price escalation, or (iii) price redetermination. The contract shall provide that during the contract period the Government shall order a stated minimum quantity of the property or services and that the contractor shall furnish such stated minimum and, if and as ordered, any additional quantities not exceeding a stated maximum which should be as realistic as possible. The maximum may be obtained from the records of previous requirements and consumption, or by other means. When large individual orders or orders from more than one activity are anticipated, the contract may specify the maximum quantities which may be ordered under each individual order or during a specified period of time. Similarly, when small orders are anticipated, the contract may specify the minimum quantities to be ordered.

(2) Application. An indefinite quantity contract may be used where it is impossible to determine in advance the precise quantities of the property or services that will be needed by designated activities during a definite period of time and it is not advisable for the Government to commit itself for more than a minimum quantity. Advantages of this type of contract are:

(i) Flexibility with respect to both quantities and delivery scheduling;

(ii) Property or services need be ordered only after actual needs have materialized;

(iii) The obligation of the Government is limited; and

(iv) It permits stocks to be maintained at minimum levels and allows direct shipment to the user.

The indefinite quantity contract should be used only when the item or service is commercial or modified commercial in type and when a recurring need is anticipated. § 1-3.410

Other types of agreements. § 1-3.410-1 Basic agreement.

(a) Description. A basic agreement is a written instrument of understanding executed between a procuring agency and a contractor which sets forth the negotiated contract clauses which shall be applicable to future procurements entered into between the parties during the term of the basic agreement. The use of the basic agreement contemplates the coverage of a particular procurement by the execution of a formal contractual document which will provide

for the scope of the work, price, delivery, and additional matters peculiar to the requirement of the specific procurement involved, and shall incorporate by reference or append the contract clauses agreed upon in the basic agreement, as required or applicable.

(b) Application. (1) Basic agreements are appropriate for use when (i) past experience and future plans indicate that a substantial number of separate contracts may be entered into with a contractor during the term of the basic agreement, and (ii) substantial recurring negotiating problems exist with a particular contractor.

(2) A basic agreement shall be amended only by an amendment of the basic agreement itself and shall not be modified or superseded by individual contracts or purchase orders entered into under and subject to the terms of such basic agreement. As a minimum, basic agreements will be reviewed annually on the anniversary of their effective date and revised at that time to conform with the current requirements of this chapter. Amendments shall not have retroactive effect.

(3) Basic agreements shall provide for discontinuance of their future application upon 30 days written notice by either party. Discontinuance of a basic agreement will not affect any individual contract referencing the basic agreement (or the clauses appended thereto) entered into prior to the effective date of discontinuance.

(c) Limitations. (1) Basic agreements shall neither cite appropriations to be charged nor be used alone for the purpose of obligating funds.

(2) Basic agreements shall not in any manner provide for or imply any agreement on the part of the Government to place future orders or contracts with the contractor involved. Basic agreements shall not be used in any manner to restrict competition.

(3) Basic agreements generally shall be utilized only in connection with negotiated contracts.

§ 1-3.410-2 Basic ordering agreement. (a) Description. A basic ordering agreement is an agreement which is similar to a basic agreement (see § 1-3.410-1) except that it also includes a description, as specific as practicable, of the supplies to be furnished or services to be performed when ordered and

a description of the method for determination of the prices, consistent with the contract types authorized by this subpart, to be paid to the contractor for such supplies or services. Either the specific terms and conditions of delivery or a description of the method for their determination shall be set forth in the basic ordering agreement. The basic ordering agreement shall list one or more activities which are authorized to issue orders under the agreement. Any activity so named may issue orders specifying the supplies or services required, which orders may be accepted by the contractor by whatever manner of acceptance is indicated in the basic ordering agreement. Each order will incorporate by reference the provisions of the basic ordering agreement.

(b) Application. The basic ordering agreement may be used as a means of expediting procurement where specific items, quantities, and prices are not known at the time of execution of the agreement but where past experience or future plans indicate that a substantial number of requirements for items or services of the type covered by the basic ordering agreement will result in procurements from the contractor during the term of the agreement. Under proper circumstances, use of the procedures under the agreement is advantageous and economical in ordering parts for equipment support since such procedures substantially shorten the administrative time required for placing such articles in a production status, thereby not only decreasing the amount of support inventory required to be carried but also decreasing the possibility that parts procured will become obsolete as a result of design changes in the equipment.

(c) Limitations. (1) Supplies or services may be ordered under a basic ordering agreement only if it is determined at the time the order is placed that it is impracticable to obtain competition by either formal advertising or negotiation for such supplies or services.

(2) The Government shall neither make any final commitment nor authorize any work by the contractor pursuant to an order under a basic ordering agreement until prices have been established, unless the order establishes a monetary limitation on the obligation of the Government and either

(1) The order is subject to provisions contained in the basic ordering agreement which set forth adequate procedures for arriving at prices as early in contract performance as practical, but in no event shall such procedures permit the price of the entire order to be established on a retroactive basis (however, incentive provisions consistent with this Subpart 1-3.4 are permitted); or

(ii) The need for the supplies or services is compelling and of unusual urgency, as when the Government would be seriously injured, financially or otherwise, if the supplies or services were not furnished by a certain date and when they could not be furnished by that date if the contractor is not allowed to proceed with work until prices have been established.

As a general rule, prices should be established prior to authorizing the contractor to begin work. However, where the contractor is allowed to begin work prior to pricing in accordance with this paragraph, the contractor and the contracting officer shall proceed with pricing as soon as practicable. The basic ordering agreement shall provide that failure to reach agreement on price in such circumstances will constitute a dispute subject to the procedures of the Disputes clause.

(3) Each order issued under a basic ordering agreement shall be subject to such reviews, approvals, and determinations and findings (including those pertaining to types of contracts) specified in this Part 1-3 as would be applicable if the order were a contract entered into apart from the basic ordering agreement.

(4) A basic ordering agreement shall be modified only by a revision of the basic ordering agreement itself and shall not be modified or superseded by individual orders issued thereunder. Basic ordering agreements shall be reviewed at least annually, before the anniversary of their effective dates, and revised to conform with the current requirements of this Part 1-3. Modifications shall not have retroactive effect.

(5) The contracting officer issuing an order under a basic ordering agreement shall be responsible for assuring compliance with the provisions of (1), (2), and (3) of this § 1-3.410-2(c).

Subpart 1-3.5-[Reserved] Subpart 1-3.6-Small Purchases § 1-3.600 Scope of subpart.

This subpart prescribes policies and procedures for the purchasing of supplies and nonpersonal services from commercial sources when the aggregate amount involved in any one transaction does not exceed $2,500. Such purchases shall be termed "small purchases." This subpart is not applicable to the procurement of supplies and services initially estimated to exceed $2,500 even though awards under such procurements do not exceed $2,500.

§ 1-3.601 Purpose.

The objectives of the simplified purchase methods prescribed herein are to reduce the administrative costs in accomplishing small purchases, to improve opportunities for small business concerns to obtain a fair proportion of Government purchases and contracts, and to eliminate costly and time consuming paper processes.

§ 1-3.602 Policy.

(a) Small purchases shall be made by negotiation (see § 1-3.203), except under special circumstances where it is clearly in the best interest of the Government to accomplish such purchases by more formal methods.

(b) The objective of helping small concerns to participate in Government contracting has wide potential application where small purchases are concerned, and accordingly, placement of small purchases with small concerns is specifically encouraged, consistent, of course, with other valid considerations such as price feasibility.

(c) When quotations are received on a number of related items (such as hardware items, spare parts for vehicles, or office supplies, etc.), one purchase order shall normally be issued to the firm quoting the lowest aggregate prices rather than issuing more than one purchase order on the basis of the lowest quotation on each item.

(d) In arriving at the aggregate amount involved in any one transaction, there must be included all supplies and services which would properly be grouped together in a single transaction and which would be included in a single advertisement for bids if the procurement were being effected by formal advertise

(a) Reasonable competition shall be obtained in making small purchases. As used in this § 1-3.603, reasonable competition means obtaining a sufficient number of quotations from qualified sources of supply to assure that the procurement is fair to the Government, price and other factors considered, including the administrative cost of the purchase. In arriving at the number of quotations to be solicited, due consideration will be given to the cost of the proposed solicitation in relation to the potential benefits to be derived by the Government, consistent with good business.

(b) Reasonable competition for small purchases ordinarily can be obtained without soliciting quotations from sources outside the trade area in which the procurement office is located. However, solicitation shall not be limited to suppliers of well-known and widely distributed makes or brands, nor shall quotations be solicited purely on a selective personal preference basis. New supply sources, disclosed through trade journals or other media, shall be continuously reviewed and, when appropriate, added to the list of available sources.

(c) The following factors influence the number of quotations required in connection with any particular purchase:

(1) The nature of the article or service to be procured, and whether highly competitive and readily available in several makes or brands, or relatively noncompetitive.

(2) Information obtained in making recent purchases of the same or similar item.

(3) The urgency of the proposed purchase.

(4) The dollar value of the proposed purchase.

(5) Past experience concerning specific dealers' prices.

(d) Solicitation of quotations may be effected orally or in writing. Written solicitation should be used only in such circumstances as where (1) the suppliers are located outside the local area, (2) special specifications are involved, (3) a large number of items are included in a single proposed procurement, or (4) obtaining oral quotations is not considered efficient. Standard Form 18, Request for Quotations shall be used for written solicitation of quotations in accordance with § 1-16.201.

(e) Where it is the practice for supliers to furnish standing price quotations on supplies or services required on an intermittent and recurring basis, this information may be used in lieu of obtaining individual quotations each time a purchase is contemplated. In such cases, the purchaser shall assure that the price information is current and that the Government obtains the benefit of maximum discounts.

§ 1-3.603-2 Data to support small purchases.

(a) The manner of securing quotations and the nature and extent of information to be required for small purchases, are for determination by the procuring agency, but should be limited to only that deemed necessary to conclude purchase action.

(b) The following are illustrative of the extent to which quotation information should be recorded:

(1) Oral solicitations. When oral price quotations are obtained, informal records should be established which will reflect clearly the propriety of placing the order at the price paid with the supplier concerned. In most cases, this will consist merely of showing the names of the suppliers contacted and the prices and other terms and conditions quoted by each. Handwritten notations on the purchase action request form of the agency or whatever medium the purchaser is using as his basis for making the purchase, are satisfactory for this purpose.

(2) Written solicitations. Retention in the purchase files of written quotations received, or references to printed price lists used, will usually suffice as the record supporting the price paid.

(c) Purchase data collected or compiled during the course of arranging the purchase are for administrative and guidance value in making the purchase and issuing the appropriate purchase document. The retention of such data

This 1-3.604 prescribes policies and procedures for making small purchases of supplies and nonpersonal services through the use of imprest funds. Related policies and regulations concerning bonding requirements and the establishment of, and accounting for, imprest funds are contained in Treasury Department Circular Nos. 1030 and 969, and GAO Manual 7 GAO 2700 and 5120. § 1-3.604-2 Definition of imprest fund.

The term "imprest fund" means a fixed cash or petty cash fund in the form of currency, coin, or Government check which has been advanced by an official Government disbursing office, without charge to a Government appropriation or fund account, to a duly authorized cashier for cash payment or other cash requirement purposes as specified in his designation or authorization. The fund may be of a revolving type, replenished to a fixed amount as spent or used, or of a stationary nature such as a change making fund.

§ 1-3.604-3 Agency responsibilities.

Each agency using imprest funds for small cash purchases of supplies or nonpersonal services shall have the responsibility of periodically reviewing and determining whether there is continuing need for each fund established, and that amounts of such funds are not in excess of actual needs. Agencies should take prompt action to have imprest funds adjusted to a level commensurate with demonstrated needs whenever circumstances warrant such action. In this connection, each agency shall:

(a) Study agency practices to insure that full advantage is taken of all small purchase processes; and

(b) Develop and issue appropriate implementing regulations.

(a) The cash payment processes described in this section should be used for making small purchases whenever advantageous to the Government. Cash purchases will generally be advantageous in the following circumstances:

(1) When vendors are reluctant to honor small purchase orders.

(2) When vendors are not equipped to bill agencies for purchases in accordance with normal business practices.

(3) When supplies or nonpersonal services are needed at locations not served by purchase offices or when the established sources of issue are not conveniently accessible to point of use.

(4) When provisions for local credit arrangements and monthly billings by vendors are impracticable.

(b) The following are typical procurements for which the use of imprest funds would be suitable:

(1) Emergency, fill-in, ocassional, or special purchases of supplies or services. (2) Repair of equipment.

(3) Perishable subsistence.

(4) Public utility bills where location of the activity is so situated as to make cash payment more efficient.

(5) Postage stamps, parcel post, COD, postal charges, local drayage, transportation tokens or passes (including cash fares), and taxi fares.

(6) Expenses incident to travel and emergency travel advances (as specified in Treasury Department Circular No. 1030).

(a) Small purchases made pursuant to imprest fund procedures may not exceed $100 for any one transaction, except that under emergency conditions the amount for any one transaction may be increased not to exceed $250. Exceptions or additions needed in connection with procurement matters described in § 1-3.604-4, as well as the maximum dollar limitation for any one procurement transaction, should be addressed to the Treasury Department (pursuant to Treasury Department Circular No. 1030). The granting of any such exceptions or additions will be coordinated with the Administrator of General Services or his designee. Approved exceptions now existing will automatically be continued without specific request from the agency to which exceptions have been granted.

(b) Supplies or services subject to

restrictions under any provisions of law or regulation may not be purchased through use of imprest funds except with such statutory and regulatory restrictions.

§ 1-3.604-6 Procurement and payment.

(a) Small purchases utilizing imprest funds may be made only by authorized employees.

(b) When payment for small purchases is made from imprest funds, no purchase order need be issued unless it is advantageous to the Government, for example, when required by the vendor to grant Government discounts. When so required, any authorized purchase order form may be used and will be endorsed "payment to be made in cash."

(c) Receipts must be secured for each payment from imprest funds (pursuant to the provisions of GAO Manual 7 GAO 5120).

(d) The cashier may either reimburse employees for amounts paid by them for authorized purchases or furnish the cash necessary to consummate such purchases. Purchases for which cash has been furnished in advance should be confirmed within five work days from the date of advance.

§ 1-3.604-7 Tax exemption certificates.

Government tax exemption certificates (Standard Form 1094-Revised) will not be required unless the amount of the taxes on any one bill or purchase exceeds one dollar. (See GAO Manual of Policies and Procedures, Title 7, section 4820.10).

§ 1-3.605 Purchase order forms. § 1-3.605-1

Standard Form 44, Purchase Order-Invoice-Voucher. (a) Purpose of the form. Standard Form 44, Purchase Order-InvoiceVoucher (illustrated in § 1-16.901-44), is a pocket-size purchase order form designed primarily for on-the-spot overthe-counter purchases of supplies and nonpersonal services. It is a multi-purpose form which can be used as a purchase order, receiving report, invoice, and public voucher.

(b) Prescribed use. Standard Form 44 is prescribed for use in connection with the documenation of purchases when all of the following conditions are satisfied:

(1) Except for purchases made under public exigency circumstances, the amount of the purchase is not in excess of $2,500.