L.80 ALLOWABLE COST, INCENTIVE FEE, AND PAYMENT (1978 SEP) (Cont'd)

opinion of the Contracting Officer, the Contractor's performance or cost indicates that target will not be achieved, the Government shall pay on the basis of such lesser fee as is appropriate. Further when the Contractor demonstrates that his performance or cost clearly indicates that he will earn a fee significantly in excess of target fee, the Government may, in the sole discretion of the Contracting Officer, pay on the basis of such higher fee as is appropriate. After payment of eighty-five percent (85%) of the applicable fee, the Contracting Officer may withhold further payment of fee until a reserve shall have been set aside in an amount which he considers necessary to protect the interests of the Government, but such reserve shall not exceed fifteen percent (15%) of the total applicable fee or one hundred thousand dollars ($100,000) whichever is less.

(d) Notwithstanding the provisions of paragraph (j) below, allowable indirect costs under this contract shall be obtained by applying overhead rate (s) established in accordance with paragraphs (e) and (f) below.

(e) Final annual overhead rates and the appropriate bases shall be established by procurement or audit determination in accordance with the procedures of Section III, Part 7, of ASPR in effect for the period covered by the proposal.

(f) The Contractor, shall, within ninety (90) days after the expiration of each of its fiscal years for estimating, accumulating, and reporting contract costs, or some later date if approved by the Contracting Officer, submit to the Contracting Officer and to the cognizant audit activity a proposed final overhead rate (s) for that period based on the Contractor's actual cost experience during that period, together with supporting cost data specifying the contract(s) and/or subcontract (s) to which such rate (s) apply. Establishment of final annual overhead rate (s) shall be undertaken as promptly as practicable after receipt of the Contractor's proposal. The Contractor shall submit an executed Certificate of Current Cost or Pricing Data applicable to data furnished in connection with establishment of any final annual overhead rate (s).

(g) Final annual overhead rate(s) shall be set forth in a written overhead rate understanding executed by the Contractor and the appropriate Government representative. Such understanding is automatically incorporated in this contract upon execution and shall specify (i) the agreed upon final annual overhead rate (s), (ii) the base(s) to which the rate(s) apply, (iii) the periods for which the rate(s) apply, (iv) any specific overhead items treated as direct costs in the settlement, and (v) the affected contract(s) and/or subcontract (s), identifying any with advance agreements or special provisions and the rate (s) applicable thereto. The overhead rate understanding shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract.

(h) Pending establishment of final annual overhead rate(s) for any period, the Contractor shall be reimbursed at billing rate(s) established by the Contracting Officer or the auditor, subject to appropriate adjustment when final rate (s) for that period are established.

Anticipated final annual rates will be used for billing rates. However, to prevent substantial over or under payment, billing rate (s) may at the request of either party be revised by mutual agreement, either retroactively or prospectively.

(1) Notwithstanding any other provisions of this clause, the quick closeout procedures set forth in Section III, Part 7, of ASPR in effect on the date of this contract, may be used when mutually agreeable to the Contractor and the Contracting Officer.

(j) At any time or times prior to final payment under this contract, the Contracting Officer may have the invoices or vouchers and statements of cost audited. Each payment theretofore made shall be subject to reduction for amounts included in the related invoice or voucher which are found by the Contracting Officer, on the basis of such audit, not to constitute allowable cost. Any payment may be reduced for overpayments, or increased for underpayments, on preceding invoices or vouchers.

(k) On receipt and approval of the invoice or voucher designated by the Contractor as the "completion invoice" or "completion voucher" and upon compliance by the Contractor with all the provisions of this contract (including without limitation, the provisions relating to patents and the provisions of (L) below), the Government shall promptly pay to the Contractor any balance of allowable cost, and any part of the fee, which has been withheld pursuant to (c) above or otherwise not paid to the Contractor. The completion invoice or voucher shall be submitted by the Contractor promptly following completion of the work under this contract but in no event later than (1) year (or such longer period as the Contracting Officer may in his discretion approve in writing) from the date of such completion.

(L) The Contractor agrees that any refunds, rebates, credits, or other amounts (including any interest thereon) accruing to or received by the Contractor or any assignee under this contract shall be paid by the Contractor to the Government to the extent that they are properly allocable to costs for which the Contractor has been reimbursed by the Government under this contract. Reasonable expenses incurred by the Contractor for the purpose of securing such refunds, rebates, credits, or other amounts shall be allowable costs hereunder when approved by the Contracting Officer. Prior to final payment under this contract, the Contractor and each assignee under this contract whose assignment is in effect at the time of final payment under this contract shall execute and deliver:

(1) an assignment to the Government, in form and substance satisfactory to the Contracting Officer, of refunds, rebates, credits, or other amounts (including any interest thereon) properly allocable to costs for which the Contractor has been reimbursed by the Government under this contract; and

(11) a release discharging the Government, its officers, agents, and employees from all liabilities, obligations, and claims arising out of or under this contract, subject only to the following exceptions:

(A) specified claims in stated amounts or in estimated amounts where the amounts are hot susceptible of exact statement by the Contractor;

(B) claims, together with reasonable expenses incidental thereto, based upon liabilities of the Contractor to third parties arising out of the performance of this contract; provided, that such claims are not known to the Contractor on the date of the execution of the release; and provided further, that the Contractor gives notice of such claims in writing to the Contracting Officer not more than six (6) years after the date of the release or the date of any notice to the Contractor that the Government is prepared to make final payment, whichever is earlier; and

(C) claims for reimbursement of costs (other than expenses of the Contractor by reason of his indemnification of the Government against patent liability), including reasonable

-P

expenses incidental thereto, incurred by the Contractor under the provisions of this contract relating to patents.

Except as provided in (p) below, payments under the assignment and claims excepted from the release shall be subject to adjustment by reason of the adjustment of fee in accordance with (o) below.

(m) Any cost incurred by the Contractor under the terms of this contract which would constitute allowable cost under the provisions of this clause shall be included in determining the amount payable under this contract, notwithstanding any provisions contained in the specifications or other documents incorporated in this contract by reference, designating services to be performed or materials to be furnished by the Contractor at his expense or without cost to the Government.

(n) When the work under this contract (including any supplies or services which are ordered separately under, or otherwise added to, this contract) is increased or decreased by contract modification or when any equitable adjustment in the target cost is authorized under any other clause of this contract, equitable adjustments in the target cost, target fee, minimum fee, maximum fee, or any or all of them, as appropriate, shall be set forth in an amendment or supplemental agreement to this contract.

(0) The fee payable hereunder shall be the target fee increased by twenty-five cents for every dollar by which the total allowable cost is less than the target cost or decreased by twenty-five cents for every dollar by which the total allowable cost exceeds the target cost. In no event shall the fee be greater than 13 percent nor less than 2 percent, of the target cost; and, except as provided in (p) below, within these limits such fee shall be subject to adjustment, by reason of increase or decrease of total allowable cost, on account of payments under the assignment required by (L) (1) above, and claims excepted from the release required by (L) (ii) above. If this contract is terminated in its entirety, the portion of the target fee payable shall not be subject to an increase or decrease as provided in this paragraph. The terminations shall be otherwise accomplished pursuant to other applicable provisions of this contract.

(p) For the purpose of the adjustment of the fee in accordance with (o) above, the term "total allowable cost" shall not include allowable costs arising out of:

(1) any of the causes covered by the clause hereof entitled "Excusable Delays" to the extent they are beyond the control and without the fault or negligence of the Contractor or any subcontractor;

(ii) the taking effect, after the negotiation of the target cost of this contract, of a statute, court decision, written ruling or regulation which results in the Contractor's being required to pay or bear the burden of any tax or duty, or increase in the rate thereof;

(iii) any direct cost attributed to the Contractor's assistance or participation in litigation as required by the Contracting Officer pursuant to a provision of this contract, including the furnishing of evidence and information requested pursuant to the clause hereof entitled "Notice and Assistance Regarding Patent and Copyright Infringement";

(iv) the procurement and maintenance of additional insurance not included in the target

CONTINUATION SHEET

NAME OF OFFEROR OR CONTRACTOR

Lockheed Missiles & Space Co., Inc.

SECTION L L.80

ALLOWABLE COST, INCENTIVE FEE, AND PAYMENT (1978 SEP) (Cont'd)

cost and required by the Contracting Officer or claims for reimbursement for liabilities to third persons pursuant to the clause hereof entitled "Insurance-Liability to Third Persons";

(v) any claim, loss or damage resulting from a risk for which the Contractor has been relieved of liability pursuant to the clause hereof entitled "Government Property."

Except as otherwise specifically provided in this contract, all other allowable costs shall be included in the term "total allowable cost" for the purpose of the adjustment of the fee in accordance with (o) above.

(q) The total allowable cost and the adjusted fee determined as provided in this clause shall be evidenced by a modification to this contract signed by the Contractor and the Contracting Officer.

(r) Compensation for supplies (including spare parts) and services which are to be furnished under this contract pursuant to a provisioning document or Government option shall be determined in accordance with the provisions of this clause notwithstanding any inconsistent provision in such provisioning document or Government option.

(s) Any failure by the parties to agree on a final overhead rate under this clause shall be considered a dispute concerning a question of fact for decision by the Contracting Officer within the meaning of the "Disputes" clause of this contract.

Prior to directing any shipment on a commercial bill of lading for which the Contractor will be reimbursed transportation costs as a direct allowable cost, the Contractor shall insure that the commercial shipping documents are annotated with either of the following notations, as appropriate:

(1) when the Government is shown as the consignor or the consignee, the notation: Transportation hereunder is for the U.S. Department of Defense and the actual charges paid to the carrier (s) by the consignor or consignee are assignable to, and are to be reimbursed by, the Government."

(11) when the Government will not be shown as the consignor or the consignee, the notation: Transportation hereunder is for the U.S. Department of Defense, and the actual total transportation charges paid to the carrier (s) by the consignor or consignee are to be reimbursed by the Government pursuant to cost-reimbursable contract No. DAAK50-79-C-0025. This may be confirmed by contacting Air Force Plant Representative Officer/TM; LMSC, Space Systems pivision; Attn: TMF, PO Box 504; Sunnyvale, Ca 94086.

DAR 7-203.14

***L.86 NOTICE OF INTENT TO DISALLOW OR NOT RECOGNIZE COSTS (1978 AUG)

(a) Notwithstanding any other provision of this contract, the Contracting Officer may,

SECTION L
L.86

NOTICE OF INTENT TO DISALLOW OR NOT RECOGNIZE COSTS (1978 AUG) (Cont'd)

at any time, issue to the Contractor a written notice of intent to disallow or not recognize costs. This notice will indicate the Contracting Officer's intent to take exception to specified costs being incurred, or planned for incurrence, which he has determined not to be allowable in accordance with the terms of this contract.

(b) The Contractor may, within sixty (60) days of receipt of such notification, submit a written response to the Contracting Officer, together with justification therefor, against the proposed cost exception.

(c) In the event the Contractor does not file any such written response within the sixty (60) day period in (b) above, the notice shall serve as the Contracting Officer's final decision under the provisons of the clause herein entitled "Disputes".

(d) The Contracting Officer shall, within sixty (60) days of receipt of any written response, either withdraw in writing the notification or issue a final decision thereon under the provisions of the clause herein entitled "Disputes".

(e) Failure to issue a notice pursuant to this clause shall not alter the Government's rights with respect to exception to incurred costs.

(a) Except as provided below and notwithstanding any other provision of this contract, the Contractor shall not be liable for loss of or damage to property of the Government (including supplies delivered under this contract) occuring after acceptance of the supplies delivered under this contract and resulting from any defects or deficiencies in such supplies

(b) The foregoing limitations shall not apply when the defects or deficiencies in such supplies or the Government acceptance of such supplies resulted from willful misconduct or lack of good faith 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 have supervision or direction of:

(1) all or substantially all of the Contractor's business; or

(11) 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.

(c) Notwithstanding paragraph (a) above, if the Contractor carries insurance or has established a reserve for self-insurance covering liability for damages or losses suffered by the Government through purchase or use of the contract supplies required to be delivered to the Government under this contract, the Contractor shall be liable to the Government for damages or losses to property of the Government occurring after acceptance of the supplies delivered to the Government under this contract and resulting from any defects or deficiencies in such supplies to the extent of such insurance or reserve for self-insurance.

DRSTS-P Form

058

1 Aug 77

6554

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