§ 1-17.000 Scope of part.

As distinguished from the normal principles and procedures set forth in the other parts of the FPR, this part establishes uniform regulations for entering into and amending or modifying contracts to facilitate the national defense under the extraordinary, emergency authority granted by the Act of August 28, 1958, Public Law 85-804 (50 U.S.C. 1431-1435), set forth in § 1-17.501, hereinafter referred to in this Part 1-17 as "the Act," and Executive Order No. 10789 of November 14, 1958 (3 CFR, 1958 Supp., pp. 72-74), as amended by Executive Order No. 11051 of September 27, 1962 (3 CFR, 1962 Supp., pp. 244–253), set forth in § 1-17.502, hereinafter referred to in this Part 1-17 as "the Executive Order."

Subpart 1-17.1-General

(a) The Act empowers the President to authorize departments and agencies exercising functions in connection with the national defense to enter into contracts or into amendments or modifications of contracts and to make advance payments, without regard to other provisions of law relating to the making, performance, amendment, or modification of contracts, whenever he deems that such action would facilitate the national defense. (Similar authority was formerly contained in Title II of the First War Powers Act, 1941, which, as extended, expired June 30, 1958.)

(b) The Executive Order authorizes the head of each agency named therein to delegate the authority conferred upon him thereby to any other officials within his agency, and to confer on any such officials the power to make further delegations of such authority within their respective organizations. However, under the Act and the Executive Order, authority to approve actions obligating the United States in an amount in excess of $50,000 may not be delegated below the secretarial level, as defined in § 1-17.104 (b).

§ 1-17.102 General policy.

(a) Authority conferred by the Act shall be delegated in a manner which will best serve the interests of the national defense and, at the same time, retain control over the exercise of the authority at a level within the agency

which is high enough to insure uniformity of action.

(b) The authority conferred by the Act shall not be utilized so as to encourage carelessness and laxity on the part of persons engaged in the defense effort nor be relied upon where other adequate legal authority exists.

(c) The actions authorized under the Act shall be processed as expeditiously as practicable consistent with the care, restraint, and exercise of sound judgment, appropriate to such extraordinary authority.

§ 1-17.103 Types of actions.

The following three types of actions may be taken by or pursuant to the direction of an approving authority under the Act:

(a) Contractual adjustments such as amendments without consideration, correction of mistakes, and formalization of informal commitments (see Subpart 1-17.2).

(b) Making advance payments (procedures for making such payments are set forth in Subpart 1-30.4).

(c) Exercise of "residual powers," which refers to all other authority under the Act (see Subpart 1-17.3).

§ 1-17.104 Definitions.

As used in this Part 1-17, the following terms have the meanings set forth:

(a) "Approving authority" means an official or a contract adjustment board having authority to approve actions under the Act. This authority is distinguished from authority to take appropriate contractual action pursuant to such approval.

(b) "Secretarial level" means an official at or above the level of an assistant head of an agency or his deputy, and a contract adjustment board.

(c) "Defense contract" means an agreement of any kind (whether in the form of a letter of intent, purchase order, or otherwise) for property or services necessary, appropriate, or convenient for the national defense.

§ 1-17.105 Reports.

(a) The Act and the Executive Order provide that each agency shall, by March 15 of each year, submit to the Congress a report of all actions taken within the agency under the authority of the Act during the preceding calendar year.

The mere fact that losses occur under a defense contract is not, by itself, a sufficient basis for the exercise of the authority conferred by the Act. Whether, in a particular case, appropriate action such as amendment without consideration, correction of a mistake or ambiguity in a contract, or formalization of an informal commitment, will facilitate the national defense is a matter of sound judgment to be made on the basis of all the facts of such case. Although it is obviously impossible to predict or enumerate all the types of cases with respect to which action may be appropriate, examples of certain cases or types of cases where action may be proper are set forth in

§§ 1-17.204-2 through 1-17.204-4. Even if all of the factors contained in any of the examples are present, other factors or considerations in a particular case may warrant denial of the request. These examples are not intended to exclude other cases where an approving authority determines that the circumstances warrant action.

(a) Where an actual or threatened loss under a defense contract, however caused, will impair the productive ability of a contractor whose continued performance on any defense contract or whose continued operation as a source of supply is found to be essential to the national defense, the contract may be adjusted but only to the extent necessary to avoid such an impairment of the contractor's productive ability.

(b) Where a contractor suffers a loss (not merely a diminution of anticipated profits) on a defense contract as a result

(a) A defense contract may be amended or modified to correct or mitigate the effect of a mistake. The following are examples:

(1) A mistake or ambiguity which consists of the failure to express, or to express clearly, in a written contract the agreement as both parties understood it.

(2) A mistake on the part of the contractor which is so obvious that it was or should have been apparent to the contracting officer.

(3) A mutual mistake as to a material fact.

(b) Amending defense contracts to correct mistakes with the least possible delay normally will facilitate the national defense by expediting the procurement program and by giving contractors proper assurance that such mistakes will be corrected expeditiously and fairly. § 1-17.204-4 Informal commitments.

Informal commitments may be formalized under certain circumstances to permit payment to persons who have taken action without a formal defense contract; for example, where any person, pursuant to written or oral instructions from an official of an agency and relying in good faith upon the apparent authority of the official to issue such instructions, has arranged to furnish or has furnished property or services to the agency or to a defense contractor or subcontractor without formal contractual coverage for such property or services. Formalization of commitments under such circumstances normally will facilitate the national defense by assuring such persons that they will be treated fairly and paid expeditiously.

(a) The Act is not authority for: (1) The use of the cost-plus-a-percentage-of-cost system of contracting;

(2) The making of any contract in violation of existing law relating to limitation of profit or fees;

(3) The negotiation of purchases of or contracts for property or services required by law to be procured by formal advertising and competitive bidding; or (4) The waiver of any bid, payment, performance or other bond required by

law.

or

(b) No contracts, amendments, modifications shall be entered into under authority of the Act:

(1) Unless a finding is made that the action will facilitate the national defense;

(2) Unless other legal authority within the agency concerned is deemed to be lacking or inadequate; and

(3) Except within the limits of the amounts appropriated and the statutory contract authorization.

(c) No contract shall be amended or modified:

(1) Unless the request therefor has been filed before all obligations (including final payment) under the contract have been discharged; and

(2) If the contract was negotiated under section 302(c) (14) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 252(c) (14)) or under 10 U.S.C. 2304(a) (15), to increase the contract price to an amount higher than the lowest rejected bid of any responsible bidder.

(d) No informal commitment shall be formalized:

(1) Unless a request for payment has been filed within six months after arranging to furnish or furnishing property or services in reliance upon the commitment; and

(2) Unless it is found that at the time the commitment was made it was impracticable to use normal procurement procedures.

§ 1-17.205-2 Additional limitations below secretarial level.

The exercise of authority by officials below the secretarial level shall be sub

(a) The action shall not deal with or directly affect any matter which has been submitted to the General Accounting Office.

(b) The action shall not obligate the Government in an amount in excess of $50,000.

(c) The action shall not release a contractor from performance of an obligation

(1) Priced in excess of $50,000; or (2) Where reprocurement is contemplated, unless the approving authority finds that the estimated actual or potential increase in cost to the Government will not exceed $50,000.

(d) The action shall not involve the disposal of Government surplus property.

(e) Mistakes shall not be corrected by action obligating the Government in an amount in excess of $500 unless notice of the mistake was given to the contracting officer before completion of the contractor's work or the effective date of contract termination.

(f) The correction of a contract because of a mistake in its making shall not result in increasing the original contract price above the next lowest responsive bid of a responsible bidder in the case of a formally advertised procurement, or the amount of the next lowest responsive proposal (at the time of award) of a responsible offeror considered in the case of a negotiated procurement.

§ 1-17.206. Contractual requirements.

Every contract entered into or amended or modified pursuant to this Part 1-17 shall contain:

(a) A citation of the Act and the Executive Order;

(b) A brief statement of the circumstances justifying the action;

(c) A recital of the finding that the action will facilitate the national defense;

(d) The contract clause entitled "Covenant Against Contingent Fees," as set forth in § 1-1.503;

(e) A contract clause in accordance with the examination of records requirements of section 3(b) of the Act (see § 1-3.814-2(e)), unless (1) the contract is for purchases authorized to be made outside the United States under the Foreign Assistance Act of 1961, and (2) pursuant to Executive Order No. 10784 of