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(2) Application. This type of contract is particularly suitable for use where it is known in advance that a definite quantity of property or services will be required during a specific period and are regularly available or will be available after a short lead time. Advantages of this type of contract are that it permits stocks in storage depots to be maintained at minimum levels and permits direct shipment to the user.

(b) Requirements contract—(1) Description. This type of contract provides for filling all actual purchase requirements of specific property or services of designated activities during a specified contract period with deliveries to be scheduled by the timely placement of orders upon the contractor by activities designated either specifically or by class. Depending on the situation, the contract may provide for (i) firm fixed-prices, (ii) price escalation, or (iii) price redetermination. An estimated total quantity is stated for the information of prospective contractors, which estimate should be as realistic as possible. The estimate may be obtained from the records of previous requirements and consumption, or by other means. Care should be used in writing and administering this type of contract to avoid imposition of an impossible burden on the contractor. Therefore, the contract shall state, where feasible, the maximum limit of the contractor's obligation to deliver and, in such event, shall also contain appropriate provision limiting the Government's obligation to order. When large individual orders or orders from more than one activity are anticipated, the contract may specify the maximum quantities which may be ordered under each individual order or during a specified period of time. Similarly, when small orders are anticipated, the contract may specify the minimum quantities to be ordered.

(2) Application. A requirements contract may be used for procurements where it is impossible to determine in advance the precise quantities of the property or services that will be needed by designated activities during a definite period of time. Advantages of this type of contract are:

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(v) It permits stocks to be maintained at minimum levels and allows direct shipment to the user. Generally, the requirements contract is appropriate for use when the item or service is commercial or modified commercial in type and when a recurring need is anticipated.

(c) Indefinite quantity contract—(1) Description. This type of contract provides for the furnishing of an indefinite quantity, within stated limits, of specific property or services, during a specified contract period, with deliveries to be scheduled by the timely placement of orders upon the contractor by activities designated either specifically or by class. Depending on the situation, the contract may provide for (i) firm fixed-prices, (ii) price escalation, or (iii) price redetermination. The contract shall provide that during the contract period the Government shall order a stated minimum quantity of the property or services and that the contractor shall furnish such stated minimum and, if and as ordered, any additional quantities not exceeding a stated maximum which should be as realistic as possible. The maximum may be obtained from the records of previous requirements and consumption, or by other means. When large individual orders or orders from more than one activity are anticipated, the contract may specify the maximum quantities which may be ordered under each individual order or during a specified period of time. Similarly, when small orders are anticipated, the contract may specify the minimum quantities to be ordered.

(2) Application. An indefinite quantity contract may be used where it is

impossible to determine in advance the precise quantities of the property or services that will be needed by designated activities during a definite period of time and it is not advisable for the Government to commit itself for more than a minimum quantity. Advantages of this type of contract

are:

(i) Flexibility with respect to both quantities and delivery scheduling;

(ii) Property or services need be or¡dered only after actual needs have materialized;

(iii) The obligation of the Government is limited; and

(iv) It permits stocks to be maintained at minimum levels and allows direct shipment to the user. The indefinite quantity contract should be used only when the item or service is commercial or modified commercial in type and when a recurring need is anticipated.

§ 1-3.410 Other types of agreements.

§ 1-3.410-1 Basic agreement.

(a) Description. A basic agreement is a written instrument of understanding executed between a procuring agency and a contractor which sets forth the negotiated contract clauses which shall be applicable to future procurements entered into between the parties during the term of the basic agreement. The use of the basic agreement contemplates the coverage of a particular procurement by the execution of a formal contractual document which will provide for the scope of the work, price, delivery, and additional matters peculiar to the requirement of the specific procurement involved, and shall incorporate by reference or append the contract clauses agreed upon in the basic agreement, as required or applicable.

(b) Application. (1) Basic agreements are appropriate for use when (i) past experience and future plans indicate that a substantial number of separate contracts may be entered into with a contractor during the term of the basic agreement, and (ii) substantial recurring negotiating problems exist with a particular contractor.

(2) A basic agreement shall be amended only by an amendment of

the basic agreement itself and shall not be modified or superseded by individual contracts or purchase orders entered into under and subject to the terms of such basic agreement. As a minimum, basic agreements will be reviewed annually on the anniversary of their effective date and revised at that time to conform with the current requirements of this chapter. Amendments shall not have retroactive effect.

(3) Basic agreements shall provide for discontinuance of their future application upon 30 days written notice by either party. Discontinuance of a basic agreement will not affect any individual contract referencing the basic agreement (or the clauses appended thereto) entered into prior to the effective date of discontinuance.

(c) Limitations. (1) Basic agreements shall neither cite appropriations to be charged nor be used alone for the purpose of obligating funds.

(2) Basic agreements shall not in any manner provide for or imply any agreement on the part of the Government to place future orders or contracts with the contractor involved. Basic agreements shall not be used in any manner to restrict competition.

(3) Basic agreements generally shall be utilized only in connection with negotiated contracts.

§ 1-3.410-2 Basic agreements with educational institutions and nonprofit organizations.

(a) This section sets forth information and procedures regarding basic agreements for the procurement of research and development from educational institutions and nonprofit organizations.

(b) An appropriate basic agreement may be negotiated with each educational institution and nonprofit organization (except Federally Funded Research and Development Centers (FFRDC), including the Federal Contract Research Centers (FCRC) as they are designated in the Department of Defense (DOD)), in accordance with the conditions set forth in § 1-3.410-1. Agencies are encouraged to obtain and utilize the basic agreements entered into by both other civil

ian agencies and DOD to the maximum practicable extent.

(c) The responsibility for negotiating basic agreements with educational institutions and nonprofit organizations for the DOD has been assigned to the Office of Naval Research, 800 North Quincy Street, Arlington, Virginia 22217. At the beginning of each fiscal year the Office of Naval Research will issue a listing of DOD current basic agreements. Copies of the agreements are maintained by the Office of Naval Research and are available to procurement activities of civilian agencies upon request.

(d) The responsibility for negotiating basic agreements for the civilian agencies rests with each individual agency. Each agency shall report its agreements to the FPR Staff, General Services Administration, FV, Washington, D.C. 20406, 15 days after September 30, each year.

(e) A list of civilian agency basic agreements will be compiled by the General Services Administration. The list will be combined with the DOD list, and will be published at the beginning of each fiscal year in FPR Bulletins.

[40 FR 27655, July 1, 1975, as amended of 43 FR 7318, Feb. 22, 1978]

§ 1-3.410-3 Basic ordering agreement.

(a) Description. A basic ordering agreement is an agreement which is similar to a basic agreement (see § 13.410-1) except that it also includes a description, as specific as practicable, of the supplies to be furnished or services to be performed when ordered and a description of the method for determination of the prices, consistent with the contract types authorized by this subpart, to be paid to the contractor for such supplies or services. Either the specific terms and conditions of delivery or a description of the method for their determination shall be set forth in the basic ordering agreement. The basic ordering agreement shall list one or more activities which are authorized to issue orders under the agreement. Any activity so named may issue orders specifying the supplies or services required, which orders may be accepted by the contractor by whatever manner of accept

ance is indicated in the basic ordering agreement. Each order will incorporate by reference the provisions of the basic ordering agreement.

(b) Application. The basic ordering agreement may be used as a means of expediting procurement where specific items, quantities, and prices are not known at the time of execution of the agreement but where past experience or future plans indicate that a substantial number of requirements for items or services of the type covered by the basic ordering agreement will result in procurements from the contractor during the term of the agreement. Under proper circumstances, use of the procedures under the agreement is advantageous and economical in ordering parts for equipment support since such procedures substantially shorten the administrative time required for placing such articles in a production status, thereby not only decreasing the amount of support inventory required to be carried but also decreasing the possibility that parts procured will become obsolete as a result of design changes in the equipment.

(c) Limitations. (1) Supplies or services may be ordered under a basic ordering agreement only if it is determined at the time the order is placed that it is impracticable to obtain competition by either formal advertising or negotiation for such supplies or services.

(2) The Government shall neither make any final commitment nor authorize any work by the contractor pursuant to an order under a basic ordering agreement until prices have been established, unless the order establishes a monetary limitation on the obligation of the Government and either

(i) The order is subject to provisions contained in the basic ordering agreement which set forth adequate procedures for arriving at prices as early in contract performance as practical, but in no event shall such procedures permit the price of the entire order to be established on a retroactive basis (however, incentive provisions consistent with this Subpart 1-3.4 are permitted); or

(ii) The need for the supplies or services is compelling and of unusual urgency, as when the Government would be seriously injured, financially or otherwise, if the supplies or services were not furnished by a certain date and when they could not be furnished by that date if the contractor is not allowed to proceed with work until prices have been established.

As a general rule, prices should be established prior to authorizing the contractor to begin work. However, where the contractor is allowed to begin work prior to pricing in accordance with this paragraph, the contractor and the contracting officer shall proceed with pricing as soon as practicable. The basic ordering agreement shall provide that failure to reach agreement on price in such circumstances will constitute a dispute subject to the procedures of the Disputes clause.

(3) Each order issued under a basic ordering agreement shall be subject to such reviews, approvals, and determinations and findings (including those pertaining to types of contracts) specified in this Part 1-3 as would be applicable if the order were a contract entered into apart from the basic ordering agreement.

(4) A basic ordering agreement shall be modified only by a revision of the basic ordering agreement itself and shall not be modified or superseded by individual orders issued thereunder. Basic ordering agreements shall be reviewed at least annually, before the anniversary of their effective dates, and revised to conform with the current requirements of this Part 1-3. Modifications shall not have retroactive effect.

(5) The contracting officer issuing an order under a basic agreement shall be responsible for ensuring compliance with the provisions of (1), (2), and (3) of this § 1-3.410-3(c).

[29 FR 10155, July 24, 1964. Redesignated at 40 FR 27655, July 1, 1975, and amended at 43 FR 7318, Feb. 22, 1978]

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(a) Small purchases shall be made by negotiation (see § 1-3.203), except under special circumstances where it is clearly in the best interest of the Government to accomplish such purchases by more formal methods.

(b) The objective of helping small concerns and minority business enterprises to participate in Federal procurement has wide potential application where small purchases are concerned and, accordingly, placement of small purchases with small concerns and minority business enterprises is specifically encouraged, consistent with other valid considerations such as price feasibility.

(c) When quotations are received on a number of related items (such as hardware items, spare parts for vehicles, or office supplies, etc.), one purchase order shall normally be issued to the firm quoting the lowest aggregate

prices rather than issuing more than one purchase order on the basis of the lowest quotation on each item.

(d) In arriving at the aggregate amount involved in any one transaction, there must be included all supplies and services which would properly be grouped together in a single transaction and which would be included in a single advertisement for bids if the procurement were being effected by formal advertising. Requirements aggregating more than $10,000 shall not be broken down into several purchases which are less than $10,000 merely for the purpose of permitting negotiation or utilizing the small purchase methods authorized under this Subpart 1-3.6.

(e) Any one of the purchase methods set forth in this subpart which is determined the most suitable to the immediate requirement and which will accomplish the procurement in the most efficient and economical manner, shall be utilized.

[29 FR 10155, July 24, 1964, as amended at 37 FR 13979, July 15, 1972; 39 FR 28437, Aug. 7, 1974; 40 FR 44138, Sept. 25, 1975]

§ 1-3.603-1 Solicitation.

(a)(1) Reasonable competition shall be obtained in making small purchases in excess of $500. As used in this § 13.603, reasonable competition means obtaining a sufficient number of quotations from qualified sources of supply to assure that the procurement is fair to the Government, price and other factors considered, including the administrative cost of the purchase. In arriving at the number of quotations to be solicited, due consideration should be given to the administrative costs associated with the proposed solicitation in relation to the potential benefits to be derived by the Government, consistent with good business practices. See § 1-1.1002-2 for the requirements regarding publicizing small purchases.

(2) Small purchases not in excess of $500 may be accomplished without securing competitive quotations if the prices quoted are considered to be reasonable. Such purchases shall be distributed equitably among qualified suppliers. When practicable a quotation should be solicited from other

than the previous supplier prior to placing a repeat order. The administrative cost of verifying the reasonableness of the price of purchases not in excess of $500 may more than offset potential savings in detecting instances of overpricing; therefore, action to verify the reasonableness of the price need be taken only when the buyer or contracting officer suspects that, or has information to indicate that, the price may not be reasonable, e.g., comparison to previous price paid, personal knowledge of the item involved, comparison to similar items.

(b) Reasonable competition for small purchases ordinarily can be obtained without soliciting quotations from sources outside the trade area in which the procurement office is located. However, solicitation shall not be limited to suppliers of well known and widely distributed makes or brands, nor shall quotations be solicited purely on a selective personal preference basis. New supply sources, disclosed through trade journals or other media, shall be continuously reviewed and, when appropriate, added to the list of available sources. Each agency shall prescribe procedures for insuring that the small business and minority business enterprise status of each source is recorded on agency small purchase source lists, where lists are maintained, when such status is made known to the agency. Such status information shall be used to insure that small business concerns and minority business enterprises are given opportunities to submit quotations in response to small purchase solicitations. Small business size standards are set forth in Subpart 1-1.7, and minority business enterprise is defined in § 1-1.1310-2.

(c) The following factors influence the number of quotations required in connection with any particular purchase:

(1) The nature of the article or service to be procured, and whether highly competitive and readily available in several makes or brands, or relatively noncompetitive.

(2) Information obtained in making recent purchases of the same or similar item.

(3) The urgency of the proposed purchase.

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