SECTION E COST REIMBURSEMENT RESEARCH AND DEVELOPMENT PROVISIONS INDEX

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89B00552R000700050015-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 15
• Document Creation Date: December 20, 2016
• Document Release Date: January 7, 2004
• Sequence Number: 15
• Publication Date: October 31, 1975
• Content Type: REGULATION

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SECTION E
COST REIMBURSEMENT RESEARCH AND DEVELOPMENT PROVISIONS
Page
Article No.
Allowable Cost, Fixed Fee, and Payment......... 6 3
Alterations in Contract ......................... 24 15
Audit ........................................ 4 2
Authorization and Consent ..................... 16 9
Changes ...................................... 12 7
Competition in Subcontracting .................. 3 2
Examination of Records ........................ 7 4
Excusable Delays .............................. 15 9
Flight Risks .................................. 17 9
Government Property .......................... 19 10
Inspection and Correction of Defects ............. 11 6
Insurance Liability to Third Persons ........... 8 5
Page
Article No.
Limitation of Cost ............................. 9 5
Negotiated Overhead Rates ..................... 1 1
Patent Rights (Title) .......................... 23 13
Payment for Overtime Premiums ................ 18 10
Price Reduction for Defective Cost or Pricing Data. 2 1
Reports of Work .............................. 13 7
Standards of Work ............................ 10 6
Subcontractor Cost or Pricing Data .............. 5 3
Subcontracts .................................. 20 12
Stop Work Order .............................. 22 13
Technical Data-Withholding of Payment........ 21 13
Termination .................................. 14 7
(a) Notwithstanding the provisions of the clause of this contract
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. Negotiation of final overhead
rates by the Contractor and the Contracting Officer shall be under-
taken as promptly as practicable after receipt of the Contractor's
proposal.
(c) Allowability of costs and acceptability of cost allocation meth-
ods 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 overhead rate agreement shall not change
any monetary ceiling, contract 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 acceptable to the
Contracting Officer, subject to appropriate adjustment when final
rates for that period are established. To prevent substantial over or
under payment, billing rates may, at the request of either party, be
revised by mutual agreement, either retroactively 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.
4FORM 1424E OBSOEDITIONSVIOUS
7-402.31 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 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 Contractor'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 "Subcontractor
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 certified in the subcon-
tractor'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 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 subcon-
tractor 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 subcon-
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tract 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
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 Contractor may wish
to include a clause in each such subcontract requiring the subcontrac-
tor 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 required to
be submitted by his lower tier subcontractors.
(b) Insert the following clause in all contracts, both formally adver-
tised 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 increases and/or
decreases in costs plus applicable profits in excess of $100,000 unless
the modification is priced on the basis of adequate competition, estab-
lished 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 reduction under this clause is limited to defects in data
relating to such modification.
(b) If any price, including profit, or fee, negotiated in connection
with any price adjustment 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 Contractor'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 "Subcontractor
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 certified in the subcon-
tractor'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 subcontract cost
estimate furnished by the Contractor but which was not com-
plete, accurate and current as of the date certified in the Con-
tractor'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 sub-
contract 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
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 Contractor may wish
to include a clause in each such subcontract 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 pro-
visions 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 required to be
submitted by his lower tier subcontractors.
7-102.29 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.
(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.
AUDIT (1971 APR.) (AMENDED)
(a) General. The Contracting Officer or his representatives shall
have the audit and inspection rights described in the applicable
paragraphs (b), (c) and (d) below.
(b) Examination of Costs. If this is a cost reimbursement type,
incentive, time and materials, labor hour, or price redeterminable
contract, or any combination thereof, the Contractor shall maintain,
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 in-
curred and anticipated to be incurred for the performance of this con-
tract. Such right of examination shall include inspection at all reason-
able times of the Contractor'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 represent-
atives 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 contract, 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 rep-
resentative who are employees of the United States Government
shall have such rights. The right of examination shall extend to all
documents necessary to permit adequate evaluation of the cost or
pricing data submitted, along with the computations 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 supporting materials, for the
purpose of evaluating (i) the effectiveness of the Contractor's policies
and procedures to produce data compatible with the objectives of
these reports, and (ii) the data reported.
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(e) Availability. The materials described in (b), (c) and (d) above
shall be made available at the office of the Contractor, at all
reasonable times, for inspection, audit, or reproduction, until the
expiration of three years from the date of final payment under this
contract or such lesser time specified in Appendix M of the Armed
Services Procurement Regulation, and for such longer period, if any,
as is required by applicable stature, 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 provi-
sions of this clause, including this paragraph (f), in all subcontracts
hereunder, except altered as necessary for proper indentification of the
contracting parties and the Contracting Officer under the Govern-
ment prime contract.
7-402.32 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 in-
clude 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 con-
nection with initial pricing of the contract.
(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 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 commercial 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 regulation. 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 AD-
JUSTMENTS
(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 aggregate 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 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 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.
(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 AD-
JUSTMENTS (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 aggregate 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 based on adequate price competition,
established catalog or market prices of commercial items sold in sub-
stantial 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 sub-
contract change or modification.
(d) The Contractor shall insert the substance of this clause including
this paragraph (d) in each subcontract which exceeds $100,000.
7-402.3 ALLOWABLE COST, FIXED FEE, AND PAYMENT
(1972 MAY)
(a) For the performance of this contract, the Government shall pay
to the Contractor-
(i) the cost thereof (hereinafter referred to as "allowable cost")
determined by the Contracting Officer to be allowable in ac-
cordance with
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(A) Part 2 of Section XV of the Armed Services Procurement
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 statement 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 Con-
tractor 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 Contractor for purposes of ob-
taining reimbursement under Government contracts plus the amount
of progress payments which have been paid to Contractor's subcon-
tractors under similar cost standards. The requirement of prior pay-
ment for items or services purchased directly for the contract shall not
apply where the Contractor 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 payment 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 in-
terests 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 state-
ments 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 underpayments, on preceding invoices
or vouchers.
(e) On receipt and approval of the invoice or voucher designated by
the Contractor as the "completion invoice" or "completion 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 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) accruing 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 substance
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 state-
ment 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 expenses
of the Contractor by reason of his indemnification of the Gov-
ernment against patent liability), including reasonable expenses
incidental thereto, incurred by the Contractor under the
provisions of this contract relating to patents.
(g) Any cost incurred by the Contractor under the terms of this
contract which would constitute allowable cost under the provisions
of this clause shall be included in determining the amount payable
under this contract, notwithstanding any provisions contained 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.
7-402.7 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 Representa-
tive of the Government or any of his duly authorized representatives
shall, until the expiration of three years after final payment 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 transactions related to this contract.
(c) The Contractor further agrees to include in all his subcontracts
hereunder a provision to the effect that the subcontractor agrees that
the Appropriate Audit Representative of the Government 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 per-
tinent books, documents, papers, and records of such subcontractor,
involving transactions related to the subcontract. The term "subcon-
tract" 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.
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(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.
7-402.26 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 in-
surance 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 Con-
tracting 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 ap-
proved 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 perform-
ance of this contract, whether or not caused by the negligence of the
Contractor, his agents, servants or employees, provided such liabilities
are represented by final judgments or settlements approved in
writing by the Government, and expenses incidental to such liabilities,
except liabilities (I) for which the Contractor is otherwise responsible
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 Con-
tracting 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 performance 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 "Allowable Cost, Fixed
Fee and Payment."
(d) The Contractor shall give the Government or its representatives
immediate notice of any suit or action filed, or prompt notice of any
claim made, against the Contractor arising out of the performance 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 connec-
tion 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.
7-402.2(a) 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 cost 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 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 Con-
tracting Officer in writing to that effect, giving the 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 Contracting 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 constitute the estimated cost of perform-
ance 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
the 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 the Schedule has been
increased, any cost incurred by the Contractor in excess of the esti-
mated cost prior to such increase shall be allowable to the same extent
as if such costs had been incurred after the increase; unless the Con-
tracting Officer issues a termination or other notice and directs that
the increase is solely for the purpose 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 negotiate an
equitable distribution of all property produced or purchased under the
contract based upon the share of costs incurred by each.
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7-402.4 STANDARDS OF WORK (1959 FEB.)
The Contractor agrees that the performance of work and services,
pursuant to the requirements of this contract, shall conform to high
professional standards.
7-402.5 INSPECTION AND CORRECTION OF DEFECTS
(1960 MAY)
(a) All work, under this contract shall be subject to inspection and
test by the Government (to the extent practicable) at all times
(including the period of performance) and places, and in any event
prior to acceptance. The Contractor shall provide and maintain an
inspection system acceptable to the Government covering the work,
hereunder. The Government, through any authorized representative,
may inspect the plant or plants of the Contractor or of any of his sub-
contractors engaged in the performance of this contract. If any
inspection 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 inspectors in the
performance of their duties. All inspections and tests by the Govern-
ment shall be performed in such a manner as will not unduly delay the
work. Except as otherwise provided in this contract, final inspection,
and acceptance shall be made at the place of delivery as promptly as
practicable after delivery and shall be deemed to have been made no
later than ninety (90) 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 time as may be provided in the
Schedule) after acceptance of all of the end items (other than designs,
drawings, or reports) to be delivered under this contract, the Govern-
ment may require the Contractor to remedy by correction or replace-
ment, as directed by the Contracting Officer, any failure by the
Contractor to comply with the requirements of this contract. Any
time devoted to such correction or replacement shall not be included
in the computation of the period of time specified in the preceding
sentence, except as provided in (d) below. Except as otherwise pro-
vided in paragraph (c) below, the allowability of the cost of any such
replacement or correction shall be determined as provided in the clause
of this contract entitled "Allowable Cost, Fixed Fee, and Payment,"
but no additional fee shall be payable with respect thereto. Corrected
articles shall not be tendered again for acceptance unless the former
tender and the requirement of correction is disclosed. If the Con-
tractor fails to proceed with reasonable promptness to perform such
replacement or correction, the Government (i) may by contract or
otherwise perform such replacement or correction and charge to the
Contractor any increased cost occasioned the Government thereby,
or may reduce any fixed fee payable under the contract (or require
repayment of any fixed fee theretofore paid) in such amount as may
be equitable under the circumstances, or (ii) in the case of articles not
delivered, may require the delivery of such articles, and shall have the
right to reduce any fixed fee payable under this contract (or to require
repayment of any fixed fee theretofore paid) in such amount as may
be equitable under the circumstances, or (iii) may terminate this
contract for default. Failure to agree to the amount of any such in-
creased cost to be charged to the Contractor or to such reduction in,
or repayment of, the fixed fee shall be deemed to be a dispute con-
cerning a question of fact within the meaning of the clause of this
contract entitled "Disputes."
(c) Notwithstanding the provisions of paragraph (b) above, the
Government may at any time require the Contractor to remedy by
correction or replacement, without cost to the Government, any
failure by the Contractor to comply with the requirements of this
contract, if such failure is 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 equiva-
lent 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 com-
plete major industrial operation in connection with the performance
of this contract. The Government may at any time also require the
Contractor to remedy by correction or replacement, without cost to
the Government, any such failure 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 unqualified.
(d) The provisions of paragraph (b) above, shall apply to any
corrected or replacement end item or component until six months
after its acceptance.
(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.
(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 articles 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 Contractor'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."
In contracts not providing for payment of a fee, the following shall
apply in lieu of paragraph (b) above:
(b) At any time during performance of this contract, but not later
than six (6) months (or such other periods as may be provided in the
Schedule) after acceptance of all of the end items (other than designs,
drawings, or reports) to be delivered under this contract, the Govern-
ment may require the Contractor to remedy by correction or replace-
ment, as directed by the Contracting Officer, any failure by the
Contractor to comply with the requirements of this contract. Any
time devoted to such correction or replacement shall not be included
in the computation of the period of time specified in the preceding
sentence except as provided in (d) below. Except as provided in
paragraph (c) below, the allowability of the cost of any such replace-
ment or correction shall be as provided in the clause of this contract
entitled "Allowable Cost and Payment." Corrected articles shall not
be tendered again for acceptance unless the former tender and the
requirement of correction is disclosed. If the Contractor fails to proceed
with reasonable promptness to perform such replacement or correction,
the Government (i) may by contract or otherwise perform such re-
placement or correction and charge to the Contractor any increased
cost occasioned the Government thereby, or (ii) in the case of articles
not delivered, may require the delivery of such articles, or (iii) may
terminate this contract for default. Failure to agree to the amount of
any such increased cost to be charged to the Contractor shall be
deemed to be a dispute concerning a question of fact within the
meaning of the clause of this contract entitled "Disputes."
When the primary contract objective is the delivery of designs,
drawings, or reports the following clause is applicable:
7-402.5(b) INSPECTION (1959 FEB.)
The Government, through any authorized representatives, has the
right at all reasonable times, to inspect, or otherwise evaluate the work
performed or being performed hereunder and the premises in which it
is being performed. If any inspection, or evaluation is made by the
Government on the premises of the Contractor or a subcontractor,
the Contractor shall provide and shall require his subcontractors to
provide all reasonable facilities and assistance for the safety and
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convenience of the Government representatives in the performance
of their duties. All inspections and evaluations shall be performed in
such a manner as will not unduly delay the work.
7-404.1 CHANGES (1967 APR.)
(a) The Contracting Officer may at any time, by it written order,
and without notice to the sureties, of any, make changes, within the
general scope of this contract, in any one or more of the following:
(i) drawings, designs, or specifications;
(ii) method of shipment or packing; and
(iii) place of inspection, delivery, or acceptance.
(b) If any such change causes an increase or decrease in the esti-
mated 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 Contractor;
and
(iii) in such other provisions of the contract as may be affected,
contract shall be modified in writing accordingly.
Any claim by the Contractor for adjustment under this clause must
be asserted within thirty (30) days from the date of receipt by the Con-
tractor 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 under this contract. Failure to agree to any adjust-
ment 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.
(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 modifi-
cation 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."
7-404.6 REPORTS OF WORK (1960 JUL.)
(a) The Contractor shall submit reports making full disclosure of
all work done and the results thereof, in the manner, at the times, and
to the extent set forth in the Schedule; provided that, unless otherwise
specified in the Schedule, the Contractor shall submit such reports
in triplicate from time to time as requested and upon completion (or
earlier termination) of the work. Except as may be otherwise specified
in the Schedule, or unless the Contractor is otherwise instructed, the
Contractor shall, upon completion (or earlier termination) of the work,
deliver any working drawings and specifications of any prototypes as
may have been developed.
(b) If the Contractor becomes unable to complete the contract
work and to deliver at the time specified in the Schedule because of
technical difficulties, notwithstanding the exercise of good faith and
diligent efforts in performance of the work, he shall give the Con-
tracting Officer written notice of the anticipated delays with reasons
therefor not less than forty-five (45) days before the completion date
specified in the Schedule or within such time as the Contracting Officer
deems sufficient. When notice is so required, the Contracting Officer
may, in his discretion, extend the time specified in the Schedule for
such period as he deems advisable.
(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 per-
formance), and shall fail to cure such default within a period of
ten days (or such longer periods 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 Contractor
of a Notice of Termination specifying whether termination 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 ter-
minated, and the date upon which such termination 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 other-
wise 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 completion
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 termina-
tion 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, com-
pleted work, supplies, and other material produced as a part of, or
acquired in respect of the performance of, the work terminated by
the Notice of Termination, (B) the completed or partially com-
pleted 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 manufactured for
the performance of this contract for the cost of which the
Contractor has been or will be reimbursed under this contract;
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(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 approved by the Contracting Officer; and provided
further that the proceeds of any such transfer or disposition shall
be applied in reduction of any payments to be made by the
Government 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 Contracting
Officer may direct, for the protection and preservation 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 Procurement Regu-
lation, as it may be amended from time to time, the Contractor may
submit to the Contracting Officer a list, certified as to quantity and
quality, of any or all items of termination inventory not previously
disposed of, exclusive of items the disposition of which has been
directed or authorized by the Contracting Officer, and may request
the Government to remove such items or enter into a storage agree-
ment 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 subject 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
submit 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
amount, 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 allowance 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 Contracting
Officer to agree in whole or in part, as provided in paragraph (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 connection with the termination
of work pursuant to this clause, the Contracting Officer shall deter-
mine, 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 Contracting
Officer; provided, however, that the Contractor shall proceed as
rapidly as practicable to discontinue such costs;
(B) there shall be included therein so far as not included
under (A) above, the cost of settling and paying claims arising
out of the termination of work under subcontracts 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 settlement
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 termination 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 settlement 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 percentage of the fee equiva-
lent to the percentage of the completion of work contemplated
by the contract, but exclusive 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 articles 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 subparagraph (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 Regula-
tion 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 pro-
vided 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 Con-
tractor 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
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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 Con-
tractor 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 deter-
mined to be due under this clause, such excess shall be payable by the
Contractor to the Government 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 Contractor to the date on which such excess is repaid to the
Government; 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 inap-
plicable if this contract does not provide for payment of a fee.
ARTICLE 15
7-403.5 EXCUSABLE DELAYS (1969 AUG.)
Except with respect to defaults of subcontractors the Contractor
shall not be in default by reason of any failure in performance 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 endangers such performance) if such failure arises out of causes
beyond the control and without the fault or negligence of the Con-
tractor. Such causes may include, but are not restricted to: acts of
God or of the public enemy; acts of the Government in either its
sovereign or contractual 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 subcontractor, and without the fault or negli-
gence 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 sub-
contractor 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 Contractor
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"
means subcontractor(s) at any tier.)
7-402.20 AUTHORIZATION AND CONSENT (1961 JAN.)
The Government hereby gives its authorization and consent for all
use and manufacture of any invention described in and covered by a
patent of the United States in the performance of this contract or any
part hereof or any amendment hereto or any subcontract hereunder
(including any lower-tier subcontract).
ARTICLE 17
7-403.16 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 members 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 Government
to the Contractor under this contract, including all Government
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 continue
until the aircraft has completed its landing run and is beached
at a ramp; as to helicopters, "flight" shall commence upon
engagement of the rotors for the purpose of take-off and
continue until the aircraft has returned to the ground and
motors are disengaged; and for vertical take-off aircraft, "flight"
shall commence upon disengagement from any launching plat-
form or device and continue until the aircraft has been reengaged
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 behalf 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 (3100,000) or twenty percent (20%) of
the estimated cost (exclusive of any fee) of this contract, 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 replacement
that is required under this contract shall be made (i) in the estimated
cost, delivery 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 materially 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.
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7-402.28 PAYMENT FOR OVERTIME PREMIUMS (1967 JUNE)
(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, transporta-
tion, maintenance, standby plant protection, operation of utilities,
or accounting;
(C) in the performance of tests, industrial processes, laboratory
procedures, loading or unloading of transportation media, and
operations in flight or afloat, which are continuous in nature and
cannot reasonably be interrupted or otherwise completed; or
(D) which will result in lower overall cost to the Government.
(b) The cost of overtime premiums otherwise allowable under (a)
above shall be allowed only to the extent the amount thereof is
reasonable and properly allocable to the work under this contract.
(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 employment of
additional personnel; and
(iv) the extent to which approval of overtime would affect the
performance or payments in connection with any other Govern-
ment contracts, together with any identification of such affected
contracts.
(d) The Contractor is authorized to perform overtime, in addition
to that performed under (a)(ii), to the extent that the overtime
premium does not exceed
7-402.25 GOVERNMENT PROPERTY (COST REIMBURSE-
MENT) (1970 SEP.)
(a) Government-Furnished Property. The Government shall deliver
to the Contractor, for use in connection with and under the terms of
this contract, the property described as Government-furnished prop-
erty 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 (herein-
after referred to as "Government-furnished property"). The delivery
or performance dates for the supplies or services 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 de-
livery 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 provisions affected by any such delay, in accordance
with the procedures provided for in the clause of this contract en-
titled "Changes." In the event that Government-furnished property
is received by the Contractor in a condition not suitable for the
intended use, the Contractor shall, upon receipt thereof notify the
Contracting Officer of such fact and, as directed by the Contracting
Officer, either (i) return such property at the Government's expense
or otherwise dispose of the property or (ii) effect repairs or modifica-
tions. Upon completion of (i) or (ii) above, the Contracting Officer
upon written request of the Contractor shall equitably adjust the
estimated cost, fixed fee, or delivery or performance 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.
(b) Changes in Government-Furnished Property.
(1) By notice in writing, the Contracting Officer may (i) decrease
the property furnished or to be furnished by the Government 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, tinder this contract. The Con-
tractor 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 property
pursuant to paragraph (1) above, or any withdrawal of authority to
use property provided under any other contract or lease, which
property the Government had agreed in the Schedule to make avail-
able for the performance of this contract, the Contracting 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, substitution 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 property 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 per-
formance of this contract, or (ii) commencement of processing or use
of such property in the performance of this contract, or (iii) reimburse-
ment of the cost thereof by the Government in whole or in part,
whichever first occurs. All Government-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 prop-
erty not owned by the Government, nor shall such Government prop-
erty, or any part thereof, be or become a fixture or lose its identity
as personalty by reason of affixation to any realty.
(d) Property Administration. The Contractor shall comply with the
provisions of Appendix B, Armed Services Procurement Regulation,
as in effect on the date of the contract, which is hereby incorporated
by reference and made a part of this contract. Material to be furnished
by the Government shall be ordered or returned by the Contractor,
when required, in accordance with the "Manual for Military Standard
Requisitioning and Issue Procedure (MILSTRIP) for Defense
Contractors" (Appendix II, Armed Services Procurement Regulation)
as in effect on the date of this contract, which Manual is hereby in-
corporated by reference and made a part of this contract.
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(e) Use of Government Property. The Government property shall,
unless otherwise provided herein or approved by the Contracting
Officer, be used only for the performance of this contract.
(f) Utilization, Maintenance and Repair of Government Property.
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, maintenance, repair,
protection and preservation of Government property so as to assure
its full availability and usefulness for the performance of this contract.
The Contractor shall take all reasonable steps to comply with all
appropriate directions or instructions which the Contracting Officer
may prescribe as reasonably necessary for the protection of Govern-
ment property.
(g) Risk of Loss.
(1) The Contractor shall not be liable for any loss of or damage
to the Government property, or for expenses incidental to such loss
or damage, except that the Contractor shall be responsible 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, superintendents,
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 operations 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 Contractor,
due to the willful misconduct or lack of good faith on the part
of any of his directors, officers, or other representatives mentioned
in subparagraph (i) above-
(A) to maintain and administer, in accordance with sound
industrial practice, the program for utilization, maintenance,
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 insurance so
required to be procured and maintained, or to the extent of
insurance actually procured and maintained, whichever is
greater; or
(v) which results from a risk which is in fact covered by
insurance or for which the Contractor is otherwise reimbursed,
but only to the extent of such insurance or reimbursement.
Any failure of the Contractor to act, as provided in subparagraph (ii)
above, shall be conclusively presumed to be a failure resulting 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 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 nonacceptance of the Contractor's program or system.
In such event it shall be presumed that any loss or damage to
Government 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 Govern-
ment property to the possession and control of a subcontractor, 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 destruction 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 Contract-
ing Officer, provides for the relief of the subcontractor from such
liability. In the absence of such approval, the subcontract shall con-
tain 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 Govern-
ment property, except to the extent that the Government 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 Contract-
ing 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 Salvage 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 further damage, separate the
damaged and undamaged Government property, put all the Govern-
ment property in the best possible order, and furnish to the Contract-
ing Officer a statement of-
(i) the lost, destroyed and damaged Government property;
(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 pro-
ceeds 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 Govern-
ment's right to recover against third parties for any such loss, des-
truction, 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 (including the prosecution
of suit and the execution of instruments of assignment in favor of
the Government) in obtaining recovery. In addition, where the sub-
contractor has not been relieved from liability for any loss or des-
truction of or damage to Government property, the Contractor shall
enforce the liability of the subcontractor for such loss or destruction
of or damage to the Government property for the benefit of the
Government.
*(5) If this contract is for the development, production, modi-
fication, 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 appli-
cable, 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 inspecting
the Government property.
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(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 Property 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 directed or authorized by the Con-
tracting 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
Contractor to omit from such inventory schedules any scrap consist-
ing of faulty castings or forgings, or cutting and processing waste,
such as chips, cuttings, borings, turnings, short ends, circles,
trimmings, clippings, and remnants, and to dispose of such scrap in
accordance with the Contractor's normal practice and account there-
for as a part of general overhead or other reimbursable cost in accord-
ance 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 there-
upon all obligations of the Government regarding such abandoned
property shall cease; and
(ii) has no obligation to the Contractor with regard to restor-
ation 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 (paragraph (i) above), nor
otherwise, except for restoration or rehabilitation costs caused by
removal of Government property 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).
7-402.8 SUBCONTRACTS (1973 APR.)
(a) The Contractor shall notify the Contracting Officer reasonably
in advance of entering into any subcontract which (i) is cost-reim-
bursement 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, (iii) provides for the fabrica-
tion, 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; or (iv) has experimental, developmental, or
research work as one of its purposes.
(b) In the case of a proposed subcontract which (i) is cost-rcim-
bursement, time and materials, or labor-hour which would involve an
estimated amount in excess of $10,000, including any fee, (ii) is pro-
posed to exceed $100,000, or (iii) is one of a number of subcontracts
under this contract with a single subcontractor 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 explana-
tion of why and how the proposed subcontractor was selected, includ-
ing the degree of competition obtained;
(3) the proposed subcontract price, together with the Contractor's
cost or price analysis thereof;
(4) the subcontractor's current, complete, and accurate cost or
pricing data and Certificate of Current Cost or Pricing Data when
such data and certificate are required by other provisions of this
contract to be obtained from the subcontractor;
(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 memo-
randum shall be retained in the Contractor's file for the use of Govern-
ment 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
required, 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, estab-
lished 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 sub-
mitted and the extent to which this data was not used by the Con-
tractor is determining the total price objective and in negotiating the
final price. The memorandum shall also reflect the extent to which it
was recognized in the negotiation that any cost or pricing data sub-
mitted 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 negotiation
shall contain an explanation of the incentive fee/profit plan identifying
each critical performance element, management decisions used to
quantify each incentive element, reasons for incentives on particular
performance characteristics, and a brief summary of trade-off pos-
sibilities considered as to cost, performance, and time.
(c) The Contractor shall obtain the written consent of the Con-
tracting 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 subcontract; 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. However,
such approval or the consent of the Contracting Officer obtained as
required by this clause shall not be construed to constitute a deter-
mination of the allowability of any cost under this contract, unless
such approval specifically provides that it constitutes 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 Government.
(g) Notwithstanding (c) above, the Contractor may enter into
subcontracts within (i) and (ii) of (a) above, without the consent of
the Contracting Officer, if the Contracting Officer has approved in
writing the Contractor's procurement system and the subcontract is
within the scope of such approval. (This subparagraph (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 redetermination or
incentive price revision subcontract hereunder the substance of the
"Limitation on Payments" paragraph set forth in the appropriate
clause prescribed by paragraph 7-108 of the Armed Services Procure-
ment Regulation, including subparagraph (4) thereof, modified to
omit mention of the Government and reflect the position of the Con-
tractor as purchaser and of the subcontractor as vendor, and to omit
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that portion of subparagraph (3) thereof relating to tax credits, and
(ii) include in each cost-reimbursement type subcontract hereunder a
requirement that each price redetermination and incentive price
revision subcontract thereunder will contain the substance of the
"Limitation on Payments" provision, including subparagraph (4)
thereof, modified as outlined in (i) above.
(i) To facilitate small business participation in subcontracting under
this contract, the Contractor agrees to provide progress payments on
the fixed-price types of 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 Regulation, 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.
ARTICLE 21
7-104.9(h) TECHNICAL DATA-WITHHOLDING OF PAYMENT
(1973 APR.)
(a) If "Technical Data" (as defined in the clause of this contract
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 Govern-
ment, 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 pursuant 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
negligence of the Contractor.
(b) After payments total ninety percent (90%) of the total contract
price or amount and if a technical data specified to be delivered under
this contract has not been accepted, the Contracting 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.
(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 Contracting 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 this 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.
Failure to agree to any adjustment shall be a dispute concerning a
question of fact within the meaning of the "Disputes" clause of this
contract.
(c) If a stop work order is not canceled and the work covered
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 resulting
from the stop work order shall be allowed by equitable adjustment or
otherwise.
ARTICLE 23
7-402.22 PATENT RIGHTS (TITLE) (1969 DEC.)
(a) Definitions Used in This Clause.
(1) Subject Invention means any invention or discovery, whether
or not patentable, conceived or first actually reduced to practice in
the course of or under this contract. The term "Subject Invention"
includes, but is not limited to, any art, method, process, machine,
manufacture, design or composition of matter, or any new and useful
improvement thereof, or any variety of plant, which is or may be
patentable under the patent laws of the United States of America or
any foreign country.
(2) Governmental purpose means the right of the Government of
the United States (including any agency thereof, state or domestic
municipal government) to practice and have practiced (make or have
made, use or have used, sell or have sold) any Subject Invention
throughout the world by or on behalf of the Government of the
United States.
(3) Contract means any contract, agreement, grant, or other
arrangement, or subcontract entered into with or for the benefit of the
Government where a purpose of the contract is the conduct of experi-
mental, developmental, or research work.
(4) Subcontract and subcontractor means any subcontract or sub-
contractor of the Contractor, any lower-tier subcontract or sub-
contractor under this contract.
(5) To bring to the point of practical application means to manu-
facture in the case of a composition or product, to practice in the case
of a process, or to operate in the case of a machine or system and, in
each case, under such conditions as to establish that the invention is
being worked and that its benefits are reasonably accessible to the
public.
(b) Rights Granted to the Government. Except as provided in (e) and
(h) of this clause, the Contractor agrees to grant the Government all
right, title and interest in and to each Subject Invention (made by the
Contractor), subject to the reservation of a nonexclusive and royalty-
free license to the Contractor. The license shall extend to existing and
future associated and affiliated companies, if any, within the corporate
structure of which the Contractor is a part and shall be assignable to
the successor of that part of the Contractor's business to which such
Invention pertains. Nothing contained in this Patent Rights clause
shall be deemed to grant any rights with respect to any invention
other than a Subject Invention.
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(c) Invention Disclosures and Reports.
(1) With respect to Subject Inventions (made by the Con-
tractor), except those which are obviously unpatentable under the
patent laws of the United States, the Contractor shall furnish to the
Contracting Officer:
(i) a written disclosure of each invention within six (6) months
after conception or first actual reduction to practice, whichever
occurs first under this contract, sufficiently complete in technical
detail to convey to one skilled in the art to which the Invention
pertains a clear understanding of the nature, purpose, operation,
and to the extent known the physical, chemical, or electrical
characteristics of the Invention; when unable to submit a com-
plete disclosure, the Contractor shall within said six (6) month
period submit a disclosure which includes all such technical detail
then known to him and shall, unless the Contracting Officer
authorizes a different period, submit all other technical detail
necessary to complete the disclosure within three (3) months of
the expiration of said six (6) month period.
(ii) interim reports at least every twelve (12) months, the
initial period of which shall commence with the date of this
contract, each report listing all such Inventions conceived or first
actually reduced to practice more than six (6) months prior to the
date of the report and not listed on a prior interim report, or
certifying that there are no such unreported Inventions;
(iii) prior to final settlement of this contract, a final report
listing all such Inventions including all those previously listed in
interim reports, or certifying that there are no such unreported
Inventions. (This Final Report and any Interim Report under
(ii) above shall be submitted on DD Form 882 or other format
acceptable to the Contracting Officer.);
(iv) information in writing, as soon as practicable, of the date
and identity of any public use, sale, or publication of such Inven-
tion made by or known to the Contractor or of any contemplated
publication by the Contractor;
(v) upon request, such duly executed instruments and other
papers (prepared by the Government) as are deemed necessary to
vest in the Government the rights granted it under this clause and
to enable the Government to apply for and prosecute any patent
application, in any country, covering such Invention where the
Government has the right under this clause to file such applica-
tion; and
(vi) upon request, an irrevocable power of attorney to inspect
and make copies of each United States patent application filed
by, or on behalf of, the Contractor covering any such Invention.
(2) With respect to each Subject Invention in which the Con-
tractor has been granted greater rights tinder paragraph (h) of this
clause, the Contractor agrees to provide written reports at reasonable
intervals, when requested by the Government as to:
(i) the commercial use that is being made or is intended to be
made of such Invention;
(ii) the steps taken by the Contractor to bring the Invention to
the point of practical application, or to make the Invention
available for licensing.
(d) Subcontracts.
(I) The Contractor shall, unless otherwise authorized or directed
by the Contracting Officer, include a patent rights clause containing
all the provisions of this Patent Rights clause except provision (g) in
any subcontract hereunder where a purpose of the subcontract is the
conduct of experimental, developmental, or research work. In the
event of refusal by a subcontractor to accept this Patent Rights
clause, or if in the opinion of the Contractor this Patent Rights clause
is inconsistent with the policy set for in ASPR 9-107.2 and 9-107.3,
the Contractor:
(i) shall promptly submit a written report to the Contracting
Officer setting forth the subcontractor's reasons for such refusal
or the reasons Contractor is of the opinion that the inclusion of
this clause would be so inconsistent, and other pertinent informa-
tion which may expedite disposition of the matter; and
(ii) shall not proceed with the subcontract without the written
authorization of the Contracting Officer.
The Contractor shall not, in any subcontract or by using such a sub-
contract as consideration therefor, acquire any rights to Subject
Inventions for his own use (as distinguished from such rights as may be
required solely to fulfill his contract obligations to the Government in
the performance of this contract). Reports, instruments, and other
information required to be furnished by a subcontractor to the Con-
tracting Officer under the provisions of such a patent rights clause in a
subcontract hereunder may, upon mutual consent of the Contractor
and the subcontractor (or by direction of the Contracting Officer) be
furnished to the Contractor for transmission to the Contracting Officer.
(2) The Contractor, at the earliest practicable date, shall also
notify the Contracting Officer in writing of any subcontract containing
a patent rights clause, furnish to the Contracting Officer a copy of such
subcontract, and notify him when such subcontract is completed. It is
understood that the Government is a third party beneficiary of any
subcontract clause granting rights to the Government in Subject
Inventions, and the Contractor hereby assigns to the Government all
the rights that the Contractor would have to enforce the subcon-
tractor's obligations for the benefit of the Government with respect to
Subject Inventions. If there are no subcontracts containing patent
rights clauses, a negative report is required. The Contractor shall not
be obligated to enforce the agreements of any subcontractor here-
under relating to the obligations of the subcontractor to the Govern-
ment in regard to Subject Inventions.
(e) Domestic Filing of Patent Applications by Contractor.
(1) If greater rights are granted in and to a Subject Invention
pursuant to paragraph (h) of this clause, the Contractor shall file in
due form and within six (6) months of the granting of such greater
rights a United States Patent application claiming the Invention
referred to in said paragraph, and shall furnish, as soon as practicable,
the serial number and filing date of each such application and the
patent number of any resulting patent. As to each Invention in which
the Contractor has been given greater rights, the Contractor shall
notify the Contracting Officer at the end of the six (6) month period
if he has failed to file or caused to be filed a patent application covering
such Invention. If the Contractor has filed or caused to be filed such an
application within the six (6) month period, but elects not to continue
prosecution of such application, he shall notify the Contracting Officer
not less than sixty (60) days before the expiration of the response
period. In either of the situations covered by the two immediately-
preceding sentences, the Government shall be entitled to all rights,
title and interest in such Invention subject to the reservation to the
Contractor of a license as specified in paragraph (b).
(2) The following statement shall be included within the first
paragraph of any patent application filed and any patent issued on an
Invention which was made under Government contract or subcontract
thereunder: "The Invention herein described was made in the course of
or under a contract or subcontract thereunder (or grant) with (here
state the Department or Agency)."
(f) Foreign Filing of Patent Applications.
(1) If the Contractor acquires greater rights in a Subject Inven-
tion pursuant to paragraph (h) of this clause and has filed a United
States patent application claiming the Invention, the Contractor, or
those other than the Government deriving rights from the Contractor,
shall as between the parties hereto, have the exclusive right, subject to
the rights of the Government under paragraph (i) of this clause, to file
applications on the Inventions in each foreign country within:
(i) nine (9) months front the date a corresponding United States
patent application is filed;
(ii) six (6) months from the date permission is granted to file
foreign applications where such filing has been prohibited for
security reasons; or
(iii) such longer period as may be approved by the Contracting
Officer.
The Contractor shall notify the Contracting Officer of each foreign
application filed and, upon written request of the Contracting Officer,
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furnish an English translation of such application, and, convey to the
Government the entire right, title and interest in the Invention in each
foreign country in which an application has not been filed within the
time specified above, subject to the reservation of a royalty-free license
as specified in paragraph (b).
(2) If the Contractor does not acquire greater rights pursuant to
paragraph (h) of this clause and the Government determines not to
file a patent application on any Subject Invention (made by the
Contractor) in any particular foreign country, the Contracting Officer,
upon request of the Contractor, may authorize the Contractor to file
a patent application on such Invention in such foreign country and
retain ownership thereof, subject to an irrevocable, nonexclusive and
royalty-free license to practice and have practiced such Subject
Invention throughout the world for Governmental purposes, including
the practice of each such Subject Invention (i) in the manufacture, use,
and disposition of any article or material, (ii) in the use of any method,
or (iii) in the performance of any service, acquired by or for the Gov-
ernment or with funds derived through the Military Assistance
Program of the Government or funds otherwise derived through the
Government.
(g) Withholding of Payment.
(1) Final payment under this contract shall not be made before
the Contractor delivers to the Contracting Officer the final report
required by (c)(1)(iii), all written invention disclosures required by
(c)(l)(i), and all information as to subcontracts required by (d)(2).
(2) If at any time before final payment under this contract the
Contractor fails to deliver an interim report required by (e)(l ) (ii), or a
written invention disclosure required by (c)(1)(i), the Contracting
Officer shall withhold from payment $50,000 or five percent (5%), of
the amount of this contract whichever is less (or whatever lesser sum is
available if payments have exceeded ninety-five percent (95%) of the
amount of this contract) until the Contractor corrects all such failures.
(3) After payments total eighty percent (80%) of the amount of
this contract, and if no amount is required to be withheld under (2)
above, the Contracting Officer may, if he deems such action warranted
because of the Contractor's performance under the Patent Rights
clause of this contract or other known Government contracts, with-
hold from payment such sum as he considers appropriate, not exceeding
$50,000 or five percent (5%), of the amount of this contract which-
ever is less, to be held as a reserve until the Contractor delivers all the
reports, disclosures, and information specified in (1) above. Subject to
the five percent (5%) or $50,000 limitation, the sum withheld under
this subparagraph (3) may be increased or decreased from time to
time at the discretion of the Contracting Officer.
(4) No amount shall be withheld under this paragraph (g) while
the amount specified by this paragraph is being withheld under other
provisions of this contract. The total amount withheld under (1), (2)
and (3) above shall not exceed $50,000 or five percent (5%), of the
amount of this contract whichever is less. The withholding of any
amount or subsequent payment thereof to the Contractor shall not be
construed as a waiver of any rights accruing to the Government under
this contract. This paragraph shall not be construed as requiring the
Contractor to withhold any amounts from a subcontractor to enforce
compliance with the patent provision of a subcontract. As used in this
paragraph (g), "this contract" means "this contract as from time to
time amended." In cost-type contracts, "amount of this contract"
means "estimated cost of this contract."
(h) Contractor's Request for Greater Rights. The Contractor at the
time of first disclosing a Subject Invention pursuant to paragraph
(c)(1)(i) of this clause, but not later than three (3) months thereafter,
may submit in writing to the Contracting Officer, in accordance with
applicable regulations, a request for greater rights than the license
reserved to the Contractor in paragraph (b) of this clause if:
(i) the Invention is not the primary object of this contract; and
(ii) the acquisition of such greater rights is consistent with the
intent of ASPR 9-107.3(a) and is necessary to call forth private
risk capital and expense to bring the Invention to the point of
practical application.
The Contracting Officer will review the Contractor's request for
greater rights and will notify the Contractor whether such request is
granted in whole or in part. Any rights granted to the contractor shall
be subject to, but not necessarily limited to, the provisions of
paragraph (i) of this clause.
(i) Reservation of Rights to the Government.
(l) In the event greater rights in any Subject Invention are
vested in or granted to the Contractor pursuant to paragraph (h)
above, such greater rights shall, as a minimum, be subject to an ir-
revocable, nonexclusive and royalty-free license to practice and have
practiced each such Subject Invention (made by the Contractor)
throughout the world for Governmental purposes, and including the
practice of each such Subject Invention (i) in the manufacture, use,
and disposition of any article or material, (ii) in the use of any method,
or (iii) in the performance of any service, acquired by or for the Gov-
ernment or with funds derived through the Military Assistance Pro-
gram of the Government or funds otherwise derived through the
Government.
(2) In the event greater rights are vested in the Contractor, the
Contractor further agrees to and does hereby grant to the Government
the right to require the granting of a license to an applicant under any
such Invention:
(i) on a nonexclusive, royalty-free basis, unless the Contractor,
his licensee, or his assignee demonstrates to the Government, at
its request, that effective steps have been taken within three (3)
years after a patent issues on such Invention to bring the Inven-
tion to the point of practical application or that the Invention
has been made available for licensing royalty-free or on terms that
are reasonable in the circumstances, or can show cause why the
title should be retained for a further period of time; or
(ii) royalty-free or on terms that are reasonable in the circum-
stances to the extent that the Invention is required for public use
by Governmental regulations or as may be necessary to fulfill
health needs, or for other public purposes stipulated in the
Schedule of this contract.
(j) Right to Disclose Subject Inventions. The Government may
duplicate and disclose reports and disclosures of Subject Inventions
required to be furnished by the Contractor pursuant to this Patent
Rights clause.
(k) Forfeiture of Rights in Unreported Subject Inventions. The
Contractor shall forfeit to the Government all rights in any Subject
Invention which he fails to report to the Contracting Officer at or
prior to the time he (i) files or causes to be filed a United States or
foreign application thereon, or (ii) submits the final report required by
(c)(iii) of this clause, whichever is later, provided that the Contractor
shall not forfeit rights in a Subject Invention if (A) contending that
the invention is not a Subject Invention, he nevertheless reports the
invention and all the facts pertinent to his contention to the Contract-
ing Officer within the time specified in (i) or (ii) above, or (B) he
establishes that the failure to report was due entirely to causes beyond
his control and without his fault or negligence. The Contractor shall
be deemed to hold any such forfeited Subject Invention, and the patent
applications and patents pertaining thereto, in trust for the Govern-
ment pending written assignment of the Invention. The rights accruing
to the Government under this paragraph shall be in addition to and
shall not supersede any other rights which the Government may have
in relation to unreported Subject Inventions. Nothing contained herein
shall be construed to require the Contractor to report any invention
which is not in fact a Subject Invention.
(1) Examination of Records Relating to Inventions. The Contracting
Officer, or his authorized representative shall, until the expiration of
three (3) years after final payment under this contract, have the right
to examine any books, records, documents, and other supporting data
of the Contractor which the Contracting Officer or his authorized
representative shall reasonably deem directly pertinent to the dis-
covery or identification of Subject Inventions or to compliance by the
Contractor with the requirements of this clause.
ARTICLE 24
7-404.2 ALTERATIONS IN CONTRACT (1949 JUL.)
The following alterations have been made in the provisions of this
contract.
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