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required by § 1-3.902-1(b), (1) a de- (f) The procuring agency will review scription by which each such item can the "make-or-buy” program to deterbe readily identified, (2) a recommenda mine if all appropriate items are intion to make or buy the item or defer cluded or if it contains items that should the decision, (3) when feasible, the be deleted because of their relatively names of proposed subcontractors, and minor importance. In all considera(4) the important items to be made by tions relative to a “make-or-buy” prothe contractor, including a designation gram, the procuring agency will obtain of the plant and division in which the the advice and assistance of all approcontractor proposes to perform the work. priate personnel whose knowledge would

(e) “Make-or-buy” programs shall be contribute to the adequacy of the review. evaluated and agreed upon by the con (g) Before agreeing to a "make-ortractor and the procuring activity at the buy” program (or consenting to any earliest practicable time during negoti change therein which, in the opinion ations. In reviewing the “make-or the contracting officer, would reduce the buy” program during the negotiations, anticipated participation of small busithe effect of the following factors on the ness), the procuring activity shall invite interests of the Government shall be the advice and counsel of the SBA by considered:

permitting SBA representatives (regu(1) The effect of the contractor's plan larly assigned to the activity) to review to "make-or-buy," as the case may be, on all pertinent facts and make recommenprice, quality, delivery, and performance. dations thereon. Such review by SBA

(2) Whether the contractor plans to should be concurrent with the review by broaden his base of subcontractors the procuring activity (or, in the case of through competition.

changes, the contracting officer). Where (3) Whether the contractor has prop urgent circumstances do not permit such erly considered the competence, abilities, a concurrent review, or where SBA fails experience, and capacities available to respond on a timely basis, the conwithin other firms.

tracting officer shall include an ex(4) Whether small business concerns planatory statement in the contract file can produce the item or perform the and shall transmit a copy to the SBA work in question and at what price. representative.

(5) Whether the contractor or major (h) After agreement on the program subcontractors propose to do work in is reached, the contracting officer shall plant, the nature of which differs sig notify the contractor as to the Governnificantly from their normal in-plant ment's approval of the program and operations or for which they are not shall inform the contractor as to any historically suited.

requirement for further review during (6) Whether production of the item performance of the contract. For exor performance of the work will create ample, if follow-on procurements occur, a requirement, either directly or indi- the procuring activity and the contractor rectly, for additional facilities to be will review the existing "make-or-buy” furnished by the Government, or the program to determine whether it should continued use of Government-owned fa- bo revised. cilities, by the contractor or by subcon- § 1-3.902–2 Approval of programs. tractors.

(7) Whether the contractor proposed (a) Proposed "make" items shall not to ask the Government to furnish addi- be agreed to when the products or serytional facilities to do the work in plant ices under consideration: for which there is capacity elsewhere (1) Are not regularly manufactured which is competitive in quality, delivery, or provided by the contractor, and are and overall cost, and is acceptable as a available-quality, quantity, delivery, source to the contractor.

and other essential factors considered (8) Whether the item or work has been subcontracted on this or previous

from other firms at prices no higher contracts.

than if the contractor makes or provides (9) Other factors, such as the na

the product or service; ture of the item, experience with similar (2) Are regularly manufactured or items, future requirements, engineering, provided by the contractor, and are tooling, starting load costs, market con available-quality, quantity, delivery, ditions, and the availability of personnel and other essential factors considered and material.

from other firms at prices lower than

if the contractor makes or provides the (b) When a "make-or-buy” program product or service; or

is agreed upon with a contractor, or there Provided, That such items may be agreed

are changes or additions to a “make-orto, notwithstanding (1) and (2), if in the

buy” program, the consideration given opinion of the contracting officer the

each item on such program will be docu

mented in the contract file. If a conoverall cost of the contract to the Government would be increased if the items

tract (including supplemental agree

ments for new procurement) except one were “bought”. (b) Approval of the contractor's pur

specifically exempted by $ 1–3.902-1(b), chasing system shall not constitute ap

does not include the Changes to Make

or-Buy Program clause, the contracting proval of the “make-or-buy” program.

officer will document the contract file § 1-3.902–3 Contract clause.

with a written statement of facts to susThe following clause shall be incor

tain and make clear the appropriateness porated in all cost-reimbursement, price

of the determination not to include the redetermination, or incentive type con

clause. Such determination will be based tracts as to which a “make-or-buy" pro

on one of the following: (1) the contract gram has been agreed upon:

is on a firm fixed-price basis; (2) the

contract is not exempt but there are no CHANGES TO MAKE-OR-BUY PROGRAM

items which can be identified as requirThe Contractor agrees to perform this con ing a “make-or-buy” program as detract in accordance with the "make-or-buy" fined in § 1-3.902–1(a); or (3) a deviaprogram attached to this contract, except as

tion has been approved. hereinafter provided. If the Contractor desires to change the “make-or-buy” program,

§ 1-3.903 Review and approval of conhe shall notify the Contracting Officer in

tractor's purchasing system and subwriting of the proposed change reasonably

contracts. in advance and shall submit justification

§ 1-3.903–1 [Reserved] in sufficient detail to permit evaluation of the proposed change. Changes in the place

§ 1-3.903–2 Review and approval of of performance of work on any "make" item

subcontracts. in the "make-or-buy" program are subject to

(a) When the prime contract is not this requirement. With respect to items de

to be placed on a firm fixed-price basis, ferred at the time of negotiation of this contract for later addition to the "make-or

review of subcontracts prior to placebuy" program, the Contractor shall notify

ment may be desirable since the ultimate the Contracting Officer of each proposed cost to the Government will depend in addition at the earliest possible time, to part on subcontract prices and performgether with justification in sufficient detail ance. Contract provisions requiring to permit evaluation. The Contractor shall advance notification to the contracting not, without the written consent of the Con

officer of proposed subcontracts for matracting Officer, make changes or additions to the program. However, in his discretion,

terials, components, and other purchases the Contracting Officer may ratify in writing

may be appropriate both for informaany changes or additions. The "make-or tion as to sources and prices and to probuy” program attached to this contract shall vide an opportunity for review and for be deemed to be modified in accordance with approval or objection by the contracting the written consent or ratification by the officer prior to award of the subcontracts. Contracting Officer.

Careful and thorough evaluation of sub[End of Clause)

contracts prior to placement is particu

larly necessary when: $ 1–3.902–4 Administration of pro

(1) The prime contractor's purchasgram.

ing system of performance thereunder is (a) On applicable contracts, the cog considered inadequate; nizant contract administration office (2) Subcontracts are for items for will establish a procedure with the con which there is no competition or for tractor to assure timely compliance with which the proposed prices appear unreathe terms of the contract clause. This sonable, and the amounts involved are procedure will include provisions for substantial (see § 1-3.807–10 (b)); processing changes to the established (3) Close working arrangements or “make-or-buy” program and for obtain business or ownership affiliations exist ing "make-or-buy” decisions for items between the prime and the subcontractor reserved for deferred decisions or un- which may preclude the free use of comidentified at the time of contract petition or result in higher subcontract negotiations.

prices than would otherwise be obtained; (4) A subcontract is being proposed erally may not be necessary. However, at a price less favorable than that which contracting officers shall conduct perihas been given by the subcontractor to odic reviews of the application of the the Government, all other factors such as system to insure conformance therewith. manufacturing period and quantity (4) In instances where subcontracts being comparable; or

have been placed on a cost-reimburse(5) A subcontract is to be placed on ment or time and materials basis, cona fixed-price incentive, time and ma tracting officers should be skeptical of terial, labor-hour, fixed-price redetermi approving the repetitive or unduly pronable, or cost-reimbursement basis. tracted use of such types of contracts

(b) (1) Prime contract provisions re and should follow the principles of lating to subcontracts, including those § 1-3.803(b). requiring advance notification, review, (c) In cases where the prime contract or approval thereof, should be consistent reserves a right for the contracting offiwith the amount and character of sub cer to review or approve subcontracts, contract work and with the overall the prime contract shall also reserve to character and type of the prime contract the Government the right to inspect and and the conditions applicable to its use audit the books and records of such subas described in Subpart 1-3.4; and should contractors. Whenever such first tier involve the Government to the minimum subcontracts are of the cost-reimburseextent practicable in the contractor's ex ment, fixed-price incentive, or time and ercise of management responsibility, but material type, a similar right shall be give reasonable assurance that adequate reserved to the Government to inspect subcontracting opportunities have been and audit the books and records of lower afforded to small business and that the tier subcontractors: Provided, That such Government is receiving the greatest a right shall not be reserved contractupractical return for its expenditure. For ally at or below the point where a firm example, if the contract is on a firm fixed-price subcontract intervenes. fixed-price basis except for a clause permitting price escalation resulting from PART 1-4-SPECIAL TYPES AND cost increases for certain materials, the prime contract may limit the contract

METHODS OF PROCUREMENT ing officer's right of review of subcon

Subpart 1-4.1— [Reserved] tracts to those for materials covered by the escalation clause. In the case of

Subpart 1-4.2—[Reserved) cost-reimbursement type contracts, ad

Subpart 1-4.3— [Reserved] vance notification, and prior consent or

Subpart 1-4.4—Public Utilities approval of subcontracts should be re

Sec. quired. (Section 304(b) of the Act (41

1-4.400 Scope of subpart. U.S.C. 254(b)) requires that all such 1-4.401 Definition. contracts shall provide for advance no 1-4.402 Applicability. tification of any subcontract thereunder 1-4.403 Utility bills rendered to executive on a cost-plus-a-fixed-fee basis and of

agencies. any fixed-price subcontract or purchase

1-4.404 GSA assistance. order which exceeds in dollar amount

1-4.405 Submission of information.

1-4.406 Procurement policy and regulaeither $25,000 or 5 per centum of the

tions. total estimated cost of the prime 1-4.406–1 Policy. contract.)

1-4.406–2 Agency supply arrangements. (2) Provisions in prime fixed-price 1-4.407 GSA areawide contracts. contracts relating to subcontract review

1-4.408 GSA long-term contracts.

1-4.409 Consolidated purchase, joint use, may, as appropriate, be confined to one

or cross-service. major subcontract or to certain classes 1-4.410 Independent procurement by exof subcontracts; may set a floor above

ecutive agencies. which advance approval of proposed sub

1-4.410-1 General.

1-4.410-2 Documentation of procurements contracts may be required before place

from regulated utility suppliers. ment; or may be tailored to cover un 1-4.410–3 Documentation of procurements usual or particular circumstances.

from unregulated utility sup(3) In those instances where a con

pliers. tractor's purchasing system, including its

1-4.410-4 Negotiations with utility sup

pliers. small business program has been deemed 1-4.410–5 Uniform clauses for utility servadequate, review of subcontracts gen

ice contracts.


tion in the Matter of Procurement of 1-4.410-6 Postreview or periodic reporting. Utility Services, as amended (15 F.R. 1-4.411 Prior review of certain proposed 8227, 22 F.R. 871), shall govern the proprocurements.

curement of utility services by the De1-4.411-1 General. 1-4.411-2 Prior review by GSA.

partment of Defense. 1-4.411-3 Alternative prior review by the

(c) The provisions of this Subpart procuring agency.

1-4.4 do not apply to: (1) Utility sery1-4.411-4 Guidelines for prior review.

ices produced, distributed, or sold by a

Federal agency (other than consolidated Subpart 1-4.5— [Reserved)

purchase, joint use, or cross-service by Subpart 1-4.6-Livestock Products

one agency for another agency); or (2) 1-4.600 Scope.

utility services (other than those re1-4.601 General.

quired for administrative purposes) ob1-4.602 Definition of livestock products. tained by purchase, exchange, or other1-4.603 Exception.

wise by Federal power or water market1-4.604 Procedures.

ing agencies as a direct incident to such 1-4.605 Statement of eligibility clause.

agency's marketing or distribution 1-4.606 Humane method of livestock

program. slaughter clause. 1-4.607 Reporting violations.

(d) GSA will, upon request, furnish the

services provided for in this Subpart AUTHORITY: The provisions of this Part 1-4

1-4.4 to any other Federal agency, mixedissued under sec. 205(c), 63 Stat. 390; 40 U.S.C. 486(c).

ownership Government corporation the

District of Columbia, the Senate, the Subpart 1-4.1 [Reserved] House of Representatives, or the Archi

tect of the Capitol and any activity under Subpart 1-4.2 [Reservedl

his direction. Subpart 1-4.3 [Reserved] § 1-4.403 Utility bills rendered to exSubpart 1-4.4—Public Utilities

ecutive agencies.

Executive agencies shall notify the utilSOURCE: The provisions of this Subpart

ity suppliers with which they do business 1-4.4 appear at 31 F.R. 16417, Dec. 23, 1966, unless otherwise noted.

to provide GSA from time to time, upon

the request of GSA to the supplier, with NOTE: The provisions of the regulation in

duplicate copies of bills rendered to the Subpart 1-4.4 become effective 90 days from

individual agencies for utility services. the publication date of December 23, 1966, in the Federal Register (31 F.R. 16417), but

The particular billing period will be mumay be observed sooner.

tually agreed upon between GSA and

the supplier. § 1-4.400 Scope of subpart.

§ 1-4.404 GSA assistance. This subpart prescribes policies and procedures for economical and efficient

(a) The Congress and the President, in procurement of public utility services by

the declaration of policy in the Federal executive agencies.

Property and Administrative Services

Act of 1949, stated an intent to provide § 1-4.401 Definition.

for the Government an economical and As used in this Subpart 1-4.4, “utility efficient system for, among other things, services” include all utility services (ex the procurement of nonpersonal services, cept telecommunications services), such including contracting for and manageas electricity, gas, steam, water, and ment of public utility services (40 U.S.C. sewerage, including facilities on both 471). In order to implement this policy, sides of the delivery point for the supply

GSA has established an experienced staff of such services.

of utilities technical specialists and engi

neers, available to all agencies, to pro§ 1-4.402 Applicability.

vide the necessary capabilities to facili(a) The provisions of this Subpart tate more economical and efficient pro1-4.4 apply to the procurement of utility curement and management of public services by executive agencies within the utility services by Federal agencies. United States and its possessions and the (b) Agencies not having personnel Commonwealth of Puerto Rico.

technically qualified to deal with spe(b) The Statement of Areas of Under cialized utilities problems and requiring standing between the Department of De- GSA technical assistance, and other fense and General Services Administra- agencies having technically qualified

personnel but desiring GSA consulting
assistance, should obtain assistance from
the Transportation and Communications
Service of GSA, in Washington, D.C., at
the address listed below in f 1-4.405, or
in the nearest of the 10 GSA regional
offices through the TCS Regional
§ 1-4.405 Submission of information.

All information required by GSA under
this Subpart 1-4.4, except where other-
wise specified, shall be addressed to the
General Services Administration, Trans-
portation and Communications Service,
Public Utilities Division, Washington,
D.C. 20405.
§ 1-4.406 Procurement policy and reg.

ulations. § 1-4.406–1 Policy.

It shall be the policy of executive agencies to obtain required utility services from sources of supply which are most advantageous to the Government in terms of economy, efficiency, or service, after investigating all appropriate sources. The supplier of a utility service is usually the sole source thereof. When more than one source of supply is available, the service may also be procured by negotiation since formal advertising is usually not feasible and practicable (see $$ 1-3.101 (a), (d); 1-3.202; 1-3.203; 1-3.210; and Subpart 1-3.3 of this chapter). 81-4.406–2 Agency supply arrange

ments. In implementing the policy stated in § 1-4.406–1, use shall be made by agencies of: (a) GSA areawide contracts (§ 1-4.407); (b) GSA long-term contracts (§ 1-4.408); and (c) consolidated purchase, joint use, or cross-service by one agency for another agency (§ 1-4.409). § 1-4.407 GSA areawide contracts.

(a) GSA enters into areawide contracts with various utility suppliers for the furnishing of utility services to Federal agencies located within the service areas of such suppliers. GSA areawide contracts provide that the utility supplier, upon execution of a Government order in the form of an authorization prescribed by the contract, will furnish, without further negotiation, the services involved in accordance with such of the supplier's rate schedules as are applicable to such services and subject to all

the provisions of the areawide contract.

(b) Unless it is determined that more advantageous competing services are available, each executive agency in the area covered by a GSA areawide contract shall procure utility services thereunder: Provided, however, That when it is in the best interest of the Government, an agency may negotiate special rates or special services under an areawide contract or under a separate contract.

(c) When procuring utility services under a GSA areawide contract, each executive agency shall furnish or arrange to furnish to GSA an executed counterpart or conformed copy of the order authorizing service connection, disconnection, or change, as set forth in the particular contract.

(d) Upon request, GSA will furnish to Federal agencies a list of GSA areawide public utility contracts, showing in each case the kind of utility service, the serving utility, and the area served. GSA also will make available to Federal agencies, upon request, à copy of any area. wide contract. Each contract includes the specimen order form authorizing service connection, disconnection, or change. § 1-4.408 GSA long-term contracts.

Executive agencies ordinarily cannot obligate the Government for utility seryices beyond the current fiscal year. Therefore, affirmative action ordinarily is required in order to renew a contract beyond the current fiscal year. GSA, however, has special statutory authority to enter into long-term contracts for utility services for periods not exceeding 10 years (40 U.S.C. 481). GSA, either on its own initiative or upon request by an agency, will negotiate or assist in the negotiation of a long-term contract for the use and benefit of the agency, if a long-term contract is justified by one or more of the following circumstances:

(a) Where lower rates, larger discounts, or more favorable conditions of service can be obtained.

(b) Where a proposed connection charge, termination liability, or any other facilities charge to be paid by the Government would be eliminated or reduced.

(c) Where the utility supplier refuses to render the desired service except under a long-term contract.

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