7103.14

b. Subletting of work. WD Contract Forms 3 and 12 provide that when in the opinion of the contracting officer it is in the best interest of the Government, he will authorize or order the contractor to subcontract any or all items or classifications of construction work required under the contract or subsequently added thereto. Such subcontracting of construction work, or the performance thereof with the contractor's own forces, regardless of the amount and/or extent of work performed or subcontracted, all with the prior written approval or order of the contracting officers, entails no adjustment in the fixed fee.

c. Restriction on use of fixed fee subcontract form. In accordance with the general policy of limiting the use of the fixed fee form of subcontract, the lump sum form of subcontract will be used, except when the use of the fixed fee form is deemed necessary.

d. Forms of change orders and supplemental agreements. For forms of change orders and supplemental agreements for use under fixed fee construction contracts see Section 13.

7103.15 Adjustment of Fixed-Fee for Subcontracting Under Prime Fixed-Fee Contract Forms

a. Approving subcontracting. In the administration of fixed fee contracts executed on forms other than WD Contract Forms 3 and 12, which contract forms (used since 1942) provide that no adjustment in the fixed fee will be made irrespective of the amount of construction work subcontracted or the amount of construction work performed by the contractor's own forces, contracting officers will not approve the subcontracting of work by a fixed fee prime or subcontractor except in those instances where it is determined that such subcontracting is in the interest of the Government either from the standpoint of time, or money, or both.

b. Findings of fact relative to adjustment of fees because of subcontracting. In accordance with the practice consistently followed, contracting officers will in all cases where they approve the subcontracting of work by a fixed fee prime or subcontractor, except in those instances where the contracts are executed on WD Contract Forms 3 or 12, make written findings of fact in each case as to whether or not the circumstances warrant an adjustment in the contractor's or subcontractor's fixed fee. Since, as a matter of law, a contract supersedes prior negotiations, the entire agreement of the parties is found in the contract. Therefore, all findings of fact should deal with what the parties intended at the time the contract was executed as stipulated therein and not with what the record of negotiations may indicate. The following factors, among others, will be considered and the findings of fact will so indicate, in determining whether an adjustment in the fixed fee should be made:

(1) Does the contract indicate that the parties did not intend that the work be subcontracted?

(2) Is it customary in the construction industry to subcontract work of the amount and character proposed to be sublet?

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7103.15

(3) Was the subcontracting in the interest of the Government from the standpoint of time, or money, or both?

(4) If the parties intended that the work should not be subcontracted, were the contractor's services decreased because of such subcontracting? (The amount of such decrease in services, if any, is the test as to the amount by which the fee should be reduced).

c. Fee adjustment agreements. Change orders will not be issued and supplemental agreements will not be executed solely for the purpose of dealing with the question of fee adjustment, except in those cases where a conclusion has been reached in the findings of fact that an adjustment in fixed fee is necessary. In such cases, it will be accomplished by a supplemental agreement, if agreement with the contractor can be reached.

d. Filing of findings of fact. Since such findings of fact are not contract instruments, no distribution will be made except that a copy will be forwarded to the Chief of Engineers. The original will be filed in the records of the contracting officer.

7103.16 Approval of Salaries and Wages under Cost-Flus-a-Fixed-Fee Contracts

(See paragraph 7109.13)..

7103.17

Administration of Fixed-Fee Contracts, General

For general information with regard to the administration of fixed fee contracts reference is made to paragraphs 7103.14, 7103.15, 7111.15, 7111.16, and 7121.27 to 7121.30. Attention is also invited to sections 13 and 20, as well as the "Contract Negotiations Manual."

7103.18 Numbering of Contracts

Contracts will be numbered in conformity with Special Regulation 35-3200-1, dated 18 March 1949, as amended. "Contracts" as used in the preceding sentence will be deemed to cover all contract instruments entered into with the Government, including but not limited to assignment to the Government of third-party equipment rental agreements, executed on ENG Form 57a (Assignment of Equipment Rental Agreement to Fixed Fee Contractor or Government), all agreements executed on WD Contract Form 14, except in those instances where the Government-owned equipment is rented to lump sum prime contractors. Agreements executed on the latter form with lump sum prime contractors will for the purpose of numbering be considered supplemental agreements and will be numbered in conformity with the next succeeding paragraph. Each subcontract under fixed fee contracts will show the prime contract number and the serial number of the subcontract in the upper right hand corner. "Subcontract" as used in the preceding sentence will be deemed to include all third-party equipment rental agreements executed on ENG Form 57. Agreements executed on ENG Form 57a for the purpose of assigning a third party equipment rental agreement to another fixed fee contractor, will for

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the purpose of numbering be considered a subcontract. However, the prime contract number to be shown in the upper right hand corner of the first page, as above provided, will be that of the prime contract under which future rental is to be paid.

7103.19 Numbering of Change Orders and Supplemental Agreements

Change orders and supplemental agreements will be numbered in conformity with SR 35-3200-1, as amended. The use of the words "Modification No." is not expressly prohibited; however, when used they will not be placed in direct relation to the terminology prescribed by the aforementioned SR for identification purposes. The intent of the SR is to provide a consecutive

series of numbers for all modifications, regardless of the type of agreement. Where supplements to change orders are issued pursuant to paragraph 7103.23c, the supplement number space in the upper right-hand corner of ENG Form 110 (Change Orders to Lump Sum Contracts, General) (paragraph 7113.22), will be filled in.

7103.20 Military Supply Contract Identification Symbol

On and after 1 July 1949, the symbol "MSP" will not be used as an integral part of any contract number, for the purpose of identifying military supply procurement transactions. Those offices responsible for such procurement may place in the upper left-hand corner of the cover sheet of the document whatever symbol is deemed appropriate to distinguish these transactions from other types of procurement. Under no circumstances will this identification be placed near the contract number prescribed for use in conformity with SR 35-3200-1.

Following is a list of order symbol numbers assigned to divisions, districts, depots, and the procurement office:

7103.21.--Requisition and Order Number to be Shown on Contract Documents.

The order number and the requisition number will be shown on purchase orders and contracts (as well as the Schedule) issued or executed in the purchase of Military supplies. The location of these numbers on the instrument will be determined by the contracting officers, but in no instance will such numbers be placed near, become an integral part of, or conflict in any way with the contract number required by paragraph 7103.18. To facilitate the administration of contracts and purchase orders, under existing procurement procedure, the order symbol number of the procurement office or District Engineer acting as authorized representative of the contracting office for inspection and other services, will be appended at the end of the order number. To illustrate: assuming that procurement is effected by the Chicago Procurement Office, CE, having Order Symbol No. "88," and assuming that ** the District Engineer, New York, with Order Symbol No. "27"

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is the authorized representative of the Chicago Procurement Office, CE, for any or all phases of contract administration, the method of numbering would be as follows:

Order No. 88 (Series No.) - 27

Requisition No. (Classification and Series No.)

This instruction will not be construed as authorizing the substitution of an Order Symbol number for a contract number when the requirement for the latter is mandatory under the provisions of SR 35-3200-1, as amended, referred to in paragraph 7103.18.

7103.22 Change Orders and Supplemental Agreements Distinguished

A change order is ordinarily the proper medium for requiring changes in work under a contract containing provisions permitting such changes under specified ** circumstances similar to the "Changes" articles of the supply and construction ** forms of contract. Such orders are confined to work within the scope of the contract and since the contractor has agreed thereto in advance, they may be issued, if necessary, without his consent or his acceptance. A supplemental agreement, on the other hand, is the proper medium for adding work to a contract which is not within the scope thereof; that is work which the contractor has not agreed in advance to perform and which cannot be required of him without his consent or acceptance. A supplemental agreement is, therefore, in effect a new contract which being with the same contractor and for performance under substantially the same terms and conditions is, for convenience, added as a supplement to an existing contract. Regardless of the form of contract employed, the distinction as to whether a supplemental agreement or a change order is required, therefore, rests upon whether the contractor is bound by the existing contract to perform the proposed change or additional work or whether such change or additional work cannot be required of him without his consent and acceptance.

7103.23 Change Orders to Lump Sum Contracts

a. Authority for. The Changes Articles of the supply and construction forms of contract, and similar provisions in other standard forms of contract; provide that contracting officers may at any time, by a written order, and without notice to the sureties, make changes in the drawings and/or specifications of the contract and within the general scope thereof. All changes in the drawings and/or specifications, however minor, must be made by a written change order. A contractor should in no case be required to perform any work in accordance with changed drawings and/or specifications prior to the receipt of written change order, approved by higher authority where necessary. The courts have held that where a contract provides that changes must be in writing and approved by a superior officer, the contractor's acceptance of the verbal assurance of an engineer in charge that increased compensation will be allowed will not bind the Government, even though it

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