(b) In the case of FSS Central Office contracts, FCS shall forward the appeal file to LC, together with the documentation required in paragraph (a) of this section.

(c) One copy of the appeal file shall be retained by the contracting officer for examination by the appellant. The contracting officer's memorandum of position including assigned counsel's statement of legal position or documents which are not part of the appeal file, furnished separately as background information, are not for examination by the appellant.

(d) In FSS, unless the appeal file and contracting officer's memorandum of position are prepared by FCS, a copy of each letter transmitting the appeal file to LC and a copy of the contracting officer's memorandum of position shall be sent to FCS.

(e) After reviewing the appeal file for adequacy, the trial attorney in LC will transmit the appeal file to the Board.

§ 5-60.204 Contracting officer's memorandum of position.

In addition to preparing the appeal file, the contracting officer (FCS in the case FSS of Central Office appeal files) shall prepare a memorandum of position (see § 5-60.206) with concurrence of assigned counsel and with the approval of the procuring director. Assigned counsel concurring in the contracting officer's memorandum of position shall also prepare and attach to the memorandum of position a statement of legal position. The memorandum of position is a chronological summary of the actions leading to the dispute and a rationale of the contracting officer's actions for the information of the trial attorney. The memorandum of position shall be submitted to LC simultaneously with the appeal file but as a separate document; i.e., it shall not be included as part of the appeal file, or included in the index. The memorandum of position should include a proposed list of witnesses for a hearing as well as a list of other individuals, whether employees of the Government, appellant, or others, with personal knowledge of the facts concerning the appeal, provided such a list is readily available and does

not interfere with timely processing of the memorandum of position. The name, position, affiliation, address, and telephone number of each witness or other individual listed shall be included.

§ 5-60.205 Procedure following decision of the GSA Board of Contract Appeals. (a) Decisions of the Board shall be promptly implemented. However, it must be recognized that the contractor may decide to bring suit regarding a Board decision in the United States Court of Claims or the Federal District Court. It is also possible for either party to file a motion for reconsideration by the Board within 30 calendar days from the date of the receipt of a copy of the Board decision.

(b) The contracting officer need take no further action (other than administrative) if the Board affirms the contracting officer's original decision, provided a recovery of costs is not due from the contractor. Where a recovery is due, collection shall be initiated by the contracting officer either by (1) a contract amendment adjusting the contract price or (2) a written demand for immediate payment, as appropriate. (In excess cost cases, the Financial Management Division, Office of Finance, (BCF), or regional counterpart, as appropriate, will normally pursue the necessary collection.) Any written demand shall instruct the contractor to make payment to the General Services Administration and address it to the appropriate GSA accounting center. A copy of any written demand shall be provided to the appropriate GSA accounting center for information and followup.

(c) When the Board does not uphold the contracting officer's original decisions and the Board's decision provides for payment in favor of the contractor, the contracting officer shall prepare a supplemental agreement with concurrrence of assigned counsel. The supplemental agreement will ensure against further litigation of the same dispute. The contracting officer shall forward the recommendation for payment to the appropriate accounting center with the original of the supple

mental agreement and a copy of the Board's decision.

§ 5-60.206 Sample of the contracting officer's memorandum of position.

MEMORANDUM OF POSITION

Appeal of the John Doe Corporation

Contract No.

Docket No.

Background

This is a requirement contract for dishwashing compound for the period through Shipment was required to be made within 45 days after receipt of order. It was necessary to terminate for default four purchase orders, one on ———, and three on Repurchases were accomplished in a timely manner on a competitive basis at considerably higher prices resulting in excess costs of $—.

The First Termination (date

Material submitted on purchase order for 484 bags was rejected on based on laboratory test number - When the material was rejected, a 10-day cure letter was issued on to which the appellant replied on ———.

After considering the reply, the purchase order was terminated.

Appellant requested a deviation on to supply liquid detergent for powder detergent which was considered and denied on

The Second Termination (date Appellant became delinquent on three additional orders and was issued a 10-day cure letter on ———. Appellant replied on After full consideration of the reply, the three delinquent purchase orders were terminated for default. Before terminating, the contracting officer checked with quality control personnel to ascertain whether the contractor had submitted material on the three orders involved.

Appellant requested approval to change the formulation by using olefin sulfonate instead of alkyl benzene as a means of resolving its problems. Appellant was advised that the specification permitted this

change.

5-63.101 General.

5-63.102 Purpose of audit.

5-63.103 Types of contracts subject to audit.

5-63.104 Contract clause.

5-63.105 Payments under contracts subject to audit.

5-63.105-1 General.

5-63.105-2 Submission and processing of invoices or vouchers.

5-63.105-3 Action upon receipt of an audit report.

*Assigned counsel's statement of legal position will be attached by the counsel.

The Assistant Inspector GeneralAuditing and the Field Audit Offices conduct contract audits of contractors' records to the extent that such audits are required by law, regulation, or sound business judgment. These audits include the conduct of periodic or special request audits of contractors deemed warranted because of such matters as the financial condition, integrity, and reliability of the contractor and prior audit experience, adequacy of the accounting system, and the amount of unaudited claims. So that the Government can benefit to the maximum extent from these audits, a coordinated and cooperative effort shall be made by contracting officers, technical specialists, and finance and audit personnel (see §§ 13.801 and 5-63.102). It is the responsibility of the contracting officer to have an audit clause inserted in all contracts subject to audit pursuant to § 5-63.103.

§ 5-63.102 Purpose of audit.

In addition to the provisions of § 13.809, Contract audit as a pricing aid, audits are conducted to advise and make recommendations to the contracting officer concerning the following:

(a) Propriety of amounts paid, or to be paid, by GSA to contractors where 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 having financial implications such as progress payments, advance payments, guaranteed loans, cash return provisions, and price adjustments. The adequacy of a contractor's accounting system and controls shall be evaluated by contract audit before inclusion of a Progress Payments clause (see §§ 1-30.506 and 5-30.550(b)(3)). A similar evaluation shall be made prior to the making of any advance payments or guaranteed loans pursuant to Parts 1-30 and 5-30;

(d) Reasonableness of contractors' settlement proposals in termination of contracts (see § 1-8.207);

(e) Compliance with contract provisions; and

(f) Contractors' financial condition and ability to perform or to continue to perform under Government contracts.

§ 5-63.103 Types of contracts subject to audit.

(a) The following types of contracts in excess of $10,000 shall include the Examination of Records by GSA clause in § 5-63.104:

(1) Cost-reimbursement type contracts (see § 1-3.405);

(2) Advertised or negotiated contracts involving the use or disposition of Government-furnished property;

(3) When advance payments, progress payments based on costs, or guaranteed loans are to be made;

(4) Contracts for supplies or services containing a price warranty or price reductions 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 with escalation (see §§ 1-2.104-3 and 1-3.404-3), with incentives (see §§ 1-3.404-4 and 13.407), and with redetermination (see §§ 1-3.404-5 and 1-3.404-7);

indefinite (see

contracts

(7) Requirements and quantity (call-type) §§ 1-2.104-4 and 1-3.409);

(8) Time and materials and laborhour contracts (see §§ 1-3.406-1 and 13.406-2); and

(9) Leases (i) when the rental is subject to adjustment (e.g., a change in the real estate taxes or service costs), or (ii) when the rental is dependent upon actual or estimated costs of construction, alteration, improvements, or repairs.

(b) In some of the contracts listed in paragraph (a) of this section, it may be appropriate to define the specific area of audit such as (1) the use or disposition of Government-furnished property, or (2) variable or other special features of the contract, e.g., price escalation and compliance with the price warranty or price reductions clauses. In these cases, the contract clause in § 5-63.104 may be appropriately modified with the concurrence of the Office of General Counsel or Regional Counsel and the Assistant Inspector General-Auditing, or the Field Audit Office, as appropriate.

(c) Inclusion of the contract clause in §5-63.104 (whether or not modified) in contracts does not affect in any way the requirements for use of the Examination of Records clause permitting review of contractor books and records by the Comptroller General or the clauses on audit and records pertaining to the verification of cost or pricing data.

(d) A copy of each contract or modification of the types described in § 563.105-1(a) subject to audit shall 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.

85-63.104 Contract clause.

The following contract clause is prescribed for use as provided in § 563.103:

EXAMINATION OF RECORDS BY GSA

The Contractor agrees that the Administrator of General Services or any of his duly authorized representatives shall, until the expiration of 3 years after final payment under this contract, or of the time periods for the particular records specified in Part 1-20 of the Federal Procurement Regulations (41 CFR Part 1-20), whichever expires earlier, have access to and the right to examine any books, documents, papers, and

records of the Contractor involving transactions related to this contract or compliance with any clauses thereunder.

The Contractor further agrees to include in all his subcontracts hereunder a provision to the effect that the subcontractor agrees that the Administrator of General Services or any of his duly authorized representatives shall, until the expiration of 3 years after final payment under the subcontract, or of the time periods for the particular records specified in Part 1-20 of the Federal Procurement Regulations (41 CFR Part 120), whichever expires earlier, have access to and the right to examine any books, documents, papers, and records of such subcontractor, involving transactions related to the subcontract or compliance with any clauses thereunder. This term "subcontract" as used in this clause excludes (a) purchase orders not exceeding $10,000 and (b) subcontracts or purchase orders for public utility services at rates established for uniform applicability to the general public.

(End of Clause)

§ 5-63.105 Payments under contracts subject to audit.

§ 5-63.105-1 General.

(a) The contracting officer shall not approve the initial payment invoice or voucher until he has consulted with the Assistant Inspector General-Auditing, or the Field Audit Office regarding cost or other supporting data as required under:

(1) Cost-reimbursement type contracts;

(2) The cost-reimbursement portion of fixed-price type contracts;

(3) Time and materials or labor-hour contracts; or

(4) Fixed-price contracts providing for (i) progress payments based on costs, (ii) advance payments, (iii) guaranteed loans, or (iv) incentives or redetermination.

(b) The contracting officer shall not approve the final payment invoice or voucher for such contracts, nor for the final payment or settlement of other contracts subject to audit (see § 563.103) prior to the (1) receipt and review of the contract audit report or (2) consultation with the Contract Audits Division or the Field Audit Office if no audit is to be conducted; provided, that this paragraph (b) shall not apply to fixed-price contracts with

escalation where no price revision (upward or downward) is to be made.

§ 5-63.105-2 Submission and processing of invoices or vouchers.

(a) Contractors shall be required to submit invoices or vouchers to the contracting officer. The processing of invoices or vouchers prior to payment for work or services rendered shall include a review by the contracting officer, or his designated representative, to determine that the nature of items and amounts claimed are in consonance with the contract terms, represent prudent business transactions, and are within any stipulated contractual limitations. The contracting officer must ensure that these payments are commensurate with physical and technical progress under the contract. If the contractor has not deducted from his claim amounts which are questionable or which are required to be withheld, the contracting officer shall make the required deduction, except as provided in § 5-63.105-3.

(b) Subject to the provisions of § 563.105-1, approval by the contracting officer of any payment, including any specific approval as to the nature or amount of the cost, shall be noted on (or attached to) the invoice or voucher. The invoice or voucher shall be forwarded to the appropriate accounting center and retained therein after certification and scheduling for payment to a disbursing office.

§ 5-63.105-3 Action upon receipt of an audit report.

Audit reports shall be furnished to the contracting officer, with a copy to the appropriate accounting center. Upon receipt of an audit report, the contracting officer shall, pursuant to contract terms, determine the allowability of all costs covered by audit, giving full consideration to the auditor's recommendations. When the contracting officer is in doubt or questions the recommendations of the auditor, deductions need not be made from invoices or vouchers for provisional payments. In these cases, the contracting officer shall confer with the auditor and other appropriate Government personnel (such as a price specialist or legal counsel) to de

termine what further action should be taken regarding the items of cost in question. If the contracting officer disagrees with the auditor's recommendations, the contracting officer shall prepare a statement for the contract file to support and justify his decision and shall furnish the auditor with a copy of the statement.

§ 5-63.105-4 Suspensions and disapprovals of amounts claimed.

The contracting officer shall notify the appropriate accounting center in writing when amounts claimed for payment are (a) suspended, (b) disapproved as not being allowable according to contract terms, or (c) not reasonably incident or allocable to performance of the contract. This notice by the contracting officer shall be the basis for the issuance by the accounting center of GSA Form 533, Administrative Difference Statement. A copy of GSA Form 533 shall be attached to each copy of the invoice or voucher from which the deduction has been made, including an explanation of the deduction. Control over the issuance of GSA Form 533 shall be maintained by the accounting center.

§ 5-63.106 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 appropriate 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 (see § 1-3.406-1(b)), 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