(a) Pursuant to 10 U.S.C. 2382 and 7300 and except as provided in (b) and (c) below, any contract in an amount which exceeds or may exceed $10,000 known to be for the construction or manufacture of all or part of any complete aircraft or naval vessel, shall contain the following clause, except that the words "if this contract is in an amount which exceeds $10,000" may be inserted at the beginning of the clause in formally advertised contracts:

EXCESS PROFITS (JUNE 1957)

The Contractor agrees that, unless otherwise provided by law, this contract shall be subject to all the provisions of 10 U. S. C. 2382 and 7300 and shall be deemed to contain all the agreements required by those sections: Provided, however, That this clause shall not be construed to enlarge or extend by contract the obligations imposed by those sections. The Contractor agrees to insert in the subcontracts specified in those sections either the provisions of this clause or the provisions required by those sections.

(b) In any contract where only certain items or lots totaling more than $10,000 are subject to 10 U. S. C. 2382 or 7300, the foregoing clause should be modified to make the agreement of the contractor applicable only to such items or lots. In any contract where only certain items or lots totaling $10,000 or less would otherwise be subject to 10 U. S. C. 2382 or 7300, the foregoing clause should not be included in the contract even though the total amount of the entire contract exceeds $10,000.

(c) In any contract, otherwise subject to 10 U. S. C. 2382 or 7300, for scientific equipment used for communication, target detection, navigation or fire control, as designated by the Secretary, the clause prescribed in (a) above shall not be included, and the following clause shall be inserted in lieu thereof:

EXCESS PROFIT (JUNE 1957)

The Secretary having designated the supplies called for by this contract to be scientific equipment used for communication, target detection, navigation or fire control, the provisions of 10 U. S. C. 2382 and 7300, are not applicable to this contract.

[25 F.R. 14178, Dec. 31, 1960]

§ 7.104-12 Military security require

ments.

(a) Except as provided in paragraph (b) of this section, insert the following clause in all contracts which are classified by a Department as "Confidential", including "Confidential-Modified Handling Authorized", or higher and in any other contracts the performance of which will require access to such classified information or material. In those cases where the situation so warrants because of the nature of the item or the conditions under which it is to be produced, the contract shall provide by a separate contract provision such additional security safeguards as may be required for the protection of that item. When the "Military Security Requirements" clause is inserted in any contract, the contracting officer or his authorized representative shall prepare and transmit to the contractor, material inspector, security officer of the cognizant Military Department having cognizance of the facility where the prime contract will be performed, and such other agencies as may be determined by the Departments, a Security Requirements Check List (DD Form 254) in accordance with § 16.811 of this chapter. The Security Requirements Check List will also be furnished by the contracting Military Department to the cognizant security office when a classified subcontract is placed under a prime contract which contains the "Military Security Requirements" clause. However, if the procurement is for a research contract, consultant service, graphic arts service, alternate storage services, or other procurement of services in which there is no requirement for a breakdown by classification of the various elements of the contract, or subcontract, a letter or other written notice of classification for the entire contract may be used in lieu of the Security Requirements Check List.

MILITARY SECURITY REQUIREMENTS (JUNE

1958)

(a) The provisions of this clause shall apply to the extent that this contract involves access to information classified "Confidential” including "Confidential-Modified Handling Authorized" or higher.

(b) The Government shall notify the Contractor of the security classifications of this contract and the elements thereof, and of any subsequent revisions in such security classification, by the use of a Security Requirements Check List (DD Form 254), or other written notification.

(c) To the extent the Government has indicated as of the date of this contract or thereafter indicates security classification under this contract as provided in paragraph (b) above, the Contractor shall safeguard all classified elements of this contract and shall provide and maintain a system of security controls within his own organization in accordance with the requirements of

(1) the Security Agreement (DD Form 441), including the Department of Defense Industrial Security Manual for Safeguarding Classified Information as in effect on the date of this contract, and any modification to the Security Agreement for the purpose of adapting the Manual to the Contractor's business; and

(ii) any amendments to said Manual made after the date of this contract, notice of which has been furnished to the Contractor by the Security Office of the Military Department having security cognizance over the facility.

(d) Representatives of the Military Department having security cognizance over the facility and representatives of the contracting Military Department shall have the right to inspect at reasonable intervals the procedures, methods, and facilities utilized by the Contractor in complying with the security requirements under this contract. Should the Government, through these representatives, determine that the Contractor is not complying with the security requirements of this contract the Contractor shall be informed in writing by the Security Office of the cognizant Military Department of the proper action to be taken in order to effect compliance with such requirements.

(e) If, subsequent to the date of this contract, the security classifications or security requirements under this contract are changed by the Government as provided in this clause and the security costs under this contract are thereby increased or decreased, the contract price shall be subject to an equitable adjustment by reason of such increased or decreased costs. Any equitable adjustment shall be accomplished in the same maner as if such changes were directed under the "Changes" clause in this contract.

(f) The Contractor agrees to insert, in all subcontracts hereunder which involve access to classified information, provisions which shall conform substantially to the language of this clause, including this paragraph (f) but excluding the last sentence of paragraph (e) of this clause.

(g) The Contractor also agrees that he shall determine that any subcontractor proposed by him for the furnishing of supplies and services which will involve access to classified information in the Contractor's custody has been granted an appropriate facility security clearance, which is still in effect, prior to being accorded access to such classified information.

(b) Contracts involving work to be performed outside the United States, its

possessions, and Puerto Rico shall include, when required by the Armed Forces Industrial Security Regulation (see § 1.320 of this chapter), an appropriate security requirements clause as follows:

(1) The security requirements clause set forth in the AFISR for use in each country in which work is to be performed; or

(2) The clause set forth in paragraph (a) of this section, modified as appropriate, in the event the AFISR does not set forth a required clause or in the event that regulation merely prescribes the use of an "appropriate" clause. [28 F.R. 12570, Nov. 23, 1963, as amended at 30 F.R. 5986, Apr. 29, 1965] § 7.104-13 Preference for certain domestic commodities.

In accordance with the requirements of § 6.305 of this chapter, insert the clause set forth therein.

[25 F.R. 14179, Dec. 31, 1960]

§ 7.104-14 Utilization of small business

concerns.

In accordance with the requirements of § 1.707-3 (a) of this subchapter, insert the clause set forth therein. [27 F.R. 3451, Apr. 11, 1962]

§ 7.104-15 Examination of records.

Pursuant to 10 U.S.C. 2313(b), the following clause will be inserted in all negotiated fixed-price supply contracts in excess of $2,500, including contracts awarded under a total (Small Business Restricted Advertising) or partial setaside, except as provided in § 6.704 of this chapter.

EXAMINATION OF RECORDS (FEB. 1962)

(a) The Contractor agrees that the Comptroller General of the United States or any of his duly authorized representatives shall, until the expiration of three years after final payment under this contract, have access to and the right to examine any directly pertinent books, documents, papers, and records of the Contractor, involving transactions related to this contract.

(b) The Contractor further agrees to include in all his subcontracts hereunder a provision to the effect that the subcontractor agrees that the Comptroller General of the United States or any of his duly authorized representatives shall, until the expiration of three years after final payment under the subcontract, have access to and the right to examine any directly pertinent books, documents, papers, and records of such subcontractor, involving transactions related to the subcontract. The term "subcontract"

as used in the clause excludes (1) purchase I orders not exceeding $2,500 and (ii) subcontracts or purchase orders for public utility services at rates established for uniform applicability to the general public.

When Standard Form 32 is used, the form need not be changed to delete the parenthetical sentence preceding paragraph (a) of the clause. (For services contracts, see §3.113 of this chapter.) [29 F.R. 6924, May 27, 1964]

§ 7.104-16 Gratuities.

Insert the clause set forth below in all fixed price supply contracts and purchase orders, except contracts and purchase orders with foreign governments obligating solely funds other than those contained in Department of Defense appropriation acts.

GRATUITIES (MAR. 1952)

(a) The Government may, by written notice to the Contractor, terminate the right of the Contractor to proceed under this contract if it is found, after notice and hearing, by the Secretary or his duly authorized representative, that gratuities (in the form of entertainment, gifts, or otherwise) were offered or given by the Contractor, or any agent or representative of the Contractor, to any officer or employee of the Government with a view toward securing a contract or securing favorable treatment with respect to the awarding or amending, or the making of any determinations with respect to the performing, of such contract: Provided, That the existence of the facts upon which the Secretary or his duly authorized representative makes such findings shall be in issue and may be reviewed in any competent court. (b) In the event this contract is terminated as provided in paragraph (a) hereof, the Government shall be entitled (1) to pursue the same remedies against the Contractor as it could pursue in the event of a breach of the contract by the Contractor, and (ii) as a penalty in addition to any other damages to which it may be entitled by law, to exemplary damages in an amount (as determined by the Secretary or his duly authorized representative) which shall be not less than three nor more than ten times the costs incurred by the Contractor in providing any such gratuities to any such officer or employee.

(c) The rights and remedies of the Government provided in this clause shall not be exclusive and are in addition to any other rights and remedies provided by law or under this contract.

[25 FR. 14179, Dec. 31, 1960] 7.104-17

Convict labor.

In accordance with the requirements of Subpart B of Part 12 of this sub

chapter, insert the contract clause set forth in § 12.203 of this subchapter. [25 F.R. 14180, Dec. 31, 1960]

§ 7.104-18 Priorities, allocations and allotments.

In accordance with the requirements of § 1.307-2 insert the following clause: PRIORITIES, ALLOCATIONS, AND ALLOTMENTS (JAN. 1961)

The Contractor shall follow the provisions of DMS Reg. 1 and all other applicable regulations and orders of the Business and Defense Services Administration in obtaining controlled materials and other products and materials needed to fill this order.

[26 F.R. 2609, Mar. 28, 1961]

§ 7.104-19 Employment of ocean-going vessels- -ocean transport of Government-owned supplies.

In accordance with the requirements of Subpart N, Part 1 of this chapter, insert one of the clauses set forth in § 1.1404 of this chapter, as appropriate. [29 F.R. 2831, Feb. 29, 1964]

§ 7.104-20 Utilization of concerns in labor surplus areas.

In accordance with the requirements of § 1.805-3 (a) of this subchapter, insert the clause set forth therein.

[27 F.R. 3451, Apr. 11, 1962]

§ 7.104-21 Limitation on withholding of payments.

(a) Except as provided in paragraph (b) of this section, the following clause shall be inserted in contracts which include more than one clause or Schedule provision authorizing the temporary withholding of amounts otherwise payable to the contractor for supplies delivered or services performed:

LIMITATION ON WITHHOLDING OF PAYMENTS (SEPT. 1958)

If more than one clause or Schedule provision of this contract authorizes the temporary withholding of amounts otherwise payable to the Contractor for supplies delivered or services performed, the total of the amounts so withheld at any one time shall not exceed the greatest amount which may be withheld under any one such clause or Schedule provision at that time: Provided, That this limitation shall not apply to:

(1) Withholdings pursuant to any clause relating to wages or hours of employees; (2) Withholdings not specifically provided for by this contract; and

(3) The recovery of overpayments.

(b) The clause set forth in paragraph (a) of this section is not required where:

(1) The contracting officer or the procuring activity determines that the withholding limitation in the said clause is incompatible with the purpose of the particular withholding provisions involved; or

(2) All of the contract clauses or Schedule provisions (in excess of one) which provide for the withholding of payments either (i) are exempt from the limitations in the clause set forth in paragraph (a) of this section under the proviso thereof, or (ii) provide that their withholding provisions do not require any additional withholdings where the amounts required to be withheld under them is being withheld under other provisions of the contract.

If it is determined that the withholding limitation in the clause set forth in paragraph (a) of this section is incompatible with the purpose of particular withholding provisions, the said clause may be omitted or modified to make it inapplicable to such withholding provisions. [25 F.R. 14180, Dec. 31, 1960]

§ 7.104-22

Small Business Subcontracting Program.

In accordance with the requirements of § 1.707-3(b) of this subchapter, insert the clause set forth therein.

[27 F.R. 3451, Apr. 11, 1962]

§ 7.104-23 Subcontracts.

In accordance with the requirements of § 3.903-1 of this chapter, insert an appropriate Subcontracts clause.

[25 F.R. 14180, Dec. 31, 1960]

§ 7.104-24 Government property.

In accordance with the requirements of § 13.702 of this chapter, insert the clause set forth therein.

[30 F.R. 1735, Feb. 9, 1965]

§ 7.104-25 Special tooling.

In accordance with the requirements of § 13.704 of this chapter, insert the clause set forth therein.

[30 F.R. 1735, Feb. 9, 1965] § 7.104-26

gram.

Changes to make or buy pro

In accordance with the requirements of $ 3.902-4 of this subchapter, insert the clause set forth therein.

[25 F.R. 14180, Dec. 31, 1960]

§ 7.104-28 Quality program.

In accordance with § 14.104-3 of this chapter, in contracts for complex supplies or services requiring a quality program, insert the following clause:

QUALITY PROGRAM (JULY 1964)

The Contractor shall provide and maintain a quality program acceptable to the Government for supplies or services covered by this contract. The quality program shall be in accordance with Military Specification MILQ-9858A.

[29 F.R. 11820, Aug. 19, 1964]

§ 7.104-29 Price reduction for defective cost or pricing data.

(a) The following clause shall be inserted in any cost-reimbursement type, price redeterminable, time and materials, labor hour, or incentive contract except cost and cost-sharing contracts the estimated cost of which does not exceed $100,000 and under which the contractor receives no fee. It shall also be inserted in any other negotiated contract over $100,000 except where the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. In addition. the contracting officer shall include this clause in other negotiated contracts for which he has obtained a Certificate of Current Cost or Pricing Data in accordance with § 3.807-3 (a) (4) of this chapter in connection with the initial pricing of the contract, and in such cases paragraph (c) may be appropriately modified in respect to subcontracts of less than $100,000.

PRICE REDUCTION FOR DEFECTIVE COST OR PRIC ING DATA (SEPT. 1964)

(a) If the Contracting Officer determines that any price, including profit or fee, negotiated in connection with this contract was increased by any significant sums because the Contractor, or any subcontractor in connection with a subcontract covered by (c) below, furnished incomplete or inaccurate cost or pricing data or data not current as certified in the Contractor's Certificate of Current Cost or Pricing Data, then such price shall be reduced accordingly and the contract shall be modified in writing to reflect such adjustment.

(b) Failure to agree on a reduction shall be a dispute concerning a question of fact within the meaning of the "Disputes" clause of this contract.

(c) The Contractor agrees to insert the substance of paragraphs (a) and (c) of this

clause in each of his cost-reimbursement type, price redeterminable, or incentive subcontracts hereunder, and in any other subcontract hereunder in excess of $100,000 unless the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quanties to the general public, or prices set by law or regulation. In each such excepted subcontract hereunder which exceeds $100,000, the Contractor shall insert the substance of the following clause.

OR

PRICE REDUCTION FOR DEFECTIVE COST PRICING DATA-PRICE ADJUSTMENTS (a) This clause shall become operative only with respect to any change or other modification made pursuant to one or more provisions of this contract which involves a price adjustment in excess of $100,000, except where the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. The right to price reduction under this clause shall be limited to such price adjustments.

(b) If the Contractor determines that any price, including profit or fee, negotiated in connection with any price adjustment within the purview of paragraph (a) above was increased by any significant sum because the subcontractor or any of his subcontractors in connection with a subcontract covered by paragraph (c) below, furnished incomplete or inaccurate cost or pricing data, or data not current as of the date of execution of the subcontractor's certificate of current cost or pricing data, then such price shall be reduced accordingly and the subcontract shall be modified in writing to reflect such adjust

ment.

(c) The subcontractor agrees to insert the substance of this clause in each subcontract hereunder which exceeds $100,000.

(b) Insert the following clause in all contracts, both formally advertised and negotiated, in excess of $100,000 other than those described in paragraph (a) of this section.

PRICE REDUCTION FOR DEFECTIVE COST OF PRICING DATA-PRICE ADJUSTMENTS (MAR. 1963) (a) This clause shall become operative only with respect to any change or other modification made pursuant to one or more provisions of this contract which involves a price adjustment in excess of $100,000, except where the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. The right to price reduction under this clause shall be limited to such price adjustments.

(b) If the Contracting Officer determines that any price, including profit, or fee, negotiated in connection with any price adjustment under this contract was increased by

any significant sums because the Contractor or any subcontractor in connection with a subcontract covered by paragraph (d) below, furnished incomplete or inaccurate cost or pricing data or data not current as of the date of execution of the Contractor's Certificate of Current Cost or Pricing Data, then such price shall be reduced accordingly and the contract shall be modified in writing to reflect such adjustment.

(c) Failure to agree on a reduction shall be a dispute concerning a question of fact within the meaning of the "Disputes" clause of this contract.

(d) The Contractor agrees to insert the substance of paragraphs (a), (b), and (d) of this clause in each subcontract hereunder that exceeds $100,000.

(c) The requirement for inclusion of the above clauses in contracts with foreign governments or agencies thereof may be waived in exceptional cases by the head of a procuring activity, stating in writing his reasons for such determination.

[28 F.R. 4886, May 16, 1963, as amended at 29 F.R. 14820, Oct. 31, 1964, 30 F.R. 6868, May 25, 1965]

§ 7.104-30 Humane slaughter of livestock.

When required by Subpart F, Part 4 of this chapter, the procedure set forth in § 4.604 of this chapter will be followed. [26 F.R. 9638, Oct. 12, 1961]

§ 7.104-31 Duty-free entry.

In accordance with the requirements of § 6.603-2 of this chapter, insert either or both of the clauses set forth in § 6.603-3 of this chapter, as appropriate. [27 F.R. 11653, Nov. 27, 1962] § 7.104-32

Duty-free entry of listed Canadian supplies.

In accordance with the requirements of $6.605 of this chapter, insert the clause set forth therein.

[26 F.R. 9638, Oct. 12, 1961]

§ 7.104-33 Taxes.

In accordance with the requirements of § 11.403-2 of this chapter, in contracts to be performed outside the United States, its possessions and Puerto Rico, insert one of the clauses set forth in paragraphs (a) and (b) thereof.

[26 F.R. 9638, Oct. 12, 1961]

§ 7.104-34 Advance payments.

When advance payments are to be made in accordance with Subpart D.