industry and instructions for the protection of U.S. classified information in connection with classified contracts awarded to foreign firms are explained in section VIII, ISR (also see § 9.106 of this chapter).

[36 F.R. 21121, Nov. 4, 1971]

§ 1.321

Procurements involving work to be performed in foreign countries by U.S. contractors.

(a) Except as otherwise provided in an international agreement, when a contract which requires work to be performed in a foreign country by personnel of a United States contractor is contemplated, coordination shall be effected with the appropriate component Commander of the unified Command concerned to assure compliance with international agreements (see § 1.320). Such coordination should be effected as early as possible.

(b) The contracting officer shall request the following information from the overseas Commander:

(1) The applicability of any international agreements to the requirement being procured;

(2) Applicability of taxes, duties, and charges for doing business;

(3) Security requirements applicable to the area concerned;

(4) Standards of conduct required to be observed by the prospective contractor and his employees, and any action that may be taken against them in the event required standards are not maintained, and

(5) Requirements pertaining to the use of foreign currencies, including applicability of U.S. holdings of excess foreign currencies.

(c) The contracting officer shall furnish the overseas Commander the following information prior to any contract performance:

(1) Any contractor logistical support desired,

(2) Contract performance period, (3) Date of planned arrival of contractor personnel,

(4) Contract security requirements, and

(5) Other pertinent information to effect complete coordination and cooperation.

(d) The contract file shall be documented as indicated in § 6.903 of this chapter.

[31 F.R. 9851, July 21, 1966, as amended at 36 F.R. 7899, April 28, 1971]

§ 1.322 Multi-year procurement. [29 F.R. 2809, Feb. 29, 1964]

§ 1.322-1 General.

(a) Description of procedure. Multiyear procurement is a method for competitive contracting for known requirements for military supplies or services in quantities and total cost not in excess of planned requirements for 5 years (4 years in the case of supplies or services for the maintenance and operation of family housing), set forth in, or in support of, the Department of Defense 5Year Defense Program, even though the total funds ultimately to be obligated by the contract are not available to the contracting officer at the time of entering into the contract. Under this method, contract quantities are budgeted for and financed in accordance with the program year for which each quantity is authorized. This procedure provides for solicitation of prices based either on award of the current 1-year program quantity only, or, in the alternative, on the total multiyear quantities. Award is made on which ever of these two alternative bases reflects the lowest unit prices to the Government. If award is made on the multiyear basis, funds are obligated only for the first year's quantity, with succeeding years' contract quantities funded annually thereafter. In the event funds are not made available to support one or more succeeding year's quantities, cancellation is effected. The contractor is protected against loss resulting from cancellation by contract provisions allowing reimbursement of unrecovered nonrecurring costs included in prices for canceled items.

(b) Policy. (1) Multiyear procurement shall be used to the maximum extent consistent with paragraphs (c), (d), and (e) of this section. Advantages of this method include, for example: (i) Lower costs;

(ii) Enhancement of standardization; (iii) Reduction of administrative burden in the placement and administration of contracts;

(iv) Substantial continuity of production or performance;

(v) Stabilization of work forces; and

(vi) Broadening the competitive base with opportunity for participation by firms not otherwise willing or able to compete for lesser quantities, particularly in cases involving high startup costs.

(2) The principal objective of the

multi-year procedure is to generate realistic competition by minimizing competitive disadvantage and by increasing contractor interest in particpating in procurements which involve high startup costs and make-ready expense and which also may require substantial capital investment by contractors for expansion of their facilities. Under this procedure:

(i) Nonrecurring costs are distributed over a large number of units, thus narrowing any price advantage of a firm already in production or performance;

(ii) There is greater assurance of depreciation recovery for capital investment; and

(iii) The competitive base is broadened with better prospects for lower prices, where firms otherwise might be unwilling or unable to compete.

(3) Another major objective is to obtain lower prices in those procurements which do not necessarily involve high startup cost but which do provide opportunity for substantial cost savings and other advantages through assurance of continiuty for production or performance over longer periods of time. In determining whether substantial cost savings and related advantages can be realized, consideration may be given to whether:

(i) Production or performance closeout or shutdown costs, including employee severance pay, represent a substantial cost contingency in prices quoted on only 1 year's program;

(ii) Stabilization of work forces will provide greater assurance of sustaining and improving efficiency and quality;

(iii) Substantial cost and quality advantage will accrue through avoidance of the possible need for establishing and "proving out" quality control techniques and procedures for a new contract each year;

(iv) Costly preproduction or pilot testing will be avoided;

(v) The ability to recruit and retain highly skilled personnel will be enhanced through assurance to employees of longer periods of employment than would be the case in single-year procurement, thereby avoiding costs of repeated training of new personnel;

(vi) The ability to vary production or performance rates during peak and offpeak periods in each program year will result in economies; and

(vii) Substantial in-house savings in maintenance and supply operations will accrue from standardization of supplies or services accomplished by procurement

66-070-72- 4

from a single source throughout the multiyear period.

(c) Set-asides. Total small business set-asides are compatible with the multiyear method of procurement and may be used when both procedures are appropriate. Partial set-aside procedures (both small business and labor surplus area) generally are not compatible with the multiyear procedure when high startup costs are involved because of the potential duplication of such costs by the setaside contractor and the non-set-aside contractor. However, when the multiyear procedure is based not on high startup costs but on the opportunity for cost savings through assurance of continuity of production over longer periods of time, partial set-aside procedures are compatible with the multiyear procedure. Furthermore, even when high startup costs are involved, use of partial set-aside procedures together with the multiyear procedure may be appropriate in exceptional circumstances, such as where the criteria for partial set-asides are met under Subparts G and H of this part, and it is likely that broader or more realistic competition will result from a combination of both procedures, and this broader competition is likely to more than offset any duplication of startup costs. When reviewing a proposed procurement involving possible use of this procedure, in addition to consideration of the criteria established in this paragraph and paragraph (b) of this section, the contracting officer shall invite the advice and counsel of the activity's small business specialist and the SBA representative, if one is assigned to that activity, permitting either or both to review all pertinent facts and make recommendations thereon.

(d) Multiyear subcontracts. The same benefits and advantages that are derived from multiyear prime contracts may frequently be increased by multiyear subcontracts thereunder. The prime contractor in the exercise of his management responsibilities must freely choose the subcontract types that best satisfy his needs. However, multiyear prime contractors should be encouraged to employ multiyear subcontracts selectively and only when:

(1) The subcontract item or service is of stable design and specification; (2) The quantity required is known and firm;

(3) Effective competition is assured;

and

(4) The use of multiyear subcontracts can reasonably be expected to result in reduced prices.

In such cases, the prime contractor is adequately protected against cancellation since appropriate cancellation charges for such multiyear subcontracts are included within the cancellation charge of the multiyear prime contract. Multiyear subcontracts may be particularly desirable under a sole source multiyear prime contract since effective competition at the subcontract level may thereby be enhanced and the attendant cost reductions realized by the prime contractor and the Government.

(e) Use of options. (1) The use of options can be of assistance to the contracting officer when some future requirements are definite and additional quantities are likely, though not definitive as to amount: Provided, The option quantities are not disproportionately large in relation to the known requirements.

(2) The solicitation document (IFB or RFP) shall contain language to require the bidders (offerors) to submit prices for option quantities which reflect only the recurring costs to produce additional items, and specifically excludes those costs of a startup and nonrecurring nature which have been amortized in the unit prices of the definitive program year quantities.

[34 F.R. 17880, Nov. 5, 1969, as amended at 36 F.R. 21121, Nov. 4, 1971]

(a) Except as provided in paragraph (j) of this section, the multiyear procurement method for supplies should be used when all of the following criteria are present:

(1) Reduced unit prices can reasonably be anticipated over annual buys by reason of continuity of production or elimination of repetitive substantial startup costs, including such costs as preproduction engineering, special tooling, plant rearrangement, initial rework, initial spoilage, and pilot runs;

(2) There is reasonable expectation that effective competition can be obtained;

(3) There are known requirements for the quantities to be purchased under the multiyear contract;

(4) The design and specifications of the item are not expected to change to

an extent that would involve a major impact on contract price; and

(5) The items being procured are not regularly manufactured and offered for sale in substantial quantities in the commercial market, except that (i) when quantities to be procured by the Government represent a substantial portion of the total market and would require special manufacturing runs for all or substantially all of the Government's requirements and (ii) significant cost savings would result from multiyear procurement; this procedure may be authorized by the head of a procuring activity or his designee with the procurement file fully documented as to reasons why the expected substantial savings are not obtainable under annual procurements.

(b) Formal advertising, including twostep formal advertising, is the preferred method for use in multiyear procurement. In cases where the period of production is such that a contingency for labor and material costs is likely otherwise to be included in the multiyear contract price, the contracting officer should normally use a provision for price escalation.

(c) Solicitations shall include:

(1) A statement of the requirements, separately identified by bid or proposal item in the schedule, for—

(i) The first program year; and

(ii) The multiyear procurement including the quantities for each program year thereunder;

(2) When previous production procurements of the item have been made with competition

(i) A provision that a price may be submitted for the total requirements of the first program year, or for the total multiyear requirements, or both, or

(ii) When competition in future procurements of the items would be impracticable after award of a contract covering the first program year quantity alone and the head of a procuring activity determines that, in order to eliminate the possibility of a first program year "buy-in," these provisions will be in the best interests of the Governmentprovisions that a price may be submitted only for the total multiyear quantity and that prices on a single-year basis will not be considered for any purpose;

(3) When there has been no previous competition for the production of the item

(i) (a) Provisions that a price must be

submitted for the total requirements of the first program year, that a price may be submitted for the total multiyear quantity; and that a bid or offer on the multiyear quantity only will be considered nonresponsive, and

(b) A provision that if only one responsive bid or offer on the multiyear requirements is received from a responsible bidder or offeror, the Government reserves the right to disregard the bid or offer on the multiyear quantity and to make an award only for the first program year requirements; or

(ii) When competition in future procurements of the items would be impractical after award of a contract covering the first program year quantity alone and the head of a procuring activity determines that, in order to eliminate the possibility of a first program year "buy-in," these provisions will be in the best interests of the Government

(a) Provisions that a price may be submitted only for the total multiyear quantity and that prices on a singleyear basis will not be considered for any purpose, and

(b) A provision that if only one responsive bid or offer on the multiyear requirements is received from a responsible bidder or offeror, the Government reserves the right to cancel the solicitation and resolicit on a single-year basis by whatever procedures are then appropriate;

(4) A provision that the unit price of each item in the multiyear requirement shall be the same for all program years included therein;

(5) Criteria for comparing the lowest evaluated submission on the first program year's requirement against the lowest evaluated submission on the multiyear requirements (see § 1.322-3 (c));

(6) When the solicitation permits bids or offers on either the first program year requirements or the multiyear requirements or both, a provision that in the event the Government determines prior to award (but see §§ 2.208 and 3.505 of this chapter) that only the first program year quantities are actually required, the Government may evaluate bids or offers and make award solely on the basis of prices bid or offered on the first program year requirements;

(7) A provision setting forth a separate cancellation ceiling (on a percentage basis) applicable to each program year

subject to cancellation (see paragraph (d) of this section);

(8) A prominently placed provision directing attention to the multiyear features of the solicitation, and to—

(i) The Limitation of Price and Contractor Obligations clause (see § 1.3225(a)) which limits the payment obligation of the Government to the requirements of the first program year and to those of such succeeding program years as may be funded by the Government (see § 1.322-5(b));

(ii) The Cancellation of Items clause (see § 1.322-5(b)) which allows the Government to cancel, by a specified date or within a specified period, all remaining program years; and

(iii) The cancellation set forth in the schedule; and

(9) A statement in the solicitation schedule that award will not be made on less than the quantity stated as the first program year requirements.

(d) The term "cancellation" as used in multiyear procurement refers only to the cancellation of the total requirements of all remaining program years. Such cancellation results from (1) notification from the contracting officer to the contractor of nonavailability of funds for contract performance for any subsequent program year, or (2) failure of the contracting officer to notify the contractor that funds have been made available for performance of the succeeding program year requirement. For each program year except the last, the contracting officer shall establish a cancellation ceiling applicable to the remaining program years which are subject to cancellation. Cancellation ceilings will be lower for each succeeding program year in that such ceilings must exclude all amounts allocable to items included in prior program years. Such ceilings shall be expressed in the schedule and shall apply to all bidders alike. The reduction in the cancellation ceilings percentage for each program year shall be in direct proportion to the reduction in the quantity remaining subject to cancellation. For example, if the total nonrecurring costs are estimated at 10 percent of the total multiyear price and program year quantities for 5 years are 30, 30, 20, 10. and 10, the cancellation percentages after deducting 3 percent for the first program year would be 7 percent, 4 percent, 2 percent, and 1 percent of the total multiyear price applicable to the second, third, fourth, and fifth program years respec

applicable to the proposed procurement because of a preexisting license agreement between the Government and a patent owner, the solicitation shall so state and shall: (a) Identify the patents and specify the royalty rate; and (b) advise that an amount equal to the royalty which the Government will be required to pay under the license agreement will be added as an evaluation factor to each bid/offer unless the bidder/ offeror includes in his bid/offer a statement that he is the owner of or a licensee under the patents. (See §§ 2.201(a) (2)(ix) and (4) (i) and (b) (16) and (28), and 3.501(b) (2) (xix), (4) (x), and (c) (44) of this chapter.

[35 F.R. 46, Jan. 3, 1970]

§ 1.305 Time of delivery or perform

(a) The time of delivery or performance is an essential element for inclusion in a contract and must be clearly set forth in invitations for bids and requests for proposals. Delivery and performance schedules shall be designed to meet the requirements of the particular procurement, with due regard to all relevant factors, and must be realistic. Delivery and performance schedules which are unreasonably tight or difficult of attainment are inimical to full competition, inconsistent with small business policies (see 1.702(b)(6), and may result in higher contract prices. Therefore, prior to issuing an invitation for bids or request for proposals, the contracting officer shall question any delivery requirement which appears unrealistic, and, if necessary, initiate action to make appropriate adjustments, with due attention to relevant factors such as applicable transportation factors (see part 19 of this chapter) and those listed below:

(1) Urgency of need for the supplies or services;

(2) Production time (quantity, complexity of design, etc.);

(3) Market conditions;
(4) Transportation time;

(5) Industry practices;

(6) Capabilities of small business concerns;

(7) Time for obtaining and evaluating bids or offers, and awarding contracts;

(8) Time for contractors to comply with any conditions precedent to contract performance; and

(9) Time for Government to perform its obligations under the contract (e.g., furnishing Government property to the contractor, approval of preproduction samples, and inspection).

(b) Where timely delivery or performance is unusually important to the Government, liquidated damages provisions may be used as provided in § 1.310.

(c) Invitations for bids and requests for proposals shall, except where clearly unnecessary, inform bidders or offerors of the basis on which their bids or proposals will be evaluated with respect to time of delivery or performance.

[25 F.R. 14083, Dec. 31, 1960, as amended at 33 F.R. 15380, Oct. 17, 1968] § 1.305-3

Terms.

(a) Delivery schedules may be expressed in terms of—

(1) Specific calendar dates (e.g., on or before, July 1, 1968);

(2) Specified periods from date of contract (i.e., date of award or acceptance by the Government, or date shown on contract document as effective date of contract); or

(3) Specified periods from date of receipt by contractor of notice of award or acceptance by the Government (including notice by receipt of contract document executed by the Government).

The full period which the Government holds out as being available for contract performance should not be curtailed to the prejudice of the contractor by delay in giving notice of award. Accordingly, one of the provisions in paragraph (b) or (c) of this section shall be used in advertised procurements and may be suitably modified and used in appropriate negotiated procurements (other than small purchases).

(b) Where the delivery schedule is in terms of specific calendar dates, invitations for bids will include one of the following provisions:

(1) The foregoing delivery requirements are based on the assumption that the Government will make award by [purchasing activity, insert calendar date]. Each delivery date in the delivery schedule set forth herein