tition, it is Department of Defense policy to break out that component if:

(a) Substantial net cost savings will probably be achieved; and

(b) Such action will not jeopardize the quality, reliability, performance or timely delivery of the end item.

The desirability of breakout should also be considered (regardless of whether the prime contract or the component being purchased by the prime contractor is on the basis of price competition) whenever substantial net cost savings will result (1) from greater quantity purchase or (2) from such factors as improved logistics support through reduction in varieties of spare parts and economies in operations and training through standardization of design. Primary breakout consideration shall be given to those components of the end item representing the highest annual procurement costs and offering the largest potential net savings through breakout.

[30 F.R. 14887, Dec. 2, 1965]

§ 1.326-3 Responsibility for component breakout selection, review and decision.

The project manager (or if there is no project manager such other official as may be designated by the Head of the Procuring Activity) supported by a project team (to include cognizant engineering, production, logistics, maintenance and other appropriate personnel, and the contracting officer or his designee) shall be responsible for:

(a) Earmarking as susceptible to break out those components potentially conforming to the criteria and policy set forth herein;

(b) Conducting the breakout review and evaluation described in § 1.326-4.

(c) Making the decision whether or not to break out the component; and

(d) Preparing records explaining such decision in compliance with § 1.326-5. [30 F.R. 14887, Dec. 2, 1965]

§ 1.326-4 Breakout guidelines.

(a) Each decision on whether or not to break out a component must embrace (1) assessment of the potential risks of degrading the end item through such contingencies as delayed delivery and reduced reliability of the component, (2) calculation of estimated net cost savings (i.e., estimated purchase savings less any offsetting costs), and (3) analysis of the technical, operational, logistic and administrative factors involved. As to each

of these, the decision must be supported by adequate explanatory information, including an assessment by, and consultation with, the end item contractor where feasible.

(b) In deciding whether a component should be broken out, the guidelines set forth below (in the form of questions) should be considered. Answers will rarely be “positively yes” or “positively no" but usually "probably yes" or "probably no," with the degree of probability governed by the facts of the particular case. The decision will depend largely upon the degree and significance of the risks to quality performance, reliability and timely delivery of the end item which would be involved in breakout and upon the estimated overall cost savings. Where the risks, if any, are acceptable and breakout is expected to result in substantial overall cost savings, the component should be broken out. On the other hand, if such risks are unacceptable, the components should not be broken out.

(1) Are the design of the component (and the design of the end item insofar as it will affect the component) sufficiently stable that further design or engineering effort by the end item contractor in respect to the component is unlikely to be required?

(2) Is a suitable data package available for Government procurement? (Note that breakout may be warranted even though competitive procurement is not possible.)

(3) Can any problems of quality control and reliability of the component be resolved without requiring effort by the end item contractor?

(4) Is it anticipated that requirements for technical support (i.e., functions such as development of proposed detailed specifications; development of test requirements to prove design adequacy or compliance with design; monitoring tests to assure compliance with established requirements; definition of quality assurance requirements for production of articles; and analysis and correction of service-revealed deficiencies) heretofore performed by the end item contractor will be negligible? If not, does the Government have the resources (manpower, technical competence, facilities, etc.) to provide such support, or can such support be obtained from the end item contractor (even though the component is broken out) or other source?

(5) Can breakout be accomplished without causing unacceptable difficulties in logistics support (e.g., be jeopardizing requisite standardization of components)?

(6) Can breakout be accomplished without causing overfragmentation of the end item that might materially impede administration, management, and performance of the end item contact (e.g., by unduly complicating production scheduling or identifying (and fixing responsibility for) end item failure that may be caused by a defective component)?

(7) Can breakout be accomplished without jeopardizing delivery requirements of the end item?

(8) If a decision is made to break out a component and to acquire it from a new source, can advance procurement funds be made available to provide that source any necessary additional lead time?

(9) Is there a source other than the present manufacturer capable of supplying the component?

(10) Has the component been (or is it known that it is going to be) purchased directly by the Government as a support item in the supply system or as GFE in other end items?

(11) Would the financial risks and other responsibilities being assumed by the prime contractor that will have to be assumed by the Government if the item is broken out be acceptable?

(12) Will breakout result in substantial net cost savings? Estimates of probable savings in cost should be developed for each case on its own facts, with consideration given to any estimated off-setting costs such as increases in the cost of requirements determination and control, contracting, contract administration, data package purchase, material inspection, qualification or preproduction testing, ground support and test equipment, transportation, security, storage, distribution, and technical support.

(c) If application of the guidelines in paragraph (b) of this section reveals conditions currently unfavorable to breakout, the feasibility of eliminating such conditions should be considered. For example, where adequate technical support is not available from Government resources, or similar assistance must be obtained in order to successfully accomplish breakout, consideration

should be given to the procurement of the necessary services, such as product assurance suitability services, from the end item contractor or other qualified

source.

[30 F.R. 14887, Dec. 2, 1965]

§ 1.326-5 Records and review procedure.

The records of the purchasing activity shall contain documentation of:

(a) Those components which have been reviewed and determined to have no potential for breakout;

(b) Those components which have been reviewed and earmarked as being susceptible to breakout pursuant to § 1.326-3; and

or

(c) Those components for which a decision to break out has been made. Documentation of these three categories, and for those components once earmarked but no longer considered susceptible to breakout, shall be signed by the cognizant project manager other designated official and reflect the facts and conditions of the case, including any assessment by the contractor, and the basis for the decision. Components that have been earmarked for potential breakout shall be reviewed well in advance of each successive procurement, with a decision made as to whether the component will be broken out for the ensuing procurement. Such reviews, made preferable in the course of requirements determination, but in any event before procurement of the requirement is initiated, shall be repeated until a final decision on whether or not to break out is reached, and shall be documented. When breakout is delayed or postponed, the documentation shall include a description of the actions required to accomplish breakout, identify the activities responsible for such actions, and indicate the fiscal year when breakout should be effected.

[30 F.R. 14888, Dec. 2, 1965, as amended at 31 F.R. 1039, Jan. 27, 1966]

§ 1.327 Use of excess aluminum in National stockpile.

[31 F.R. 9851, July 21, 1966]

§ 1.327-1 Government Use Program.

It has been determined to be in the public interest to establish a Government Use Program requiring, to the maximum practicable extent, purchase of excess aluminum in the Government stockpile by defense contractors, directly

or through subcontractors or suppliers, equal in weight to the weight of aluminum products as defined in § 1.327-2, purchased by the Government or used in the production of items delivered under defense contracts. In implementation of this Program, all contracts in the categories listed below, shall contain the clause in § 1.327-2, or in the case of construction contracts, the clause as modified in § 1.327-3:

(a) Purchases in the amount of $500 or more of aluminum products as defined in § 1.327-2.

(b) Purchases of supplies or construction in the amount of $25,000 or more where the aluminum products used in the production of items delivered under the contract or in the production of items incorporated in construction performed under the contract are estimated by the contracting officer to approximate 10,000 pounds or more.

by

In

These provisions do not apply to procurements of supplies or construction effected by procuring activities located outside, for use outside, the United States, its possessions, and Puerto Rico. These provisions are applicable to new procurements that are effected amendments to an existing contract. such cases, only the new procurement portion of the total contract is considered in determining whether the clause is required and, if required, the extent of its applicability. Copies of all aluminum controlled material allotments made to contractors, together with a showing of any modifications or quantity adjustments thereto, shall be forwarded by the allotting activity to GSA at the address specified in the contract clause within 30 days following the calendar quarter for which all or any portion of the allotment was made. Copies or pertinent abstracts of all contracts or purchase orders for aluminum products (subject to paragraph (a) of this section) and modifications affecting aluminum product quantities shall be forwarded by the purchasing activity to GSA at the same address. [31 F.R. 9851, July 21, 1966]

as an end item under this contract, or used to produce an end item under this contract, such as by way of example (but not limited to) wrought aluminum products; forgings and castings; rolled bar, rod, structural shapes, and bare wire; aluminum conductor steel reinforced and bare aluminum cable; insulated or covered wire or cable; extruded bar, rod, shapes, and tube (extruded, drawn, and welded tube); sheet, strip, and plate; pig or ingot; granular or shot; slab; foil; and powder, flake, or paste; and (ii) the term "supplier" includes vendors, materialmen, warehousemen, distributors, or manufacturers of aluminum products or other items containing aluminum in any form.

a

(b) Except as provided in (c) below, the Contractor (or subcontractor or supplier, where applicable) shall purchase from the General Services Administration (GSA) quantity of aluminum pig or ingot equal in weight to the gross weight of aluminum products constituting, or used in the production of, the items to be delivered under this contract. Such purchase shall be in accordance with the terms and conditions of sale prescribed therefor by GSA. Each order placed with GSA pursuant to this clause shall state that it is placed in accordance therewith and shall be sent to:

Director, Industry Materials Division, Defense Materials Service, General Services Administration, Washington, D.C., 20405. Aluminum purchased pursuant to this clause may be used in any manner the Contractor desires and need not be earmarked in any way after delivery to the Contractor, nor physically incorporated in the items to be delivered hereunder.

(c) To the extent the Contractor (or subcontractor or supplier, where applicable) places subcontracts or purchase orders for aluminum products or for items other than aluminum products and containing aluminum in any form, he is not required with respect to such subcontracts or purchase orders to purchase aluminum from the GSA. However, he agrees to incorporate this clause, except paragraph (d):

(i) In any such subcontract or purchase order for aluminum products in the total amount of $500 or more, or

(ii) In any such subcontract or purchase order in the total amount of $25,000 or more for any items containing aluminum in any form where the quantity of aluminum products used in the production of such items is estimated to be 10,000 pounds or more.

(d) The Contractor shall furnish to the GSA, calendar quarter summaries (within 30 days following the close of the applicable quarter) of all subcontracts and purchase orders placed by him pursuant to (c) (i) above that will identify (1) each aluminum product supplier involved, (ii) the quantity (by weight) of aluminum products, and (iii) the Authorized Control Material allotment number if any, applicable to specific quantities. The requirements of this paragraph

(d) are applicable only to the prime Contractor and not to any subcontractor or other supplier hereunder. This reporting requirement has been approved by the Bureau of the Budget in accordance with the Federal Reports Act of 1942.

(e) The requirements of this clause are not intended to preclude basic agreements or other arrangements between the parties to any contracts (subcontracts or purchase orders) subject to this clause that will permit reference in such contracts to the applicability of the requirements of this clause, without the need for physically incorporating this clause in its entirety in each affected -subcontract or purchase order.

(f) In placing subcontracts and purchase orders subject to the clause, the Contractor and all subcontractors and suppliers are authorized and encouraged to consolidate aluminum product purchases hereunder with other defense rated order purchases (ACM, DO, or DX) and other identifiable Government orders so as to apply the requirements of this clause to the total purchase. Otherwise, it is required either that aluminum product purchases subject to this clause be separately made, or, if consolidated with other aluminum product purchases, that the quantities (by weights) of aluminum products subject to this clause be separately set forth in the purchase document and identified as subject to this clause.

(g) Required purchases of aluminum from GSA by Contractors, subcontractors, or suppliers, shall be made within 90 days from the date (1) of final delivery pursuant to a contract, subcontract, or purchase order containing the requirements of this clause, or (ii) when the Contractor, subcontractor or supplier, has completed deliveries of aluminum products aggregating 100,000 pounds, whichever is earlier: Provided, however, That any Contractor, subcontractor, or supplier, may defer required purchases of aluminum for the purpose of consolidating purchases to meet the requirement of two or more contracts, subcontracts, or purchase orders containing this clause until 90 days after the aggregate purchase requirements of such contracts, subcontracts, or purchase orders equal the minimum order quantities established by GSA (approximately 10,000 pounds or more). Successive consolidated purchases thereafter may be made at any time within 90-day intervals. The 90-day limitations may be extended upon approval = in writing by the GSA.

(h) Certain producers of aluminum have entered into contracts with GSA effective as of November 1, 1965, under which they have made long term commitments to purchase certain minimum and maximum quantities of aluminum from that Agency. The obligations of such producers under this clause I shall be governed by the provisions of those - contracts to the extent of any inconsistency.

(1) All purchases made pursuant to this clause, other than from GSA, are required to be rated (ACM, DO or DX) in accordance

with DMS Regulation 1, NPA Order M-5A and BDSA Regulation 2, and are subject to the provisions of those regulations concerning the maintenance of records, rights of inspection and audit, and the penalty provisions contained therein for willful noncompliance.

[31 F.R. 9851, July 21, 1966]

§ 1.327-3 Modification of contract clause in § 1.327-2 in contracts for construction.

The clause contained in § 1.327-2 shall be modified by deletion of paragraph (c) thereof and substitution of the following paragraph in all contracts for construction:

(c) To the extent the Contractor or subcontractor or supplier, where applicable places subcontracts or purchase orders for aluminum products, or for items other than aluminum products and containing aluminum in any form, or for construction where the subcontractor is to furnish materials containing aluminum in any form, he is not required with respect to such subcontracts or purchase orders to purchase aluminum from the GSA. However, he agrees to incorporate this clause, except paragraph (d):

(i) In any such subcontract or purchase order for aluminum products in the total amount of $500 or more, or

(ii) In any such subcontract or purchase order in the total amount of $25,000 or more for any items containing aluminum in any form where the quantity of aluminum products used in the production of such items is estimated to be 10,000 pounds or more, or (iii) Construction, where the materials are to be supplied by the subcontractor and the total value of such materials containing aluminum (in any form) is estimated to be $25,000 or more, and where the quantity of aluminum products used in the production of such items is estimated to be 10,000 pounds or more.

[31 F.R. 9852, July 21, 1966]

Subpart D-Procurement Responsibility and Authority

SOURCE: The provisions of this Subpart D appear at 31 F.R. 1039, Jan. 29, 1966, unless otherwise noted.

§ 1.400 Scope of subpart.

This subpart deals with the procurement responsibility and authority of (a) the Head of a Procuring Activity and (b) contracting officers, and with the appointment of contracting officers. This subpart also imposes limitations upon the authority to enter into contracts. For the purpose of this subpart, the term "contracting officer" does not include authorized representatives of the contracting officer.

exercise of the option is limited to the date set forth in the contract schedule for notifying the contractor that funds are available for the requirements of the next succeeding program year. If such an option is included, the following paragraph (f) should be added to the clause set forth above:

(f) Any quantities added to the original contract quantities through exercise of the Government option in the "Option to Increase Quantities" clause of this contract shall be subtracted from what would otherwise be considered the quantity cancelled for the purpose of computing allowable cancellation charges.

[29 F.R. 2811, Feb. 29, 1964]

§ 1.323 Procurement of natural rubber for aircraft tires, tubes, tire recapping, and recapping materials.

(a) It is national policy to require contractors to purchase natural rubber from the National Stockpile in connection with defense contracts for aircraft tires, tubes, tire recapping, and recapping material. The Office of Emergency Planning, Executive Office of the President, has authorized the General Services Administration to dispose of natural rubber for that purpose.

(b) The following clause shall be inserted in contracts for aircraft tires, tubes, tire recapping (unless the recapping materials are Government furnished), and recapping materials, and in contracts for aircraft under which the contractor is to furnish tires or tubes.

PURCHASE OF NATURAL RUBBER (MAY 1964)

(a) Except as provided in paragraph (b) below, the Contractor shall purchase from the General Services Administration, either directly or through a dealer, during the life of this contract

pounds of crude natural rubber. Each order for rubber placed with the General Services Administration pursuant to this clause shall state that it has been placed in accordance with the provisions of this clause, shall identify this contract by number and the name of the issuing activity and shall be sent to:

Manager, Rubber Project,

General Services Administration,
Room 6042, GSA Building,
18th and F Streets NW.,
Washington, D.C., 20025.

1 Contracting officer shall insert approximate quantity of crude natural rubber contained in the tires, tubes, tire recapping, or recapping materials to be delivered under this contract.

Rubber purchased pursuant to this clause may be used in any manner the Contractor desires and need not be earmarked in any way after delivery to the Contractor, nor physically incorporated in the items to be delivered, provided the specifications are met.

(b) To the extent the Contractor places subcontracts for tires, tubes, tire recapping, or recapping materials under this contract, he is not required to purchase rubber from the General Services Administration. However, he agrees to incorporate in any such subcontract the same terms and conditions set forth in this clause including this paragraph (b), specifying approximate quantity of crude natural rubber contained in the tires, tubes, tire recapping, or recapping materials to be delivered under the subcontract. The Contractor shall forward one copy of each such subcontract, referencing the prime contract number and the issuing activity, to the General Services Administration at the above address.

(c) Copies or pertinent abstracts of all contracts and contract modifications affecting rubber quantities will be forwarded by the purchasing activity to the General Services Administration at the address specified in the contract clause.

[29 F.R. 9747, July 21, 1964] Warranties.

§ 1.324

[29 F.R. 14816, Oct. 31, 1964]

§ 1.324-1 General.

A warranty clause gives the Government a contractual right to assert claims regarding the deficiency of supplies or services furnished, notwithstanding any other contractual provisions pertaining to acceptance by the Government. Such a clause allows the Government additional time after acceptance in which to assert a right to correction of the defects, reperformance, an equitable adjustment in the contract price, or other remedies. This additional period of time may begin at the time of delivery or at the occurrence of a specified event, and may run for a given number of days or months or until occurrence of another specified event. The value of a warranty clause depends upon the circumstances and its use is influenced by many factors (see § 1.324-3 (b)).

[29 F.R. 14816, Oct. 31, 1964]