by this regulation (but see § 7.104-45(b) of this chapter).

(b) Therefore, the clause set forth in § 7.104-45(a) of this chapter shall be inserted in all contracts requiring the delivery of supplies with exception of the following:

(1) Major items. In procurements of high dollar value items, it is Department of Defense policy, in addition to paragraph (a) of this section, to relieve the contractor from liability for loss of or damage to the contract end item occurring after final acceptance of such end item. Accordingly, the clause in § 7.10445 (b) of this chapter shall be substituted for the clause in § 7.104-45(a) of this chapter in contracts for such items as missiles, aircraft, tanks, ships, aircraft engines, navigational and communications systems to the extent any of these items have a high unit cost. The § 7.10445(b) of this chapter clause would not be appropriate when the contractor includes in his price a contingency for such losses. The § 7.104-45 (b) of this chapter clause does not limit the Government's rights otherwise arising under the contract to have any defective items or components thereof, corrected, repaired or replaced when discovery of the defect occurs prior to loss of or damage to the contract end item or equivalent relief when the defect is discovered after loss or damage occurs.

(2) Catalog or market priced items. Contractors generally carry products liability insurance or similar insurance coverage or maintain a reserve for self insurance covering liability arising out of defective commercial items. Accordingly, the clause in § 7.104-45 (a) of this chapter should not be used for catalog or market priced items (see § 3.807-1(b) (2) of this chapter) unless there is an appropriate reduction in the catalog or market price to reflect reduced contractor liability.

(3) Purchase orders. The $7.104-45 (a) of this chapter clause is optional for use with DD Form 1155, Order for Supplies or Services/Request for Quotations.

(4) Contractor practices. When it is a contractor's practice to insure for the liability excluded by the clause in § 7.10445(a) of this chapter, the clause shall not be used unless it can be ascertained that the price includes no part of the cost of insurance or a reserve for self insurance for such liability.

[36 F.R. 21122, Nov. 4, 1971]

§ 1.331 Management control systems.

(a) A management control system is an orderly way, generally including a documented procedure, of assisting managers in defining or stating policy, objectives, and requirements; assigning responsibility; achieving efficient and effective utilization of resources; periodically measuring performance; comparing that performance against stated objectives and requirements; and taking appropriate action. Contractually imposed management control systems require the contractor to submit management reports and/or specify management procedures, To avoid duplication and proliferation, only those management control systems which are essential to the fulfillment of DoD and contractor responsibilities shall be made a contractual requirement.

(b) The responsibility for determining management control systems requirements and for completion of the DD Form 1660 is vested in the project officer, program manager, commodity manager, or other requiring office. Procedures for review of the DD Form 1660 by the contracting officer are specified in § 16.827-3 of this chapter.

(c) Although the judicious application of management control systems on all contracts regardless of size is important, use of the DD Form 1660 is only required on those contracts exceeding $1 million.

(d) Pursuant to the above, appropriate management control systems shall be contractually applied only if they:

(1) Are required by a standard ASPR clause, or

(2) Are listed in DoD Manual 7000.6 M, Management Control Systems List; or (3) Are specifically approved by the Office of the Assistant Secretary of Defense (Comptroller) or of the Secretary of the Department concerned.

(e) Approved management control systems, except those specified in this Regulation, shall be listed on a Management Control Systems Summary List, DD Form 1660 (see F-200.1660). An approved DD Form 1660 and the contract clause titled "Management Control Systems Requirement" (see § 7.104-50 of this chapter) shall be included in all contracts when applicable.

(f) The DD Form 1660 procedures help to achieve the following objectives with respect to the management of programs and the acquisition of management data:

(1) Management control systems selected for use in managing the contract/

program should be limited to those that are essential to the fulfillment of the responsibilities of the Department of Defense and contractor.

(2) More than one management control system satisfying the same requirement should not be specified on a single contract.

(3) The management data requirements in a contract should be formally approved, should not exceed the needs of the planned program management approach, and should be specifically identified on an individual item basis. (g) Instructions for the preparation, review and use of DD Form 1660 are in § 16.827 of this chapter. [34 F.R. 12017, July 17, 1969]

Subpart D-Procurement Responsibility and Authority

SOURCE: The provisions of this Subpart D appear at 31 F.R. 1039, Jan. 29, 1966, unless otherwise noted.

§ 1.400 Scope of subpart.

This subpart deals with the procurement responsibility and authority of (a) the Head of a Procuring Activity, (b) purchasing offices, (c) contract administration offices, and (d) contracting officers, and with the appointment of contracting officers. This subpart also im'poses limitations upon the authority to enter into and administer contracts. For the purpose of this subpart, the term "contracting officer" does not include authorized representatives of the contracting officer.

[33 F.R. 15380, Oct. 17, 1968]

§ 1.401 Responsibility of each procuring activity.

Except as otherwise prescribed by procedures of each respective Department, the Head of a Procuring Activity is responsible for the procurement of supplies and services under or assigned to the procurement cognizance of his activity.

§ 1.402 Authority of contracting officers.

Contracting officers at purchasing offices (see § 1.201-24) are authorized to enter into contracts for supplies or services on behalf of the Government, and in the name of the United States of America, by formal advertising, by negotiation, or by coordinated or interdepartmental procurement; and when authorized to administer such contracts, in accordance with this subchapter. This

authority is subject to the requirements prescribed in §§ 1.403 and 1.404 and any further limitations, consistent with this subchapter, imposed by the appointing authority. Contracting officers at contract administration offices (see § 1.20125) are, except as otherwise provided, authorized to perform the applicable contract administration functions (see § 1.406) and to perform additional procurement functions when delegated by the purchasing office.

[33 F.R. 15380, Oct. 17, 1968]

§ 1.403 Requirements to be met before entering into contracts.

No contract shall be entered into unless all applicable requirements of law and of this subchapter, and all other applicable procedures, including business clearance and approval, have been met. § 1.404 Special requirements to be met before entering into negotiated con

tracts.

In addition to the requirements in § 1.403, no negotiated contract shall be entered into until the determinations and findings required by Subparts C and D, Part 3 of this chapter, with respect to the circumstances justifying negotiation and with respect to any use of a special method of contracting have been made. § 1.405 Selection, appointment, and termination of appointment of contracting officers.

The selection, appointment, and termination of appointment of contracting officers shall be made only by the Secretary of the Department, the Head of a Procuring Activity, or their designees. § 1.405-1

Selection.

(a) Considerations. In selecting contracting officers, the appointing authority shall consider experience, training, education, business acumen, judgment, character, reputation, and ethics.

(b) Evaluation of experience, training, and education. In considering experience, training, and education, the following shall be evaluated:

(1) Experience in a Government procurement office, commercial procurement, or related fields;

(2) Formal education or special training in business administration, law, accounting, or related fields;

(3) Completion of the Defense Procurement Management Course or other procurement courses; and

(4) Knowledge of the provisions of this subchapter and of other applicable regulations.

§ 1.405-2 Appointment.

(a) Except for those individuals who are designated contracting officers by position, appointment of contracting officers shall be made on DD Form 1539, Certificate of Appointment, issued by the appointing official (see F-200.1539). Any limitations on the scope of the authority to be exercised by the contracting officer, other than those contained in this subchapter, shall be entered on the face of the certificate. Certificates may be serially numbered.

(b) The office of each appointing authority shall maintain a file containing all documents (such as résumés, references, and records of training) necessary to support the appointment of each contracting officer.

§ 1.405-3 Termination of appointment.

(a) Automatic termination. Unless the appointment of a contracting officer contains other provision for automatic termination, the appointment shall remain effective, unless sooner revoked, until the contracting officer is reassigned or his employment is terminated.

(b) Revocation. The appointment of a contracting officer may be revoked at any time by the appointing authority, or higher appointing authority, or any successor to either, but no such revocation shall operate retroactively. Revocation of the appointment shall be made by letter, reading substantially as follows:

ability, training and experience of the contracting officer. Duties, involving contracts of large dollar value and complexity, shall be given only to personnel with commensurate experience, training, and ability.

§ 1.406 Contract administration functions.

(a) When a contract is assigned for administration, functions which have been determined to be the responsibility of the contract administration component will automatically be performed by that component, and a delegation or assignment letter is unnecessary. However, if special instructions pertaining to administration of a particular contract are to apply, they should be contained in a letter accompanying the contract when it is assigned for administration. Such letters will not reference directives of the procuring department without the prior concurrence of the department peforming contract administration services.

(b) Each contract assigned by a purchasing office to a contract administration component for administration shall contain or be accompanied by all procuring agency instructions or directives which are incorporated in such contract by reference. This will not be necessary if a copy has been previously furnished for application to that contractor.

(c) This section constitutes the authority of the contract administration office designated in accordance with section XX, Part 7, of the ASPR, to perform contract administration functions to the extent applicable, in accordance with this regulation, the provisions of contracts assigned for administration, and the directives of the department performing the services. Functions listed below are the responsibility of, and, except as provided in 20-703.3 of the ASPR, shall be performed by, contract administration offices:

(1) Review contractor's compensation structure;

(2) Review the contractor's insurance plans;

(3) Review and approve or disapprove contractor's request for payments under the progress payments clause;

(4) Determine the allowability of costs suspended or disapproved on a DCAA Form 1 when a written appeal has been received from the contractor, direct the suspension or disapproval of any costs when there is reason to believe that they

should be suspended or disapproved, and approve final vouchers;

(5) Negotiate billing and final overhead rates when the contract contains the clause in §3.704 of this chapter, except when negotiations responsibility is placed elsewhere in accordance with Departmental procedures;

(6) Negotiate understandings consistent with agreements negotiated under $15.107 of this chapter applicable to treatment of costs under contracts currently assigned for administration;

(7) Negotiate prices and execute supplemental agreements for spare parts and other items selected through provisioning procedures;

(8) Review and evaluate contractor's proposals in accordance with § 3.801-3 (b) of this chapter and furnish comments and recommendations to the procuring contracting officer when negotiation will be accomplished by the procuring contracting officer;

(9) When authorized by the purchasing office, negotiate or negotiate and execute supplemental agreements incorporating contractor proposals resulting from change orders issued under the Changes clause (prior to completion of negotiations and issuance of the supplemental agreement, any delivery schedule change shall be coordinated with the purchasing office);

(10) Manage special bank accounts; (11) Assure timely notification by the contractor of any anticipated overrun or underrun of the estimated cost under cost-type contracts;

(12) Review, approve or disapprove and maintain surveillance of the contractor's procurement system;

(13) Consent to the placement of subcontracts;

(14) Monitor contractor's financial condition and advise the procuring contracting officer when contract performance is jeopardized thereby;

(15) When authorized by the purchasing office, negotiate prices and execute priced exhibits for unpriced orders issued by the procuring contracting officer under basic ordering agreements;

(16) Issue tax exemption certificates; (17) Conduct post-award orientation conferences;

(18) Issue work requests under maintenance, overhaul and modification contracts;

(19) Negotiate and execute contractual documents for settlement of partial and complete contract terminations for

convenience, except as otherwise prescribed by Part 8 of this chapter;

(20) Perform necessary screening, redistribution, and disposal of contractor inventory;

(21) Perform property administration;

(22) Prepare findings of fact and issue decisions under the disputes clause on matters on which the contract administration office has the authority to take definitive action;

(23) Assure processing and execution of duty-free entry certificates;

(24) In facilities contracts

(i) Evaluate contractor's requests for facilities and changes to existing facilities, and provide the procuring contracting officer with appropriate recommendations thereon;

(ii) Assure required screening of facility items before acquisition by contractor;

(iii) Approve use of facilities on a noninterference basis in accordance with paragraph (b) of the clause in § 7.70212 of this chapter;

(iv) Assure payment of any rental due; and

(v) Assure reporting of items no longer needed for defense production;

(25) Perform production support, surveillance, and status reporting, including timely reporting of potential and actual slippages in contract schedules;

(26) Perform pre-award surveys; (27) Perform industial readiness and mobilization production planning field surveys and schedule negotiations;

(28) Monitor compliance with labor and industrial relations matters under the contract, apprising the procuring contracting officer of actual or potential labor disputes, and removing material from strikebound contractor's plants upon instructions from the procuring contracting officer;

(29) Perform traffic management services including issuance and control of Government bills of lading and other transportation documentation;

(30) Review the adequacy of the contractor's traffic operations;

(31) Review and evaluate preservation, packaging, and packing;

(32) Provide surveillance of contractor design, development, and production engineering efforts;

(33) Review engineering studies, design, and proposals, and make recommendations to the system/project manager or purchasing office;

(34) Evaluate and monitor contractor engineering efforts and expenditures in accordance with contract terms;

(35) Conduct surveillance of contractor engineering practices with regard to subcontractors;

(36) Review, on a continuing basis, contractor test plans and directives for compliance with contract terms; compare milestone; progress, and cost against contract requirements;

(37) Assist in classification of waivers and deviations;

(38) Evaluate the adequacy of contractor engineering data control systems, including assurance that systems provide for timely incorporation of changes in data being acquired;

(39) Monitor contractor value engineering programs;

(40) Review cost reduction proposals, and submit comments regarding effect of proposed changes on the engineering requirements of the contract;

(41) Evaluate and perform surveillance of contractor configuration management systems and procedures;

(42) Perform surveillance of contractor engineering change systems; review Class I engineering change proposals, and comment on engineering feasibility and need; assist in price analysis of engineering changes; review Class II engineering changes to insure proper classification;

(43) Evaluate the contractor management, planning, scheduling, and allocation of engineering resources;

(44) Evaluate and monitor contractor reliability and maintainability programs;

(45) Review and evaluate for technical adequacy the logistic support, maintenance, and modification programs accomplished by the contractor;

(46) Make appropriate comments to purchasing offices on any inadequacies noted in specifications;

(47) Perform procurement quality

assurance;

(48) Maintain surveillance of flight operations;

(49) Assure contractor compliance with applicable safety requirements;

(50) Assure contractor's compliance with small business and labor surplus area mandatory subcontracting program, conducting, on an as-required basis, small business and labor surplus area setaside surveillance, and providing advice to small business and labor surplus area concerns;

(51) In connection with classified contracts, administer those portions of the

66-070-726

Industrial Security Program designated as ACO responsibilities in the ISR and ISM (See Appendix C, Industrial Security Regulation, DoD 5220.22-R, for partial listing of primary responsibilities (also see § 1-320).);

(52) Make payments on assigned contracts;

(53) Assign and perform supporting administration;

(54) Assure timely submission of required reports;

(55) Will advise and assist defense contractors regarding their priorities and allocations responsibilities and assist defense purchasing activities in processing requests for special assistance and for priority ratings for privately owned capital equipment;

(56) Process and execute novation and change of name agreements in accordance with Subpart D, Part 26 of this chapter, and;

(57) When authorized by the purchasing office, negotiate or negotiate and execute supplemental agreements accelerating or decelerating contract delivery schedules.

Procurement functions not designated as contract administration functions shall remain the responsibility of the purchasing office.

[36 F.R. 7900, Apr. 28, 1971, as amended at 36 F.R. 21123, Nov. 4, 1971]

Subpart E-Contingent or Other Fees § 1.500 Scope of subpart.

This subpart sets forth the procedures to be followed and prescribes the form to be used for obtaining information concerning contingent or other fees paid by contractors for soliciting or securing contracts from the Department of Defense, including the Departments of the Army, the Navy, the Air Force, and the Defense Supply Agency.

[27 F.R. 11644, Nov. 27, 1962] § 1.502

Applicability.

This subpart applies to all contracts. [25 F.R. 14086, Dec. 31, 1960]

§ 1.503 Covenant against contingent fees clause.

Every contract shall contain the clause entitled "Covenant Against Contingent Fees" as set forth in § 7.103-20 except as provided in § 16.401-3(g). [31 F.R. 9852, July 21, 1966]