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value of the work done on the undeliv- lish and protect the Government title ered portion of the contract. (See also The existence of any such encum § 1-30.525-1.)
brance is a violation of the contrac
tor's obligations under the contract. § 1-30.524-6 Erroneous cost estimates.
§ 1-30.525-1 Loss, theft, destruction, oi When liquidation percentages lower
damage. than those called for by $ 1-30.512-1
Paragraph (e) of the clauses present. are established pursuant to § 1-30.5102, it may occur that actual costs and
ed in § 1-30.510-1(a) are not intended future cost of performance are higher
to apply to normal spoilage. The risk than the estimated costs used to estab
of loss as to property affected by the lish liquidation rates. In such cases
Progress Payments clause is on the (see paragraph (c)(vi) of the clause
contractor, except to the extent that presented in $ 1-30.510-1(a) and para
by some special provision of the con
tract (such as that relating to aircraft graph (c)(iv) of the clause prescribed in § 1-30.510-2(a)) appropriate increase
in the open) the Government shall of the liquidation percentage will be
have expressly assumed the risk of necessary to adjust for any under-liq
loss. Such express assumption of risk uidation that may have occurred, to
by the Government is not made in the bring the amount of unliquidated
Progress Payments clause, the Default progress payments within the limits of
clause, or the Termination clause. Beparagraph (a)(3) of these clauses, and
cause of problems of administering the to assure the adequacy of future liqui
contract, especially those connected dations. Increase of the liquidation
with property responsibility and inpercentage will also become necessary
ventory control, the risk of loss on even though the provisions of $ 1
property to which the Government 30.512-2 have not been applied in
holds title because of progress pay. fixing the liquidation percentage,
ments must be on the contractor to when progress payments are based on
the same extent that it would be if the costs of direct labor and material only
contractor held title to the property. (§ 1-30.510-2) or any limited cost base
This risk of loss carries with it the ac(§ 1-30.511-5), and actual costs forming
companying duty to repay to the Gov. the base for progress payments are
ernment the amount of unliquidated higher than the estimated eligible progress payments based on cost allocosts used in establishing the liquida
cable to lost, stolen, or destroyed proption percentage.
erty or to the damaged portion of the
property. If the Government has ex8 1-30.525 Government title.
pressly assumed particular risks of Since the clauses in § 1-30.510 give
loss, then, to the extent of such exthe Government title to all of the ma
press assumption of risk by the Gov. terials, work in process, and finished
ernment, the contractor would not be goods under contracts after the obligated to repay to the Government making of progress payments thereon. the amount of unliquidated progress care should be taken to assure, to the payments based on costs allocable to extent reasonably necessary, that the such lost, stolen, destroyed, or damtitle to the Government will be free of aged property. (See, however, paraall encumbrances. The procedure in graphs (c)(v) and (c)(vi) of the clauses this respect will necessarily vary with prescribed in $$ 1-30.510-1(a) and 1the particular circumstances of indi. 30.510-2(a), respectively, as to future vidual cases. Ordinarily, in the absence payments on the contract after such of reason to believe that the Govern loss, damage, theft, or destruction.) ment title may be subject to encumbrance, the contractor's certificate will
§ 1-30.525-2 Government-furnished propbe relied on. If any arrangements or
erty. conditions are found that would Contract provisions referring to or impair the contractor's right of dispo- defining liability for Government-fursition of the property affected by the nished property do not apply to propprogress payments, appropriate ar- erty to which the Government shall rangements should be made to estab- have acquired title solely pursuant to
the provisions of paragraph (d) of the ited against the costs of contract perProgress Payments clauses prescribed formance. Costs allocable to property, in § 1-30.510.
other than scrap, so transferred from
the contract will be eliminated from § 1-30.525–3 Special tooling.
the costs of contract performance, and When the contractor furnishes spe- the contractor shall be required to cial tooling, pursuant to a special tool- repay to the Government an amount ing clause in the contract, and such equal to the unliquidated progress special tooling is not to be delivered to payments allocable to the property so the Government as an end item under transferred from the contract. the contract, the handling and disposi (b) When (1) the contractor has tion of such special tooling should be completed all work called for by the governed by the Special Tooling clause contract, and (2) such work has been of the contract, even though title to delivered to and accepted by the Govsuch special tooling is held by the ernment, and (3) progress payments Government pursuant to the Progress made under the contract have been Payment clause of the contract.
fully liquidated, and (4) the contractor
has fully performed all his obligations $ 1-30.525-4 Termination for convenience
under the contract (including the of the Government.
making of any payments to which the After the giving of notice of termina Government may be entitled under tion under contract provision for Ter the contract, and including compliance mination for Convenience of the Gov- with any other provisions of the conernment, the property to which the tract, such as the Termination clause Government has title pursuant to the or the Government-furnished properProgress Payments clause and which ty clause), any excess property reis a part of termination inventory maining is to be regarded as having should be acquired or disposed of in not been allocated or properly chargeaccordance with the provisions of the able to the contract under sound and Termination clause of the contract generally accepted accounting princiand of applicable laws and regulations. ples and practices, and this outside the The acquisition or disposition of such scope of the Progress Payments clause termination inventory shall be gov- which would have vested title in the erned by the Termination clause, even Government. Accordingly, the contracthough title to all or a portion of such tor holds title to such excess property inventory is in the Government pursu- and may deal with it as he desires. ant to the Progress Payments clause of the contract.
§ 1-30.526 Consideration for progress pay
ments-awards. § 1-30.525–5 Scrap-excess property.
When a Progress Payments clause is (a) In the course of proper perform included at the inception of a contract, ance of contracts, contractors are per- no separate consideration is charged mitted to sell or otherwise dispose of for the Progress Payments clause, and current production scrap in the ordi there shall be no provision for interest nary course of business, notwithstand- or other specific charge for progress ing the Government's title under the payments, or for a reduction in payProgress Payments clause. Permission ments (other than any agreed discount of the contracting officer for such dis- for prompt payment) by reason of the posal of scrap is not required. With making of progress payments. The the permission of the contracting offi- worth of the Progress Payments cer and on terms approved by him, clause to the contractor is expected to contractors may also acquire or dis- be reflected in one or both of (a) a bid pose of materials, inventories, or work or negotiated price that will be lower in process to which the Government than such price would have been if has acquired title pursuant to the provision had not been made for progProgress Payments clause of the con ress payments, or (b) contract terms tract, including transfer of such prop and conditions, other than price, that erty to other work of the contractor. are more beneficial to the GovernProceeds of scrap disposal will be cred- ment than they would have been if
provision had not been made for prog- (29 FR 10356, July 24, 1964, as amended at ress payments.
40 FR 43732, Sept. 23, 1975) $ 1-30.527 Amendments to provide prog- $ 1-30.528 Consideration for amendments ress payments.
providing for progress payments. There should be ordinarily no occa- Contracts may not be modified sion to amend contracts to provide for except in the interest of the Governprogress payments unless there has ment. Contracts which do not provide been material change from the circum for progress payments may be amendstances contemplated by the parties ed to provide for progress payments when invitations for bids were issued only when the amendment provides or the contract was entered into with new and valuable consideration out progress payment provision. How moving to the Government. Appropriever, cases do occur (a) in which the ate price reduction may provide this actual lead time or preparatory period consideration. In the varying circumbetween the beginning of work and stances of individual cases, the considthe first delivery substantially exceeds eration for progress payments need the estimated lead time and in fact not necessarily be monetary. Agreeruns or will run over 6 months (f 1- ments by the contractor, incorporated 30.503), or (b) in which unusual cir in such an amendment, for the benefit cumstances bring about unexpected of and substantially advantageous to substantial accumulation of predeli. the Government, may constitute suffivery costs having material impact on cient consideration for an amendment the contractor's working funds (f 1- providing for progress payments. 30.505). These cases may arise from oc- When estimated financing costs have currences such as (a) uncertainties or been included as an element (whether errors in specifications, (b) contract or not identified) in the contract price change notices, (c) Government delays of a contract not providing for progin testing, inspection, furnishing of ress payments, it is fair to expect material or equipment, furnishing of elimination of the applicable portion stock numbers, packaging or shipping of that element of the price when instructions or shipping documents, or progress payments are provided by completion of contract supplements, amendment. The fair and reasonable (d) stretchouts or stop-work orders, (e) consideration for the progress pay. performance difficulties of subcontrac ment amendment should approximate tors suppliers, and (f) causes beyond in value as nearly as practically ascerthe control and without the fault or tainable the amount by which the connegligence of the contractor of the tract price would have been smaller if kinds mentioned in paragraph (c) of a Progress Payments clause had been the Default clause provided in § 1- contained in the contract in the first 8.707. In these kinds of cases, requests instance. In the absence of definite inof contractors for amendments to pro- formation on this point, pertinent facvide progress payments should be con- tors for estimating the fair and reasidered promptly, in the light of the sonable amount of consideration circumstances then existing. If the cir would include (a) the amounts of progcumstances then existing approximate ress payments expected to be outconditions under which progress pay- standing for an estimated period of ments would have been properly pro- time, (b) the cost of equivalent work. vided in conformity with these regula- ing funds to the contractor, and (c) tions at contract inception, if the new the estimated profit rate expected to circumstances had been foreseen, be earned by contract performance. If progress payments should be provided not accomplished by a contract price by amendment. In this connection see reduction, other concessions or agreeparticularly $$ 1-30.202, 1-30.204, 1- ment by the contractor, advantageous 30.205, 1-30.206, 1-30.207, 1-30.210, 1- to the Government and incorporated 30.210-1, and 1-30.528. In conformity in the amendment, may be fairly evalwith the standards and procedures of uated and accepted as being of value 8 1-30.505, unusual progress payments reasonably equivalent to a price reducmay be provided by amendment.
tion. This consideration should be
such as is fair, equitable and reason specific charge for progress payments, able in the light of the circumstances or for a reduction in payments after of each case. (See § 1-30.527.) This con- the progress payment amendment sideration should be for the progress (other than any agreed discount for payment amendment, and there shall prompt payment) by reason of the be no provision for interest or other making of progress payments.