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contractor engaged in the performance of a cost-type contract shall be expressly reserved in any such contract. The audit clause in this $ 13.814-2(a) may be used for that purpose. (39 FR 1755, Jan. 14, 1974, as amended at 41 FR 19312, May 12, 1976)

§ 1-3.814-3 Subcontractor cost or pricing

data. (a) Where the clause in § 1-3.8141(a) is included in contracts in excess of $100,000, the clause in this § 13.814-3(a) also shall be included. In addition, the clause, appropriately modified, may be included in contracts of $100,000 or less which contain the clause in § 1-3.814-1(a).

documents necessary to permit adequate evaluation of the cost or pricing data submitted, along with the computations and projections used therein.

(d) Availability. The materials described in (b) and (c) above, shall be made available at the office of the Contractor, at all reasonable times, for inspection, audit or reproduction, until the expiration of 3 years from the date of final payment under this contract or such lesser time specified in Part 120 of the Federal Procurement Regulations (41 CFR Part 1-20) and for such longer period, if any, as is required by applicable statute, or by other clauses of this contract, or by (1) and (2) below:

(1) If this contract is completely or partially terminated, the records relating to the work terminated shall be made available for a period of 3 years from the date of any resulting final settlement.

(2) Records which relate to appeals under the “Disputes" clause of this contract, or litigation or the settlement of claims arising out of the performance of this contract, shall be made available until such appeals, litigation, or claims have been disposed of.

(e) The Contractor shall insert a clause containing all the provisions of this clause, including this paragraph (e), in all subcontracts hereunder except altered as necessary for proper identification of the contracting parties and the Contracting Officer under the Government prime contract.

(b) The requirement for inclusion of the clause in paragraph (a) of this $ 13.814-2 may be waived for contracts with foreign governments or agencies thereof under circumstances where the requirement for the clauses in $$ 1-3.814-1 and 1-3.814-3 may be waived.

(c) Except as otherwise provided in Subpart 1-6.10 of this chapter, or when independent authority exists for the omission of the clause, the clause in § 1-7.103-3 shall be inserted in all negotiated fixed-price contracts in excess of $10,000, including contracts awarded under a total set-aside small business restricted advertising, as de fined in § 1-1.701-9, or a partial small business restricted advertising set aside (see $ $ 1-1.706 and 1-1.804), and a clause containing substantially the same provisions shall be included in all other negotiated contracts in excess of $10,000 (the clause prescribed by $ 17.103-3 of this chapter satisfies this requirement). In addition, the right of the contracting agency to inspect the plant and to audit the books and records of any prime contractor or sub

SUBCONTRACTOR COST OR PRICING DATA (a) The Contractor shall require subcontractors hereunder to submit, actually or by specific identification in writing, cost or pricing data under the following circumstances:

(1) Prior to the award of any subcontract the amount of which is expected to exceed $100,000 when entered into;

(2) Prior to the pricing of any subcontract modification which involves aggregate increases and/or decreases in costs plus applicable profits expected to exceed $100,000; except where the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation.

(b) The Contractor shall require subcontractors to certify, in substantially the same form as that used in the certificate by the Prime Contractor to the Government, that to the best of their knowledge and belief, the cost and pricing data submitted under (a) above is accurate, complete, and current as of the date of agreement on the negotiated price of the subcontract or subcontract change or modification.

(c) The Contractor shall insert the substance of this clause including this paragraph (c) in each subcontract hereunder which exceeds $100,000 when entered into except where the price thereof is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. In each such excepted subcontract hereunder in excess of $100,000, the Contractor shall insert the substance of the following clause:

SUBCONTRACTOR COST OR PRICING DATA

PRICE ADJUSTMENTS (a) Paragraphs (b) and (c) of this clause shall become operative only with respect to any modification made pursuant to one or more provisions of this contract which involves aggregate increases and/or decreases in costs plus applicable profits expected to exceed $100,000. The requirements of this clause shall be limited to such contract modifications.

(b) The Contractor shall require subcontractors hereunder to submit, actually or by specific identification in writing, cost or pricing data under the following circumstances:

(1) Prior to award of any subcontract, the amount of which is expected to exceed $100,000 when entered into;

(2) Prior to the pricing of any subcontract modification which involves aggregate increases and/or decreases in costs plus applicable profits expected to exceed $100,000; except where the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation.

(c) The Contractor shall require subcontractors to certify, in substantially the same form as that used in the certificate by the Prime Contractor to the Government, that to the best of their knowledge and belief the cost and pricing data submitted under (b) above is accurate, complete, and current as of the date of agreement on the negotiated price of the subcontract or subcontract change or modification.

(d) The Contractor shall insert the substance of this clause including this paragraph (d) in each subcontract hereunder which exceeds $100,000 when entered into.

(b) Where the clause in § 1-3.814-1 (b) is included in contracts in excess of $100,000, the clause in this $ 1-3.814-3 (b) also shall be included. In addition, the clause, appropriately modified, may be included in contracts of $100,000 or less which contain the clause in § 1-3.814-1(b).

(b) The Contractor shall require subcontractors hereunder to submit cost or pricing data under the following circumstances:

(1) Prior to the award of any subcontract the amount of which is expected to exceed $100,000 when entered into;

(2) Prior to the pricing of any subcontract modification which involves aggregate increases and/or decreases in costs plus applicable profits expected to exceed $100,000; except where the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation.

(c) The Contractor shall require subcontractors to certify that to the best of their knowledge and belief the cost or pricing data submitted under (b) above is accurate, complete, and current as of the date of agreement on the negotiated price of the subcontract or subcontract change or modification.

(d) The Contractor shall insert the substance of this clause including this paragraph (d) in each subcontract which exceeds $100,000.

(c) The requirements for inclusion of the clauses in paragraphs (a) and (b) of this $ 1-3.814-3 in contracts with foreign governments or agencies thereof may be waived where the head of the agency or his designee authorizes such waiver and states in writing his reasons for such determination. [30 FR 6584, May 13, 1965, as amended at 39 FR 1755, Jan. 14, 1974)

Subpart 1-3.9—Subcontracting

Policies and Procedures

SUBCONTRACTOR COST OR PRICING DATA

PRICE ADJUSTMENTS (a) Paragraphs (b) and (c) of this clause shall become operative only with respect to any modification made pursuant to one or more provisions of this contract which involves aggregate increases and/or decreases in costs plus applicable profits expected to exceed $100,000. The requirements of this clause shall be limited to such modifications.

§ 1-3.900 Scope of subpart.

This subpart sets forth policies and procedures for the evaluation, review, and approval of contractors' “make-orbuy” programs, purchasing systems, and proposed subcontracts. § 1-3.901 General.

(a) Information as to the contractor's “make-or-buy" program, purchasing system, and proposed subcontracts may be important to (1) negotiation of reasonable contract prices (see $$ 13.807-10 and 1-3.808-2(h)), (2) assurance of satisfactory contract performance or (3) carrying out Government policies regarding small business (see § 1-1.710-1), labor surplus areas (see § 1-1.805-1), acquisition and use of Government facilities, maintenance of

mobilization base, or other policies shall request potential suppliers to which may be appropriate to the par- furnish a "make-or-buy” program on ticular procurement. Therefore, Gov- all negotiated procurements except as ernment surveillance of a contractor's otherwise provided in (3), (4), or (5) of "make-or-buy” program, purchasing this § 1-3.902-1(b). system, and proposed subcontracts is (3) A "make-or-buy" program will required as set forth in this Subpart 1 not be required when a proposed con3.9. Where "make-or-buy” decisions tract has a total estimated value of and subcontracting will have a sub less than $1,000,000 unless the constantial impact on any of the above

tracting officer specifically determines mentioned factors, the contractor's that a “make-or-buy” program is ap"make-or-buy” program and subcon

propriate. tracting should, to the extent practica (4) Research and development conble, be evaluated and agreed on during

tracts are exempt from the provisions negotiations.

of this f 1-3.902 unless it can reason(b) The subcontracting policies and

ably be anticipated that follow-on procedures in this Subpart 1-3.9

quantities of the product will be proshould generally be applied to pro

cured. curement where (1) the item, system,

(5) A "make-or-buy" program will or work is complex, the dollar value is

not be required if the contracting offisubstantial, or competition is restrict

cer determines that none of the faced, and (2) either (i) cost-reimburse

tors in § 1-3.901(b) are applicable. ment, price redetermination, or incen

(c) The contractor will be informed tive-type contracts are to be used, or (ii) "make-or-buy” decisions are ex

that the program he submits should

be confined to important items which, pected to have a substantial impact on negotiations leading to a firm fixed

because of their complexity, quantity,

cost or requirement for additional price contract.

Government facilities, normally would $ 1-3.902 "Make-or-buy” programs.

require company management review

of the "make-or-buy” decision. “Detail § 1-3.902-1 Review of program.

parts" or "off-the-shelf” items will not (a) A "make-or-buy” program is that

be incorporated in a “make-or-buy" part of a contractor's written plan for

program unless their potential impact the development or production of an

on such program or production schedend item which outlines the major

ule makes their inclusion necessary. If components, assemblies, subassemb

the design status of the end item being lies, and parts to be manufactured (in

procured is not sufficiently advanced cluding testing, treating, and assem

to permit accurate precontract identibling) in his own facilities, and those

fication of all items that may be subwhich will be obtained elsewhere by

ject to “make-or-buy” decisions, the subcontract. A "make" item is any contractor shall be notified that such item produced, or work performed, by

items must be submitted when identi. the contractor or his affiliate, subsidi fiable under the terms of the Changes ary, or division.

to Make-or-Buy Program clause (see (b)(1) Where the nature of the pro- $ 1-3.902-3). curement is such that, in view of the (d) The contractor shall be required factors referred to in § 1-3.901(b), to submit, with his proposal, a "makereview of the "make-or-buy" program or-buy” program of important items is appropriate or is otherwise consid including in addition to information ered essential, the prospective contrac- required by $ 1-3.902-1(b), (1) a detor shall be required to submit his pro- scription by which each such item can posed "make-or-buy” program, togeth- be readily identified, (2) a recommener with sufficient related data, to the dation to make or buy the item or contracting officer for evaluation of defer the decision, (3) when feasible, such factors in (e) of this $ 1-3.902-1 as the names of proposed subcontractors, are pertinent

and (4) the important items to be (2) At the time a request for propos- made by the contractor, including a als is issued, the procuring agency designation of the plant and division

in which the contractor proposes to should be deleted because of their relperform the work.

atively minor importance. In all con(e) "Make-or-buy" programs shall be siderations relative to a “make-or-buy" evaluated and agreed upon by the con program, the procuring agency will tractor and the procuring activity at obtain the advice and assistance of all the earliest practicable time during ne

appropriate personnel whose knowlgotiations. In reviewing the "make-or

edge would contribute to the adequacy buy” program during the negotiations,

of the review. the effect of the following factors on

(g) Before agreeing to a "make-orthe interests of the Government shall

buy" program (or consenting to any be considered:

change therein which, in the opinion (1) The effect of the contractor's

of the contracting officer, would plan to "make-or-buy," as the case

reduce the anticipated participation of may be, on price, quality, delivery, and

small business), the procuring activity performance. (2) Whether the contractor plans to

shall invite the advice and counsel of broaden his base of subcontractors

the SBA by permitting SBA reprethrough competition.

sentatives (regularly assigned to the (3) Whether the contractor has

activity) to review all pertinent facts properly considered the competence, and make recommendations thereon. abilities, experience, and capacities Such review by SBA should be concuravailable within other firms.

rent with the review by the procuring (4) Whether small business concerns activity (or, in the case of changes, the can produce the item or perform the contracting officer). Where urgent cirwork in question and at what price. cumstances do not permit such a con

(5) Whether the contractor or major current review, or where SBA fails to subcontractors propose to do work in respond on a timely basis, the conplant, the nature of which differs sig.

tracting officer shall include an exnificantly from their normal in-plant

planatory statement in the contract operations or for which they are not file and shall transmit a copy to the historically suited.

SBA representative. Where the SBA (6) Whether production of the item

review results in a disagreement beor performance of the work will create

tween the procuring activity (or, in a requirement, either directly or indi

the case of changes, the contracting rectly, for additional facilities to be

officer) and the SBA representatives furnished by the Government, or the

regarding a "make-or-buy" program continued use of Government-owned facilities, by the contractor or by sub

decision, SBA may appeal such decicontractors.

sion to the head of the procuring ac(7) Whether the contractor proposed

tivity, or other appropriate level above to ask the Government to furnish ad

the contracting officer in accordance ditional facilities to do the work in

with agency procedures. Decisions by plant for which there is capacity else the procuring activity shall be final. where which is competitive in quality, (h) After agreement on the program delivery, and overall cost, and is ac is reached, the contracting officer ceptable as a source to the contractor. shall notify the contractor as to the

(8) Whether the item or work has Government's approval of the probeen subcontracted on this or previous gram and shall inform the contractor contracts.

as to any requirement for further (9) Other factors, such as the nature review during performance of the conof the item, experience with similar tract. For example, if follow-on proitems, future requirements, engineer

curements occur, the procuring activiing, tooling, starting load costs,

ty and the contractor will review the market conditions, and the availability

existing "make-or-buy" program to deof personnel and material.

termine whether it should be revised. (f) The procuring agency will review the "make-or-buy" program to deter (29 FR 10155, July 24, 1964, as amended at mine if all appropriate items are in 37 FR 23543, Nov. 14, 1972) cluded or if it contains items that

[blocks in formation]

8 1-3.902–2 Approval of programs.

cer may ratify in writing any changes or ad

ditions. The "make-or-buy" program at(a) Proposed "make" items shall not

tached to this contract shall be deemed to be agreed to when the products or be modified in accordance with the written services under consideration:

consent or ratification by the Contracting (1) Are not regularly manufactured

Officer. or provided by the contractor, and are

(End of Clause) available-quality, quantity, delivery, and other essential factors consid § 1-3.902-4 Administration of program. ered-from other firms at prices no

(a) On applicable contracts, the coghigher than if the contractor makes or

nizant contract administration office provides the product or service;

will establish a procedure with the (2) Are regularly manufactured or

contractor to assure timely compliance provided by the contractor, and are

with the terms of the contract clause. available-quality, quantity, delivery,

This procedure will include provisions and other essential factors consid

for processing changes to the estabered from other firms at prices lower

lished “make-or-buy" program and for than if the contractor makes or pro

obtaining "make-or-buy" decisions for vides the product or service; or

items reserved for deferred decisions Provided, That such items may be or unidentified at the time of contract agreed to, notwithstanding paragraphs negotiations. (a) (1) and (2) of this section, if in the (b) When a “make-or-buy" program opinion of the contracting officer the is agreed upon with a contractor, or overall cost of the contract to the Gov there are changes or additions to a ernment would be increased if the "make-or-buy" program, the consideritems were "bought”.

ation given each item on such program (b) Approval of the contractor's pur- will be documented in the contract chasing system shall not constitute ap file. If a contract (including suppleproval of the “make-or-buy" program. mental agreements for new procure

ment) except one specifically exempt§ 1-3.902–3 Contract clause.

ed by $ 1-3.902-1(b), does not include The following clause shall be incor- the Changes to Make-or-Buy Program porated in all cost-reimbursement, clause, the contracting officer will docprice redetermination, or incentive ument the contract file with a written type contracts as to which a “make-or statement of facts to sustain and make buy" program has been agreed upon: clear the appropriateness of the deter

mination not to include the clause. CHANGES TO MAKE-OR-BUY PROGRAM

Such determination will be based on The Contractor agrees to perform this one of the following: (1) the contract contract in accordance with the "make-or is on a firm fixed-price basis; (2) the buy" program attached to this contract, contract is not exempt but there are except as hereinafter provided. If the Con

no items which can be identified as retractor desires to change the "make-or-buy"

quiring a "make-or-buy" program as program, he shall notify the Contracting

defined in § 1-3.902-1(a); or (3) a devi. Officer in writing of the proposed change reasonably in advance and shall submit jus

ation has been approved. tification in sufficient detail to permit evaluation of the proposed change. Changes in

$ 1-3.903 Review and approval of contracthe place of performance of work on any

tor's purchasing system and subcon"make" item in the "make-or-buy" program

tracts. are subject to this requirement. With respect to items deferred at the time of nego

§ 1-3.903-1 (Reserved] tiation of this contract for later addition to the "make-or-buy" program, the Contractor

§ 1-3.903-2 Review and approval of subshall notify the Contracting Officer of each

contracts. proposed addition at the earliest possible

(a) When the prime contract is not time, together with justification in suffi

to be placed on a firm fixed-price cient detail to permit evaluation. The Contractor shall not, without the written con

basis, review of subcontracts prior to sent of the Contracting Officer, make

placement may be desirable since the changes or additions to the program. How- ultimate cost to the Government will ever, in his discretion, the Contracting Offi- depend in part on subcontract prices

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