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(a) When new procurement is initiated for items covered by existing specifications that do not contain a statement of the contractor's responsibilities in the performance of inspections, the contractor shall be required to perform the inspections set forth in the specifications to substantiate conformance of supplies to specification requirements.

(b) Inspections which the Government may perform.

(c) Existing specifications which do not contain complete and definitive quality assurance provisions will be supplemented to the extent necessary to clearly define the inspections required to be performed by the contractor and those which the Government may perform.

(d) Contractors shall have available adequate test facilities for executing specific prescribed tests or make arrangements for the utilization of suitable test facilities. (23 F. R. 1067, Feb. 19, 1958]

$ 596.103-8 Assignment of claims(a) Setoff as against assignee. (1) In the cases where special circumstances make it advisable in the best interest of the Government, Heads of Procuring Activities may authorize deletion of the last sentence of paragraph (a) of the assignment of claims clause, set forth in $ 7.103-8 of this title. In any event, the sentence will be deleted from contracts for transportation of persons

or property.

(2) Reduction of or setoff from payments to be made to an assignee will be effected with respect to liabilities of the assignor to the Government arising out of matters in connection with the contract, or of amounts which may be collected or withheld from the assignor in accordance with, or for failure to comply with, the terms of the contract, except as stated in $ 7.103–8 of this title. Examples of cases in which setoff will be may include (but are not limited to):

(i) Amounts due pursuant to price redetermination clauses.

(ii) Deduction of liquidated damages.

(iii) Excess costs and damages after termination for default.

(iv) Equitable adjustments and rejections under the changes, inspection and guaranty clauses.

(v) Damages resulting from fraud or criminal conduct.

(b) Refunds, etc., of Payments Received by Assignees. In any case in moneys due or to become due under any contract are or have been assigned pursuant to section 1 of the Assignment of Claims Act of 1940, as amended, no liability of any nature of the assignor to the United States or any department or agency thereof, whether arising from or independently of such contract, shall create or impose any liability on the part of the assignee to make restitution, refund, or repayment to the United States of any amount heretofore since July 1, 1950, or hereafter received under the assignment.

(c) Acknowledgment of notice of assignment. contracting Officers will acknowledge notices of assignment Aled by assignees. Where a notice of assignment of monies due under a definitive contract, which supersedes a letter contract, is received pursuant to the Assignment of Claims Act of 1940 (54 Stat. 1029), as amended, such notice should be acknowledged regardless of the fact that a notice of assignment of monies due under the letter contract had been previously acknowledged.


two notices of assignment should be considered as one and filed accordingly.

(d) Assignor's statement. Where direct payment is made to an assignee, the Contractor will furnish on each voucher, invoice, or other supporting paper, a statement to the effect that he recognizes the assignment, its validity, and the right of the assignee to receive payment.

(e) Information to be furnished to assignees.

Contracting Officers will. upon request of the Contractor, furnish proposed assignees information regarding the status of the contract at the time of the assignment. In so doing, the Contracting Officer will advise the assignee that the information is so furnished only for confidential use in connection with the assignment.

8 596.103–10 Federal, State, and local taxes. In effecting procurement outside the United States, its Territories and possessions, substitute the clause set forth in $ 600.401 of this subchapter in lieu of the clause prescribed in $ 11,401 of this title. $ 596.103-11

Default-(a) Application. (1) If the Contractor (1) fails to make delivery of the supplies or to perform the services within the time speci

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fied in the contract, or (ii) fails to perform any provision of the contract other than the delivery schedules, or (iii) so fails to make progress as to endanger performance of his contract in accordance with the terms thereof, the Contractor may be said to be in default.

(2) Defaults may be excusable or nonexcusable. Defaults are excusable when they arise out of the causes set forth in clauses set forth in clause (b) of the Default article. (8 7.103-11 of this title.)

(3) Paragraphs (b) through (1) of this section apply to contracts other than those under the Federal Supply Schedule. Paragraph (j) of this section applies to contracts under the Federal Supply Schedule.

(b) Termination of contracts by agreement. When default occurs in the performance of a contract, the contract may be terminated by supplemental agreement with the contractor, provided:

(1) The default is not excusable and the Contractor agrees to pay excess costs incurred in repurchase and damages resulting from delay.

(2) The default is determined by the Contracting Oficer to be excusable and the Contractor is willing to execute a termination agreement without cost to the Government. (If the Contractor refuses to execute a termination agreement without cost to the Government, the Contracting Officer may terminate the contract under the clause entitled "Termination for the Convenience of the Government.")

(3) That where a performance bond has been filed, the surety thereon is a party to the supplemental agreement.

(c) Completion of contract after default. (1) In the event that default has occurred in a contract by reason of nonexcusable delay, which results in actual damage to the Government, and the Contracting Officer deems it to be in the best interest of the Government to permit the Contractor to complete performance of the contract, a supplemental agreement may be entered into providing for completion of performance notwithstanding such default, if the Contractor assumes liability for the actual damages. The surety, if any, should either be a party to the supplemental agreement or should execute and deliver to the Contracting Officer, simultane

ously with the execution of a supplemental agreement with the contractor, a written consent extending the terms of any performance bond to cover such supplemental agreement. The agreement should distinctly state that the Government's rights to accrued damages are not thereby waived.

(2) If a performance bond has been filed in connection with the contract, or otherwise, and action outlined in subparagraph (1) of this paragraph is not deemed to be in the best interests of the Government, an agreement may be entered into with the surety, providing for completion of performance of the contract upon the same terms and conditions as the original contract, less actual damages resulting from delay, and further providing for payment directly to the surety. Such agreement should clearly state that all rights against the Contractor and the surety are reserved so far as the surety does not cure defaults of the Contractor. The Contractor will be furnished promptly with a findings of fact as indicated in paragraph (d) (2) of this section, adapting subdivision (iv) to the action taken.

(d) Termination pursuant to default article. (1) (1) Where the Contractor, and/or his surety elect not to complete performance of the contract after being afforded an opportunity to do so (see paragraph (c) of this section), or (ii) when the Contracting Officer deems it to be in the best interests of the Government to terminate the contract following default thereof, and the default consists of the failure on the part of the Contractor to make delivery of the supplies or to perform the services within the time specified in the contract or any extension thereof, the procedure set forth in subparagraphs (2) through (4) of this paragraph will be followed.

(2) The Contractor will be given notice in writing which will include the following:

(1) Reference to contract number, date, and portion of contract as to which his right to proceed is terminated.

(ii) That his right to proceed further with performance under the contract is thereby terminated.

(iii) A specific description of the acts or omissions constituting the default.

(iv) That the supplies, services or construction required by the contract will be procured in the open market against

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his account, and that he will be held liable for any excess costs.

(v) That the Government reserves all rights and remedies provided by law or under the contract, in addition to charging excess


(Where liquidated damages are provided for, substitute a reference thereto.)

(vi) That the notice constitutes a finding of fact pursuant to the Disputes article from which he has the right of appeal as specified therein.

(3) The same distribution will be made of the termination notice as was made of the contractual documents. In addition thereto, a copy will be furnished to the Disbursing Officer who will be advised to withhold further payments to the Contractor pending additional instructions.

(4) Notice of termination of a contract will be furnished to the Contractor within a reasonable time after the default occurs, or after efforts to arrange for compliance with the terms of the contract have resulted in failure. This requirement must be complied with in order to fulfill the Government's obligation to mitigate damages.

(5) If the default consists of the failure to perform any provision of the contract other than specified in subparagraph (1) of this paragraph, or if the Contractor so fails to make progress as to endanger performance of the contract, a notice of termination will not be issued unless the Contracting Officer has previously notified the Contractor in writing of the specific default or failure, and has by the terms of such notice afforded the Contractor an opportunity to cure such default or failure within a period of time which shall be not less than 10 days from the date of receipt of such notice. The notice of termination in such cases will refer to the notice of default.

(e) Repurchase against Contractor's account. (1) In the event of termination of a contract for default, the Government is under a duty to mitigate damages.

(2) Accordingly, where the supplies or services are still required after termination, repurchase will be made against the Contractor's account either from other Contractors or Government facilities (i) as soon as possible after termination, (ii) of supplies or services similar to those called for in the contract, (iii) at as reasonable a price as practicable

considering the quantity and quality required by the Government and the time within which the supplies or services are required; (iv) in construction contracts, the work will be let according to the same plans and specifications to such other responsible Contractor who offers the lowest price or it will be completed by Government plant and hired labor.

(f) Action by commanding officer. (1) If repurchase will not be effected, compute actual (or liquidated damages when clause contained in $ 7.105-5 of this title is used), and make written demand upon the Contractor for the amount thereof.

(2) If repurchase is effected, compute excess costs and actual (or liquidated damages, when clause contained in $ 7.105-5 of this title is used), and make written demand upon the Contractor for the total amount.

(g) Amount chargeable against defaulting Contractor. A purchase or purchases against the account of a defaulting Contractor must not exceed the quan: tity originally ordered, with consideration given, of course, to the variation clause, if any, in the contract, and must be secured if practicable on the same unit basis, such as each, dozen, pound. This, however, does not preclude the Government from entering into one contract with the completing Contractor which includes additional needed supplies provided that the excess costs to be charged against the account of the defaulting Contractor are determined as provided in the preceding sentence of this paragraph. In any event, actual damages (or liquidated damages, if clause contained in $ 7.105-5 of this title is used) resulting from delay, may be assessed in addition to excess costs.

(h) Action in connection with Federal Supply Schedule Contracts—(1) Action by contracting officer-(i) Ordering office. Before declaring a Contractor in default, it is suggested that ordinarily ordering offices should notify the Contractor in writing that unless satisfactory performance occurs by a specified date, which should allow a reasonable time for performance, his right to proceed further under the delivery order will be considered terminated and he will be held liable for any excess costs resulting from purchasing the supplies or services elsewhere. This step would not be taken ordinarily when the default involves an attempted fraud on the United States, or when it obviously would be futile, as for example, when the Contractor has already declined to perform. Where excess costs are anticipated, the ordering office may likewise decide to withhold sufficient funds due the Contractor as offset security. Ordering offices will endeavor to minimize excess costs to be charged against the Contractor and to collect, by check or setoff, excess costs owed. Such collected funds are usually for deposit into the Treasury as miscellaneous receipts.

(ii) Federal Supply Service. Where ordering offices are notified by the Federal Supply Service that it has declared the Contractor in default, ordering offices will thereafter refuse to accept further performance by the Contractor or place further delivery orders with him. Ordering offices will thereafter purchase against the account of the Contractor from replacing contractors designated by the Federal Supply Service or in such other manner as directed by the Federal Supply Service.

(2) Reports. Ordering offices will report to the Purchase Branch, Federal Supply Service, Washington 25, D. C., the details concerning all material instances of unsatisfactory performance by the Contractor, whether or not properly adjusted and settled. Ordering offices also will report, as may be directed by the Federal Supply Service, all purchases made against the account of a Contractor placed in default by the Federal Supply Service.

(i) Excusable delay. Where, following termination for default, it is subsequently determined that the Contractor's delay was excusable, the procedure outlined in paragraph (e) of the Default Clause (§ 7.103-11 of this title) will be followed.

(j) Applicability to oversea commands. The default clause is applicable to oversea commands except where any of its provisions are inconsistent with or prohibited by local law, in which case the clause should be amended to conform to local law. For the purpose of this paragraph, local law is defined as the law of the foreign country or legal entity which is applicable to the execution and performance of contracts therein.

(k) Excusable delay. (Revoked]

(1) Applicability to oversea commands. (Revoked)

CODIFICATION: $ 596.103-11 was amended as follows, 22 F. R. 7175, Sept. 7, 1957:

1. Paragraphs (f), (g), (h), (1), and (1) were amended to read as set forth above. 2. Paragraphs (k) and (1) were revoked.

$ 596.103–12 Disputes-(a) General(1) Contract Clause. The “Disputes" Clause contained in $ 7.103–12 of this title will be inserted as specified, except for contracts entered into by major oversea commanders and to be performed outside the United States (48 States and the District of Columbia) (paragraph (c) of this section). The “Disputes” Clause may be modified to provide for an intermediate appeal to the Head of the Procuring Activity concerned.

(2) Armed Services Board of Contract Appeals. The charter and rules of the Armed Services Board of Contract Appeals are set forth in $ 30.1 of this title. References herein to "rules" are to the mentioned rules.

(3) Correspondence and communications. All oficial correspondence with the Board vill be addressed to the "Army Contract Appeals Panel, Armed Services Board of Contract Appeals, Office of the Secretary of the Army, Washington 25, D. C.All official correspondence with the Chief Trial Attorney, will be addressed “Chief Trial Attorney, Office of The Judge Advocate General, Department of the Army, Washington 25, D. C.The Chief Trial Attorney and the attorneys assigned to his office are authorized to communicate directly by telephone or otherwise with any person or organization to secure any witnesses, documents or information considered necessary in connection with properly protecting the interests of and representing the Government in matters before the Board.

(4) Time of filing of appeal to be indorsed. When a notice of appeal has been received by the Contracting Officer or the Head of a Procuring Activity, as the case may be, there shall be indorsed thereon the date of receipt, and also, where apparent, the date of mailing or, if dispatched by appellant by other means, the date of such dispatch.

(b) Procedure for handling disputes(1) Screening. (i) The Contracting Officer should screen disputes arising under contracts to insure that findings and decision appealable under the “Disputes" Clause are rendered only on disputes concerning questions of fact or disputes otherwise made subject to the “Disputes" procedure by specific contract provisions, such as a dispute as to an equitable adjustment under $ 7.103–2 of this title and $ 596.103-12, “Changes" Clause, or $ 7.103–5 of this title, "Inspection" Clause, or a dispute resulting from failure to agree on a redetermined price under $ 596.150–5, “Price Redetermination" Clause. For example, an appealable decision and findings should not be issued by the Contracting Officer: (a) Where a mistake in bid is alleged by the Contractor after award in that the procedure outlined in g 2.405-3 of this title and $ 591.405 of this subchapter covers such cases, or (b) where 7.104-16 of this title, "Gratuities" Clause, is to be invoked in that under such clause and $ 30.4 of this title, findings of fact are made by duly designated representatives of the Secretary.

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(ii) Whenever a Contracting Officer has doubt as to whether findings and a decision should be made pursuant to the "Disputes" Clause he should obtain the advice of legal counsel.

(2) Findings and decision-(i) Dejinitions—(a) Decision. The “Decision" means that document furnished by the Contracting Officer to the Contractor which sets forth the findings of fact and the conclusion of the Contracting Offcer deciding the matter in dispute.

(b) Findings of fact. "Findings of Fact" means that portion of the decision of the Contracting Officer which recites his determination of the facts in dispute.

(c) Complaint. A "Complaint" is a written statement from the Contractor filed with the Board stating the reasons which entitle him to relief from the decision of the Contracting Officer. For the purposes of this procedure, a Complaint need not be formally labeled as a Complaint," but may be submitted as part of, or simultaneously with, the Notice of Appeal, or in letter or memorandum form subsequent to the filing of the Notice of Appeal.

(ii) Findings. Whenever it becomes necessary to render a decision on a dispute the Contracting Officer will prepare and sign findings, a true copy of which with his written decision will be promptly furnished the Contractor. When the Contractor has a right of appeal under the contract and such right is directly to the Secretary, the Contracting Officer will conclude his decision with the following paragraph:

If the decision hereinbefore set forth results in a dispute concerning a question of

fact or a dispute otherwise made subject to the Disputes procedure by specific contract provisions, you are hereby notified that you may appeal from this decision to the Sec. retary of the Army in accordance with the provisions of Clause “Disputes" of the above numbered contract. A notice of appeal must be in writing and should indicate that an appeal is thereby intended, and should identify the contract (by number) and the decision from which the appeal is taken. The original, together with two copies, should be filed with the undersigned Contracting Officer. If a Notice of Appeal is filed, it will be forwarded to the Armed Services Board of Contract Appeals and the Recorder of that Board will docket the appeal and will forward to you a copy of the Rules of the Board. Under the Rules, the original and three copies of a complaint may be filled with the Contracting Officer at the time the Notice of Appeal is filed, or it may be filed with the Recorder of the Board after the Appeal has been docketed. The rules provide that a complaint should set forth a simple, concise, and direct statement of each claim and show wherein a Contractor contends that he is entitled to relief. The rules further provide that each claim shall be stated with as much particularity as is practical, that each claim should be separately identified, that documentary evidence in support of claims may be filled as exhibits to the complaint, that all documents fled as exhibits to the complaint shall be plainly listed and identified in the complaint, and that an original and three copies of the complaint shall be filled.

(iii) Determinations. It is emphasized that, where a contract provides for a decision or a determination to be made by a Contracting Officer, he must give his personal and independent consideration to the making of each determination or decision, with the aid of such technical and legal advice as may be available to him.

(3) Appeals to Secretary from decisions of Contracting Officers-(i) Action by Contracting Officer. (a) Within 10 days after receipt of a Notice of Appeal or a Complaint from the Contractor, the Contracting Officer will forward the same to the Board through the Head of the Procuring Activity concerned.

(b) Within 30 days after the receipt of the Notice of Appeal, the Contracting Officer will forward to the Head of the Procuring Activity concerned a comprehensive report in narrative form concerning the dispute. The following will be included in or attached to the report:

(1) The Findings of Fact supporting the Decision and the Decision from which the appeal is taken;

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