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graph (a) of this section must be furnished to the Assistant Inspector General for Auditing (JA), General Services Administration, Washington, DC 20405, or to the Field Audit Office, as appropriate, simultaneously with distribution of other copies of the contract.

342.7102 Purpose of audit.

Audits are conducted to advise and make recommendations to the contracting officer concerning:

(a) Propriety of amounts paid, or to be paid, by GSA to contractors when such amounts are based on a cost or time determination or on variable features related to the results of contractors' operations;

(b) Adequacy of measures taken by contractors regarding the use and safeguarding of Government assets under their custody or control;

(c) Compliance by contractors with contractual provisions such as progress payments, advance payments, guaranteed loans, cash return provisions, and price adjustments; and

(d) Reasonableness of contractor's termination settlement proposals.

542.7104 Additional internal controls.

As a supplement to the contractual right to audit contractor records in cost-reimbursement type, time and materials, labor-hour requirements and indefinite quantity (call-type) contracts, the contracting officer (with the assistance of the Assistant Inspector General-Auditing or the Field Audit Office) shall establish internal controls or procedures prior to the performance of those contracts with respect to any flexible or variable features. For example, if a time and materials or labor-hour contract is performed (on a Government facility or elsewhere) subject to observation or overall supervision by Government personnel approval of time records may be provided for as incidental to the Government supervision. Any reasonable and reliable method or procedure may be established to account for such matters as the time spent on the job and materials or supplies received which will assist the contract auditor and the contracting officer to determine the correctness of the charges to the contract.

542.7103 Types of contracts subject to

audit. (a) The following types of contracts, (excluding small purchases) include either the Audit-Negotiation clause prescribed in FAR 15.106-2 or the Examination of Records by GSA clause at 552.215–70 and are subject to audit.

(1) Cost-reimbursement type contracts;

(2) Contracts involving the use or disposition of Government-furnished property;

(3) Contracts that provide for advance payments, progress payments based on costs, or guaranteed loans;

(4) Contracts containing a price warranty or price reduction clause;

(5) Contracts or leases involving income to the Government when the income is based on operations that are under the control of the contractor or lessee;

(6) Fixed-price contracts or leases with economic price adjustment, with incentives and with price redetermination;

(7) Requirements and indefinite quantity (call-type) contracts;

(8) Time-and-material, labor-hour, and letter contracts; and

(9) Leases when the rental is subject to adjustment based on negotiated operating cost escalation.

(b) A copy of each contract or modification of the types described in para

542.7105 Releasing or withholding of

audit reports. The Freedom of Information Act generally requires the disclosure of Government records subject to certain exceptions. It may be to the benefit or detriment of the Government to release contract audit reports or portions of them depending upon the circumstances. However, because of the complexity of the matter, contracting officers shall consult with both the Assistant Inspector General-Auditing and the Office of General Counsel, before releasing or withholding such information.

PART 543-CONTRACT

MODIFICATION

time necessary for offices concerned to take required actions.

Subpart 543.1-General

Sec. 543.102 Policy. 543.170 Changes in designated subcontrac

tors, inspection and/or production points.

Subpart 543.2-Change Orders

543.202 Authority to issue change orders. 543.205 Contract clauses.

AUTHORITY: 40 U.S.C. 486(c).

SOURCE: 54 FR 26554, June 23, 1989, unless otherwise noted.

Subpart 543.1-General

543.102 Policy.

A modification for work outside the scope of a contract must be treated as a new procurement. Such modifications must be justified and approved under FAR Subpart 6.3, synopsized under FAR Subpart 5.2 and Subpart 505.2, and effected through a supplemental agreement.

Subpart 543.2-Change Orders 543.202 Authority to issue change or

ders. (a) Change orders must be issued by the procuring contracting officer unless FAR 42.202(c) or 542.302 apply.

(b) A contracting officer's representative (COR) for a construction contract that has been issued a warrant under 501.603–70, may be authorized to issue change orders of $25,000 or less. (See 542.302.) Such change order authority may be exercised on a contract-by-contract basis by the contracting officer's written authorization. The contracting officer may further limit the authorization, e.g., to lower dollar amounts, to emergency situations, etc. In addition, the contracting officer's written authorization must instruct the COR to avoid personally performing all of the following tasks for a single change order: (1) Determining the need for a change, (2) Preparing the Government's cost estimate, (3) Conducting negotiations, (4) Issuing the change order and (5) Inspecting the work. The contracting officer shall further instruct the COR to submit change orders to a designated official for review before issuance (for price-to-be-determined-later change orders before definitization) whenever all of these activities are personally performed. The contracting officer may personally review change orders or may designate the COR’s immediate supervisor or a higher-level official within the organization to review change orders. To the maximum extent possible, the same individual should review change orders issued under a particular contract.

(c) Change orders should be issued after coordination as appropriate, with counsel, quality control, finance, audit or other technical personnel.

543.170 Changes in designated sub

contractors, inspection and/or pro

duction points. (a) The contracting officer shall not execute a contract modification that authorizes a change in a designated subcontractor or any designated inspection or production point, without considering the impact of the change on the contractor's ability to fulfill the terms and conditions of the contract. When considering the impact, the contracting officer should consider the same factors that would be considered in evaluating whether a contractor is responsible. (See FAR Subpart 9.1 and Subpart 509.1.)

(b) If the contracting officer approves a change of subcontractor, inspection point, or production point, the contracting officer shall issue a contract modification specifying the nature of the change and the effective date. Where feasible, the modification should provide that delivery orders placed before the effective date will remain in effect as written. In determining the effective date, contracting officers should take into consideration the

543.205 Contract clauses.

(a) The contracting officer shall insert the clause at 552.243–70, Pricing of Adjustments, in solicitations and contracts when the contract amount is expected to exceed the small purchase limitation and a contract other than a cost type contract is contemplated.

Subpart 546.3-Contract Clauses

(b) The contracting officer shall insert the clause at 552.243–71, Equitable Adjustments, in solicitations and contracts for (1) dismantling, demolishing, or removing improvements; or (2) construction, when the contract amount is expected to exceed the small purchase limitation and a fixed-price contract is contemplated.

PART 544-SUBCONTRACTING

POLICIES AND PROCEDURES
(RESERVED)

PART 545-GOVERNMENT

PROPERTY

Subpart 545.3—Providing Gover

ment Property to Contractors

545.302–1 Policy.

The head of the contracting activity (HCA) may issue determinations and findings under FAR 45.302–1(a)(4). (40 U.S.C. 486(c)) (55 FR 8954, Mar. 9, 1990)

546.302 Fixed-price supply contracts. 546.302–70 Source inspection by Qual

ity Approved Manufacturer. Contracting officers in the Federal Supply Service shall insert the clause at 552.246–70, Source Inspection by Quality Approved Manufacturer, in solicitations and contracts that provide for source inspection, except multiple award schedules contracts, motor vehicle contracts, and contracts awarded by the Special Programs Division of the Office of Scientific Equipment Commodity Center, unless the contracting officer, in conjunction with the Central Office Quality Assurance Division (FQA), decides inspection by Government personnel is necessary. Contracting officers may authorize the use of manufacturing plants or other facilities located outside the United States (including Puerto Rico and the Virgin Islands) to perform inspection and testing under paragraph (a)(1) of the clause when:

(a) Inspection services are available from another Federal agency on the basis of its primary inspection responsibility in a geographic area;

(b) An inspection interchange agreement exists with another agency concerning inspection at a contractor's plant;

(c) Procurement is being made for AID and specifies the area of source; or

(d) Other considerations will ensure more economical and effective inspection consistent with the Government's interest. Such authorization must be fully coordinated with FQA and documented in the file.

PART 546-QUALITY ASSURANCE

Subpart 546.3-Contract Clauses

Sec. 546.302 Fixed-price supply contracts. 546.302–70 Source inspection by Quality Ap

proved Manufacturer. 546.302–71 Source inspection. 546.312 Construction contracts.

Subpart 546.4-Goverment Contract

Quality Assurance

546.400 Scope of subpart. 546.402 Government contract quality assur

ance at source. 546.403 Government contract quality assur

ance at destination. 546.470 Testing. 546.470-1 Acceptance testing. 546.470-2 Certification testing.

546.302-71 Source inspection.

The contracting officer shall insert the clause at 552.246–72, Source Inspection, in solicitations and contracts when it is determined that inspection is to be performed at the source by Government personnel.

Subpart 546.7-Warranties

546.704 Authority for use of warranties.
546.705 Limitations.
546.708 Warranties of data.
546.709 Warranties of commercial items.
546.710 Contract clauses.

AUTHORITY: 40 U.S.C 486(c)

SOURCE: 54 FR 26555, June 23, 1989, unless otherwise noted.

546.312 Construction contracts.

The contracting officer shall insert the clause at 552.246–71, Final Inspection and Tests, in solicitations and contracts for construction that include the Inspection of Construction clause at FAR 52.246–12.

(c) Trucks weighing 10,000 pounds GVW or less purchased for domestic consignees using a Federal Standard.

Subpart 546.4-Government

Contract Quality Assurance 546.400 Scope of subpart.

This subpart prescribes policies and procedures for use by the Federal Supply Service. Use by other GSA activities is optional.

546.470 Testing.

Testing to determine conformance with specifications and standards may be conducted at facilities of Federal agencies, manufacturers, independent testing laboratories, and others, as appropriate. 546.470-1 Acceptance testing.

(a) Acceptance testing is conducted to determine conformance with purchase descriptions or specifications before a shipment is accepted. Such testing must not be solely for the purpose of furnishing information to a producer or vendor as to conformance with specification requirements.

(b) The cost of services for acceptance testing of samples of a shipment normally will be borne by GSA, except for retesting necessitated by prior rejection.

Subpart 546.4-Government

Contract Quality Assurance 546.402 Government contract quality

assurance at source. (a) Source inspection of supplies shall be performed either by Government personnel or by a Quality Approved Manufacturer when the contract is:

(1) A Federal Supply Schedule contract selected for source inspection;

(2) A requirements contract which is national in scope (including shipments to GSA distribution centers);

(3) A requirements contract which is regional in scope;

(4) A definite quantity contract for stock items;

(5) For Class 8010 items; or

(6) For Special-purpose vehicles, trucks over 10,000 pounds gross vehicle weight (GVW), trucks weighing 10,000 pounds GVW or less that are not covered by a Federal standard, and vehicles to be shipped outside the coterminous United States.

(b) Contracts may also provide for source inspection when the contracting director, after coordination with FQA, determines that it is in the Government's interest due to the critical nature of the supplies. 546.403 Government contract quality

assurance at destination. Inspection of supplies at destination should be performed when the supplies are purchased using small purchase procedures, a schedule contract is involved (except for schedules selected for source inspection), or the contract is for:

(a) Commercial or off-the-shelf products;

(b) Standard vehicles purchased for domestic consignees; or

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(d) The contracting officer shall insert the clause at 552.246–76, Warranty of Pesticides, in solicitations and contracts involving the procurement of pesticides.

(e) The contracting officer shall insert the clause at 552.246–75, Guarantees, in solicitations and contracts for construction when the contract amount is expected to exceed the small purchase limitation. (54 FR 26555, June 23, 1989, as amended at 56 FR 1741, Jan. 17, 1991)

PART 547 -TRANSPORTATION

Subpart 547.3-Transportation in Supply

Contracts

546.708 Warranties of data.

Warranties of data should be developed by the technical or specification manager when the contracting officer decides that the use of a warranty is in the Government's interest and the contracting director concurs. 546.709 Warranties of commercial

items. The specification manager shall advise the contracting officer: (a) Whether the specification contains a warranty or a commercial warranty applies and (b) when an extended warranty is necessary and recommends the duration of the extended warranty. 546.710 Contract Clauses.

(a)(1) The contracting officer shall insert the clause at 552.246–17, Warranty of Supplies of a Noncomplex Nature, or applicable alternate in solicitations and contracts instead of the FAR clause at 52.246–17 or applicable alternate.

(2) If commercial products or items are to be acquired, the contracting officer shall use the clause at 552.246-17 with its Alternate I. The term “commercial items" does not include Commercial Item Description (CIDs) that describe “commercial-type products" or specifications.

(3) If the acquisition is for other than commercial items in Class 8010, the contracting officer shall use the clause at 552.246-17 with its Alternate II.

(4) If the acquisition is for other than commercial items in Class 8030 or 8040, the contracting officer shall use the clause at 552.246–17 with its Alternate III. In addition, the contracting officer shall specify in the solicitation whether items being acquired are “noncritical end use items” or “critical end use items".

(b) The contracting officer shall insert the clause at 552.246–73, Warranty-Multiple Award Schedule, in solicitations and multiple award schedule (except international schedule) contracts.

(c) The contracting officer shall insert the clause at 552.246–74, Warranty-International Multiple Award Schedule, in solicitations and international multiple award schedule contracts.

Sec. 547.300 Scope of subpart. 547.303 Standard delivery terms and con

tract clauses. 547.303–1 F.o.b. origin. 547.304–5 Exceptions. 547.305 Solicitation provisions, contract

clauses, and transportation factors. 547.370 Restrictions on transportation to

military installations. AUTHORITY: 40 U.S.C. 486(c).

SOURCE: 54 FR 26556, June 23, 1989, unless otherwise noted.

Subpart 547.3-Transportation in

Supply Contracts

547.300 Scope of subpart.

This subpart prescribes policies and procedures for Federal Supply Service (FSS) acquisitions. 547.303 Standard delivery terms and

contract clauses.

547.303–1 F.o.b origin.

(a) The contractor shall request a carrier routing from the applicable transportation zone office on all shipments weighing 10,000 pounds or more.

(b) The contractor shall ship on a Government bill of lading (GBL) unless:

(1) Shipment is via postal or parcel service;

(2) Shipment on a commercial bill of lading (CBL) is authorized in writing by the contracting officer because (i) shipment is urgently required and (ii) a GBL cannot be issued in a timely manner; or

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