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exceeded. Officers charged with making such agreements shall submit prior to incurring any obligation, the proposed agreements to the cognizant fiscal officer for verification as to sufficiency of funds for that purpose. The following statements shall be included on the face of the contract: “The supplies and services to be obtained by this instrument are authorized by, are for the purpose set forth in, and are chargeable to the following allotments, the available balances of which are sufficient to cover the cost of the same.”

(b) An agreement to pay running royalties on future procurement proportioned to use is not subject to the provision mentioned in paragraph (a) of this section.

(c) Any fiscal questions involving patent matters may be referred to the Chief, Patents Division, for opinion.

§ 598.105–61 Approval of certain contracts-(a) Contracts requiring approval. Approval by the Chief, Contracts Branch, is required of all contracts made under any of the following circumstances:

(1) The contract provides for total payments by the Government of $25,000 or more.

(2) The scope of the license is limited to:

(i) A term less than the life of any patent involved;

(ii) Any particular Government purpose;

(iii) Less than all Government agencies on the same terms; or

(iv) Disposition rights otherwise than according to law.

(3) The rights obtained are a release of past infringement only.

(b) Submission for approval. Where approval of a contract is required by paragraph (a) of this section, or because the contract contains a deviation from the requirements of $ 598.105 the Designee shall submit the contract in the number of copies for which approval is sought (plus one unexecuted copy) to the Chief, Contracts Branch, through the Chief, Patents Division. The contract shall be accompanied by a memorandum of facts signed by the Designee setting forth, where pertinent:

(1) Identification and brief description of the subject matter of the patent, patent application, or invention involved in the claim being settled.

(2) Date of clearance required by § 598.105-55.

(3) A brief statement of the Designee's conclusions regarding validity and infringement and the reasons therefor.

(4) A statement of the extent of Government use of the invention(s), including the estimated money value of the claim, if any, and an estimate of future procurement, if any, involving possible increase of the amount of the claim.

(5) Specific reference to the sections of this subchapter necessitating the requested approval.

(6) Reasons for any deviations from any prescribed contract clause, and precise statement of such deviation.

(7) Recommendation, with supporting reasons, that the contract be approved.

$ 598.105-62 Contract distribution(a) General. The Designee will obtain the original and at least one executed copy of each release, license, and assignment made in accordance with these paragraphs. The original shall be forwarded by the Designee (unless the contract does not involve the payment of money to the Contractor) to Audits Branch, United States General Accounting Ofice, Fort Benjamin Harrison, Indianapolis 49, Indiana. The executed copy, together with a second copy (photostatic preferred), shall be transmitted without delay by the Designee to the Chief, Patents Division for recording in the United States Patent Office. The memorandum of transmittal shall include the Designee's recommendation whether the instrument should be filed in the public register, departmental register, or the secret register. This memorandum shall also set forth (1) the name of the claimant; name of the releasor, licensor, or assignor; and name of the patentee or inventor; (2) the patent number or patent application serial number; and (3) a statement that the instrument effects settlement of the claim for which clearance was granted.

(b) Contracts providing for payment or a running royalty. A copy of each license which provides for the payment of a running royalty shall be transmitted by the Designee to the chiefs of the technical services. Receipt of such copy shall constitute notice that future procurement of the licensed subject matter requires the payment of royalties to the licensor. Where necessary, the

in accordance with the provisions of this
clause in the following manner:

(i) On the basis of the information re-
quired by paragraph (e) above, together
with the results of such other investigation,
as the Contracting Oficer may deem appro-
priate, there shall be established by negotia-
tion the adjusted total contract cost of those
Items subject to the provisions of this
clause. Fallure to agree on any of the mat-
ters set forth in this paragraph (1) shall be
a dispute concerning a question of fact
within the meaning of the clause of this
contract entitled “Disputes."

(11) The final contract price of such Items shall be established by adding to the adjusted total contract cost, as negotiated under subparagraph (1) above, an allowance for profit determined in accordance with the instructions set forth in subparagraph (111) below, provided, however, that in no event shall the final contract price exceed such percent of the contract target cost as has been negotiated pursuant to paragraph (h) hereof.

(ill) The allowance for profit with respect to such Items shall be determined in accordance with the following schedule:

1

When the adjusted total contract cost
is

The allowance for profit is
Equal to the contract cost.---

Contract target profit.
Greater than the contract target cost. Contract target profit less such percent of the amount

by which the adjusted total contract cost exceed
the contract target cost as has been negotiated

pursuant to paragraph (h) hereof. Less than the contract target cost.-- Contract target profit plus such percent of the

amount by which the adjusted total contract cost is less than the contract target cost as has been negotiated pursuant to paragraph (h) hereof.

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(k) Adjustment of payments. Notwith- for Items delivered to (or services performed standing any provision of this contract for) and accepted by the Government authorizing greater payment, adjustments (including amounts applied to liquidate and refunds shall be made if the total of all

progress payments) under this contract as amounts billed and paid or payable under of end of each quarter. If on any quarterly this contract for items delivered to (or sery- statement these total billings exceed the sum ices performed for) and accepted by the of the three numbered items above, this gross Government (including amounts applied to

excess less any applicable tax credit under liquidate progress payments) until final price Section 1481 of the Internal Revenue Code revision has been made shall exceed the sum of 1954 shall, after deduction of the total of the following items as reported by the refunds (cash or credit memoranda not inContractor from time to time as hereinafter cluding any tax credits under the Internal provided; (1) the total contract price of all Revenue Code) theretofore made, be paid items delivered to (or services performed for) immediately by the contractor to the Gove and accepted by the Government for which ernment or credited against exitsing unpaid final prices have been established, and (11) billings covered by such statement; provided the total amount of costs (estimated to the that if any portion of such excess (less all tax extent necessary (that have been reasonably credits under the Internal Revenue Code) incurred for and are properly allocable solely has been applied to the liquidation of proga to items delivered to (or services performed ress payments, such amount may be added or for) and accepted by the Government for restored to the unliquidated progress pay. which final prices have not been established, ment account, to the extent consistent with and (iii) the total amount of the established the progress payment clause of this contract, target profit allocable by direct proportion instead of making direct refund thereof. to Items delivered to (or services performed (1) Termination. In the event this confor) and accepted by the Government for tract is terminated, in whole or in part, which final prices have not been estab- settlement shall be made in accordance with lished-increased or decreased in accordance the provisions of the clause hereof entitled with the incentive profit formula of this con- "Termination for the Convenience of the tract when the amount of costs stated in Government" or the provisions of the clause Item (11), above, differs from the applicable hereof entitled "Default' whichever is aptarget costs. Within 45 days after the end plicable, subject to the following: of each quarter of the Contractor's fiscal year, (1) If this contract is terminated in its beginning for the quarter in which a delivery entirety at any time prior to agreement upon is first made (or services are first performed revised prices hereunder, the contractor and for and accepted by the Government) under the Contracting Officer shall ir termination this contract, and as of the end of each settlement is to be negotiated on an inven. quarter, the Contractor shall submit a state- tory basis, negotiate to establish such prices ment setting forth the respective amounts of for completed articles or services, the price each of the three numbered items next above, of which was subject to revision hereunder, together with the total amount of all billings as may be equitable under the circum

tract not providing for payment of a running royalty:

(ALTERNATE A)

TERMS

The license hereby granted shall remain in full force and effect for the full term of the patent(8) referred to above (and any and all patents hereafter issued on applications for patent referred to, above.)

(ALTERNATE B)

TERM

(b) The Government shall have the right, notwithstanding any other provision of this contract, to terminate the within license by giving notice in writing to Contractor specifying a date when such termination is to be effective; termination of said license in the manner aforesaid may, as specified in such notice, take effect either in whole or insofar as said license applies to any specified service or command of the Department of the Army or to any specified article, material or method, or to the extent that rights are granted under any specified patent or the specified claims of any patent; and 11 any part of the said license is thus terminated the rights of the Government to enjoy or to terminate other parts thereof shall be in no wise prejudiced thereby.

(c) In the event any claim of any patent hereby licensed is construed or held invalid by decision of a court of competent jurisdiction, the requirement to pay royalties under this contract insofar as it arises solely by reason of such claim, and any other claim not materially different therefrom, shall we interpreted in conformity with the court's decision as to the scope or validity of such claims: Provided, however, That in the event such decision is modified or reversed on appeal, the requirements to pay royalties under this license shall be interpreted in conformity with the final decision rendered on such appeal.

(b) Suggested clauses; contracts except running royalty contracts (1) License grant. The following clause is a suggested form for expressing the license grant in all contracts except those providing for payment of a running royalty:

LICENSE (a) Contractor agrees to and does hereby grant and convey to the Government, an irrevocable, nonexclusive, nontransferable and paid up license under the following patent(s) (and application(s) for patent) to practice and cause to be practiced for the government any and all of the inventions thereof in the manufacture, use and disposition of any article or material, and in the use of any method, in accordance with law: U.S. Patent No.

Date Application serial No.

Filing date (together with corresponding foreign patents and applications for patent, insofar as Contractor has the right to grant licenses thereunder).

(b) Nothing contained herein shall limit any rights which the Government may have obtained by virtue of prior contracts or by operation of law or otherwise.

(2) License term. Either the following clauses is suggested as a form for expressing the license term in any con

The license hereby granted shall terminate on the day of

19.--; Provided, however, That said termination shall be without prejudice to the completion of any contract entered into by the Government prior to said date of termination or to the use or disposition thereafter of any articles or materials manufactured by or for the Government under this license.

(c) Suggested clauses; contracts providing for payment of a running royalty. In addition to any clause required in accordance with paragraph (a) of this section, the following clauses are suggested for use, where appropriate, in contracts providing for payment of a running royalty:

(1) License grant. No departments other than the Department of the Army shall be obligated to pay royalties unless the contract is signed on behalf of such departments. Accordingly, the following license grant clause, appropriately limited to the practice of the invention by or for the Department of the Army, iş suggested for use:

LICENSE (a) Contractor agrees to and does hereby grant and convey to the Government, as represented by the Secretary of the Army, an irrevocable, nonexclusive, nontransferable license under the following patent(s) (and application(s) for patent) to practice by the Department of the Army and cause to be practiced for the Department of the Army any and all of the inventions thereof in the manufacture, use and disposition of any article or material, and in the use of any method, in accordance with law: U. S. Patent No.

Date Application serial No.

Filing date (together with corresponding foreign patents and applications for patent, so far as contractor has the right to grant licenses thereunder).

(b) Nothing contained herein shall limit any rights which the Government may have obtained by virtue of prior contracts or by operation of law or otherwise.

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invoice or voucher which are found by the contracting officer, on the basis of such audit, not to constitute allowable cost. Any payment may be reduced for overpayments, or increased for underpayments, on preceding invoices or vouchers.

(e) On receipt and approval of the invoice or voucher designated by the Contractor as the "completion invoice" or "completion voucher" and upon compliance by the Contractor with all the provisions of this contract (including, without limitation, the provisions relating to patents and the provisions of (f) below), the Government shall pay to the Contractor as promptly as possible any balance of allowable cost, and any part of the final contract fee which has been withheld pursuant to (c) above or otherwise not paid to the Contractor. The completion invoice or voucher shall be submitted by the Contractor as promptly as possible following completion of the work under this contract but in no event later than one (1) year (or such longer period as the Contracting Officer may in his discretion approve in writing) from the date of such completion. The final contract fee, established pursuant to (j) below, shall be evidenced by a supple. mental agreement hereto, whereupon the Contractor shall promptly repay to the Gov. ernment any excess fee payments theretofore made.

(f) The Contractor agrees that any refunds, rebates, or credits (including any interest thereon) accruing to or received by the Contractor or any assignee under this contract shall be paid by the Contractor to the Government to the extent that they are properly allocable to costs for which the Contractor has been reimbursed by the Gov. ernment under this contract. Reasonable expenses incurred by the Contractor for the purpose of securing such refunds, rebates, or credits shall be allowable costs hereunder when approved by the Contracting Officer Prior to final payment under this contract. the Contractor and each assignee under this contract, whose assignment is in effect at the time of final payment under this con. tract, shall execute and deliver:

(1) An assignment to the Government, ir form and substance satisfactory to the Con. tracting Officer, of refunds, rebates, or credits (including any interest thereon) properly allocable to costs for which the Contractor has been reimbursed by the Government under this contract; and

(2) A release discharging the Government, Its cfficers, agents, and employees from all liabilities, obligations, and claims arising out of or under this contract, subject only to the following exceptions:

(1) Specified claims in stated amounts or in estimated amounts where the amounts are not susceptible of exact statement by the Contractor;

(11) Claims, together with reasonable expenses incidental thereto, based upon llabilities of the Contractor, to third parties arising out of the performance of this con

tract; provided that such claims are not known to the Contractor on the date of the execution of the release; and provided fur. ther that the Contractor gives notice of such claims in writing to the Contracting Officer not more than six (6) years after the date of the release or the date of any notice to the Contractor that the Government is prepared to make final payment, whichever is earlier; and

(111) Claims for reimbursement of costs (other than expenses of the Contractor by reason of its indemnification of the Govern. ment against patent liability). Including reasonable expenses incidental thereto, incurred by the Contractor under the provision of this contract relating to patents.

(g) Any cost incurred by the Contractor under the terms of this contract which would constitute allowable cost under the provisions of this clause shall be included in determining the amount payable under this contract, notwithstanding any provisions contained in the specifications or other documents incorporated in this contract by refer. ence, designating services to be performed or materials to be furnished by the Contractor at its expense or without cost to the Gov. ernment

(h) In order to foster economy by providing å tangible reward therefor. the target fees established in the Schedule shall be subject to adjustment in accordance with the provisions of (i) and (1) below. The following definitions apply:

(1) “Target cost" means the negotiated estimated cost of each item under this contract; and

(2) "Target fee" means the fee for each item under this contract which fee was negotiated on the assumption that each item would be produced for a cost equal to the target cost.

(1) The estimated cost and fee set forth opposite items (Insert Items for which target costs and target fees have been negotiated) are the target costs and target fees for those items.

(1) within 90 days after completion of the work under this contract the contractor shall forward to the Contracting omcer a detailed statement of all reimbursable costs determined in accordance with the terms of this contract. Upon submission of this statement the Contractor and the Contracting Officer shall negotiate promptly to establish the final contract fee as follows:

(1) The parties shall agree to a total contract cost to be utilized in determination of the final contract fee.

(2) The final contract fee for the performance of this contract shall be the sum of all target fees increased by (Insert contractor's participation) cents for every dollar by which the total contract cost as determined in (1) above is less than the sum of the target costs or decreased by (insert contractor's participation) cents for every dollar by which the total contract costs as determined in (1) above exceeds the sum of the target

costs. In no event shall the final contract fee be greater than the sum of the maximum incentive fees nor less than the sum of the minimum incentive fees set forth in the Schedule of this contract.

$ 596.203-51 Cost-plus-a-percentageof-cost subcontracting. [Added, 23 F. R. 3003, May 6, 1958; Revoked, 23 F. R. 6105, Aug. 9, 1958]

Part 597—Termination of

Contracts Subpart Settlement of Contracts Terminated

For Convenience; General Sec. 597.515 Audit of settlement proposals and

subcontract settlements. (Re

vised] Subpart Termination Inventory 597.603 Inventory schedules. (Revoked] 597.603-3 Inventory descriptions. (Revoked) 597.604 Plant clearance period. (Revoked) 597.604–1 Rejection of inadequate sched

ules. (Revoked] AUTHORITY NOTE: The citation of authority for Part 597 is changed to read:

AUTHORITY: 88 597.000 to 597.750 issued under sec. 3012, 70A Stat. 157; 10 U. S. C. 3012. Interpret or apply secs. 2301-2314, 70A Stat. 127-133; 10 U. S. C. 2301-2314. SUBPART E_SETTLEMENT OF CONTRACTS TER

MINATED FOR CONVENIENCE; GENERAL $ 597.515 Audit of settlement proposals and subcontract settlements—(a) General. Referral by the Contracting Officer to the Army Audit Agency of settlement proposals and requests for audit which are required to be submitted under the provisions of $ 8.515 of this title will be governed by the provisions of $ 606.206 of this subchapter. In addition to these requirements of audit support, Contracting Officers generally will solicit accounting counsel from the cognizant audit agency on audit problems relating to prime or subcontract termination settlement proposals.

(b) Subcontract settlement proposals. (1) Every subcontract settlement proposal will be subject to review and examination by the Contracting Officer or his authorized representative, regardless of the amount involved. In performing the review, the Contracting Officer will give consideration to the cost and price aspects of the settlement proposal. The scope of the review will vary depending on the amount involved, the complexities of the claim, and the Contracting

Oficer's previous experience with the Contractor.

(2) Section 8.515 of this title provides that all subcontract settlement proposals be submitted to the cognizant audit agency for examination and recommendation when such proposals involve an amount of $25,000 or more or when the Contracting Officer considers an audit, in whole or in part, desirable. Subcontract settlement proposals in amounts less than $25,000 which are not submitted by the Contracting Officer to the audit agency for audit are nevertheless later subject to audit examination by the audit agency for the reason that the audit agency audits all prime contractors' settlement proposals and these must be supported by subcontractors' claims.

(3) Audits performed of subcontractors' termination settlement proposals by prime contractors, or higher-tier subcontractors, will be reviewed by the cognizant audit agency. Where such audits are found to be acceptable by the cognizant auditor, no further audit will be required. Where the audit is not acceptable to the cognizant auditor, he may require further audit action on the part of the prime contractor or highertier subcontractor, or by Government auditors as deemed appropriate under the circumstances.

(4) Contracting Officers will instruct prime contractors to submit their accounting analyses of subcontractors' settlement proposals along with the proposed settlement with the subcontractors at the time the proposed settlement is forwarded for review and ratification by the Contracting Officer. If the Contracting Officer is not satisfied with the accounting examination or review made by the prime contractor or the lower-tier subcontractor of a subcontract settlement proposal for less than $25,000, he will submit the proposal to the appropriate audit agency for examination and recommendation together with a copy of the accounting analysis made by the Contractor.

(5) Settlement proposals under terminated subcontracts which are common to two or more prime contracts will require special consideration. To permit the Contracting Officer to make proper allocations to the prime contracts involved and to facilitate joint settlement of two or more claims by prime contractors pursuant to $ 8.311 of this

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