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§ 1.111-2

Noncompetitive practices.

(a) Unless bids or proposals are genuinely competitive, contract prices tend to be higher than they should be. If the Secretary concerned or his representative considers that any bid received after formal advertising evidences a violation of the antitrust laws, he is required by 10 U.S.C. 2305(d) to refer such bids to the Attorney General for appropriate action. Similarly, evidence of such violations in negotiated procurements should be referred to the Attorney General. Practices which are designed to eliminate competition or restrain trade and which may evidence possible violations of such laws include collusive bidding, follow-the-leader pricing, rotated low bids, uniform estimating systems, sharing of the business, identical bids, etc.

(b) Reports of identical or equal bids or proposals should not be submitted automatically, but only where there is some reason to believe that those kids or proposals may not have been arrived at independently. Such reports should be accompanied by conformed copies of the bid or proposal, other contract documents, and supporting data. The report should set forth:

(1) The noncompetitive pattern or situation under consideration;

(2) Purchase experience in the same product or service for a reasonable period of time (one or more years) prior to the receipt of the bids or proposals under consideration, including unit and total contract price and abstract of bids;

(3) Community of financial interest among bidders, insofar as is known;

(4) The extent, if any, to which specification requirements or patents restrict competition;

(5) Information which may be available with respect to the pricing system

employed in bids or proposals believed to reflect noncompetitive practices; and

(6) Any other information deemed pertinent.

(c) The reports required by this section do not satisfy the reporting requirement contained in § 1.114.

[30 F.R. 5959, April 29, 1965]

§ 1.111-3 Subcontractor kickbacks.

The Anti-Kickback Act (41 U.S.C. 51) prohibits the payment, directly or indirectly, by or on behalf of a subcontractor in any tier under any Government negotiated contract of any fee, commission, compensation, gift, or gratuity to the prime contractor or any higher tier subcontractor or to any officer, partner, employee, or agent of the prime contractor, of any higher tier subcontractor, as an inducement or acknowledgment for the award of a subcontract or order. The Act further provides that the amount of any such fee, commission, or compensation, or the cost or expense of any such gratuity or gift, whether heretofore, or hereafter paid by the subcontractor, shall not be charged, either directly or indirectly, as a part of the contract price charged by the subcontractor to the prime contractor or higher tier subcontractor. It also creates a conclusive presumption that the cost of any such prohibited payment has been included in the price of the subcontract or order and ultimately borne by the Government. The Act provides for the recovery on behalf of the United States of any such payment from either the subcontractor or recipient, by court action, or by setoff of moneys otherwise owing to the subcontractor either by the United States directly or by the prime contractor. The Act imposes criminal penalties on any person who knowingly, makes or receives, directly or indirectly, any such prohibited payment.

[30 F.R. 5959, Apr. 29, 1965]

§ 1.111-4 Contractor gratuities to Government personnel.

(a) The right of a contractor to proceed under the contract may be terminated if it is found, after notice and hearing, that the contractor, or his agent or other representative, offered or gave any gratuity, such as entertainment or a gift, to an officer, official, or employee of the Government to obtain a contract or favorable treatment in the awarding, amending, or making of determinations

concerning the performance, of a contract.

(b) To constitute a violation under the Gratuities clause (§ 7.104-16 of this chapter) three elements must be present: (1) The contractor must have a contract which contains the Gratuities

clause;

(2) The contractor, his agent, or other representative must have offered or given a gratuity to an officer, official, or employee of the Government; and

(3) The gratuity must have been offered or given with the intent to obtain a contract or favorable treatment in the awarding or amending, or the making of determinations concerning the performance, of a contract (in this respect, intent generally must be inferred because an admission is rarely obtainable).

A lack of any of these elements will cause an action taken by the Government pursuant to the Gratuities clause to fail. Procedural requirements for gratuities hearings are set out in § 30.4 of this chapter.

[30 F.R. 5959, Apr. 29, 1965]

§ 1.112 Federal procurement regulations and General Services Administration regulations relating to procurement of supplies and services.

All policy and procedural matter of Federal Procurement Regulations (See Chapter I of Title 41) and General Services Administration regulations which are to be made applicable to the Department of Defense and are within the scope of this subchapter will be codified herein prior to compliance therewith by the Military Departments. The applicable Department of Defense Directives covering the assignments of responsibility for the purchasing of specific supplies under Interagency Purchase Assignment will be incorporated by reference in this subchapter. For Department of Defense implementation of Federal Supply Schedules, see § 5.103. [25 F.R. 12080, Dec. 31, 1960] § 1.113 Standards of conduct. [30 F.R. 5960, Apr. 29, 1965]

§ 1.113-1 Government personnel.

All governmental personnel engaged in procurement and related activities shall conduct business dealing with industry in a manner above reproach in every respect. Transactions relating to expenditure of public funds require the highest

degree of public trust to protect the interests of the Government. While many Federal laws and regulations place restrictions on the actions of governmental personnel, the latter's official conduct must, in addition, be such that the individual would have no reticence about making a full public disclosure thereof. See AR 600-50 and CPR C2, for the Army; SECNAV Instr. 5370.2C, revised 1 December 1964, for the Navy; AFR 3030, for the Air Force; and DSAR 5500.1, for the Defense Supply Agency. [30 F.R. 5960, Apr. 29, 1965]

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(a) Department of Defense Directive 5500.10, promulgated June 1, 1963, Subject: Rules for the Avoidance of Organizational Conflicts of Interest, is set forth in Part 141 of this chapter.

(b) The Directive describes examples of various organizational conflicts of interest which might come into being and methods for avoidance of such conflicts. It provides that action must be taken to avoid placing a contractor in a position where his judgment might be biased or where he would have an unfair competitive advantage within the scope and intent of the rules. All prospective contractors in such situations will be advised of the extent of the applicability of these rules by a notice in solicitations and by a clause in resulting contracts. Such contract clause shall spell out the specific extent of any future restrictions on the contractor which are imposed by the contract. A standard form of notice for use in solicitations or contract clause is not prescribed in this subchapter since such notices in solicitations and contract clauses must be especially adapted to apply the principle of these rules to the specific facts of each contractual situation. The rules for avoidance of organizational conflict, as such, do not impose any contractual obligation on the contractor; such obligation is imposed only by the contract clause designed to carry out such rules. The contracting officer shall not impose restrictions on any contractor in reliance on these rules in the absence of a specific contractual agreement with that contractor. This, of course, does not require contract awards in circumstances that demonstrate a clear conflict of interests of a kind specifically not within the scope of the rules.

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The Military Departments and other Department of Defense Agencies will maintain a record of all such clauses incorporated in contracts and notices in solicitations for a period of time.

[29 F.R. 2809, Feb. 29, 1964, as amended at 30 F.R. 5960, Apr. 29, 1965]

§ 1.114 Reporting of identical bids.

(a) General. Executive Order 10936 dated April 24, 1961, as implemented by the Department of Justice, requires a report to be submitted to the Attorney General on each formally advertised procurement (including small business restricted advertising) over $10,000 which involves identical bids. Identical bids are two or more bids for the same line item which:

(1) Are identical on their face (regardless of evaluation factors such as discount, transportation, etc.) either as to unit price or total line item amount;

or

(2) Are identical as evaluated either as to unit price or total line item amount. A line item is an item of supply or service which independently can be made the subject of an award by the Government. However, the reporting requirements herein established for line items shall be applicable to invitations calling for line item bidding even though the invitations or bids contained qualifying or restrictive limitations on award (e.g., all or none bids or award on one item being conditioned on award of other items). This reporting requirement is in addition to the reports required by § 1.111-2.

(b) Information to be obtained from bidders. Each invitation for bids for a procurement estimated to exceed $10,000 shall include substantially the following: PARENT COMPANY AND EMPLOYER IDENTIFICATION NUMBER

(a) Bidder represents that he [ ] is, [ ] is not, owned or controlled by a parent company. For this purpose a parent company is defined as one which either owns or controls his activities and basic business policies of the bidder. To own another company means the parent company must own at least a majority (more than 50 percent) of the To control voting rights in that company. another company such ownership is not required; if another company is able to formulate, determine or veto basic business policy decisions of the bidder, such other company is considered the parent of the bidder. This control may be exercised through the use of dominant minority voting rights, use of proxy voting, contractual arrangements, or otherwise.

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(c) Bidder will provide in the applicable space below, if he has no parent company, his own Employer's Identification Number (E.I. No.) (Federal Social Security Identification Number used on Federal Tax Return), or, if he has a parent company, the E. I. No. of his parent company. Bidder's E. I. No.

Parent Company's E. I. No.

If a bidder fails to provide the above information on an invitation for bids and if identical bids are involved, one inquiry will be made in an effort to obtain the information. Failure to provide information concerning the parent company or the employer's identification number is not a basis for rejection of bids.

(c) Reportable bids. An identical bid report shall be submitted when identical bids are received and the bid value of all line items covered by the invitation for bids exceeds $10,000 (based on the apparent low bid for each line item) except that reports will not be submitted when:

(1) Bids are received only from foreign sources on invitations involving delivery and performance outside the United States, its possessions, or Puerto Rico;

(2) There is no line item on which the apparent low bids exceeds $2,500 (line item evaluation computations beyond those normally made to determine the low bidder are not required); or

(3) No identical bids are discovered in the normal process of evaluating bids for award and no identical bids are apparent on the face of the bid.

Identical

(d) Submission of reports. bid reports shall be submitted for all reportable bids on Department of Justice Form DJ-1500 (Federal Stock No. 7540823-7870), available from General Services Administration stores depots. Instructions for filling out this form are printed as the cover sheet of each pad of these forms. Reports shall be made within 20 days following the disposition of all of one or more contracts or other action. Two completed copies of the report, a copy of the invitation for bids and a copy of the completed abstract of bids shall be sent to the Attorney General, Ref: AT-IBR, Washington 25, D.C. The abstract of bids need not be furnished when the number of line items on an invitation exceeds 100; in which

event, the identical bid report shall be annotated to indicate (1) the number of line items and (2) the number of bidders on the invitation. A copy of the identical bid report shall be retained by the purchasing activity.

(e) Completion of reports. All bids for each line item on which reportable identical bids have been disclosed shall be reported regardless of whether the identical bids were the low bids. Reports are required on reportable identical bids regardless of whether an award is made on the line item, the invitation is canceled, or any other disposition is made subsequent to the public opening of the invitation.

[27 F.R. 11643, Nov. 27, 1962]

§ 1.115 Noncollusive bids and proposals.

(a) In order to promote full and free competition for Government contracts, the following certification shall be included in all (1) invitations for bids and (2) requests for proposals or quotations (other than for small purchases made in accordance with Subpart F, Part 3 of this chapter, and other than requests for technical proposals in connection with two-step formal advertising) involving firm fixed-price contracts and fixed-price contracts with escalation. When the solicitation authorizes the submission of oral offers and requires that such offers be confirmed in writing, it shall require that the certification be included with or be expressly incorporated by reference in and thereby made a part of the confirmation.

CERTIFICATE OF INDEPENDENT PRICE DETERMINATION (JUNE 1964)

(a) By submission of this bid or proposal, each bidder or offeror certifies, and in the case of a joint bid or proposal, each party thereto certifies as to its own organization, that in connection with this procurement:

(1) The prices in this bid or proposal have been arrived at independently, without consultation, communication, or agreement, for the purpose of restricting competition, as to any matter relating to such prices with any other bidder or offeror or with any compettor;

(2) unless otherwise required by law, the prices which have been quoted in this bid or proposal have not been knowingly disclosed by the bidder or offeror and will not knowingly be disclosed by the bidder or offeror prior to opening, in the case of a bid, or prior to award, in the case of a proposal, directly or indirectly to any other bidder or offeror or to any competitor; and

(3) no attempt has been made or will be made by the bidder or offeror to induce any

other person or firm to submit or not to submit a bid or proposal for the purpose of restricting competition.

(b) Each person signing this bid or proposal certifies that:

(1) He is the person in the bidder's or offeror's organization responsible within that organization for the decision as to the prices being bid or offered herein and that he has not participated, and will not participate, in any action contrary to (a)(1) through (a) (3) above; or

(2) (a) He is not the person in the bidder's or offeror's organization responsible within that organization for the decision as to the prices being bid or offered herein but that he has been authorized in writing to act as agent for the persons responsible for such decision in certifying that such persons have not participated, and will not participate, in any action contrary to (a) (1) through (a) (3) above, and as their agent does hereby so certify; and (b) he has not participated, and will not participate, in any action contrary to (a) (1) through (a) (3) above.

(c) This certification is not applicable to a foreign bidder or offeror submitting a bid or proposal for a contract which requires performance or delivery outside the United States, its possessions, and Puerto Rico.

(d) A bid or proposal will not be considered for award where (a)(1), (a)(3), or (b) above has been deleted or modified. Where (a) (2) above has been deleted or modified, the bid or proposal will not be considered for award unless the bidder or offeror furnishes with the bid or proposal a signed statement which sets forth in detail the circumstances of the disclosure and the Secretary, or his designee, determines that such disclosure was not made for the purpose of restricting competition.

(b) The fact that a firm (1) has published price lists, rates, or tariffs covering items being procured by the Government, (2) has informed prospective customers of proposed or pending publication of new or revised price lists for such items, or (3) has sold the same items to commercial customers at the same prices being offered the Government does not constitute, without more, a disclosure within the meaning of paragraph (a) (2) of the Certificate.

(c) It is not required that a separate written authorization be given to the signer of the bid or proposal for each procurement involved where the signer makes the certification provided in paragraph (b) (2) of the Certificate, provided that with respect to any blanket authorization given, (1) the procurement to which the Certificate applies is clearly within the scope of such authorization, and (2) the person giving such authorization is the person responsible within

the bidder's or offeror's organization for the decision as to the prices being bid or offered at the time the Certificate is made in a particular procurement.

(d) After the execution of an initial certificate and the award of a contract in connection therewith, the contractor need not submit additional certificates in connection with proposals submitted on "work orders" or similar ordering instruments issued pursuant to the terms of that contract, where the Government's requirements cannot be met from another source.

(e) The authority to make the determination described in paragraph (d) of the above certification shall not be delegated to an official below the level of the head of a procuring activity.

(f) When a certification is suspected of being false or there is indication of collusion, the matter shall be processed in accordance with § 1.111. For rejection of bids which are suspected of being collusive and for the negotiation of procurements subsequent to such rejection, see §§ 2.404-1(b) (7) and 3.215 of this chapter.

[30 F.R. 5960, Apr. 29, 1960]

Subpart B-Definitions of Terms §1.201

Definitions.

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"Change order" means a written order signed by the contracting officer, directing the contractor to make changes which the Changes clause of the contract authorizes the contracting officer to order without the consent of the contractor (see §§ 16.815-1 and 16.813 of this chapter).

[30 F.R. 14071, Nov. 9, 1965] §1.201-2

Contract modification.

Contract modification means any written alteration in the specification, delivery point, rate of delivery, contract period, price, quantity, or other contract provisions of an existing contract, whether accomplished by unilateral action in accordance with a contract pro

vision, or by mutual action of the parties to the contract. It includes (a) bilateral actions such as supplemental agreements, and (b) unilateral actions such as change orders, administrative notices of the exercise of a contract changes, notices of termination, and option.

[25 F.R. 14081, Dec. 31, 1960] §1.201-3 Contracting officer.

"Contracting officer" means any person who, in accordance with Departmental procedures, is currently designated a contracting officer with the authority to enter into and administer contracts and make determinations and findings with respect thereto, or with any part of such authority. The term also includes the authorized representative of the contracting officer acting within the limits of his authority. (NOTE: Recent assignments of contract administration responsibilities have necessitated a separation of duties related to procurement, with some duties normally performed at a purchasing office and some normally performed at a contract administration office. For convenience of expression, when requiring performance of specific duties by a contracting officer, this subchapter may refer to a contracting officer at the purchasing office as the procuring contracting officer (PCO), and to a contracting officer at a contract administration office as an administrative contracting officer (ACO). Additionally, a contracting officer, responsible for the settlement of terminated contracts, may be referred to as the termination contracting officer (TCO). It is recognized that a single contracting officer may be responsible for duties in any or all of these areas, and reference in this subchapter to PCO, ACO, or TCO does not of itself require that duty be performed at a particular office or activity or restrict in any way a contracting officer in the performance of any duty properly assigned. For example, a duty specified by this subchapter to be performed by the ACO will be performed by a contracting officer at the purchasing office when contract administration or responsibility for that duty has been retained in the purchasing office.)

[30 F.R. 11997, Sept. 21, 1965] § 1.201-4 Contracts.

"Contracts" means all types of agreements and orders for the procurement of supplies or services. It includes awards

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