SECTION B FIXED PRICE SUPPLY PROVISIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89B00552R000700050009-8
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 15
• Document Creation Date: December 20, 2016
• Document Release Date: January 6, 2004
• Sequence Number: 9
• Content Type: REGULATION

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SECTION B
FIXED PRICE SUPPLY PROVISIONS
Article
Page
No.
Additional Bond Security ......................
6
2
Alterations in Contract ........................
28
15
Audit .......................................
10
3
Authorization and Consent .....................
14
7
Changes ....................................
1
1
Competition in Subcontracting ............ .....
9
3
Default .....................................
13
6
Discounts ...................................
26
15
Examination of Records .......................
7
2
Extras ......................................
2
1
Federal, State, and Local Taxes ................
18
9
Government Delay of Work ................ .
25
15
Government Property ...................... ..
19
10
Ground and Flight Risk ................ ......
17
7
Page
Article No.
Inspection ................................... 3 1
Material Inspection and Receiving Report ........ 27 15
Patent Indemnity ............................ 15 7
Payments ................................... 5 2
Price Reduction for Defective Cost or Pricing Data . 8 2
Pricing of Adjustments ........................ 24 14
Special Tooling .............................. 20 12
Stop Work Order ............................ 23 14
Subcontractor Cost and Pricing Data ............ 11 4
Subcontracts ................................. 21 13
Technical Data-Withholding of Payment ....... 16 7
Termination for Convenience of the Government .. 12 4
Title and Risk of Loss ........................ 4 2
Variation in Quantity ......................... 22 14
7-103.2 CHANGES (1958 JAN.)
The Contracting Officer may at any time, by written order, and
without notice to the sureties, make changes, within the general
scope of this contract, in any one or more of the following: (i)
Drawings, designs, or specifications, where the supplies to be fur-
nished are to be specially manufactured for the Government in ac-
cordance therewith; (ii) method of shipment or packing; and (iii)
place of delivery. If any such change causes an increase or decrease
in the 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, an equitable adjustment shall be made in the
contract price or delivery schedule, or both, and the contract shall
be modified in writing accordingly. Any claim by the Contractor for
adjustment under this clause must be asserted within 30 days from
the date of receipt by the Contractor of the notification of change,
provided, however, that the Contracting Officer, if he decides that
the facts justify such action, may receive and act upon any such
claim asserted at any time prior to final payment under this con-
tract. Where the cost of property made obsolete or excess as result
of a change is included in the Contractor's claim for adjustment,
the Contracting Officer shall have the right to prescribe the man-
ner of disposition of such property. 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." how-
ever, nothing in this clause shall excuse the Contractor from pro-
ceeding with the contract as changed.
7-103.3 EXTRAS (1949 JUL.)
Except as otherwise provided in this contract, no payment for
extras shall be made unless such extras and the price therefor have
been authorized in writing by the Contracting Officer.
7-103.5 INSPECTION (1958 MAY)
(a) All supplies (which term throughout this clause includes
without limitation raw materials, components, intermediate assem-
blies, and end products) shall be subject to inspection and test
by the Government, to the extent practicable at all times and
places including the period of manufacture, and in any event prior
to acceptance.
(b) In case any supplies or lots of supplies are defective in
material or workmanship or otherwise not in conformity with the
requirements of this contract, the Government shall have the
right either to reject them (with or without instructions as to
their disposition) or to require their correction. Supplies or lots
of supplies which have been rejected or required to be corrected
shall be removed or, if permitted or required by the Contracting
Officer, corrected in place by and at the expense of the Con-
tractor promptly after notice, and shall not thereafter be tendered
for acceptance unless the former rejection or requirement of
correction is disclosed. If the Contractor fails promptly to remove
such supplies or lots of supplies which are required to be removed
or promptly to replace or correct such supplies or lots of supplies,
the Government either (i) may by contract or otherwise replace
or correct such supplies and charge to the Contractor the cost oc-
casioned the Government thereby; or (ii) may terminate this con-
tract for default as provided in the clause of this contract entitled
"Default." Unless the Contractor corrects or replaces such supplies
within the delivery schedule, the Contracting Officer may require
the delivery of such supplies at a reduction in price which is equi-
table under the circumstances. Failure to agree to such reduction
of price shall be a dispute concerning a question of fact within
the meaning of the clause of this contract entitled "Disputes."
(c) If any inspection or test is made by the Government on the
premises of the Contractor or a subcontractor, the Contractor with-
out additional charge shall provide all reasonable facilities and
assistance for the safety and convenience of the Government in-
spectors in the performance of their duties. If Government inspec-
tion or test is made at a point other than the premises of the
Contractor or a subcontractor, it shall be at the expense of the
Government except as otherwise provided in this contract; pro-
vided, that in case of rejection the Government shall not be
liable for any reduction in value of samples used in connection with
such inspection or test. All inspections and tests by the Govern-
ment shall be performed in such a manner as not to unduly
delay the work. The Government reserves the right to charge to the
Contractor any additional cost of Government inspection and test
when supplies are not ready at the time such inspection and test
is requested by the Contractor or when reinspection or retest is
necessitated by prior rejection. Acceptance or rejection of the
supplies shall be made as promptly as practicable after delivery,
except as otherwise provided in this contract; but failure to inspect
and accept or reject supplies shall neither relieve the Contractor
from responsibility for such supplies as are not in accordance with
the contract requirements nor impose liability on the Government
therefor.
(d) The inspection and test by the Government of any supplies
or lots thereof does not relieve the Contractor from any respon-
sibility regarding defects or other failures to meet the contract
requirements which may be discovered prior to acceptance. Except
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as otherwise provided in this contract, acceptance shall be con-
clusive except as regards latent defects, fraud, or such gross mis-
takes as amount to fraud.
(e) The Contractor shall provide and maintain an inspection
system acceptable to the Government covering the supplies
hereunder. Records of all inspection work by the Contractor shall
be kept complete and available to the Government during the
performance of this contract and for such longer period as may
be specified elsewhere in this contract.
7-103.6 TITLE AND RISK OF LOSS (1968 JUN.)
(a) Unless this contract specifically provides for earlier passage
of title, title to supplies covered by this contract shall pass to the
Government upon formal acceptance, regardless of when or where
the Government takes physical possession.
(b) (1) Unless this contract specifically provides otherwise,
risk of loss of or damage to supplies covered by this contract shall
remain with the Contractor until, and shall pass to the Government
upon:
(i) delivery of the supplies to a carrier, if transportation is
f.o.b. origin;
(ii) acceptance by the Government or delivery of possession
of the supplies to the Government at the destination specified
in this contract, whichever is later, if transportation is f.o.b.
destination.
(2) Notwithstanding (1) above, the risk of loss of or damage
to supplies which so fail to conform to the contract as to give a
right of rejection shall remain with the Contractor until cure or
acceptance, at which time (1) above shall apply.
(c) Notwithstanding (b) above, the Contractor shall not be
liable for loss of or damage to supplies caused by the negligence
of officers, agents, or employees of the Government acting within
the scope of their employment.
7-104.15 EXAMINATION OF RECORDS (1971 MAR.)
(AMENDED)
(a) This clause is applicable if the amount of this contract
exceeds $2,500 and was entered into by means of negotiation,
including small business restricted advertising, but is not applicable
if this contract was entered into by means of formal advertising.
(b) The Contractor agrees that the Appropriate Audit Repre-
sentative of the Government or any of his duly authorized repre-
sentatives shall, until the expiration of three years after final pay-
ment under this contract or such lesser time specified in either
Appendix M of the Armed Services Procurement Regulation or the
Federal Procurement Regulations Part 1-20, as appropriate, have
access to and the right to examine any directly pertinent books,
documents, papers, and records of the Contractor involving trans-
actions related to this contract.
(c) The Contractor further agrees to include in all his subcon-
tracts hereunder a provision to the effect that the subcontractor
agrees that the Appropriate Audit Representative of the Govern-
ment or any of his duly authorized representatives shall, until the
expiration of three years after final payment under the sub-
contract or such lesser time specified in either Appendix M of
the Armed Services Procurement Regulation or the Federal Pro-
curement Regulations Part 1-20, as appropriate, have access to and
the right to examine any directly pertinent books, documents,
papers, and records of such subcontractor, involving transactions
related to the subcontract. The term "subcontract" as used in this
clause excludes (i) purchase orders not exceeding $2,500 (ii)
subcontracts or purchase orders for public utility services at rates
established for uniform applicability to the general public.
(d) The periods of access and examination described in (b)
and (c) above for records which relate to (i) appeals under the
"Disputes" clause of this contract, (ii) litigation or the settlement
of claims arising out of the performance of this contract, or (iii)
costs and expenses of this contract as to which exception has been
taken by the Appropriate Audit Representative of the Government
or any of his duly authorized representatives, shall continue until
such appeals, litigation, claims or exceptions have been disposed of.
7-103.7 PAYMENTS (1958 JAN.) (AMENDED)
The Contractor shall be paid, upon the submission of proper
invoices or vouchers, the prices stipulated herein for supplies de-
livered and accepted or services rendered and accepted, less
deductions, if any, as herein provided. Unless otherwise specified,
payment will be made on partial deliveries accepted by the Gov-
ernment when the amount due on such deliveries so warrants; or,
when requested by the Contractor, payment for accepted partial
deliveries shall be made whenever such payment would equal or
exceed either $1,000 or 50 percent of the total amount of this
contract. However, in consideration of effecting expedited pay-
ment in certain cases, the Government may elect to make
payment upon delivery, prior to inspection and final acceptance,
but reserves the right subsequent thereto to reject for any defect
in material or workmanship or non-conformance with the specifica-
tions or other requirements of this contract.
7-103.9 ADDITIONAL BOND SECURITY (1949 JUL.)
If any surety upon any bond furnished in connection with this
contract becomes unacceptable to the Government, or if any such
surety fails to furnish reports as to his financial condition from
time to time as requested by the Government, the Contractor
shall promptly furnish such additional security as may be required
from time to time to protect the interest of the Government and
of persons supplying labor or materials in the prosecution of the
work contemplated by this contract.
7-104.29 PRICE REDUCTION FOR DEFECTIVE COST OR
PRICING DATA (1970 JAN.)
(a) The following clause shall be inserted in negotiated con-
tracts which when entered into exceed $100,000, except where
the price is based on adequate price competition, established cata-
log or market prices of commercial items sold in substantial quan-
tities to the general public, or prices set by law or regulation. In
addition the contracting officer shall include this clause in other
negotiated contracts for which he has obtained a Certificate of
Current Cost or Pricing Data in accordance with 3-807.3 (a) (iii )
in connection with the initial pricing of the contract, or for which
he has obtained partial cost or pricing data in accordance with
3-807.3(e).
PRICE REDUCTION FOR DEFECTIVE COST OR PRICING
DATA (1970 JAN.)
If any price, including profit or fee, negotiated in connection
with this contract or any cost reimbursable under this contract
was increased by any significant sums because:
(i) the Contractor furnished cost or pricing data which was
not complete, accurate and current as certified in the Con-
tractor's Certificate of Current Cost or Pricing Data;
(ii) a subcontractor, pursuant to the clause of this con-
tract entitled "Subcontractor Cost or Pricing Data" or "Sub-
contractor 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 subcontractor's Certificate of Current Cost or Pricing
Data;
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(iii) a subcontractor or prospective subcontractor furnished
cost or pricing data which was required to be complete, ac-
curate and current and to be submitted to support a subcon-
tract cost estimate furnished by the Contractor but which was
not complete, accurate and current as of the date certified in
the Contractor's Certificate of Current Cost or Pricing Data;
or
(iv) the Contractor or a subcontractor or prospective sub-
contractor furnished any data, not within (i), (ii) or (iii)
above, which was not accurate as submitted;
the price or cost shall be reduced accordingly and the contract
shall be modified in writing as may be necessary to reflect such
reduction. However, any reduction in the contract price due to
defective subcontract data of a prospective subcontractor when
the subcontract was not subsequently awarded to such subcon-
tractor, 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 Con-
tractor, 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 connec-
tion 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. How-
ever, 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
advertised and negotiated, which when entered into exceed
$100,000 except those containing the clause set forth in (a) above.
(iv) the Contractor or a subcontractor or prospective sub-
contractor furnished any data, not within (i), (ii) or (iii)
above, which was not accurate, as submitted;
the price shall be reduced accordingly and the contract shall be
modified in writing as may be necessary to reflect such reduction.
However, any reduction in the contract price due to defective
subcontract data of a prospective subcontractor, when the sub-
contract 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 prospec-
tive subcontract cost estimate submitted by the Contractor, pro-
vided 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, How-
ever, 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.
7-104.40 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.
PRICE REDUCTION FOR DEFECTIVE COST OR PRICING
DATA-PRICE ADJUSTMENTS (1970 JAN.)
(a) This clause shall become operative only with respect to
any modification of this contract which involves aggregate in-
creases and/or decreases in costs plus applicable profits in excess
of $100,000 unless the modification is priced on the basis of ade-
quate competition, established catalog or market prices of com-
mercial 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 connec-
tion 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 "Subcon-
tractor Cost or Pricing Data-Price Adjustments" or any
subcontract clause therein required, furnished cost or pricing
data which was not complete, accurate and current as certified
in the subcontractor's Certificate of Current Cost or Pricing
Data;
(iii) a subcontractor or prospective subcontractor furnished
cost or pricing data which was required to be complete, ac-
curate and current and to be submitted to support a subcon-
tract 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
7-104.41 AUDIT (1971 APR.) (AMENDED)
(a) General. The Contracting Officer or his representatives
shall have the audit and inspection rights described in the ap-
plicable paragraphs (b), (c) and (d) below.
(b) Examination of Costs. If this is a cost reimbursement type,
incentive, time and materials, labor hour, or price redeterminable
contract, or any combination thereof, the Contractor shall main-
tain, and the Contracting Officer or his representatives shall have
the right to examine books, records, documents, and other evidence
and accounting procedures and practices, sufficient to reflect prop-
erly all direct and indirect costs of whatever nature claimed to have
been incurred and anticipated to be incurred for the performance of
this contract. Such right of examination shall include inspection
at all reasonable times of the 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 representatives who are employees of the United States
Government shall have the right to examine all books, records,
documents and other data of the Contractor related to the nego-
tiation, pricing or performance of such contract, change or modi-
fication, for the purpose of evaluating the accuracy, completeness
and currency of the cost or pricing data submitted. Additionally,
in the case of pricing any change or modification exceeding
$100,000 to formally advertised contracts, the Appropriate Audit
Representative of the Government or his representatives who are
employees of the United States 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.
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(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.
(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 statute, or by other
clauses of this contract, or by (1) and (2) below:
(1) If this contract is completely or partially terminated,
the records relating to the work terminated shall be made
available for a period of three years from the date of any
resulting final settlement.
(2) Records which relate to appeals under the "Disputes"
clause of this contract, or litigation or the settlement of claims
arising out of the performance of this contract, shall be made
available until such appeals, litigation, or claims have been
disposed of.
(f) The Contractor shall insert a clause containing all the pro-
visions of this clause, including this paragraph (f), in all subcon-
tracts hereunder, except altered as necessary for proper identifica-
tion of the contracting parties and the Contracting Officer under
the Government prime contract.
SUBCONTRACTOR COST OR PRICING DATA-PRICE
ADJUSTMENTS
(a) Paragraphs (b) and (c) of this clause shall become opera-
tive 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 sub-
contract 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 com-
petition, 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 subcon-
tract change or modification.
(d) The Contractor shall insert the substance of this clause in-
cluding 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:
7-104.42 SUBCONTRACTOR COST AND PRICING DATA
(a) The following clause shall be inserted in all negotiated
contracts expected to exceed $100,000, except where the price
is based on adequate price competition, established catalog or
market prices of commercial items sold in substantial quantities
to the general public, or prices set by law or regulation, The
contracting officer may include this clause, with appropriate reduc-
tion in the dollar amounts included therein, in other negotiated
contracts where a Certificate of Current Cost or Pricing Data is
required (see 3-$07.3 (a) (iii)) in connection with initial pricing
of the contract.
SUBCONTRACTOR COST OR PRICING DATA (1970 JAN.)
(a) The Contractor shall require subcontractors hereunder to
submit, actually or by specific identification in writing, cost or
pricing data under the following circumstances: (i) prior to the
award of any subcontract the amount of which is expected to
exceed $100,000 when entered into; (ii) prior to the pricing of
any subcontract modification which involves aggregate increases
and/or decreases in cost plus applicable profits expected to exceed
$100,000; except where the price is based on adequate price com-
petition, 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 subcon-
tract 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 Con-
tractor shall insert the substance of the following clause:
SUBCONTRACTOR COST OR PRICING DATA-PRICE
ADJUSTMENTS (1970 JAN.)
(a) Paragraphs (b) and (c) of this clause shall become opera-
tive 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 aggre-
gate 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 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 sub-
contract or subcontract change or modification.
(d) The Contractor shall insert the substance of this clause
including this paragraph (d) in each subcontract which exceeds
$100,000.
7-103.21(b) TERMINATION FOR CONVENIENCE OF THE
GOVERNMENT (1973 APR.)
(a) The performance of work under this contract may be
terminated by the Government in accordance with this clause in
whole, or from time to time in part, whenever 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
the extent to which performance of work under the contract is
terminated, and the date upon which such termination becomes
effective.
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(b) After receipt of a Notice of Termination, and except as
otherwise directed by the Contracting Officer, the Contractor shall,
(i) stop work under the contract on the date and to the
extent specified in the Notice of Termination;
(ii) place no further orders or subcontracts for materials,
services or facilities, except as may be necessary for comple-
tion 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, at the
times, and to the extent directed by the Contracting Officer,
all of the right, title, and interest of the Contractor under
the orders and subconracts 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) settle all outstanding liabilities and all claims arising
out of such termination of orders and subcontracts, with the
approval or ratification of the Contracting Officer, to the
extent he may require, which approval or ratification shall
be final for all the purposes of this clause;
(vi) transfer title and deliver to the Government, in the
manner, at the times, and to the extent, if any, directed by
the Contracting Officer, (A) the fabricated or unfabricated
parts, work in process, completed work, supplies, and other
material produced as a part of, or acquired in connection
with the performance of, the work terminated by the Notice
of Termination, and (B) the completed or partially com-
pleted plans, drawings, information, and other property
which, if the contract had been completed, would have been
required to be furnished to the Government;
(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 Con-
tracting Officer may direct, for the protection and preserva-
tion of the property related to this contract which is in the
possession of the Contractor and in which the Government
has or may acquire an interest.
At any time after expiration of the plant clearance period, as
defined in Section VIII, Armed Services Procurement Regula-
tion, 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 agreement covering them. Not later than
fifteen (15) days thereafter, the Government will accept title
to such items and remove them or enter into a storage agree-
ment 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 submission of the list, and any necessary
adjustment 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 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 to the Contractor by
reason of the total or partial termination of work pursuant to
this clause, which amount or amounts may include a reasonable
allowance for profit on work done; provided, that such agreed
amount or amounts, exclusive of settlement costs, shall not exceed
the total contract price as reduced by the amount of payments
otherwise made and as further reduced by the contract price of
work not terminated. The contract shall be amended accordingly,
and the Contractor shall be paid the agreed amount. Nothing in
paragraph (e) of this clause, prescribing the amount to be paid
to the Contractor in the event of failure of the Contractor and
the Contracting Officer to agree upon the whole amount to be
paid to the Contractor by reason of the termination of work pur-
suant to this clause, shall be deemed to limit, restrict, or other-
wise determine or affect the amount or amounts which may be
agreed upon to be paid to the Contractor pursuant to this para-
graph (d).
(e) In the event of the failure of the Contractor and the Con-
tracting Officer to agree as provided in paragraph (d) upon the
whole amount to be paid to the Contractor by reason of the ter-
mination of work pursuant to this clause, the Contracting Officer
shall pay to the Contractor the amounts determined by the Con-
tracting Officer, as follows, but without duplication of any amounts
agreed upon in accordance with paragraph (d):
(i) for completed supplies or services accepted by the
Government (or sold or acquired as provided in paragraph
(b) (vii) above) and not theretofore paid for, a sum equiva-
lent to the aggregate price for such supplies or services com-
puted in accordance with the price or prices specified in the
contract, appropriately adjusted for any saving of freight or
other charges:
(ii) the total of-
(A) the cost incurred in the performance of the work
terminated, including initial costs and preparatory expense
allocable thereto, but exclusive of any costs attributable to
supplies or services paid or to be paid for under paragraph
(e) (i) hereof;
(B) 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 (ex-
clusive of amounts paid or payable on account of supplies
or materials delivered or services furnished by sub-
contractors or vendors prior to the effective date of the
Notice of Termination, which amounts shall be included
in the costs payable under (A) above) ; and
(C) a sum, as profit on (A) above, determined by the
Contracting Officer pursuant to 8-303 of the Armed Serv-
ices Procurement Regulation, in effect as of the date of
execution of this contract, to be fair and reasonable; pro-
vided, however, that if it appears that the Contractor would
have sustained a loss on the entire contract had it been
completed, no profit shall be included or allowed under
this subdivision (C) and an appropriate adjustment shall
be made reducing the amount of the settlement to reflect
the indicated rate of loss; and
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(iii) the reasonable costs of settlement, including account-
ing, 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 subcontract thereunder,
together with reasonable storage, transportation, and other
costs incurred in connection with the protection or disposi-
tion of property allocable to this contract.
The total sum to be paid to the Contractor under (i) and (ii)
of this paragraph (e) shall not exceed the total contract price
as reduced by the amount of payments otherwise made and as
further reduced by the contract price of work not terminated.
Except for normal spoilage, and except to the extent that the
Government shall have otherwise expressly assumed the risk
of loss, there shall be excluded from the amounts payable to
the Contractor as provided in (e) (i) and (ii) (A) above, the
fair value, as determined by the Contracting Officer, of property
which is destroyed, lost, stolen, or damaged so as to become un-
deliverable to the Government, or to a buyer pursuant to para-
graph (b) (vii). ,
(f) Costs claimed, agreed to, or determined pursuant to (c),
(d) and (e) hereof shall be in accordance with Section XV of
the Armed Services Procurement Regulation as in effect on the
date of this contract.
(g) The Contractor shall have the right of appeal, under the
clause of this contract entitled "Disputes," from any determina-
tion made by the Contracting Officer under paragraph (c) or
(e) above, except that if the Contractor has failed to submit
his claim within the time provided in paragraph (c) above and
has failed to request extension of such time, he shall have no such
right of appeal. In any case where the Contracting Officer has
made a determination of the amount due under paragraph (c)
or (e) above, the Government shall pay to the Contractor the
following: (i) if there is no right of appeal hereunder or if no
timely appeal has been taken, the amount so determined by the
Contracting Officer, or (ii) if an appeal has been taken, the
amount finally determined on such appeal.
(h) In arriving at the amount due the Contractor under this
clause there shall be deducted (i) all unliquidated advance or
other payments on account theretofore made to the Contractor
applicable to the terminated portion of this contract, (ii) any
claim which the Government may have against the Contractor
in connection with this contract, and (iii) the agreed price for,
or the proceeds of sale of, any materials, supplies, or other things
acquired by the Contractor or sold, pursuant to the provisions of
this clause, and not otherwise recovered by or credited to the
Government.
(i) If the termination hereunder be partial, prior to the settle-
ment of the terminated portion of this contract, the Contractor
may file with the Contracting Officer a request in writing for
an equitable adjustment of the price or prices specified in the
contract relating to the continued portion of the contract (the
portion not terminated by the Notice of Termination), and such
equitable adjustment as may be agreed upon shall be made in
such price or prices.
(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 this contract when-
ever 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 agreed or determined 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 pur-
suant to Public Law 92-41; 85 STAT 97 for the Renegotiation
Board, for the period from the date such excess payment is re-
ceived 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 at-
tributable to a reduction in the Contractor's claim by reason
of retention or other disposition of termination inventory until
ten 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) Unless otherwise provided for in this contract, or by ap-
plicable statute, the Contractor shall-from the effective date
of termination until the expiration of three years after final settle-
ment under this contract-preserve and make available to the
Government at all reasonable times at the office of the Con-
tractor but without direct charge to the Government, all his books,
records, documents and other evidence bearing on the costs and
expenses of the Contractor under this contract and relating to
the work terminated hereunder, or, to the extent approved by
the Contracting Officer, photographs, microphotograph, or other
authentic reproductions thereof.
7-103.11 DEFAULT (1969 AUG.)
(a) The Government may, subject to the provisions of paragraph
(c) below, by written notice of default to the Contractor, termi-
nate the whole or any part of this contract in any one of the
following circumstances:
(i) if the Contractor fails to make delivery of the supplies
or to perform the services within the time specified herein or
any extension thereof; or
(ii) if the Contractor fails to perform any of the other pro-
visions of this contract, or so fails to make progress as to
endanger performance of this contract in accordance with its
terms, and in either of these two circumstances does not
cure such failure within a period of 10 days (or such longer
period as the Contracting Officer may authorize in writing)
after receipt of notice from the Contracting Officer specifying
such failure.
(b) In the event the Government terminates this contract in
whole or in part as provided in paragraph (a) of this clause, the
Government may procure, upon such terms and in such manner
as the Contracting Officer may deem appropriate, supplies or
services similar to those so terminated, and the Contractor shall
be liable to the Government for any excess costs for such similar
supplies or services; provided, that the Contractor shall continue
the performance of this contract to the extent not terminated under
the provisions of this clause.
(c) Except with respect to defaults of subcontractors, the Con-
tractor shall not be liable for any excess costs if the failure to
perform the contract arises out of causes beyond the control and
without the fault or negligence of the Contractor. 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 restric-
tions, 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 default of a subcontractor,
and if such default arises out of causes beyond the control of
both the Contractor and subcontractor, and without the fault
or negligence of either of them, the Contractor shall not he liable
for any excess costs for failure to perform, unless the supplies or
services to be furnished by the subcontractor were obtainable from
other sources in sufficient time to permit the Contractor to meet
the required delivery schedule.
(d) If this contract is terminated as provided in paragraph (a)
of this clause, the Government, in addition to any other rights
provided in this clause, may require the Contractor to transfer
title and deliver to the Government, in the manner and to the
extent directed by the Contracting Officer, (i) any completed
supplies, and (ii) such partially completed supplies and materials,
parts, tools, dies, jigs, fixtures, plans, drawings, information, and
contract rights (hereinafter called "manufacturing materials")
as the Contractor has specifically produced or specifically acquired
for the performance of such part of this contract as has been
terminated; and the Contractor shall, upon direction of the Con-
tracting Officer, protect and preserve property in the possession
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of the Contractor in which the Government has an interest. Pay-
ment for completed supplies delivered to and accepted by the
Government shall be at the contract price. Payment for manu-
facturing materials delivered to and accepted by the Government
and for the protection and preservation of property shall be in
an amount agreed upon by the Contractor and Contracting Officer;
failure to agree to such amount shall be a dispute concerning a
question of fact within the meaning of the clause of this contract
entitled "Disputes." The Government may withhold from amounts
otherwise due the Contractor for such completed supplies or manu-
facturing materials such sum as the Contracting Officer determines
to be necessary to protect the Government against loss because
of outstanding liens or claims of former lien holders.
(e) If, after notice of termination of this contract under the
provisions of this clause, it is determined for any reason that the
Contractor was not in default under the provisions of this clause,
or that the default was excusable under the provisions of this
clause, the rights and obligations of the parties shall, if the con-
tract contains a clause providing for termination for convenience
of the Government, be the same as if the notice of termination had
been issued pursuant to such clause. If, after notice of termination
of this contract under the provisions of this clause, it is determined
for any reason that the Contractor was not in default under the
provisions of this clause, and if this contract does not contain a
clause providing for termination for convenience of the Govern-
ment, the contract shall be equitably adjusted to compensate for
such termination and the contract modified accordingly; failure
to agree to any such adjustment shall be a dispute concerning a
question of facts within the meaning of the clause of this contract
entitled "Disputes."
(f) The rights and remedies of the Government provided in
this clause shall not be exclusive and are in addition to any other
rights and remedies provided by law or under this contract.
(g) As used in paragraph (c) of this clause, the terms "sub-
contractor" and "subcontractors" mean subcontractor (s) at any
tier.
7-103.22 AUTHORIZATION AND CONSENT (1964 MAR.)
The Government hereby gives its authorization and consent
(without prejudice to any rights of indemnification) for all use
and manufacture, in the performance of this contract or any part
hereof or any amendment hereto or any subcontractor hereunder
(including any lower-tier subcontract), of any invention described
in and covered by a patent of the United States (i) embodied in
the structure or composition of any article the delivery of which
is accepted by the Government under this contract, or (ii) utilized
in the machinery, tools, or methods the use of which necessarily
results from compliance by the Contractor or the using subcon-
tractor with (a) specifications or written provisions now or here-
after forming a part of this contract, or (b) specific written
instructions given by the Contracting Officer directing the manner
of performance. The entire liability to the Government for infringe-
ment of a patent of the United States shall be determined solely
by the provisions of the indemnity clauses, if any, included in this
contract or any subcontract hereunder (including any lower-tier
subcontract), and the Government assumes liability for all other
infringement to the extent of the authorization and consent here-
inabove granted.
7-104.5 PATENT INDEMNITY,(1964 SEP.)
If the amount of this contract is in excess of $5,000, the Con-
tractor shall indemnify the Government and its officers, agents, and
employees against liability, including costs, for infringement of any
United States letters patent (except letters patent issued upon an
application which is now or may hereafter be kept secret or other-
wise withheld from issue by order of the Government) arising out
of the manufacture or delivery of supplies or out of construction,
alteration, modification, or repair of real property (hereinafter
referred to as "construction work") under this contract, or out of
the use or disposal by or for the account of the Government of
such supplies or construction work. The foregoing indemnity shall
not apply unless the Contractor shall have been informed as soon
as practicable by the Government of the suit or action alleging
such infringement, and shall have been given such opportunity as
is afforded by applicable laws, rules, or regulations to participate
in the defense thereof; and further, such indemnity shall not
apply to: (i) an infringement resulting from compliance with
specific written instructions of the Contracting Officer directing
a change in the supplies to be delivered or in the materials or
equipment to be used, or directing a manner of performance of
the contract not normally used by the Contractor; (ii) an infringe-
ment resulting from addition to, or change in, such supplies or
components furnished or construction work performed which
addition or change was made subsequent to delivery or performance
by the Contractor; or (iii) a claimed infringement which is settled
without the consent of the Contractor, unless required by final
decree of a court of competent jurisdiction.
7-104.9(h) TECHNICAL DATA-WITHHOLDING OF PAY-
MENT (1973 APR.)
(a) If "Technical Data" (as defined in the clause of this con-
tract entitled "Rights in Technical Data"), or any part thereof,
specified to be delivered under this contract, is not delivered
within the time specified by this contract or is deficient upon
delivery (including having restrictive markings not specifically
authorized by this contract), the Contracting Officer may until
such data is accepted by the Government, withhold payment to
the Contractor of ten percent (10%) of the total contract price
or amount unless a lesser withholding limit is specified in the
Schedule. Payments shall not be withheld nor any 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 negli-
gence of the Contractor.
(b) After payments total ninety percent (90%) of the total
contract price or amount and if all technical data specified to
he delivered under this contract has not been accepted, the Con-
tracting Officer may, withhold from further payment such sum
as he considers appropriate, not exceeding ten percent (10%) of
the total contract price or amount unless a lesser withholding
limit is specified in the Schedule.
(c) The withholding of any amount or subsequent payment to
the Contractor shall not be construed as a waiver of any rights
accruing to the Government under this contract.
(a) Notwithstanding any other provisions of this contract,
except as may be specifically provided in the Schedule as an
exception to this clause, the Government, subject to the definitions
and limitations of this clause, assumes the risk of damage to, or
loss or destruction of, aircraft "in the open," during "Operation,"
and in "flight," as these terms are defined below, and agrees that
the Contractor shall not be liable to the Government for any such
damage, loss, or destruction, the risk of which is so assumed by
the Government.
(b) For the purposes of this clause:
(i) Unless otherwise specifically provided in the Schedule,
the term "aircraft" means-
(A) aircraft (including (I) complete aircraft, and (II)
aircraft in the course of being manufactured, disassembled,
or reassembled; provided, that an engine or a portion of a
wing or a wing is attached to a fuselage of such aircraft)
to be furnished to the Government under this contract
(whether before or after acceptance by the Government);
and
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(B) aircraft (regardless of whether in a state of dis-
assembly or reassembly) furnished by the Government to
the Contractor under this contract;
including all property installed therein, or in the process of
installation, or temporarily removed from such aircraft; pro-
vided, however, that such aircraft and property are not cov-
ered by a separate bailment agreement.
(ii) The term "in the open" means located wholly outside
of buildings on the Contractor's premises or at such other
places as may be described in the Schedule as being in the
open for the purposes of this clause, except that aircraft fur-
nished by the Government shall be deemed to be in the open
at all times while in Contractor's possession, care, custody, or
control.
(iii) 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 air-
craft, or previously approved in writing by the Contracting
Officer. With respect to land based aircraft "flight" shall
commence with the taxi roll from a flight line on the Con-
tractor's premises, and continue until the aircraft has com-
pleted the taxi roll in returning to a flight line on the Con-
tractor's premises; with respect to seaplanes, "flight" shall
commence with the launching from a ramp on the Contractor's
premises and continue until the aircraft has completed its
landing run upon return and is beached at a ramp on the
Contractor's premises; with respect to helicopters, "flight"
shall commence upon engagement of the rotors for the pur-
pose of take-off from the Contractor's premises and continue
until the aircraft has returned to the ground on the Con-
tractor's premises and the rotors are disengaged; and with
respect to vertical take-off aircraft, "flight" shall commence
upon disengagement from any launching platform or device
on the Contractor's premises and continue until the aircraft
has been re-engaged to any landing platform or device on
the Contractor's premises; provided, however, that aircraft off
the Contractor's premises shall be deemed to be in flight when
on the ground or water only during periods of reasonable
duration following emergency landing, other landings made
in the performance of this contract or landings approved by
the Contracting Officer in writing.
(iv) The term "Contractor's premises" means those prem-
ises designated as such in the Schedule or in writing by the
Contracting Officer and any other place to which aircraft
are moved for the purpose of safeguarding the Aircraft.
(v) The term "operation" means operations and tests, other
than on any production line, of aircraft, when not in flight,
whether or not the aircraft is in the open or in motion during
the making of any such operations or tests, and includes
operations and tests of equipment, accessories, and power
plants, only when installed in aircraft.
(vi) 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 defensive systems operator, when required, or assigned to
their respective crew positions, to conduct any flight on behalf
of the Contractor.
(c) (1) The Government's assumption of risk under this clause,
as to aircraft in the open, shall continue in effect unless termi-
nated pursuant to subparagraph (3) below. Where the Contracting
Officer finds that any of such aircraft is in the open under un-
reasonable conditions, he shall notify the Contractor in writing
of the conditions he finds to be unreasonable and require the
Contractor to correct such conditions within a reasonable time.
(2) Upon receipt of such notice, the Contractor shall act
promptly to correct such conditions, regardless of whether he
agrees that such conditions are in fact unreasonable. To the extent
that the Contracting Officer may later determine that such con-
ditions were not in fact unreasonable, an equitable adjustment
shall be made in the contract price to compensate the Contractor
for any additional costs he incurred in correcting such conditions
and the contract shall be modified in writing accordingly. Any
dispute as to the unreasonableness. of such conditions or the equi-
table adjustment shall be deemed to be a dispute concerning a
question of the fact within the meaning of the clause of this
contract entitled "Disputes."
(3) If the Contracting Officer finds that the Contractor has
failed to act promptly to correct such conditions or has failed to
correct such conditions within a reasonable time, he may terminate
the Government's assumption of risk under this clause, as to any
of the aircraft which is in the open under such conditions, such
termination to be effective at 12:01 A.M. on the fifteenth day
following the day of receipt by the Contractor of written notice
thereof. If the Contracting Officer later determines that the Con-
tractor acted promptly to correct such conditions or that the time
taken by the Contractor was not in fact unreasonable, an equitable
adjustment shall, notwithstanding paragraph (g) of this clause,
be made in the contract price to compensate the Contractor for
any additional costs he incurred as a result of termination of the
Government's assumption of risk under this clause and the contract
shall be modified in writing accordingly. Any dispute as to whether
the Contractor failed to act promptly to correct such conditions,
or as to the reasonableness of the time for correction of such
conditions, or as to such equitable adjustment, shall be deemed
to be a dispute concerning a question of fact within the meaning
of the clause of this contract entitled "Disputes."
(4) In the event the Government's assumption of risk under
this clause is terminated in accordance with (3) above, the risk
of loss with respect to Government-furnished property shall be
determined in accordance with the clause of this contract, if any,
entitled "Government Property" until the Government's assumption
of risk is reinstated in accordance with (5) below.
(5) When unreasonable conditions have been corrected, the
Contractor shall promptly notify the Government thereof. The
Government may elect to again assume the risks and relieve the
Contractor of liabilities as provided in this clause, or not, and the
Contracting Officer shall notify the Contractor of the Government's
election. If, after correction of the unreasonable conditions the
Government elects to again assume such risks and relieve the Con-
tractor of such liabilities, the Contractor shall be entitled to an
equitable adjustment in the contract price for costs of insurance,
if any, extending from the end of the third working day after the
Contractor notifies the Government of such correction until the
Government notifies the Contractor of such election. If the Gov-
ernment elects not to again assume such risks, and such con-
ditions have in fact been corrected, the Contractor shall be entitled
to an equitable adjustment for costs of insurance, if any, extending
after such third working day.
(d) The Government's assumption of risk shall not extend to
damage to, or loss or destruction of, such aircraft:
(i) resulting from failure of the Contractor, due to willful
misconduct or lack of good faith of any of the Contractor's
managerial personnel, to maintain and administer a program
for the protection and preservation of aircraft in the open, and
during operation, in accordance with sound industrial practice
(the term "Contractor's managerial personnel" means the
Contractor's directors, officers, and any of his managers, su-
perintendents, or other equivalent representatives, who has
supervision or direction of all or substantially all of the Con-
tractor's business, or all or substantially all of the Contractor's
operations at any one plant or separate location at which this
contract is performed, or a separate and complete major indus-
trial operation in connection with theperformance of this
contract);
(ii) sustained during flight if the flight crew members con-
ducting such flight have not been approved in writing by the
Contracting Officer;
(iii) while in the course of transportation by rail, or by
conveyance on public streets, highways, or waterways, except
for Government-furnished property;
(iv) to the extent that such damage, loss or destruction is
in fact covered by insurance;
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(v) consisting of wear and tear, deterioration (including
rust and corrosion), freezing, or mechanical, structural, or
electrical breakdown or failure, unless such damage is the
result of other loss, damage, or destruction covered by this
clause; provided, however, in the case of Government-fur-
nished property, if such damage consists of reasonable wear
and tear or deterioration, or results from intercnt vice in
such property, this exclusion shall not apply; or
(vi) sustained while the aircraft is being worked upon and
directly resulting therefrom, including but not limited to any
repairing, adjusting, servicing or maintenance operation, unless
such damage, loss, or destruction, is of a type which would be
covered by insurance which would customarily have been
maintained by the Contractor at the time of such damage,
loss, or destruction, but for the Government's assumption of
risk under this clause.
(e) With the exception of damage to, or loss or destruction of
aircraft in "flight," the Government's assumption of risk under this
clause shall not exceed to the first $1,000 of loss or damage resulting
from each event separately occurring. The Contractor assumes the
risk of and shall be responsible for the first $1,000 of loss of or
damage to aircraft "in the open" or during "operation" resulting
from each event separately occurring, except for reasonable wear
and tear and except to the extent the loss or damage is caused by
negligence of Government personnel. If the Government elects to
require that the aircraft be replaced or restored by the Contractor
to the condition in which it was immediately prior to the damage,
the equitable adjustment in the price authorized by paragraph (i)
below shall not include the dollar amount of the risk assumed by
the Contractor under this paragraph. In the event the Government
does not elect repair or replacement, the Contractor agrees to credit
the contract price or pay the Government $1,000 (or the amount
of the loss if smaller) as directed by the Contracting Officer.
(f) A subcontractor shall not be relieved from liability for
damage to, or loss or destruction of aircraft while in his possession
or control, except to the extent that the subcontract, with the prior
written approval of the Contracting Officer, provides for relief of
the subcontractor for such liability. In the absence of such ap-
proval, the subcontract shall contain appropriate provisions requir-
ing the return of such aircraft in as good condition as when re-
ceived, except for reasonable wear and tear or for the utilization
of the property in accordance with the provisions of this contract.
Where a subcontractor has not been relieved from liability for
any damage, loss, or destruction of aircraft and any damage, loss,
or destruction occurs, the Contractor shall enforce the liability of
the subcontractor for such damage to, or loss or destruction of, the
aircraft for the benefit of the Government.
(g) The Contractor warrants that the contract price does not
and will not include, except as may be otherwise authorized in
this clause, any charge or contingency reserve for insurance (in-
cluding self-insurance funds or reserves) covering any damage to,
or loss or destruction of, aircraft while in the open, during opera-
tions, or in flight, the risk of which has been assumed by the Gov-
ernment under the provisions of this clause, whether or not such
assumption may be terminated as to aircraft in the open.
(h) In the event of damage to, or loss or destruction of, aircraft
in the open, during operation, or in flight, the Contractor shall
take all reasonable steps to protect such aircraft from further
damage, separate damage and undamaged aircraft, put all aircraft
in the best possible order and, further, except in cases covered
by (e) above, the Contractor should furnish to the Contracting
Officer a statement of:
(i) the damaged, lost, or destroyed aircraft;
(ii) the time and origin of the damage, loss or destruction;
(iii) all know interests in commingled property of which
aircraft are a part; and
(iv) the insurance, if any, covering any part of the interest
in such commingled property.
Except in cases covered by (e) above, an equitable adjustment
shall be made in the amount due under this contract for expendi-
tures made by the Contractor in performing his obligations under
this paragraph (h) and this contract shall be modified in writing
accordingly.
(i) If prior to delivery and acceptance by the Government any
aircraft is damaged, lost, or destroyed and the Government has
under this clause assumed the risk of such damage, loss or destruc-
tion, the Government shall either (1) require that such aircraft
be replaced or restored by the Contractor to the condition in which
it was immediately prior to such damage, or (2) shall terminate
this contract with respect to such aircraft. In the event that the
Government requires that the aircraft be replaced or restored, an
equitable adjustment shall be made in the amount due under this
contract and in the time required for its performance, and this
contract shall be modified in writing accordingly. If, in the alterna-
tive, this contract is terminated under this paragraph with respect
to such aircraft and under this clause the Government has assumed
the risk of such damage, loss, or destruction, the Contractor shall
be paid the contract price for said aircraft (or, if applicable, any
work to be performed on said aircraft) less such amounts as the
Contracting Officer determines (1) that it would have cost the
Contractor to complete the aircraft (or any work to be performed
on said aircraft) together with anticipated profit, if any, on any
such uncompleted work, and (2) to be the value, if any, of the
damaged aircraft or any remaining portion thereof retained by the
Contractor. The Contracting Officer shall have the right to pre-
scribe the manner of disposition of the damaged, lost, or destroyed
aircraft, or any remaining parts thereof; and, if any additional
costs of such disposition are incurred by the Contractor, a further
equitable adjustment will be made in the amount due to the Con-
tractor. Failure of the parties to agree upon an equitable adjust-
ment or upon the amount to be paid in the event of termination
of the contract with respect to any aircraft, shall be a dispute
concerning a question of fact within the meaning of the Disputes
clause of this contract.
(j) In the event the Contractor is at any time reimbursed or
compensated by any third person for any damage, loss, or destruc-
tion of any aircraft, the risk of which has been assumed by the
Government under the provisions of this clause and for which
the Contractor has been compensated by the Government, he shall
equitably reimburse the Government. The Contractor shall do
nothing to prejudice the Government's rights to recover against
third parties for any such damage, loss, or destruction and, upon
the request of the Contracting Officer, shall at the Government's
expense furnish to the Government all reasonable assistance and co-
operation (including the prosecution of suit and the execution of
instruments of assignment or subrogation in favor of the Gov-
ernment) in obtaining recovery.
7-103.10(a) FEDERAL, STATE, AND LOCAL TAXES (1971
NOV.)
(a) Except as may be otherwise provided in this contract, the
contract price includes all applicable Federal, State, and local
taxes and duties.
(b) Nevertheless, with respect to any Federal excise tax or
duty on the transactions or property covered by this contract, if
a statute, court decision, written ruling, or regulation takes effect
after the contract date, and-
(1) results in the Contractor being required to pay or bear
the burden of any such Federal excise tax or duty or increase in
the rate thereof which would not otherwise have been payable
on such transactions or property, the contract price shall be in-
creased by the amount of such tax or duty or rate increase, pro-
vided the Contractor warrants in writing that no amount for such
newly imposed Federal excise tax or duty or rate increase was
included in the contract price as a contingency reserve or other-
wise; or
(2) results in the Contractor not being required to pay or
bear the burden of, or in his obtaining a refund or drawback
of, any such Federal excise tax or duty which would otherwise
have been payable on such transactions or property or which was
the basis of an increase in the contract price, the contract price
shall be decreased by the amount of the relief, refund, or draw-
back, or that amount shall be paid to the Government, as directed
by the Contracting Officer. The contract price shall be similarly
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decreased if the Contractor, through his fault or negligence or
his failure to follow instructions of the Contracting Officer, is
required to pay or bear the burden of, or does not obtain a refund
or drawback of, any such Federal excise tax or duty.
(c) Paragraph (b) above shall not be applicable to social
security taxes or to any other employment tax.
(d) No adjustment of less than $100 shall be made in the
contract price pursuant to paragraph (b) above.
(e) As used in paragraph (b) above, the term "contract date"
means the date set for bid opening, or if this is a negotiated
contract, the contract date. As to additional supplies or services
procured by modification to this contract, the term "contract
date" mean the date of such modification.
(f) Unless there does not exist any reasonable basis to sustain
an exemption, the Government upon the request of the Contractor
shall, without further liability, furnish evidence appropriate to
establish exemption from any Federal, State, or local tax; pro-
vided that, evidence appropriate to establish exemption from any
Federal excise tax or duty which may give rise to either an in-
crease or decrease in the contract price will be furnished only at
the discretion of the Government.
(g) The Contractor shall promptly notify the Contracting Of-
ficer of matters which will result in either an increase or decrease
in the contract price and shall take action with respect thereto
as directed by the Contracting Officer.
7-104.24 GOVERNMENT PROPERTY (FIXED PRICE) (1968
SEP.)
(a) Government Property Clause. Except as provided in (b)
through (d) below, insert the following clause when the Govern-
ment is to furnish the contractor, or the contractor is to acquire
Government property.
GOVERNMENT PROPERTY (FIXED PRICE) (1968 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 property in the Schedule or specifications, together
with such related data and information as the Contractor may
request and as may reasonably be required for the intended use
of such property (hereinafter referred to as "Government-furnished
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 (except for such property furnished "as is") will
be delivered to the Contractor at the times stated in the Schedule
or, if not so stated, in sufficient time to enable the Contractor to
meet such delivery or performance dates. In the event that Gov-
ernment-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 thereby, and shall
equitably adjust the delivery or performance dates or the contract
price, or both, and any other contractual provision affected by
any such delay, in accordance with the procedures provided for
in the clause of this contract entitled "Changes." Except for
Government-furnished property furnished "as is," in the event the
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 modifications. Upon the com-
pletion of (i) or (ii) above, the Contracting Officer upon written
request of the Contractor shall equitably adjust the delivery or
performance dates or the contract price, or both, and any other
contractual provision affected by the rejection 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) de-
crease the property provided or to be provided by the Govern-
ment under this contract, or (ii) substitute other Government-
owned property for property to be provided by the Government,
or to be acquired by the Contractor for the Government, under
this contract. The Contractor shall promptly take such action as
the Contracting Officer may direct with respect to the removal
and shipping of property covered by such notice.
(2) In the event of any decrease in or substitution of prop-
erty pursuant to subparagraph (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 available for the performance of this contract, the Con-
tracting Officer, upon the written request of the Contractor (or, if
the substitution of property causes a decrease in the cost of per-
formance, on his own initiative), shall equitably adjust such
contractual provisions as may be affected by the decrease, sub-
stitution, or withdrawal, in accordance with the procedures pro-
vided for in the "Changes" clause of this contract.
(c) Title. Title to all property furnished by the Government
shall remain in the Government. In order to define the obligations
of the parties under this clause, title to each item of facilities,
special test equipment, and special tooling (other than that sub-
ject to a "Special Tooling" clause) acquired by the Contractor
for the Government pursuant to this contract shall pass to and
vest in the Government when its use in the performance of this
contract commences, or upon payment therefor by the Govern-
ment, whichever is earlier, whether or not title previously vested.
All Government-furnished property, together with all property
acquired by the Contractor title to which vests in the Government
under this pragraph, is subject to the provisions of this clause
and is hereinafter collectively referred to as "Government prop-
erty." Title to Government property shall not be affected by the
incorporation or attachment thereof to any property not owned by
the Government, nor shall such Government property, or any part
thereof, be or become a fixture or lose its identity as personalty
by reason of affixation to any realty.
(d) Property Administration, The Contractor shall comply with
the provisions of Appendix B, Armed Services Procurement Regu-
lation, as in effect on the date of the contract, which is hereby
incorporated by reference and made a part of this contract.
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 H,
Armed Services Procurement Regulation) as in effect on the date
of this contract, which Manual is hereby incorporated by reference
and made a part of this contract.
(e) Use of Government Property. The Government property
shall, unless otherwise provided herein or approved by the Con-
tracting Officer, be used only for the performance of this contract.
(f) Utilization, Maintenance and Repair of Government Prop-
erty. The Contractor shall maintain and administer, in accordance
with sound industrial practice, and in accordance with applicable
provisions of Appendix B, a program for the utilization, mainte-
nance, repair, protection, and preservation of Government property
until disposed of by the Contractor in accordance with this clause.
In the event that any damage occurs to Government property the
risk of which has been assumed by the Government under this
contract, the Government shall replace such items or the Con-
tractor shall make such repair of the property as the Government
directs; provided, however, that if the Contractor cannot effect
such repair within the time required, the Contractor shall dispose
of such property in the manner directed by the Contracting Of-
ficer. The contract price includes no compensation to the Con-
tractor for the performance of any repair or replacement for which
the Government is responsible, and an equitable adjustment will
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be made in any contractual provisions affected by such repair or
replacement of Government property made at the direction of the
Government, in accordance with the procedures provided for in
the "Changes" clause of this contract. Any repair or replacement
for which the Contractor is responsible under the provisions of
this contract shall be accomplished by the Contractor at his own
expense.
(g) Risk of Loss. Unless otherwise provided in this contract,
the Contractor assumes the risk of, and shall be responsible for,
any loss of or damage to Government property provided under
this contract upon its delivery to him or upon passage of title
thereto to the Government as provided in paragraph (c) hereof,
except for reasonable wear and tear and except to the extent that
such property is consumed in the performance of this contract.
(h) Access. The Government, and any persons designated by
it, shall at all reasonable times have access to the premises wherein
any Government property is located, for the purpose of inspecting
the Government property.
(i) Final Accounting and Disposition of Government Property.
Upon the completion of this contract, or at such earlier dates as
may be fixed by the Contracting Officer, the Contractor shall
submit, in a form acceptable to the Contracting Officer, inventory
schedules covering all items of Government property not con-
sumed in the performance of this contract (including any result-
ing scrap) or not theretofore delivered to the Government, and
shall prepare for shipment, delivery f.o.b. origin, or dispose of the
Government property, as may be directed or authorized by the
Contracting Officer. The net proceeds of any such disposal shall
be credited to the contract price or shall be paid in such other
manner as the Contracting Officer may direct.
(j) Restoration of Contractor's Premises and Abandonment.
Unless otherwise provided herein, the Government:
(i) may abandon any Government property in place, and
thereupon all obligations of the Government regarding such
abandoned property shall cease; and
(ii) has no obligation to the Contractor with regard to
restoration or rehabilitation of the Contractor's premises,
neither in case of abandonment (paragraph (j) (i) above),
disposition on completion of need or of the contract (para-
graph (i) above), nor otherwise, except for restoration or
rehabilitation costs which are properly included in an equita-
able adjustment under 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).
(b) Overseas Contracts. If the contract is an overseas contract,
insert the words "United States" before the words "Government"
and "Government-furnished" wherever they appear in the above
clause. Also, substitute the following paragraphs (d) and (k)
for paragraphs (d) and (k) of the above clause.
(d) Property Administration. The Contractor shall comply
with the provisions of Appendix B, Armed Services Procure-
ment Regulation, as in effect on the date of the contract, which
is hereby incorporated by reference and made a part of this
contract.
(k) Communications. All communications issued pursuant to
this clause shall be in writing.
(c) Negotiated Contracts. In negotiated fixed price contracts
for which the price is not based on (i) adequate price competition,
(ii) established catalog or market prices of commercial items sold
in substantial quantities to the general public (see 3-807.1(b) ),
or (iii) prices set by law or regulation, substitute the following
paragraph (g) for paragraph (g) of the clause in (a) above.
(g) Risk of Loss.
(1) Except as provided in (2) below, the Contractor shall
not be liable for loss or destruction of or damage to the Govern-
ment property provided under this contract:
(i) caused by any peril while the property is in transit off
the Contractor's premises; or
(ii) caused by any of the following perils while the prop-
erty is on the Contractor's or subcontractor's premises, or on
any other premises where such property may properly be
located, or by removal therefrom because of any of the
following perils-
(A) fire; lightning, windstorm, cyclone, tornado, hail;
explosion; riot, riot attending a strike, civil commotion;
vandalism and malicious mischief; sabotage; aircraft or
objects falling therefrom; vehicles running on land or
tracks; excluding vehicles owned or operated by the
Contractor or any agent or employee of the Contractor;
smoke; sprinkler leakage; earthquake or volcanic eruption;
flood, meaning thereby rising of a body of water; nuclear
reaction, nuclear radiation or radioactive contamination;
hostile or warlike action, including action in hindering,
combating, or defending against an actual, impending or
expected attack by any government or sovereign power
(de jure or de facto), or by any authority using military,
naval, or air forces; or by an agent of any such govern-
ment, power, authority, or forces; or
(B) other peril, of a type not listed above, if such
other peril is customarily covered by insurance (or by a
reserve for self-insurance) in accordance with the normal
practice of the Contractor, or the prevailing practice in
the industry in which the Contractor is engaged with
respect to similar property in the same general locale.
The perils as set forth in (i) and (ii) above are hereinafter
called "excepted perils."
If the Contractor transfers Government property to the posses-
sion 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 Contracting Officer,
provides for the relief of the subcontractor from such liability. In
the absence of such approval, the subcontract shall contain appro-
priate 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) Notwithstanding (1) above, the Contractor shall be
responsible for any loss or damage (i) to the extent specifically
provided in the clause or clauses of this contract designated in
the schedule, or (ii) which results from:
(A) willful misconduct or lack of good faith of any of
the Contractor's managerial personnel; or
(B) a failure on the part of the Contractor, due to
willful misconduct or lack of good faith of the Contractor's
managerial personnel, (i) to maintain and administer the
program for maintenance, repair, protection, and preserva-
vation of the Government property as required by para-
graph (f) hereof, or (ii) to establish, maintain and ad-
minister a system for control of Government property as
required by paragraph (d) of this clause.
Any failure of the Contractor to act, as provided in this (B),
shall be conclusively presumed to be a failure resulting from
willful misconduct, or lack of good faith on the part of one
of the Contractor's managerial personnel if the Contractor
is notified by the Contracting Officer by registered or certi-
fied mail addressed to one of the Contractor's managerial
personnel, 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 of
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.
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The term "Contractor's managerial personnel" as used herein
means the Contractor's directors, officers, and any of his man-
agers, superintendents, or other equivalent representatives who
have supersvision or director of:
(i) all or substantially all of the Contractor's business;
(ii) all or substantially all of the Contractor's operation at
any one plant or separate location at which the contract is
being performed; or
(iii) a separate and complete major industrial operation in
connection with the performance of this contract.
(3) The Contractor represents that he is not including in the
price hereunder, and agrees that he will not hereafter include in
any price to the Government, any charge or reserve for insurance
(including any self-insurance funds or reserve) covering loss or
destruction of or damage to the Government property caused by
any excepted peril.
(4) Upon the happening of loss or destruction of or damage
to any Government property caused by an excepted peril, the
Contractor shall notify the Contracting 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 directed that no such organi-
zation 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 Government
property in the best possible order, and furnished to the Contracting
Officer a statement of:
(i) the lost, destroyed, and damaged Government property;
(ii) the item 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 be entitled to an equitable adjustment in the
contract price for the expenditures made by him in performing
his obligation under this subparagraph (4) (including charges
made to the Contractor by the Loss and Salvage Organization,
expect any of such charges the payment of which the Government
has, at its option, assumed directly), in accordance with the
procedures provided for in the "Changes" clause of this contract.
(5) With the approval of the Contracting Officer after loss
or destruction of or damage to Government property, and subject
to such conditions and limitations as may be imposed by the Con-
tracting Officer, the Contractor may, in order to minimize the loss
to the Government or in order to permit resumption of business or
the like, sell for the account of the Government any item of Gov-
ernment property which has been damaged beyond practicable
repair, or which is so commingled or combined with property of
others, including the Contractor, that seperation is impracticable.
(6) Except to the extent of any loss or destruction of or
damage to Government property for which the Contractor is re-
lieved of liability under the foregoing provisions of this clause,
and except for reasonable wear and tear or depreciation, or the
utilization of the Government property in accordance with the pro-
visions of this contract, the Contractor assumes the risk of, and
shall be responsible for, any loss or destruction of or damage to
the Government property, and such property (other than that
which is permitted to be sold) shall be returned to the Govern-
ment in as good condition as when received by the Contractor in
connection with this contract, or as repaired under paragraph (f)
above.
(7) In the event the Contractor is reimbursed or compen-
sated for any loss or destruction of or damage to the Government
property, caused by an excepted peril, he shall equitably reimburse
the Government. The Contractor shall do nothing to prejudice the
Government's rights to recover against third parties for any such
loss, destruction or damage and, upon request of the Contracting
Officer, shall at the Government's expense, furnish to the Gov-
ernment 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 a subcontractor has not been relieved from liability for any
loss or destruction of or damage to the 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.
*(8) 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 "Ground and
Flight Risk" clause of this contract shall control, to the extent
it is applicable, in the case of loss or destruction of, or damage to,
aircraft.
(d) Fixed-Price With Reimbursement Provision. If the supply
or services contract sets out a fixed-price for a portion of the
contract but also provides for reimbursement of costs of certain
materials, include the clause from (a) above, but substitute the
following paragraph (c) for paragraph (c) of the clause.
(c) Title. Title to all property furnished by the Government
shall remain in the Government, In order to define the obliga-
tions of the parties under this clause, title to each item of fa-
cilities, special test equipment, and special tooling (other than
that subject to a "Special Tooling" clause) acquired by the
Contractor for the Government pursuant to this contract shall
pass to and vest in the Government when its use in the per-
formance of this contract commences, or upon payment therefor
by the Government, whichever is earlier, whether or not title
previously vested. Title to all material purchased by the Con-
tractor, 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
material by the vendor. Title to other material, the cost of
which is reimbursable to the Contractor under this contract,
shall pass to and vest in the Government upon (i) issuance
for use of such material in the performance of this contract, or
(ii) commencement of processing or use of such material in the
performance of this contract, or (iii) reimbursement of the
cost thereof by the Government, whichever occurs first. All Gov-
ernment-furnished property, together with all property acquired
by the Contractor title to which vests in the Government under
this paragraph, is subject to the provisions of this clause and is
hereinafter collectively referred to as "Government property."
Title to Government property shall not be affected by the in-
corporation or attachment thereof to any property not owned by
the Government, nor shall such Government property, or any
part thereof, be or become a fixture or lose its identity as per-
sonalty by reason of affixation to any realty.
7-104.25 SPECIAL TOOLING (1967 OCT.)
(a) Definition.
(1) The term "special tooling" means all jigs, dies, fixtures,
molds, patterns, taps, gauges, other equipment and manufacturing
aids, and replacements thereof, which are of such a specialized
nature that, without substantial modification or alteration, their
use is limited to the development or production of particular sup-
plies or parts thereof, or the performance of particular services. The
term includes all components of such items, but does not include:
(i) consumable property;
(ii) special test equipment; or
(iii) buildings, nonseverable structures (except foundations
and similar improvements necessary for the installation of
special tooling), general or special machine tools, or similar
capital items.
(2) For the purposes of this clause, the term "special tooling"
does not include:
(i) items acquired by the Contractor prior to the effective
date of this contract, or replacements of such items, whether
or not altered or adapted for use in the performance of this
contract; or
(ii) items specifically excluded by the Schedule.
*This subparagraph may be omitted where it is clearly in-
applicable and shall be deleted when the Ground and Flight Risk
clause is omitted pursuant to 10-404 (b) (2).
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(b) Use of Special Tooling. The Contractor agrees not to use
any items of special tooling except in the performance of this con-
tract, or as approved by the Contracting Officer.
(c) List of Special Tooling. Within sixty (60) days after de-
livery of the first production end items under this contract, or such
later date as may be prescribed by the Contracting Officer, the
Contractor shall if the Contracting Officer so requests, furnish
the Contracting Officer a list of all special tooling acquired or
manufactured by the Contractor for use in the performance of this
contract. The list shall specify the nomenclature, tool number and
related product part number or service, and unit or group cost of
the special tooling. Upon completion or termination of all or a
substantial part of the work under this contract the Contractor
shall furnish a final list in the same form covering all items not
previously reported under this paragraph; provided, however, that
the Contracting Officer may by written notice waive this require-
ment or extend it until the completion of this contract and other
contracts and subcontracts as to which approval has been obtained
under paragraph (b) above. Special tooling which has become
obsolete as a result of changes in design or specification need not
be reported, except as provided for in paragraph (d).
(d) Changes in Design. In the event of any changes in design
or specifications which affect interchangeability of parts, the Con-
tractor shall, unless otherwise agreed to by the Contracting Officer,
give the Contracting Officer notice of any part which is not inter-
changeable with the new or superseding part and the usable special
tooling for each part covered in such notice shall be retained by
the Contractor subject to the provisions of paragraph (i), pending
disposition under paragraph (f).
(e) Contractor's Offer to Retain Special Tooling. At the time he
furnishes any list or notice under (c) or (d) above, the Contractor
may designate those items of special tooling (either specifically or
by listing the particular products, parts, or services for which such
items were used or designed) which he desires to retain, together
with a written offer:
(i) to retain any or all of such items, free and clear of any
Government interest, for an amount designated therein, which
should ordinarily not be less than the then fair value of such
items which fair value takes into account, among other things,
the value of such items to the Contractor for use in further
work by him; or
(ii) to retain any or all such items for such period of time
and subject to such terms and conditions as may be agreed to
by the parties hereto, subject to ultimate retention or disposi-
tion of such items in accordance with paragraph (f) hereof.
(f) Disposition of Special Tooling. Within ninety (90) days
after receipt of any lists or notice under paragraph (c) or (d)
hereof, or such further period as may be agreed upon by the
parties, the Contracting Officer shall furnish to the Contractor:
(i) a list specifying the particular products, parts or serv-
ices for which the Government may require special tooling
together with a request that the Contractor transfer title (to
the extent not previously transferred tinder any other clause
of this contract) and deliver to the Government all usable
items of special tooling which were used or designed for the
manufacture or performance of any designated portion of such
products, parts, or services, and which were on hand when
production of such products or parts, or performance of such
services, ceased;
(ii) an acceptance or rejection of any offer made by the
Contractor under paragraph (e) above, or a request for
further negotiation with respect thereto;
(iii) a direction to the Contractor to sell, or to dispose of
as scrap, for the account of the Government, any or all of
the special tooling covered by such list;
(iv) a statement with respect to any or all of the special
tooling covered by such list that the Government has no fur-
ther interest therein and waives its rights therein; or
(v) any combination of the foregoing, as the circumstances
warrant.
The Contractor shall promptly comply with any request by the
Contracting Officer under this paragraph to transfer title to any
items of special tooling, and shall: (1) immediately prepare such
items for shipment by proper packaging, packing, and marking, in
accordance with any instruction which may be issued by the Con-
tracting Officer, and shall promptly deliver such items to the Gov-
ernment as directed by the Contracting Officer; or (2) if a storage
agreement has been entered into, prepare such items for storage in
accordance therewith, as directed by the Contracting Officer. To
the extent that compliance with such directions under (iii), (1)
or (2) above occasions any cost to the Contractor for which he
will not otherwise be compensated, the contract price shall be
equitably adjusted in accordance with the procedures of the
"Changes" clause hereof. Any items of special tooling so delivered
or stored shall be accompanied by such operation sheets or other
appropriate data as are necessary to show the manufacturing op-
erations or processes for which such items were used or designed.
If the Contracting Officer has requested further negotiations under
(ii) of this paragraph, the Contractor agrees that he will enter into
such negotiations in good faith with the Contracting Officer. Any
items of special tooling which are not disposed of by transfer of
title and delivery to the Government, or by acceptance of an offer
of the Contractor made under paragraph (c), or of such offer as
modified in the course of negotiations, shall be disposed of in the
manner set forth in (iii) or (iv) of this paragraph. Any failure
of the Contracting Officer to give the directions required under
(1)- (v) above within the specified period shall be construed as
a direction pursuant to (iii) above.
(g) Proceeds of Retention or Disposition of Special Tooling. If
the Contracting Officer accepts an offer of the Contractor to retain
any items of special tooling, or if any such items are sold to third
parties or disposed of as scrap, the net proceeds shall: (i) be
deducted from the amounts due to the Contractor under this con-
tract and the contract amended accordingly; or (ii) be otherwise
paid as the Contracting Officer may direct.
(h) Property Control. The Contractor agrees that he will follow
his normal industrial practice in maintaining property control
records on all the special tooling, and that he will make such
records available for inspection by the Government at all season-
able times. The Contractor further agrees that, to the extent prac-
ticable, he will identify by appropriate stamp, tag or other mark
all special tooling subject to this clause.
(i) Maintenance Pending Disposition. The Contractor agrees
that between the date any usable items of special tooling are no
longer needed by him, within the meaning of this clause, and the
date of final disposition of such items under this clause, he will
take all reasonable steps necessary to maintain the identity and
existing conditions of such items, unless the Contracting Officer
has directed that such items be disposed of as scrap or has given
notice under (f) (iv) . The Contractor shall not be required to
keep any such items in place.
(j) Special Tooling Provisions for Subcontracts. The Contractor
agrees that, in placing any subcontracts or purchase orders under
this contract which involve the use of special tooling, the full cost
of which is charged to such subcontract or purchase order, he will
include therein appropriate provisions to obtain rights comparable
to those granted to the Government by this clause, unless the Con-
tracting Officer determines, upon the Contractor's request, that,
with respect to any subcontract, purchase order, or class thereof,
such rights are not of substantial interest to the Government. The
Contractor further agrees that he will exercise any such rights for
the benefit of the Government, as the Contracting Officer may
direct.
7-104.23 SUBCONTRACTS (1972 APR.)
(The provisions of this clause do not apply to firm fixed-price
and fixed price with escalation contracts. However, the clause
does apply to unpriced modifications under such contracts.)
(a) As used in this clause, the term "subcontract" includes
purchase orders.
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(b) The Contractor shall notify the Contracting Officer reason-
ably in advance of entering into any subcontract if the Contractor's
procurement system has not been approved by the Contracting
Officer and if the subcontract:
(i) is to be a cost-reimbursement, time and materials, or
labor-hour contract which it is estimated will involve an
amount in excess of ten thousand dollars ($10,000) including
any fee;
(ii) is proposed to exceed one hundred thousand dollars
($100,000); or
(iii) is one of a number of subcontracts, under this con-
tract, with a single subcontractor for the same or related
supplies or services which, in the aggregate, are expected to
exceed one hundred thousand dollars ($100,000).
(c) The advance notification required by paragraph (b) above
shall include:
(i) a description of the supplies or services to be called for
by the subcontract;
(ii) identification of the proposed subcontractor and an
explanation of why and how the proposed subcontractor was
selected, including the competition obtained;
(iii) the proposed subcontract price, together with the
Contractor's cost or price analysis thereof;
(iv) the subcontractor's current, complete, and accurate
cost or pricing data and Certificate of Current Cost or Pricing
Data, when such data and certificates are required by other
provisions of this contract to be obtained from the subcon-
tractor;
(v) identification of the type of subcontract to be used;
(vi) a memorandum of negotiation which sets forth the
principal elements of the subcontract price negotiations. A
copy of this memorandum shall be retained in the Contractor's
file for the use of Government reviewing authorities. The
memorandum shall be in sufficient detail to reflect the most
significant considerations controlling the establishment of
initial or revised prices. The memorandum should include an
explanation of why cost or pricing data was, or was not
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, established catalog or
market prices of commercial items sold in substantial quanti-
ties to the general public, or prices set by law or regulation.
If cost or pricing data was submitted and a certificate of
cost or pricing data was required, the memorandum shall
reflect the extent to which reliance was not placed upon the
factual cost or pricing data submitted and the extent to
which this data was not used by the Contractor in determining
the total price objective and in negotiating the final price.
The memorandum shall also reflect the extent to which it
was recognized in the negotiation that any cost or pricing data
submitted by the subcontractor was not accurate, complete,
or current; the action taken by the Contractor and the sub-
contractor 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
(vii) when incentives are used, the memorandum of nego-
tiation shall contain an explanation of the incentive fee/profit
plan identifying each critical performance element, manage-
ment decisions used to qualify each incentive element, reasons
for incentives on particular performance characteristics, and
a brief summary of trade-off possibilities considered as to cost,
performance, and time.
(d) The Contractor shall not enter into any subcontract for
which advance notification to the Contracting Officer is required
by this clause, without the prior written consent of the Contracting
Officer; provided that the Contracting Officer, in his discretion,
may ratify in writing any subcontract. Such ratification shall con-
stitute the consent of the Contracting Officer required by this
paragraph.
(e) Neither consent by the Contracting Officer to any sub-
contract or any provisions thereof nor approval of the Contractor's
procurement system shall be construed to be a determination of
the acceptability of any subcontract price or of any amount paid
under any subcontract or to relieve the Contractor of any respon-
sibility for performing this contract, unless such approval or con-
sent specifically provides otherwise.
(f) The Contractor agrees that no subcontract placed under
this contract shall provide for payment on a cost-plus-a-percentage-
of-cost basis.
7-103.4 VARIATION IN QUANTITY (1949 JUL.)
No variation in the quantity of any item called for by this
contract will be accepted unless such variation has been caused by
conditions of loading, shipping, or packing, or allowances in
manufacturing processes, and then only to the extent, if any,
specified elsewhere in this contract and/or as approved by the
Contracting Officer.
7-105.3 STOP WORK ORDER (1971 APR.)
(a) The Contracting Officer may, at any time, by written order
to the Contractor, require the Contractor to stop all, or any part,
of the work called for by this contract for a period of ninety (90) *
days after the order is delivered to the Contractor, and for any
further period to which the parties may agree. Any such order
shall be specifically identified as a Stop Work Order issued
pursuant to this clause. Upon receipt of such an order, the Con-
tractor shall forthwith comply with its terms and take all reason-
able 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 "Default" or the "Termination for Convenience" 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 or contract price, or both, and the
contract shall be modified in writing accordingly, if-
(i) the stop work order results in an increase in the time
required for, or in the Contractor's cost properly allocable to,
the performance of any part of this contract, and
(ii) the Contractor asserts a claim for such adjustment
within thirty (30) days after the end of the period of work
stoppage; provided that, if the Contracting Officer decides
the facts justify such action, he may receive and act upon any
such claim asserted at any time prior to final payment under
this contract.
(c) If a stop work order is not canceled and the work covered
by such order is terminated for the convenience of the Govern-
ment, 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 result-
ing from the stop work order shall be allowed by equitable adjust-
ment or otherwise.
7-103.26 PRICING OF ADJUSTMENTS (1970 JUL.)
When costs are a factor in any determination of a contract price
adjustment pursuant to the "Changes" clause or any other provision
of this contract, such costs shall be in accordance with Section XV
of the Armed Services Procurement Regulation as in effect on the
date of this contract.
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7-104.77 GOVERNMENT DELAY OF WORK (1968 SEP.)
(a) If the performance of all or any part of the work is delayed
or interrupted by an act of the Contracting Officer in the admin-
istration of this contract, which act is not expressly or impliedly
authorized by this contract, or by his failure to act within the time
specified in this contract (or within a reasonable time if no time
is specified), and adjustment (excluding profit) shall be made for
any increase in the cost of performance of this contract caused
by such delay or interruption and the contract modified in writing
accordingly. Adjustment shall be made also in the delivery or
performance dates and any other contractural provision affected
by such delay or interruption. However, no adjustment shall be
made under this clause for any delay or interruption (i) to the
extent that performance would have been delayed or interrupted
by any other cause, including the fault or negligence of the
Contractor; or (ii) for which an adjustment is provided or ex-
cluded under any other provision of this contract.
(b) No claim under this clause shall be allowed (i) for any
costs incurred more than twenty (20) days before the Contractor
shall have notified the Contracting Officer in writing of the act
or failure to act involved; and (ii) unless the claim, in an amount
stated, is asserted in writing as soon as practicable after the
termination of such delay or interruption, but not later than the
date of final payment under the contract.
7-103.14 DISCOUNTS (1968 JUN.)
In connection with any discount offered, time will be com-
puted from date of delivery of the supplies to carrier when ac-
ceptance is at the point of origin, or from date of delivery at
destination or port of embarkation when delivery and acceptance
are at either of these points, or from the date the correct invoice
or voucher is received in the office specified by the Government,
if the latter is later than date of delivery. Payment is deemed to
be made for the purpose of earning the discount on the date of
mailing of the Government check.
7-104.62 MATERIAL INSPECTION AND RECEIVING RE-
PORT (1969 DEC.)
At the time of each delivery of supplies or services under this
contract, the Contractor shall prepare and furnish to the Gov-
ernment a Material Inspection and Receiving Report in the
manner and to the extent required by ASPR Appendix I, "Ma-
terial Inspection and Receiving Report."
ARTICLE 28
7-105.1 ALTERATIONS IN CONTRACT (1949 JUL.)
The following alterations have been made in the provision of
this contract,
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