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(2) Application. This type of con- (i) Flexibility with respect to both tract is particularly suitable for use quantities and delivery scheduling; where it is known in advance that a (ii) Supplies or services need be ordefinite quantity of property or serv- dered only after actual needs have maices will be required during a specific terialized; period and are regularly available or (iii) Where production lead time is will be available after a short lead involved, deliveries may be made more time. Advantages of this type of con

promptly because the contractor is tract are that it permits stocks in stor usually willing to maintain limited age depots to be maintained at mini stocks in view of the Government's mum levels and permits direct ship commitment; ment to the user.

(iv) Price advantages or savings may (b) Requirements contract-(1) De

be realized through combining several scription. This type of contract pro

anticipated requirements into
anticipated I

one vides for filling all actual purchase re

quantity procurement; and quirements of specific property or

(V) It permits stocks to be mainservices of designated activities during

tained at minimum levels and allows a specified contract period with deliv

direct shipment to the user. Generally, eries to be scheduled by the timely

the requirements contract is appropri

ate for use when the item or service is placement of orders upon the contractor by activities designated either spe

commercial or modified commercial in

type and when a recurring need is ancifically or by class. Depending on the

ticipated. situation, the cor.tract may provide for

(c) Indefinite quantity contract-(1) (i) firm fixed-prices, (ii) price escala

Description. This type of contract protion, or (iii) price redetermination. An

vides for the furnishing of an indefiestimated total quantity is stated for

nite quantity, within stated limits, of the information of prospective con

specific property or services, during a tractors, which estimate should be as

specified contract period, with deliv. realistic as possible. The estimate may

eries to be scheduled by the timely be obtained from the records of previ

placement of orders upon the contracous requirements and consumption, or

tor by activities designated either speby other means. Care should be used

cifically or by class. Depending on the in writing and administering this type

situation, the contract may provide for of contract to avoid imposition of an

(i) firm fixed-prices, (ii) price escalaimpossible burden on the contractor.

tion, or (iii) price redetermination. Therefore, the contract shall state,

The contract shall provide that during where feasible, the maximum limit of

the contract period the Government the contractor's obligation to deliver

shall order a stated minimum quantity and, in such event, shall also contain

of the property or services and that appropriate provision limiting the

the contractor shall furnish such Government's obligation to order.

stated minimum and, if and as orWhen large individual orders or orders

dered, any additional quantities not from more than one activity are antici

exceeding a stated maximum which pated, the contract may specify the

should be as realistic as possible. The maximum quantities which may be or maximum may be obtained from the dered under each individual order or

records of previous requirements and during a specified period of time. Simi

consumption, or by other means. larly, when small orders are anticipat

When large individual orders or orders ed, the contract may specify the mini

from more than one activity are anticimum quantities to be ordered.

pated, the contract may specify the (2) Application. A requirements con- maximum quantities which may be ortract may be used for procurements dered under each individual order or where it is impossible to determine in during a specified period of time. Simi. advance the precise quantities of the larly, when small orders are anticipatproperty or services that will be ed, the contract may specify the minineeded by designated activities during mum quantities to be ordered. a definite period of time. Advantages (2) Application. An indefinite quanof this type of contract are:

tity contract may be used where it is


impossible to determine in advance the basic agreement itself and shall the precise quantities of the property not be modified or superseded by indiof services that will be needed by des- vidual contracts or purchase orders enimated activities during a definite tered into under and subject to the period of time and it is not advisable terms of such basic agreement. As a for the Government to commit itself minimum, basic agreements will be refor more than a minimum quantity viewed annually on the anniversary of Advantages of this type of contract their effective date and revised at that

time to conform with the current re(i) Flexibility with respect to both quirements of this chapter. Amendquantities and delivery scheduling; ments shall not have retroactive

(ii) Property or services need be or effect. dered only after actual needs have ma (3) Basic agreements shall provide serialized;

for discontinuance of their future ap(iii) The obligation of the Govern

plication upon 30 days written notice ment is limited; and

by either party. Discontinuance of a (iv) It permits stocks to be main

basic agreement will not affect any inrained at minimum levels and allows

dividual contract referencing the basic direct shipment to the user. The in

agreement (or the clauses appended definite quantity contract should be

thereto) entered into prior to the efused only when the item or service is

fective date of discontinuance. commercial or modified commercial in

(c) Limitations. (1) Basic agreeLype and when a recurring need is an

ments shall neither cite appropriticipated.

ations to be charged nor be used alone 1-3.410 Other types of agreements.

for the purpose of obligating funds.

(2) Basic agreements shall not in any 11-3.410-1 Basic agreement.

manner provide for or imply any (a) Description, A basic agreement is

agreement on the part of the Govern

ment to place future orders or cona written instrument of understanding

tracts with the contractor involved. executed between a procuring agency and a contractor which sets forth the

Basic agreements shall not be used in negotiated contract clauses which

any manner to restrict competition. shall be applicable to future procure

(3) Basic agreements generally shall ments entered into between the par

be utilized only in connection with neties during the term of the basic agree

gotiated contracts. ment. The use of the basic agreement

§ 1-3.410-2 Basic agreements with educacontemplates the coverage of a partic

tional institutions and nonprofit orgaular procurement by the execution of a formal contractual document which

nizations. will provide for the scope of the work, (a) This section sets forth informaprice, delivery, and additional matters tion and procedures regarding basic peculiar to the requirement of the spe agreements for the procurement of recific procurement involved, and shall search and development from educaincorporate by reference or append tional institutions and nonprofit orgathe contract clauses 'agreed upon in nizations. the basic agreement, as required or ap (b) An appropriate basic agreement plicable.

may be negotiated with each educa(b) Application. (1) Basic agree tional institution and nonprofit orgaments are appropriate for use when (i) nization (except Federally Funded Repast experience and future plans indi search and Development Centers cate that a substantial number of sep. (FFRDC), including the Federal Conarate contracts may be entered into tract Research Centers (FCRC) as with a contractor during the term of they are designated in the Departthe basic agreement, and (ii) substan- ment of Defense (DOD)), in accordtial recurring negotiating problems ance with the conditions set forth in exist with a particular contractor.

§ 1-3.410-1. Agencies are encouraged to (2) A basic agreement shall be obtain and utilize the basic agreeamended only by an amendment of ments entered into by both other civilian agencies and DOD to the maxi. ance is indicated in the basic order mum practicable extent.

agreement. Each order will incor (c) The responsibility for negotiating rate by reference the provisions of 1 basic agreements with educational in basic ordering agreement. stitutions and nonprofit organizations (b) Application. The basic order for the DOD has been assigned to the

agreement may be used as a means Office of Naval Research, 800 North

expediting procurement where speci Quincy Street, Arlington, Virginia

items, quantities, and prices are i 22217. At the beginning of each fiscal

known at the time of execution of t year the Office of Naval Research will

agreement but where past experier issue a listing of DOD current basic

or future plans indicate that a si agreements. Copies of the agreements

stantial number of requirements 1 are maintained by the Office of Naval

items or services of the type cover Research and are available to procure

by the basic ordering agreement w ment activities of civilian agencies

result in procurements from the ca upon request.

tractor during the term of the agre (d) The responsibility for negotiat

ment. Under proper circumstances, u ing basic agreements for the civilian

of the procedures under the agre agencies rests with each individual

ment is advantageous and economic agency. Each agency shall report its

in ordering parts for equipment su agreements to the FPR Staff, General

port since such procedures substantis Services Administration, FV, Washing

ly shorten the administrative time r ton, D.C. 20406, 15 days after September 30, each year.

quired for placing such articles in (e) A list of civilian agency basic

production status, thereby not on agreements will be compiled by the

decreasing the amount of support i General Services Administration. The

ventory required to be carried but al: list will be combined with the DOD

decreasing the possibility that par list, and will be published at the begin

procured will become obsolete as ning of each fiscal year in FPR Bulle- result of design changes in the equil


(c) Limitations. (1) Supplies or seri (40 FR 27655, July 1, 1975, as amended of 43

ices may be ordered under a basic o FR 7318, Feb. 22, 1978)

dering agreement only if it is dete. § 1-3.410-3 Basic ordering agreement. mined at the time the order is place

that it is impracticable to obtain con (a) Description. A basic ordering

petition by either formal advertisin agreement is an agreement which is similar to a basic agreement (see $ 1

or negotiation for such supplies a 3.410-1) except that it also includes a

services. description, as specific as practicable,

(2) The Government shall neithe

make any final commitment nor au of the supplies to be furnished or serv. ices to be performed when ordered and

thorize any work by the contracto a description of the method for deter

pursuant to an order under a basic or mination of the prices, consistent with

dering agreement until prices hav the contract types authorized by this

been established, unless the order es subpart, to be paid to the contractor

tablishes a monetary limitation on thi

obligation of the Government and for such supplies or services. Either the specific terms and conditions of eitherdelivery or a description of the (i) The order is subject to provision method for their determination shall contained in the basic ordering agree be set forth in the basic ordering

the basic ordering ment which set forth adequate proce agreement. The basic ordering agree dures for arriving at prices as early in ment shall list one or more activities contract performance as practical, but which are authorized to issue orders in no event shall such procedures under the agreement. Any activity so permit the price of the entire order to named may issue orders specifying the be established on a retroactive basis supplies or services required, which (however, incentive provisions consistorders may be accepted by the con- ent with this Subpart 1-3.4 are permit. tractor by whatever manner of accept- ted); or


(ii) The need for the supplies or

Subpart 1-3.5—[Reserved] services is compelling and of unusual urgency, as when the Government

Subpart 1-3.6—Small Purchases would be seriously injured, financially or otherwise, if the supplies or services

$ 1-3.600 Scope of subpart. were not furnished by a certain date and when they could not be furnished

This subpart prescribes policies and by that date if the contractor is not al

procedures for the purchasing of suplowed to proceed with work until

plies and nonpersonal services from

commercial sources when the aggreprices have been established.

gate amount involved in any one As a general rule, prices should be es- transaction does not exceed $10,000. tablished prior to authorizing the con Such purchases shall be termed "small tractor to begin work. However, where purchases." This subpart is not applithe contractor is allowed to begin cable to the procurement of supplies work prior to pricing in accordance

and services initially estimated to with this paragraph, the contractor

exceed $10,000 even though awards and the contracting officer shall pro

under such procurements do not ceed with pricing as soon as practica

exceed $10,000. ble. The basic ordering agreement (40 FR 44138. Sept. 25, 1975) shall provide that failure to reach agreement on price in such circum- § 1-3.601 Purpose. stances will constitute a dispute sub- The objectives of the simplified purject to the procedures of the Disputes chase methods prescribed herein are clause.

to reduce the administrative costs in (3) Each order issued under a basic accomplishing small purchases, to imordering agreement shall be subject to prove opportunities for small business such reviews, approvals, and determi

concerns and minority business enternations and findings (including those

prises to obtain a fair proportion of pertaining to types of contracts) speci

Government purchases and contracts, fied in this part 1-3 as would be appli

and to eliminate costly and time concable if the order were a contract en

suming paper processes. tered into apart from the basic order [37 FR 13979, July 15, 1972) ing agreement. (4) A basic ordering agreement shall

$ 1-3.602 Policy. be modified only by a revision of the (a) Small purchases shall be made basic ordering agreement itself and by negotiation (see § 1-3.203), except shall not be modified or superseded by under special circumstances where it is individual orders issued thereunder.

clearly in the best interest of the GovBasic ordering agreements shall be re

ernment to accomplish such purchases viewed at least annually, before the

by more formal methods. anniversary of their effective dates,

(b) The objective of helping small

concerns and minority business enterand revised to conform with the cur

prises to participate in Federal prorent requirements of this part 1-3.

curement has wide potential applicaModifications shall not have retroac

tion where small purchases are contive effect.

cerned and, accordingly, placement of (5) The contracting officer issuing

small purchases with small concerns an order under a basic agreement shall

and minority business enterprises is be responsible for ensuring compliance

specifically encouraged consistent with the provisions of (1), (2), and (3)

with other valid considerations such as of this g 1-3.410-3(c).

price feasibility. (29 FR 10155, July 24, 1964. Redesignated at

(c) When quotations are received on 40 FR 27655, July 1, 1975, and amended at

a number of related items (such as 43 FR 7318. Feb. 22, 1978)

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 than the previous supplier prior to one purchase order on the basis of the placing a repeat order. The adminislowest quotation on each item.

trative cost of verifying the reason(d) In arriving at the aggregate ableness of the price of purchases not amount involved in any one transac in excess of $500 may more than offset tion, there must be included all sup- potential savings in detecting inplies and services which would proper- stances of overpricing; therefore, ly be grouped together in a single action to verify the reasonableness of transaction and which would be in the price need be taken only when the cluded in a single advertisement for buyer or contracting officer suspects bids if the procurement were being ef that, or has information to indicate fected by formal advertising. Require that, the price may not be reasonable, ments aggregating more than $10,000 e.g., comparison to previous price paid, shall not be broken down into several personal knowledge of the item inpurchases which are less than $10,000 volved, comparison to similar items. merely for the purpose of permitting (b) Reasonable competition for small negotiation or utilizing the small pur purchases ordinarily can be obtained chase methods authorized under this

without soliciting quotations from Subpart 1-3.6.

sources outside the trade area in (e) Any one of the purchase methods

which the procurement office is locatset forth in this subpart which is de ed. However, solicitation shall not be termined the most suitable to the im

limited to suppliers of well known and mediate requirement and which will

widely distributed makes or brands, accomplish the procurement in the

nor shall quotations be solicited most efficient and economical manner,

purely on a selective personal prefershall be utilized.

ence basis. New supply sources, dis(29 FR 10155, July 24, 1964, as amended at

closed through trade journals or other 37 FR 13979, July 15, 1972; 39 FR 28437, media, shall be continuously reviewed Aug. 7, 1974; 40 FR 44138, Sept. 25, 1975) and, when appropriate, added to the

list of available sources. Each agency § 1-3.603-1 Solicitation.

shall prescribe procedures for insuring (a)(1) Reasonable competition shall that the small business and minority be obtained in making small purchases business enterprise status of each in excess of $500. As used in this § 1- source is recorded on agency small 3.603, reasonable competition means purchase source lists, where lists are obtaining a sufficient number of quo- maintained, when such status is made tations from qualified sources of known to the agency. Such status insupply to assure that the procurement formation shall be used to insure that is fair to the Government, price and small business concerns and minority other factors considered, including the business enterprises are given opportuadministrative cost of the purchase. In nities to submit quotations in response arriving at the number of quotations to small purchase solicitations. Small to be solicited, due consideration business size standards are set forth in should be given to the administrative Subpart 1-1.7, and minority business costs associated with the proposed so- enterprise is defined in § 1-1.1310-2. licitation in relation to the potential (c) The following factors influence benefits to be derived by the Govern the number of quotations required in ment, consistent with good business connection with any particular purpractices. See § 1-1.1002-2 for the re chase: quirements regarding publicizing small (1) The nature of the article or sery. purchases.

ice to be procured, and whether highly (2) Small purchases not in excess of competitive and readily available in $500 may be accomplished without se- several makes or brands, or relatively curing competitive quotations if the noncompetitive. prices quoted are considered to be rea- (2) Information obtained in making sonable. Such purchases shall be dis- recent purchases of the same or simitributed equitably among qualified lar item. suppliers. When practicable a quota- (3) The urgency of the proposed purtion should be solicited from other chase.

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