near excess foreign currencies and reflect the recommendation of the President's Cabinet Committee on Balance of Payments that, with the exception of the Agency for International Development, all Federal agencies procuring for use abroad should, in general, procure domestic materials unless the delivered cost of domestic materials is estimated to be 50 percent greater than the cost of like materials of foreign origin. AID is expected to follow this policy on its administrative procurement only, continuing its more restrictive buying policies on other procurement. For purposes of carrying out this decision on procurement for use abroad, it is suggested that agencies generally follow the definition of "domestic product" which is provided in Executive Order No. 10582, although it is recognized that some flexibility in the use of this definition may be warranted in exceptional circumstances.

As used in this subpart, the following terms have the meanings set forth in this § 1-6.802.

(a) "End products" means articles, materials, and supplies, which are to be acquired for public use. As to a given contract, the end products are the items to be delivered to the Government, as specified in the contract, including supplies to be acquired by the Government for public use in connection with service contracts, but excluding installation and other services to be performed after delivery.

(b) "Components" means those articles, materials, and supplies, which are directly incorporated into end products.

(c) "United States" means the States, District of Columbia, Puerto Rico, American Samoa, the Canal Zone, the Virgin Islands, and any other place subject to the jurisdiction of the United States.

(d) "U.S. end product" means an unmanufactured end product which has been mined or produced in the United States, or an end product manufactured in the United States if the cost of its components which are mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components. The cost of components shall include transportation costs to the place of incorporation into the end product and, in the case of a component of foreign origin, duty (whether or not a duty free entry certificate may be issued).

A component shall be considered to have been mined, produced, or manufactured in the United States (regardless of its source in fact) if the end product into which it is incorporated is manufactured in the United States and the component is of a class or kind determined by the procuring agency not to be mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities and of a satisfactory quality.

(e) "Foreign end products" means those other than U.S. end products.

(f) "Domestic cost" means the total estimated or actual cost of U.S. end products and services, including all transportation and handling charges.

(g) "Foreign cost" means the total estimated or actual cost of foreign end products and services, including all transportation and handling charges.

(h) "U.S. services" means those that are performed within the United States. In some instances, services provided under a single contract are performed partially in the United States and partially abroad. Such services shall be considered U.S. services if 25 percent or less of the total cost of the services is attributable to services (including incidental supplies used in connection therewith) performed outside the United States.

(i) "Foreign services" means those other than U.S. services.

(j) "Excess and near-excess foreign currencies" means those currencies of other countries held by the United States in amounts determined by the Secretary of the Treasury to be "excess" to the foreseeable, or above the immediate (near-excess), requirements of the U.S. Government, as publicized to U.S. agencies by Bureau of the Budget bulletins. § 1-6.803 Deviations from evaluation and preference procedures.

(a) The evaluation and preference procedures for U.S. end products and services, as described in this subpart, reduce overseas dollar expenditures resulting from agency procurement at an acceptable increase in budgetary costs. However, this result is an average and overall result rather than one which precisely obtains in each case, because, for reasons of administrative practicability, items are considered absolutely as "foreign" or "domestic" and varying degrees within each class are not recognized.

(b) In some cases, consideration of items on such an absolute basis does not produce a satisfactory result. Accordingly, deviation from the evaluation procedures or from the definitions of "U.S. end product" (see §§ 1-6.802 and 1-6.806– 4) should be considered for major procurements (e.g., over $250,000) where it is anticipated that the low domestic bid will involve relatively substantial expenditures for foreign components in the end product offered or that the low foreign bid will involve relatively substantial expenditures for domestic components in the end product offered. In such cases, agencies should determine whether an award based on the domestic end product offered would produce a sufficient balance of payments advantage to warrant the resulting increased cost of procurement.

(c) A request for a deviation should be made sufficiently in advance of the solicitation to describe the evaluation procedure that will be used. The deviation should be approved by the head of the agency or his designee.

§ 1-6.804 Policy.

(a) Wherever feasible, excess foreign currencies (see Bureau of the Budget Circular No. A-20) shall be used for the procurement of articles, materials, supplies, and services for use outside the Contracts for such proUnited States. curements may also provide for payment in both local currency and dollars if the dollar portion is limited to the contractor's validated direct dollar costs of the U.S. export content of these procurements.

(b) When use of excess currencies is found not feasible, and except as provided in § 1-6.805, proposed procurement of articles, materials, supplies, and services for use outside the United States shall be restricted to U.S. end products and services.

(c) Procurements shall not be broken into several separate smaller procurements for the purpose of bringing the individual amounts of such procurements within the dollar limitations of the exceptions in § 1-6.805 which permit the procurement of foreign items.

cordance with a treaty or international agreement.

(2) Where the estimated cost of the product does not exceed $2,500.

(3) Where the estimated cost of the product does not exceed $10,000 and the procuring activity determines that the procurement of such product is required by a compelling emergency.

(4) Where, in connection with the procurement of perishable subsistence items, it is determined that delivery from the United States would destroy or significantly impair their quality at the point of consumption. Such determinations shall be made by each agency in accordance with agency procedures.

(5) Where it is determined, in accordance with agency procedures, that a requirement can only be filled by a foreign end product or service, and that it is not feasible to forego filling the requirement or to provide a U.S. substitute for the requirement.

(6) Where, with respect to procurements other than those covered in subparagraphs (1) through (8) of this paragraph, U.S. end products or services are available, the domestic cost is estimated not to exceed $10,000, and the difference between the domestic cost and the foreign cost is determined to be so large as to make procurements of foreign end products and services clearly desirable. Such determinations shall be made in accordance with agency procedures. Where the domestic cost is estimated to exceed $10,000, and the difference between the domestic cost and the foreign cost exceeds 50 percent of the foreign cost, the matter shall be forwarded to the head of the agency or his designee for determination. In either case, if the agency determines that the foreign end product or service shall be purchased, contracts for such procurements shall provide that the payment in dollars will be limited to the contractor's validated direct dollar costs of the U.S. export content of the procurement where excess or near-excess foreign currency is available and such a limitation on payments in dollars is considered to be practicable.

(7) Where procurements are financed from the Treasury Department supply of "near-excess" foreign currencies.

(8) Where individual products or services have been excepted by agency regulations.

(b) Complete documentation justifying procurements under paragraph (a)

§ 1-6.806-1 Restricted solicitation.

(a) In the case of procurements other than those referred to in §§ 1-6.804(a) and 1-6.805, where the domestic cost is estimated to exceed $10,000, cost estimates of United States and foreign end products and services shall be made prior to solicitation (where one agency procures for another agency the requiring agency shall make the cost estimate). If the domestic cost is estimated to exceed the foreign cost by not more than 50 percent of the foreign cost, the solicitation shall be restricted to U.S. end products and services.

(b) If after bid opening, or receipt of proposals or quotations, the contracting officer has knowledge that domestic cost exceeds foreign cost by more than 50 percent of the foreign cost, he shall proceed as follows:

(1) Where the domestic cost is in excess of $10,000, forward the matter to the head of the agency or his designee for determination; or

(2) Where the domestic cost is not in excess of $10,000, award the contract for U.S. end products or services unless the domestic and foreign cost differential is so large as to make the procurement of foreign end products or services clearly desirable. Should the latter be the case, the solicitation shall be canceled and a nonrestricted solicitation issued.

(c) If the agency determines that the foreign end product or service shall be purchased, contracts for such procurements shall provide that the payment in dollars will be limited to the contractor's validated direct dollar costs of the U.S. export content of the procurement where excess or near-excess foreign currency is available and such a limitation on payments in dollars is considered to be practicable.

§ 1-6.806-2 Method of purchase.

Contracts in furtherance of this Subpart 1-6.8 are considered to be negotiated procurements and may be entered into by conventional negotiation or by special method of negotiated procurement knows as "Balance of Payments Restricted Advertising." Within the United States, the latter method shall be used wherever possible. Balance of Payments Restricted Advertising, includ

ing awards thereunder, shall be conducted in the same manner as prescribed for formal advertising in Part 1-2 of this chapter, except that bids and awards shall be restricted to U.S. end products and services. Contracts entered into pursuant to conventional negotiation shall cite exceptions (2) through (15) of 41 U.S.C. 252(c), as appropriate. Where such negotiation authority is not applicable or where contracts are entered into pursuant to the Balance of Payments Restricted Advertising method of procurement, 41 U.S.C. 252(c) (1) shall be cited as negotiation authority. Invitations for bids and requests for proposals shall clearly designate items being procured pursuant to the Balance of Payments Program.

To the extent that the Government specifies that the items being purchased are in implementation of the Balance of Payments Program, the bidder or offeror hereby certifies that each such item is a U.S. end product or comprises U.S. services (as defined in the contract clause entitled "U.S. Products and Services (Balance of Payments Program)"), and that components of unknown origin have been considered to have been mined, produced, or manufactured outside the United States.

§ 1-6.806-4 Contract clause.

The clause set forth below shall be inserted in contracts resulting from Balance of Payments Program procurements.

U.S. PRODUCTS AND SERVICES (BALANCE OF PAYMENTS PROGRAM)

(a) To the extent that the Government specifies that the items being purchased are in implementation of the Balance of Payments Program, the Contractor agrees that there will be delivered or performed under this contract only U.S. end products or U.S. services.

(b) For the purpose of this clause:

(1) "Components" means those articles, materials, and supplies which are directly incorporated in the end products;

(2) "End products" means those articles, materials, and supplies which are acquired under this contract for public use;

(3) "U.S. end product" means:

(i) An unmanufactured end product which has been mined or produced in the United States; or

(ii) An end product manufactured in the United States, if the cost of the components thereof which are mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components. For the purpose of this subparagraph, components of foreign origin of the same type and kind which the Government determines are not mined, produced, or manufactured in sufficient and reasonably available commercial quantities and of satisfactory quality shall be treated as components mined, produced, or manufactured in the United States.

(4) "U.S. services" means those that are performed within the United States. In some instances, services provided under a single contract are performed partially in the United States and partially abroad. Such services shall be considered U.S. services if 25 percent or less of the total cost of the services is attributable to services (including incidental supplies used in connection therewith) performed outside the United States.

PART 1-7-CONTRACT CLAUSES

Sec.

1-7.000 Scope of part.

Subpart 1-7.1-Fixed-Price Supply Contracts

1-7.601-3

1-7.601-4

1-7.602 1-7.602-1

1-7.602-2

1-7.602-9

Termination for convenience of the Government, in contracts estimated to exceed $10,000. Termination for convenience of the Government, in contracts estimated not to exceed $10,000.

Price reduction for defective cost

or pricing data.

Audit and records.

Subcontractor cost and pricing

Examination of records.

Workmen's compensation insur

ance (Defense Base Act). 1-7.602-10 Federal, State, and local taxes.

Appendix-Background and nature of revisions to contract clauses.

AUTHORITY: The provisions of this Part 1–7 issued under sec. 205 (c), 63 Stat. 390; 40 U.S.C. 486 (c).

SOURCE: The provisions of this Part 1-7 appear at 29 F.R. 10192, July 24, 1964, unless otherwise noted.

§ 1-7.000 Scope of part.

This part sets forth contract clauses for use in connection with the procurement of personal property and nonpersonal services (including construction).

As used throughout this contract, the following terms shall have the meanings set forth below:

(a) The term "head of the agency" or "Secretary" as used herein means the Secretary, the Under Secretary, any Assistant Secretary, or any other head or assistant head of the executive or military department or other Federal agency; and the term "his duly authorized representative" means any person or persons or board (other than the Contracting Officer) authorized to act for the head of the agency or the Secretary.

(b) The term "Contracting Officer" means the person executing this contract on behalf of the Government, and any other officer or civilian employee who is a properly designated Contracting Officer; and the term includes, except as otherwise provided in this contract, the authorized representative of a Contracting Officer acting within the limits of his authority.

(c) Except as otherwise provided in this contract, the term "subcontracts" includes purchase orders under this contract.

The Contracting Officer may at any time, by a 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 furnished are to be specially manufactured for the Government in accordance 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 Con

99-187-69-13

tractor 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 contract. Where the cost of property made obsolete or excess as a result of a change is included in the Contractor's claim for adjustment, the Contracting Officer shall have the right to prescribe the manner of disposition of such property. Failure to agree to any adjustment shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes." However, nothing in this clause shall excuse the Contractor from proceeding with the contract as changed. § 1-7.101-3

Extras. EXTRAS

(a) All supplies (which term throughout this clause includes without limitation raw materials, components, intermediate assemblies, 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 Gov. ernment 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 Contractor 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