CONTRACT CLAUSES AND SOLICITATION PROVISIONS

tract (or to require repayment of any fixed fee theretofore paid) in such amount as may be equitable under the circumstances, or (iii) may terminate this contract for default as provided in the clause of this contract entitled "Termination." Failure to agree to the amount of any such increased cost to be charged to the Contractor or to such reduction in, or repayment of, the fixed fee shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes."

(c) Notwithstanding the provisions of paragraph (b) hereof, the Government may at any time require the correction or replacement by the Contractor, without cost to the Government, of supplies or lots of supplies which are defective in material or workmanship, or otherwise not in conformity with the requirements of this contract, if such defects or failures are due to fraud, lack of good faith or willful misconduct on the part of any of the Contractor's directors or officers, or on the part of any of his managers, superintendents, or other equivalent representatives, who has supervision or direction of (i) all or substantially all of the Contractor's business, or (ii) all or substantially all of the Contractor's operations at any one plant or separate location in which this contract is being performed, or (iii) a separate and complete major industrial operation in connection with the performance of this contract. The Government may at any time also require correction or replacement by the Contractor, without cost to the Government, of any such defective supplies or lots of supplies if the defects or failures are caused by one or more individual employees selected or retained by the Contractor after any such supervisory personnel has reasonable grounds to believe that such employee is habitually careless or otherwise unqualified.

(d) Corrected supplies or replaced supplies shall be subject to the provisions of this clause in the same manner and to the same extent as supplies originally delivered under this contract.

(e) The Contractor shall make his records of all inspection work available to the Government during the performance of this contract and for such longer period as may be specified in this

contract.

(f) Except as provided in this clause and as may be provided in the Schedule, the Contractor shall have no obligation or liability to correct or replace supplies or lots of supplies which at the time of delivery are defective in material or workmanship or otherwise not in conformity with the requirements of this contract.

(g) Except as otherwise provided in the Schedule, the Contractor's obligation to correct or replace Government-furnished property (which is property in the possession of or acquired directly by the Government and delivered or otherwise made available to the Contractor) shall be governed by the provisions of the clause of this contract entitled “Government Property".

(End of clause)

(b) When it is desired to require contractors to maintain an inspection system in accordance with Military Specification MIL-I-45208 (see 14–303), the clause in (a) above shall be inserted in the contract except that the following shall be added as the third sentence of paragraph (a).

The inspection system shall be in accordance with the edition of Military Specification MIL1-45208 in effect on the date of this contract. (1967 AUG)

7-203.6 Assignment of Claims. In accordance with 7-103.8, insert the clause

therein.

7-203.7 Examination of Records by Comptroller General. In accordance with 7-104.15, insert the clause therein.

7-203.8 Subcontracts.

(a) In accordance with 23-201.2, and subject to the instructions in (b) below, insert the following clause.

SUBCONTRACTS (1974 APR)

(a) The Contractor shall notify the Contracting Officer reasonably in advance of entering into any subcontract which (i) is cost-reimbursement type, time and materials or labor-hour, or (ii) is

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fixed-price type and exceeds in dollar amount either $25,000 or five percent (5%) of the total estimated cost of this contract, or (iii) provides for the fabrication, purchase, rental, installation, or other acquisition of special test equipment having a value in excess of $1,000 or of any items of industrial facilities.

(b) In the case of a proposed subcontract which (i) is cost-reimbursement type, time and materials, or labor-hour, and would involve an estimated amount in excess of $10,000, including any fee, or (ii) is proposed to exceed $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 expected to exceed $100,000; the advance notification required by (a) above shall include:

(1) a description of the supplies or services to be called for by the subcontract;
(2) identification of the proposed subcontractor and an explanation of why and how the
proposed subcontractor was selected, including the degree of competition obtained;
(3) the proposed subcontract price, together with the Contractor's cost or price analysis
thereof;

(4) the subcontractor's current, complete, and accurate cost or pricing data and Cer-
tificate of Current Cost or Pricing Data, when such data and certificate are required,
by other provisions of this contract, to be obtained from the subcontractor;
(5) identification of the type of subcontract to be used;

(6) a memorandum of negotiation which sets forth the principal elements of the subcon-
tract price negotiations. A copy of this memorandum shall be retained in the contrac-
tor's file for the 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 ex-
planation 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 sub-
stantial 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 fac-
tual 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 subcon-
tractor 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 Contrac-
tor's total price objective, the memorandum shall explain this difference;
(7) when incentives are used, the memorandum of negotiation shall contain an explana-
tion of the incentive fee/profit plan identifying each critical performance element,
management decisions used to quantify each incentive element, reasons for incen-
tives on particular performance characteristics, and a brief summary of trade-off pos-
sibilities considered as to cost, performance, and time; and

(8) 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 ob-
tained from the subcontractor.

(c) The Contractor shall obtain the written consent of the Contracting Officer prior to placing any subcontract for which advance notification is required under (a) above. The Contracting Officer may, in his discretion, ratify in writing any such subcontract; such action shall constitute the consent o`the Contracting Officer as required by this paragraph (c).

(d) The Contractor agrees that no subcontract placed under this contract shall provide for payment on a cost-plus-a-percentage-of-cost basis.

(e) The Contracting Officer may, in his discretion, specifically approve in writing any of the provisions of a subcontract. However, such approval or the consent of the Contracting Officer obtained as required by this clause shall not be construed to constitute a determination of the al

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CONTRACT CLAUSES AND SOLICITATION PROVISIONS lowability of any cost under this contract, unless such approval specifically provides that it constitutes a determination of the allowability of such cost.

(f) The Contractor shall give the Contracting Officer immediate notice in writing of any action or suit filed, and prompt notice of any claim made against the Contractor by any subcontractor or vendor which, in the opinion of the Contractor, may result in litigation, related in any way to this contract with respect to which the Contractor may be entitled to reimbursement from the Government.

(g) Notwithstanding (c) above, the Contractor may enter into subcontracts within (i) and (ii) of (a) above without the consent of the Contracting Officer if the Contracting Officer has approved in writing the Contractor's procurement system and the subcontract is within the scope of the approval. (This subparagraph (g) however, shall not be applicable to those subcontracts subject to subparagraph (j) below, if any.)

(h) The Contractor shall (i) insert in each price redetermination or incentive price revision subcontract hereunder the substance of the “Limitation on Payments" paragraph set forth in the appropriate clause prescribed by paragraph 7-108 of the Armed Services Procurement Regulation, including subparagraph (4) thereof, modified to omit mention of the Government and reflect the position of the Contractor as purchaser and of the subcontractor as vendor, and to omit the portion of subparagraph (3) thereof relating to tax credits, and (ii) include in each costreimbursement type subcontract hereunder a requirement that each price redetermination and incentive price revision subcontract thereunder will contain the substance of the “Limitation on Payments" provision, including subparagraph (4) thereof, modified as outlined in (i) of this paragraph.

(i) To facilitate small business participation in subcontracting under this contract, the Contractor agrees to provide progress payments on the fixed-price subcontracts of those subcontractors which are small business concerns, in conformity with the standards for customary progress payments stated in paragraphs 503 and 514 of Appendix E of the Armed Services Procurement Regulation, as in effect on the date of this contract. The Contractor further agrees that the need for such progress payments will not be considered as a handicap or adverse factor in the award of subcontracts.

(End of clause)

(b) Insert the following additional subparagraph to the clause in (a) above in accordance with 23-201.2(d).

(j) Notwithstanding approval of the procurement system, the Contractor shall not enter into certain subcontracts or classes of subcontracts set forth elsewhere in this contract without the prior written consent of the Contracting Officer. (1967 APR)

(c) In accordance with 23-201.4, insert the Equal Opportunity Pre-Award Clearance of Subcontracts clause in 7-104.22.

7-203.9 Utilization of Small Business Concerns. In accordance with 1-707.3(a) and (b), insert one or both of the clauses in 7-104.14.

7-203.10 Termination. In accordance with 8-702(a), insert the following

clause.

TERMINATION (1973 APR)

(a) The performance of work under the contract may be terminated by the Government in accordance with this clause in whole, or from time to time in part:

(i) whenever the Contractor shall default in performance of this contract in accordance with its terms (including in the term "default" any such failure by the Contractor to make progress in the prosecution of the work hereunder as endangers such performance), and shall fail to cure such default within a period of ten days (or such longer periods as the Contracting Officer may allow) after receipt from the Contracting Officer of a notice specifying the default; or

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(ii) whenever for any reason the Contracting Officer shall determine that such termination is in the best interest of the Government.

Any such termination shall be effected by delivery to the Contractor of a Notice of Termination specifying whether termination is for the default of the Contractor or for the convenience of the Government, the extent to which performance of work under the contract is terminated, and the date upon which such termination becomes effective. If, after notice of termination of this contract for default under (i) above, it is determined for any reason that the Contractor was not in default pursuant to (i), or that the Contractor's failure to perform or to make progress in performance is due to causes beyond the control and without the fault or negligence of the Contractor pursuant to the provisions of the clause of this contract relating to excusable delays, the Notice of Termination shall be deemed to have been issued under (ii) above, and the rights and obligations of the parties hereto shall in such event be governed accordingly.

(b) After receipt of a Notice of Termination and except as otherwise directed by the Contracting Officer, the Contractor shall:

(i) stop work under the contract on the date and to the extent specified in the Notice of Termination;

(ii) place no further orders or subcontracts for materials, services, or facilities, except as may be necessary for completion of such portion of the work under the contract as is not terminated;

(iii) terminate all orders and subcontracts to the extent that they relate to the performance of work terminated by the Notice of Termination;

(iv) assign to the Government, in the manner and to the extent directed by the Contracting Officer, all of the right, title, and interest of the Contractor under the orders or subcontracts so terminated, in which case the Government shall have the right, in its discretion, to settle or pay any or all claims arising out of the termination of such orders and subcontracts;

(v) with the approval or ratification of the Contracting Officer, to the extent he may
require, which approval or ratification shall be final and conclusive for all purposes
of this clause, settle all outstanding liabilities and all claims arising out of such ter-
mination of orders and subcontracts, the cost of which would be reimbursable in
whole or in part, in accordance with the provisions of this contract;

(vi) transfer title (to the extent that title has not already been transferred) and in the
manner, to the extent, and at the times directed by the Contracting Officer, deliver to
the Government (A) the fabricated or unfabricated parts, work in process,
completed work, supplies, and other material produced as a part of, or acquired in
respect of the performance of, the work terminated by the Notice of Termination,
(B) the completed or partially completed plans, drawings, information, and other
property which, if the contract had been completed, would be required to be
furnished to the Government, and (C) the jigs, dies, and fixtures, and other special
tools and tooling acquired or manufactured for the performance of this contract for
the cost of which the Contractor has been or will be reimbursed under this contract;
(vii) use his best efforts to sell in the manner, at the times, to the extent, and at the price
or prices directed or authorized by the Contracting Officer, any property of the types
referred to in (vi) above; provided, however, that the Contractor (A) shall not be
required to extend credit to any purchaser, and (B) may acquire any such property
under the conditions prescribed by and at a price or prices approved by the Con-
tracting Officer; and provided further that the proceeds of any such transfer or
disposition shall be applied in reduction of any payments to be made by the Govern-
ment to the Contractor under this contract or shall otherwise be credited to the price
or cost of the work covered by this contract or paid in such other manner as the Con-
tracting Officer may direct;

(viii) complete performance of such part of the work as shall not have been terminated by
the Notice of Termination; and

(ix) take such action as may be necessary, or as the Contracting Officer may direct, for the protection and preservation of the property related to this contract which is in the possession of Contractor in which the Government has or may acquire an in

terest.

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The Contractor shall proceed immediately with the performance of the above obligations notwithstanding any delay in determining or adjusting the amount of the fee, or any item of reimbursable cost, under this clause. At any time after expiration of the plant clearance period, as defined in Section VIII, Armed Services Procurement Regulation, as it may be amended from time to time, the Contractor may submit to the Contracting Officer a list, certified as to quantity and quality, of any or all items of termination inventory not previously disposed of, exclusive of items the disposition of which has been directed or authorized by the Contracting Officer, and may request the Government to remove such items or enter into a storage agreement covering them. Not later than fifteen (15) days thereafter, the Government will accept such items and remove them or enter into a storage agreement covering the same; provided, that the list submitted shall be subject to verification by the Contracting Officer upon removal of the items, or if the items are stored, within forty-five (45) days from the date of submission of the list, and any necessary adjustment to correct the list as submitted shall be made prior to final settlement.

(c) After receipt of a Notice of Termination, the Contractor shall submit to the Contracting Officer his termination claim in the form and with the certification prescribed by the Contracting Officer. Such claim shall be submitted promptly but in no event later than one year from the effective date of termination, unless one or more extensions in writing are granted by the Contracting Officer, upon request of the Contractor made in writing within such one year period or authorized extension thereof. However, if the Contracting Officer determines that the facts justify such action, he may receive and act upon any such termination claim at any time after such one year period or any extension thereof. Upon failure of the Contractor to submit his termination claim within the time allowed, the Contracting Officer may determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall thereupon pay to the Contractor the amount so determined.

(d) Subject to the provisions of paragraph (c), the Contractor and the Contracting Officer may agree upon the whole or any part of the amount or amounts to be paid (including an allowance for the fee) to the Contractor by reason of the total or partial termination of work pursuant to this clause. The contract shall be amended accordingly, and the Contractor shall be paid the agreed amount.

(e) In the event of the failure of the Contractor and the Contracting Officer to agree in whole or in part, as provided in paragraph (d), as to the amounts with respect to costs and fee, or as to the amount of the fee, to be paid to the Contractor in connection with the termination of work pursuant to this clause, the Contracting Officer shall determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall pay to the Contractor the amount determined as follows:

(i) if the settlement includes cost and fee:

(A) there shall be included therein all costs and expenses reimbursable in accordance with this contract, not previously paid to the Contractor for the performance of this contract prior to the effective date of the Notice of Termination, and such of these costs as may continue for a reasonable time thereafter with the approval of or as directed by the Contracting Officer; provided, however, that the Contractor shall proceed as rapidly as practicable to discontinue such costs;

(B) there shall be included therein so far as not included under (A) above, the cost of settling and paying claims arising out of the termination of work under subcontracts or orders, as provided in paragraph (b)(v) above, which are properly chargeable to the terminated portion of the contract;

(C) there shall be included therein the reasonable costs of settlement, including accounting, legal, clerical, and other expenses reasonably necessary for the preparation of settlement claims and supporting data with respect to the terminated portion of the contract and for the termination and settlement of subcontracts, thereunder, together with reasonable storage, transportation, and other costs incurred in connection with the protection or disposition of termination inventory; provided, however, that if the termination is for default of the Contractor there shall not be included any amounts for the preparation of the Contractor's settlement proposal; and

(D) there shall be included therein a portion of the fee payable under the contract determined as follows:

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