is title will be forwarded to Hq USAF AFSPPB). Requests will be routed rough AFSC (SCK-3) or AFLC MCPC), as appropriate. For those prorements where Head of a Procuring ctivity waiver is prescribed by Subhapter A, Chapter 1 of this title, reests will be forwarded directly to CK-3 or MCPC.

1003.807-6 Refusal to provide cost or pricing data.

When the situation described in Subapter A, Chapter 1 of this title applies, id the contracting officer and the Comander of the local activity have exusted all means available to them to cure the required data, the case will referred to AFSC (ASXKF) Wrightatterson AFB, Ohio, or Hq AFLC MCPKP), as appropriate. Referrals ill include the information required by ibchapter A, Chapter 1 of this title. 1003.807-10 Subcontracting considerations in cost analysis.

(a) to (c) No implementation.

(d) To obtain Secretarial approval of abcontract fees in excess of those stated 1 Subchapter A, Chapter 1 of this title, request will be forwarded to Hq USAF AFSPPB). Hq AFSC procuring activiies and OAR will route requests through AFSC (SCK-3), all other AF procuring ctivities will route requests through FLC (MCPC).

1003.809 Audit as a pricing aid. (a) No implementation.

(b) Application. (1) For procedures be followed when requesting audit asstance, see § 1003.850-3.

activity

(2) Contract management CMD/AFPRO) will support auditor's quests to contractor for access to conactor records and data and will be reonsible for furnishing auditor's coments or report to procuring activity, Icept for audit reports covering price visions where the provisions of Subart T of this part apply. Procuring tivity will be responsible for inviting aditor attendance at principal negotiaon conferences.

(c) Conditions for use. (1) Audit ssistance will be requested (i) Prior to he award of a contract to a sole source, r definitization of a letter contract warded to a sole source, where definitive rice negotiations in excess of $350,000 re contemplated, (ii) whenever a costeimbursement, incentive, or redeter

minable type contract is contemplated and compatibility of contractor's accounting system with the particular contract type is in doubt, or (iii) on any change or group of changes to be covered by a single amendment to a contract for which any individual increase or decrease for any individual change exceeds $350,000, if the contracting officer and auditor agree that an audit is necessary. In all other negotiations, the contracting officer (or price analyst reviewing the proposal at the contracting officer's request) will determine the need for requesting audit assistance after evaluation of the entire procurement situation including, but not limited to, the conditions discussed in Subchapter A, Chapter 1 of this title.

(a) General, (1) Only rarely are contract changes made that do not affect the work and therefore the price or estimated cost and fee contemplated by the contract. The term "no cost change" can be a misnomer for a charge or credit will accrue to the Government from most changes.

(2) As a rule, all contract changes will be priced and contract price adjusted within a reasonable and specified time after change is authorized. (See §§ 1054.307 and 1054.308 of this subchapter.)

(3) For procedures applicable to engineering changes resulting in termination claims or property disposal.

(b) Responsibility. See § 1054.307(b) of this subchapter. To facilitate PCO evaluation and action, ACO recommendations should be supported by sufficient information to indicate the extent and nature of analysis effort accomplished. If ACO analysis has indicated that adjustments proposed by the contractor are unsatisfactory, and discussions with contractor personnel have failed to result in submission of a revised acceptable proposal, a detailed summary of the ACOs position also should be sent to the PCO for further review and resolution.

(c) Procedures. (1) Dollar value of any change is arrived at by considering the difference between the article or work deleted and the article or work added.

Because dollar value of any change will be determined by negotiation with the contractor, tests of reasonableness and equity should guide every time.

(2) Knowledge of contractor's estimating system is of great importance in pricing changes.

(3) Price analyst and auditor will be used in reviewing change proposals as necessary. Every quotation requires some degree of price analysis regardless of dollar value; the degree of price analysis and the need for audit assistance depends upon individual circumstances. When the increase or decrease for any individual change exceeds $350,000, the designated representative of the chief CMD/AFPRO and the auditor will hold a pre-analysis review to determine the requirement for audit assistance or approach to the analysis. The complexity

of the change, as well as its dollar value, are factors governing the need for price analyst or auditor support. Complexity and dollar value, however, cannot be construed to be the only governing factors since a proposed no-cost change or a seemingly insignificant price adjustment may, in fact, result in a significant price decrease. Adequate review thus requires a knowledge and understanding of a contractor's cost estimating and accounting procedures.

(4) Evaluation of the profit factors under § 3.808-2 of this title is required when analyzing each change proposal. Profit patterns considered in establishing original negotiation objective will not be accepted automatically when pricing a change.

(d) See § 16.813 of this title for instructions regarding use of DD Form 1107 "Change Order Price Analysis." Exact types of pertinent supporting information to be submitted will be the subject of agreement between Air Force and contractor with ACO the coordinator.

§ 1003.850-3 Planning and coordination.

The team approach to pricing requires adequate planning and coordination to prevent duplication of effort or inadequate analysis.

(a) The following planning and coordination procedures are required prior to PCO award of a contract to a sole source, or definitization of a letter contract awarded to a sole source, where definitive price negotiations in excess of $350,000 are anticipated. In addition, these procedures are applicable in multisource procurements or where definitive

price negotiations not in excess $350,000 are contemplated, provided PCO (or price analyst) has first det mined that the services of techni specialists in field contract manageme activities or audit field officers are quired. Such determination will made after consideration of the con tions set forth in § 3.809 (c) of this ti and § 1003.809 (c), and evaluation of su other factors as types and availabil of cost and pricing data required analysis, complexity of the procureme contract type contemplated, and ext of price competition, if any, obtain In situations where a complete analy is not mandatory and only factual inf mation is required, such information m be obtained by telephone if other mea of communication would unduly de the procurement action. All such te phone requests and responses will confirmed in writing as soon as possib Indiscriminate release of pricing inf mation, by any means of communicati is prohibited.

Step 1. This step applies only to s source negotiations in excess of $350,0 (but see Step 2(iii)). Procuring activit will distribute two copies of each request í proposal to the CMD/AFPRO. The reque for proposal will include instructions th the contractor submit two copies of the pr posal to the CMD/AFPRO at the same time. furnishes the original proposal to the pr curing activity. Upon receipt, the CMI AFPRO will distribute one copy of each r quest for proposal and of each proposal the responsible field auditor.

Step 2. The PCO (or price analyst) w prepare a single, detailed request for analy support and send it to the CMD/AFPR

(1) In sole source negotiations expect to exceed $350,000, inclusion of a request audit assistance is mandatory, and an i formation copy of the request will be fu nished to the Auditor General represent tive at the procuring activity.

(ii) In sole source negotiations und $350,000 and in multi-source negotiation one copy each of the request for proposal and the proposal to be analyzed will attached to the request. If audit review requested, an additional copy of each will attached, and an information copy of t request will be furnished to the Audit General representative at the procuri activity.

(iii) If a procuring activity negotiates r peatedly with the same source, agreemen may be reached with the concerned CMI AFPRO as to types of sole source proposa under $350,000 requiring field analysis, any, and the extent and areas of analys required. Where these agreements exist an are applicable, this Step 2 may be omitte

y the PCO unless audit review is desired; owever, the procedures in Step 1 will be ǝllowed.

Step 3. Upon receipt of a request for suport analysis that includes a request for udit review, the designated representative f the CMD chief/AFPR and the auditor ill hold a pre-analysis review. This meet1g may be as formal or informal as dered. The procurement situation and the rocuring activity's request will be disussed and a mutually agreeable approach to nalysis determined. Following this review, he CMD/AFPRO representative will advise he PCO of target date for submission of reuested support. If, during pre-analysis relew, it is agreed that pertinent information quested by the PCO has been furnished in rior unclassified analysis and audit reports, hat this information is still valid, and that either the CMD/AFPRO nor the auditor in contribute any other significant inforiation, the CMD/AFPRO representative will dvise the PCO accordingly. In such cases, e will advise the PCO that a pre-analysis eview was held with the auditor, will refernce the earlier reports and, where the earlier eports were prepared for procuring activities ther than the requesting activity, attach nformation copies.

Step 4. If review of any subcontract cost stimate is necessary during AF field analysis of a prime proposal, efforts will be made by he CMD/AFPRO to obtain the required support information from the prime before requesting assist analyses. However, if assist analyses are necessary, requests for and any followup required will be prepared by the CMD/AFPRO representative and sent to the CMD/AFPRO having cognizance over the ubcontractor's facility. If the prime is a ole source and its proposal exceeds $350,000, r if a requirement for audit review of a subontract proposal is included in the request or assist analysis, the request will be cordinated with and an information copy urnished to the audit activity located at or esponsible for audit of the prime's facility. pon receipt of a request for assist analysis hat includes a request for audit review, the ubcontractor's CMD/AFPRO and the local uditor will follow the procedure outlined in tep 3.

28 F.R. 9583, Aug. 31, 1963, as amended at 9 F.R. 2845, Feb. 29, 1964]

1003.850-4 Packaging costs.

USAF Packaging Cost Standards, covring direct material costs and direct abor for all of the packaging and preseration methods in Specification MIL-P16, Preservation, Methods of, are availble to packaging specialists located in ontract management activities (CMDS/ AFPROS), AFSC divisions, and AFLC IMAS (Packaging Control Components). By referring to the Cost Standard, pack

aging specialists can develop independent estimates in these direct cost areas. These estimates can be a useful tool in the overall evaluation and analysis of contractor posed direct packaging costs, and will be requested whenever appropriate. Requests will include sufficient information to permit the packaging specialist to make a proper appraisal of packaging effort required. As a minimum, information about the size and quantity of items being procured, and the methods of packaging and preservation required, will be included. Where the number of different items being procured is so large as to preclude development of individual estimates by the packaging specialist, a sampling of items should be considered. Following development of his estimate, the packaging specialist is available for additional study or assistance as indicated. [29 F.R. 2845, Feb. 29, 1964] § 1003.850-5

Prenegotiation

ences and briefings.

confer

(a) When, in any procurement cycle, a meeting is held with the contractor to reach agreement upon terms and conditions of a proposed contract or upon adjusted price on an existing contract, meeting will be preceded by a prenegotiation conference of Government's pricing team. Purpose of this meeting will be to: (1) Discuss proposal in detail to achieve full understanding, (2) to express opinions and air problems that have developed during review and analysis of proposal, and (3) to determine unified negotiation objectives and a course of action to be followed during conference with contractor.

(b) Those to whom the authority to manually approve contracts has been delegated (§ 1001.457(a) of this subchapter) by the Director of Procurement and Production, Hq AFLC, or the Deputy Chief of Staff, Procurement and Production, Hq AFSC, will establish a system for briefings by AF negotiating team after negotiation objectives have been firmed but before conclusion of negotiation conference. Procedures and requirement for prenegotiation reviews will be determined locally. However, briefings will be appropriate in following situations:

(1) A new contract follows contract(s) where contractor's performance has been unsatisfactory.

(2) A new procurement substantially increases a contractor's annual sales and production volume.

(3) Costs have increased substantially beyond those originally estimated.

(4) Items procured have performed poorly and required modification and retrofit.

(5) Performance indicates justification for additional or reduced profit.

(6) The procurement obligates a significant portion of the AF budget. § 1003.850-6 Pricing of fixed-price type maintenance, overhaul, and modification contracts.

(a) In those maintenance, overhaul, and modification contracts where services and indirect materials are procured on a fixed-price basis and it is agreed that contractor wili furnish, as needed, certain direct materials and parts on a costreimbursement basis, profit consideration on fixed price negotiated will represent reasonable reward for total contract effort. Subsequent reimbursement for contractor-furnished direct materials or parts will be limited to direct material costs only (see § 1007.4503-4 of this subchapter for contract clause and § 15.20522(c) of this title for discussion on pricing intercompany sales or transfers of materials).

(b) In sole source procurements and procurements where manufacturer of item being repaired is quoting in competition with contractor(s) who must procure parts from such manufacturer to perform, exception to procedure outlined in paragraph (a) of this section is appropriate if review and negotiation reveals that compliance would prohibit an award at lowest overall price to Government, all factors considered. Under these conditions only, it may be agreed in advance to reimburse contractor at a later date for profit considerations applicable to furnishing direct materials and parts, as well as costs. However, in multiple source situation described, all sources must first be given an opportunity to requote on revised basis. Whenever such prospective agreement is reached, care must be exercised to insure that contract clearly reflects intent of both parties.

(c) Paragraph (a) of this section does not apply to contract changes authorizing the contractor to procure or fabricate direct materials or parts that were previously designated as Government-fur

nished. Such a change increases co tract scope originally contemplated a payment of additional profit is appr priate.

[28 F.R. 9583, Aug. 31, 1963, as amended 29 F.R. 15258, Nov. 13, 1964]

§ 1003.850-7 Savings clauses.

Contractual savings clauses ident specific cost elements not considered negotiating price or estimated cost, which may be recognized at some fut date. It is AF policy to limit subseque recoupment to costs only and all savi clauses will include a statement to t effect. Exception to this policy is app priate only as follows:

(a) Where a savings clause was existence before the effective date of t section and it can be firmly establish that the original intent of both part was to recognize profit consideration a plicable to the excluded element, as w as the cost, at some later date.

(b) Where deviation approval has be received.

§ 1003.850-8 Contractors' estimati systems.

Contractor's estimators perform major role in devolping projections a estimates of all elements of cost. evaluate these elements, it is necessa to understand contractor's estimati system, including sources from whi information is obtained by estimato manner in which this information is us in developing estimates, extent of ma agement review and revision, and co trols exercised to insure realism of es mates. Where a continuing relations exists with an AF supplier, estimati system surveys will be conducted by contract management activity. Beca an understanding of a contractor's counting system is necessary to det mine its tie-in to cost estimating syste assistance of audit agency represen tives usually will be obtained. Final ports of completed surveys will be s to all interested AF procurement acti ties. Two copies of each report will sent to AFSC, Directorate of Procu ment (ASXKF), WPAFB, Ohio. It important to remember, however, th estimating is largely a judgment proc and that it is the judgments, as much the system, that must be evaluated to termine the realism of a contracto proposed price.

Subpart 1-Subcontracting Policies and Procedures

§ 1003.902 "Make-or-Buy" programs. [28 F.R. 3991, Apr. 6, 1963]

§ 1003.902-1 General.

(a)-(i) No implementation.

(j) Upon receipt of changes or additions to the "Make-or-Buy" program the ACO will evaluate the contractor's proposal and forward it, with his recommendations, to the appropriate PCO. The PCO will make the necessary determinations and will document the contract file accordingly. Any written consents to changes or additions to the "Make-or-Buy" program issued by the PCO to the contractor will be transmitted through the ACO. [28 F.R. 3991, Apr. 6, 1963]

§ 1003.903 Review of subcontracting and contractors' purchasing systems. [27 F.R. 2410, Mar. 14, 1962, as amended at 28 F.R. 3991, Apr. 6, 1963]

§ 1003.903-1

Contract clauses.

(a)-(b) No implementation.

(c) In determining the figure to be inserted in paragraph (b) (ii) and (iii) of the clause in § 3.903-1(a) of this title the contracting officer will apply the factors in § 3.903-1(c) of this title. Insert the $100,000 only where it has been determined that no one of the factors requires a lower dollar figure. When a lower dollar figure is determined to be necessary, insert $25,000.

(d) No implementation.

(e) The percentage and amount in § 7.203-8(a) of this title will not be revised downward.

[28 F.R. 3391, Apr. 6, 1963, as amended at 28 F.R. 5570, June 6, 1963]

§ 1003.903-2 Consent to subcontracts.

The ACO must check all approval requirements established by the prime contract. Clauses containing indemnity or "hold harmless" provisions which do not conform with standard provisions in ASPR or AFPI will not be approved for use in subcontracts unless approval is accomplished according to procedures in § 1015.205-16(b) of this subchapter.

(a) The provisions of Subpart F, Part 1001 of this subchapter, "Debarred, Ineligible, and Suspended Bidders," will be complied with in granting consent (§ 1.603 (c) of this title).

(b) Situations involving the transfer of an active subcontract to another contract for performance will be handled according to instructions from higher authority, on a case-by-case basis.

(c) Where subcontracts for research and development are proposed to be placed with contractors located in the European area, the assistance and recommendations of the European Office, OAR, Brussels, Belgium, will be obtained regarding the subcontractor's capability of performance.

(d) With regard to prime contracts under the terms of which "data" (as defined in § 9.201(a) of this title) is to be furnished by the prime contractor to the Government, no clause of any subcontract thereunder will be consented to which by its terms has the effect of restricting whatever use the Government may make of such data under the terms of the prime contract.

(e) With respect to security requirements under classified subcontracts see AFR 205-4 and 205-1.

(f) The ACO will use the following terminology when granting consent to the placement of a subcontract or purchase order.

Consent is hereby given to the placement of subject proposed subcontract or purchase order, subject to the conditions of clauses (insert the numbers of the clauses of the prime contract entitled "Subcontracts" and "Responsibility of the Contractor for Subcontracts") of the prime contract and conditioned upon the information furnished by the contractor in support thereof. This consent shall in no way relieve the prime contractor of any obligations or responsibilities it may otherwise have under the contract or under law, shall not create any obligation of the Government to, or privity with, the subcontractor or vendor, and shall be without prejudice to any right or claim of the Government under the prime contract.

The use by ACO's of the above terminology is mandatory and no deviation is authorized without the prior written approval of Hq AFSC (SCK-3).

[29 F.R. 2845, Feb. 29, 1964, as amended at 29 F.R. 8168, June 27, 1964]

§ 1003.903-3 Approval of purchasing

system.

(a) While the approval of the system is the responsibility of the ACO, the purchase methods analyst (PMA) is responsible for "Purchase System Review," con