ties. The acquisition of, or work on, facilities for the Government normally does not involve the manufacturing processes, plant departmental operations, cost patterns of work, administrative and managerial control, or clerical effort usual to production of the contractor's normal products or services. These operating and administrative differences affect the equitable allocation of indirect costs to facility contracts and make it desirable that advance understandings, as provided in § 15.107, be agreed to between the contractor and the contracting officer as to such indirect cost items to be applied to the facilities acquisition. A contractor's normal accounting practice for allocating indirect costs to the acquisition of his own facilities may range from charging all such costs to this acquisition to not charging any such costs thereto. Where necessary to produce an equitable result, the contractor's usual method of allocating indirect cost will be varied and appropriate adjustment will be made to the pools of indirect cost and the bases of their distribution.

§ 15.503 Allocation of indirect manufacturing and plant operational costs.

(a) Facilities contract operations may involve:

(1) The purchase of facilities, or services in connection therewith, on a completed basis from outside source;

(2) The purchase of completed facilities from outside sources, installation to be accomplished by the contractor's own employees;

(3) Rehabilitation of existing facilities by the contractor's own employees;

or

(4) Construction or manufacture of facilities by the contractor from purchased components.

Guidelines for the allocation of indirect costs in these particular circumstances are set forth in paragraphs (b), (c), and (d) of this section.

(b) The purchase of facilities, or services in connection therewith, from outside sources on a completed basis does not involve the contractor's direct labor or indirect plant maintenance personnel. Accordingly, indirect manufacturing and plant overhead costs, which are primarily incurred or generated by reason of direct labor or maintenance labor operations, are not allocable to the acquisition of such facilities.

(c) Contracts providing for the installation of new facilities or the rehabilitation of existing facilities may involve the use of the contractor's plant maintenance labor, as distinguished from direct labor engaged in the production of the company's normal products. In such instances, only those types of indirect manufacturing and plant operating costs that are related to or incurred by reason of the expenditure of the classes of labor utilized for the performance of the facilities work may be allocated to the facilities work. Thus, a facilities contract which involves the use of plant maintenance labor only would not be subject to an allocation of such cost items as direct productive labor supervision, depreciation and maintenance expense applicable to productive machinery and equipment, or raw material and finished goods storage costs.

(d) Where a facilities contract calls for the construction, production, or rehabilitation of equipment or other items which are involved in the regular course of the contractor's business by the use of the contractor's direct labor and manufacturing processes, the indirect costs normally allocated to all such work may be allocated to the facilities contract.

§ 15.504 General and administrative costs (including home office allocations).

General and administrative costs consist of items of cost attributable to the overall management, supervision and conduct of the business. General and administrative costs in connection with the acquisition of or work on industrial facilities shall be allowed only when and to the extent specifically provided for in the contract. In allocating general and administrative costs, consideration should be given to (a) all work to which such costs are common, including acquisition of or work on facilities by the contractor for his own account, and (b) any difference in the amount of administrative effort expended by the contractor on his various activities, such as between production and fixed asset improvement programs or between the acquisition of facilities by purchase and by construction or manufacture. However, in no event will prices charged pursuant to § 15.505 be increased by the allocation of additional general and administrative costs.

This subpart provides guidance for the use of Subparts B, C, and D of this part, (a) in the evaluation of costs in pricing of negotiated fixed-price type contracts and subcontracts where such evaluation is required to establish prices for such contracts, (b) in the negotiation of termination settlements, and (c) in the negotiation of any adjustment in price required by the contract, such as issu-, ance of change orders, a suspension of work for the convenience of the Government under an appropriate contract clause, and equitable adjustments under the Government-furnished property clause.

[26 F.R. 9643, Oct. 12, 1961]

§ 15.601 Definition of fixed-price type

contracts.

"Fixed-price type" contracts include, for purpose of this subpart, the following:

(a) Firm fixed-price contracts (§ 3.4042 of this chapter),

(b) Fixed-price contracts with escalation (§ 3.404-3 of this chapter),

(c) Fixed-price contracts providing for the redetermination of price (§§ 3.404-5 and 3.404-7 of this chapter),

(d) Fixed-price incentive contracts (§ 3.404-4 of this chapter),

(e) Noncost-reimbursable portion of time and materials contracts (§ 3.406-1 of this chapter), and

(f) Labor-hour contracts (§ 3.406-2 of this chapter.

[29 F.R. 2841, Feb. 29, 1964]

§ 15.602 Basic considerations.

(a) Under fixed-price type contracts, the negotiated price is the basis for pay

ment to a contractor whereas allowable costs are the basis for reimbursement under cost-reimbursement type contracts. Accordingly, the policies and procedures of Subpart H, Part 3, of this chapter, are governing and shall be followed in the negotiation of fixed-price type contracts. Cost and accounting data may provide guides for ascertaining fair compensation but are not rigid measures of it. Other types of data, criteria, or standards may furnish reliable guides to fair compensation. The ability to apply standards of business judgment as distinct from strict accounting principles is at the heart of a negotiated price or settlement.

(b) Among the different types of fixed-price type contracts, the need for consideration of costs varies considerably as indicated below:

(1) Retrospective pricing and settlements. In negotiating firm fixed prices or settlements for work which has been completed at the time of negotiation (e.g., final negotiations under fixedprice incentive contracts, redetermination of price after completion of the work, or negotiation of a settlement agreement under a contract terminated for the convenience of the Government), the treatment of costs is a major factor in arriving at the amount of the price or settlement. However, even in these situations, the finally agreed price or settlement may represent something other than the sum total of acceptable costs plus profit, since the final price accepted by each party does not necessarily reflect agreement on the evaluation of each element of cost, but rather a final resolution of all issues in the negotiation process.

(2) Forward pricing. The extent to which costs influence forward pricing varies greatly from case to case. In negotiations covering future work, actual costs cannot be known and the importance of cost estimates depends on the circumstances. The contracting officer must consider all the factors affecting the reasonableness of the total proposed price, such as the technical, production or financial risk assumed, the complexity of work, the extent of competitive pricing, and the contractor's record for efficiency, economy and ingenuity. as well as available cost estimates. He must be free to bargain for a total price which equitably distributes the risks between the contractor and the Government and provides incentives for effi

ciency and cost reduction. In negotiating such a price, it is not possible to identify the treatment of specific cost elements since the bargaining is on a total price basis. Thus, while cost data is often a valuable aid, it will not control negotiation of prices for work to be performed, or a target price under an incentive contract.

[25 F.R. 14309, Dec. 31, 1960]

§ 15.603 Cost principles and their use. (a) When, pursuant to § 15.602, costs are to be considered in the negotiation of fixed-price type contracts, the appropriate subpart of this part shall be used as a guide in the evaluation of cost data required to establish a fair and reasonable price in conjunction with other pertinent considerations as set forth more fully in Subpart H, Part 3, of this chapter, and—in the case of negotiated termination settlements part C, Part 8 of this chapter.

Sub

(b) In retrospective pricing, whenever an occasion arises in which acceptability of a specific item of cost becomes an issue, the appropriate part of this Part 15 will serve as a guide for the contracting officer in his conduct of negotiations.

(c) In applying this part to fixed-price contracts, contracting officers will: (1) Not be expected to negotiate agreement on every individual element of cost; and (2) be expected to use their judgment as to the degree of detail in which they consider the individual elements of cost in arriving at their evaluation of total cost, where such evaluation is appropriate. However, the negotiation record should fully substantiate and justify the reasoning leading to any negotiated price.

(d) In order to permit the proper evaluation of cost data submitted by contractors for use in negotiating prices, it may be necessary to obtain breakdowns or account analyses in respect to some cost items particularly those whose treatment may be dependent upon special circumstances as stated in the principles. Contractors will be expected to be responsive to reasonable requests for data of this kind.

[25 F.R. 14309, Dec. 81, 1960]

PART 16-PROCUREMENT FORMS

Sec. 16.000

16.400

Scope of subpart.

Scope of part.

16.401

Subpart A-Forms for Advertised Supply Contracts

16.401-1

General.

16.401-2

16.100 Scope of subpart.

Advertised construction contract forms.

Conditions for use.

16.401-8 Terms, conditions and provisions

70A Stat. 120, 127–133; 5 U.S.C. 22, 10 U.S.C. 2202, 2301-2314.

§ 16.000 Scope of part.

This part prescribes forms1 for use in connection with the procurement of supplies and services (see Appendix F for illustrations of these forms). In using these forms for procurement outside the United States, its possessions, and Puerto Rico, contract provisions which are made inapplicable to such procurement by this subchapter or by Departmental procedures may be deleted. [28 F.R. 4892, May 16, 1963]

Subpart A-Forms for Advertised Supply Contracts

This subpart prescribes forms for use in procuring supplies by formal advertising; it is not applicable to specialized procurements for which other instructions are given by this subchapter or departmental procedures.

[25 F.R. 14311, Dec. 31, 1960]

§ 16.101 Combination Type (Standard Forms 33, 33–A, 32, 26, and 36 and DD Form 1260).

[30 F.R. 14093, Nov. 9, 1965]

§ 16.101-1 General.

The following supply contract forms shall be used in effecting procurements by formal advertising:

(a) Invitation, Bid, and Award (Supply Contract) (Standard Form 33);

(b) Bidding Instructions, Terms, and Conditions (Supply Contract) (Standard Form 33-A);

(c) General Provisions (Supply Contract) (Standard Form 32);

(d) Any other special terms for the invitation for bids or additional contract provisions which are prescribed by this subchapter or Departmental procedures (Note. The Federal, State, and Local Taxes clause at § 11.401-1 of this chapter shall be used as a part of Standard Form 32, when that standard form is used in any advertised procurement or in any of the other circumstances set forth in § 11.401-1. When a standard form is used in a negotiated fixed-price type contract in excess of $10,000 where the con

1 Appendix F, containing a facsimile of each of the forms listed below, has been filled with the Office of the Federal Register; copies of forms may be obtained through the Contracting Officer in any of the military departments.

tracting officer is not satisfied that the contract price, virtue of competition or otherwise, excludes contingencies for State and local taxes, the Federal, State, and Local Taxes clause at § 11.401-2 shall be made a part of the contract, and the clause at § 11.401-1 shall be deleted from Standard Form 32.);

(e) Continuation Sheet (Supply Contract) (Standard Form 36) (when needed with Standard Forms 33 and 33-A or 26 or DD Form 1260);

(f) Amendment to Invitation for Bids (DD Form 1260) when needed; and (g) Award (Supply Contract) (Standard Form 26) when needed. [30 F.R. 14093, Nov. 9, 1965] § 16.101-2

Conditions for use.

(a) The Invitation, Bid, and Award (Standard Form 33) and the Schedule portion of Standard Form 33 shall be prepared in accordance with §2.201 of this chapter. One copy of Standard Form 33-A shall accompany each copy ( of Standard Form 33. Bidders shall be requested to return only three signed copies of their bids.

(b) Standard Form 32 and any additional general provisions may be attached to each copy of the Invitation for Bids. Alternatively, only one copy of Standard Form 32 and any additional general provisions need be furnished to each bidder, for retention, if such provisions are specifically incorporated by reference, including each form name, number and date, in the Schedule. Provisions which are inapplicable to a particular procurement, or to military procurements generally may be deleted by appropriate reference in an "Alterations in Contract" clause.

(c) Award of contracts shall be accomplished by completing the Award portion of Standard Form 33 and furnishing a copy of the form, so completed, to each successful bidder. Alternatively, such award may be accomplished by furnishing a completed Standard Form 26 to each successful bidder. Papers previously forwarded to bidders need not accompany the successful bidder's copy of the Award document. The required use of the Award portion of Standard Form 33 or the use of Standard Form 26 does not preclude the additional use of informal documents, including telegrams, as notices of awards.

(d) DD Form 1260 (Amendment to Invitation for Bids) shall be used when it is necessary to issue an amendment.