or prime
contractors shall not reverse the deter-
30.2027 Determinations. mination of the ACO cognizant of the
(a) Adequacy determination. As pre- subcontractor.
scribed by 48 CFR 9903.2026 (FAR ap- (b) Any determination that it is im-
pendix), the cognizant auditor shall practical to secure a subcontractors
conduct a review of the Disclosure Disclosure Statement must be made in
559
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-
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
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
30.6022 48 CFR Ch. 1 (10103 Edition)
determination of compliance or non- be computed pursuant to Public Law

compliance. If the ACO determines 100679.
that the contractors practices are in (d) Remedies for contractor failure to
noncompliance, a written explanation make required submissions. (1) If the con-
shall be provided as to why the ACO tractor does not submit the accounting
disagrees with the contractors ration- change description or the general dol-
ale. The ACO shall notify the con- lar magnitude of the change or cost im-
tractor and the auditor in writing of pact proposal (in the form and manner
the determination. If the ACO makes a specified), the ACO, with the assistance
determination of noncompliance, the of the cognizant auditor, shall estimate
procedures in (b) through (d), as appro- the general dollar magnitude of the
priate, shall be followed. cost impact on CAS-covered contracts
(b) Accounting changes. (1) The clause and subcontracts. The ACO may then
at FAR 52.2306, Administration of Cost withhold an amount not to exceed 10
Accounting Standards, requires the percent of each subsequent amount de-
contractor to submit a description of termined payable related to the con-
any cost accounting practice change tractors CAS-covered prime contracts,
needed to correct a noncompliance. up to the estimated general dollar
magnitude of the cost impact until the
(2) The ACO shall review the pro-
required submission is furnished by the
posed change concurrently for ade-
contractor.
quacy and compliance (see 30.2027). If
(2) If the contractor has not sub-
the description of the change meets
mitted the cost impact proposal before
both tests, the ACO shall notify the
the total withheld amount reaches the
contractor and request submission of a
estimated general dollar magnitude
cost impact proposal in accordance
and the ACO determines that an ad-
with FAR 30.602.
justment is required (see 30.602), the
(c) Contract price adjustments. (1) The ACO shall notify the contractor and re-
ACO shall request that the contractor quest agreement as to the cost or price
submit a cost impact proposal within adjustment together with any applica-
the time specified in the clause at FAR ble interest as computed in accordance
52.2306, Administration of Cost Ac- with 30.6022(c)(2). The contractor shall
counting Standards. also be advised that in the event no
(2) Upon receipt of the cost impact agreement on the cost or price adjust-
proposal, the ACO shall then follow the ment is reached within 20 days, the
procedures in 30.6021(c)(1). In accord- ACO may make a unilateral adjust-
ance with the clause at 52.2302, Cost ment, subject to contractor appeal, as
Accounting Standards, or FAR 52.2305, provided in the clause at 52.2331, Dis-
Cost Accounting StandardsEdu- putes.
cational Institution, the ACO shall in- (3) If the ACO determines that there
clude and separately identify, as part is no material increase in costs as a re-
of the computation of the contract sult of the noncompliance, the ACO
price adjustment(s), applicable interest shall notify the contractor in writing
on any increased costs paid to the con- that the contractor is in noncompli-
tractor as a result of the noncompliance, that corrective action should be
ance. Interest shall be computed from taken, and that if such noncompliance
the date of overpayment to the time subsequently results in materially in-
the adjustment is effected. If the costs creased costs to the Government, the
were incurred and paid evenly over the provisions of the clause at 52.2302,
fiscal years during which the non- Cost Accounting Standards, 52.2305,
compliance occurred, then the mid- Cost Accounting StandardsEdu-
point of the period in which the non- cational Institution, and/or the clause
compliance began may be considered at 52.2303, Disclosure and Consistency
the baseline for the computation of in- of Cost Accounting Practices, will be
terest. An alternate equitable method enforced.
should be used if the costs were not in- [57 FR 39590, Aug. 31, 1992; 57 FR 43409, Sept.
curred and paid evenly over the fiscal 21, 1992, as amended at 57 FR 47373, Oct. 15,
years during which the noncompliance 1992; 59 FR 67043, Dec. 28, 1994; 61 FR 18918,
occurred. Interest under 52.2302 should Apr. 29, 1996]
562
30.6023 Voluntary changes. up to the estimated general dollar

(a) General. (1) The contractor may magnitude of the cost impact, until the
voluntarily change its disclosed or es- required submission is furnished by the
tablished cost accounting practices. contractor.
(2) The contract price may be ad- (2) If the contractor has not sub-
justed for voluntary changes. However, mitted the cost impact proposal before
increased costs resulting from a vol- the total withheld amount reaches the
untary change may be allowed only if estimated general dollar magnitude
the ACO determines that the change is and the ACO determines that an ad-
desirable and not detrimental to the justment is appropriate (see 30.602), the
interest of the Government. ACO shall request the contractor to
(b) Accounting changes. (1) The clause agree to the cost or price adjustment.
at FAR 52.2306, Administration of Cost The contractor shall also be advised
Accounting Standards, requires the that, in the event no agreement on the
contractor to notify the ACO and sub- cost or price adjustment is reached
mit a description of any voluntary cost within 20 days, the ACO may make a
accounting practice change not less unilateral adjustment subject to con-
than 60 days (or such other date as may tractor appeal, as provided in the
be mutually agreed to) before imple- clause at 52.2331, Disputes.
mentation of the voluntary change. [57 FR 39587, Aug. 31, 1992, as amended at 59
(2) The ACO, with the assistance of FR 67043, Dec. 28, 1994; 61 FR 18918, Apr. 29,
the cognizant auditor, shall review the 1996]
proposed change concurrently for ade-
quacy and compliance (see 30.2027). If 30.603 Subcontract administration.
the description of the change meets When a negotiated CAS price adjust-
both tests, the ACO shall notify the ment or a determination of noncompli-
contractor and request submission of a ance is required at the subcontract
cost impact proposal in accordance level, the ACO cognizant of the subcon-
with FAR 30.602. tractor shall make the determination
(c) Contract price adjustments. (1) With and advise the ACO cognizant of the
the assistance of the auditor, the ACO prime contractor or next higher tier
shall promptly analyze the cost impact subcontractor of the decision. The
proposal to determine whether or not ACOs cognizant of higher tier sub-
the proposed change will result in in- contractors or prime contractors shall
creased costs being paid by the Govern- not reverse the determination of the
ment. The ACO shall consider all of the ACO cognizant of the subcontractor.
contractors affected CAS-covered con-
tracts and subcontracts, but any cost [57 FR 39590, Aug. 31, 1992; 57 FR 43495, Sept.
changes to higher-tier subcontracts or 21, 1992; 61 FR 18918, Apr. 29, 1996]
contracts of other contractors over and
above the cost of the subcontract ad- PART 31CONTRACT COST
justment shall not be considered. PRINCIPLES AND PROCEDURES
(2) The ACO shall then follow the
procedures in 30.6021(c)(1). Sec.
(d) Remedies for contractor failure to 31.000 Scope of part.
make required submissions. (1) If the con- 31.001 Definitions.
tractor does not submit the accounting 31.002 Availability of accounting guide.
change description or the general dol-
Subpart 31.1Applicability
lar magnitude of the change or cost im-
pact proposal (in the form and manner 31.100 Scope of subpart.
specified), the ACO, with the assistance 31.101 Objectives.
of the cognizant auditor, shall estimate 31.102 Fixed-price contracts.
the general dollar magnitude of the 31.103 Contracts with commercial organiza-
cost impact on CAS-covered contracts tions.
31.104 Contracts with educational institu-
and subcontracts. The ACO may then
tions.
withhold an amount not to exceed 10 31.105 Construction and architect-engineer
percent of each subsequent amount de- contracts.
termined payable related to the con- 31.106 Facilities contracts.
tractors CAS-covered prime contracts 31.1061 Applicable cost principles.
563
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
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-
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-
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.
564
31.000 Scope of part. of the actuarial accrued liability over

This part contains cost principles the actuarial value of the assets of a
and procedures for (a) the pricing of pension plan is the unfunded actuarial
contracts, subcontracts, and modifica- liability. The excess of the actuarial
tions to contracts and subcontracts value of the assets of a pension plan
whenever cost analysis is performed over the actuarial accrued liability is
(see 15.4041(c)) and (b) the determina- an actuarial surplus and is treated as a
tion, negotiation, or allowance of costs negative unfunded actuarial liability.
when required by a contract clause. Actuarial assumption means an esti-
mate of future conditions affecting
48 FR 42301, Sept. 19, 1983, as amended at 62
FR 51271, Sept. 30, 1997] pension cost; e.g., mortality rate, em-
ployee turnover, compensation levels,
31.001 Definitions. earnings on pension plan assets, and
As used in this part changes in values of pension plan as-
Accrued benefit cost method means an sets.
actuarial cost method under which Actuarial cost method means a tech-
units of benefits are assigned to each nique which uses actuarial assump-
cost accounting period and are valued tions to measure the present value of
as they accrue; i.e., based on the serv- future pension benefits and pension
ices performed by each employee in the plan administrative expenses, and that
period involved. The measure of nor- assigns the cost of such benefits and
mal cost under this method for each expenses to cost accounting periods.
cost accounting period is the present The actuarial cost method includes the
value of the units of benefit deemed to asset valuation method used to deter-
be credited to employees for service in mine the actuarial value of the assets
that period. The measure of the actu- of a pension plan.
arial accrued liability at a plans in- Actuarial gain and loss means the ef-
ception date is the present value of the fect on pension cost resulting from dif-
units of benefit credited to employees ferences between actuarial assump-
for service prior to that date. (This
tions and actual experience.
method is also known as the unit cred-
it cost method without salary projec- Actuarial valuation means the deter-
tion.) mination, as of a specified date, of the
Accumulating costs means collecting normal cost, actuarial accrued liabil-
cost data in an organized manner, such ity, actuarial value of the assets of a
as through a system of accounts. pension plan, and other relevant values
Actual cash value means the cost of for the pension plan.
replacing damaged property with other Allocate means to assign an item of
property of like kind and quality in the cost, or a group of items of cost, to one
physical condition of the property im- or more cost objectives. This term in-
mediately before the damage. cludes both direct assignment of cost
Actual costs means (except for subpart and the reassignment of a share from
31.6) amounts determined on the basis an indirect cost pool.
of costs incurred, as distinguished from Compensated personal absence means
forecasted costs. Actual costs include any absence from work for reasons
standard costs properly adjusted for such as illness, vacation, holidays, jury
applicable variances. duty, military training, or personal ac-
Actuarial accrued liability means pen- tivities for which an employer pays
sion cost attributable, under the actu- compensation directly to an employee
arial cost method in use, to years prior in accordance with a plan or custom of
to the current period considered by a the employer.
particular actuarial valuation. As of
Compensation for personal services
such date, the actuarial accrued liabil-
ity represents the excess of the present means all remuneration paid currently
value of future benefits and adminis- or accrued, in whatever form and
trative expenses over the present value whether paid immediately or deferred,
of future normal costs for all plan par- for services rendered by employees to
ticipants and beneficiaries. The excess the contractor.
565
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
566
more than minimal value, and is ex- Material-quantity standard means a

pected to be held by an enterprise for preestablished measure, expressed in
continued use or possession beyond the physical terms, of the quantity of ma-
current accounting period for the bene- terial.
fits it yields. Moving average cost means an inven-
Job means a homogeneous cluster of tory costing method under which an
work tasks, the completion of which average unit cost is computed after
serves an enduring purpose for the or- each acquisition by adding the cost of
ganization. Taken as a whole, the col- the newly acquired units to the cost of
lection of tasks, duties, and respon- the units of inventory on hand and di-
sibilities constitutes the assignment viding this figure by the new total
for one or more individuals whose work number of units.
is of the same nature and is performed Nonqualified pension plan means any
at the same skill/ responsibility level pension plan other than a qualified
as opposed to a position, which is a col- pension plan as defined in this part.
lection of tasks assigned to a specific Normal cost means the annual cost at-
individual. Within a job, there may be tributable, under the actuarial cost
pay categories which are dependent on method in use, to current and future
the degree of supervision required by years as of a particular valuation date
the employee while performing as- excluding any payment in respect of an
signed tasks which are performed by unfunded actuarial liability.
all persons with the same job. Original complement of low cost equip-
Job class of employees means employment means a group of items acquired
ees performing in positions within the for the initial outfitting of a tangible
same job. capital asset or an operational unit, or
Labor cost at standard means a a new addition to either. The items in
preestablished measure of the labor the group individually cost less than
element of cost, computed by multi- the minimum amount established by
plying labor-rate standard by labor- the contractor for capitalization for
time standard. the classes of assets acquired but in the
Labor market means a place where in- aggregate they represent a material in-
dividuals exchange their labor for com- vestment. The group, as a complement,
pensation. Labor markets are identi- is expected to be held for continued
fied and defined by a combination of service beyond the current period. Ini-
the following factors: tial outfitting of the unit is completed
(1) Geography, when the unit is ready and available
(2) Education and/or technical back- for normal operations.
ground required, Pay-as-you-go cost method means a
(3) Experience required by the job, method of recognizing pension cost
(4) Licensing or certification require- only when benefits are paid to retired
ments, employees or their beneficiaries.
(5) Occupational membership, and Pension plan means a deferred com-
(6) Industry. pensation plan established and main-
Labor-rate standard means a tained by one or more employers to
preestablished measure, expressed in provide systematically for the payment
monetary terms, of the price of labor. of benefits to plan participants after
Labor-time standard means a their retirements, provided that the
preestablished measure, expressed in benefits are paid for life or are payable
temporal terms, of the quantity of for life at the option of the employees.
labor. Additional benefits such as permanent
Material cost at standard means a and total disability and death pay-
preestablished measure of the material ments, and survivorship payments to
elements of cost, computed by multi- beneficiaries of deceased employees,
plying material-price standard by ma- may be an integral part of a pension
terial-quantity standard. plan.
Material-price standard means a Pension plan participant means any
preestablished measure, expressed in employee or former employee of an em-
monetary terms, of the price of mate- ployer or any member or former mem-
rial. ber of an employee organization, who is
567
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
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 infor advance agreements.
568
31.101 Objectives. 31.103 Contracts with commercial or-

ganizations.
In recognition of differing organiza-
tional characteristics, the cost prin- This category includes all contracts
ciples and procedures in the succeeding and contract modifications for sup-
subparts are grouped basically by orga- plies, services, or experimental, devel-
opmental, or research work negotiated
nizational type; e.g., commercial con-
with organizations other than edu-
cerns and educational institutions. The
cational institutions (see 31.104), con-
overall objective is to provide that, to struction and architect-engineer con-
the extent practicable, all organiza- tracts (see 31.105), State and local gov-
tions of similar types doing similar ernments (see 31.107) and nonprofit or-
work will follow the same cost prin- ganizations (see 31.108) on the basis of
ciples and procedures. To achieve this cost.
uniformity, individual deviations con- (a) The cost principles and proce-
cerning cost principles require advance dures in subpart 31.2 and agency sup-
approval of the agency head or des- plements shall be used in pricing nego-
ignee. Class deviations for the civilian tiated supply, service, experimental,
agencies require advance approval of developmental, and research contracts
the Civilian Agency Acquisition Coun- and contract modifications with com-
cil. Class deviations for the National mercial organizations whenever cost
Aeronautics and Space Administration analysis is performed as required by
require advance approval of the Assist- 15.4041(c).
ant Administrator for Procurement. (b) In addition, the contracting offi-
Class deviations for the Department of cer shall incorporate the cost prin-
ciples and procedures in subpart 31.2
Defense require advance approval of
and agency supplements by reference
the Director of Defense Procurement,
in contracts with commercial organiza-
Office of the Under Secretary of De- tions as the basis for
fense for Acquisition, Technology, and (1) Determining reimbursable costs
Logistics. under (i) cost-reimbursement contracts
[48 FR 42301, Sept. 19, 1983, as amended at 56 and cost-reimbursement subcontracts
FR 67133, Dec. 27, 1991; 61 FR 31655, June 20, under these contracts performed by
1996; 65 FR 24325, Apr. 25, 2000; 67 FR 13068, commercial organizations and (ii) the
Mar. 20, 2002] cost-reimbursement portion of time-
and-materials contracts except when
31.102 Fixed-price contracts. material is priced on a basis other than
The applicable subparts of part 31 at cost (see 16.601(b)(3));
(2) Negotiating indirect cost rates
shall be used in the pricing of fixed-
(see subpart 42.7);
price contracts, subcontracts, and (3) Proposing, negotiating, or deter-
modifications to contracts and sub- mining costs under terminated con-
contracts whenever (a) cost analysis is tracts (see 49.103 and 49.113);
performed, or (b) a fixed-price contract (4) Price revision of fixed-price incen-
clause requires the determination or tive contracts (see 16.204 and 16.403);
negotiation of costs. However, applica- (5) Price redetermination of price re-
tion of cost principles to fixed-price determination contracts (see 16.205 and
contracts and subcontracts shall not be 16.206); and
construed as a requirement to nego- (6) Pricing changes and other con-
tiate agreements on individual ele- tract modifications.
ments of cost in arriving at agreement [48 FR 42301, Sept. 19, 1983, as amended at 62
on the total price. The final price ac- FR 51271, Sept. 30, 1997]
cepted by the parties reflects agree-
ment only on the total price. Further, 31.104 Contracts with educational in-
notwithstanding the mandatory use of stitutions.
cost principles, the objective will con- This category includes all contracts
tinue to be to negotiate prices that are and contract modifications for research
fair and reasonable, cost and other fac- and development, training, and other
tors considered. work performed by educational institu-
tions.
569
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
rates or computations. Contracting of- (B) Costs incident to major repair

ficers should review the computations and overhaul of rental equipment are
and factors included within the speci- unallowable.
fied schedule and ensure that unallow- (C) The allowability of charges for
able or unacceptably computed factors construction equipment rented from
are not allowed in cost submissions. any division, subsidiary, or organiza-
(B) Predetermined schedules of con- tion under common control, will be de-
struction equipment use rates (e.g., the termined in accordance with 31.205
Construction Equipment Ownership 36(b)(3).
and Operating Expense Schedule pub- (3) Costs incurred at the job site inci-
lished by the U.S. Army Corps of Engi- dent to performing the work, such as
neers, industry sponsored construction the cost of superintendence,
equipment cost guides, or commer- timekeeping and clerical work, engi-
cially published schedules of construc- neering, utility costs, supplies, mate-
tion equipment use cost) provide aver- rial handling, restoration and cleanup,
age ownership and operating rates for etc., are allowable as direct or indirect
construction equipment. The allowance costs, provided the accounting practice
for ownership costs should include the used is in accordance with the contrac-
cost of depreciation and may include tors established and consistently fol-
facilities capital cost of money. The allowed cost accounting practices for all
lowance for operating costs may in- work.
clude costs for such items as fuel, fil- (4) Rental and any other costs, less
ters, oil, and grease; servicing, repairs, any applicable credits incurred in ac-
quiring the temporary use of land,
and maintenance; and tire wear and re-
structures, and facilities are allowable.
pair. Costs of labor, mobilization, de-
Costs, less any applicable credits, in-
mobilization, overhead, and profit are
curred in constructing or fabricating
generally not reflected in schedules,
structures and facilities of a temporary
and separate consideration may be nec-
nature are allowable.
essary.
(C) When a schedule of predetermined [48 FR 42301, Sept. 19, 1983, as amended at 50
use rates for construction equipment is FR 23607, June 4, 1985; 52 FR 19804, May 27,
1987; 62 FR 51271, Sept. 30, 1997]
used to determine direct costs, all
costs of equipment that are included in 31.106 Facilities contracts.
the cost allowances provided by the
schedule shall be identified and elimi- 31.1061 Applicable cost principles.
nated from the contractors other di- The cost principles and procedures
rect and indirect costs charged to the applicable to the evaluation and deter-
contract. If the contractors account- mination of costs under facilities con-
ing system provides for site or home of- tracts (as defined in 45.301), and sub-
fice overhead allocations, all costs contracts thereunder, will be governed
which are included in the equipment by the type of entity to which a facili-
allowances may need to be included in ties contract is awarded. Except as oth-
any cost input base before computing erwise provided in 31.1062 below, sub-
the contractors overhead rate. In peri- part 31.2 applies to facilities contracts
ods of suspension of work pursuant to a awarded to commercial organizations;
contract clause, the allowance for subpart 31.3 applies to facilities con-
equipment ownership shall not exceed tracts awarded to educational institu-
an amount for standby cost as deter- tions; and 31.105 applies to facilities
mined by the schedule or contract pro- contracts awarded to construction con-
vision. tractors. Whichever cost principles are
(ii) Reasonable costs of renting con- appropriate will be used in the pricing
struction equipment are allowable (but of facilities contracts and contract
see paragraph (C) below). modifications if cost analysis is per-
(A) Costs, such as maintenance and formed as required by 15.4041(c). In ad-
minor or running repairs incident to dition, the contracting officer shall in-
operating such rented equipment, that corporate the cost principles and proce-
are not included in the rental rate are dures appropriate in the circumstances
allowable. (e.g., subpart 31.2; subpart 31.3; or
571
31.1062 48 CFR Ch. 1 (10103 Edition)
31.105) by reference in facilities con- allocable to the acquisition of such fa-

tracts as the basis for cilities.
(a) Determining reimbursable costs (d) Contracts providing for the instal-
under facilities contracts, including lation of new facilities or the rehabili-
cost-reimbursement subcontracts tation of existing facilities may in-
thereunder; volve the use of the contractors plant
(b) Negotiating indirect cost rates; maintenance labor, as distinguished
and from direct labor engaged in the pro-
(c) Determining costs of terminated duction of the companys normal prod-
contracts when the contractor elects to ucts. In such instances, only those
voucher out costs (see subpart 49.3), and types of indirect manufacturing and
for settlement by determination (see plant operating costs that are related
49.1097). to or incurred by reason of the expendi-
[48 FR 42301, Sept. 19, 1983, as amended at 62 tures of the classes of labor used for
FR 51271, Sept. 30, 1997] the performance of the facilities work
may be allocated to the facilities con-
31.1062 Exceptions to general rules tract. Thus, a facilities contract which
on allowability and allocability. involves the use of plant maintenance
(a) A contractors established ac- labor only would not be subject to an
counting system and procedures are allocation of such cost items as direct
normally directed to the equitable al- productive labor supervision, deprecia-
location of costs to the types of prod- tion, and maintenance expense applica-
ucts which the contractor produces or ble to productive machinery and equip-
services rendered in the course of nor- ment, or raw material and finished
mal operating activities. The acquisi- goods storage costs.
tion of, or work on, facilities for the (e) Where a facilities contract calls
Government normally does not involve for the construction, production, or re-
the manufacturing processes, plant de- habilitation of equipment or other
partmental operations, cost patterns of items that are involved in the regular
work, administrative and managerial course of the contractors business by
control, or clerical effort usual to pro- the use of the contractors direct labor
duction of the contractors normal and manufacturing processes, the indi-
products or services. rect costs normally allocated to all
(b) Advance agreements (see 31.109) that work may be allocated to the fa-
should be made between the contractor cilities contract.
and the contracting officer as to indi-
rect cost items to be applied to the fa- 31.1063 Contractors commercial
items.
cilities acquisition. A contractors nor-
mal accounting practice for allocating If facilities constituting the contrac-
indirect costs to the acquisition of con- tors usual commercial items (or only
tractor facilities may range from minor modifications thereof) are ac-
charging all these costs to this acquisi- quired by the Government under the
tion to not charging any. When nec- contract, the Government shall not
essary to produce an equitable result, pay any amount in excess of the con-
the contractors usual method of allo- tractors most favored customer price
cating indirect cost shall be varied, and or the price of other suppliers for like
appropriate adjustment shall be made quantities of the same or substantially
to the pools of indirect cost and the the same items, whichever is lower.
bases of their distribution. [48 FR 42301, Sept. 19, 1983, as amended at 60
(c) The purchase of completed facili- FR 48248, Sept. 18, 1995]
ties (or services in connection with the
facilities) from outside sources does 31.107 Contracts with State, local, and
not involve the contractors direct federally recognized Indian tribal
labor or indirect plant maintenance governments.
personnel. Accordingly, indirect manu- (a) Subpart 31.6 provides principles
facturing and plant overhead costs, and standards for determining costs ap-
which are primarily incurred or gen- plicable to contracts with State, local,
erated by reason of direct labor or and federally recognized Indian tribal
maintenance labor operations, are not governments. They provide the basis
572
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
31.110 48 CFR Ch. 1 (10103 Edition)
memorandum providing the informa- 31.110 Indirect cost rate certification

tion specified in 15.4063, as applicable. and penalties on unallowable costs.
(h) Examples of costs for which ad- (a) Certain contracts require certifi-
vance agreements may be particularly cation of the indirect cost rates pro-
important are posed for final payment purposes. See
(1) Compensation for personal serv- 42.7032 for administrative procedures
ices, including but not limited to al- regarding the certification provisions
lowances for off-site pay, incentive and the related contract clause pre-
pay, location allowances, hardship pay, scription.
cost of living differential, and termi- (b) If unallowable costs are included
nation of defined benefit pension plans; in final indirect cost settlement pro-
(2) Use charges for fully depreciated posals, penalties may be assessed. See
assets; 42.709 for administrative procedures re-
(3) Deferred maintenance costs; garding the penalty assessment provi-
(4) Precontract costs; sions and the related contract clause
prescription.
(5) Independent research and develop-
ment and bid and proposal costs; [60 FR 42658, Aug. 16, 1995, as amended at 62
(6) Royalties and other costs for use FR 237, Jan. 2, 1997]
of patents;
(7) Selling and distribution costs; Subpart 31.2Contracts With
(8) Travel and relocation costs, as re- Commercial Organizations
lated to special or mass personnel
movements, as related to travel via 31.201 General.
contractor-owned, -leased, or -char- 31.2011 Composition of total cost.
tered aircraft, or as related to max-
imum per diem rates; (a) The total cost of a contract is the
(9) Costs of idle facilities and idle ca- sum of the direct and indirect costs al-
pacity; locable to the contract, incurred or to
be incurred, less any allocable credits,
(10) Severance pay to employees on
plus any allocable cost of money pursu-
support service contracts;
ant to 31.20510. In ascertaining what
(11) Plant reconversion; constitutes a cost, any generally ac-
(12) Professional services (e.g., legal, cepted method of determining or esti-
accounting, and engineering); mating costs that is equitable and is
(13) General and administrative costs consistently applied may be used, in-
(e.g., corporate, division, or branch al- cluding standard costs properly ad-
locations) attributable to the general justed for applicable variances. See
management, supervision, and conduct 31.2012(b) and (c) for Cost Accounting
of the contractors business as a whole. Standards (CAS) requirements.
These costs are particularly significant (b) While the total cost of a contract
in construction, job-site, architect-en- includes all costs properly allocable to
gineer, facilities, and Government- the contract, the allowable costs to the
owned contractor operated (GOCO) Government are limited to those allo-
plant contracts (see 31.203(f)); cable costs which are allowable pursu-
(14) Costs of construction plant and ant to part 31 and applicable agency
equipment (see 31.105(d)). supplements.
(15) Costs of public relations and ad- [48 FR 42301, Sept. 19, 1983, as amended at 59
vertising; and FR 67045, Dec. 28, 1994]
(16) Training and education costs (see
31.20544(h)). 31.2012 Determining allowability.
(a) The factors to be considered in de-
termining whether a cost is allowable
FR 12298, Apr. 9, 1986; 51 FR 27489, July 31,
1986; 52 FR 9038, Mar. 20, 1987; 52 FR 27806,
include the following:
July 24, 1987; 54 FR 34755, Aug. 21, 1989; 59 FR (1) Reasonableness.
67045, Dec. 28, 1994; 61 FR 69288, Dec. 31, 1996; (2) Allocability.
62 FR 51271, Sept. 30, 1997; 63 FR 9061, Feb. 23, (3) Standards promulgated by the
1998] CAS Board, if applicable; otherwise,
574
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
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
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.
576
31.202 Direct costs. quire subdivision of these groupings,

(a) A direct cost is any cost that can e.g., building occupancy costs might be
be identified specifically with a par- separable from those of personnel ad-
ticular final cost objective. No final ministration within the manufacturing
cost objective shall have allocated to it overhead group. This necessitates se-
as a direct cost any cost, if other costs lecting a distribution base common to
incurred for the same purpose in like all cost objectives to which the group-
circumstances have been included in ing is to be allocated. The base should
any indirect cost pool to be allocated be selected so as to permit allocation
to that or any other final cost objec- of the grouping on the basis of the ben-
tive. Costs identified specifically with efits accruing to the several cost objec-
the contract are direct costs of the tives. When substantially the same re-
contract and are to be charged directly sults can be achieved through less pre-
to the contract. All costs specifically cise methods, the number and composi-
identified with other final cost objection of cost groupings should be gov-
tives of the contractor are direct costs erned by practical considerations and
of those cost objectives and are not to should not unduly complicate the allo-
be charged to the contract directly or cation.
indirectly. (c) Once an appropriate base for dis-
(b) For reasons of practicality, any tributing indirect costs has been ac-
direct cost of minor dollar amount may cepted, it shall not be fragmented by
be treated as an indirect cost if the ac- removing individual elements. All
counting treatment items properly includable in an indi-
(1) Is consistently applied to all final rect cost base should bear a pro rata
cost objectives; and share of indirect costs irrespective of
(2) Produces substantially the same their acceptance as Government con-
results as treating the cost as a direct tract costs. For example, when a cost
cost. input base is used for the distribution
of G&A costs, all items that would
31.203 Indirect costs. properly be part of the cost input base,
(a) An indirect cost is any cost not whether allowable or unallowable,
directly identified with a single, final shall be included in the base and bear
cost objective, but identified with two their pro rata share of G&A costs.
or more final cost objectives or an in- (d) The contractors method of allo-
termediate cost objective. It is not sub- cating indirect costs shall be in accord-
ject to treatment as a direct cost. ance with standards promulgated by
After direct costs have been deter- the CAS Board, if applicable to the
mined and charged directly to the con- contract; otherwise, the method shall
tract or other work, indirect costs are be in accordance with generally accept-
those remaining to be allocated to the ed accounting principles which are con-
several cost objectives. An indirect sistently applied. The method may re-
cost shall not be allocated to a final quire examination when
cost objective if other costs incurred (1) Substantial differences occur be-
for the same purpose in like cir- tween the cost patterns of work under
cumstances have been included as a di- the contract and the contractors other
rect cost of that or any other final cost work;
objective. (2) Significant changes occur in the
(b) Indirect costs shall be accumu- nature of the business, the extent of
lated by logical cost groupings with subcontracting, fixed-asset improve-
due consideration of the reasons for in- ment programs, inventories, the vol-
curring such costs. Each grouping ume of sales and production, manufac-
should be determined so as to permit turing processes, the contractors prod-
distribution of the grouping on the ucts, or other relevant circumstances;
basis of the benefits accruing to the or
several cost objectives. Commonly, (3) Indirect cost groupings developed
manufacturing overhead, selling ex- for a contractors primary location are
penses, and general and administrative applied to offsite locations. Separate
(G&A) expenses are separately grouped. cost groupings for costs allocable to
Similarly, the particular case may re- offsite locations may be necessary to
577
31.204 48 CFR Ch. 1 (10103 Edition)
permit equitable distribution of costs firm-fixed-price subcontract or fixed-

on the basis of the benefits accruing to price subcontract with economic price
the several cost objectives. adjustment provisions are allowable to
(e) A base period for allocating indi- the extent that allowance is consistent
rect costs is the cost accounting period with the appropriate subpart of this
during which such costs are incurred part 31 applicable to the subcontract
and accumulated for distribution to involved. Costs incurred as payments
work performed in that period. The cri- under firm-fixed-price subcontracts or
teria and guidance in 48 CFR 9904.406 fixed-price subcontracts with economic
for selecting the cost accounting peri- price adjustment provisions or modi-
ods to be used in allocating indirect fications thereto, when cost analysis
costs are incorporated herein for appli- was performed under 15.4041(c), shall
cation to contracts subject to full CAS be allowable only to the extent that
coverage. For contracts subject to the price was negotiated in accordance
modified CAS coverage and for non- with 31.102.
CAS-covered contracts, the base period (c) Section 31.205 does not cover
for allocating indirect costs will nor- every element of cost. Failure to in-
mally be the contractors fiscal year.
clude any item of cost does not imply
But a shorter period may be appro-
that it is either allowable or unallow-
priate (1) for contracts in which per-
able. The determination of allowability
formance involves only a minor portion
shall be based on the principles and
of the fiscal year, or (2) when it is gen-
standards in this subpart and the treat-
eral practice in the industry to use a
ment of similar or related selected
shorter period. When a contract is per-
items. When more than one subsection
formed over an extended period, as
many base periods shall be used as are in 31.205 is relevant to a contractor
required to represent the period of con- cost, the cost shall be apportioned
tract performance. among the applicable subsections, and
(f) Special care should be exercised in the determination of allowability of
applying the principles of paragraphs each portion shall be based on the guid-
(b), (c), and (d) above when Govern- ance contained in the applicable sub-
ment-owned contractor-operated section. When a cost, to which more
(GOCO) plants are involved. The dis- than one subsection in 31.205 is rel-
tribution of corporate, division, or evant, cannot be apportioned, the de-
branch office G&A expenses to such termination of allowability shall be
plants operating with little or no de- based on the guidance contained in the
pendence on corporate administrative subsection that most specifically deals
activities may require more precise with, or best captures the essential na-
cost groupings, detailed accounts ture of, the cost at issue.
screening, and carefully developed dis- [48 FR 42301, Sept. 19, 1983, as amended at 53
tribution bases. FR 17858, May 18, 1988; 62 FR 51271, Sept. 30,
1997]
FR 39590, Aug. 31, 1992]
31.205 Selected costs.
31.204 Application of principles and
procedures. 31.2051 Public relations and adver-
tising costs.
(a) Costs shall be allowed to the ex-
tent they are reasonable, allocable, and (a) Public relations means all func-
determined to be allowable under tions and activities dedicated to
31.201, 31.202, 31.203, and 31.205. These (1) Maintaining, protecting, and en-
criteria apply to all of the selected hancing the image of a concern or its
items that follow, even if particular products; or
guidance is provided for certain items (2) Maintaining or promoting recip-
for emphasis or clarity. rocal understanding and favorable rela-
(b) Costs incurred as reimbursements tions with the public at large, or any
or payments to a subcontractor under segment of the public. The term public
a cost-reimbursement, fixed-price in- relations includes activities associated
centive, or price redeterminable type with areas such as advertising, cus-
subcontract of any tier above the first tomer relations, etc.
578
(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.
579
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
(b) Reasonableness(1) Compensation (d) Form of payment. (1) Compensation

pursuant to labor-management agree- for personal services includes com-
ments. If costs of compensation estab- pensation paid or to be paid in the fu-
lished under arms length labor-man- ture to employees in the form of
agement agreements negotiated under (i) Cash;
the terms of the Federal Labor Rela- (ii) Corporate securities, such as
tions Act or similar state statutes are stocks, bonds, and other financial in-
otherwise allowable, the costs are rea- struments (see paragraph (d)(2) of this
sonable unless, as applied to work in subsection regarding valuation); or
performing Government contracts, the (iii) Other assets, products, or serv-
costs are unwarranted by the character ices.
and circumstances of the work or dis-
(2) When compensation is paid with
criminatory against the Government.
securities of the contractor or of an af-
The application of the provisions of a
filiate, the following additional restric-
labor-management agreement designed
to apply to a given set of cir- tions apply:
cumstances and conditions of employ- (i) Valuation placed on the securities
ment (e.g., work involving extremely is the fair market value on the first
hazardous activities or work not re- date the number of shares awarded is
quiring recurrent use of overtime) is known, determined upon the most ob-
unwarranted when applied to a Govern- jective basis available.
ment contract involving significantly (ii) Accruals for the cost of securities
different circumstances and conditions before issuing the securities to the em-
of employment (e.g., work involving ployees are subject to adjustment ac-
less hazardous activities or work con- cording to the possibilities that the
tinually requiring use of overtime). It employees will not receive the securi-
is discriminatory against the Govern- ties and that their interest in the ac-
ment if it results in employee com- cruals will be forfeited.
pensation (in whatever form or name) (e) Income tax differential pay. (1) Dif-
in excess of that being paid for similar ferential allowances for additional in-
non-Government work under com- come taxes resulting from foreign as-
parable circumstances. signments are allowable.
(2) Compensation not covered by labor- (2) Differential allowances for addi-
management agreements. Compensation tional income taxes resulting from do-
for each employee or job class of em- mestic assignments are unallowable.
ployees must be reasonable for the (However, payments for increased em-
work performed. Compensation is rea- ployee income or Federal Insurance
sonable if the aggregate of each meas- Contributions Act taxes incident to al-
urable and allowable element sums to a lowable reimbursed relocation costs
reasonable total. In determining the are allowable under 31.20535(a)(10).)
reasonableness of total compensation,
(f) Bonuses and incentive compensation.
consider only allowable individual ele-
(1) Bonuses and incentive compensa-
ments of compensation. In addition to
tion are allowable provided the
the provisions of 31.2013, in testing the
reasonableness of compensation for (i) Awards are paid or accrued under
particular employees or job classes of an agreement entered into in good
employees, consider factors determined faith between the contractor and the
to be relevant by the contracting offi- employees before the services are ren-
cer. Factors that may be relevant in- dered or pursuant to an established
clude, but are not limited to, con- plan or policy followed by the con-
formity with compensation practices of tractor so consistently as to imply, in
other firms effect, an agreement to make such pay-
(i) Of the same size; ment; and
(ii) In the same industry; (ii) Basis for the award is supported.
(iii) In the same geographic area; and (2) When the bonus and incentive
(iv) Engaged in similar non-Govern- compensation payments are deferred,
ment work under comparable cir- the costs are subject to the require-
cumstances. ments of paragraphs (f)(1) and (k) of
(c) [Reserved] this subsection.
581
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
(2) Any compensation represented by pursuant toan agreement entered

dividend payments or which is cal- into in good faith between the con-
culated based on dividend payments is tractor and employees before the work
unallowable. or services are performed; and the
(3) If a contractor pays an employee terms and conditions of the established
in lieu of the employee receiving or ex- plan. The cost of changes in pension
ercising a right, option, or benefit plans that are discriminatory to the
which would have been unallowable Government or are not intended to be
under this paragraph (i), such pay- applied consistently for all employees
ments are also unallowable. under similar circumstances in the fu-
(j) Pension costs. (1) A pension plan, as ture are not allowable.
defined in 31.001, is a deferred com- (iii) Except as provided for early re-
pensation plan. Additional benefits tirement benefits in paragraph (j)(7) of
such as permanent and total disability this subsection, one-time-only pension
and death payments and survivorship supplements not available to all par-
payments to beneficiaries of deceased ticipants of the basic plan are not al-
employees may be treated as pension lowable as pension costs unless the
costs, provided the benefits are an inte- supplemental benefits represent a sepa-
gral part of the pension plan and meet rate pension plan and the benefits are
all the criteria pertaining to pension payable for life at the option of the em-
costs. ployee.
(2) Pension plans are normally seg- (iv) Increases in payments to pre-
regated into two types of plans: de- viously retired plan participants cov-
fined-benefit or defined-contribution ering cost-of-living adjustments are al-
pension plans. The cost of all defined- lowable if paid in accordance with a
benefit pension plans shall be meas- policy or practice consistently fol-
ured, allocated, and accounted for in lowed.
compliance with the provisions of 48 (3) Defined-benefit pension plans. This
CFR 9904.412, Cost accounting standard paragraph covers pension plans in
for composition and measurement of which the benefits to be paid or the
pension cost, and 48 CFR 9904.413, Ad- basis for determining such benefits are
justment and allocation of pension established in advance and the con-
cost. The costs of all defined-contribu- tributions are intended to provide the
tion pension plans shall be measured, stated benefits. The cost limitations
allocated, and accounted for in accord- and exclusions pertaining to defined-
ance with the provisions of 48 CFR benefit plans are as follows:
9904.412 and 48 CFR 9904.413. Pension (i)(A) Except for nonqualified pension
costs are allowable subject to the ref- plans, pension costs (see 48 CFR
erenced standards and the cost limita- 9904.41240(a)(1)) assigned to the cur-
tions and exclusions set forth in para- rent accounting period, but not funded
graphs (j)(2)(i) and (j)(3) through (8) of during it, shall not be allowable in sub-
this subsection. sequent years (except that a payment
(i) Except for nonqualified pension made to a fund by the time set for fil-
plans using the pay-as-you-go cost ing the Federal income tax return or
method, to be allowable in the current any extension thereof is considered to
year, pension costs must be funded by have been made during such taxable
the time set for filing of the Federal year). However, any portion of pension
income tax return or any extension cost computed for a cost accounting
thereof. Pension costs assigned to the period, that exceeds the amount re-
current year, but not funded by the tax quired to be funded pursuant to a waiv-
return time, shall not be allowable in er granted under the provisions of the
any subsequent year. For nonqualified Employees Retirement Income Secu-
pension plans using the pay-as-you-go rity Act of 1974 (ERISA), will be allow-
cost method, to be allowable in the able in those future accounting periods
current year, pension costs must be al- in which the funding of such excess
locable in accordance with 48 CFR amounts occurs (see 48 CFR 9904.412
9904.41250(d)(3). 50(c)(5)).
(ii) Pension payments must be rea- (B) For nonqualified pension plans,
sonable in amount and must be paid except those using the pay-as-you-go
583
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
benefits is determined by the contribu- were terminated before the adoption of

tions made. It also covers profit shar- the plan is unallowable; and
ing, savings plans, and other such (iv) The total of the incentive pay-
plans, provided the plans fall within ments to any employee may not exceed
the definition of a pension plan in para- the amount of the employees annual
graph (j)(1) of this subsection. salary for the previous fiscal year be-
(i) Allowable pension cost is limited fore the employees retirement.
to the net contribution required to be (8) Employee stock ownership plans
made for a cost accounting period after (ESOP). (i) An ESOP is an individual
taking into account dividends and stock bonus plan designed specifically
other credits, where applicable. How- to invest in the stock of the employer
ever, any portion of pension cost com- corporation. The contractors contribu-
puted for a cost accounting period that tions to an Employee Stock Ownership
exceeds the amount required to be Trust (ESOT) may be in the form of
funded pursuant to a waiver granted cash, stock, or property. Costs of
under the provisions of ERISA will be ESOPs are allowable subject to the
allowable in those future accounting following conditions:
periods in which the funding of such (A) Contributions by the contractor
excess amounts occurs (see 48 CFR in any one year may not exceed 15 per-
9904.41250(c)(5)). cent (25 percent when a money pur-
(ii) The provisions of paragraphs chase plan is included) of salaries and
(j)(3) (ii) and (iv) of this subsection wages of employees participating in
apply to defined-contribution plans. the plan in any particular year.
(6) Pension plans using the pay-as-you- (B) The contribution rate (ratio of
go cost method. The cost of pension contribution to salaries and wages of
plans using the pay-as-you-go cost participating employees) may not ex-
method shall be measured, allocated, ceed the last approved contribution
and accounted for in accordance with rate except when approved by the con-
48 CFR 9904.412 and 9904.413. Pension tracting officer based upon justifica-
costs for a pension plan using the pay- tion provided by the contractor. When
as-you-go cost method shall be allow- no contribution was made in the pre-
able to the extent they are allocable, vious year for an existing ESOP, or
reasonable, and not otherwise unallow- when a new ESOP is first established,
able. and the contractor proposes to make a
(7) Early retirement incentive plans. An contribution in the current year, the
early retirement incentive plan is a contribution rate shall be subject to
plan under which employees receive a the contracting officers approval.
bonus or incentive, over and above the (C) When a plan or agreement exists
requirement of the basic pension plan, wherein the liability for the contribu-
to retire early. These plans normally tion can be compelled for a specific
are not applicable to all participants of year, the expense associated with that
the basic plan and do not represent life liability is assignable only to that pe-
income settlements, and as such would riod. Any portion of the contribution
not qualify as pension costs. However, not funded by the time set for filing of
for contract costing purposes, early re- the Federal income tax return for that
tirement incentive payments are al- year or any extension thereof shall not
lowable subject to the pension cost cri- be allowable in subsequent years.
teria contained in paragraphs (j)(3)(i) (D) When a plan or agreement exists
through (iv) provided wherein the liability for the contribu-
(i) The costs are accounted for and tion cannot be compelled, the amount
allocated in accordance with the con- contributed for any year is assignable
tractors system of accounting for pen- to that year provided the amount is
sion costs. funded by the time set for filing of the
(ii) The payments are made in ac- Federal income tax return for that
cordance with the terms and conditions year.
of the contractors plan; (E) When the contribution is in the
(iii) The plan is applied only to ac- form of stock, the value of the stock
tive employees. The cost of extending contribution shall be limited to the
the plan to employees who retired or fair market value of the stock on the
585
31.2056 48 CFR Ch. 1 (10103 Edition)
date that title is effectively trans- Awards made in periods subsequent to

ferred to the trust. Cash contributions the period when the work being remu-
shall be allowable only when the con- nerated was performed are not allow-
tractor furnishes evidence satisfactory able.
to the contracting officer dem- (2) The costs of deferred awards shall
onstrating that stock purchases by the be measured, allocated, and accounted
ESOT are or will be at a fair market for in compliance with the provisions
price; e.g., makes arrangements with of 48 CFR 9904.415, Accounting for the
the trust permitting the contracting Cost of Deferred Compensation.
officer to examine purchases of stock (3) Deferred compensation payments
by the trust to determine that prices to employees under awards made before
paid are at fair market value. When ex- the effective date of 48 CFR 9904.415 are
cessive prices are paid, the amount of allowable to the extent they would
the excess will be credited to the same have been allowable under prior acqui-
indirect cost pools that were charged sition regulations.
for the ESOP contributions in the year (l) Compensation incidental to business
in which the stock purchase occurs. acquisitions. The following costs are un-
However, when the trust purchases the allowable:
stock with borrowed funds which will
(1) Payments to employees under
be repaid over a period of years by cash
agreements in which they receive spe-
contributions from the contractor to
cial compensation, in excess of the con-
the trust, the excess price over fair
tractors normal severance pay prac-
market value shall be credited to the
tice, if their employment terminates
indirect cost pools pro rata over the pe-
riod of years during which the con- following a change in the management
tractor contributes the cash used by control over, or ownership of, the con-
the trust to repay the loan. When the tractor or a substantial portion of its
fair market value of unissued stock or assets.
stock of a closely held corporation is (2) Payments to employees under
not readily determinable, the valuation plans introduced in connection with a
will be made on a case-by-case basis change (whether actual or prospective)
taking into consideration the guide- in the management control over, or
lines for valuation used by the IRS. ownership of, the contractor or a sub-
(ii) Amounts contributed to an ESOP stantial portion of its assets in which
arising from either (A) an additional those employees receive special com-
investment tax credit (see 1975 Tax Re- pensation, which is contingent upon
duction ActTRASOPs); or (B) a pay- the employee remaining with the con-
roll-based tax credit (see Economic Re- tractor for a specified period of time.
covery Tax Act of 1981) are unallow- (m) Fringe benefits. (1) Fringe benefits
able. are allowances and services provided by
(iii) The requirements of subdivision the contractor to its employees as
(j)(3)(ii) above are applicable to Em- compensation in addition to regular
ployee Stock Ownership Plans. wages and salaries. Fringe benefits in-
(k) Deferred compensation other than clude, but are not limited to, the cost
pensions. (1) Deferred compensation is of vacations, sick leave, holidays, mili-
an award given by an employer to com- tary leave, employee insurance, and
pensate an employee in a future cost supplemental unemployment benefit
accounting period or periods for serv- plans. Except as provided otherwise in
ices rendered in one or more cost ac- subpart 31.2, the costs of fringe benefit
counting periods before the date of re- are allowable to the extent that they
ceipt of compensation by the employee. are reasonable and are required by law,
Deferred compensation does not in- employer-employee agreement, or an
clude the amount of year-end accruals established policy of the contractor.
for salaries, wages, or bonuses that are (2) That portion of the cost of com-
paid within a reasonable period of time pany-furnished automobiles that re-
after the end of a cost accounting pe- lates to personal use by employees (in-
riod. Subject to 31.2056(a), deferred cluding transportation to and from
awards are allowable when they are work) is unallowable regardless of
based on current or future services. whether the cost is reported as taxable
586
income to the employees (see 31.205 ciples and practices as promulgated by

46(f)). the Actuarial Standards Board.
(n) Employee rebate and purchase dis- (3) To be allowable, costs must be
count plans. Rebates and purchase dis- funded by the time set for filing the
counts, in whatever form, granted to Federal income tax return or any ex-
employees on products or services pro- tension thereof. PRB costs assigned to
duced by the contractor or affiliates the current year, but not funded or
are unallowable. otherwise liquidated by the tax return
(o) Postretirement benefits other than time, shall not be allowable in any sub-
pensions (PRB). (1) PRB covers all bene- sequent year.
fits, other than cash benefits and life (4) Increased PRB costs caused by
insurance benefits paid by pension delay in funding beyond 30 days after
plans, provided to employees, their each quarter of the year to which they
beneficiaries, and covered dependents are assignable are unallowable.
during the period following the em- (5) Costs of postretirement benefits
ployees retirement. Benefits encom- in paragraph (o)(2)(iii) of this section
passed include, but are not limited to, attributable to past service (transi-
postretirement health care; life insur- tion obligation) as defined in Finan-
ance provided outside a pension plan; cial Accounting Standards Board
and other welfare benefits such as tui- Statement 106, paragraph 110, are al-
tion assistance, day care, legal serv- lowable subject to the following limita-
ices, and housing subsidies provided tion: The allowable amount of such
after retirement. costs assignable to a contractor fiscal
(2) To be allowable, PRB costs must year cannot exceed the amount of such
be reasonable and incurred pursuant to costs which would be assigned to that
law, employer-employee agreement, or contractor fiscal year under the de-
an established policy of the contractor. layed recognition methodology de-
In addition, to be allowable, PRB costs scribed in paragraphs 112 and 113 of
must also be calculated in accordance Statement 106.
with paragraphs (o)(2)(i), (ii), or (iii) of (6) The Government shall receive an
this section. equitable share of any amount of pre-
(i) Cash basis. Cost recognized as ben- viously funded PRB costs which revert
efits when they are actually provided, or inure to the contractor. Such equi-
must be paid to an insurer, provider, or table share shall reflect the Govern-
other recipient for current year bene- ments previous participation in PRB
fits or premiums. costs through those contracts for
which cost or pricing data were re-
(ii) Terminal funding. If a contractor
quired or which were subject to subpart
elects a terminal-funded plan, it does
31.2.
not accrue PRB costs during the work-
(p) Limitation on allowability of com-
ing lives of employees. Instead, it ac-
pensation for certain contractor per-
crues and pays the entire PRB liability
sonnel.
to an insurer or trustee in a lump sum
upon the termination of employees (or (Note that pursuant to Section 804 of Pub. L.
upon conversion to such a terminal- 105261, the definition of senior executive
funded plan) to establish and maintain in (p)(2)(ii) has been changed for compensa-
tion costs incurred after January 1, 1999.)
a fund or reserve for the sole purpose of
providing PRB to retirees. The lump (1) Costs incurred after January 1,
sum is allowable if amortized over a 1998, for compensation of a senior exec-
period of 15 years. utive in excess of the benchmark com-
(iii) Accrual basis. Accrual costing pensation amount determined applica-
other than terminal funding must be ble for the contractor fiscal year by the
measured and assigned according to Administrator, Office of Federal Pro-
Generally Accepted Accounting Prin- curement Policy (OFPP), under Sec-
ciples and be paid to an insurer or tion 39 of the OFPP Act (41 U.S.C. 435)
trustee to establish and maintain a are unallowable (10 U.S.C. 2324(e)(1)(P)
fund or reserve for the sole purpose of and 41 U.S.C. 256(e)(1)(P)). This limita-
providing PRB to retirees. The accrual tion is the sole statutory limitation on
must also be calculated in accordance allowable senior executive compensa-
with generally accepted actuarial prin- tion costs incurred after January 1,
587
31.2057 48 CFR Ch. 1 (10103 Edition)
1998, under new or previously existing 31.2057 Contingencies.

contracts. This limitation applies
(a) Contingency, as used in this sub-
whether or not the affected contracts
part, means a possible future event or
were previously subject to a statutory
condition arising from presently
limitation on such costs.
(2) As used in this paragraph known or unknown causes, the out-
(i) Compensation means the total come of which is indeterminable at the
amount of wages, salary, bonuses, de- present time.
ferred compensation (see paragraph (k) (b) Costs for contingencies are gen-
of this subsection), and employer con- erally unallowable for historical cost-
tributions to defined contribution pen- ing purposes because such costing deals
sion plans (see paragraphs (j)(5) and with costs incurred and recorded on the
(j)(8) of this subsection), for the fiscal contractors books. However, in some
year, whether paid, earned, or other- cases, as for example, terminations, a
wise accruing, as recorded in the con- contingency factor may be recognized
tractors cost accounting records for when it is applicable to a past period to
the fiscal year. give recognition to minor unsettled
(ii) Senior executive means factors in the interest of expediting
(A) Prior to January 2, 1999 settlement.
(1) The Chief Executive Officer (CEO) (c) In connection with estimates of
or any individual acting in a similar future costs, contingencies fall into
capacity at the contractors head- two categories:
quarters; (1) Those that may arise from pres-
(2) The four most highly compensated ently known and existing conditions,
employees in management positions at the effects of which are foreseeable
the contractors headquarters, other within reasonable limits of accuracy;
than the CEO; and e.g., anticipated costs of rejects and de-
(3) If the contractor has intermediate fective work. Contingencies of this cat-
home offices or segments that report egory are to be included in the esti-
directly to the contractors head- mates of future costs so as to provide
quarters, the five most highly com- the best estimate of performance cost.
pensated employees in management po- (2) Those that may arise from pres-
sitions at each such intermediate home ently known or unknown conditions,
office or segment. the effect of which cannot be measured
(B) Effective January 2, 1999, the five so precisely as to provide equitable re-
most highly compensated employees in sults to the contractor and to the Gov-
management positions at each home ernment; e.g., results of pending litiga-
office and each segment of the con- tion. Contingencies of this category are
tractor, whether or not the home office to be excluded from cost estimates
or segment reports directly to the con- under the several items of cost, but
tractors headquarters. should be disclosed separately (includ-
(iii) Fiscal year means the fiscal year ing the basis upon which the contin-
established by the contractor for ac- gency is computed) to facilitate the ne-
counting purposes. gotiation of appropriate contractual
(iv) Contractors headquarters means coverage. (See, for example, 31.2056(g),
the highest organizational level from 31.20519, and 31.20524.)
which executive compensation costs
are allocated to Government contracts. 31.2058 Contributions or donations.
[48 FR 42301, Sept. 19, 1983] Contributions or donations, including
EDITORIAL NOTE: For FEDERAL REGISTER ci- cash, property and services, regardless
tations affection section 31.2056, see the List of recipient, are unallowable, except as
of CFR Sections Affected which appears in provided in 31.2051(e)(3).
the Finding Aids section of the printed vol-
ume and on GPO Access. [51 FR 12300, Apr. 9, 1986]
EFFECTIVE DATE NOTE: At 68 FR 56686, Oct. 31.2059 [Reserved]

1, 2003, 31.2056 was amended in paragraph
(m)(2) by removing the words (see 31.205 31.20510 Cost of money.
46(f)) and adding the words (see 31.205
46(d)) in its place, effective Oct. 31, 2002. (a) General. Cost of money
588
(1) Is an imputed cost that is not a persede any conflicting requirements

form of interest on borrowings (see of this cost principle. Once electing to
31.20520); adopt 48 CFR 9904.409 for all contracts,
(2) Is an incurred cost for cost-re- contractors must continue to follow it
imbursement purposes under applicable until notification of final acceptance of
cost-reimbursement contracts and for all deliverable items on all open nego-
progress payment purposes under fixed- tiated Government contracts. Para-
price contracts; and graphs (c) through (e) below apply to
(3) Refers to contracts to which 48 CFR 9904.409 is
(i) Facilities capital cost of money not applied.
(48 CFR 9904.414); and (c) Normal depreciation on a contrac-
(ii) Cost of money as an element of tors plant, equipment, and other cap-
the cost of capital assets under con- ital facilities is an allowable contract
struction (48 CFR 9904.417). cost, if the contractor is able to dem-
(b) Cost of money is allowable, pro- onstrate that it is reasonable and allo-
vided cable (but see paragraph (i) below).
(1) It is measured, assigned, and allo- (d) Depreciation shall be considered
cated to contracts in accordance with reasonable if the contractor follows
48 CFR 9904.414 or measured and added policies and procedures that are
to the cost of capital assets under con- (1) Consistent with those followed in
struction in accordance with 48 CFR the same cost center for business other
9904.417, as applicable; than Government;
(2) The requirements of 31.20552, (2) Reflected in the contractors
which limit the allowability of cost of books of accounts and financial state-
money, are followed; and ments; and
(3) The estimated facilities capital (3) Both used and acceptable for Fed-
cost of money is specifically identified eral income tax purposes.
and proposed in cost proposals relating (e) When the depreciation reflected
to the contract under which the cost is on a contractors books of accounts
to be claimed. and financial statements differs from
(c) Actual interest cost in lieu of the that used and acceptable for Federal
calculated imputed cost of money is income tax purposes, reimbursement
unallowable.
shall be based on the asset cost amor-
[68 FR 28091, May 22, 2003] tized over the estimated useful life of
the property using depreciation meth-
31.20511 Depreciation. ods (straight line, sum of the years
(a) Depreciation is a charge to cur- digits, etc.) acceptable for income tax
rent operations which distributes the purposes. Allowable depreciation shall
cost of a tangible capital asset, less es- not exceed the amounts used for book
timated residual value, over the esti- and statement purposes and shall be
mated useful life of the asset in a sys- determined in a manner consistent
tematic and logical manner. It does not with the depreciation policies and pro-
involve a process of valuation. Useful cedures followed in the same cost cen-
life refers to the prospective period of ter on non-Government business (but
economic usefulness in a particular see paragraph (o) of this subsection).
contractors operations as distin- (f) Depreciation for reimbursement
guished from physical life; it is evi- purposes in the case of tax-exempt or-
denced by the actual or estimated re- ganizations shall be determined on the
tirement and replacement practice of basis described in paragraph (e) imme-
the contractor. diately above.
(b) Contractors having contracts sub- (g) Special considerations are re-
ject to 48 CFR 9904.409, Depreciation of quired for assets acquired before the ef-
Tangible Capital Assets, must adhere fective date of this cost principle if, on
to the requirement of that standard for that date, the undepreciated balance of
all fully CAS-covered contracts and these assets resulting from deprecia-
may elect to adopt the standard for all tion policies and procedures used pre-
other contracts. All requirements of 48 viously for Government contracts and
CFR 9904.409 are applicable if the elec- subcontracts is different from the
tion is made, and its requirements su- undepreciated balance on the books
589
31.20511 48 CFR Ch. 1 (10103 Edition)
and financial statements. The subsidiary, or affiliate of the con-

undepreciated balance for contract tractor under common control.
cost purposes shall be depreciated over (k) The depreciation on any item
the remaining life using the methods which meets the criteria for allowance
and lives followed for book purposes. at a price under 31.20526(e) may be
The aggregate depreciation of any based on that price, provided the same
asset allowable after the effective date policies and procedures are used for
of this 31.20511 shall not exceed the costing all business of the using divi-
cost basis of the asset less any depre- sion, subsidiary, or organization under
ciation allowed or allowable under common control.
prior acquisition regulations. (l) No depreciation or rental shall be
(h) Depreciation should usually be al- allowed on property fully depreciated
located to the contract and other work by the contractor or by any division,
as an indirect cost. The amount of de- subsidiary, or affiliate of the con-
preciation allowed in any accounting tractor under common control. How-
period may, consistent with the basic ever, a reasonable charge for using
objectives in paragraph (a) above, vary fully depreciated property may be
with volume of production or use of agreed upon and allowed (but see
multishift operations. 31.109(h)(2)). In determining the charge,
(i) In the case of emergency facilities consideration shall be given to cost,
covered by certificates of necessity, a total estimated useful life at the time
contractor may elect to use normal de- of negotiations, effect of any increased
preciation without requesting a deter-
maintenance charges or decreased effi-
mination of true depreciation, or may
ciency due to age, and the amount of
elect to use either normal or true depre-
depreciation previously charged to
ciation after a determination of true de-
Government contracts or subcontracts.
preciation has been made by an Emer-
gency Facilities Depreciation Board (m) 48 CFR 9904.404, Capitalization of
(EFDB). The method elected must be Tangible Assets, applies to assets ac-
followed consistently thoughout the quired by a capital lease as defined in
life of the emergency facility. When an Statement of Financial Accounting
election is made to use normal depre- Standard No. 13 (FAS13), Accounting
ciation, the criteria in paragraphs (c), for Leases, issued by the Financial Ac-
(d), (e), and (f) above shall apply for counting Standards Board (FASB).
both the emergency period and the Compliance with 48 CFR 9904.404 and
post-emergency period. When an elec- FAS13 requires that such leased assets
tion is made to use true depreciation, (capital leases) be treated as purchased
the amount allowable as depreciation assets; i.e., be capitalized and the cap-
(1) With respect to the emergency pe- italized value of such assets be distrib-
riod (five years), shall be computed in uted over their useful lives as deprecia-
accordance with the determination of tion charges, or over the leased life as
the EFDB and allocated rateably over amortization charges as appropriate.
the full five year emergency period; Assets whose leases are classified as
provided no other allowance is made capital leases under FAS13 are subject
which would duplicate the factors, such to the requirements of 31.20511 while
as extraordinary obsolescence, covered assets acquired under leases classified
by the Boards determination; and as operating leases are subject to the
(2) After the end of the emergency pe- requirements on rental costs in 31.205
riod, shall be computed by distributing 36. The standards of financial account-
the remaining undepreciated portion of ing and reporting prescribed by FAS13
the cost of the emergency facility over are incorporated into this principle and
the balance of its useful life provided shall govern its application, except as
the remaining undepreciated portion of provided in subparagraphs (1), (2), and
such cost shall not include any amount (3) below.
of unrecovered true depreciation. (1) Rental costs under a sale and
(j) No depreciation, rental, or use leaseback arrangement shall be allow-
charge shall be allowed on property ac- able up to the amount that would have
quired at no cost from the Government been allowed had the contractor re-
by the contractor or by any division, tained title to the property.
590
(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
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
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 dormitory 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
(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
31.20517 48 CFR Ch. 1 (10103 Edition)
same extent as outlined in subpara- whether owned or leased by the con-

graph (c)(1) above. tractor.
(d) Gains and losses on the disposi- Idle capacity means the unused capac-
tion of depreciable property shall not ity of partially used facilities. It is the
be recognized as a separate charge or difference between that which a facil-
credit when ity could achieve under 100 percent op-
(1) Gains and losses are processed erating time on a one-shift basis, less
through the depreciation reserve ac- operating interruptions resulting from
count and reflected in the depreciation time lost for repairs, setups, unsatis-
allowable under 31.20511; or factory materials, and other normal
(2) The property is exchanged as part delays, and the extent to which the fa-
of the purchase price of a similar item, cility was actually used to meet de-
and the gain or loss is taken into con- mands during the accounting period. A
sideration in the depreciation cost multiple-shift basis may be used in the
basis of the new item. calculation instead of a one-shift basis
(e) Gains and losses arising from
if it can be shown that this amount of
mass or extraordinary sales, retire-
usage could normally be expected for
ments, or other disposition other than
the type of facility involved.
through business combinations shall be
considered on a case-by-case basis. Idle facilities means completely un-
(f) Gains and losses of any nature used facilities that are excess to the
arising from the sale or exchange of contractors current needs.
capital assets other than depreciable (b) The costs of idle facilities are un-
property shall be excluded in com- allowable unless the facilities
puting contract costs. (1) Are necessary to meet fluctua-
(g) With respect to long-lived tan- tions in workload; or
gible and identifiable intangible assets (2) Were necessary when acquired and
held for use, no loss shall be allowed are now idle because of changes in re-
for a write-down from carrying value quirements, production economies, re-
to fair value as a result of impairments organization, termination, or other
caused by events or changes in cir- causes which could not have been rea-
cumstances (e.g., environmental dam- sonably foreseen. (Costs of idle facili-
age, idle facilities arising from a de- ties are allowable for a reasonable pe-
clining business base, etc.). If depre- riod, ordinarily not to exceed 1 year,
ciable property or other capital assets depending upon the initiative taken to
have been written down from carrying use, lease, or dispose of the idle facili-
value to fair value due to impairments, ties (but see 31.20542)).
gains or losses upon disposition shall (c) Costs of idle capacity are costs of
be the amounts that would have been doing business and are a factor in the
allowed had the assets not been written normal fluctuations of usage or over-
down. head rates from period to period. Such
[48 FR 42301, Sept. 19, 1983, as amended at 55 costs are allowable provided the capac-
FR 25530, June 21, 1990; 60 FR 64255, Dec. 14, ity is necessary or was originally rea-
1995; 61 FR 67424, Dec. 20, 1996] sonable and is not subject to reduction
or elimination by subletting, renting,
31.20517 Idle facilities and idle capac-
ity costs. or sale, in accordance with sound busi-
ness, economics, or security practices.
(a) Definitions. As used in this sub- Widespread idle capacity throughout
section an entire plant or among a group of as-
Costs of idle facilities or idle capacity sets having substantially the same
means costs such as maintenance, re- function may be idle facilities.
pair, housing, rent, and other related
(d) Any costs to be paid directly by
costs; e.g., property taxes, insurance,
the Government for idle facilities or
and depreciation.
idle capacity reserved for defense mobi-
Facilities means plant or any portion
lization production shall be the subject
thereof (including land integral to the
operation), equipment, individually or of a separate agreement.
collectively, or any other tangible cap- [48 FR 42301, Sept. 19, 1983, as amended at 66
ital asset, wherever located, and FR 2131, Jan. 10, 2001; 67 FR 6120, Feb. 8, 2002]
594
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
31.20519 48 CFR Ch. 1 (10103 Edition)
equitable cost allocation, the con- (i) Section 12 of the Stevenson-

tracting officer may approve use of a Wydler Technology Transfer Act of 1980
different base. (15 U.S.C. 3710(a));
(c) Allowability. Except as provided in (ii) Sections 203(c) (5) and (6) of the
paragraphs (d) and (e) of this sub- National Aeronautics and Space Act of
section, or as provided in agency regu- 1958, as amended (42 U.S.C. 2473(c) (5)
lations, costs for IR&D and B&P are al- and (6));
lowable as indirect expenses on con- (iii) 10 U.S.C. 2371 for the Defense Ad-
tracts to the extent that those costs vanced Research Projects Agency; or
are allocable and reasonable. (iv) Other equivalent authority.
(d) Deferred IR&D costs. (1) IR&D (2) IR&D costs incurred by a con-
costs that were incurred in previous ac- tractor pursuant to these types of co-
counting periods are unallowable, ex- operative arrangements should be con-
cept when a contractor has developed a sidered as allowable IR&D costs if the
specific product at its own risk in an- work performed would have been al-
ticipation of recovering the develop- lowed as contractor IR&D had there
ment costs in the sale price of the been no cooperative arrangement.
product provided that (3) Costs incurred in preparing, sub-
(i) The total amount of IR&D costs mitting, and supporting offers on po-
applicable to the product can be identi- tential cooperative arrangements are
fied; allowable to the extent they are allo-
(ii) The proration of such costs to cable, reasonable, and not otherwise
sales of the product is reasonable; unallowable.
(iii) The contractor had no Govern- [57 FR 44265, Sept. 24, 1992, as amended at 59
ment business during the time that the FR 11379, Mar. 10, 1994; 62 FR 12705, Mar. 17,
costs were incurred or did not allocate 1997; 62 FR 51271, Sept. 30, 1997; 62 FR 64932,
IR&D costs to Government contracts Dec. 9, 1997; 66 FR 2131, Jan. 10, 2001]
except to prorate the cost of developing
a specific product to the sales of that 31.20519 Insurance and indemnifica-
product; and tion.
(iv) No costs of current IR&D pro- (a) Insurance by purchase or by self-
grams are allocated to Government insuring includes coverage the con-
work except to prorate the costs of de- tractor is required to carry, or to have
veloping a specific product to the sales approved, under the terms of the con-
of that product. tract and any other coverage the con-
(2) When deferred costs are recog- tractor maintains in connection with
nized, the contract (except firm-fixed- the general conduct of its business.
price and fixed-price with economic Any contractor desiring to establish a
price adjustment) will include a spe- program of self-insurance applicable to
cific provision setting forth the contracts that are not subject to 48
amount of deferred IR&D costs that are CFR 9904.416, Accounting for Insurance
allocable to the contract. The negotia- Costs, shall comply with the self-insur-
tion memorandum will state the cir- ance requirements of that standard as
cumstances pertaining to the case and well as with part 28 of this Regulation.
the reason for accepting the deferred However, approval of a contractors in-
costs. surance program in accordance with
(e) Cooperative arrangements. (1) IR&D part 28 does not constitute a deter-
costs may be incurred by contractors mination as to the allowability of the
working jointly with one or more non- programs cost. The amount of insur-
Federal entities pursuant to a coopera- ance costs which may be allowed is
tive arrangement (for example, joint subject to the cost limitations and ex-
ventures, limited partnerships, clusions in the following subpara-
teaming arrangements, and collabora- graphs.
tion and consortium arrangements). (1) Costs of insurance required or ap-
IR&D costs also may include costs con- proved, and maintained by the con-
tributed by contractors in performing tractor pursuant to the contract, are
cooperative research and development allowable.
agreements, or similar arrangements, (2) Costs of insurance maintained by
entered into under the contractor in connection with the
596
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 insurers (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
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
officer of the Executive branch of the cerning the interpretation or applica-

Federal Government to give consider- tion of this subsection.
ation to or act regarding a regulatory
or contract matter. FR 12301, Apr. 9, 1986; 52 FR 19804, May 27,
(b) The following activities are ex- 1987; 60 FR 42660, Aug. 16, 1995; 61 FR 31657,
cepted from the coverage of (a) above: June 20, 1996; 61 FR 67425, Dec. 20, 1996; 62 FR
(1) Providing a technical and factual 237, Jan. 2, 1997]
presentation of information on a topic
directly related to the performance of 31.20523 Losses on other contracts.
a contract through hearing testimony, An excess of costs over income under
statements or letters to the Congress any other contract (including the con-
or a state legislature, or subdivision, tractors contributed portion under
member, or cognizant staff member cost-sharing contracts) is unallowable.
thereof, in response to a documented
request (including a Congressional 31.20524 Maintenance and repair
Record notice requesting testimony or costs.
statements for the record at a regu- (a) Costs necessary for the upkeep of
larly scheduled hearing) made by the property (including Government prop-
recipient member, legislative body or erty, unless otherwise provided for)
subdivision, or a cognizant staff mem- that neither add to the permanent
ber thereof; provided such information value of the property nor appreciably
is readily obtainable and can be readily prolong its intended life, but keep it in
put in deliverable form; and further an efficient operating condition, are to
provided that costs under this section be treated as follows (but see 31.20511):
for transportation, lodging or meals (1) Normal maintenance and repair
are unallowable unless incurred for the costs are allowable.
purpose of offering testimony at a reg- (2) Extraordinary maintenance and
ularly scheduled Congressional hearing repair costs are allowable, provided
pursuant to a written request for such those costs are allocated to the appli-
presentation made by the Chairman or cable periods for purposes of deter-
Ranking Minority Member of the Com- mining contract costs (but see 31.109).
mittee or Subcommittee conducting (b) Expenditures for plant and equip-
such hearing. ment, including rehabilitation which
(2) Any lobbying made unallowable should be capitalized and subject to de-
by paragraph (a)(3) of this subsection preciation, according to generally ac-
to influence state or local legislation cepted accounting principles as applied
in order to directly reduce contract under the contractors established pol-
cost, or to avoid material impairment icy or, when applicable, according to 48
of the contractors authority to per- CFR 9904.404, Capitalization of Tan-
form the contract. gible Assets, are allowable only on a
(3) Any activity specifically author- depreciation basis.
ized by statute to be undertaken with [48 FR 42301, Sept. 19, 1983, as amended at 57
funds from the contract. FR 39591, Aug. 31, 1992]
(c) When a contractor seeks reim-
bursement for indirect costs, total lob- 31.20525 Manufacturing and produc-
bying costs shall be separately identi- tion engineering costs.
fied in the indirect cost rate proposal, (a) The costs of manufacturing and
and thereafter treated as other unal- production engineering effort as de-
lowable activity costs. scribed in (1) through (4) below are all
(d) Contractors shall maintain ade- allowable:
quate records to demonstrate that the (1) Developing and deploying new or
certification of costs as being allow- improved materials, systems, proc-
able or unallowable (see 42.7032) pursu- esses, methods, equipment, tools and
ant to this subsection complies with techniques that are or are expected to
the requirements of this subsection. be used in producing products or serv-
(e) Existing procedures should be uti- ices;
lized to resolve in advance any signifi- (2) Developing and deploying pilot
cant questions or disagreements con- production lines;
599
31.20526 48 CFR Ch. 1 (10103 Edition)
(3) Improving current production ther be credited directly to the cost of

functions, such as plant layout, pro- the material or be allocated as a credit
duction scheduling and control, meth- to indirect costs. When the contractor
ods and job analysis, equipment capa- can demonstrate that failure to take
bilities and capacities, inspection tech- cash discounts was reasonable, lost dis-
niques, and tooling analysis (including counts need not be credited.
tooling design and application im- (c) Reasonable adjustments arising
provements); and from differences between periodic phys-
(4) Material and manufacturing ical inventories and book inventories
producibility analysis for production may be included in arriving at costs;
suitability and to optimize manufac- provided, such adjustments relate to
turing processes, methods, and tech- the period of contract performance.
niques.
(d) When materials are purchased
(b) This cost principle does not cover:
(1) Basic and applied research effort specifically for and are identifiable
(as defined in 31.20518(a)) related to solely with performance under a con-
new technology, materials, systems, tract, the actual purchase cost of those
processes, methods, equipment, tools materials should be charged to the con-
and techniques. Such technical effort is tract. If material is issued from stores,
governed by 31.20518, Independent re- any generally recognized method of
search and development costs and bid pricing such material is acceptable if
and proposal costs; and that method is consistently applied
(2) Development effort for manufac- and the results are equitable. When es-
turing or production materials, sys- timates of future material costs are re-
tems, processes, methods, equipment, quired, current market price or antici-
tools and techniques that are intended pated acquisition cost may be used, but
for sale is also governed by 31.20518. the basis of pricing must be disclosed.
(c) Where manufacturing or produc- (e) Allowance for all materials, sup-
tion development costs are capitalized plies, and services that are sold or
or required to be capitalized under the transferred between any divisions, sub-
contractors capitalization policies, al- divisions, subsidiaries, or affiliates of
lowable cost will be determined in ac- the contractor under a common control
cordance with the requirements of shall be on the basis of cost incurred in
31.20511, Depreciation. accordance with this subpart. However,
allowance may be at price when it is
31.20526 Material costs.
the established practice of the transfer-
(a) Material costs include the costs of ring organization to price inter-
such items as raw materials, parts, organizational transfers at other than
sub-assemblies, components, and man- cost for commercial work of the con-
ufacturing supplies, whether purchased tractor or any division, subsidiary, or
or manufactured by the contractor, affiliate of the contractor under a com-
and may include such collateral items mon control, and when the item being
as inbound transportation and transferred qualifies for an exception
intransit insurance. In computing ma- under 15.4031(b) and the contracting
terial costs, consideration shall be officer has not determined the price to
given to reasonable overruns, spoilage, be unreasonable.
or defective work (unless otherwise
(f) When a commercial item under
provided in any contract provision re-
paragraph (e) of this subsection is
lating to inspecting and correcting de-
transferred at a price based on a cata-
fective work). These costs are allow-
log or market price, the price should be
able, subject to the requirements of
adjusted to reflect the quantities being
paragraphs (b) through (e) below.
(b) Costs of material shall be ad- acquired and may be adjusted to reflect
justed for income and other credits, in- the actual cost of any modifications
cluding available trade discounts, re- necessary because of contract require-
funds, rebates, allowances, and cash ments.
discounts, and credits for scrap, sal- [48 FR 42301, Sept. 19, 1983, as amended at 60
vage, and material returned to vendors. FR 48218, Sept. 18, 1995; 62 FR 259, Jan. 2,
Such income and other credits shall ei- 1997; 62 FR 51271, Sept. 30, 1997]
600
31.20527 Organization costs. (g) Other similar costs.

(a) Except as provided in paragraph [48 FR 42301, Sept. 19, 1983, as amended at 68
(b) of this section, expenditures in con- FR 28092, May 22, 2003]
nection with (1) planning or executing
31.20529 Plant protection costs.
the organization or reorganization of
the corporate structure of a business, Costs of items such as (a) wages, uni-
including mergers and acquisitions, (2) forms, and equipment of personnel en-
resisting or planning to resist the reor- gaged in plant protection, (b) deprecia-
ganization of the corporate structure tion on plant protection capital assets,
of a business or a change in the con- and (c) necessary expenses to comply
trolling interest in the ownership of a with military requirements, are allow-
business, and (3) raising capital (net able.
worth plus long-term liabilities), are 31.20530 Patent costs.
unallowable. Such expenditures include
but are not limited to incorporation (a) The following patent costs are al-
fees and costs of attorneys, account- lowable to the extent that they are in-
ants, brokers, promoters and orga- curred as requirements of a Govern-
nizers, management consultants and ment contract (but see 31.20533):
investment counselors, whether or not (1) Costs of preparing invention dis-
employees of the contractor. Unallow- closures, reports, and other documents.
able reorganization costs include the (2) Costs for searching the art to the
cost of any change in the contractors extent necessary to make the inven-
tion disclosures.
financial structure, excluding adminis-
(3) Other costs in connection with the
trative costs of short-term borrowings
filing and prosecution of a United
for working capital, resulting in alter-
States patent application where title
ations in the rights and interests of se-
or royalty-free license is to be con-
curity holders, whether or not addi-
veyed to the Government.
tional capital is raised. (b) General counseling services relat-
(b) The cost of activities primarily ing to patent matters, such as advice
intended to provide compensation will on patent laws, regulations, clauses,
not be considered organizational costs and employee agreements, are allow-
subject to this subsection, but will be able (but see 31.20533).
governed by 31.2056. These activities (c) Other than those for general coun-
include acquiring stock for (1) execu- seling services, patent costs not re-
tive bonuses, (2) employee savings quired by the contract are unallowable.
plans, and (3) employee stock owner- (See also 31.20537.)
ship plans.
31.20531 Plant reconversion costs.
FR 10830, Apr. 1, 1988] Plant reconversion costs are those
incurred in restoring or rehabilitating
31.20528 Other business expenses. the contractors facilities to approxi-
The following types of recurring mately the same condition existing im-
costs are allowable mediately before the start of the Gov-
ernment contract, fair wear and tear
(a) Registry and transfer charges re-
excepted. Reconversion costs are unal-
sulting from changes in ownership of
lowable except for the cost of removing
securities issued by the contractor.
Government property and the restora-
(b) Cost of shareholders meetings. tion or rehabilitation costs caused by
(c) Normal proxy solicitations. such removal. However, in special cir-
(d) Preparing and publishing reports cumstances where equity so dictates,
to shareholders. additional costs may be allowed to the
(e) Preparing and submitting re- extent agreed upon before costs are in-
quired reports and forms to taxing and curred. Care should be exercised to
other regulatory bodies. avoid duplication through allowance as
(f) Incidental costs of directors and contingencies, additional profit or fee,
committee meetings. or in other contracts.
601
31.20532 48 CFR Ch. 1 (10103 Edition)
31.20532 Precontract costs. award is by the Government, or by a

prime contractor or subcontractor.
Precontract costs means costs incurred
(3) Any other services obtained, per-
before the effective date of the con-
formed, or otherwise resulting in viola-
tract directly pursuant to the negotia-
tion of any statute or regulation pro-
tion and in anticipation of the contract
hibiting improper business practices or
award when such incurrence is nec-
conflicts of interest.
essary to comply with the proposed
(4) Services performed which are not
contract delivery schedule. These costs
consistent with the purpose and scope
are allowable to the extent that they
of the services contracted for or other-
would have been allowable if incurred
wise agreed to.
after the date of the contract (see
(d) In determining the allowability of
31.109).
costs (including retainer fees) in a par-
[48 FR 42301, Sept. 19, 1983, as amended at 66 ticular case, no single factor or any
FR 2131, Jan. 10, 2001] special combination of factors is nec-
essarily determinative. However, the
31.20533 Professional and consultant contracting officer shall consider the
service costs.
following factors, among others:
(a) Definition. Professional and con- (1) The nature and scope of the serv-
sultant services, as used in this sub- ice rendered in relation to the service
section, means those services rendered required.
by persons who are members of a par- (2) The necessity of contracting for
ticular profession or possess a special the service, considering the contrac-
skill and who are not officers or em- tors capability in the particular area.
ployees of the contractor. Examples in- (3) The past pattern of acquiring such
clude those services acquired by con- services and their costs, particularly in
tractors or subcontractors in order to the years prior to the award of Govern-
enhance their legal, economic, finan- ment contracts.
cial, or technical positions. Profes- (4) The impact of Government con-
sional and consultant services are gen- tracts on the contractors business.
erally acquired to obtain information, (5) Whether the proportion of Govern-
advice, opinions, alternatives, conclu- ment work to the contractors total
sions, recommendations, training, or business is such as to influence the
direct assistance, such as studies, anal- contractor in favor of incurring the
yses, evaluations, liaison with Govern- cost, particularly when the services
ment officials, or other forms of rep- rendered are not of a continuing nature
resentation. and have little relationship to work
(b) Costs of professional and consult- under Government contracts.
ant services are allowable subject to (6) Whether the service can be per-
this paragraph and paragraphs (c) formed more economically by employ-
through (f) of this subsection when rea- ment rather than by contracting.
sonable in relation to the services ren- (7) The qualifications of the indi-
dered and when not contingent upon vidual or concern rendering the service
recovery of the costs from the Govern- and the customary fee charged, espe-
ment (but see 31.20530 and 31.20547). cially on non-Government contracts.
(c) Costs of professional and consult- (8) Adequacy of the contractual
ant services performed under any of agreement for the service (e.g., descrip-
the following circumstances are unal- tion of the service, estimate of time re-
lowable: quired, rate of compensation, termi-
(1) Services to improperly obtain, nation provisions).
distribute, or use information or data (e) Retainer fees, to be allowable,
protected by law or regulation (e.g., must be supported by evidence that
52.2151(e), Restriction on Disclosure (1) The services covered by the re-
and Use of Data). tainer agreement are necessary and
(2) Services that are intended to im- customary;
properly influence the contents of so- (2) The level of past services justifies
licitations, the evaluation of proposals the amount of the retainer fees (if no
or quotations, or the selection of services were rendered, fees are not
sources for contract award, whether automatically unallowable);
602
(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
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
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
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 concludes 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
(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
31.20542 48 CFR Ch. 1 (10103 Edition)
books of account and financial state- cost principles peculiar to terminktion

ments. situations are to be used in conjunc-
(c) Taxes on property (see subpara- tion with the other cost principles in
graph (b)(5) above) used solely in con- subpart 31.2:
nection with either non-Government or (a) Common items. The costs of items
Government work should be considered reasonably usable on the contractors
directly applicable to the respective other work shall not be allowable un-
category of work unless the amounts less the contractor submits evidence
involved are insignificant or com-
that the items could not be retained at
parable results would otherwise be ob-
tained; e.g., taxes on contractor-owned cost without sustaining a loss. The
work-in-process which is used solely in contracting officer should consider the
connection with non-Government work contractors plans and orders for cur-
should be allocated to such work; taxes rent and planned production when de-
on contractor-owned work-in-process termining if items can reasonably be
inventory (and Government-owned used on other work of the contractor.
work-in-process inventory when taxed) Contemporaneous purchases of com-
used solely in connection with Govern- mon items by the contractor shall be
ment work should be charged to such regarded as evidence that such items
work. The cost of taxes incurred on are reasonably usable on the contrac-
property used in both Government and tors other work. Any acceptance of
non-Government work shall be appor- common items as allocable to the ter-
tioned to all such work based upon the minated portion of the contract should
use of such property on the respective be limited to the extent that the quan-
final cost objectives. tities of such items on hand, in transit,
(d) Any taxes, interest, or penalties and on order are in excess of the rea-
that were allowed as contract costs and sonable quantitative requirements of
are refunded to the contractor shall be
other work.
credited or paid to the Government in
(b) Costs continuing after termination.
the manner it directs. If a contractor
or subcontractor obtains a foreign tax Despite all reasonable efforts by the
credit that reduces its U.S. Federal in- contractor, costs which cannot be dis-
come tax return because of the pay- continued immediately after the effec-
ment of any tax or duty allowed as tive date of termination are generally
contract costs, and if those costs were allowable. However, any costs con-
reimbursed by a foreign government, tinuing after the effective date of the
the amount of the reduction shall be termination due to the negligent or
paid to the Treasurer of the United willful failure of the contractor to dis-
States at the time the Federal income continue the costs shall be unallow-
tax return is filed. However, any inter- able.
est actually paid or credited to a con- (c) Initial costs. Initial costs, includ-
tractor incident to a refund of tax, in- ing starting load and preparatory
terest, or penalty shall be paid or cred- costs, are allowable as follows:
ited to the Government only to the ex- (1) Starting load costs not fully ab-
tent that such interest accrued over sorbed because of termination are non-
the period during which the contractor recurring labor, material, and related
had been reimbursed by the Govern- overhead costs incurred in the early
ment for the taxes, interest, or pen- part of production and result from fac-
alties.
tors such as
[48 FR 42301, Sept. 19, 1983, as amended at 55 (i) Excessive spoilage due to inexperi-
FR 3884, Feb. 5, 1990; 55 FR 52794, Dec. 21, enced labor;
1990; 61 FR 2641, Jan. 26, 1996]
(ii) Idle time and subnormal produc-
31.20542 Termination costs. tion due to testing and changing pro-
duction methods;
Contract terminations generally give
rise to the incurrence of costs or the (iii) Training; and
need for special treatment of costs that (iv) Lack of familiarity or experience
would not have arisen had the contract with the product, materials, or manu-
not been terminated. The following facturing processes.
608
(2) Preparatory costs incurred in pre- performance of the terminated con-

paring to perform the terminated contract, if
tract include such costs as those in- (1) The amount of rental claimed
curred for initial plant rearrangement does not exceed the reasonable use
and alterations, management and per- value of the property leased for the pe-
sonnel organization, and production riod of the contract and such further
planning. They do not include special period as may be reasonable; and
machinery and equipment and starting (2) The contractor makes all reason-
load costs. able efforts to terminate, assign, set-
(3) When initial costs are included in tle, or otherwise reduce the cost of
the settlement proposal as a direct such lease.
charge, such costs shall not also be in- (f) Alterations of leased property. The
cluded in overhead. Initial costs attrib- cost of alterations and reasonable res-
utable to only one contract shall not torations required by the lease may be
be allocated to other contracts. allowed when the alterations were nec-
essary for performing the contract.
(4) If initial costs are claimed and
(g) Settlement expenses. (1) Settlement
have not been segregated on the con- expenses, including the following, are
tractors books, they shall be seg- generally allowable:
regated for settlement purposes from (i) Accounting, legal, clerical, and
cost reports and schedules reflecting similar costs reasonably necessary
that high unit cost incurred during the for
early stages of the contract. (A) The preparation and presen-
(5) If the settlement proposal is on tation, including supporting data, of
the inventory basis, initial costs settlement claims to the contracting
should normally be allocated on the officer; and
basis of total end items called for by (B) The termination and settlement
the contract immediately before termi- of subcontracts.
nation; however, if the contract in- (ii) Reasonable costs for the storage,
cludes end items of a diverse nature, transportation, protection, and disposi-
some other equitable basis may be tion of property acquired or produced
used, such as machine or labor hours. for the contract.
(d) Loss of useful value. Loss of useful (iii) Indirect costs related to salary
value of special tooling, and special and wages incurred as settlement ex-
machinery and equipment is generally penses in (i) and (ii); normally, such in-
allowable, provided direct costs shall be limited to payroll
(1) The special tooling, or special ma- taxes, fringe benefits, occupancy costs,
chinery and equipment is not reason- and immediate supervision costs.
ably capable of use in the other work of (2) If settlement expenses are signifi-
the contractor; cant, a cost account or work order
(2) The Governments interest is pro- shall be established to separately iden-
tected by transfer of title or by other tify and accumulate them.
means deemed appropriate by the con- (h) Subcontractor claims. Subcon-
tracting officer; and tractor claims, including the allocable
(3) The loss of useful value for any portion of the claims common to the
one terminated contract is limited to contract and to other work of the con-
that portion of the acquisition cost tractor, are generally allowable. An ap-
which bears the same ratio to the total propriate share of the contractors in-
acquisition cost as the terminated por- direct expense may be allocated to the
tion of the contract bears to the entire amount of settlements with sub-
terminated contract and other Govern- contractors; provided, that the amount
ment contracts for which the special allocated is reasonably proportionate
tooling, or special machinery and to the relative benefits received and is
equipment was acquired. otherwise consistent with 31.2014 and
(e) Rental under unexpired leases. 31.203(c). The indirect expense so allo-
Rental costs under unexpired leases, cated shall exclude the same and simi-
less the residual value of such leases, lar costs claimed directly or indirectly
are generally allowable when shown to as settlement expenses.
have been reasonably necessary for the [48 FR 42301, Sept. 19, 1983]
609
31.20543 48 CFR Ch. 1 (10103 Edition)
31.20543 Trade, business, technical, erated by the contractor, and/or (4)

and professional activity costs. training materials and textbooks.
The following types of costs are al- (c) Part-time college level education. Al-
lowable: lowable costs of part-time college edu-
(a) Memberships in trade, business, cation at an undergraduate or post-
technical, and professional organiza- graduate level, including that provided
tions. at the contractors own facilities, are
limited to
(b) Subscriptions to trade, business,
(1) Fees and tuition charged by the
professional, or other technical peri-
educational institution, or, instead of
odicals.
tuition, instructors salaries and the
(c) When the principal purpose of a
related share of indirect cost of the
meeting, convention, conference, sym-
educational institution, to the extent
posium, or seminar is the dissemina-
that the sum thereof is not in excess of
tion of trade, business, technical or
the tuition that would have been paid
professional information or the stimu-
to the participating educational insti-
lation of production or improved pro-
tution;
ductivity:
(2) Salaries and related costs of in-
(1) Costs of organizing, setting up,
structors who are employees of the
and sponsoring the meetings, conven-
contractor; and
tions, symposia, etc., including rental
(3) Training materials and textbooks;
of meeting facilities, transportation,
and
subsistence, and incidental costs;
(4) Straight-time compensation of
(2) Costs of attendance by contractor
each employee for time spent attend-
employees, including travel costs (see
ing classes during working hours not in
31.20546); and
excess of 156 hours per year where cir-
(3) Costs of attendance by individuals cumstances do not permit the oper-
who are not employees of the con- ation of classes or attendance at class-
tractor, provided; es after regular working hours. In un-
(i) Such costs are not also reimbursed usual cases, the period may be ex-
to the individual by the employing tended (see paragraph (h) below).
company or organization, and (d) Full-time education. Costs of tui-
(ii) The individuals attendance is es- tion, fees, training materials and text-
sential to achieve the purpose of the books (but not subsistence, salary, or
conference, meeting, convention, sym- any other emoluments) in connection
posium, etc. with full-time education, including
[48 FR 42301, Sept. 19, 1983, as amended at 53 that provided at the contractors own
FR 27467, July 20, 1988; 60 FR 42660, Aug. 16, facilities, at a postgraduate but not un-
1995] dergraduate college level, are allowable
only when the course or degree pursued
31.20544 Training and education is related to the field in which the em-
costs. ployee is working or may reasonably be
(a) Allowable costs. Training and edu- expected to work and are limited to a
cation costs are allowable to the extent total period not to exceed 2 school
indicated below. years or the length of the degree pro-
(b) Vocational training. Costs of pre- gram, whichever is less, for each em-
paring and maintaining a noncollege ployee so trained.
level program of instruction, including (e) Specialized programs. Costs of at-
but not limited to on-the-job, class- tendance of up to 16 weeks per em-
room, and apprenticeship training, de- ployee per year at specialized programs
signed to increase the vocational effec- specifically designed to enhance the ef-
tiveness of employees, are allowable. fectiveness of managers or to prepare
These costs include (1) salaries or employees for such positions are allow-
wages of trainees (excluding overtime able. Such costs include enrollment
compensation), (2) salaries of the direc- fees and related charges and employ-
tor of training and staff when the ees salaries, subsistence, training ma-
training program is conducted by the terials, textbooks, and travel. Costs al-
contractor, (3) tuition and fees when lowable under this paragraph do not in-
the training is in an institution not op- clude costs for courses that are part of
610
a degree-oriented curriculum, which employee is working in a foreign coun-

are only allowable pursuant to para- try where public education is not avail-
graphs (c) and (d) of this subsection. able and where suitable private edu-
(f) Other expenses. Maintenance ex- cation is inordinately expensive may
pense and normal depreciation or fair be included in overseas differential.
rental on facilities owned or leased by (j) Employee dependent education
the contractor for training purposes plans. Costs of college plans for em-
are allowable in accordance with ployee dependents are unallowable.
31.20517, 31.20524, and 31.20536.
(g) Grants. Grants to educational or [48 FR 42301, Sept. 19, 1983, as amended at 52
FR 9038, Mar. 20, 1987; 52 FR 27806, July 24,
training institutions, including the do-
1987; 52 FR 30077, Aug. 12, 1987]
nation of facilities or other properties,
scholarships, and fellowships are con- 31.20545 [Reserved]
sidered contributions and are unallow-
able. 31.20546 Travel costs.
(h) Advance agreements. (1) Training
and education costs in excess of those (a) Costs for transportation, lodging,
otherwise allowable under (c) and (d) of meals, and incidental expenses. (1) Costs
this subsection, including subsistence, incurred by contractor personnel on of-
salaries, or any other emoluments, ficial company business are allowable,
may be allowed to the extent set forth subject to the limitations contained in
in an advance agreement negotiated this subsection. Costs for transpor-
under 31.109. To be considered for an tation may be based on mileage rates,
advance agreement, the contractor actual costs incurred, or on a combina-
must demonstrate that the costs are tion thereof, provided the method used
consistently incurred under an estab- results in a reasonable charge. Costs
lished managerial, engineering, or sci- for lodging, meals, and incidental ex-
entific training and education pro- penses may be based on per diem, ac-
gram, and that the course or degree tual expenses, or a combination there-
pursued is related to the field in which of, provided the method used results in
employees are now working or may a reasonable charge.
reasonably be expected to work. Before (2) Except as provided in paragraph
entering into the advance agreement, (a)(3) of this section, costs incurred for
the contracting officer shall give con- lodging, meals, and incidental expenses
sideration to such factors as (as defined in the regulations cited in
(i) The length of employees service (a)(2) (i) through (iii) of this paragraph)
with the contractor; shall be considered to be reasonable
(ii) Employees past performance and and allowable only to the extent that
potential; they do not exceed on a daily basis the
(iii) Whether employees are in formal maximum per diem rates in effect at
development programs; and the time of travel as set forth in the
(iv) The total number of partici- (i) Federal Travel Regulation, pre-
pating employees. scribed by the General Services Admin-
(2) Any advance agreement must in- istration, for travel in the contiguous
clude a provision requiring the con- United States, available on a subscrip-
tractor to refund to the Government tion basis from the Superintendent of
training and education costs for em- Documents, U.S. Government Printing
ployees who resign within 12 months of Office, Washington, DC 20402, Stock No.
completion of such training or edu- 922002000002;
cation for reasons within an employ- (ii) Joint Travel Regulations, Volume
ees control. 2, DoD Civilian Personnel, Appendix A,
(i) Training or education costs for other prescribed by the Department of De-
than bonafide employees. Costs of tui- fense, for travel in Alaska, Hawaii, and
tion, fees, textbooks, and similar or re- outlying areas of the United States,
lated benefits provided for other than available on a subscription basis from
bonafide employees are unallowable, the Superintendent of Documents, U.S.
except that the costs incurred for edu- Government Printing Office, Wash-
cating employee dependents (primary ington, DC 20402, Stock No. 908010
and secondary level studies) when the 000001; or
611
31.20546 48 CFR Ch. 1 (10103 Edition)
(iii) Standarized Regulations (Gov- (5) An advance agreement (see 31.109)

ernment Civilians, Foreign Areas), sec- with respect to compliance with para-
tion 925, Maximum Travel Per Diem Al- graphs (a)(2) and (a)(3) of this section
lowances of Foreign Areas, prescribed by may be useful and desirable.
the Department of State, for travel in (6) The maximum per diem rates ref-
areas not covered in (a)(2) (i) and (ii) of erenced in subparagraph (a)(2) of this
this paragraph, available on a subscrip- subsection generally would not con-
tion basis from the Superintendent of stitute a reasonable daily charge
Documents, U.S. Government Printing (i) When no lodging costs are in-
Office, Washington, DC 20402, Stock No. curred; and/or
744088000000. (ii) On partial travel days (e.g., day
(3) In special or unusual situations, of departure and return).
actual costs in excess of the above-ref- Appropriate downward adjustments
erenced maximum per diem rates are from the maximum per diem rates
allowable provided that such amounts would normally be required under
do not exceed the higher amounts au- these circumstances. While these ad-
thorized for Federal civilian employees justments need not be calculated in ac-
as permitted in the regulations ref- cordance with the Federal Travel Reg-
erenced in (a)(2) (i), (ii), or (iii) or this ulation or Joint Travel Regulations,
section. For such higher amounts to be they must result in a reasonable
allowable, all of the following condi- charge.
tions must be met: (7) Costs shall be allowable only if
(i) One of the conditions warranting the following information is docu-
approval of the actual expense method, mented:
as set forth in the regulations referred (i) Date and place (city, town, or
in (a)(2) (i), (ii), or (iii) of this section, other similar designation) of the ex-
must exist. penses;
(ii) A written justification for use of (ii) Purpose of the trip; and
the higher amounts must be approved (iii) Name of person on trip and that
by an officer of the contractors organi- persons title or relationship to the
zation or designee to ensure that the contractor.
authority is properly administered and (b) Travel costs incurred in the nor-
controlled to prevent abuse. mal course of overall administration of
(iii) If it becomes necessary to exer- the business are allowable and shall be
cise the authority to use the higher ac- treated as indirect costs.
tual expense method repetitively or on (c) Travel costs directly attributable
a continuing basis in a particular area, to specific contract performance are al-
the contractor must obtain advance ap- lowable and may be charged to the con-
proval from the contracting officer. tract under 31.202.
(iv) Documentation to support actual (d) Airfare costs in excess of the low-
costs incurred shall be in accordance est customary standard, coach, or
with the contractors established prac- equivalent airfare offered during nor-
tices, subject to paragraph (a)(7) of this mal business hours are unallowable ex-
subsection, and provided that a receipt cept when such accommodations re-
is required for each expenditure of quire circuitous routing, require travel
$75.00 or more. The approved justifica- during unreasonable hours, excessively
tion required by paragraph (a)(3)(ii) prolong travel, result in increased cost
and, if applicable, paragraph (a)(3)(iii) that would offset transportation sav-
of this subsection must be retained. ings, are not reasonably adequate for
(4) Subparagraphs (a)(2) and (a)(3) of the physical or medical needs of the
this subsection do not incorporate the traveler, or are not reasonably avail-
regulations cited in subdivisions able to meet mission requirements.
(a)(2)(i), (ii), and (iii) of this subsection However, in order for airfare costs in
in their entirety. Only the maximum excess of the above standard airfare to
per diem rates, the definitions of lodg- be allowable, the applicable condi-
ing, meals, and incidental expenses, tion(s) set forth in this paragraph must
and the regulatory coverage dealing be documented and justified.
with special or unusual situations are (e)(1) Cost of travel by contractor-
incorporated herein. owned, -leased, or -chartered aircraft, as
612
used in this subparagraph, includes the tenance, depreciation, insurance, etc.

cost of lease, charter, operation (in- These costs are allowable, if reason-
cluding personnel), maintenance, de- able, to the extent that the auto-
preciation, insurance, and other re- mobiles are used for company business.
lated costs. That portion of the cost of company-
(2) The costs of travel by contractor- furnished automobiles that relates to
owned, -leased, or -chartered aircraft personal use by employees (including
are limited to the standard airfare de- transportation to and from work) is
scribed in paragraph (d) of this sub- compensation for personal services and
section for the flight destination unless is unallowable as stated in 31.205
travel by such aircraft is specifically 6(m)(2).
required by contract specification,
term, or condition, or a higher amount [48 FR 42301, Sept. 19, 1983, as amended at 51
is approved by the contracting officer. FR 12301, Apr. 9, 1986; 51 FR 27489, July 31,
A higher amount may be agreed to 1986; 51 FR 36972, Oct. 16, 1986; 56 FR 41739,
Aug. 22, 1991; 57 FR 20377, May 12, 1992; 61 FR
when one or more of the circumstances 31657, June 20, 1996; 62 FR 40237, July 25, 1997;
for justifying higher than standard air- 62 FR 64933, Dec. 9, 1997; 68 FR 28083, May 22,
fare listed in paragraph (d) of this sub- 2003]
section are applicable, or when an ad-
vance agreement under subparagraph EFFECTIVE DATE NOTE: At 68 FR 56688, Oct.
1, 2003, 31.20546 was amended by removing
(e)(3) of this subsection has been exe-
paragraphs (b) and (c), redesignating para-
cuted. In all cases, travel by con- graphs (d), (e), and (f) as (b), (c), and (d), and
tractor-owned, -leased, or -char- in the introductory text of newly designated
tered aircraft must be fully docu- (c)(2) by removing paragraph (d) each time
mented and justified. For each con- it appears and adding paragraph (b) in its
tractor-owned, -leased, or -chartered place, and removing the words subpara-
aircraft used for any business purpose graph (e)(3) and adding paragraph (c)(3)
which is charged or allocated, directly in its place, effective Oct. 31, 2003.
or indirectly, to a Government con-
tract, the contractor must maintain 31.20547 Costs related to legal and
and make available manifest/logs for other proceedings.
all flights on such company aircraft. (a) Definitions. As used in this sub-
As a minimum, the manifest/log shall part
indicate Costs include, but are not limited to,
(i) Date, time, and points of depar- administrative and clerical expenses;
ture; the costs of legal services, whether per-
(ii) Destination, date, and time of ar- formed by in-house or private counsel;
rival; the costs of the services of account-
(iii) Name of each passenger and rela- ants, consultants, or others retained by
tionship to the contractor; the contractor to assist it; costs of em-
(iv) Authorization for trip; and ployees, officers, and directors; and any
(v) Purpose of trip. similar costs incurred before, during,
(3) Where an advance agreement is and after commencement of a judicial
proposed (see 31.109), consideration or administrative proceeding which
may be given to the following: bears a direct relationship to the pro-
(i) Whether scheduled commercial
ceedings.
airlines or other suitable, less costly,
Fraud, as used in this subsection,
travel facilities are available at rea-
sonable times, with reasonable fre- means
quency, and serve the required destina- (1) Acts of fraud or corruption or at-
tions conveniently. tempts to defraud the Government or
(ii) Whether increased flexibility in to corrupt its agents;
scheduling results in time savings and (2) Acts which constitute a cause for
more effective use of personnel that debarment or suspension under 9.406
would outweigh additional travel costs. 2(a) and 9.4072(a); and
(f) Costs of contractor-owned or (3) Acts which violate the False
leased automobiles, as used in this Claims Act, 31 U.S.C., sections 3729
paragraph, include the costs of lease, 3731, or the Anti-Kickback Act, 41
operation (including personnel), main- U.S.C., sections 51 and 54.
613
31.20547 48 CFR Ch. 1 (10103 Edition)
Penalty, does not include restitution, specifically provided in such agree-

reimbursement, or compensatory dam- ment.
ages. (2) In the event of a settlement of
Proceeding, includes an investigation. any proceeding brought by a third
(b) Costs incurred in connection with party under the False Claims Act in
any proceeding brought by a Federal, which the United States did not inter-
State, local, or foreign government for vene, reasonable costs incurred by the
violation of, or a failure to comply contractor in connection with such a
with, law or regulation by the con- proceeding, that are not otherwise un-
tractor (including its agents or em- allowable by regulation or by separate
ployees), or costs incurred in connec- agreement with the United States, may
tion with any proceeding brought by a be allowed if the contracting officer, in
third party in the name of the United consultation with his or her legal advi-
States under the False Claims Act, 31 sor, determines that there was very lit-
U.S.C. 3730, are unallowable if the re- tle likelihood that the third party
sult is would have been successful on the mer-
(1) In a criminal proceeding, a con- its.
viction; (d) To the extent that they are not
(2) In a civil or administrative pro- otherwise unallowable, costs incurred
ceeding, either a finding of contractor in connection with any proceeding
liability where the proceeding involves under paragraph (b) of this subsection
an allegation of fraud or similar mis- commenced by a State, local, or for-
conduct or imposition of a monetary
eign government may be allowable
penalty where the proceeding does not
when the contracting officer (or other
involve an allegation of fraud or simi-
official specified in agency procedures)
lar misconduct;
determines, that the costs were in-
(3) A final decision by an appropriate
curred either:
official of an executive agency to:
(1) As a direct result of a specific
(i) Debar or suspend the contractor;
term or condition of a Federal con-
(ii) Rescind or void a contract; or tract; or
(iii) Terminate a contract for default (2) As a result of compliance with
by reason of a violation or failure to
specific written direction of the cog-
comply with a law or regulation;
nizant contracting officer.
(4) Disposition of the matter by con-
(e) Costs incurred in connection with
sent or compromise if the proceeding
proceedings described in paragraph (b)
could have led to any of the outcomes
of this subsection, but which are not
listed in subparagraphs (b) (1) through
made unallowable by that paragraph,
(3) of this subsection (but see para-
may be allowable to the extent that:
graphs (c) and (d) of this subsection); or
(1) The costs are reasonable in rela-
(5) Not covered by subparagraphs (b)
(1) through (4) of this subsection, but tion to the activities required to deal
where the underlying alleged con- with the proceeding and the underlying
tractor misconduct was the same as cause of action;
that which led to a different proceeding (2) The costs are not otherwise recov-
whose costs are unallowable by reason ered from the Federal Government or a
of subparagraphs (b) (1) through (4) of third party, either directly as a result
this subsection. of the proceeding or otherwise; and
(c)(1) To the extent they are not oth- (3) The percentage of costs allowed
erwise unallowable, costs incurred in does not exceed the percentage deter-
connection with any proceeding under mined to be appropriate considering
paragraph (b) of this subsection com- the complexity of procurement litiga-
menced by the United States that is re- tion, generally accepted principles gov-
solved by consent or compromise pur- erning the award of legal fees in civil
suant to an agreement entered into be- actions involving the United States as
tween the contractor and the United a party, and such other factors as may
States, and which are unallowable sole- be appropriate. Such percentage shall
ly because of paragraph (b) of this sub- not exceed 80 percent. Agreements
section, may be allowed to the extent reached under paragraph (c) of this
614
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, (insurance, 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
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 acquisitions 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
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
31.702 48 CFR Ch. 1 (10103 Edition)
a business entity organized and oper- 32.007 Contract financing payments.

ated exclusively for charitable, sci- 32.008 Notification of overpayment.
entific, or educational purposes, of
Subpart 32.1Non-Commercial Item
which no part of the net earnings inure
Purchase Financing
to the benefit of any private share-
holder or individual, of which no sub- 32.100 Scope of subpart.
stantial part of the activities is car- 32.101 Authority.
rying on propaganda or otherwise at- 32.102 Description of contract financing
tempting to influence legislation or methods.
32.103 Progress payments under construc-
participating in any political campaign
tion contracts.
on behalf of any candidate for public 32.104 Providing contract financing.
office, and which are exempt from fed- 32.105 Uses of contract financing.
eral income taxation under section 501 32.106 Order of preference.
of the Internal Revenue Code. 32.107 Need for contract financing not a de-
terrent.
31.702 General. 32.108 Financial consultation.
32.109 Termination financing.
Office of Management and Budget 32.110 Payment of subcontractors under
(OMB) Circular No. A122, Cost Prin- cost-reimbursement prime contracts.
ciples for Nonprofit Organizations, sets 32.111 Contract clauses for noncommercial
forth principles for determining the purchases.
costs applicable to work performed by 32.112 Nonpayment of subcontractors under
nonprofit organizations under con- contracts for noncommercial items.
tracts (also applies to grants and other 32.1121 Subcontractor assertions of non-
agreements) with the Government. payment.
32.1122 Subcontractor requests for informa-
31.703 Requirements. tion.
32.113 Customary contract financing.
(a) Contracts which refer to this sub- 32.114 Unusual contract financing.
part 31.7 for determining allowable
costs shall be deemed to refer to, and Subpart 32.2Commercial Item Purchase
shall have the allowability of costs de- Financing
termined by the contracting officer in 32.200 Scope of subpart.
accordance with, the revision of OMB 32.201 Statutory authority.
Circular A122 in effect on the date of 32.202 General.
the contract. 32.2021 Policy.
(b) Agencies are not expected to 32.2022 Types of payments for commercial
place additional restrictions on indi- item purchases.
vidual items of cost. However, under 10 32.2023 Conducting market research about
U.S.C. 2324(e) and 41 U.S.C. 256(e), the financing terms.
32.2024 Security for Government financing.
costs cited in 31.603(b) are unallowable. 32.203 Determining contract financing
[48 FR 42301, Sept. 19, 1983, as amended at 60 terms.
FR 42661, Aug. 16, 1995] 32.204 Procedures for contracting officer-
specified commercial contract financing.
32.205 Procedures for offeror-proposed com-
PART 32CONTRACT FINANCING mercial contract financing.
Sec. clauses.
32.000 Scope of part. 32.207 Administration and payment of com-
32.001 Definitions. mercial financing payments.
32.002 Applicability of subparts.
32.003 Simplified acquisition procedures fi- Subpart 32.3Loan Guarantees for
nancing. Defense Production
32.004 Contract performance in foreign
countries. 32.300 Scope of subpart.
32.005 Consideration for contract financing. 32.301 Definitions.
32.006 Reduction or suspension of contract 32.302 Authority.
payments upon finding of fraud. 32.303 General.
32.0061 General. 32.304 Procedures.
32.0062 Definition. 32.3041 Application for guarantee.
32.0063 Responsibilities. 32.3042 Certificate of eligibility.
32.0064 Procedures. 32.3043 Asset formula.
32.0065 Reporting. 32.3044 Guarantee amount and maturity.
618
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
32.401 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 refunds.
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
32.000 48 CFR Ch. 1 (10103 Edition)
Subpart 32.9Prompt Payment (a) Payment methods, including par-

tial payments and progress payments
based on percentage or stage of com-
32.902 Definitions. pletion;
32.903 Responsibilities. (b) Loan guarantees, advance pay-
32.904 Determining payment due dates. ments, and progress payments based on
32.905 Payment documentation and process. costs;
32.906 Making payments. (c) Administration of debts to the
32.907 Interest penalties. Government arising out of contracts;
32.908 Contract clauses. (d) Contract funding, including the
32.909 Contractor inquiries.
use of contract clauses limiting costs
Subpart 32.10Performance-Based or funds;
Payments (e) Assignment of claims to aid in
private financing;
32.1000 Scope of subpart. (f) Selected payment clauses;
32.1001 Policy. (g) Financing of purchases of com-
32.1002 Bases for performance-based pay- mercial items;
ments.
32.1003 Criteria for use.
(h) Performance-based payments; and
32.1004 Procedures. (i) Electronic funds transfer pay-
32.1005 Solicitation provision and contract ments.
clause. [48 FR 42328, Sept. 19, 1983, as amended at 60
32.1006 [Reserved] FR 49710, Sept. 26, 1995; 61 FR 45772, Aug. 29,
32.1007 Administration and payment of per- 1996; 67 FR 13054, Mar. 20, 2002]
formance-based payments.
32.1008 Suspension or reduction of perform- 32.001 Definitions.
ance-based payments.
32.1009 Title. As used in this part
32.1010 Risk of loss. Commercial interim payment means
any payment that is not a commercial
Subpart 32.11Electronic Funds Transfer advance payment or a delivery pay-
32.1100 Scope of subpart. ment. These payments are contract fi-
32.1101 Statutory requirements. nancing payments for prompt payment
32.1102 Definitions. purposes (i.e., not subject to the inter-
32.1103 Applicability. est penalty provisions of the Prompt
32.1104 Protection of EFT information. Payment Act in accordance with sub-
32.1105 Assignment of claims. part 32.9). A commercial interim pay-
32.1106 EFT mechanisms.
ment is given to the contractor after
32.1107 Payment information.
32.1108 Payment by Governmentwide com- some work has been done, whereas a
mercial purchase card. commercial advance payment is given
32.1109 EFT information submitted by to the contractor when no work has
offerors. been done.
32.1110 Solicitation provision and contract Contract action means an action re-
clauses. sulting in a contract, as defined in sub-
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap- part 2.1, including actions for addi-
ter 137; and 42 U.S.C. 2473(c). tional supplies or services outside the
EFFECTIVE DATE NOTE: At 68 FR 56683, Oct. existing contract scope, but not includ-
1, 2003, the authority citation for Part 32 was ing actions that are within the scope
revised, effective Oct. 31, 2003. For the con- and under the terms of the existing
venience of the user, the revised text is set contract, such as contract modifica-
forth below: tions issued pursuant to the Changes
AUTHORITY: 40 U.S.C. 121(c); 10 U.S.C. chap- clause, or funding and other adminis-
ter 137; and 42 U.S.C. 2473(c). trative changes.
SOURCE: 48 FR 42328, Sept. 19, 1983, unless Contract financing payment means an
otherwise noted. authorized Government disbursement
of monies to a contractor prior to ac-
32.000 Scope of part. ceptance of supplies or services by the
This part prescribes policies and pro- Government.
cedures for contract financing and (1) Contract financing payments in-
other payment matters. This part ad- clude
dresses (i) Advance payments;
620
(ii) Performance-based payments; Designated payment office means the

(iii) Commercial advance and interim office designated in the contract to
payments; make invoice payments or contract fi-
(iv) Progress payments based on cost nancing payments. Normally, this will
under the clause at 52.23216, Progress be the Government disbursing office.
Payments; Due date means the date on which
(v) Progress payments based on a per- payment should be made.
centage or stage of completion (see Invoice payment means a Government
32.102(e)), except those made under the disbursement of monies to a contractor
clause at 52.2325, Payments Under under a contract or other authoriza-
Fixed-Price Construction Contracts, or tion for supplies or services accepted
the clause at 52.23210, Payments Under by the Government.
Fixed-Price Architect-Engineer Con- (1) Invoice payments include
tracts; and (i) Payments for partial deliveries
(vi) Interim payments under a cost that have been accepted by the Govern-
reimbursement contract, except for a ment;
cost reimbursement contract for serv- (ii) Final cost or fee payments where
ices when Alternate I of the clause at amounts owed have been settled be-
52.23225, Prompt Payment, is used. tween the Government and the con-
(2) Contract financing payments do tractor;
not include (iii) For purposes of subpart 32.9 only,
all payments made under the clause at
(i) Invoice payments;
52.2325, Payments Under Fixed-Price
(ii) Payments for partial deliveries;
Construction Contracts, and the clause
or
at 52.23210, Payments Under Fixed-
(iii) Lease and rental payments. Price Architect-Engineer Contracts;
Customary contract financing means and
that financing deemed by an agency to (iv) Interim payments under a cost-
be available for routine use by con- reimbursement contract for services
tracting officers. Most customary con- when Alternate I of the clause at
tract financing arrangements should be 52.23225, Prompt Payment, is used.
usable by contracting officers without (2) Invoice payments do not include
specific reviews or approvals by higher contract financing payments.
management. Unusual contract financing means any
Delivery payment means a payment financing not deemed customary con-
for accepted supplies or services, in- tract financing by the agency. Unusual
cluding payments for accepted partial contract financing is financing that is
deliveries. Commercial financing pay- legal and proper under applicable laws,
ments are liquidated by deduction from but that the agency has not authorized
these payments. Delivery payments are contracting officers to use without spe-
invoice payments for prompt payment cific reviews or approvals by higher
purposes. management.
Designated billing office means the of-
fice or person (governmental or non-
FR 49710, Sept. 26, 1995; 66 FR 2131, Jan. 10,
governmental) designated in the con- 2001; 66 FR 65354, Dec. 18, 2001; 67 FR 13054,
tract where the contractor first sub- Mar. 20, 2002]
mits invoices and contract financing
requests. The contract might designate 32.002 Applicability of subparts.
different offices to receive invoices and (a) The following sections and sub-
contract financing requests. The des- parts of this part are applicable to all
ignated billing office might be purchases subject to part 32:
(1) The Government disbursing office; (1) Sections 32.000 through 32.005.
(2) The contract administration of- (2) Subpart 32.3, Loan Guarantees for
fice; Defense Production.
(3) The office accepting the supplies (3) Subpart 32.6, Contract Debts.
delivered or services performed by the (4) Subpart 32.7, Contract Funding.
contractor; (5) Subpart 32.8, Assignment of
(4) The contract audit office; or Claims.
(5) A nongovernmental agent. (6) Subpart 32.9, Prompt Payment.
621
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
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
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
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-
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 subcontract 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
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
value of orders or contracts that indi- (b) Customary contract financing

vidually exceed the simplified acquisi- other than loan guarantees and certain
tion threshold to have a total value of advance payments (see 32.113).
$2 million or more. The contracting of- (c) Loan guarantees.
ficer must limit financing to those or- (d) Unusual contract financing (see
ders or contracts that exceed the sim- 32.114).
plified acquisition threshold. (e) Advance payments (see exceptions
(3) If the contractor is a small busi- in 32.402(b)).
ness concern [48 FR 42328, Sept. 19, 1983, as amended at 60
(i) For an individual contract, the FR 49711, Sept. 26, 1995; 65 FR 16279, Mar. 27,
contract price exceeds the simplified 2000]
acquisition threshold; or
(ii) For an indefinite-delivery con- 32.107 Need for contract financing not
tract, a basic ordering agreement or a a deterrent.
similar ordering instrument, the con- (a) If the contractor or offeror meets
tracting officer expects the aggregate the standards prescribed for respon-
value of orders or contracts to exceed sible prospective contractors at 9.104,
the simplified acquisition threshold. the contracting officer shall not treat
[65 FR 16278, Mar. 27, 2000] the contractors need for contract fi-
nancing as a handicap for a contract
32.105 Uses of contract financing. award; e.g., as a responsibility factor
(a) Contract financing methods cov- or evaluation criterion.
ered in this part are intended to be (b) The contractor should not be dis-
self-liquidating through contract per- qualified from contract financing sole-
formance. Consequently, agencies shall ly because the contractor failed to in-
only use the methods for financing of dicate a need for contract financing be-
contractor working capital, not for the fore the contract was awarded.
expansion of contractor-owned facili-
ties or the acquisition of fixed assets. 32.108 Financial consultation.
However, under loan guarantees, excep- Each contracting office should have
tions may be made for available and use the services of con-
(1) Facilities expansion of a minor or tract financing personnel competent to
incidental nature, if a relatively small evaluate credit and financial problems.
part of the guaranteed loan is used for In resolving any questions concerning
the expansion and the contractors re- (a) the financial capability of an offer-
payment would not be delayed or im- or or contractor to perform a contract
paired; or or (b) what form of contract financing
(2) Other instances of facilities ex- is appropriate in a given case, the con-
pansion for which contract financing is tracting officer should consult the ap-
appropriate under agency procedures. propriate contract financing office.
(b) The limitations in this section do
not apply to contracts under which fa- 32.109 Termination financing.
cilities are being acquired for Govern- To encourage contractors to invest
ment ownership. their own funds in performance despite
the susceptibility of the contract to
32.106 Order of preference. termination for the convenience of the
The contracting officer must con- Government, the contract financing
sider the following order of preference procedures under this part may be ap-
when a contractor requests contract fi- plied to the financing of terminations
nancing, unless an exception would be either in connection with or independ-
in the Governments best interest in a ently of financing for contract per-
specific case: formance (see 49.1121).
(a) Private financing without Gov-
ernment guarantee. It is not intended, 32.110 Payment of subcontractors
however, that the contracting officer under cost-reimbursement prime
require the contractor to obtain pri- contracts.
vate financing If the contractor makes financing
(1) At unreasonable terms; or payments to a subcontractor under a
(2) From other agencies. cost-reimbursement prime contract,
627
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
(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 subcontractor 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
32.114 48 CFR Ch. 1 (10103 Edition)
(a) Financing of shipbuilding, or ship Subpart 32.2Commercial Item

conversion, alteration, or repair, when Purchase Financing
agency regulations provide for progress
payments based on a percentage or
stage of completion. otherwise noted.
(b) Financing of construction or ar-
chitect-engineer services purchased 32.200 Scope of subpart.
under the authority of part 36. This subpart provides policies and
(c) Financing of contracts for sup- procedures for commercial financing
plies or services awarded under the arrangements under commercial pur-
sealed bid method of procurement in chases pursuant to Part 12.
accordance with part 14 through
progress payments based on costs in 32.201 Statutory authority.
accordance with subpart 32.5. 10 U.S.C. 2307(f) and 41 U.S.C. 255(f)
(d) Financing of contracts for sup- provide that payment for commercial
plies or services awarded under the items may be made under such terms
competitive negotiation method of pro- and conditions as the head of the agen-
curement in accordance with part 15, cy determines are appropriate or cus-
through either progress payments tomary in the commercial marketplace
based on costs in accordance with sub- and are in the best interest of the
part 32.5, or performance-based pay- United States.
ments in accordance with subpart 32.10
(but not both). 32.202 General.
(e) Financing of contracts for sup-
32.2021 Policy.
plies or services awarded under a sole-
source acquisition as defined in 2.101 (a) Use of financing in contracts. It is
and using the procedures of part 15, the responsibility of the contractor to
through either progress payments provide all resources needed for per-
based on costs in accordance with sub- formance of the contract. Thus, for
part 32.5, or performance-based pay- purchases of commercial items, financ-
ments in accordance with subpart 32.10 ing of the contract is normally the con-
(but not both). tractors responsibility. However, in
(f) Financing of contracts for supplies some markets the provision of financ-
or services through advance payments ing by the buyer is a commercial prac-
in accordance with subpart 32.4. tice. In these circumstances, the con-
tracting officer may include appro-
(g) Financing of contracts for sup-
priate financing terms in contracts for
plies or services through guaranteed
commercial purchases when doing so
loans in accordance with subpart 32.3.
will be in the best interest of the Gov-
(h) Financing of contracts for sup- ernment.
plies or services through any appro- (b) Authorization. Commercial in-
priate combination of advance pay- terim payments and commercial ad-
ments, guaranteed loans, and either vance payments may be made under
performance-based payments or the following circumstances
progress payments (but not both) in ac- (1) The contract item financed is a
cordance with their respective sub- commercial supply or service;
parts. (2) The contract price exceeds the
[65 FR 16279, Mar. 27, 2000, as amended at 66 simplified acquisition threshold;
FR 2132, Jan. 10, 2001] (3) The contracting officer deter-
mines that it is appropriate or cus-
32.114 Unusual contract financing. tomary in the commercial marketplace
Any contract financing arrangement to make financing payments for the
that deviates from this part is unusual item;
contract financing. Unusual contract (4) Authorizing this form of contract
financing shall be authorized only after financing is in the best interest of the
approval by the head of the agency or Government (see paragraph (e) of this
as provided for in agency regulations. subsection);
(5) Adequate security is obtained (see
[60 FR 49711, Sept. 26, 1995] 32.2024);
630
(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
32.203 48 CFR Ch. 1 (10103 Edition)
obtain adequate security for Govern- (3) Provision of Government financ-

ment financing. The contracting offi- ing shall be conditioned upon a con-
cer shall specify in the solicitation the tractor certification that the assets
type of security the Government will subject to the lien are free from any
accept. If the Government is willing to prior encumbrances. Prior liens may
accept more than one form of security, result from such things as capital
the offeror shall be required to specify equipment loans, installment pur-
the form of security it will provide. If chases, working capital loans, various
acceptable to the contracting officer, lines of credit, and revolving credit ar-
the resulting contract shall specify the rangements.
security (see 32.206(b)(1)(iv)). (c) Other assets as security. Con-
(2) Subject to agency regulations, the tracting officers may consider the
contracting officer may determine the guidance at 28.2032, 28.2033, and 28.204
offerors financial condition to be ade- in determining which types of assets
quate security, provided the offeror may be acceptable as security. For the
agrees to provide additional security purpose of applying the guidance in
should that financial condition become part 28 to this subsection, the term
inadequate as security (see paragraph surety and/or individual surety
(c) of the clause at 52.23229, Terms for should be interpreted to mean offer-
Financing of Purchases of Commercial or and/or contractor.
Items). Assessment of the contractors (d) Other forms of security. Other ac-
financial condition shall consider both ceptable forms of security include
net worth and liquidity. If the con- (1) An irrevocable letter of credit
tracting officer finds the offerors fi- from a federally insured financial insti-
nancial condition is not adequate secu- tution;
rity, the contracting officer shall re- (2) A bond from a surety, acceptable
quire other adequate security. Para- in accordance with part 28 (note that
graphs (b), (c), and (d) of this sub- the bond must guarantee repayment of
section list other (but not all) forms of the unliquidated contract financing);
security that the contracting officer (3) A guarantee of repayment from a
may find acceptable. person or corporation of demonstrated
(3) The value of the security must be liquid net worth, connected by signifi-
at least equal to the maximum unliqui- cant ownership to the contractor; or
dated amount of contract financing (4) Title to identified contractor as-
payments to be made to the con- sets of adequate worth.
tractor. The value of security may be (e) Management of risk and security. In
adjusted periodically during contract establishing contract financing terms,
performance, as long as it is always the contracting officer must be aware
equal to or greater than the amount of of certain risks. For example, very
unliquidated financing. high amounts of financing early in the
(b) Paramount lien. (1) The statutes contract (front-end loading) may un-
cited in 32.201 provide that if the Gov- duly increase the risk to the Govern-
ernments security is in the form of a ment. The security and the amounts
lien, such lien is paramount to all and timing of financing payments must
other liens and is effective imme- be analyzed as a whole to determine
diately upon the first payment, with- whether the arrangement will be in the
out filing, notice, or other action by best interest of the Government.
the United States.
(2) When the Governments security 32.203 Determining contract financing
is in the form of a lien, the contract terms.
shall specify what the lien is upon, e.g., When the criteria in 32.2021(b) are
the work in process, the contractors met, the contracting officer may either
plant, or the contractors inventory. specify the financing terms in the so-
Contracting officers may be flexible in licitation (see 32.204) or permit each of-
the choice of assets. The contract must feror to propose its own customary fi-
also give the Government a right to nancing terms (see 32.205). When the
verify the existence and value of the contracting officer has sufficient infor-
assets. mation on financing terms that are
632
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
and Discount Rates for Benefit-Cost
FR 51271, Sept. 30, 1997]
Analysis of Federal Programs, appro-
32.205 Procedures for offeror-propriate to the period of contract financ-
posed commercial contract financing. 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
32.206 48 CFR Ch. 1 (10103 Edition)
Propose Financing Terms, shall be in- contracting officer under paragraph

cluded. The contract clause shall be (b)(1) of this section shall contain the
constructed in accordance with the re- following:
quirements of this subpart and any (i) A statement that the offerors pro-
agency regulations. posed listing of earliest times and
(b) Each contract financing clause greatest amounts of projected financ-
shall include: ing payments submitted in accordance
(1) A description of the with paragraph (d)(2) of the provision
(i) Computation of the financing pay- at 52.23231, Invitation to Propose Fi-
ment amounts (see paragraph (c) of nancing Terms, is incorporated into
this section); the contract, and
(ii) Specific conditions of contractor (ii) A statement that financing pay-
entitlement to those financing payments shall be made in the lesser
ments (see paragraph (c) of this sec- amount and on the later of the date
tion); due in accordance with the financing
(iii) Liquidation of those financing terms of the contract, or in the amount
payments by delivery payments (see and on the date projected in the listing
paragraph (e) of this section); of earliest times and greatest amounts
(iv) Security the contractor will pro- incorporated in the contract.
vide for financing payments and any (3) If the security accepted by the
terms or conditions specifically appli- contracting officer is the contractors
cable thereto (see 32.2024); and financial condition, the contracting of-
(v) Frequency, form, and any addi- ficer shall incorporate in the clause
tional content of the contractors re- constructed under paragraph (b)(1) of
quest for financing payment (in addi- this section the following
tion to the requirements of the clause (i) A statement that the contractors
at 52.23229, Terms for Financing of financial condition has been accepted
Purchases of Commercial Items; and as adequate security for commercial fi-
(2) Unless agency regulations author- nancing payments; and
ize alterations, the unaltered text of (ii) A statement that the contracting
the clause at 52.23229, Terms for Fi- officer may exercise the Governments
nancing of Purchases of Commercial rights to require other security under
Items. paragraph (c), Security for Government
(c) Computation of amounts, and con- Financing, of the clause at 52.23229,
tractor entitlement provisions. (1) Con- Terms for Financing of Purchases of
tracts shall provide that delivery pay- Commercial Items, in the event the
ments shall be made only for com- contractors financial condition
pleted supplies and services accepted changes and is found not to be ade-
by the Government in accordance with quate security.
the terms of the contract. Contracts (d) Instructions for multiple appropria-
may provide for commercial advance tions. If contract financing is to be
and commercial interim payments computed for the contract as a whole,
based upon a wide variety of bases, in- and if there is more than one appro-
cluding (but not limited to) achieve- priation account (or subaccount) fund-
ment or occurrence of specified events, ing payments under the contract, the
the passage of time, or specified times contracting officer shall include, in the
prior to the delivery date(s). The basis contract, instructions for distribution
for payment must be objectively deter- of financing payments to the respective
minable. The clause written by the funds accounts. Distribution instruc-
contracting officer shall specify, to the tions and contract liquidation instruc-
extent access is necessary, the infor- tions must be mutually consistent.
mation and/or facilities to which the (e) Liquidation. Liquidation of con-
Government shall have access for the tract financing payments shall be on
purpose of verifying the contractors the same basis as the computation of
entitlement to payment of contract fi- contract financing payments; that is,
nancing. financing payments computed on a
(2) If the contract is awarded using whole contract basis shall be liquidated
the offeror-proposed procedure at on a whole contract basis; and a pay-
32.205, the clause constructed by the ment computed on a line item basis
634
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 payment 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
32.300 48 CFR Ch. 1 (10103 Edition)
Subpart 32.3Loan Guarantees 32.303 General.

for Defense Production (a) Section 301 of the Defense Produc-
tion Act authorizes loan guarantees for
32.300 Scope of subpart. contract performance or other oper-
This subpart prescribes policies and ations related to national defense, sub-
procedures for designated agencies ject to amounts annually authorized by
guarantees of loans made by private fi- Congress on the maximum obligation
nancial institutions to borrowers per- of any guaranteeing agency under any
forming contracts related to national loan, discount, advance, or commit-
defense (see 30.102). ment in connection therewith, entered
into under section 301. (See 50 U.S.C.
32.301 Definitions. App. 2091 for statutory limitations and
exceptions concerning the authoriza-
tion of loan guarantee amounts and the
Borrower means a contractor, subcon- use of loan guarantees for the preven-
tractor (at any tier), or other supplier tion of insolvency or bankruptcy.)
who receives a guaranteed loan. (b) The guarantee shall be for less
Federal Reserve Board means the than 100 percent of the loan unless the
Board of Governors of the Federal Re- agency determines that
serve System. (1) The circumstances are excep-
Guaranteed loan or V loan means a tional;
loan, revolving credit fund, or other fi- (2) The operations of the contractor
nancial arrangement made pursuant to are vital to the national defense; and
Regulation V of the Federal Reserve (3) No other suitable means of financ-
Board, under which the guaranteeing ing are available.
agency is obligated, on demand of the (c) Loan guarantees are not issued to
lender, to purchase a stated percentage other agencies of the Government.
of the loan and to share any losses in (d) Guaranteed loans are essentially
the amount of the guaranteed percent- the same as conventional loans made
age. by private financial institutions, ex-
Guaranteeing agency means any agen- cept that the guaranteeing agency is
cy that the President has authorized to obligated, on demand of the lender, to
guarantee loans, through Federal Re- purchase a stated percentage of the
serve Banks, for expediting national loan and to share any losses in the
defense production. amount of the guaranteed percentage.
It is the responsibility of the private fi-
FR 2132, Jan. 10, 2001] nancial institution to disburse and col-
lect funds and to administer the loan.
32.302 Authority. Under Regulation V of the Federal Re-
serve Board (12 CFR 245), any private
Congress has authorized Federal Re-
financing institution may submit an
serve Banks to act, on behalf of guar-
application to the Federal Reserve
anteeing agencies, as fiscal agents of
Bank of its district for guarantee of a
the United States in the making of
loan or credit.
loan guarantees for defense production (e) Federal Reserve Banks will make
(Section 301, Defense Production Act of the loan guarantee agreements on be-
1950 (50 U.S.C. App. 2091)). By Executive half of the guaranteeing agencies.
Order 10480, August 14, 1953 (3 CFR 1949 (f) Under Section 302(c) of Executive
53), as amended, the President has des- Order 10480, August 14, 1953 (3 CFR 1949
ignated the following agencies as guar- 53), as amended, all actions and oper-
anteeing agencies: ations of Federal Reserve Banks, as fis-
(a) Department of Defense. cal agents, are subject to the super-
(b) Department of Energy. vision of the Federal Reserve Board.
(c) Department of Commerce. The Federal Reserve Board is author-
(d) Department of the Interior. ized to prescribe the following, after
(e) Department of Agriculture. consultation with the heads of guaran-
(f) General Services Administration. teeing agencies:
(g) National Aeronautics and Space (1) Regulations governing the actions
Administration. and operations of fiscal agents.
636
(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
32.3043 48 CFR Ch. 1 (10103 Edition)
major policy on defense acquisition; (i) Substantially the same procedure

e.g., policies relating to the mobiliza- may be followed for the application of
tion base. an offeror who is actively negotiating
(2) The urgency of contract perform- or bidding for a defense contract, ex-
ance schedules. cept that the guarantee shall not be
(3) The technical ability and facili- authorized until the contract has been
ties of other potential sources. executed.
(4) The extent to which other sources (j) The contracting officer shall re-
would need contract financing to per- port to the agency contract finance of-
form. fice any information about the con-
(5) The willingness of other sources tractor that would have a potentially
to enter into contracts. adverse impact on a pending guarantee
(6) The time and expense involved in application. The contracting officer is
repurchasing for contracts or parts of not required, however, to initiate any
contracts. This may include potential special investigation for this purpose.
claims under a termination for conven- (k) With regard to existing contracts,
ience or delays incident to default at a the agency shall not consider the per-
later date. centage of guarantee requested by the
(7) The comparative prices available financing institution in determining
from other sources. the contractors eligibility.
(8) The disruption of established sub-
32.3043 Asset formula.
contracting arrangements.
(9) Other pertinent factors. (a) Under guaranteed loans made pri-
(f) The contracting officer shall at- marily for working capital purposes,
tach sufficient data to the certificate the agency shall normally limit the
of eligibility to support the determina- guarantee, by use of an asset formula,
tions made. Available pertinent infor- to an amount that does not exceed a
mation shall be included on specified percentage (90 percent or less)
(1) The contractors past perform- of the contractors investment (e.g.,
ance; payrolls and inventories) in defense
(2) The relationship of the contrac- production contracts. The asset for-
tors operations to performance sched- mula may include all items under de-
ules; and fense contracts for which the con-
(3) Other factors listed in paragraph tractor would be entitled to payment
(e) above, if relevant to the case under on performance or termination. The
consideration. formula shall exclude
(g) If the contracting officer deter- (1) Amounts for which the contractor
mines that a certificate of eligibility is has not done any work or made any ex-
not justified, the facts and reasons sup- penditure;
porting that conclusion shall be docu- (2) Amounts that would become due
mented and furnished to the agency as the result of later performance
contract finance office. under the contracts; and
(h) The guaranteeing agency shall re- (3) Cash collateral or bank deposit
view the proposed guarantee terms and balances.
conditions. If they are considered ap- (b) Progress payments are deducted
propriate, the guaranteeing agency from the asset formula.
shall complete a standard form of au- (c) The agency may relax the asset
thorization as prescribed by the Fed- formula to an appropriate extent for
eral Reserve Board. The agency shall the time actually necessary for con-
transmit the authorization through the tract performance, if the contractors
Federal Reserve Board to the Federal working capital and credit are inad-
Reserve Bank. The Bank is authorized equate.
to execute and deliver to the financing
institution a standard form of guar- 32.3044 Guarantee amount and matu-
antee agreement, with the terms and rity.
conditions approved for the particular The agency may change the guar-
case. The financing institution will antee amount or maturity date, within
then make the loan. the limitations at 32.3043, as follows:
638
(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
32.3048 48 CFR Ch. 1 (10103 Edition)
32.3048 Other borrowing. contracts that have been totally termi-

nated or (2) the terminated portion of
(a) Because of the limitations under
contracts that have been partially ter-
guaranteed loans, some contractors
seek to supplement the loan by other minated. The agency shall take pre-
borrowing (outside the guarantee) from cautions necessary to avoid Govern-
the financing institution or other ment losses and to ensure the loans
sources. It has been recognized in prac- will be self-liquidating from the pro-
tice that, while prohibition of bor- ceeds of defense production contracts.
rowings outside the guaranteed loan is (c) Loan guarantees for contract ter-
preferable when practicable in a given mination financing shall not be pro-
V-loan case, such other borrowings vided before specific contract termi-
should be permitted when necessary. nations are certain.
(b) If the agency consents to the con-
tractor obtaining other borrowing dur- 32.306 Loan guarantees for sub-
contracts.
ing the guaranteed loan period, the
agency shall apply the following re- If the request for a loan guarantee
strictions: concerns a subcontractor that is finan-
(1) A reasonable limit on the amount cially weak in comparison with its con-
of other borrowing. tractor, the Governments interests
(2) If guaranteed and unguaranteed may be fostered by the contractor
loans are made by the same financing making progress payments to the sub-
institution, a requirement that any contractor. If so, the agency shall try
collateral security requested by the in- to arrange for the contractor to pro-
stitution under the unguaranteed loan vide the progress payments. As a re-
is also to be secondary collateral for sult, the need for the loan guarantee
the guaranteed loan. may be reduced or eliminated and the
(3) A requirement that the contractor contractor would bear part or all of the
provide appropriate documentation to risk of loss arising from the selection
the guaranteeing agency, at intervals of the subcontractor.
not longer than 30 days, to disclose
outstanding unguaranteed borrowings. Subpart 32.4Advance Payments
[48 FR 42328, Sept. 19, 1983, as amended at 62 for Non-Commercial Items
FR 237, Jan. 2, 1997]
32.305 Loan guarantees for terminated
contracts. This subpart provides policies and
procedures for advance payments on
(a) The purpose of guaranteed loans; prime contracts and subcontracts. It
i.e., to provide for financing based on does not include policies and proce-
the borrowers recoverable investment dures for advance payments for the
in defense production contracts, may types of transactions listed in 32.404.
also apply to contracts that have been This subpart does not apply to com-
terminated (partially or totally) for mercial advance payments, which are
the convenience of the Government. subject to subpart 32.2.
Guaranteed loans also may be made be-
fore such termination if it is known [48 FR 42328, Sept. 19, 1983, as amended at 60
that termination of particular con- FR 49714, Sept. 26, 1995]
tracts for the convenience of the Gov-
ernment is about to occur. These loans 32.401 Statutory authority.
are expected to provide necessary fi- The agency may authorize advance
nancing pending termination settle- payments in negotiated and sealed bid
ments and payments. They may also fi- contracts if the action is appropriate
nance continuing performance of de- under (a) section 305 of the Federal
fense production contracts that are eli- Property and Administrative Services
gible for guaranteed loans. Act of 1949 (41 U.S.C. 255), (b) the
(b) The procedure for such guarantees Armed Services Procurement Act (10
is substantially the same as that out- U.S.C. 2307), or (c) Pub. L. 85804 (50
lined in 32.304, except that certificates U.S.C. 14311435) and Executive Order
of eligibility are not required for (1) 10789, November 14, 1958 (3 CFR 1958
640
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 concerning 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 payment 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
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
(b) If agencies provide advance pay- 32.407 Interest.

ments to contractors, use of the fol- (a) Except as provided in paragraph
lowing methods is required unless the (d) below, the contracting officer shall
agency has obtained a waiver from the charge interest on the daily unliqui-
Treasury Department: dated balance of all advance payments
(1) By letter of credit if the con- at the higher of
tracting agency expects to have a con- (1) The published prime rate of the fi-
tinuing relationship with the con- nancial institution (depository) in
tractor for a year or more, with ad- which the special account (see 32.4093)
vances totaling at least $120,000 a year. is established; or
(2) By direct Treasury check if the (2) The rate established by the Sec-
circumstances do not meet the criteria retary of the Treasury under 50 U.S.C.
in subparagraph (1) above. App. 1215(b)(2).
(c) If the agency has entered into (b) The interest rate for advance pay-
multiple contracts (or a combination ments shall be adjusted for changes in
of contract(s) and assistance agree- the prime rate of the depository and
ment(s)) involving eligibility of a con- the semiannual determination by the
tractor for more than one letter of Secretary of the Treasury under 50
credit, the agency shall follow arrange- U.S.C. App. 1215(b)(2). The contracting
officer shall obtain data from the de-
ments made under Treasury procedures
pository on changes in the interest
for (1) consolidating funding to the
rate during the month. Interest shall
same contractor under one letter of
be computed at the end of each month
credit or (2) replacing multiple letters
on the daily unliquidated balance of
of credit with a single letter of credit. advance payments at the applicable
(d) The letter of credit enables the daily interest rate.
contractor to withdraw Government (c) Interest shall be required on con-
funds in amounts needed to cover its tracts that are for acquisition, at cost,
own disbursements of cash for contract of facilities for Government ownership,
performance. Whenever feasible, the if the contracts are awarded in com-
agency shall, under the direction and bination with, or in contemplation of,
approval of the Department of the supply contracts or subcontracts.
Treasury, use a letter of credit method (d) The agency head or designee may
that requires the contractor not to authorize advance payments without
withdraw the Government funds until interest under the following types of
the contractors checks have been (1) contracts, if in the Governments inter-
forwarded to the payees (delay of draw- est:
down technique), or (2) presented to the (1) Contracts for experimental, re-
contractors bank for payment (checks search, or development work (including
paid technique) (see 31 CFR 205.3 and studies, surveys, and demonstrations in
205.4(d)). socio-economic areas) with nonprofit
(e) The Treasury regulations provide education or research institutions.
for terminating the advance financing (2) Contracts solely for the manage-
arrangement if the contractor is un- ment and operation of Government-
willing or unable to minimize the owned plants.
elapsed time between receipt of the ad- (3) Cost-reimbursement contracts
vance and disbursement of the funds. with governments, including State or
In such cases, if reversion to normal local governments, or their instrumen-
payment methods is not feasible, the talities.
Treasury regulation provides for use of (4) Other classes of contracts, or un-
a working capital method of advance; usual cases, for which the exclusion of
i.e., for limiting advances to (1) only interest on advances is specifically au-
thorized by agency procedures.
the estimated disbursements for a
(e) If a contract provides for interest-
given initial period and (2) subse-
free advance payments, the contracting
quently, for only actual cash disburse-
officer may require the contractor to
ments (31 CFR 205.3(k) and 205.7).
charge interest on advances or
[48 FR 42328, Sept. 19, 1983, as amended at 52 downpayments to subcontractors and
FR 19805, May 27, 1987] credit the Government for the proceeds
643
32.408 48 CFR Ch. 1 (10103 Edition)
from the interest charges. Interest (6) Other information appropriate to

rates shall be determined as described an understanding of (i) the contractors
in paragraphs (a) and (b) above. The financial condition and need, (ii) the
contracting officer need not require the contractors ability to perform the con-
contractor to charge interest on an ad- tract without loss to the Government,
vance to a subcontractor that is an in- and (iii) financial safeguards needed to
stitution of the kind described in para- protect the Governments interest. Or-
graph (d)(1). dinarily, if the contract is a type de-
(f) The contracting officer shall not scribed in 32.403(a) or (b), the con-
allow interest charges, required by this tractor may limit the response to this
32.407, as reimbursable costs under subparagraph (6) to information on the
cost-reimbursement contracts, whether contractors reliability, technical abil-
the interest charge was incurred by the ity, and accounting system and con-
prime contractor or a subcontractor. trols.
[48 FR 42328, Sept. 19, 1983, as amended at 66 [48 FR 42328, Sept. 19, 1983, as amended at 66
FR 2138, Jan. 10, 2001] FR 2138, Jan. 10, 2001]
32.408 Application for advance pay- 32.409 Contracting officer action.

ments. After analysis of the contractors ap-
(a) A contractor may apply for ad- plication and any appropriate inves-
vance payments before or after the tigation, the contracting officer shall
award of a contract. recommend approval or disapproval
(b) The contractor shall submit any and transmit the request and rec-
advance payment request in writing to ommendation to the approving author-
the contracting officer and provide the ity designated under 32.402(e).
following information: 32.4091 Recommendation for ap-
(1) A reference to the contract if the proval.
request concerns an existing contract,
If recommending approval, the con-
or a reference to the solicitation if the
tracting officer shall transmit the fol-
request concerns a proposed contract.
lowing, under agency procedures, to
(2) A cash flow forecast showing esti-
the approving authority:
mated disbursements and receipts for (a) Contract data, including
the period of contract performance. If (1) Identification and date of the
the application pertains to a type of award;
contract described in 32.403(a) or (b), (2) Citation of the appropriation;
the contractor shall limit the forecast (3) Type and dollar amount of the
to the contract to be financed by ad- contract;
vance payments. (4) Items to be supplied, schedule of
(3) The proposed total amount of ad- deliveries or performance, and status of
vance payments. any deliveries or performance;
(4) The name and address of the fi- (5) The contract fee or profit con-
nancial institution at which the contemplated; and
tractor expects to establish a special (6) A copy of the contract, if avail-
account as depository for the advance able.
payments. If advance payments in the (b) The contractors request and sup-
form of a letter of credit are antici- porting information.
pated, the contractor shall identify the (c) A report on the contractors past
specific account at the financial insti- performance, responsibility, technical
tution to be used. This subparagraph ability, and plant capacity.
(4) is not applicable if an alternate (d) Comments on (1) the contractors
method is used under agency proce- need for advance payments and (2) po-
dures. tential Government benefits from the
(5) A description of the contractors contract performance.
efforts to obtain unguaranteed private (e) Proposed advance payment con-
financing or a V-loan (see 32.301) under tract terms, including proposed secu-
eligible contracts. This requirement is rity requirements.
not applicable to the contract types de- (f) The findings, determination, and
scribed in 32.403(a) or (b). authorization (see 32.410).
644
(g) The recommendation for approval (1) Personal or corporate endorse-

of the advance payment request. ments or guarantees;
(h) Justification of any proposal for (2) Pledges of collateral;
waiver of interest charges (see 32.407). (3) Subordination or standby of other
indebtedness;
32.4092 Recommendation for dis- (4) Controls or limitations on profit
approval. distributions, salaries, bonuses or com-
If recommending disapproval, the missions, rentals and royalties, capital
contracting officer shall, under agency expenditures, creation of liens, retire-
procedures, transmit ment of stock or debt, and creation of
(a) The items prescribed in 32.409 additional obligations; and
1(a), (b), and (c); and (5) Advance payment bonds (rarely
(b) The recommendation for dis- required).
approval and the reasons. (e) In an advance payment agreement
with an instrumentality of the Govern-
32.4093 Security, supervision, and ment, a State, a local government, or
covenants. an agency or instrumentality of a
(a) If advance payments are ap- State or local government, the con-
proved, the contracting officer shall tracting officer may omit the require-
enter into an agreement with the con- ment for deposit of the advances in a
tractor covering special accounts and special account, if the official approv-
suitable covenants protecting the Gov- ing the advance determines that other
ernments interest (see 32.411). This re- adequate security exists to protect the
quirement generally applies under all Governments interest.
statutory authorities, but modified re- (f) The requirements of this 32.4093
quirements applicable to certain spe- do not apply when using letters of cred-
cific cases are prescribed in paragraphs it if an agencys procedures provide
(e) through (g) below. for
(b) The agency shall (1) ensure that (1) The use under a cost-reimburse-
the amount of advance payments does ment contract of Federal funds depos-
not exceed the contractors financial ited in the contractors account at a fi-
needs, and (2) closely supervise the con- nancial institution (without the con-
tractors withdrawal of funds from spe- tractor acquiring title to the funds);
cial accounts in which the advance and
payments are deposited. (2) The security of such deposit of
(c) In the terms of the agreement, the public moneys in accordance with gov-
contracting officer should provide for a erning regulations of the Treasury De-

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48

Chapter 1 (Parts 1 to 51)

Containing a codification of documents

A Special Edition of the Federal Register

For sale by the Superintendent of Documents, U.S. Government Printing Office

Chapter 1Federal Acquisition Regulation .................................... 3

Table of CFR Titles and Chapters ....................................................... 1043

Alphabetical List of Agencies Appearing in the CFR ......................... 1061

List of CFR Sections Affected ............................................................. 1071

To cite the regulations in

Title 48FEDERAL ACQUISITION REGULATIONS SYSTEM is composed of seven vol-

The Federal acquisition regulations in chapter 1 are those government-wide

The first volume, containing chapter 1 (parts 1 to 51), includes an index to

CHAPTER 1Federal Acquisition Regulation ......................... 1

5 Publicizing contract actions ................................... 81

13 Simplified acquisition procedures ........................... 197

19 Small business programs ......................................... 332

27 Patents, data, and copyrights ................................. 489

34 Major system acquisition ........................................ 698

42 Contract administration and audit services ........... 758

PART 1FEDERAL ACQUISITION Subpart 1.6Career Development,

acquisition cycle to help the Govern- ness require open communication

left of the dash, represent, in order, the 1.1053 Copies.

OMB control OMB control

31.20546(a)(3) ................................................. 90000088 52.21910 .......................................................... 90000006

OMB control OMB control

52.23213 .......................................................... 90000010 52.24763 .......................................................... 90000054

(3) Be funded by their respective operating the FAR Secretariat to

(b) Agency heads shall establish pro- 1.302 Limitations.

(2) Except as required by law or as (f) The issuance of policies or proce-

(a) For civilian agencies except FAR Secretariat through a central

1.6032 Selection. Subpart 1.7Determinations and

methodologies, and related software ture, or incidental services, that mem-

(1) Require that a duty be performed (2) Reflect a clear understanding of

Environmentally preferable means financial support from the Govern-

communicated, and includes electroni- (ii) To a significant extent, its use in

power; in corporate suretyship, an in- by-products generated from, and com-

Self-insurance means the assumption individual, indicates a present inten-

exceeding the size standard in 13 CFR bids. Solicitations under negotiated

Subpart 2.2Definitions Clause Subpart 3.3Reports of Suspected Antitrust

Subpart 3.9Whistleblower Protections for terests that may be substantially af-

of contractor bid or proposal informa- promptly submit written notice of dis-

3.1046 Ethics advisory opinions re- that the information is fraudulent,

(2) Begin an investigation; in conduct constituting an offense pun-

with the individuals ability to perform 3.204 Treatment of violations.

agency regulations, evidence of sus- (4) Rotation of bids or proposals, so

Subcontract, means a contract or such prohibited conduct and from any

audit the books and records, including 3.503 Unreasonable restrictions on

3.703 Authority. cordance with subpart 9.4, Debarment,

United States, an agency or instrumen- compensation made to an officer or

technical services rendered directly in neer providing an engineering analysis

(c) The contractor shall require the 3.807 Civil penalties.

agency or designee shall request the Subpart 4.6Contract Reporting

Subpart 4.4Safeguarding Classified Subpart 4.10Administrative Matters

4.102 Contractors signature. 4.201 Procedures.

NISP or agency procedures, as appro- agency-prescribed clause as required by

(3) Facilitate access to Government (5) Those procurements which result

(4) Other pertinent documents. 4.8042 Closeout of the contracting of-

paragraph (b) of this section may not Document Retention period

periods. Line items may be further sub- 101(a)(13) or humanitarian or peace-

PART 5PUBLICIZING CONTRACT 5.000 Scope of part.

Subpart 5.6Publicizing Multi-Agency Use Subpart 5.1Dissemination of

disseminate information on proposed (2) Assisting local trade associations

situations in 5.205, the contracting offi- international agreement or treaty be-