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on the performance of this contract of which the Contractor has knowledge.

(b) In the event of any claim or suit against the Government, on account of any alleged patent or copyright infringement arising out of the performance of this contract or out of the use of any supplies fur. nished or work or services performed hereunder, the Contractor shall furnish to the Government, when requested by the Contracting Officer, all evidence and information in possession of the Contractor pertaining to such suit or claim. Such evidence and information shall be furnished at the expense of the Government except where the Contractor has agreed to indemnify the Government.

§ 1-7.103–5 Convict labor.

Insert the clause set forth in $ 112.204 under the conditions contained in § 1-12.203. (39 FR 24009, June 28, 1974)

ing small business restricted advertising, but is not applicable if this contract was entered into by means of formal advertising.

(b) The Contractor agrees that the Comptroller General of the United States or any of his duly authorized representatives shall, until the expiration of 3 years after final payment under this contract or such lesser time specified in either Appendix M of the Armed Services Procurement Regulation or the Federal Procurement Regulations Part 1-20, as appropriate, have access to and the right to examine any directly pertinent books, documents, papers, and records of the Contractor involving transactions related to this contract.

(c) The Contractor further agrees to include in all his subcontracts hereunder a provision to the effect that the subcontractor agrees that the Comptroller General of the United States or any of his duly authorized representatives shall, until the expiration of 3 years after final payment under the subcontract or such lesser time specified in either Appendix M of the Armed Services Procurement Regulation or the Federal Procurement Regulations Part 1-20, as appropriate, have access to and the right to examine any directly pertinent books, documents, papers, and records of such subcontractor, involving transactions related to the subcontract. The term "subcontract” as used in this clause excludes (1) purchase orders not exceeding $2,500 and (2) subcontractors or purchase orders for public utility services at rates established for uniform applicability to the general public.

(d) The periods of access and examination described in (b) and (c), above, for records which relate to (1) appeals under the “Disputes" clause of this contract, (2) litigation or the settlement of claims arising out of the performance of this contract, or (3) costs and expenses of this contract as to which exception has been taken by the Comptroller General or any of his duly authorized representatives, shall continue until such appeals, litigation, claims, or exceptions have been disposed of. [29 FR 10192, July 24, 1964, as amended at 40 FR 44140, Sept. 25, 1975)

$ 1-7.103-6 Walsh-Healey Public Con

tracts Act. Insert the clause set forth in $ 112.605 under the conditions contained in 8 1-12.602.

81-7.103-7 Utilization of small business

concerns. Insert the clause set forth in $ 11.710-3(a) under the conditions and in the manner prescribed therein. § 1-7.103-8 Small business subcontracting

program. Insert the clause set forth in § 11.710-3(b) under the conditions and in the manner prescribed therein.

81-7.103-9 Utilization of labor surplus

area concerns. Insert the clause set forth in § 11.805-3(a) under the conditions and in the manner prescribed therein.

$ 1-7.103-4 Notice and assistance regard

ing patent and copyright infringement. The following clause shall be included in all contracts which exceed $10,000:

8 1-7.103-10 Labor surplus area subcon

tracting program. Insert the clause set forth in § 11.805-3(b) under the conditions and in the manner prescribed therein.

NOTICE AND ASSISTANCE REGARDING PATENT

AND COPYRIGHT INFRINGEMENT (a) The Contractor shall report to the Contracting Officer, promptly and in reasonable written detail, each notice or claim of patent or copyright infringement based

$ 1-7.103-11 Utilization of minority busi

ness enterprises. Insert the clause set forth in 811.1310-2(a) under the conditions and in the manner prescribed therein.

$ 1-7.103-12 Minority business enterprises

subcontracting program. Insert the clause set forth in § 11.1310-2(b) under the conditions and in the manner prescribed therein. $ 1-7.103-13 Humane slaughter of live.

stock. Insert the clause set forth in $ 14.605 or in § 1-4.606 under the procedures provided in § 1-4.604. § 1-7.103-14 Required source for jewel

bearings. Insert the clause set forth in $ 11.319 under the conditions and in the manner prescribed therein. $ 1-7.103–15 (Reserved) § 1-7.103-16 Listing of employment open

ings.' Insert the clause set forth in § 112.1102-2 under the conditions and in the manner prescribed therein.

$1-7.103-22 Workmen's compensation in

surance (Defense Base Act). Insert the clause set forth in $ 110.402 under the conditions described therein. $ 1-7.103-23 Late offers and modifications

or withdrawals. (a) Insert the provision set forth in § 1-2.201(a)(31) in all formally advertised solicitations.

(b) The provision set forth in § 13.802-1(b) shall be used in all negotiated solicitations except as provided by § 1-3.802-2(a).

(c) The provision set forth in § 13.802-2(b) may be used in negotiated solicitations under the conditions prescribed in § 1-3.802-2(a). (38 FR 26916, Sept. 27, 1973)

§ 1-7.103-17 Price reduction for defective

cost or pricing data. Insert the appropriate clause set forth in $ 1-3.814-1 under the condi. tions described therein. $ 1-7.103-18 Audit and records.

Insert the appropriate clause or clauses set forth in § 1-3.814-2 under the conditions described therein.

$ 1-7.103-24 Contracts with the Small

Business Administration. (a) Insert the clause set forth in § 11.713-3(d)(1) in contracts with the Small Business Administration awarded pursuant to section 8(a) of the Small Business Act (15 U.S.C. 637(a)).

(b) Insert the clause set forth in § 11.713-3(e) in subcontracts which will be executed by the Small Business Administration and its subcontractors.

§ 1-7.103-25 Supplementary tax clauses.

(a) Insert the supplementary clause set forth in $ 1-11.401-3(a) under the conditions contained therein.

(b) Insert the clause set forth in § 111.401-3(b) under the conditions contained therein.

81-7.103-19 Subcontractor cost and pric

ing data. Insert the appropriate clause set forth in $ 1-3.814-3 under the conditions described therein. 8 1-7.103-20 Advance payments.

When advance payments are to be made in accordance with Subpart 130.4, insert the appropriate provisions as prescribed in § 1-30.414-2.

§ 1-7.103-21 Progress payments.

When progress payments are to be made in accordance with Subpart 1. 30.5, insert the appropriate clause as provided in § 1-30.510.

§ 1-7.103-26 Preference for U.S. flag air

carriers. Insert the clause set forth in 811.323-2 under the conditions pre1 392_2 under scribed therein. (39 FR 34665, Sept. 27, 1974) $ 1-7.103-27 Cost accounting standards."

(a) National defense procurements. Insert the notices set forth in $ 13.1203-3(a) in solicitations of proposals and the appropriate contract clauses set forth in § 1-3.1204-1 in negotiated contracts in accordance with the provisions of Subpart 1-3.12.

For a document relating to this section, see Appendix-Temporary Regulations, appearing at the end of Chapter 1.

(b) Nondefense procurements. Insert the notice set forth in $ 1-3.1203-3(b) in solicitations of proposals and the appropriate contract clause set forth in § 1-3.1204-2 in negotiated contracts in accordance with the provisions of Subpart 1-3.12.

(43 FR 14121, Apr. 4, 1978)

§ 1-7.103-28 Subcontracts.

The following clause may be inserted in fixed-price supply contracts whenever it is likely that subsequent to award major modifications will be initiated pursuant to the Changes clause, or other contract provisions, and that such modifications will result in the placement of additional subcontracts. The pricing arrangements of such subcontracts have an impact upon the final price of the modification; therefore, it is essential that they be made available by the contractor for review by the contracting officer (see $ $ 1-3.807-10(b) and 1-3.903).

SUBCONTRACTS (The provisions of this clause do not apply to firm fixed-price and fixed price with escalation (economic price adjustment) contracts. The clause does apply to new subcontracts or modifications of existing subcontracts which are necessitated because of unpriced contract changes pursuant to the Changes clause or other provisions of this contract.)

(a) As used in this clause, the term "subcontract" includes purchase orders.

(b) The Contractor shall notify the Contracting Officer reasonably in advance of entering into any subcontract if the Contractor's procurement system has not been approved by the Contracting Officer and if the subcontract:

(i) Is to be a cost-reimbursement, time and materials, or labor-hour contract which it is estimated will involve an amount in excess of ten thousand dollars ($10,000) including any fee;

(ii) Is proposed to exceed one hundred thousand dollars ($100,000); or

(iii) is one of a number of subcontracts, under this contract, with a single subcontractor for the same or related supplies or services which, in the aggregate, are expect ed to exceed one hundred thousand dollars ($100,000).

(c) The advance notification required by paragraph (b) above shall include:

(i) A description of the supplies or services to be called for by the subcontract;

(ii) Identification of the proposed subcontractor and an explanation of why and how

the proposed subcontractor was selected, including the competition obtained;

(iii) The proposed subcontract price, together with the Contractor's cost or price analysis thereof;

(iv) The subcontractor's current, complete, and accurate cost or pricing data and Certificate of Current Cost of Pricing Data, when such data and certificates are required by other provisions of this contract to be obtained from the subcontractor;

(v) Identification of the type of subcontract to be used;

(vi) A memorandum of negotiation which sets forth the principal elements of the subcontract price negotiations. A copy of this memorandum shall be retained in the Contractor's file for use of Government reviewing authorities. The memorandum shall be in sufficient detail to reflect the most significant considerations controlling the establishment of initial or revised prices. The memorandum should include an explanation of why cost or pricing data was, or was not required, and, if it was not required in the case of any price negotiation in excess of $100,000, a statement of the basis for determining that the price resulted from or was 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. If cost or pricing data was submitted and a certificate of cost or pricing data was required, the memorandum shall reflect the extent to which reliance was not placed upon the factual cost or pricing data submitted and the extent to which this data was not used by the Contractor in determining the total price objective and in negotiating the final price. The memorandum shall also reflect the extent to which it was recognized in the negotiation that any cost or pricing data submitted by the subcontractor was not accurate, complete, or current; the action taken by the Contractor and the subcontractor as a result; and the effect, if any, of such defective data on the total price negotiated. Where the total price negotiated differs significantly from the Contractor's total price objective, the memorandum shall explain this difference;

(vii) When incentives are used, the memorandum of negotiation shall contain an explanation of the incentive fee profit plan identifying each critical performance element, management decisions used to quantify each incentive element, reasons for incentives on particular performance characteristics, and a brief summary of trade-off possibilities considered as to cost, performance, and time; and

(viii) The Subcontractor's Disclosure Statement or Certificate relating to Cost Accounting Standards when such data are required by other provisions of this contract to be obtained from the subcontractor.

supply contracts if it is desired to cover the subject matter thereof.

§ 1-7.104-1 Liquidated damages provi.

sions. Insert the provision set forth in § 11.315-3 under the conditions and in the manner prescribed in § 1-1.315.

(d) The Contractor shall not enter into any subcontract for which advance notification to the Contracting Officer is required by this clause, without the prior written consent of the Contracting Officer; Provided, That the Contracting Officer in his discretion, may ratify in writing any subcontract. Such ratification shall constitute the consent of the Contracting Officer required by this paragraph.

(e) Neither consent by the Contracting Officer to any subcontract or any provisions thereof nor approval of the Contractor's procurement system shall be construed to be a determination of the acceptability of any subcontract price or of any amount paid under any subcontract or to relieve the Contractor of any responsibility for performing this contract, unless such approval or consent specifically provides otherwise.

(f) The Contractor agrees that no subcontract placed under this contract shall provide for payment on a cost-plus-a-percentage-of-cost basis. (40 FR 11580, Mar. 12, 1975; 40 FR 20818, May 13, 1975)

$ 1-7.104-2 Changes to "make-or-buy"

program. Insert the clause set forth in 813.902-3 in all contracts containing a "make-or-buy” program.

Subpart 1-7.2–Cost-Reimbursement

Type Supply Contracts

SOURCE: 39 FR 1756, Jan. 14, 1974, unless otherwise noted.

$ 1-7.103-29 Privacy Act.

Insert the clause prescribed by § 11.327-5 under the conditions set forth therein. [40 FR 44504, Sept. 26, 1975)

§ 1-7.200 Scope of subpart.

This subpart sets forth contract clauses for use in cost-reimbursement type supply contracts. 81-7.201 Applics § 1-7.201 Applicability.

The clauses set forth in this subpart shall be used in cost-reimbursement type supply contracts.

$ 1-7.202 Required clauses.

The clauses set forth in this $ 17.202 shall be inserted in all cost-reimbursement type supply contracts.

§ 1-7.202-1 Definitions.

Insert the clause set forth in § 17.102-1. Additional definitions may included provided they are not inconsistent with the clause or the provisions of these regulations.

81-7.103-30 Clauses for solicitations and

contracts for automatic data processing (ADP) equipment, software, main

tenance services, and supplies. Insert the standard clauses set forth in § 1-4.1108 in solicitations and contracts for ADP under the conditions specified in § 1-4.1108. The clauses are:

(a) Warranty Exclusion and Limitation of Damages.

(b) Contractor Representation. (c) Fixed Price Options: Option to Extend the Term of the Contract, Option for Increased Quantity. (41 FR 43546, Oct. 1, 1976) $ 1-7.103-31 Use of U.S. flag commercial

vessels. Insert the clause prescribed by $ 119.108-2 under the conditions set forth therein. (41 FR 52457, Nov. 30, 1976)

§ 1-7.202-2 Changes.

CHANGES (a) The Contracting Officer may at any time, by a written order, and without notice to the sureties, if any, make changes, within the general scope of this contract, in any one or more of the following: (1) Drawings, designs, or specifications, where supplies to be furnished are to be specially manufactured for the Government in accordance therewith; (2) method of shipment or packing; and (3) place of delivery.

(b) If any such change causes an increase or decrease in the estimated cost of, or the time required for, the performance of any part of the work under this contract, wheth

§ 1-7.104 Additional clauses.

The clauses set forth in this § 17.104 shall be inserted in fixed-price

40-104

0–79_-26

er changed or not changed by any such the performance of this contract, exclusive order, or otherwise affects any other provi of any fee, will be greater or substantially sion of this contract, an equitable adjust- less than the then estimated cost hereof, ment shall be made: (1) In the estimated the Contractor shall notify the Contracting cost or delivery schedule, or both; (2) in the Officer in writing to that effect, giving the amount of any fixed-fee to be paid to the revised estimate of such total cost for the contractor; and (3) in such other provisions performance of this contract. of the contract as may be affected, and the

(b) Except as required by other provisions contract shall be modified in writing accord

of this contract specifically citing and stated ingly. Any claim by the Contractor for ad

to be an exception from this clause, the justment under this clause must be asserted

Government shall not be obligated to reimwithin 30 days from the date of receipt by burse the Contractor for costs incurred in the Contractor of the notification of

excess of the estimated cost set forth in the change: Provided, however, That the Con

Schedule, and the Contractor shall not be tracting Officer, if he decides that the facts

obligated to continue performance under justify such action, may receive and act

the contract (including actions under the upon any such claim asserted at any time

Termination clause) or otherwise to incur prior to final payment under this contract.

costs in excess of the estimated cost set Failure to agree to any adjustment shall be

forth in the Schedule, unless and until the a dispute concerning a question of fact

Contracting Officer shall have notified the within the meaning of the clause of this

Contractor in writing that such estimated contract entitled “Disputes." However,

cost has been increased and shall have specexcept as provided in paragraph (c), below,

ified in such notice a revised estimated cost nothing in this clause shall excuse the Con

which shall thereupon constitute the estitractor from proceeding with the contract

mated cost of performance of this contract. as changed.

No notice, communication, or representa(c) Notwithstanding the provisions of

tion in any other form or from any person paragraphs (a) and (b), above, the estimated

other than the Contracting Officer shall cost of this contract and, if this contract is incrementally funded, the funds allotted for

affect the estimated cost of this contract. In

the absence of the specified notice, the Goythe performance thereof, shall not be in

ernment shall not be obligated to reimburse creased or deemed to be increased except by specific written modification of the contract

the Contractor for any costs in excess of the indicating the new contract estimated cost

estimated cost set forth in the Schedule, and, if this contract is incrementally

whether those excess costs were incurred funded, the new amount allotted to the con

during the course of the contract or as a tract. Until such modification is made, the

result of termination. When and to the Contractor shall not be obligated to contin

extent that the estimated cost set forth in ue performance or incur costs beyond the

the Schedule has been increased, any costs point established in the clause of this con

incurred by the Contractor in excess of the tract entitled "Limitation of Cost" or "Limi.

estimated cost prior to such increase shall tation of Funds."

be allowable to the same extent as if such

costs had been incurred after the increase; 8 1-7.202-3 Limitation of cost or funds.

unless the Contracting Officer issues a ter

mination or other notice and directs that (a) Insert the following clause in all the increase is solely for the purpose of covfully funded cost-reimbursement type ering termination or other specified exsupply contracts:

penses.

(c) Change orders issued pursuant to the LIMITATION OF Cost

Changes clause of this contract shall not be (a) It is estimated that the total cost to considered an authorization to the Contracthe Government for the performance of tor to exceed the estimated cost set forth in this contract, exclusive of any fee, will not the Schedule in the absence of a statement exceed the estimated cost set forth in the in the change order, or other contract modiSchedule, and the Contractor agrees to use fication, increasing the estimated cost. his best efforts to perform the work speci. (d) In the event that this contract is terfied in the Schedule and all obligations minated or the estimated cost not increased, under this contract within such estimated the Government and the Contractor shall cost. If, at any time, the Contractor has negotiate an equitable distribution of all reason to believe that the costs which he ex property produced or purchased under the pects to incur in the performance of this contract based upon the share of costs incontract in the next succeeding 60 days, curred by each. when added to all costs previously incurred,

(b) Insert the following clause in all will exceed 75 percent of the estimated cost then set forth in the Schedule, or if, at anycost-reimbursement type supply contime, the Contractor has reason to believe tracts which are to be incrementally that the total cost to the Government for funded:

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