(i) The expiration of 180 days from the date of the letter contract; or

(ii) Forty percent (40%) of the production of the supplies, or the performance of the work, called for under the contract, whichever occurs first. In extreme cases, an additional period may be authorized in accordance with Departmental procedures.

(4) The maximum liability of the Government stated in the letter contract generally shall not exceed fifty percent (50%) of the total estimated cost of the procurement, but this liability may be increased in accordance with Departmental procedures.

(d) Content. Letter contracts shall be specifically negotiated and, as a minimum, shall include agreement as to the following:

(1) The immediate commencement of performance of the contract by the contractor, including procurement of necessary materials;

(2) The extent and method of payments in the event of termination either for the convenience of the Government or for default;

(3) The fact that the contractor is not authorized to expend moneys or incur obligations in excess of the maximum liability of the Government as stated in the letter contract;

(4) The type of definitive contract anticipated at the time of letter contract award;

(5) A consent to subcontracts clause in accordance with § 3.903–1 and as many other definitive contract provisions as possible;

[Subparagraph (5) amended, 28 F.R. 12554, Nov. 23, 1963]

(6) The contractor's obligation to provide such price and cost information as may reasonably be required by the contracting officer; and

(7) The prompt entry into good faith negotiations by the contractor and the Government to reach agreement upon and execute a definitive contract.

§ 3.409 Indefinite delivery type con

tracts.

One of the following indefinite delivery type contracts may be used for procurement where the exact time of delivery is not known at time of contracting.

(a) Definite quantity contracts.—(1) Description. This type of contract provides for a definite quantity of specified supplies or for the performance of speci

fied services for a fixed period, with deliveries or performance at designated locations upon order. Depending on the situation, the contract may provide for: (i) Firm fixed-prices; (ii) price escalation; or (iii) price redetermination.

(2) Applicability. This type of contract is particularly suitable for use where it is known in advance that a definite quantity of supplies or services will be required during a specified period and are regularly available or will be available after a short lead time. Advantages of this type of contract are that it permits stocks in storage depots to be maintained at minimum levels and permits direct shipment to the user.

(b) Requirements contract-(1) Description. This type of contract provides for filling all actual purchase requirements of specific supplies or services of designated activities during a specified contract period with deliveries to be scheduled by the timely placement of orders upon the contractor by activities designated either specifically or by class. Depending on the situation, the contract may provide for: (i) Firm fixed prices; (ii) price escalation; or (iii) price redetermination. An estimated total quantity is stated for the information of prospective contractors, which estimate should be as realistic as possible. The estimate may be obtained from the records of previous requirements and consumption, or by other means. should be used in writing and administering this type of contract to avoid imposition of an impossible burden on the contractor. Therefore, the contract shall state, where feasible, the maximum limit of the contractor's obligation to deliver and, in such event, shall also contain appropriate provision limiting the Government's obligation to order. When large individual orders or orders from more than one activity are anticipated, the contract may specify the maximum quantities which may be ordered under each individual order or during a specified period of time. Similarly, when small orders are anticipated, the contract may specify the minimum quantities to be ordered.

Care

(2) Applicability. A requirements contract may be used for procurements where it is impossible to determine in advance the precise quantities of the supplies or services that will be needed by designated activities during a definite period of time. Advantages of this type of contract are:

(i) Flexibility with respect to both quantities and delivery scheduling;

(ii) Supplies or services need be ordered only after actual needs have materialized;

(iii) Where production lead time is involved, deliveries may be made more promptly because the contractor is usually willing to maintain limited stocks in view of the Government's commitment;

(iv) Price advantages or savings may be realized through combining several anticipated requirements into one quantity procurement; and

(v) It permits stocks to be maintained at minimum levels and allows direct shipment to the user.

Generally, the requirements contract is appropriate for use when the item of service is commercial or modified commercial in type and when a recurring need is anticipated.

(c) Indefinite quantity contract—(1) Description. This type of contract provides for the furnishing of an indefinite quantity, within stated limits, of specific supplies or services, during a specified contract period, with deliveries to be scheduled by the timely placement of orders upon the contractor by activities designated either specifically or by class. Depending on the situation, the contract may provide for: (i) Firm fixed prices; (ii) price escalation; or (iii) price redetermination. The contract shall provide that during the contract period the Government shall order a stated minimum quantity of the supplies or services and that the contractor shall furnish such stated minimum and, if and as ordered, any additional quantities not exceeding a stated maximum which should be as realistic as possible. The maximum may be obtained from the records of previous requirements and consumption, or by other means. When large individual orders or others from more than one activity are anticipated, the contract may specify the maximum quantities which may be ordered under each individual order or during a specified period of time. Similarly, when small orders are anticipated, the contract may specify the minimum quantities to be ordered.

(2) Applicability. An indefinite quantity contract may be used where it is impossible to determine in advance the precise quantities of the supplies or services that will be needed by designated

activities during a definite period of time and it is not advisable for the Government to commit itself for more than a minimum quantity. Advantages of this type of contract are:

(i) Flexibility with respect to both quantities and delivery scheduling;

(ii) Supplies or services need be ordered only after actual needs have materialized;

(iii) The obligation of the Government is limited; and

(iv) It permits stocks to be maintained at minimum levels and allows direct shipment to the user.

The indefinite quantity contract should be used only when the item or service is commercial or modified commercial in type and when a recurring need is anticipated.

(a) Description. A basic agreement is a written instrument of understanding executed between a Department or procuring activity and a contractor which sets forth the negotiated contract clauses which shall be applicable to future procurements entered into between the parties during the term of the basic agreement. The use of the basic agreement contemplates the coverage of a particular procurement by the execution of a formal contractual document which will provide for the scope of the work, price, delivery, and additional matters peculiar to the requirements of the specific procurement involved, and shall incorporate by reference or append the contract clauses agreed upon in the basic agreement as required or applicable.

(b) Applicability. (1) Basic agreements are appropriate for use when (i) past experience and future plans indicate that a substantial number of separate contracts may be entered into with a contractor during the term of the basic agreement, and (ii) substantial recurring negotiating problems exist with a particular contractor.

(2) A basic agreement shall be modified only by a modification of the basic agreement itself and shall not be modified or superseded by individual contracts or purchase orders entered into under and subject to the terms of such basic agreement. To minimize modification, revisions to this subchapter involving changes in authorized contract clauses utilized in basic agreements will provide

appropriate direction with respect to any required modifications of basic agreements and to the extent possible, modifications will be required only in matters resulting from changes in statutes, or executive orders. As a minimum, basic agreements shall be reviewed annually before the anniversary of their effective date and revised to conform with the current requirements of this subchapter. Modifications shall not have retroactive effect.

(3) Basic agreements shall provide for discontinuance of their future application upon 30 days written notice by either party. Discontinuance of basic agreement will not affect any individual contract referencing the basic agreement (or the clauses appended thereto) entered into prior to the effective date of discontinuance.

(4) Basic agreements may include negotiated overhead rates for cost-reimbursement type contracts (see § 3.705 (f)).

[Subparagraph (4) added, 28 F.R. 2577, Mar. 16, 1963]

(c) Limitations. (1) Basic agreements shall neither cite appropriations to be charged nor be used alone for the purpose of obligating funds.

(2) Basic agreements shall not in any manner provide for or imply any agreement on the part of the Government to place future orders or contracts with the contractor involved, nor shall they be used in any manner to competition.

restrict

(3) Basic agreements generally shall be utilized only in connection with negotiated contracts.

§ 3.410-2

Basic ordering agreement.

(a) Description. -A basic ordering agreement is an agreement which is similar to a basic agreement (see § 3.410-1) except that it also includes a description, as specific as practicable, of the supplies to be furnished or services to be performed when ordered and a description of the method for determination of the prices, consistent with the contract types authorized by this part, to be paid to the contractor for such supplies or services. Either the specific terms and conditions of delivery or a description of the method for their determination shall be set forth in the basic ordering agreement. The basic ordering agreement shall list one or more activties which are authorized to

22-051-64-8

issue orders under the agreement. Any activity so named may issue orders specifying the supplies or services required, which orders may be accepted by the contractor by whatever manner of acceptance is indicated in the basic ordering agreement. Each order will incorporate by reference the provisions of the basic ordering agreement.

(b) Applicability. The basic ordering agreement may be used as a means of expediting procurement where specific items, quantities, and prices are not known at the time of execution of the agreement but where past experience or future plans indicate that a substantial number of requirements for items or services of the type covered by the basic ordering agreement will result in procurements from the contractor during the term of the agreement. Under proper circumstances, use of the procedures under the agreement is advantageous and economical in ordering parts for equipment support since such procedures substantially shorten the administrative time required for placing such articles in a production status, thereby not only decreasing the amount of support inventory required to be carried but also decreasing the possibility that parts procured will become obsolete as a result of design changes in the equipment.

(c) Limitation. (1) Supplies or services may be ordered under a basic ordering agreement only if it is determined at the time the order is placed that it is impracticable to obtain competition by either formal advertising or negotiation for such supplies or services.

(2) The Government shall neither make any final commitment nor authorize any work by the contractor pursuant to an order under a basic ordering agreement until prices have been established unless the order establishes a monetary limitation on the obligation of the Government and either:

(i) The order is subject to provisions contained in the basic ordering agreement which set forth adequate procedures for arriving at prices as early in contract performance as practical, but in no event shall such procedures permit the price of the entire order to be established on a retroactive basic (however, incentive provisions consistent with this part are permitted); or

(ii) The need for the supplies or services is compelling and of unusual urgency, as when the Government would

be seriously injured, financially or otherwise, if the supplies or services were not furnished by a certain date and when they could not be furnished by that date if the contractor is not allowed to proceed with work until prices have been established. The circumstances listed in § 3.202-2 are indicative of instances in which the contractor may be permitted to proceed with work prior to establishment of prices.

As a general rule, prices should be established prior to authorizing the contractor to begin work. However, where the contractor is allowed to begin work prior to pricing in accordance with this section, the contractor and the contracting officer shall proceed with pricing as soon as practicable. The basic ordering agreement shall provide that failure to reach agreement on price in such circumstances will constitute a dispute subject to the procedures of the disputes clause.

(3) Each order issued under a basic ordering agreement shall be subject to such reviews, approvals, and determinations and findings (including those pertaining to types of contracts) specified in this subchapter as would be applicable if the order were a contract entered into apart from the basic ordering agreement.

To

(4) A basic ordering agreement shall be modified only by a revision of the basic ordering agreement itself and shall not be modified or superseded by individual orders issued thereunder. minimize modifications, revisions to this subchapter involving changes in authorized contract clauses utilized in basic ordering agreements shall provide appropriate direction with respect to any required modifications of basic ordering agreements; and, to the extent possible, modifications shall be required only in matters resulting from changes in statutes, or executive orders. Basic ordering agreements shall be reviewed at least annually, before the anniversary of their effective dates, and revised to conform with the current requirements of this subchapter. Modifications shall not have retroactive effect.

(5) The contracting officer issuing an order under a basic ordering agreement shall be responsible for assuring compliance with the provisions of subparagraphs (1), (2), and (3) of this paragraph.

[28 F.R. 2577, Mar. 16, 1963]

Subpart E-Solicitations of Proposals and Quotations [Added]

SOURCE: $ 3.500 and 3.501 appear at 27 F.R. 1694, Feb. 22, 1962, except as otherwise noted.

§ 3.500 Scope of subpart.

This subpart applies only to negotiated procurements in excess of $2,500 (see Subpart F of this part for small purchases).

§ 3.501 Preparation of request for proposals or request for quotations.

(a) Forms used for requesting proposals or quotations on negotiated procurements shall be as required by Part 16 of this chapter, or if not required by such Section, as prescribed by Departmental regulations.

(b) When written proposals or quotations for contemplated negotiated procurements for supplies or services, including research and development, and construction, are solicited, the request for proposals or the request for quotations normally should contain the following information if applicable to the procurement involved:

(1) Request for proposals or request for quotations number;

(2) Name and address of issuing activity, channels for submission of offer, and identification of the Government office or individual responsible for supplying additional information and answering inquiries.

(3) Date of issuance;

(4) Closing date and time. [Subparagraph (4) amended, 28 F.R. 12554, Nov. 23, 1963]

Prior Amendments 1963: 28 F.R. 4883, May 16.

(5) Number of pages and list of enclosures;

(6) Requisition or other purchase authority and appropriation and accounting data, if considered appropriate by the purchasing activity;

(7) A description (complying with Subpart L, Part 1 of this chapter) of the supplies or services to be furnished;

(8) Type of contract contemplated, together with type of repricing;

(9) The time of delivery or performance (see § 1.305 of this chapter);

(10) Requirements for performance and payment bonds;

(11) A list of any Government-furnished property, including Government

owned tooling, which will be furnished for the performance of the contract, and any special provisions relating thereto;

(12) A requirement that information be furnished with respect to any Government-owned facilities, industrial equipment, or special tooling intended to be used in the performance of the contract, the value thereof, identification of the Government contract under which acquired, rental provisions, and other relevant information;

(13) A requirement for stipulation of a time within which the Government may accept the proposal;

(14) Consistent with § 3.805-1(a) (5), notice to all offerors of the possibility that award may be made without discussion of proposals (in the case of construction contracts, see § 4.103-1 of this chapter);

(15) Special provisions necessary for the particular procurement, relating to such matters as progress payments (see Defense Contract Financing Regulations, 163.73 of this chapter), patent licenses, liquidated damages, Buy American Act (see §§ 6.104-3 and 6.204-4 of this chapter);

(16) Any applicable wage determination of the Secretary of Labor (for construction contracts, see Subpart D, Part 12 of this chapter);

(17) Identification of special factors, such as Government costs or other expenditures, which must be considered in the evaluation of proposals or quotations;

(18) Factors other than price which will be given paramount consideration in the awarding of the contract;

(19) Information as to requirements for Certificate of Current Pricing Data (see § 3.807-3);

(20) Adequate statement of information required to enable evaluation of technical and financial capabilities, and a statement covering special technical capabilities which the offeror must possess;

(21) Instructions regarding the marking of information which is not to be disclosed to the public or used by the Government for any purpose other than the evaluation of the proposals (see § 3.109);

(22) Directions for obtaining copies of any documents, such as plans, drawings, and specifications, which have been incorporated by reference (see § 1.1203 of this chapter);

(23) A provision for late proposals as set forth in § 3.804-2(d) and, in addition, the following notice shall be prominently set forth in the request for proposals (in the case of request for quotations, the provision in § 3.804–2(d) and the following notice will be appropriately modified.

CAUTION-LATE PROPOSALS. See the special provision entitled "Late Proposals" which provides that late proposals sent through the mails ordinarily will be considered ONLY IF TIMELY MAILED BY REGISTERED MAIL OR BY CERTIFIED MAIL FOR WHICH A POSTMARKED RECEIPT HAS BEEN OBTAINED AS SPECIFIED IN SUCH PROVISION.

[Subparagraph (23) amended, 28 F.R. 12554, Nov. 23, 1963]

Prior Amendments

1962: 27 F.R. 8871, Sept. 6. 1963: 28 F.R. 4884, May 16.

(24) Discount provisions (see § 2.407-3 of this chapter);

(25) Provisions for quantity variations;

(26) A requirement that the proposal state the intended place of performance, including the street address, and the names and addresses of owner and operator of producing facilities, if other than offeror, when it is reasonably anticipated that such facilities will be used in the performance of the contract;

(27) Place and method of delivery (see Subpart M, Part 1 of this chapter); (28) Preservation, packaging, packing, and marking requirements;

(29) Place, method, and condition of inspection;

(30) A clear statement of option provisions (see Subpart O, Part 1 of this chapter);

(31) Any applicable requirements for samples or descriptive literature;

(32) Instructions with respect to disposition of drawings and specifications supplied with the request for proposals or request for quotations;

(33) Description of information required to support proposed prices (subcontract, structure, make-or-buy program, purchasing system, royalty, and cost and price information);

(34) A statement of disaster area, labor surplus area, or small business setasides;

(35) Required representations regarding small business status;

(36) Statutory cost limitations (for construction, see § 4.101-4 of this chapter);