required by § 1-3.902-1(b), (1) a description by which each such item can be readily identified, (2) a recommendation to make or buy the item or defer the decision, (3) when feasible, the names of proposed subcontractors, and (4) the important items to be made by the contractor, including a designation of the plant and division in which the contractor proposes to perform the work.

(e) "Make-or-buy” programs shall be evaluated and agreed upon by the contractor and the procuring activity at the earliest practicable time during negotiations. In reviewing the "make-orbuy" program during the negotiations, the effect of the following factors on the interests of the Government shall be considered:

(1) The effect of the contractor's plan to "make-or-buy," as the case may be, on price, quality, delivery, and performance.

(2) Whether the contractor plans to broaden his base of subcontractors through competition.

(3) Whether the contractor has properly considered the competence, abilities, experience, and capacities available within other firms.

(4) Whether small business concerns can produce the item or perform the work in question and at what price.

(5) Whether the contractor or major subcontractors propose to do work in plant, the nature of which differs significantly from their normal in-plant operations or for which they are not historically suited.

(6) Whether production of the item or performance of the work will create a requirement, either directly or indirectly, for additional facilities to be furnished by the Government, or the continued use of Government-owned facilities, by the contractor or by subcontractors.

(7) Whether the contractor proposed to ask the Government to furnish additional facilities to do the work in plant for which there is capacity elsewhere which is competitive in quality, delivery, and overall cost, and is acceptable as a source to the contractor.

(8) Whether the item or work has been subcontracted on this or previous contracts.

(9) Other factors, such as the nature of the item, experience with similar items, future requirements, engineering, tooling, starting load costs, market conditions, and the availability of personnel and material.

(f) The procuring agency will review the "make-or-buy" program to determine if all appropriate items are included or if it contains items that should be deleted because of their relatively minor importance. In all considerations relative to a "make-or-buy" program, the procuring agency will obtain the advice and assistance of all appropriate personnel whose knowledge would contribute to the adequacy of the review.

(g) Before agreeing to a "make-orbuy" program (or consenting to any change therein which, in the opinion the contracting officer, would reduce the anticipated participation of small business), the procuring activity shall invite the advice and counsel of the SBA by permitting SBA representatives (regularly assigned to the activity) to review all pertinent facts and make recommendations thereon. Such review by SBA should be concurrent with the review by the procuring activity (or, in the case of changes, the contracting officer). Where urgent circumstances do not permit such a concurrent review, or where SBA fails to respond on a timely basis, the contracting officer shall include an explanatory statement in the contract file and shall transmit a copy to the SBA representative.

(h) After agreement on the program is reached, the contracting officer shall notify the contractor as to the Government's approval of the program and shall inform the contractor as to any requirement for further review during performance of the contract. For example, if follow-on. procurements occur, the procuring activity and the contractor will review the existing "make-or-buy" program to determine whether it should be revised.

§ 1-3.902-2 Approval of programs.

(a) Proposed "make" items shall not be agreed to when the products or services under consideration:

(1) Are not regularly manufactured or provided by the contractor, and are available-quality, quantity, delivery, and other essential factors consideredfrom other firms at prices no higher than if the contractor makes or provides the product or service;

(2) Are regularly manufactured or provided by the contractor, and are available-quality, quantity, delivery, and other essential factors consideredfrom other firms at prices lower than

The following clause shall be incorporated in all cost-reimbursement, price redetermination, or incentive type contracts as to which a "make-or-buy” program has been agreed upon:

CHANGES TO MAKE-OR-BUY PROGRAM

The Contractor agrees to perform this contract in accordance with the "make-or-buy” program attached to this contract, except as hereinafter provided. If the Contractor desires to change the "make-or-buy" program, he shall notify the Contracting Officer in writing of the proposed change reasonably in advance and shall submit justification in sufficient detail to permit evaluation of the proposed change. Changes in the place of performance of work on any "make" item in the "make-or-buy” program are subject to this requirement. With respect to items deferred at the time of negotiation of this contract for later addition to the "make-orbuy" program, the Contractor shall notify the Contracting Officer of each proposed addition at the earliest possible time, together with justification in sufficient detail to permit evaluation. The Contractor shall not, without the written consent of the Contracting Officer, make changes or additions to the program. However, in his discretion, the Contracting Officer may ratify in writing any changes or additions. The "make-orbuy" program attached to this contract shall be deemed to be modified in accordance with the written consent or ratification by the Contracting Officer.

(b) When a "make-or-buy" program is agreed upon with a contractor, or there are changes or additions to a "make-orbuy" program, the consideration given each item on such program will be documented in the contract file. If a contract (including supplemental agreements for new procurement) except one specifically exempted by § 1-3.902-1(b), does not include the Changes to Makeor-Buy Program clause, the contracting officer will document the contract file with a written statement of facts to sustain and make clear the appropriateness of the determination not to include the clause. Such determination will be based on one of the following: (1) the contract is on a firm fixed-price basis; (2) the contract is not exempt but there are no items which can be identified as requiring a "make-or-buy" program as defined in § 1-3.902-1(a); or (3) a deviation has been approved.

§ 1-3.903 Review and approval of contractor's purchasing system and sub

§ 1-3.903-2 Review and approval of subcontracts.

(a) When the prime contract is not to be placed on a firm fixed-price basis, review of subcontracts prior to placement may be desirable since the ultimate cost to the Government will depend in part on subcontract prices and performance. Contract provisions requiring advance notification to the contracting officer of proposed subcontracts for materials, components, and other purchases may be appropriate both for information as to sources and prices and to provide an opportunity for review and for approval or objection by the contracting officer prior to award of the subcontracts. Careful and thorough evaluation of subcontracts prior to placement is particularly necessary when:

(1) The prime contractor's purchasing system of performance thereunder is considered inadequate;

(2) Subcontracts are for items for which there is no competition or for which the proposed prices appear unreasonable, and the amounts involved are substantial (see § 1-3.807-10 (b));

(3) Close working arrangements or business or ownership affiliations exist between the prime and the subcontractor which may preclude the free use of competition or result in higher subcontract prices than would otherwise be obtained;

(4) A subcontract is being proposed at a price less favorable than that which has been given by the subcontractor to the Government, all other factors such as manufacturing period and quantity being comparable; or

(5) A subcontract is to be placed on a fixed-price incentive, time and material, labor-hour, fixed-price redeterminable, or cost-reimbursement basis.

(b) (1) Prime contract provisions relating to subcontracts, including those requiring advance notification, review, or approval thereof, should be consistent with the amount and character of subcontract work and with the overall character and type of the prime contract and the conditions applicable to its use as described in Subpart 1-3.4; and should involve the Government to the minimum extent practicable in the contractor's exercise of management responsibility, but give reasonable assurance that adequate subcontracting opportunities have been afforded to small business and that the Government is receiving the greatest practical return for its expenditure. For example, if the contract is on a firm fixed-price basis except for a clause permitting price escalation resulting from cost increases for certain materials, the prime contract may limit the contracting officer's right of review of subcontracts to those for materials covered by the escalation clause. In the case of cost-reimbursement type contracts, advance notification, and prior consent or approval of subcontracts should be required. (Section 304 (b) of the Act (41 U.S.C. 254(b)) requires that all such contracts shall provide for advance notification of any subcontract thereunder on a cost-plus-a-fixed-fee basis and of any fixed-price subcontract or purchase order which exceeds in dollar amount either $25,000 or 5 per centum of the total estimated cost of the prime contract.)

(2) Provisions in prime fixed-price contracts relating to subcontract review may, as appropriate, be confined to one major subcontract or to certain classes of subcontracts; may set a floor above which advance approval of proposed subcontracts may be required before placement; or may be tailored to cover unusual or particular circumstances.

(3) In those instances where a contractor's purchasing system, including its small business program has been deemed adequate, review of subcontracts gen

erally may not be necessary. However, contracting officers shall conduct periodic reviews of the application of the system to insure conformance therewith.

(4) In instances where subcontracts have been placed on a cost-reimbursement or time and materials basis, contracting officers should be skeptical of approving the repetitive or unduly protracted use of such types of contracts and should follow the principles of § 1-3.803(b).

(c) In cases where the prime contract reserves a right for the contracting officer to review or approve subcontracts, the prime contract shall also reserve to the Government the right to inspect and audit the books and records of such subcontractors. Whenever such first tier subcontracts are of the cost-reimbursement, fixed-price incentive, or time and material type, a similar right shall be reserved to the Government to inspect and audit the books and records of lower tier subcontractors: Provided, That such a right shall not be reserved contractually at or below the point where a firm fixed-price subcontract intervenes.

tion in the Matter of Procurement of Utility Services, as amended (15 F.R. 8227, 22 F.R. 871), shall govern the procurement of utility services by the Department of Defense.

(c) The provisions of this Subpart 1-4.4 do not apply to: (1) Utility services produced, distributed, or sold by a Federal agency (other than consolidated purchase, joint use, or cross-service by one agency for another agency); or (2) utility services (other than those required for administrative purposes) obtained by purchase, exchange, or otherwise by Federal power or water marketing agencies as a direct incident to such agency's marketing or distribution program.

(d) GSA will, upon request, furnish the services provided for in this Subpart 1-4.4 to any other Federal agency, mixedownership Government corporation the District of Columbia, the Senate, the House of Representatives, or the Architect of the Capitol and any activity under his direction.

§ 1-4.404 GSA assistance.

(a) The Congress and the President, in the declaration of policy in the Federal Property and Administrative Services Act of 1949, stated an intent to provide for the Government an economical and efficient system for, among other things, the procurement of nonpersonal services, including contracting for and management of public utility services (40 U.S.C. 471). In order to implement this policy, GSA has established an experienced staff of utilities technical specialists and engineers, available to all agencies, to provide the necessary capabilities to facilitate more economical and efficient procurement and management of public utility services by Federal agencies.

(b) Agencies not having personnel technically qualified to deal with specialized utilities problems and requiring GSA technical assistance, and other 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 § 1-4.405, or in the nearest of the 10 GSA regional offices through the TCS Regional Director.

§ 1-4.405 Submission of information.

All information required by GSA under this Subpart 1-4.4, except where otherwise specified, shall be addressed to the General Services Administration, Transportation 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).

§ 1-4.406-2 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 contract.

separate

(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, a copy of any areawide contract. Each contract includes the specimen order form authorizing service connection, disconnection, change.

§ 1-4.408 GSA long-term contracts.

or

Executive agencies ordinarily cannot obligate the Government for utility services 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

any

proposed connection charge, termination liability, or 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.