(b) If the parties fail to agree whether the Contractor or a subcontractor has complied with an applicable Cost Accounting Standard, rule, or regulation of the Cost Accounting Standards Board and as to any cost adjustment demanded by the United States, such failure to agree shall be a dispute concerning a question of fact within the meaning of the disputes clause of this contract,

(c) The Contractor shall permit any authorized representatives of the head of the agency, of the Cost Accounting Standards Board, or of the Comptroller General of theUnited States to examine and make copies of any documents, papers, or records relating to compliance with the requirements of this clause.

(d) The Contractor shall include in all negotiated subcontracts which he enters into the substance of this clause except paragraph (b), and shall require such inclusion in all other subcontracts of any tier, including the obligation to comply with all Cost Accounting Standards in effect on the date of award of the subcontract or if the subcontractor has submitted cost or pricing data, on the date of final agreement on price as shown on the subcontractor's signed certificate of current cost or pricing data. This requirement shall apply only to negotiated subcontracts in excess of $100,000 where the price negotiated is not based on:

(i) established catalog or market prices of commercial items sold in substantial quantities to the general public, or

(TI)

prices set by law or regulation and except that the requirement shall not apply to negotiated subcontracts otherwise exempt from the requirement to accept the Cost Accounting Standards clause by reason of Section 331.30(b) of Title 4 Code of Federal Regulations (4 CFR 331.30(b)).

NOTE: (1) Subcontractors shall be required to submit their Disclosure Statements to the Contractor. However, if a subcontractor has previously submitted his Disclosure Statement to a Government Administrative Contracting Officer (ACO) he may satisfy that requirement by certifying to the Contractor the date of such Statement and the address of the ACO.

NOTE: (2) In any case where a subcontractor determines that the Disclosure Statement information is priviledged and confidential and declines to provide it to his Contractor or higher tier subcontractor the Contractor may authorize direct submission of that subcontractor's Disclosure Statement to the same Government offices to which the Contractor was required to make submission of his Disclosure Statement. Such authorization shall in no way relieve the Contractor of liability as provided in paragraph (a)(5) of this clause. In view of the foregoing and since the contract may be subject to adjustment under this clause by reason of any failure to comply with rules, regulations, and Standards of the Cost Accounting Standards Board in connection with covered subcontracts, it is expected that the Contractor may wish to include a clause in each such subcontract requiring the subcontractor to appropriately indemnify the Contractor. However, the inclusion of such a clause and the terms thereof are matters for negotiation andagreement between the Contractor and the subcontractor, provided that they do not conflict with the duties of the Contractor under its contract with the Government. It is also expected that any subcontractor subject to such indemnification will generally require substantially similar indemnification to be submitted by his subcontractors.

NOTE: (3) If the subcontractor is a business unit which, pursuant to 4CFR332 is entitled to elect modified contract coverage and to follow Standards 401 and 402 only, the clause entitled "Disclosure and Consistency of Cost Accounting Practices" set forth in ASPR 7-104.83(a)(2) shall be inserted in lieu of this clause.

(e) The terms defined in Section 331.20 of Part 331 of Title 4, Code of Federal Regulations (4 CFR 331.20) shall have the same meanings herein. As there defined, "negotiated subcontract" means "any subcontract except a firm fixed-price subcontract made by a Contractor or subcontractor after receiving offers from at least two firms not associated with each other or auch Contractor or subcontractor, providing (1) the solicitation to all competing firms is identical, (2) price is the only consideration in selecting the subcontractor from among the competing firms solicited, and (3) the lowest offer received in compliance with the solicitation from among those solicited is accepted."

DAR 7-104.83(a)(1) and 3-1204.1(a) and DAC 76-18

**L.69 DISCLOSURE AND CONSISTENCY OF COST ACCOUNTING PRACTICES (1978 MAY)

(a) The Contractor, in connection with this contract, shall:

(1) Comply with the requirements of 4 CFR, Parts 401, Consistency in Estimating, Accumulating and Reporting Costs, and 402, Consistency in Allocating Costs Incurred for the Same Purpose, in effect on the date of award of this contract,

(2) If it is a business unit of a company required to submit a Disclosure Statement, disclose in writing its cost accounting practices as required by regulations of the Cost Accounting Standards Board. The required disclosures must be made prior to contract award unless the Contracting Officer provides a written notice to the contractor authorizing post-award submission in accordance with regulations of the Cost Accounting Standards Board. If the contractor has notified the Contracting Officer that the Disclosure Statement contains trade secrets and commercial or financial information which is privileged and confidential, the Disclosure Statement will be protected and will not be released outside of the Government.

CONTINUATION SHEET

NAME OF OFFEROR OR CONTRACTOR

Lockheed Missiles and Space Co., Inc.

SECTION L GENERAL PROVISIONS (Cont'd)

L.69

DISCLOSURE AND CONSISTENCY OF COST ACCOUNTING PRACTICES (1978 MAY) (Cont'd)

NOTE: (1) Subcontractors shall be required to submit their Disclosure Statements to the Contractor. However, if a subcontractor has previously submitted his Disclosure Statement to a Government Administrative Contracting Officer (ACO), he may satisfy that requirement by certifying to the Contractor the date of such Statement and the address of the ACO.

NOTE: (2) In any case where a subcontractor determines that the Disclosure Statement information la privileged and confidential and declines to provide it to his Contractor or higher tier subcontractor, the Contractor may authorize direct submission of that subcontractor' Disclosure Statement to the same Government offices to which the Contractor was required to make submission of his Disclosure Statement. Such authorization shall in no way relieve the Contractor of liability if he or a subcontractor fails to comply with an applicable Cost Accounting Standard or to follow any practice disclosed pursuant to this paragraph and such failure results in any increased costs paid by the United States. In view of the foregoing and since the contract may be subject to adjustment under this clause by reason of any failure to comply with rules, regulations, and Statdards of the Cost Accounting Standards Board in connection with covered subcontracts, it is expected that the Contractor may wish to include a clause in each such subcontract requiring the subcontractor to appropriately indemnify the Contractor. However, the inclusion of such a clause and the terms thereof are matters for negotiation and agreement between the Contractor and the subcontractor, provided that they do not conflict with the duties of the Contractor under its contract with the Government. It is also expected that any subcontractor subject to such indemnification will generally require substantially similar indemnification to be submitted by his subcontractors.

(3) Follow consistently the cost accounting practices disclosed pursuant to (2) above and the established cost accounting practices of the business unit. A change to such practices may be proposed, however, by either the Government or the Contractor, and the Contractor agrees to negotiate with the Contracting Officer the terms and conditions under which a change may be made. After the terms and conditions under which the change is to be made have been agreed to, the change must be applied prospectively to this contract, and the Disclosure Statement if affected must be amended accordingly. No agreement may be made under this provision that will increase costs paid by the United States.

(4) Agree to an adjustment of the contract price or cost allowance, as appropriate, if he or a subcontractor fails to comply with the applicable Cost Accounting Standards or to follow any practice disclosed or established pursuant to subparagraph (a)(2) or (a)(3) above and such failure results in any increased costs paid by the United States. Such adjustment shall provide for recovery of the increased costs to the United States together with interest thereon computed at the rate determined by the Secretary of the Treasury pursuant to Public Law 92-41, 85 STAT. 97, or 7 percent per annum, whichever is less, from the time the payment by the United States was made to the time the adjustment is effected.

(5) When the parties agree to a change to either a disclosed cost accounting practice or an established cost accounting practice, negotiate an equitable adjustment as provided in the changes clause of this contract.

(b) If the parties fail to agree whether the Contractor has complied with an applicable Cost Accounting Standard, rule or regulation of the Cost Accounting Standards Board and as to any cost adjustment demanded by the United States, such failure to agree shall be a dispute conceming a question of fact within the meaning of the disputes clause of this contract.

(c) The Contractor shall permit any authorized representatives of the head of the agency, of the Cost Accounting Standards Board, or of the Comptroller General of the United States to examine and make copies of any documents, papers, or records relating to compliance with the requirements of this clause.

(d) The Contractor shall include in all negotiated subcontracts into which he enters the substance of this clause except paragraph (b) of this section, and shall require such inclusion in all other subcontracts of any tier, except that:

(1) If the subcontract is awarded to a business unit which pursuant to Part 331 is required to follow all Cost Accounting Standards, the clause entitled "Cost Accounting Standards" set forth in ASPR 7-104,83(a)(1) shall be inserted in lieu of this clause, or (2) This requirement shall not apply to negotiated subcontracts where the price negotiated is based on:

(i) Established catalog or market prices of commercial items sold in substantial quantities to the general public or
(ii) Prices set by law or regulation.

(e) The requirement shall not apply to negotiated subcontracts otherwise exempt from the requirement to accept a Cost Accounting Standards clause by reason of Section 331.30(b) of the Board's regulation.

NOTE: The terms defined in Section 331.20 of Part 331 of Title 4, Code of Federal Regulations (4CFR 331.20) shall have the same meaning herein. As there defined, "negotiated subcontract" means "any subcontract except a firm fixed-price subcontract made by a Contractor or subcontractor after receiving offers from at least two firms not associated with each other or such Contractor or subcontractor, providing (1) the solicitation to all competing firms is identical, (2) price is the only consideration in selecting the subcontractor from among the competing firms solicited, and (3) the lowest offer received in compliance with the solicitation from among those solicited is accepted."

DAR 7-104.83(a) (2) and 3-1204.1 (a) and DAC 76-18

DRSTSP Form

Replaces DRSAV-P Form 1554, 1 Apr 76 which may be used.

045

**L.70 ADMINISTRATION OF COST ACCOUNTING STANDARDS (1978 MAY)

For the purpose of administering Cost Accounting Standards requirements under this contrar 1, the Continetur shall

(a) Submit to the cognizant Contracting Officer a description of the accounting change and the general dollar magnitude of the change to reflect the sum of all increases and the sum of all decreases for all contracts containing the Cost Accounting Standards clause (7-104,83(a)(1)) or the Disclosure and Consistency of Cost Accounting Practices clause (7-104.83(#)(2)):

(i) for any change in cost accounting practices required to comply with a new cost accounting standard in accordance with paragraph (a)(3) and (a)(4)(A) of the clause entitled "Cost Accounting Standards" within sixty (60) days (or such other date as may be mutually agreed to) after award of a contract requiring such change,

(ii) for any change to cost accounting practices proposed in accordance with paragraph (a)(4)(B) or (a)(4)(C) of the clause entitled "Cost Accounting Standards" or with paragraph (a)(3) or (a)(5) of the clause entitled "Disclosure and Consistency of Cost Accounting Practices" not less than sixty (60) days (or such other date as may be mutually agreed to) prior to the effective date of the proposed change.

or

(iii) for any failure to comply with an applicable Cost Accounting Standard or to follow a disclosed practice as contemplated by paragraph (u)(5) of the clause entitled "Cost Accounting Standards" or with paragraph (a)(4) of the clause entitled "Disclosure and Consistency of Cost Accounting Practices" within sixty (60) days (or such other date as may be mutually agreed to) after the date of agreement of such noncompliance by the Contractor.

(b) Submit a cost impact proposal in the form and manner specified by the cognizant Contracting Officer within sixty (60) days (or such other date as may be mutually agreed to) after the date of determination of the adequacy and compliance of a change submitted pursuant to (a)(i), (ii) or (ii) above.

(c) Agree to appropriate contract and subcontract amendments to reflect adjustments established in accordance with paragraphs (a,(4) and (a)(5) of the clause entitled "Cost Accounting Standards" or with paragraphs (a)(3), (a)(4), and (a)(5) of clause entitled "Disclosure and Consistency of Cost Accounting Practices."

(d) When the subcontract is subject to either the clause entitled "Cost Accounting Standards" or the clause entitled "Disclosure and Consistency of Cost Accounting Practices" so state in the body of the subcontract and/or in the letter of award. Self-deleting clauses shall not be used.

(e) Include the substance of this clause in all negotiated subcontracts containing either the clause entitled "Cost Accounting Standards" or the clause entitled "Disclosure and Consistency of Cost Accounting Practices. In addition include a provision in these subcontracts which will require such subcontractors, within thirty (30) days after receipt of award (or such other date as may be mutually agreed to) to submit the following information to the Contract Administration Office cognizant of the subcontractor s facility.

(1) Subcontractor's name and subcontract number.

(2) Dollar amount and date of award.

(3) Name of Contractor making the award.

(4) A Statement as to whether the subcontractor has made or proposes to make any changes to accounting practices that affect prime contracts or subcontracts containing the Cost Accounting Standards clause or Disclosure and Consistency of Cost Accounting Practices clause unless such changes have already been reported. If award of the subcontract results in making a Cost Accounting Stanis) effective for the first time, this shall also be reported.

For negotiated subcontracts containing the clause entitled "Cost Accounting Standards", require the subcontractor to comply with all Standards in effect on the date of final agreement on price as shown on the subcontractor's signed certificate of current cost or pricing data cr uate of award which ever is earlier.

In the event an adjustment is required to be made to any subcontract hereunder, notify the Contracting Officer in writing of such adjestment and agree to an adjustment in the price or estimated cost and fee of this contract, as appropriate, based upon the adjustment ext, lesed under the subcontract. Such notice shall be given within thirty (30) days after receipt of the proposed subcontract adjustment, I such eliter late as may be mutually agreed to, and shall include a proposal for adjustment to such higher tier subcontract or prime contra. as appriate.

(h) When either the Cost Accounting Standards clause or the Disclosure and Consistency of Cost Accounting Practices clause and this clause are included 1. subcontracts, the term Contracting Officer" shall be suitably altered to identify the purchaser.

(a) Definitions. As used in this clause, (1) the term "Contracting Officer" does not include any representative of the Contracting Officer whether or not usch representative is acting within the scope of his authority, and (ii) the term "specifically authorized representative" means any person the Contracting Officer has so designated by written notice which shall refer to this subparagraph and shall be issued to the designated representative prior to his invocation of such authority (and a copy of which shall be provided to the Contractor).

(b) Notice. The primary purpose of this clause is to obtain prompt reporting of Government conduct which the Contractor considers to constitute a change to this contract. Except for changes identified as such in writing and signed by the Contracting Officer, the Contractor shall notify the Administrative Contracting Officer in writing promptly, and in any event within 30 calendar days from the date that the Contractor identifies any Government conduct (including actions, inactions, and written or oral communications) which the Contractor regards as a change to the contract terms and conditions. The Notice shall state, on the basis of the most accurate information available to the Contractor:

(1) the date, nature, and circumstances of the conduct regarded as a change; (11) the name, function, and activity of each Government individual and Contractor official or employee involved in or knowledgeable about such conduct;

(111) the identification of any documents and the substance of any oral communications involved in such conduct;

(iv) in the instance of alleged acceleration of schedule performance or delivery, the basis upon which it arose;

(v) the particular elements of contract performance for which the Contractor may seek an equitable adjustment under this clause, including:

(1) what contract line item(s) have been or may be affected by the alleged change; (2) what labor or materials or both have been or may be added, deleted, or wasted by the alleged change;

(3)

to the extent practicable, what delay and disruption in the manner and sequence of performance and effect on continued performance have been or may be caused by the alleged change;

(4) what adjustments to contract cost, delivery schedule, and other provisions affected by the alleged change are estimated; and

(vi) the Contractor's estimate of the time which the Government must respond to the Contractor's notice to minimize cost, delay or disruption of performance.

(c) Continued Performance. Following submission of the notice required by (b) above, the Contractor shall diligently continue performance of this contract to the maximum extent possible in accordance with its terms and conditions as construed by the Contractor, unless such notice reports a direction of the Contracting Officer or a communication from a specifically authorized representative of the Contracting Officer, in either of which events the

DRSTS-P Form

Replaces DRSAV-P Form 1554, 1 Apr 76, which may be used.

047

Contractor shall continue performance in compliance therewith, provided however, that if the Contractor regards the direction or communication as a change as described in (b) above, notice shall be given as therein provided. All directions, communications, interpretations, orders and similar actions of such specifically authorized representative shall be reduced to writing promptly and copies thereof furnished to the Contractor and to the Contracting Officer. The Contracting Officer shall promptly countermand any action which exceeds the authority of the specifically authorized representative.

(d) Government Response. The Contracting Officer shall promptly, and in any event within 60 calendar days after receipt of NOTICE, respond thereto in writing. In such response the Contracting Officer shall either:

(1) confirm that the conduct of which the Contractor gave notice constitutes a change and when necessary direct the mode of further performance;

(11) countermand any communication regarded as a change;

deny that the conduct of which the Contractor gave notice constitutes a change and when necessary direct the mode of further performance; or

(iv) in the event the Contractor's notice information is inadequate to make a decision under (1), (11), or (iii) above, advise the Contractor what additional information is required, and establish the date by which it should be furnished and the date thereafter by which the Government will respond.

(e) Equitable Adjustments. If the Contracting Officer confirms that Government conduct effected a change as alleged by the Contractor, and such conduct causes an increase or decrease in the Contractor's cost of, or the time required for, performance of any part of the work under this contract, whether changed or not changed by such conduct, an equitable adjustment shall be made:

(1) in the contract cost or delivery schedule or both; and

(11) in such other provisions of the contract as may be affected;

and the contract shall be modified in writing accordingly. In the case of drawings, designs or specifications which are defective and for which the Government is responsible, the equitable adjustment shall include the cost and time extension for delay reasonably incurred by the Contractor in attempting to comply with such defective drawings, designs or specifications before the Contractor identified, or reasonably should have identified, such defect. When the cost of property made obsolete or excess as a result of a change confirmed by the Contracting Officer pursuant to this clause is included in the equitable adjustment, the Contracting Officer shall have the right to prescribe the manner of disposition of such property. The equitable adjustment shall not include increased costs or time extensions for delay resulting from the Contractor's failure to provide notice or to continue performance as provided, respectively, in (b) and (c) above.

DAR 7-104.86 and 26-802

DRSTS-P Form

1 Aug 77

048

Replaces DRSAV-P Form 1554, 1 Apr 76, which may be used.

6554