(5) Period covered by report;

(6) List of contracts being performed during the period concerned, showing as to each:

(i) Contract number;

(ii) Date;

(iii) Total amount of contract;

(iv) Principal product or service; (v) Method of procurement (advertised or negotiated, and extent of competition);

(vi) Type of contract;

(vii) Total billings during period; and (viii) Principal place of manufacture; (7) Brief description of manufacturing techniques and type of work normally performed by contractor (e.g., production, fabrication, assembly) and relative complexity of the work (state the percentage of work subcontracted);

(8) Information concerning contractor performance, including extent to which:

(i) The product exceeded, met or fell below the contract requirements;

(ii) Delivery schedules were met (indicate reasons for failures to meet schedules, and compliance with requests for early deliveries, if any);

(iii) Rejections and spoilage rates were high or low and reasons therefor;

(iv) Contractor met targets under incentive contracts and reasons therefor;

(v) Contractor was economical in use of materials, facilities, and manpower, and was otherwise effective in controlling production costs;

(vi) Contractor made effective use of his facilities (state whether he expanded facilities to undertake renegotiable business and if so, was such expansion excessive);

(vii) Strikes, stoppages, or other significant developments in labor management affected contract performance;

(9) Information concerning reasonableness of cost and profits, including:

(i) Basis for use of particular type of contract in significant contracts (if an incentive contract, describe also the basis for negotiation of target and cost sharing formulas);

(ii) Adequacy and reliability of cost information furnished by contractor;

(iii) Unusual risks assumed by contractor in particular contracts, e.g., close pricing, labor and material cost increases, shortage of materials, inventory spoilage and obsolescence, cutbacks, terminations, and quality or performance

guarantees (explain extent to which risks were reduced or minimized by types of contracts used);

(iv) Contingencies included in quoted prices;

(v) Experience as to profits received by contractor in significant contracts, especially incentive contracts, with appraisal as to whether or not profits were earned by contractor's efforts (state whether any important contracts were negotiated with no profit or at less than normal profit);

(vi) Significant refunds and voluntary price reductions, with circumstances of each;

(vii) Evaluation of contractor as a high, average, or low cost producer;

(viii) Reasonableness of contractor's pricing policies;

(ix) Comparison of prices with competitor's prices for same or similar products or services;

(x) Reasons for cost overruns and underruns in cost-reimbursement type contracts;

(10) List of capital funds and facilities employed by contractor, with particular reference to their source, e.g., contractor's equity capital, borrowed or rented, Government-financed, or Gov

ernment-furnished;

(11) Extent to which contractor has complied with Govermnent policies such as the small business program, labor surplus area program, competition in subcontracting, and make or buy program;

(12) Full information as to any terminations for default or for the convenience of the Goverment to include the status of appeals or claims, if any, and the extent to which payments were made during the period concerned;

(13) Status of price revision actions and the basis for any revision completed in the period concerned;

(14) Such pertinent information on defense subcontracts, as is available;

(15) Appraisal of contractor's contribution to the defense effort, with particular emphasis on work done by him in development of new materiel, invention of new devices, management of large weapon system contracts as prime or associate contractor, effective use of value engineering, and the like;

(16) A current appraisal of contractor's performance and recommendation as to reasonableness of contractor's profits for the period under consideration under the listed contracts; and

(17) Such other information as may be particularly requested by the Renegotiation Board.

While all the contracts concerned will be listed at the beginning of a performance report (see subparagraph (6) of this paragraph), individual contracts need not thereafter be identified except where information as to unusual performance is set forth, especially in cases of incentive contracts.

(e) Departmental distribution of performance reports. A copy of each performance report on a contractor who is on the list of the 100 contractors awarded the largest dollar amount of defense contracts (which list is published annually in a Defense Procurement Circular) shall be sent to the Assistant Secretary of Defense (Installations and Logistics). A copy shall also be sent to the appropriate Departmental Secretary.

(f) Advanced-Development, Engineering-Development, and Operational-Systems-Development, and Production Contracts. Upon request of the Renegotiation Board, the Director of Contractor Performance Evaluation, Office of the Assistant Secretary of Defense (Installations and Logistics) (see § 1.908–1), shall furnish Contractor Performance Evaluation Reports on advanced-development contracts, engineering-development tracts, and operational-systems-development contracts and production contracts which follow or are concurrent with the development contracts that are evaluated.

con

[29 F.R. 11809, Aug. 19, 1964, as amended at 33 F.R. 15380, Oct. 17, 1968]

§ 1.320 Industrial security.

Certain required procedures designed to safeguard classified defense information are set forth in the Department of Defense Industrial Security Regulation, DOD 5220.22-R (Implemented for the Army by AR 380-131; for the Navy by OPNAV Instruction 5540-8E; for the Air Force by AFR 205-4; and for the Defense Supply Agency by DSAM 85002.1), and DD Form 441 "Security Agreement" and Its attachment, the Department of Defense Industrial Security Manual together with Supplements thereto. Security requirements governing work to be performed outside the United States, Its possessions, and Puerto Rico by United States or foreign nationals, or work to be performed in the United States by foreign nationals (including

companies located in the United States which are owned, controlled, or influenced by nationals of a foreign country), are subject to security agreements which the United States maintains with a number of foreign countries. The requirements of these agreements are set forth in the Department of Defense Industrial Security Regulation. [32 F.R. 5505, Apr. 4, 1967]

§ 1.321 Procurements involving work to be performed in foreign countries by U.S. contractors.

(a) Except as otherwise provided in an international agreement, when a contract which requires work to be performed in a foreign country by personnel of a United States contractor is contemplated, coordination shall be effected with the appropriate component Commander of the unified Command concerned to assure compliance with international agreements (see § 1.320). Such coordination should be effected as early as possible.

(b) The contracting officer shall request the following information from the overseas Commander:

(1) The applicability of any international agreements to the requirement being procured;

(2) Applicability of taxes, duties, and charges for doing business;

(3) Security requirements applicable to the area concerned;

(4) Standards of conduct required to be observed by the prospective contractor and his employees, and any action that may be taken against them in the event required standards are not maintained, and

(5) Requirements pertaining to the use of foreign currencies, including applicability of U.S. holdings of excess foreign currencies.

(c) The contracting officer shall furnish the overseas Commander the following information prior to any contract performance:

(1) Any contractor logistical support desired,

(2) Contract performance period, (3) Date of planned arrival of contractor personnel,

(4) Contract security requirements, and

(5) Other pertinent information to effect complete coordination and cooperation.

[31 F.R. 9851, July 21, 1966]

(a) Description of procedure. Multiyear procurement is a method for competitive contracting for known requirements for military supplies, in quantities and total cost not in excess of planned requirements for 5 years, set forth in, or in support of, the Department of Defense 5-Year Defense Program, even though the total funds ultimately to be obligated by the contract are not available to the contracting officer at the time of entering into the contract. Under this method, contract quantities are budgeted for and financed in accordance with the program year for which each quantity is authorized. This procedure provides for solicitation of prices for supplies based either on award of the current 1-year program quantity only, or, in the alternative, on total quantities representing the first and one or more succeeding program year quantities (multiyear). Award is made on whichever of these two alternative bases reflects the lowest unit prices to the Government. If award is made on the multiyear basis, funds are obligated only for the first year's quantity, with succeeding years' contract quantities funded annually thereafter. In the event funds are not made available to support one or more succeeding year's quantities, cancellation is effected. That contractor is protected against loss resulting from cancellation by contract provisions allowing reimbursement of unrecovered nonrecurring costs included in prices for canceled items.

(b) Policy. (1) Multiyear procurement shall be used to the maximum extent consistent with paragraphs (c), (d), and (e) of this section. Advantages of this method include, for example:

istic competition by minimizing competitive disadvantage and by increasing contractor interest in participating in procurements which involve high startup costs and make-ready expense and which also may require substantial capital investment by contractors for expansion of their facilities. Under this procedure:

(i) Nonrecurring costs are distributed over a larger number of units, thus narrowing any price advantage of a firm already in production;

(ii) There is greater assurance of depreciation recovery for capital investment; and

(iii) The competitive base is broadened with better prospects for lower prices, where firms otherwise might be unwilling or unable to compete.

(3) Another major objective is to obtain lower prices in those procurements which do not necessarily involve high startup cost but which do provide opportunity for substantial cost savings and other advantages through assurance of continuity of production over longer periods of time. In determining whether substantial cost savings and related advantages can be realized, consideration may be given to whether:

(i) Production closeout or shutdown costs, including employee severance pay, may represent a substantial cost contingency in prices quoted on only 1 year's production;

(ii) Stabilization of work forces will provide greater assurance of sustaining and improving production efficiency and product quality;

(iii) Substantial cost and quality advantage will accrue through avoidance of the possible need for establishing and "proving out" quality control techniques and procedures for a new contract each year;

(iv) Costly preproduction or pilot lot testing will be avoided;

(v) The ability to recruit and retain highly skilled personnel will be enhanced through assurance to employees of longer periods of employment than would be the case in single-year procurement, thereby avoiding costs of repeated training of new personnel;

(vi) The ability to vary production rates during peak and offpeak periods in each program year will result in production economies; and

(vii) Substantial in-house savings in maintenance and supply operations will accrue from standardization of supplies

accomplished by procurement from a single source throughout the multiyear period.

(4) When the items being procured are regularly manufactured and offered for sale in substantial quantities in the commercial market, this procedure will not normally be used. However, (i) when quantities to be procured by the Government represent a substantial portion of the total market and would require special manufacturing runs of all or substantially all of the Government's requirements and (ii) significant costs savings would result from multiyear procurement, this procedure may be authorized by the Head of a Procuring Activity or his designee. In such cases the procurement file shall be fully documented with reasons why the expected substantial savings are not obtainable under annual procurements.

(5) The multiyear procurement procedure is to be used only in procurements in which realistic competition is anticipated.

(c) Application. Unless overriding disadvantages are evident, the multiyear procurement method should be used when all of the following criteria are present:

(1) Reduced unit prices can reasonably be anticipated over annual buys by reason of continuity of production or elimination of repetitive substantial startup costs, including such costs as preproduction engineering, special tooling, plant rearrangement, initial rework, initial spoilage, and pilot runs;

(2) There is reasonable expectation that effective competition can be obtained;

(3) There are known requirements for the quantities to be purchased under the multiyear contract; and

(4) The design and specifications of the item are not expected to change to an extent that would involve a major impact on contract price.

(d) Limitations. Multiyear procurement shall not be used:

(1) When funds covering the procurement are limited by statute for obligation during the fiscal year in which the contract is executed;

(2) For quantities or total costs in excess of the planned requirements for 5 years set forth in, or in support of, the Department of Defense Five Year Force Structure and Financial Program; or

(3) When any one of the criteria set forth in paragraph (c) of this section is not present.

(e) Set-asides. Total small business set-asides are compatible with the multiyear method of procurement and may be used when both procedures are appropriate. Partial set-aside procedures (both small business and labor surplus area) are generally not compatible with the multiyear procedure when high startup costs are involved because of the potential duplication of such costs by the set-aside contractor and the non-setaside contractor. Nevertheless, when the multiyear procedure is based not on high startup costs but on the opportunity for cost savings through assurance of continuity of production over longer periods of time, partial set-aside procedures are compatible with the multiyear procedure. Furthermore, even where high startup costs are involved, use of partial set-aside procedures together with the multiyear procedure may be appropriate in exceptional circumstances, such as where the criteria for partial set-asides are met under Subparts G or H of this part and it is likely that broader or more realistic competition will result from a combination of both procedures, and this broader competition is likely to more than offset any duplication of startup costs. When reviewing a proposed procurement involving possible use of this procedure, in addition to consideration of the criteria established in paragraphs (b) and (c) of this section, the contracting officer shall invite the advice and counsel of the activity's small business specialist and the SBA representative, if one is assigned to that activity, permitting either or both to review all pertinent facts and make recommendations thereon.

[32 F.R. 499, Jan. 18, 1967, as amended at 33 F.R. 7348, May 18, 1968; 33 F.R. 15380, Oct. 17, 1968]

§ 1.322-2 Procedure.

(a) Formal advertising, including twostep formal advertising, is the preferred method for use in multiyear procurement. In cases where the period of production is such that a contingency for labor and material costs is likely otherwise to be included in the multiyear contract price, the contracting officer should normally use a provision for price escalation.

(b) Solicitations shall include: (1) A statement of the requirements, separately identified by bid or proposal item in the schedule, for

(1) The first program year; and

(ii) The multiyear procurement including the quantities for each program year thereunder;

(2) When previous production procurements of the item have been made with competition

(i) A provision that a price may be submitted for the total requirements of the first program year, or for the total multi-year requirements, or both, or

(ii) When competition in future procurements of the items would be impracticable after award of a contract covering the first program year quantity alone and the Head of a Procuring Activity determines that, in order to eliminate the possibility of a first program year "buy-in," these provisions will be in the best interests of the Government-provisions that a price may be submitted only for the total multiyear quantity and that prices on a single-year basis will not be considered for any purpose;

(3) When there has been no previous competition for the production of the item

(1) (a) Provisions that a price must be submitted for the total requirements of the first program year, that a price may be submitted for the total multiyear quantity, and that a bid or offer on the multiyear quantity only will be considered nonresponsive, and

(b) A provision that if only one responsive bid or offer on the multiyear requirements is received from a responsible bidder or offeror, the Government reserves the right to disregard the bid or offer on the multiyear quantity and to make an award only for the first program year requirements; or

(li) When competition in future procurements of the items would be impractical after award of a contract covering the first program year quantity alone and the Head of a Procuring Activity determines that, in order to eliminate the possibility of a first program year "buy-in," these provisions will be in the best interests of the Government

(a) Provisions that a price may be submitted only for the total multiyear quantity and that prices on a single-year basis will not be considered for any purpose, and

(b) A provision that if only one responsive bid or offer on the multiyear

requirements is received from a responsible bidder or offeror, the Government reserves the right to cancel the solicitation and resolicit on a single-year basis by whatever procedures are then appropriate;

(4) A provision that the unit price of each item in the multiyear requirement shall be the same for all program years included therein;

(5) Criteria for comparing the lowest evaluated submission on the first program year's requirement against the lowest evaluated submission on the multiyear requirements (see § 1.322-3(b));

(6) A provision setting forth a separate cancellation ceiling (on a percentage basis) applicable to each program year subject to cancellation (see paragraph (c) of this section); and

(7) A prominently placed provision directing attention to the multiyear features of the solicitation, and to

(i) The Limitation of Price and Contractor Obligations clause (see § 1.322-5 (a)) which limits the payment obligation of the Government to the requirements of the first program year and to those of such succeeding program years as may be funded by the Government (see § 1.322–5(b));

(ii) The Cancellation of Items clause (see § 1.322-5(b)) which allows the Government to cancel, by a specified date or within a specified period, all remaining program years; and

(iii) The cancellation ceiling set forth in the schedule.

(c) The term "cancellation" as used in multiyear procurement refers only to the cancellation of the total requirements of all remaining program years. Such cancellation results from (1) notification from the contracting officer to the contractor of nonavailability of funds for contract performance for any subsequent program year, or (2) failure of the contracting officer to notify the contractor that funds have been made available for performance of the program year requirement for the succeeding program year. For each program year except the last, the contracting officer shall establish a cancellation ceiling applicable to the remaining program years which are subject to cancellation. Cancellation ceilings will be lower for each succeeding program year in that such ceilings must exclude all amounts allocable to items included in the prior program year requirements. Such ceilings shall be expressed in the Schedule in percentages