SECTION C COST REIMBURSEMENT SUPPLY PROVISIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89B00552R000700050011-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 14
• Document Creation Date: December 20, 2016
• Document Release Date: January 6, 2004
• Sequence Number: 11
• Publication Date: October 31, 1975
• Content Type: REGULATION

Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
SECTION C
COST REIMBURSEMENT SUPPLY PROVISIONS
Article
Page
No.
Allowable Cost, Fixed Fee, and Payment .........
8
4
Alterations in Contract ........................
23
13
Audit .......................................
4
2
Authorization and Consent ................. ...
14
8
Changes ....................................
6
3
Competition in Subcontracting ..................
3
2
Examination of Records ......................
10
6
Excusable Delays ............................
13
8
Flight Risks .................................
16
9
Government Property .........................
18
10
Inspection of Supplies and Correction of Defects ..
9
5
Insurance-Liability to Third Persons ...........
11
6
Article
Limitation of Cost ........................... 7
Negotiated Overhead Rates .................... 1
Patent Indemnity ............................ 15
Payment for Overtime Premiums 17
Price Reduction for Defective Cost or Pricing Data . 2
Stop Work Order ............................ 21
Subcontractor Cost and Pricing Data ............ 5
Subcontracts ................................. 19
Technical Data-Withholding of Payment ....... 20
Termination ................................. 12
Title and Risk of Loss ........................ 22
Page
No.
4
1
9
9
1
13
3
12
13
6
13
7-204.16 NEGOTIATED OVERHEAD RATES (1970 SEP)
(a) Notwithstanding the provisions of the clause of this con-
tract entitled "Allowable Cost, Fixed Fee, and Payment," the
allowable indirect costs under this contract shall be obtained by
applying negotiated overhead rates to bases agreed upon by the
parties, as specified below.
(b) The Contractor, as soon as possible but not later than ninety
(90) days after the expiration of each period specified in the
Schedule, shall submit to the Contracting Officer with a copy to
the cognizant audit activity a proposed final overhead rate or rates
for that period based on the Contractor's actual cost experience
during that period, together with supporting cost data. Negotia-
tion of final overhead rates by the Contractor and the Contracting
Officer shall be undertaken as promptly as practicable after receipt
of the Contractor's proposal.
(c) Allowability of costs and acceptability of cost allocation
methods shall be determined in accordance with Part 2 of Section
XV of the Armed Services Procurement Regulation as in effect on
the date of this contract.
(d) The results of each negotiation shall be set forth in a
written overhead rate agreement, executed by both parties. Such
agreement is automatically incorporated in this contract upon
execution and shall specify (i) the agreed final rates, (ii) the
bases to which the rates apply, (iii) the periods for which the
rates apply, and (iv) the items treated as direct costs. The over-
head rate agreement shall not change any monetary ceiling, con-
tract obligation, or specific cost allowance or disallowance provided
for in this contract.
(e) Pending establishment of final overhead rates for any
period, the Contractor shall be reimbursed either at negotiated
billing rates as provided in the Schedule or at billing rates accept-
able to the Contracting Officer, subject to appropriate adjustment
when final rates for that period are established. To prevent sub-
stantial over or under payment, billing rates may, at the request
of either party, be revised by mutual agreement, either retro-
actively or prospectively. Any such revision of the negotiated billing
rates provided in the Schedule shall be set forth in a modification
to this contract.
(f) Any failure by the parties to agree on any final rate or
rates under this clause shall be considered a dispute concerning
a question of fact for decision by the Contracting Officer within
the meaning of the "Disputes" clause of this contract.
7-203.30 PRICE REDUCTION FOR DEFECTIVE COST OR
PRICING DATA (1970 JAN)
(a) The following clause shall be inserted in negotiated contracts
which when entered into exceed $100,000, except where the price
FORM 1 4240 Obsolete Previous
4-73 Editions
is based on adequate price competition, established catalog or
market prices of commercial items sold in substantial quantities to
the general public, or prices set by law or regulation. In addition
the contracting officer shall include this clause in other negotiated
contracts for which he has obtained a Certificate of Current Cost
or Pricing Data in accordance with 3-807.3(a) (iii) in connection
with the initial pricing of the contract, or for which he has obtained
partial cost or pricing data in accordance with 3-807.3(e).
PRICE REDUCTION FOR DEFECTIVE COST OR PRICING
DATA (1970 JAN)
If any price, including profit or fee, negotiated in connection
with'this contract or any cost reimbursable under this contract
was increased by any significant sums because:
(i) the Contractor furnished cost or pricing data which was
not complete, accurate and current as certified in the Con-
tractor's Certificate of Current Cost or Pricing Data;
(ii) a subcontractor, pursuant to the clause of this contract
entitled "Subcontractor Cost or Pricing Data" or "Subcon-
tractor Cost or Pricing Data-Price Adjustments" or any sub-
contract clause therein required, furnished cost or pricing data
which was not complete, accurate and current as certified in
the subcontractor's Certificate of Current Cost or Pricing
Data;
(iii) a subcontractor or prospective subcontractor furnished
cost or pricing data which was required to be complete, accu-
rate and current and to be submitted to support a subcontract
cost estimate furnished by the Contractor but which was not
complete, accurate and current as of the date certified in the
Contractor's Certificate of Current Cost or Pricing Data; or
(iv) the Contractor or a subcontractor or prospective sub-
contractor furnished any data, not within (i), (ii) or (iii)
above, which was not accurate as submitted;
the price or cost shall be reduced accordingly and the contract
shall be modified in writing as may be necessary to reflect such
reduction. However, any reduction in the contract price due to
defective subcontract data of a prospective subcontractor when
the subcontract was not subsequently awarded to such sub-
contractor, will be limited to the amount (plus applicable over-
head and profit markup) by which the actual subcontract, or
actual cost to the Contractor if there was no subcontract, was
less than the prospective subcontract cost estimate submitted by
the Contractor, provided the actual subcontract price was not
affected by defective cost or pricing data.
Note: Since the contract is subject to reduction under this
clause by reason of defective cost or pricing data submitted in
connection with certain subcontracts, it is expected that the con-
tractor may wish to include a clause in each such subcontract
requiring the subcontractor to appropriately indemnify the con-
tractor. However, the inclusion of such a clause and the terms
thereof are matters for negotiation and agreement between the
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
contractor and the subcontractor, provided that they are con-
sistent with ASPR 23-203 relating to Disputes provisions in sub-
contracts. It is also expected that any subcontractor subject to
such indemnification will generally require substantially similar
indemnification for defective cost or pricing data required to be
submitted by his lower tier subcontractors.
(b) Insert the following clause in all contracts, both formally
advertised and negotiated, which when entered into exceed
$100,000 except those containing the clause set forth in (a) above.
PRICE REDUCTION FOR DEFECTIVE COST OR PRICING
DATA-PRICE ADJUSTMENTS (1970 JAN)
(a) This clause shall become operative only with respect to
any modification of this contract which involves aggregate in-
creases and/or decreases in costs plus applicable profits in excess
of $100,000 unless the modification is priced on the basis of
adequate competition, established catalog or market prices of
commercial items sold in substantial quantities to the general
public, or prices set by law or regulation. The right to price re-
duction under this clause is limited to defects in data relating to
such modification.
(b) If any price, including profit, or fee, negotiated in con-
nection with any price adjustment under this contract was in-
creased by any significant sums because:
(i) the Contractor furnished cost or pricing data which was
not complete, accurate and current as certified in the Con-
tractor's Certificate of Current Cost or Pricing Data;
(ii) a subcontractor, pursuant to the clause of this contract
entitled "Subcontractor Cost or Pricing Data" or "Subcon-
tractor Cost or Pricing Data-Price Adjustments" or any
subcontract clause therein required, furnished cost or pricing
data which was not complete, accurate and current as cer-
tified in the subcontractor's Certificate of Current Cost or
Pricing Data;
(iii) a subcontractor or prospective subcontractor furnished
cost or pricing data which was required to be complete,
accurate and current and to be submitted to support a sub-
contract cost estimate furnished by the Contractor but which
was not complete, accurate and current as of the date certified
in the Contractor's Certificate of Current Cost or Pricing
Data; or
(iv) the Contractor or a subcontractor or prospective sub-
contractor furnished any data, not within (i), (ii) or (iii)
above, which was not accurate, as submitted;
the price shall be reduced accordingly and the contract shall
be modified in writing as may be necessary to reflect such
reduction. However, any reduction in the contract price due
to defective subcontract data of a prospective subcontractor,
when the subcontract was not subsequently awarded to such
subcontractor, will be limited to the amount (plus applicable
overhead and profit markup) by which the actual subcontract,
or actual cost to the Contractor if there was no subcontract,
was less than the prospective subcontract cost estimate sub-
mitted by the Contractor, provided the actual subcontract price
was not affected by defective cost or pricing data.
Note: Since the contract is subject to reduction tinder this
clause by reason of defective cost or pricing data submitted in
connection with certain subcontracts, it is expected that the
contractor may wish to include a clause in each such subcon-
tract requiring the subcontractor to appropriately indemnify
the contractor. However, the inclusion of such a clause and the
terms thereof are matters for negotiation and agreement between
the contractor and the subcontractor, provided that they are
consistent with ASPR 23-203 relating to Disputes provisions in
subcontracts. It is also expected that any subcontractor subject
to such indemnification will generally require substantially
similar indemnification for defective cost or pricing data re-
quired to be submitted by his lower tier subcontractors.
ARTICLE 3
7-203.28 COMPETITION IN SUBCONTRACTING (1962 APR)
The Contractor shall select subcontractors (including suppliers)
on a competitive basis to the maximum practical extent consistent
with the objectives and requirements of the contract.
7-203.29 AUDIT (1971 APR) (AMENDED)
(a) Insert the clause set forth below in all contracts other than
contracts entered into by formal advertising which are not expected
to exceed $100,000.
(a) General. The Contracting Officer or his representatives
shall have the audit and inspection rights described in the ap-
plicable paragraphs (b), (c) and (d) below.
(b) Examination of costs. If this as a cost reimbursement type,
incentive, time and materials, labor hour, or price redeterminable
contract, or any combination thereof, the Contractor shall main-
tain, and the Contracting Officer or his representatives shall
have the right to examine books, records, documents, and other
evidence and accounting procedures and practices, sufficient to
reflect properly all direct and indirect costs of whatever nature
claimed to have been incurred and anticipated to be incurred
for the performance of this contract. Such right of examination
shall include inspection at all reasonable times of the Contract-
tor's plants, or such parts thereof, as may be engaged in the
performance of this contract.
c) Cost or Pricing Data. If the Contractor submitted cost
or pricing data in connection with the pricing of this contract
or any change or modification thereto, unless such pricing was
based on adequate price competition, established catalog or
market prices of commercial items sold in substantial quantities
to the general public, or prices set by law or regulation, the
Contracting Officer or his representatives who are employees of
the United States Government shall have the right to examine
all books, records, documents and other data of the Contractor
related to the negotiation, pricing or performance of such con-
tract, change or modification, for the purpose of evaluating the
accuracy, completeness and currency of the cost or pricing data
submitted. Additionally, in the case of pricing any change or
modification exceeding $100,000 to formally advertised contracts,
the Appropriate Audit Representative of the Government or his
representatives who are employees of the United States Govern-
ment shall have such rights. The right of examination shall ex-
tend to all documents necessary to permit adequate evaluation
of the cost or pricing data submitted, along with the computa-
tions and projections used therein.
(d) Reports. If the Contractor is required to furnish Cost In-
formation Reports (CIR) or Contract Fund Status Reports
(CFSR), the Contracting Officer or his representatives shall
have the right to examine books, records, documents, and sup-
porting materials, for the purpose of evaluating (i) the effective-
ness of the Contractor's policies and procedures to produce data
compatible with the objectives of these reports, and (ii) the data
reported.
(e) Availability. The materials described in (b), (c) and
(d) above shall be made available at the office of the Contrac-
tor, at all reasonable times, for inspection, audit, or reproduction,
until the expiration of three years from the date of final pay-
ment under this contract or such lesser time specified in Ap-
pendix M of the Armed Services Procurement Regulation, and
for such longer period, if any, as is required by applicable
statute, or by other clauses of this contract, or by (1) and
(2) below:
(1) If this contract is completely or partially terminated,
the records relating to the work terminated shall be made
available for a period of three years from the date of any
resulting final settlement.
(2) Records which relate to appeals under the "Disputes"
clause of this contract, or litigation or the settlement of claims
arising out of the performance of this contract, shall be made
available until such appeals, litigation, or claims have been
disposed of.
(f) The Contractor shall insert a clause containing all the
provisions of this clause, including this paragraph (f), in all
subcontracts hereunder, except altered as necessary for proper
identification of the contracting parties and the Contracting
Officer under the Government prime contract.
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
low
7-203.31 SUBCONTRACTOR COST OR PRICING DATA (1970
JAN)
(a) The following clause shall be inserted in all negotiated
contracts expected to exceed $100,000, except where the price is
based on adequate price competition, established catalog or market
prices of commercial items sold in substantial quantities to the
general public, or prices set by law or regulation. The Contracting
Officer may include this clause, with appropriate reduction in
the dollar amounts included therein, in other negotiated contracts
where a Certificate of Current Cost or Pricing Data is required
(see 3-807.3(a) (iii)) in connection with initial pricing of the
contract.
SUBCONTRACTOR COST OR PRICING DATA (1970 JAN)
(a) The Contractor shall require subcontractors hereunder to
submit, actually or by specific identification in writing, cost
or pricing data under the following circumstances: (i) prior
to the award of any subcontract the amount of which is expected
to exceed $100,000 when entered into; (ii) prior to the pricing
of any subcontract modification which involves aggregate in-
creases and/or decreases in costs plus applicable profits expected
to exceed $100,000; except where the price is based on adequate
price competition, established catalog or market prices of com-
merical items sold in substantial quantities to the general public,
or prices set by law or regulation.
(b) The Contractor shall require subcontractors to certify,
in substantially the same form as that used in the certificate by
the Prime Contractor to the Government, that to the best of
their knowledge and belief, the cost and pricing data submitted
under (a) above is accurate, complete, and current as of the
date of agreement on the negotiated price of the subcontract
or subcontract change or modification,
(c) The Contractor shall insert the substance of this clause
including this paragraph (c) in each subcontract hereunder
which exceeds $100,000 when entered into except where the
price thereof is based on adequate price competition, established
catalog or market prices of commercial items sold in substantial
quantities to the general public, or prices set by law or regula-
tion. In each such excepted subcontract hereunder in excess
of $100,000, the Contractor shall insert the substance of the
following clause:
SUBCONTRACTOR COST OR PRICING DATA-PRICE
ADJUSTMENTS
(a) Paragraphs (b) and (c) of this clause shall become
operative only with respect to any modification made pursuant
to one or more provisions of this contract which involves aggre-
gate increases and/or decreases in costs plus applicable profits
expected to exceed $100,000. The requirements of this clause
shall be limited to such contract modifications.
(b) The Contractor shall require subcontractors hereunder
to submit, actually or by specific identification in writing, cost
or pricing data under the following circumstances: (i) prior to
award of any subcontract, the amount of which is expected to
exceed $100,000 when entered in; (ii) prior to the pricing of
any subcontract modification which involves aggregate increases
and/or decreases in costs plus applicable profits expected to
exceed $100,000; except where the price is based on adequate
price competition, established catalog or market prices of com-
mercical items sold in substantial quantities to the general public,
or prices set by law or regulation.
(c) The Contractor shall require subcontractors to certify, in
substantially the same form as that used in the certificate by
the Prime Contractor to the Government, that to the best of
their knowledge and belief the cost and pricing data submitted
under (b) above is accurate, complete, and current as of the
date of agreement on the negotiated price of the subcontract
or subcontract change or modification.
(d) The Contractor shall insert the substance of this clause
including this paragraph (d) in each subcontract hereunder
which exceeds $100,000 when entered into.
(b) Insert the following clause in all contracts, both formally
advertised and negotiated, which exceed $100,000 other than those
described in (a) above:
SUBCONTRACTOR COST OR PRICING DATA-PRICE
ADJUSTMENTS (1970 JAN)
(a) Paragraphs (b) and (c) of this clause shall become
operative only with respect to any modification made pursuant
to one or more provisions of this contract which involves aggre-
gate increases and/or decreases in costs plus applicable profits
expected to exceed $100,000. The requirements of this clause
shall be limited to such modifications.
(b) The Contractor shall require subcontractors hereunder
to submit cost or pricing data under the following circumstances:
(i) prior to the award of any subcontract the amount of which
is expected to exceed $100,000 when entered into; (ii) prior to
the pricing of any subcontract modification which involves
aggregate increases and/or decreases in costs plus applicable
profits expected to exceed $100,000; except where the price is
basd on adequate price competition, established catalog or
market prices of commercial items sold in substantial quantities
to the general public, or prices set by law or regulation.
(c) The Contractor shall require subcontractors to certify
that to the best of their knowledge and belief the cost and
pricing data submitted under (b) above is accurate, complete,
and current as of the date of agreement on the negotiated price
of the subcontract or subcontract change or modification.
(d) The Contractor shall insert the substance of this clause
including this paragraph (d) in each subcontract which exceeds
$100,000.
7-203.2 CHANGES (1967 APR)
(a) The Contracting Officer may at any time, by a written
order, and without notice to the sureties, if any, make changes,
within the general scope of this contract, in any one or more of
the following:
(i) drawings, designs, or specifications, where supplies to
be furnished are to be specially manufactured for the Govern-
ment in accordance therewith;
(ii) method of shipment or packing; and
(iii) place of delivery.
(b) If any such change causes an increase or decrease in the
estmiated cost of, or the time required for, the performance of
any part of the work under this contract, whether changed or
not changed by any such order, or otherwise affects any other
provision of this contract, an equitable adjustment shall be made:
(i) in the estimated cost or delivery schedule, or both;
(ii) in the amount of any fixed fee to be paid to the Con-
tractor; and
(iii) in such other provisions of the contract as may be so
affected, and the contract shall be modified in writing accord-
ingly. Any claim by the Contractor for adjustment under this
clause must be asserted within thirty (30) days from the date
of receipt by the Contractor of the notification of change;
provided, however, that the Contracting Officer, if he decides
that the facts justify such action, may receive and act upon
any such claim asserted at any time prior to final payment
tinder this contract. Failure to agree to any adjustment shall
be a dispute concerning a question of fact within the meaning
of the clause of this contract entitled "Disputes." However,
except as provided in paragraph (c) below, nothing in this
clause shall excuse the Contractor from proceeding with the
contract as changed.
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, the estimated cost of this contract and, if this contract is
incrementally funded, the funds allotted for the performance
thereof, shall not be increased or deemed to be increased except
by specific written modification of the contract indicating the new
contract estimated cost and, if this contract is incrementally
funded, the new amount allotted to the contract. Until such
modification is made, the Contractor shall not be obligated to
continue performance or incur costs beyond the point established
in the clause of this contract entitled "Limitation of Cost" or
"Limitation of Funds."
7-203.3 LIMITATION OF COST (1966 OCT)
(a) It is estimated that the total cost to the Government for
the performance of this contract, exclusive of any fee, will not
exceed the estimated cost set forth in the Schedule, and the
Contractor agrees to use his best efforts to perform the work
specified in the Schedule and all obligations under this contract
within such estimated cost. If, at any time, the Contractor has
reason to believe that the costs which he expects to incur in the
performance of this contract in the next succeeding sixty (60) days,
when added to all costs previously incurred, will exceed seventy-
five percent (75%) of the estimated cost then set forth in the
Schedule, or if, at any time, the Contractor has reason to believe
that the total cost to the Government for the performance of
this contract, exclusive of any fee, will be greater or substantially
less than the then estimated cost hereof, the Contractor shall
notify the Contracting Officer in writing to that effect, giving
his revised estimate of such total cost for the performance of
this contract.
(b) Except as required by other provisions of this contract spe-
cifically citing and stated to be an exception from this clause, the
Government shall not be obligated to reimburse the Contractor
for costs incurred in excess of the estimated cost set forth in the
Schedule, and the Contractor shall not be obligated to continue
performance under the contract (including actions under the
Termination clause) or otherwise to incur costs in excess of the
estimated cost set forth in the Schedule, unless and until the Con-
tracting Officer shall have notified the Contractor in writing that
such estimated cost has been increased and shall have specified in
such notice a revised estimated cost which shall thereupon consti-
tute the estimated cost of performance of this contract. No notice,
communication or representation in any other form or from any
person other than the Contracting Officer shall affect the estimated
cost of this contract. In the absence of the specified notice, the
Government shall not be obligated to reimburse th Contractor
for any costs in excess of the estimated cost set forth in the
Schedule, whether those excess costs were incurred during the
course of the contract or as a result of termination. When and
to the extent that the estimated cost set forth in he Schedule
has been increased, any costs incurred by the Contractor in excess
of the estimated cost prior to such increase shall be allowable
to the same extent as if such costs had been incurred after
the increase; unless the Contracting Officer issues a termination
or other notice and directs that the increase is solely for the pur-
pose of covering termination or other specified expenses.
(c) Change orders issued pursuant to the Changes clause of this
contract shall not be considered an authorization to the Contractor
to exceed the estimated cost set forth in the Schedule in the
absence of a statement in the change order, or other contract
modification, increasing the estimated cost.
(d) In the event this contract is terminated or the estimated
cost not increased, the Government and the Contractor shall nego-
tiate an equitable distribution of all property produced or pur-
chased under the contract based upon the share of costs incurred
by each.
7-203.4 ALLOWABLE COST, FIXED FEE, AND PAYMENT
(1972 MAY)
(a) For the performance of this contract, the Government shall
pay to the Contractor-
(s) the cost thereof (hereinafter referred to as "allowable
cost") determined by the Contracting Officer to be allowable
in accordance with-
(A) Part 2 of Section XV of the Armed Services Pro-
curement Regulation as in effect on the date of this
contract; and
(B) the terms of this contract; and
(ii) such fixed fee, if any, as may be provided for in
the Schedule.
(b) Payments shall be made to the Contractor when requested
as work progresses, but not more frequently than bi-weekly, in
amounts approved by the Contracting Officer. The Contractor
may submit to an authorized representative of the Contracting
Officer, in such form and reasonable detail as such representative
may require, an invoice or public voucher supported by a state-
ment of cost for the performance of this contract and claimed
to constitute allowable cost. For this purpose, the term costs shall
include only those recorded costs which result, at the time of the
request for reimbursement, from payment by cash, check, or other
form of actual payment for items or services purchased directly
for the contract, together with (when the Contractor is not
delinquent in payment of costs of contract performance in the
ordinary course of business) costs incurred, but not necessarily
paid, for materials which have been issued from the Contractor's
stores inventory and placed in the production process for use
on the contract, for direct labor, for direct travel, for other
direct inhouse costs, and for properly allocated and allowable
indirect costs, as is shown by records maintained by the Con-
tractor for purposes of obtaining reimbursement under Govern-
ment contracts plus the amount of progress payments which have
been paid to Contractor's subcontractors under similar cost stand-
ards. The requirement of prior payment for items or services
purchased directly for the contract shall not apply where the Con-
tractor is a small business concern.
(c) Promptly after receipt of each invoice or voucher and
statement of cost, the Government shall, except as otherwise
provided in this contract, subject to the provisions of (d) below,
make payment thereon as approved by the Contracting Officer.
Payment of the fixed fee, if any, shall be made to the Contractor
as specified in the Schedule; provided, however, that after pay-
ment of eighty-five percent (85%) of the fixed fee set forth
in the Schedule, the Contracting Officer may withhold further
payment of fee until a reserve shall have been set aside in an
amount which he considers necessary to protect the interests of
the Government, but such reserve shall not exceed fifteen percent
(15%) of the total fixed fee or one hundred thousand dollars
($100.000), whichever is less.
(d) At any time or times prior to final payment under this
contract, the Contracting Officer may have the invoices or vouchers
and statements of cost audited. Each payment theretofore made
shall be subject to reduction for amounts included in the related
invoice or voucher which are found by the Contracting Officer,
on the basis of such audit, not to constitute allowable cost. Any
payment may be reduced for overpayments, or increased for under-
payments, on preceding invoices or vouchers.
(e) On receipt and approval of the invoice or voucher desig-
nated by the Contractor as the "completion invoice" or "com-
pletion voucher" and upon compliance by the Contractor with
all the provisions of this contract (including, without limitation,
the provisions relating to patents and the provisions of (f) below),
the Government shall promptly pay to the Contractor any balance
of allowable cost, and any part of the fixed fee, which has been
withheld pursuant to (c) above or otherwise not paid to the
Contractor. The completion invoice or voucher shall be submitted
by the Contractor promptly following completion of the work
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
under this contract but in no event later than one (1) year
(or such longer period as the Contracting Officer may in his
discretion approve in writing) from the date of such completion.
(f) The Contractor agrees that any refunds, rebates, credits,
or other amounts (including any interest thereon) accuring to
or received by the Contractor or any assignee under this contract
shall be paid by the Contractor to the Government, to the extent
that they are properly allocable to costs for which the Contractor
has been reimbursed by the Government under this contract.
Reasonable expenses incurred by the Contractor for the purpose
of securing such refunds, rebates, credits, or other amounts shall
be allowable costs hereunder when approved by the Contracting
Officer. Prior to final payment under this contract, the Contractor
and each assignee under this contract whose assignment is in
effect at the time of final payment under this contract shall
execute and deliver-
(i) an assignment to the Government, in form and sub-
stance satisfactory to the Contracting Officer, of refunds,
rebates, credits, or other amounts (including any interest
thereon) properly allocable to costs for which the Contractor
has been reimbursed by the Government under this contract;
and
(ii) a release discharging the Government, its officers,
agents, and employees from all liabilities, obligations, and
claims arising out of or under this contract, subject only to the
following exceptions-
(A) specified claims in stated amounts or in estimated
amounts where the amounts are not susceptible of exact
statement by the Contractor;
(B) claims, together with reasonable expenses incidental
thereto, based upon liabilities of the Contractor to third
parties arising out of the performance of this contract;
provided, that such claims are not known to the Contractor
on the date of the execution of the release; and provided
further that the Contractor gives notice of such claims in
writing to the Contracting Officer not more than six (6)
years after the date of the release or the date of any notice
to the Contractor that the Government is prepared to make
final payment, whichever is earlier; and
(C) claims for reimbursement of costs (other than ex-
penses of the Contractor by reason of his indemnification
of the Government against patent liability), including rea-
sonable expenses incidental thereto, incurred by the Con-
tractor under the provisions of this contract relating to
patents.
Any cost incurred by the Contractor under the terms of this
contract which would constitute allowable cost under the pro-
visions of this clause shall be included in determining the amount
payable under this contract, notwithstanding any provisions con-
tained in the specifications or other documents incorporated in this
contract by reference, designating services to be performed or
materials to be furnished by the Contractor at his expense or
without cost to the Government.
7-203.5 INSPECTION OF SUPPLIES AND CORRECTION OF
DEFECTS (1960 MAY)
(a) All supplies (which term throughout this clause includes
without limitation raw materials, components, intermediate as-
semblies, and end products) shall be subject to inspection and
test by the Government, to the extent practicable at all times and
places including the period of manufacture, and in any event prior
to acceptance. The Contractor shall provide and maintain an
inspection system acceptable to the Government covering the
supplies, fabricating methods, and special tooling hereunder. The
Government, through any authorized representative, may inspect
the plant or plants of the Contractor or of any of his subcon-
tractors engaged in the performance of this contract. If any in-
spection or test is made by the Government on the premises of the
Contractor or a subcontractor, the Contractor shall provide and
shall require subcontractors to provide all reasonable facilities and
assistance for the safety and convenience of the Government in-
spectors in the performance of their duties. All inspections and
tests by the Government shall be performed in such a manner as
will not unduly delay the work. Except as otherwise provided
in this contract, acceptance of any supplies or lots of supplies
shall be made as promptly as practicable after delivery thereof
and shall be deemed to have been made no later than sixty (60)
days after the date of such delivery, if acceptance has not been
made earlier within such period.
(b) At any time during performance of this contract, but not
later than six (6) months (or such other period as may be pro-
vided in the Schedule) after acceptance of the supplies or lots
of supplies last delivered in accordance with the requirements of
this contract, the Government may require the Contractor to
remedy by correction or replacement, as directed by the Contract-
ing Officer, any supplies or lots of supplies which at the time of de-
livery thereof are defective in material or workmanship or other-
wise not in conformity with the requirements of this contract.
Except as otherwise provided in paragraph (c) hereof, the cost
of any such replacement or correction shall be included in Allow-
able Cost determined as provided in the clause of this contract
entitled "Allowable Cost, Fixed Fee and Payment," but no addi-
tional fee shall be payable with respect thereto. Such supplies
or lots of supplies shall not be tendered thereafter for acceptance
unless the former requirement or correction is disclosed. If the
Contractor fails to proceed with reasonable promptness to re-
place or correct such supplies or lots of supplies, the Government
(i) may be contract or otherwise replace or correct such supplies
and charge to the Contractor any increased cost occasioned the
Government thereby, or may reduce any fixed fee payable under
this contract (or require repayment of any fixed fee theretofore
paid) in such amount as may be equitable under the circum-
stances, or (ii) in the case of supplies not delivered, may require
the delivery of such supplies, and shall have the right to reduce
any fixed fee payable under this contract (or to require repay-
ment of any fixed fee theretofore paid) in such amount as may
be equitable under the circumstances (or (iii) may terminate this
contract for default as provided in the clause of this contract
entitled "Termination." Failure to agree to the amount of any
such increased cost to be charged to the Contractor or to such
reduction in, or repayment of, the fixed fee shall be a dispute
concerning a question of fact within the meaning of the clause
of this contract entitled "Disputes."
(c) Notwithstanding the provisions of paragraph (b) hereof,
the Government may at any time require the correction or re-
placement by the Contractor, without cost to the Government,
of supplies or lots of supplies which are defective in material or
workmanship, or otherwise not in conformity with the require-
ments of this contract, if such defects or failures are due to fraud,
lack of good faith or willful misconduct on the part of any of
the Contractor's directors or officers, or on the part of any of his
managers, superintendents, or other equivalent representatives,
who has supervision or direction of (i) all or substantially all
of the Contractor's business, or (ii) all or substantially all of the
Contractor's operations at any one plant or separate location in
which this contract is being performed, or (iii) a separate and
complete major industrial operation in connection with the per-
formance of this contract. The Government may at any time also
require correction or replacement by the Contractor, without cost
to the Government, of any such defective supplies or lots of
supplies if the defects or failures are caused by one or more
individual employees selected or retained by the Contractor after
any such supervisory personnel has reasonable grounds to believe
that any such employee is habitually careless or otherwise un-
qualified.
(d) Corrected supplies or replaced supplies shall be subject to
the provisions of this clause in the same manner and to the same
extent as supplies originally delivered under this contract.
(e) The Contractor shall make his records of all inspection
work available to the Government during the performance of this
contract and for such longer period as may be specified in this
contract.
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
(f) Except as provided in this clause and as may be provided
in the Schedule, the Contractor shall have no obligation or liability
to correct or replace supplies or lots of supplies which at the
time of delivery are defective in material or workmanship or
otherwise not in conformity with the requirements of this contract.
(g) Except as otherwise provided in the Schedule, the Con-
tractor's obligation to correct or replace Government-furnished
property (which is property in the possession of or acquired
directly by the Government and delivered or otherwise made
available to the Contractor) shall be governed by the provisions
of the clause of this contract entitled "Government Property."
7-203.7 EXAMINATION OF RECORDS (1971 MAR)
(AMENDED)
(a) This clause is applicable if the amount of this contract
exceeds $2,500 and was entered into by means of negotiation,
including small business restricted advertising, but is not applicable
if this contract was entered into by means of formal advertising.
(b) The Contractor agrees that the Appropriate Audit Repre-
sentative of the Government or any of his duly authorized repre-
sentatives shall, until the expiration of three years after final pay-
ment under this contract or such lesser time specified in either
Appendix M of the Armed Services Procurement Regulation or the
Federal Procurement Regulations Part 1-20, as appropriate, have
access to and the right to examine any directly pertinent books,
documents, papers, and records of the Contractor involving trans-
actions related to this contract.
(c) The Contractor further agrees to include in all his sub-
contracts hereunder a provision to the effect that the subcontractor
agrees that the Appropriate Audit Representative of the Govern-
men or any of his duly authorized representatives shall, until the
expiration of three years after final payment under the subcontract
or such lesser time specified in either Appendix M of the Armed
Services Procurement Regulation or the Federal Procurement
Regulations Part 1-20, as appropriate, have access to and the right
to examine any directly pertinent books, documents, papers, and
records of such subcontractor, involving transactions related to the
subcontract. The term "subcontract" as used in this clause excludes
(i) purchase orders not exceeding $2,500 (ii) subcontracts or
purchase orders for public utility services at rates established for
uniform applicability to the general public.
(d) The periods of access and examination described in (b) and
(c) above for records which relate to (i) appeals under the
"Disputes" clause of this contract, (ii) litigation or the settlement
of claims arising out of the performance of this contract, or (iii)
costs and expenses of this contract as to which exception has been
taken by the Appropriate Audit Representative of the Government
or any of his duly authorized representatives, shall continue until
such appeals, litigation, claims or exceptions have been disposed of.
7-203.22 INSURANCE-LIABILITY TO THIRD PERSONS
(1966 DEC)
(a) The Contractor shall procure and thereafter maintain work-
men's compensation, employer's liability, comprehensive general
liability (bodily injury) and comprehensive automobile liability
(bodily injury and property damage) insurance, with respect to
performance under this contract, and such other insurance as the
Contracting Officer may from time to time require with respect
to performance under this contract; provided, that the Contractor
may with the approval of the Contracting Officer maintain a self-
insurance program, and provided further, that with respect to
workmen's compensation the Contractor is qualified pursuant
to statutory authority. All insurance required pursuant to the
provisions of this paragraph shall be in such form, in such
amounts, and for such periods of time, as the Contracting Officer
may from time to time require or approve, and with insurers
approved by the Contracting Officer.
(b) The Contractor agrees, to the extent and in the manner
required by the Contracting Officer, to submit for the approval
of the Contracting Officer any other insurance maintained by the
Contractor in connection with the performance of this contract
and for which the Contractor seeks reimbursement hereunder.
(c) The Contractor shall be reimbursed; (i) for the portion
allocable to this contract of the reasonable cost of insurance as
required or approved pursuant to the provisions of this clause, and
(ii) without regard to and as an exception to the "Limitation of
Cost" or the "Limitation of Funds" clause of this contract, for
liabilities to third persons for loss of or damage to property (other
than property (A) owned, occupied or used by the Contractor or
rented to the Contractor, or (B) in the care, custody, or control
of the Contractor), or for death or bodily injury, not compensated
by insurance or otherwise, arising out of the performance of this
contract, whether or not caused by the negligence of the Con-
tractor, his agents, servants or employees, provided such liabilities
are represented by final judgments or settlements approved in writ-
ing by the Government, and expenses incidental to such liabilities,
except liabilities (I) for which the Contractor is otherwise respon-
sible under the express terms of the clause or clauses, if any,
specified in the Schedule, or (II) with respect to which the
Contractor has failed to insure as required or maintain insurance
as approved by the Contracting Officer or (III) which results from
willful misconduct or lack of good faith on the part of any of
the Contractor's directors or officers, or on the part of any of his
managers, superintendents, or other equivalent representatives,
who has supervision or direction of (1) all or substantially all of
the Contractor's business, or (2) all or substantially all of the
Contractor's operations at any one plant or separate location
in which this contract is being performed, or (3) a separate and
complete major industrial operation in connection with the per-
formance of this contract. The foregoing shall not restrict the
right of the Contractor to be reimbursed for the cost of insurance
maintained by the Contractor in connection with the performance
of this contract, other than insurance required to be submitted
for approval or required to be procured and maintained pursuant
to the provisions of this clause, provided such cost would constitute
Allowable Cost under the clause of this contract entitled "Allow-
able Cost, Fixed Fee and Payment."
(d) The Contractor shall give the Government or its representa-
tives immediate notice of any suit or action filed, or prompt notice
of any claim made, against the Contractor arising out of the per-
formance of this contract, the cost and expense of which may be
reimbursable to the Contractor under the provisions of this contract
and the risk of which is then uninsured or in which the amount
claimed exceeds the amount of coverage. The Contractor shall
furnish immediately to the Government copies of all pertinent
papers received by the Contractor. If the amount of the liability
claimed exceeds the amount of coverage, the Contractor shall
authorize representatives of the Government to collaborate with
counsel for the insurance carrier, if any, in settling or defending
such claim. If the liability is not insured or covered by bond, the
Contractor shall, if required by the Government, authorize repre-
sentatives of the Government to settle or defend any such claim
and to represent the Contractor in or take charge of any litigation
in connection therewith; provided, however, that the Contractor
may, at his own expense, be associated with the representatives
of the Government in the settlement or defense of any such claim
or litigation.
7-203.10 TERMINATION (1973 APR)
(a) The performance of work under the contract may be
terminated by the Government in accordance with this clause
in whole, or from time to time in part:
(i) whenever the Contractor shall default in performance
of this contract in accordance with its terms (including in
the term "default" any such failure by the Contractor to
make progress in the prosecution of the work hereunder as
endangers such performance), and shall fail to cure such
default within a period of ten days, or such longer periods
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
as the Contracting Officer may allow) after receipt from
the Contracting Officer of a notice specifying the default; or
(ii) whenever for any reason the Contracting Officer shall
determine that such termination is in the best interest of
the Government.
Any such termination shall be effected by delivery to the Con-
tractor of a Notice of Termination specifying whether termina-
tion is for the default of the Contractor or for the convenience of
the Government, the extent to which performance of work under
the contract is terminated, and the date upon which such termina-
tion becomes effective. If, after notice of termination of this
contract for default under (i) above, it is determined for any
reason that the Contractor was not in default pursuant to (i),
or that the Contractor's failure to perform or to make progress
in performance is due to causes beyond the control and without
the fault or negligence of the Contractor pursuant to the pro-
visions of the clause of this. contract relating to excusable delays,
the Notice of Termination shall be deemed to have been issued
under (ii) above, and the rights and obligations of the parties
hereto shall in such event be governed accordingly.
(b) After receipt of a Notice of Termination and except as
otherwise directed by the Contracting Officer, the Contractor shall:
(i) stop work under the contract on the date and to the
extent specified in the Notice of Termination;
(ii) place no further orders or subcontracts for materials,
services, or facilities, except as may be necessary for com-
pletion of such portion of the work under the contract as
is not terminated;
(iii) terminate all orders and subcontracts to the extent
that they relate to the performance of work terminated by
the Notice of Termination;
(iv) assign to the Government, in the manner and to the
extent directed by the Contracting Officer, all of the right,
title, and interest of the Contractor under the orders or
subcontracts so terminated, in which case the Government
shall have the right, in its discretion, to settle or pay any
or all claims arising out of the termination of such orders
and subcontracts;
(v) with the approval or ratification of the Contracting
Officer, to the extent he may require, which approval or
ratification shall be final and conclusive for all purposes of
this clause, settle all outstanding liabilities and all claims
arising out of such termination of orders and subcontracts,
the cost of which would be reimbursable in whole or in part,
in accordance with the provisions of this contract;
(vi) transfer title (to the extent that title has not already
been transferred) and in the manner, to the extent, and at
the times directed by the Contracting Officer, deliver to
the Government (A) the fabricated or unfabricated parts,
work in process, completed work, supplies, and other material
produced as a part of, or acquired in respect of the per-
formance of, the work terminated by the Notice of Termi-
nation, (B) the completed or partially completed plans,
drawings, information, and other property which, if the
contract had been completed, would be required to be
furnished to the Government, and (C) the jigs, dies, and
fixtures, and other special tools and tooling acquired or manu-
factured for the performance of this contract for the cost of
which the Contractor has been or will be reimbursed under
this contract;
(vii) use his best efforts to sell in the manner, at the
times, to the extent, and at the price or prices directed or
authorized by the Contracting Officer, any property of the
types referred to in (vi) above; provided, however, that the
Contractor (A) shall not be required to extend credit to any
purchaser, and (B) may acquire any such property under
the conditions prescribed by and at a price or prices ap-
proved by the Contracting Officer; and provided further that
the proceeds of any such transfer or disposition shall be ap-
plied in reduction of any payments to be made by the Gov-
ment to the Contractor under this contract or shall otherwise
be credited to the price or cost of the work covered by this
contract or paid in such other manner as the Contracting
Officer may direct;
(viii) complete performance of such part of the work as
shall not have been terminated by the Notice of Termination;
and
(ix) take such action as may be necessary, or as the Con-
tracting Officer may direct, for the protection and preserva-
tion of the property related to this contract which is in the
possession of Contractor in which the Government has or
may acquire an interest.
The Contractor shall proceed immediately with the performance
of the above obligations notwithstanding any delay in determining
or adjusting the amount of the fee, or any item of reimbursable
cost, under this clause. At any time after expiration of the plant
clearance period, as defined in Section VIII, Armed Services Pro-
curement Regulation, as it may be amended from time to time,
the Contractor may submit to the Contracting Officer a list, cer-
tified as to quantity and quality, of any or all items of termination
inventory not previously disposed of, exclusive of items the dis-
position of which has been directed or authorized by the Con-
tracting Officer, and may request the Government to remove such
items or enter into a storage agreement covering them. Not later
than fifteen (15) days thereafter, the Government will accept
such items and remove them or enter into a storage agreement
covering the same; provided, that the list submitted shall be sub-
ject to verification by the Contracting Officer upon removal of
the items, or if the items are stored, within forty-five (45) days
from the date of submission of the list, and any necessary adjust-
ment to correct the list as submitted shall be made prior to final
settlement.
(c) After receipt of a Notice of Termination, the Contractor
shall sumbit to the Contracting Officer his termination claim in
the form and with the certification prescribed by the Contracting
Officer. Such claim shall be submitted promptly but in no event
later than one year from the effective date of termination, unless
one or more extensions in writing are granted by the Contracting
Officer, upon request of the Contractor made in writing within
such one year period or authorized extension thereof. However,
if the Contracting Officer determines that the facts justify such
action, he may receive and act upon any such termination claim
at any time after such one year period or any extension thereof.
Upon failure of the Contractor to submit his termination claim
within the time allowed, the Contracting Officer may determine,
on the basis of information available to him, the amout, if any,
due to the Contractor by reason of the termination and shall
thereupon pay to the Contractor the amount so determined.
(d) Subject to the provisions of paragraph (c), the Contractor
and the Contracting Officer may agree upon the whole or any
part of the amount or amounts to be paid (including an allow-
ance for the fee) to the Contractor by reason of the total or partial
termination of work pursuant to this clause. The contract shall be
amended accordingly, and the Contractor shall be paid the agreed
amount.
(e) In the event of the failure of the Contractor and the Con-
tracting Officer to agree in whole or in part, as provided in para-
garph (d), as to the amounts with respect to costs and fee, or
as to the amount of the fee, to be paid to the Contractor in con-
nection with the termination of work pursuant to this clause, the
Contracting Officer shall determine, on the basis of information
available to him, the amount, if any, due to the Contractor by
reason of the termination and shall pay to the Contractor the
amount determined as follows:
(i) if the settlement includes cost and fee-
(A) there shall be included therein all costs and expenses
reimbursable in accordance with this contract, not previously
paid to the Contractor for the performance of this contract
prior to the effective date of the Notice of Termination, and
such of these costs as may continue for a reasonable time
thereafter with the approval of or as directed by the Con-
tracting Officer; provided, however, that the Contractor
shall proceed as rapidly as practicable to discontinue such
costs;
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
(B) there shall be included therein so far as not in-
cluded under (A) above, the cost of settling and paying
claims arising out of the termination of work under sub-
contracts or orders, as provided in paragraph (b) (v) above,
which are properly chargeable to the terminated portion of
the contract;
(C) there shall be included therein the reasonable costs
of settlement, including accounting, legal, clerical, and other
expenses reasonably necessary for the preparation of settle-
ment claims and supporting data with respect to the
terminated portion of the contract and for the termination
and settlement of subcontracts, thereunder, together with
reasonable storage, transportation, and other costs incurred
in connection with the protection or disposition of termina-
tion inventory; provided, however, that if the termination is
for default of the Contractor there shall not be included
any amounts for the preparation of the Contractor's settle-
ment proposal; and
(D) there shall be included therein a portion of the
fee payable under the contract determined as follows-
(I) in the event of the termination of this contract
for the convenience of the Government and not for the
default of the Contractor, there shall be paid a percent-
age of the fee equivalent to the percentage of the com-
pletion of work contemplated by the contract, but ex-
clusive of subcontract effort included in subcontractors'
termination claims, less fee payments previously made
hereunder; or
(II) in the event of the termination of this contract
for the default of the Contractor, the total fee payable
shall be such proportionate part of the fee (or, if this
contract calls for articles or services of different types,
of such part of the fee as is reasonably allocable to the
type of article or services under consideration) as the
total number of articles or amount of services delivered
to and accepted by the Government bears to the total
number of atricles or amount of services of a like kind
called for by this contract;
if the amount determined under this subparagraph (i) is less
than the total payment theretofore made to the Contractor,
the Contractor shall repay to the Government the excess
amount; or
(ii) if the settlement includes only the fee, the amount
thereof will be determined in accordance with the subpara-
graph (i) (D) above.
(f) Costs claimed, agreed to, or determined pursuant to (c),
(d), and (e) hereof shall be in accordance with the Section XV
Contract Cost Principles and Procedures of the Armed Services
Procurement Regulation as in effect on the date of this contract.
(g) The Contractor shall have the right of appeal, under the
clause of this contract entitled "Disputes," from any determination
made by the Contracting Officer under paragraphs (c) or (e)
above, except that if the Contractor has failed to submit his claim
within the time provided in paragraph (c) above and has failed
to request extension of such time, he shall have no such right of
appeal. In any case where the Contracting Officer has made a
determination of the amount due under paragraph (c) or (e)
above, the Government shall pay to the Contractor the following:
(i) if there is no right of appeal hereunder or if no timely appeal
has been taken, the amount so determined by the Contracting
Officer, or (ii) if an appeal has been taken, the amount finally
determined on such appeal.
(h) In arriving at the amount due the Contractor under this
clause, there. shall be deducted (i) all unliquidated advance or
other payments theretofore made to the Contractor, applicable
to the terminated portion of this contract; (ii) any claim which
the Government may have against the Contractor in connection
with this contract; and (iii) the agreed price for, or the proceeds
of sale of, any materials, supplies, or other things acquired by
the Contractor or sold pursuant to the provisions of the clause and
not otherwise recovered by or credited to the Government.
(i) In the event of a partial termination, the portion of the fee
which is payable with respect to the work under the continued
portion of the contract shall be equitably adjusted by agreement
between the Contractor and the Contracting Officer, and such
adjustment shall be evidenced by an amendment to this contract.
(j) The Government may from time to time, under such terms
and conditions as it may prescribe, make partial payments and
payments on account against costs incurred by the Contractor in
connection with the terminated portion of the contract whenever
in the opinion of the Contracting Officer the aggregate of such
payments shall be within the amount to which the Contractor will
be entitled hereunder. If the total of such payments is in excess
of the amount finally determined to be due under this clause,
such excess shall be payable by the Contractor to the Govern-
ment upon demand, together with interest computed at the rate
established by the Secretary of the Treasury pursuant to Public
Law 92-41; 85 STAT 97 for the Renegotiation Board, for the
period from the date such excess payment is received by the Con-
tractor to the date on which such excess is repaid to the Govern-
ment; provided, however, that no interest shall be charged with
respect to any such excess payment attributable to a reduction in
the Contractor's claim by reason of retention or other disposition
of termination inventory until 10 days after the date of such
retention or disposition, or such later date as determined by the
Contracting Officer by reason of the circumstances.
(k) The provisions of this clause relating to the fee shall be
inapplicable if this contract does not provide for payment of a fee.
7-203.11 EXCUSABLE DELAYS (1909 AUG)
Except with respect to defaults of subcontractors, the Con-
tractor shall not be in default by reason of any failure in per-
fornmance of this contract in accordance with its terms (including
any failure by the Contractor to make progress in the prosecution
of the work hereunder which endanger such performance) if
such failure arises out of causes beyond the control and without
the fault or negligence of the Contractor. Such causes may in-
clude, but are not restricted to: Acts of God or of the public
enemy; acts of the Government in either its sovereign or con-
tractual capacity; fires; floods; epidemics; quarantine restrictions;
strikes; freight embargoes; and unusually severe weather; but
in every case the failure to perform. must be beyond the control
and without the fault or negligence of the Contractor. If the
failure to perform is caused by the failure of a subcontractor
to perform or make progress, and if such failure arises out of
causes beyond the control of both the Contractor and subcon-
tractor, and without the fault or negligence of either of them,
the Contractor shall not be deemed to be in default, unless (i)
the supplies or services to be furnished by the subcontractor
were obtainable from other sources, (ii) the Contracting Officer
shall have ordered the Contractor in writing to procure such
supplies or services from such other sources, and (iii) the Con-
tractor shall have failed to comply reasonably with such order.
Upon request of the Contractor, the Contracting Officer shall
ascertain the facts and extent of such failure and, if he shall
determine that any failure to perform was occasioned by any one
or more of the said causes, the delivery schedule shall be revised
accordingly, subject to the rights of the Government under the
clause hereof entitled "Termination." (As used in this clause, the
terms "subcontractor" and "subcontractors" mean subcontractor( s )
at any tier.)
7-203.23 AUTHORIZATION AND CONSENT (1964 MAR)
The Government hereby gives its authorization and consent
(without prejudice to any rights of indemnification) for all use
and manufacture, in the performance of this contract or any part
hereof or any amendment hereto or any subcontract hereunder
(including any lower-tier subcontract), of any invention described
in and covered by a patent of the United States (i) embodied
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
in the structure or composition of any article the delivery of
which is accepted by the Government under this contract, or
(ii) utilized in the machinery, tools, or methods the use of which
necessarily results from compliance by the Contractor or the
using subcontractor with (a) specifications or written provisions
now or hereafter forming a part of this contract, or (b) specific
written instructions given by the Contracting Officer directing
the manner of performance. The entire liability to the Govern-
ment for infringement of a patent of the United States shall be
determined solely by the provisions of the indemnity clauses,
if any, included in this contract or any subcontract hereunder
(including any lower-tier subcontract), and the Government
assumes liability for all other infringement to the extent of the
authorization and consent hereinabove granted.
7-204.5 PATENT INDEMNITY (1964 SEP)
If the amount of this contract is in excess of $5,000, the Con-
tractor shall indemnify the Government and its officers, agents, and
employees against liability, including costs, for infringement of
any United States letters patent (except letters patent issued upon
an application which is now or may hereafter be kept secret or
otherwise withheld from issue by order of the Government) arising
out of the manufacture or delivery of supplies or out of construc-
tion, alteration, modification, or repair of real property (herein-
after referred to as "construction work") under this contract, or
out of the use or disposal by or for the account of the Govern-
ment of such supplies or construction work. The foregoing in-
demnity shall not apply unless the Contractor shall have been
informed as soon as practicable by the Government of the suit
or action alleging such infringement, and shall have been given
such opportunity as is afforded by applicable laws, rules, or regu-
lations to participate in the defense thereof; and further, such
indemnity shall not apply to: (i) an infringement resulting from
compliance with specific written instructions of the Contracting
Officer directing a change in the supplies to be delivered or in
the materials or equipment to be used, or directing a manner of
performance of the contract not normally used by the Contractor;
(ii) an infringement resulting from addition to, or change in,
such supplies or components furnished or construction work per-
formed which addition or change was made subsequent to delivery
or performance by the Contractor; or (iii) a claimed infringement
which is settled without the consent of the Contractor, unless re-
quired by final decree of a court of competent jurisdiction.
7-204.21 FLIGHT RISKS (1965 OCT)
(a) Notwithstanding any other provision of this contract, and
particularly subparagraph (g) (1) of the Government Property
clause and paragraph (c) of the Insurance-Liability to Third
Persons clause, the Contractor shall not (i) be relieved of liability
for, damage to, or loss or destruction of, aircraft sustained during
flight, or (ii) be reimbursed for liabilities to third persons for
loss of or damage to property, or for death or bodily injury, which
are caused by aircraft during flight, unless the flight crew mem-
bers have previously been approved in writing by the Contracting
Officer.
(b) For the purposes of this clause:
(i) Unless otherwise specifically provided in the Schedule,
the term "aircraft" means any aircraft, whether furnished by
the Contractor under this contract (either before or after ac-
ceptance by the Government) or furnished by the Govern-
ment to the Contractor under this contract, including all Gov-
ernment Property placed or installed therein or attached
thereto; provided, however, that such aircraft and property
are not covered by a separate bailment agreement.
(ii) The term "flight" means any flight demonstration, flight
test, taxi test, or other flight, made in the performance of this
contract, or for the purpose of safeguarding the aircraft, or
previously approved in writing by the Contracting Officer. As
to land based aircraft, "flight" shall commence with the taxi
roll from a flight line and continue until the aircraft has
completed the taxi roll to a flight line; as to seaplanes, "flight"
shall commence with the launching from a ramp and con-
tinue until the aircraft has completed its landing run and
is beached at a ramp; as to helicopters, "flight" shall com-
mence upon engagement of the rotors for the purpose of
take-off and continue until the aircraft has returned to the
ground and rotors are disengaged; and for vertical take-off
aircraft, "flight" shall commence upon disengagement from
any launching platform or device and continue until the air-
craft has been re-engaged to any launching platform or device.
(iii) The term "flight crew members" means the pilot, the
co-pilot and unless otherwise specifically provided in the
Schedule, the flight engineer, navigator, bombardier-navigator,
and defense systems operator, when required, or assigned to
their respective crew positions, to conduct any flight on be-
half of the Contractor.
(c) If any aircraft is damaged, lost, or destroyed during flight,
and if the amount of such damage, loss, or destruction exceeds
one hundred thousand dollars ($100,000) or twenty percent
(20%) of the estimated cost (exclusive of any fee) of this con-
tract, whichever is less, and if the Contractor is not liable for the
damage, loss, or destruction pursuant to the "Government Property"
clause of this contract together with paragraph (a) above, then an
equitable adjustment for any resulting repair, restoration, or re-
placement that is required under this contract shall be made (i) in
the estimated cost, delivey schedule, or both, and (ii) in the
amount of any fee to be paid to the Contractor, and the contract
shall be modified in writing accordingly; provided, in determining
the amount of adjustment in the fee that is equitable, any fault of
the Contractor, his employees, or any subcontractor, which materi-
ally contributed to the damage, loss, or destruction shall be taken
into consideration. Failure to agree on any adjustment shall be
a dispute concerning a question of fact within the meaning of the
"Disputes" clause of this contract.
7-203.27 PAYMENT FOR OVERTIME PREMIUMS (1967
JUNE)
This Article is applicable if the contract is in excess of $100,000,
unless it is a cost-plus-incentive-fee contract having a cost in-
centive which provides for a swing from target fee of at least plus
or minus 3% and the Contractor's share of cost of at least 10%.
(a) Allowable cost shall not include any amount on account of
overtime premiums except when (i) specified in (d) below or
(ii) paid for work-
(A) necessary to cope with emergencies such as those
resulting from accidents, natural disasters, breakdowns of
production equipment, or occasional production bottlenecks
of a sporadic nature;
(B) by indirect labor employees such as those performing
duties in connection with administration, protection, transpor-
tation, maintenance, standby plant protection, operation of
utilities, or accounting;
(C) in the performance of tests, industrial processes,
laboratory procedures, loading or unloading of transporta-
tion media, and operations in flight or afloat, which are con-
tinuous in nature and cannot reasonably be interrupted or
otherwise completed; or
(D) which will result in lower overall cost to the Gov-
ernment.
(b) The cost of overtime premiums otherwise allowable under
(a) above shall be allowed only to the extent the amount
thereof is reasonably and properly allocable to the work under
this contract.
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
(c) Any request for overtime, in addition to any amount
specified in (d) below, will be for all overtime which can be
estimated with reasonable certainty shall be used for the remainder
of the contract, and shall contain the following:
(i) identification of the work unit, such as the department
or section in which the requested overtime will be used,
together with present workload, manning and other data of
the affected unit, sufficient to permit an evaluation by the
Contracting Officer of the necessity for the overtime;
(ii) the effect that denial of the request will have on the
delivery or performance schedule of the contract;
(iii) reasons why the required work cannot be performed
on the basis of utilizing multi-shift operations or by the em-
ployment of additional personnel; and
(iv) the extent to which approval of overtime would effect
the performance or payments in connection with any other
Government contracts, together with any identification of
such affected contracts.
(d) The Contractor is authorized to perform overtime, in ad-
dition to that performed under (a) (ii) , to the extent that the
overtime premium does not exceed*
7-203.21 GOVERNMENT PROPERTY (COST-REIMBURSE-
MENT) (1970 SEP)
(a) Government-furnished Property. The Government shall de-
liver to the Contractor, for use in connection with and under the
terms of this contract, the property described as Government-
furnished property in the Schedule or specifications, together with
such related data and information as the Contractor may request
and as may reasonably be required for the intended use of such
property (hereinafter referred to as "Government-furnished prop-
erty"). The delivery or performance dates for the supplies or serv-
ices to be furnished by the Contractor under this contract are based
upon the expectation that Government-furnished property suitable
for use will be delivered to the Contractor at the times stated in
the Schedule or, if not so stated, in sufficient time to enable the
Contractor to meet such delivery or performance dates. In the
event that Government-furnished property is not delivered to the
Contractor by such time or times, the Contracting Officer shall,
upon timely written request made by the Contractor, make a
determination of the delay, if any, occasioned the Contractor and
shall equitably adjust the estimated cost, fixed fee, or delivery or
performance dates, or all of them, and any other contractual pro-
visions affected by any such delay, in accordance with the pro-
cedures provided for in the clause of this contract entitled
"Changes." In the event that Government-furnished property is
received by the Contractor in a condition not suitable for the in-
tended use, the Contractor shall, upon receipt thereof notify the
Contracting Officer of such fact and, as directed by the Contract-
ing Officer, either (i) return such property at the Government's
expense or otherwise dispose of the property or (ii) effect repairs
or modifications. Upon completion of (i) or (ii) above, the Con-
tracting Officer upon written request of the Contractor shall
equitably adjust the estimated cost, fixed fee, or delivery or per-
formance dates, or all of them, and any other contractual provision
affected by the return or disposition, or the repair or modification
in accordance with the procedures provided for in the clause
of this contract entitled "Changes." The foregoing provisions for
adjustment are exclusive and the Government shall not be liable
to suit for breach of contract by reason of any delay in delivery of
Government-furnished property or delivery of such property in a
condition not suitable for its intended use.
" Insert the amount, in dollars, agreed to during negotia-
tions as representing the overtime premiums applicable to
overtime not reimbursable under the exceptions contained
in (a) (ii) of the clause. If it was agreed that the con-
tract could be performed without the use of additional
overtime, insert "Zero."
(b) Changes in Government-Furnished Property
(1) By notice in writing, the Contracting Officer may 0)
decrease the property furnished or to be furnished by the Govern-
ment under this contract, or (ii) substitute other Government-
owned property for property to be furnished by the Government, or
to be acquired by the Contractor for the Government, under this
contract. The Contractor shall promptly take such action as the
Contracting Officer may direct with respect to the removal and
shipping of property covered by such notice.
(2) In the event of any decrease in or substitution of prop-
erty pursuant to paragraph (1) above, or any withdrawal of au-
thority to use property provided under any other contract or lease,
which property the Government had agreed in the Schedule to
make available for the performance of this contract, the Con-
tracting Officer, upon the written request of the Contractor (or,
if the substitution of property causes a decrease in the cost of
performance, on his own initiative), shall equitably adjust such
contractual provisions as may be affected by the decrease, substi-
tution or withdrawal, in accordance with the procedures provided
for in the "Changes" clause of this contract.
(c) Title. Title to all property furnished by the Government
shall remain in the Government. Title to all property purchased
by the Contractor, for the cost of which the Contractor is entitled
to be reimbursed as a direct item of cost under this contract, shall
pass to and vest in the Government upon delivery of such prop-
erty by the vendor. Title to other property, the cost of which is
reimbursable to the Contractor under the contract, shall pass to
and vest in the Government upon (i) issuance for use of such
property in the performance on this contract, or (ii) commence-
ment of processing or use of such property in the performance of
this contract, or (iii) reimbursement of the cost thereof by the
Government in whole or in part, which ever first occurs. All Gov-
ernment-furnished property, together with all property acquired
by the Contractor title to which vests in the Government under this
paragraph, are subject to the provisions of this clause and are
hereinafter collectively referred to as "Government property."
Title to the Government property shall not be affected by the
incorporation or attachment thereof to any property not owned
by the Government, nor shall such Government property, or any
part thereof, be or become a fixture or lose its identity as person-
alty by reason of affixation to any realty.
(d) Property Administration. The Contractor shall comply with
the provisions of Appendix B, Armed Services Procurement Regu-
lation, as in effect on the date of the contract, which is hereby
incorporated by reference and made a part of this contract. Mate-
rial to be furnished by the Government shall be ordered or re-
turned by the Contractor, when required, in accordance with the
"Manual for Military Standard Requisitioning and Issue Procedure
(MILSTRIP) for Defense Contractors" (Appendix H, Armed
Services Procurement Regulation) as in effect on the date of this
contract, which Manual is hereby incorporated by reference and
made a part of this contract.
(e) Use of Government Property. The Government property
shall, unless otherwise provided herein or approved by the Con-
tracting Officer, be used only for the performance of this contract.
(f) Utilization, Maintenance and Repair of Government Prop-
erty. The Contractor shall maintain and administer, in accordance
with sound industrial practice, and in accordance with applicable
provisions of Appendix B, a program for the utilization, main-
tenance, repair, protection and preservation of government prop-
erty so as to assure its full availability and usefulness for the
performance of this contract. The Contractor shall take all reason-
able steps to comply with all appropriate directions or instructions
which the Contracting Officer may prescribe as reasonably neces-
sary for the protection of Government property.
(g) Risk of Loss.
(1) The Contractor shall not be liable for any loss of or dam-
age to the Government property, or for expenses incidental to such
loss or damage, except that the Contractor shall be responsible
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
for any such loss or damage (including expenses incidental
thereto) :
(i) which results from willful misconduct or lack of good
faith on the part of any one of the Contractor's directors or
officers, or on the part of any of his managers, superintend-
ents, or other equivalent representatives, who has supervision
or direction of-
(A) all or substantially all of the Contractor's business; or
(B) all or substantially all of the Contractor's opera-
tions at any one plant or separate location, in which this
contract is being performed; or
(C) a separate and complete major industrial operation
in connection with the performance of this contract;
(ii) which results from a failure on the part of the Con-
tractor, due to the willful misconduct or lack of good faith
on the part of his director, officers, or other representa-
tives mentioned in subparagraph (i) above-
(A) to maintain and administer, in accordance with
sound industrial practice, the program for utilization, main-
tenance, repair, protection and preservation of Government
property as required by paragraph (f) hereof, or to take
all reasonable steps to comply with any appropriate written
direction of the Contracting Officer under paragraph (f)
hereof; or
(B) to establish, maintain and administer, in accordance
with (d) above, a system for control of Government
property;
(iii) for which the Contractor is otherwise responsible
under the express terms of the clause or clauses designated
in the Schedule;
(iv) which results from a risk expressly required to be
insured under this contract, but only to the extent of the in-
surance so required to be procured and maintained, or to the
extent of insurance actually procured and maintained, which-
ever is greater; or
(v) which results from a risk which is in fact covered by
insurance or for which the Contractor is otherwise reim-
bursed, but only to the extent of such insurance or reim-
bursement.
Any failure of the Contractor to act, as provided in subparagraph
(ii) above, shall be conclusively presumed to be a failure result-
ing from willful misconduct, or lack of good faith on the part of
such directors, officers, or other representatives mentioned in
subparagraph (i) above, if the Contractor is notified by Con-
tracting Officer by registered or certified mail addressed to one
of such directors, officers, or other representative mentioned in
subparagraph (i) above, if the Contractor is notified by the
Contracting Officer by registered or certified mail, addressed
to one of such directors, officers, or other representatives, of
the Government's disapproval, withdrawal of approval, or non-
acceptance of the Contractor's program or system. In such
event it shall be presumed that any loss or damage to Govern-
ment property resulted from such failure. The Contractor shall
he liable for such loss or damage unless he can establish by
clear and convincing evidence that such loss or damage did not
result from his failure to maintain an approved program or
system, or occurred during such time as an approved program
or system for control of Government property was maintained.
If more than one of the above exceptions shall be applicable in
any case, the Contractor's liability under any one exception shall
not be limited by any other exception. If the Contractor transfers
Government property to the possession and control of a subcon-
tractor, the transfer shall not affect the liability of the Contractor
for loss or destruction of or damage to the property as set forth
above. However, the Contractor shall require the subcontractor
to assume the risk of, and be responsible for, any loss or de-
struction of or damage to the property while in the latter's
possession or control, except to the extent that the subcontract,
with the prior approval of the Contractor Officer, provides for
the relief of the subcontractor for such liability. In the absence
of such approval, the subcontractor shall contain appropriate
provisions requiring the return of all Government property in as
good condition as when received, except for reasonable wear
and tear or for the utilization of the property in accordance
with the provisions of the prime contract.
(2) The Contractor shall not be reimbursed for, and shall
not include as an item of overhead, the cost of insurance, or any
provision for a reserve, covering the risk of loss of or damage to
the Government property, except to the extent that the Govern-
ment may have required the Contractor to carry such insurance
under any other provisions of this contract.
(3) Upon the happening of loss or destruction of or damage
to the Government property, the Contractor shall notify the Con-
tracting Officer thereof, and shall communicate with the Loss and
Salvage Organization, if any, now or hereafter designated by the
Contracting Officer, and with the assistance of the Loss and Sal-
vage Organization so designated (unless the Contracting Officer
has designated that no such organization be employed), shall take
all reasonable steps to protect the Government property from fur-
ther damage, separate the damaged and undamaged Government
property, put all the Government property in the best possible
order, and furnish to the Contracting Officer a statement of-
(i) the lost, destroyed and damaged Government prop-
erty;
(ii) the time and origin of the loss, destruction or damage;
(iii) all known interests in commingled property of which
the Government property is a part; and
(iv) the insurance, if any, covering any part of or interest
in such commingled property.
The Contractor shall make repairs and renovations of the damaged
Government property or take such other action, as the Contracting
Officer directs.
(4) In the event the Contractor is indemnified, reimbursed,
or otherwise compensated for any loss or destruction of or damage
to the Government property, he shall use the proceeds to repair,
renovate or replace the Government property involved, or shall
credit such proceeds against the cost of the work covered by the
contract, or shall otherwise reimburse the Government, as directed
by the Contracting Officer. The Contractor shall do nothing to
prejudice the Government's right to recover against third parties
for any such loss, destruction, or damage and, upon the request of
the Contracting Officer, shall, at the Government's expense, furnish
to the Government all reasonable assistance and cooperation (in-
cluding the prosecution of suit and the execution of instruments of
assignment in favor of the Government) in obtaining recovery. In
addition, where the subcontractor has not been relieved from
liability for any loss or destruction of or damage to Government
property, the Contractor shall enforce the liability of the sub-
contractor for such loss or destruction of or damage to the Govern-
ment property for the benefit of the Government.
(5) If this contract is for the development, production,
modification, maintenance, or overhaul of aircraft, or otherwise
involves the furnishing of aircraft by the Government, the clause
of this contract entitled "Flight Risks" shall control, to the extent
it is applicable, in the case of loss or destruction of, or damage
to, aircraft.
(h) Access. The Government, and any persons designated by it,
shall at all reasonable times have access to the premises where any
of the Government property is located, for the purpose of inspect-
ing the Government property.
(i) Final Accounting and Disposition of Government Property.
Upon the completion of this contract, or at such earlier dates as
may be fixed by the Contracting Officer, the Contractor shall
submit to the Contracting Officer in a form acceptable to him,
inventory schedules covering all items of the Government Prop-
erty not consumed in the performance of this contract, or not
theretofore delivered to the Government, and shall deliver or make
such other disposal of such Government Property as may be di-
rected or authorized by the Contracting Officer. The net proceeds
of any such disposal shall be credited to the cost of the work
covered by the contract or shall be paid in such manner as the
Contracting Officer may direct. The foregoing provisions shall
apply to scrap from Government Property; provided, however,
that the Contracting Officer may authorize or direct the Con-
tractor to omit from such inventory schedules any scrap consisting
of faulty castings or forgings, or cutting and processing waste, such
as chips, cuttings, borings, turnings, short ends, circles, trimmings,
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
clippings, and remnants, and to dispose of such scrap in accordance
with the Contractor's normal practice and account therefor as
a part of general overhead or other reimbursable cost in accordance
with the Contractor's established accounting procedures.
(j) Restoration of Contractor's Premises and Abandonment.
Unless otherwise provided herein, the Government:
(i) may abandon any Government property in place, and
thereupon all obligations of the Government regarding such
abandoned property shall cease; and
(ii) has no obligation to the Contractor with regard to
restoration or rehabilitation of the Contractor's premises,
neither in case of abandonment (paragraph (j) (i) above),
disposition on completion of need or of the contract (para-
graph (i) above), nor otherwise, except for restoration or
rehabilitation costs caused by removal of Government prop-
erty pursuant to paragraph (b) above.
(k) Communications. All communications issued pursuant to
this clause shall be in writing or in accordance with the "Manual
for Military Standard Requisitioning and Issue Procedure
(MILSTRIP) for Defense Contractors" (Appendix H, Armed
Services Procurement Regulation).
7-203.8 SUBCONTRACTS (1973 APR)
(a) The Contractor shall notify the Contracting Officer reason-
ably in advance of entering into any subcontract which (i) is
cost-reimbursement type, time and materials or labor-hour or
(ii) is fixed-price type and exceeds in dollar amount either $25,000
or five percent (5%) of the total estimated cost of this contract,
or (iii) provides for the fabrication, purchase, rental, installation,
or other acquisition of special test equipment having a value in
excess of $1,000 or of any items of industrial facilities.
(b) In the case of a proposed subcontract which (i) is cost-
reimbursement type, time and materials, or labor-hour, and would
involve an estimated amount in excess of $10,000, including any
fee, or (ii) is proposed to exceed $100,000, or (iii) is one of a
number of subcontracts under this contract with a single sub-
contractor for the same or related supplies or services which, in
the aggregate are expected to exceed $100,000; the advance
notification required by (a) above shall include:
(1) a description of the supplies or services to be called
for by the subcontract;
(2) identification of the proposed subcontractor and an
explanation of why and how the proposed subcontractor was
selected, including the degree of competition obtained;
(3) the proposed subcontract price, together with the Con-
tractor's cost or price analysis thereof;
(4) the subcontractor's current, complete, and accurate cost
or pricing data and Certificate of Current or Pricing Data,
when such data and certificate are required, by other pro-
visions of this contract, to be obtained from the subcon-
tractor;
(5) identification of the type of subcontract to be used;
(6) a memorandum of negotiation which sets forth the
principal elements of the subcontract price negotiations. A
copy of this memorandum shall be retained in the contractor's
file for the use of Government reviewing authorities. The
memorandum shall be in sufficient detail to reflect the most
significant considerations controlling the establishment of
initial or revised prices. The memorandum should include an
explanation of why cost or pricing data was, or was not re-
quired, and, if it was not required in the case of any price
negotiation in excess of $100,000, a statement of the basis
for determining that the price resulted from or was based on
adequate price competition, established catalog or market
prices of commercial items sold in substantial quantities to
the general public, or prices set by law or regulation. If cost
or pricing data was submitted and a certificate of cost or
pricing data was required, the memorandum shall reflect the
extent to which reliance was not placed upon the factual
cost or pricing data submitted and the extent to which this
data was not used by the contractor in determining the total
price objective and in negotiating the final price. The memo-
randum shall also reflect the extent to which it was recog-
nized in the negotiation that any cost or pricing data submitted
by the subcontractor was not accurate, complete, or current;
the action taken by the contractor and the subcontractor as
a result; and the effect, if any, of such defective data on the
total price negotiated. Where the total price negotiated differs
significantly from the Contractor's total price objective, the
memorandum shall explain this difference; and
(7) when incentives are used, the memorandum of nego-
tiation shall contain an explanation of the incentive fee/profit
plan identifying each critical performance element, manage-
ment decisions used to quantify each incentive element, rea-
sons for incentives on particular performance characteristics,
and a brief summary of trade-off possibilities considered as to
cost, performance, and time.
(c) The Contractor shall obtain the written consent of the
Contracting Officer prior to placing any subcontract for which
advance notification is required under (a) above. The Contracting
Officer may, in his discretion, ratify in writing any such subcon-
tract; such action shall constitute the consent of the Contracting
Officer as required by this paragraph (c).
(d) The Contractor agrees that no subcontract placed under
this contract shall provide for payment on a cost-plus-a-percentage-
of-cost basis.
(e) The Contracting Officer may, in his discretion, specifically
approve in writing any of the provisions of a subcontract. How-
ever, such approval or the consent of the Contracting Officer ob-
tained as required by this clause shall not be construed to consti-
tute a determination of the allowability of any cost under this
contract, unless such approval specifically provides that it consti-
tutes a determination of the allowability of such cost.
(f) The Contractor shall give the Contracting Officer immediate
notice in writing of any action or suit filed, and prompt notice
of any claim made against the Contractor by any subcontractor or
vendor which, in the opinion of the Contractor, may result in
litigation, related in any way to this contract with respect to which
the Contractor may be entitled to reimbursement from the Govern-
ment.
(g) Notwithstanding (c) above, the Contractor may enter into
subcontracts within (i) and (ii) of (a) above without the con-
sent of the Contracting Officer if the Contracting Officer has ap-
proved in writing the Contractor's procurement system and the
subcontract is within the scope of the approval. (This subpara-
graph (g) however, shall not be applicable to those subcontracts
subject to subparagraph (j) below, if any.)
(h) The Contractor shall (i) insert in each price redetermina-
tion or incentive price revision subcontract hereunder the sub-
stance of the "Limitation on Payments" paragraph set forth in, the
appropriate clause prescribed by paragraph 7-108 of the Armed
Services Procurement Regulation, including subparagraph (4)
thereof, modified to omit mention of the Government and reflect
the position of the Contractor as purchaser and of the subcon-
tractor as vendor, and to omit the portion of subparagraph (3)
thereof relating to tax credits, and (ii) include in each cost-reim-
bursement type subcontract hereunder a requirement that each
price redetermination and incentive price revision subcontract
thereunder will contain the substance of the "Limitation on Pay-
inents" provision, including subparagraph (4) thereof, modified
as outlined in (i) of this paragraph.
(i) To facilitate small business participation in subcontracting
under this contract, the Contractor agrees to provide progress
payments on the fixed-price subcontracts of those subcontractors
which are small business concerns, in conformity with the standards
for customary progress payments stated in paragraphs 503 and
514 of Appendix E of the Armed Services Procurement Regula-
tion, as in effect on the date of this contract. The Contractor
further agrees that the need for such progress payments will not
be considered as a handicap or adverse factor in the award of
subcontracts.
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
MW
for any such loss or damage (including expenses incidental
thereto):
(i) which results from willful misconduct or lack of good
faith on the part of any one of the Contractor's directors or
officers, or on the part of any of his managers, superintend-
ents, or other equivalent representatives, who has supervision
or direction of-
(A) all or substantially all of the Contractor's business; or
(B) all or substantially all of the Contractor's opera-
tions at any one plant or separate location, in which this
contract is being performed; or
(C) a separate and complete major industrial operation
in connection with the performance of this contract;
(ii) which results from a failure on the part of the Con-
tractor, due to the willful misconduct or lack of good faith
on the part of his director, officers, or other representa-
tives mentioned in subparagraph (i) above-
(A) to maintain and administer, in accordance with
sound industrial practice, the program for utilization, main-
tenance, repair, protection and preservation of Government
property as required by paragraph (f) hereof, or to take
all reasonable steps to comply with any appropriate written
direction of the Contracting Officer under paragraph (f)
hereof; or
(B) to establish, maintain and administer, in accordance
with (d) above, a system for control of Government
property;
(iii) for which the Contractor is otherwise responsible
under the express terms of the clause or clauses designated
in the Schedule;
(iv) which results from a risk expressly required to be
insured under this contract, but only to the extent of the in-
surance so required to be procured and maintained, or to the
extent of insurance actually procured and maintained, which-
ever is greater; or
(v) which results from a risk which is in fact covered by
insurance or for which the Contractor is otherwise reim-
bursed, but only to the extent of such insurance or reim-
bursement.
Any failure of the Contractor to act, as provided in subparagraph
(ii) above, shall be conclusively presumed to be a failure result-
ing from willful misconduct, or lack of good faith on the part of
such directors, officers, or other representatives mentioned in
subparagraph (i) above, if the Contractor is notified by Con-
tracting Officer by registered or certified mail addressed to one
of such directors, officers, or other representative mentioned in
subparagraph (i) above, if the Contractor is notified by the
Contracting Officer by registered or certified mail, addressed
to one of such directors, officers, or other representatives, of
the Government's disapproval, withdrawal of approval, or non-
acceptance of the Contractor's program or system. In such
event it shall be presumed that any loss or damage to Govern-
ment property resulted from such failure. The Contractor shall
be liable for such loss or damage unless he can establish by
clear and convincing evidence that such loss or damage did not
result from his failure to maintain an approved program or
system, or occurred during such time as an approved program
or system for control of Government property was maintained.
If more than one of the above exceptions shall be applicable in
any case, the Contractor's liability under any one exception shall
not be limited by any other exception. If the Contractor transfers
Government property to the possession and control of a subcon-
tractor, the transfer shall not affect the liability of the Contractor
for loss or destruction of or damage to the property as set forth
above. However, the Contractor shall require the subcontractor
to assume the risk of, and be responsible for, any loss or de-
struction of or damage to the property while in the latter's
possession or control, except to the extent that the subcontract,
with the prior approval of the Contractor Officer, provides for
the relief of the subcontractor for such liability. In the absence
of such approval, the subcontractor shall contain appropriate
provisions requiring the return of all Government property in as
good condition as when received, except for reasonable wear
and tear or for the utilization of the property in accordance
with the provisions of the prime contract.
(2) The Contractor shall not be reimbursed for, and shall
not include as an item of overhead, the cost of insurance, or any
provision for a reserve, covering the risk of loss of or damage to
the Government property, except to the extent that the Govern-
ment may have required the Contractor to carry such insurance
under any other provisions of this contract.
(3) Upon the happening of loss or destruction of or damage
to the Government property, the Contractor shall notify the Con-
tracting Officer thereof, and shall communicate with the Loss and
Salvage Organization, if any, now or hereafter designated by the
Contracting Officer, and with the assistance of the Loss and Sal-
vage Organization so designated (unless the Contracting Officer
has designated that no such organization be employed), shall take
all reasonable steps to protect the Government property from fur-
ther damage, separate the damaged and undamaged Government
property, put all the Government property in the best possible
order, and furnish to the Contracting Officer a statement of-
(i) the lost, destroyed and damaged Government prop-
erty;
(ii) the time and origin of the loss, destruction or damage;
(iii) all known interests in commingled property of which
the Government property is a part; and
(iv) the insurance, if any, covering any part of or interest
in such commingled property.
The Contractor shall make repairs and renovations of the damaged
Government property or take such other action, as the Contracting
Officer directs.
(4) In the event the Contractor is indemnified, reimbursed,
or otherwise compensated for any loss or destruction of or damage
to the Government property, he shall use the proceeds to repair,
renovate or replace the Government property involved, or shall
credit such proceeds against the cost of the work covered by the
contract, or shall otherwise reimburse the Government, as directed
by the Contracting Officer. The Contractor shall do nothing to
prejudice the Government's right to recover against third parties
for any such loss, destruction, or damage and, upon the request of
the Contracting Officer, shall, at the Government's expense, furnish
to the Government all reasonable assistance and cooperation (in-
cluding the prosecution of suit and the execution of instruments of
assignment in favor of the Government) in obtaining recovery. In
addition, where the subcontractor has not been relieved from
liability for any loss or destruction of or damage to Government
property, the Contractor shall enforce the liability of the sub-
contractor for such loss or destruction of or damage to the Govern-
ment property for the benefit of the Government.
(5) If this contract is for the development, production,
modification, maintenance, or overhaul of aircraft, or otherwise
involves the furnishing of aircraft by the Government, the clause
of this contract entitled "Flight Risks" shall control, to the extent
it is applicable, in the case of loss or destruction of, or damage
to, aircraft.
(h) Access. The Government, and any persons designated by it,
shall at all reasonable times have access to the premises where any
of the Government property is located, for the purpose of inspect-
ing the Government property.
(i) Final Accounting and Disposition of Government Property.
Upon the completion of this contract, or at such earlier dates as
may be fixed by the Contracting Officer, the Contractor shall
submit to the Contracting Officer in a form acceptable to him,
inventory schedules covering all items of the Government Prop-
erty not consumed in the performance of this contract, or not
theretofore delivered to the Government, and shall deliver or make
such other disposal of such Government Property as may be di-
rected or authorized by the Contracting Officer. The net proceeds
of any such disposal shall be credited to the cost of the work
covered by the contract or shall be paid in such manner as the
Contracting Officer may direct. The foregoing provisions shall
apply to scrap from Government Property; provided, however,
that the Contracting Officer may authorize or direct the Con-
tractor to omit from such inventory schedules any scrap consisting
of faulty castings or forgings, or cutting and processing waste, such
as chips, cuttings, borings, turnings, short ends, circles, trimmings,
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
 Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5
7-104.9(h) TECHNICAL DATA-WITHHOLDING OF PAY-
MENT (1973 APR)
(a) If "Technical Data" (as defined in the clause of this con-
tract entitled "Rights in Technical Data"), or any part thereof,
specified to be delivered under this contract, is not delivered
within the time specified by this contract or is deficient upon
delivery (including having restrictive markings not specifically
authorized by this contract), the Contracting Officer may until
such data is accepted by the Government, withhold payment to
the Contractor of ten percent (10%) of the total contract price
or amount unless a lesser withholding specified in the Schedule.
Payments shall not be withheld nor any other action taken pur-
suant to this paragraph when the Contractor's failure to make
timely delivery or to deliver such data without deficiencies arises
out of causes beyond the control and without the fault or negli-
gence of the Contractor.
(b) After payments total ninety percent (90%) of the total
contract price or amount and if all technical data specified to be
delivered tinder this contract has not been accepted, the Con-
tracting Officer may, withhold from further payment such sum
as he considers appropriate, not exceeding ten percent (10%)
of the total contract price or amount unless a lesser withholding
limit is specified in the Schedule.
(c) The withholding of any amount or subsequent payment to
the Contractor shall not be construed as a waiver of any rights
accruing to the Government under this contract.
7-205.6 STOP WORK ORDER (1971 APR)
(a) The Contracting Officer may, at any time, by written order
to the Contractor, require the Contractor to stop all, or any part,
of the work called for by this contract for a period of ninety
(90) * days after the order is delivered to the Contractor, and
for any further period to which the parties may agree. Any such
order shall be specifically identified as a Stop Work Order issued
pursuant to this clause. Upon receipt of such an order, the
Contractor shall forthwith comply with its terms and take all
reasonable steps to minimize the incurrence of costs allocable
to the work covered by the order during the period of work
stoppage. Within a period of ninety (90) days after a stop
work order is delivered to the Contractor, or within any extension
of that period to which the parties shall have agreed, the Con-
tracting Officer shall either-
(i) cancel the stop work order, or
(ii) terminate the work covered by such order as provided
in the "Termination" clause of the contract.
(b) If a stop work order issued under this clause is canceled
or the period of the order or any extension thereof expires, the
Contractor shall resume work. An equitable adjustment shall be
made in the delivery schedule, the estimated cost, the fee, or a
combination thereof, and in any other provisions of the contract
that may be affected, and the contract shall be modified in writing
accordingly, if-
(i) the stop work order results in an increase in the time
required for, or in the Contractor's cost properly allocable
to, the performance of any part of this contract, and
(ii) the Contractor asserts a claim for such adjustment
within thirty (30) days after the end of the period of work
stoppage; provided that, if the Contracting Officer decides
the facts justify such action, he may receive and act upon
any such claim asserted at any time prior to final payment
under this contract.
(c) If a stop work order is not canceled and the work cov-
ered by such order is terminated for the convenience of the
Government, the reasonable costs resulting from the stop work
order shall be allowed in arriving at the termination settlement.
(d) If a stop work order is not canceled and the work covered
by such order is terminated for default, the reasonable costs re-
sulting from the stop work order shall be allowed by equitable
adjustment or otherwise.
7-205.3 TITLE AND RISK OF LOSS (1968 JUN)
(a) Unless this contract specifically provides for earlier passage
of title, title to supplies covered by this contract shall pass to
the Government upon formal acceptance, regardless of when or
where the Government takes physical possession.
(b) (1) Unless this contract specifically provides otherwise,
risk of loss of or damage to supplies covered by this contract shall
remain with the Contractor until, and shall pass to the Government
upon:
(i) delivery of the supplies to a carrier, if transportation
is f.o.b. origin;
(ii) acceptance by the Government or delivery of possession
of the supplies to the Government at the destination specified
in this contract, whichever is later, if transportation is f.o.b.
destination.
(2) Notwithstanding (1) above, the risk of loss of or damage
to supplies which so fail to conform to the contract as to give
a right of rejection shall remain with the Contractor until cure
or acceptance, at which time (1) above shall apply.
(c) Notwithstanding (b) above, the Contractor shall not be
liable for loss of or damage to supplies caused by the negligence
of officers, agents, or employees of the Government acting within
the scope of their employment.
7-205.1 ALTERATIONS IN CONTRACT (1949 JUL)
The following alterations have been made in the provisions of
this contract:
Approved For Release 2006/10/20: CIA-RDP89B00552R000700050011-5