§ 7.104-40 Competition in subcontracting. The following clause shall be included in all negotiated contracts over $10,000, except in firm fixed-price contracts where award is on the basis of effective price competition or where prices are established by law or regulation. COMPETITION IN SUBCONTRACTING (Apr. 1962) The Contractor shall select subcontractors (including suppliers) on a competitive basis to the maximum practical extent consistent with the objectives and requirements of the contract. [27 F.R. 6133, June 29, 1962] (a) Insert the following clause only in firm fixed-price and fixed-price with escalation negotiated contracts which exceed $100,000, except where the price negotiated is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. AUDIT (Nov. 1962) (a) For purposes of verifying that cost or pricing data submitted, in conjunction with the negotiation of this contract or any contract change or other modification involving an amount in excess of $100,000 are accurate, complete, and current, the Contracting Officer, or his authorized representatives, shall-until the expiration of three years from the date of final payment under this contract-have the right to examine those books, records, documents and other supporting data which will permit adequate evaluation of the cost or pricing data submitted, along with the computations and projections used therein, which were available to the Contractor as of the date of execution of the Contractor's Certificate of Current Cost or Pricing Data. (b) The Contractor agrees to insert the substance of this clause including this paragraph (b) in all subcontracts hereunder in excess of $100,000 unless the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. (b) Insert the following clause in formally advertised contracts which are expected to exceed $100,000, and in firm fixed-price and fixed-price with escalation negotiated contracts which exceed $100,000 when the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. In negotiated contracts, delete from paragraph (b) of the clause the words "the Comptroller General of the United States." AUDIT-PRICE ADJUSTMENTS (Nov. 1962) (a) This clause shall become operative only with respect to any change or other modification made pursuant to one or more provisions of this contract which involves a price adjustment in excess of $100,000, unless the price adjustment is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. (b) For purposes of verifying that cost or pricing data submitted in conjunction with a contract change or other modification involving an amount in excess of $100,000 are accurate, complete, and current, the Contracting Officer, the Comptroller General of the United States, or any authorized representatives, shall-until the expiration of three years from the date of final payment under this contract-have the right to examine those books, records, documents and other supporting data which will permit adequate evaluation of the cost or pricing data submitted, along with the computations and projections used therein, which were available to the Contractor as of the date of execution of the Contractor's Certificate of Current Cost or Pricing Data. (c) The Contractor agrees to insert the substance of this clause including this paragraph (c) in all subcontracts hereunder in excess of $100,000 unless the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. (c) Insert the following clause in any negotiated cost-reimbursement type incentive, or price redeterminable contract. AUDIT AND RECORDS (Nov. 1962) (a) The Contractor shall maintain books, records, documents, and other evidence and accounting procedures and practices, sufficient to reflect properly all direct and indirect costs of whatever nature claimed to have been incurred and anticipated to be incurred for the performance of this contract. The foregoing constitute "records" for the purposes of this clause. (b) The Contractor's plants, or such part thereof as may be engaged in the performance of this contract, and his records shall be subject at all reasonable times to inspection and audit by the Contracting Officer or his authorized representative. (c) The Contractor shall preserve and make available his records (1) until the expiration of three years from the date of final payment under this contract, and (11) for such longer period, if any, as is required by applicable statute, or by other clauses of this contract, or by (A) or (B) below. (A) If this contract is completely or partially terminated, the records relating to the work terminated shall be preserve and made available for a period of three years from the date of any resulting final settlement. (B) Records which relate to (i) appeals under the "Disputes" clause of this contract, or (ii) litigation or the settlement of claims arising out of the performance of this contract, shall be retained until such appeals, litigation, or claims have been disposed of. (d) (1) The Contractor shall insert the substance of this clause, including the whole of this paragraph (d), in each subcontract hereunder that is not on a firm fixed-price basis. (2) The Contractor shall insert the substance of the following clause in each firm fixed-price subcontract hereunder in excess of $100,000, except those subcontracts covered by subparagraph (3) below. AUDIT (a) For purposes of verifying that cost or pricing data submitted in conjunction with the negotiation of this contract or any contract change or other modification involving an amount in excess of $100,000 are accurate, complete, and current, the Contracting Officer, or his duly authorized representatives, shall-until the expiration of three years from the date of final payment under this contract-have the right to examine those books, records, documents, and other supporting data which will permit adequate evaluation of the cost or pricing data submitted, along with the computations and projections used therein which were available to the Contractor as of the date of execution of the Contractor's Certificate of Current Cost or Pricing Data. (b) The Contractor agrees to insert the substance of this clause including this paragraph (b) in all subcontracts hereunder in excess of $100,000 unless the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. (3) The Contractor shall insert the substance of the following clause in each firm fixed-price subcontract hereunder in excess of $100,000 where the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. AUDIT-PRICE ADJUSTMENTS (a) This clause shall become operative only with respect to any change or other modification made pursuant to one or more provisions of this contract which involves a price adjustment in excess of $100,000, unless the price adjustment is based on adequate price competition, established catalog or 22-051-64- -15 market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. (b) For the purposes of verifying that any cost or pricing data submitted in conjunction with a contract change or other modification involving an amount in excess of $100,000 are adequate, complete, and current, the Contracting Officer, or his authorized representatives, shall-until the expiration of three years from the date of final payment under this contract-have the right to examine those books, records, documents and other supporting data which will permit adequate evaluation of the cost or pricing data submitted, along with the computations and projections used therein, which were available to the Contractor as of the date of execution of the Contractor's Certficate of Current Cost or Pricing Data. (c) The Contractor agrees to insert the substance of this clause including this paragraph (c) in all subcontracts hereunder in excess of $100,000, unless the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. In cost-reimbursement type contracts that have separate periods of performance and that are to include, in the Examination of Records clause prescribed by § 7.203-7, the alternate paragraph (a) (4) which is set forth in § 7.203-7(b), the clause set forth above in this paragraph shall be modified by adding the following to paragraph (c) thereof: Notwithstanding the foregoing, the Contractor's obligation to preserve and make available his records shall not extend beyond the period of his like obligation under the "Examination of Records" clause of this contract. Such contracts may be administered as indicated in § 7.203-7(b). (d) The requirement for inclusion of the clauses in paragraphs (a) and (b) of this section may be waived for contracts with foreign governments or agencies thereof under circumstances where the requirement for the clauses in §§ 7.104-29 and 7.104-42 may be waived. [28 F.R. 2098, Mar. 5, 1963] § 7.104-42 ing data. Subcontractor cost and pric (a) The following clause shall be inserted in any cost-reimbursement type, incentive, or price redeterminable contract. In addition, it shall also be inserted in all other negotiated contracts over $100,000, except where the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. The contracting officer may include this clause, with appropriate reduction in the dollar amounts included therein, in other negotiated contracts where a Certificate of Current Cost or Pricing Data is required (see § 3.807-3(b)(4) of this chapter) in connection with initial pricing of the contract. SUBCONTRACTOR COST AND PRICING DATA (a) The Contractor shall require subcontractors hereunder to submit cost or pricing data under the following circumstances: (i) prior to award of any cost-reimbursement type, incentive, or price redeterminable subcontract; (ii) prior to the award of any subcontract the price of which is expected to exceed $100,000; (iii) prior to the pricing of any subcontract change or other modification for which the price adjustment is expected to exceed $100,000; except in the case of (ii) or (iii) where the price is based on adequate price competition, established catalog or market prices of commerical items sold in substantial quantities to the general public, or prices set by law or regulation. (b) The Contractor shall require subcontractors to certify, in substantially the same form as that used in the certificate by the Prime Contractor to the Government, that to the best of their knowledge and belief, the cost and pricing data submitted under (a) above is accurate, complete, and current as of the date of execution, which date shall be as close as possible to the date of agreement on the negotiated price of the subcontract. (c) The Contractor shall insert the substance of this clause, including this paragraph (c), in each subcontract hereunder which exceeds $100,000, except where the price thereof is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. In each such excepted subcontract hereunder in excess of $100,000 the Contractor shall insert the substance of the following clause: SUBCONTRACTOR COST AND PRICING DATAPRICE ADJUSTMENTS (a) Paragraphs (b) and (c) of this clause shall become operative only with respect to any change or other modification made pursuant to one or more provisions of this contract which involves a price adjustment in excess of $100,000. The requirements of this clause shall be limited to such price adjustments. (b) The Contractor shall require subcontractors hereunder to submit cost or pricing data under the following circumstances: (i) prior to award of any cost-reimbursement type, incentive, or price redeterminable subcontract; (ii) prior to award of any subcontract, the price of which is expected to exceed $100,000; (iii) prior to the pricing of any subcontract change or other modification for which the price adjustment is expected to exceed $100,000; except, in the case of (ii) or (iii), where the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. (c) The Contractor shall require subcontractors to certify, in substantially the same form as that used in the certificate by the Prime Contractor to the Government, that to the best of their knowledge and belief the cost and pricing data submitted under (b) above is accurate, complete, and current as of the date of execution, which date shall be as close as possible to the date of agreement on the negotiated price of the contract modification. (d) The Contractor shall insert the substance of this clause including this paragraph (d) in each subcontract hereunder which exceeds $100,000. (b) Insert the following clause in all contracts, both formally advertised and negotiated, which exceed $100,000 other than those described in paragraph (a) of this section: SUBCONTRACTOR COST AND PRICING DATAPRICE ADJUSTMENTS (MAY 1963) (a) Paragraphs (b) and (c) of this clause shall become operative only with respect to any change or other modification made pursuant to one or more provisions of this contract which involves a price adjustment in excess of $100,000. The requirements of this clause shall be limited to such price adjustments. (b) The Contractor shall require subcontractors hereunder to submit cost or pricing data under the following circumstances: (1) prior to award of any cost-reimbursement type, incentive, or price redeterminable subcontract; (ii) prior to the award of any subcontract the price of which is expected to exceed $100,000; (iii) prior to the pricing of any subcontract change or other modification for which the price adjustment is expected to exceed $100,000; except in the case of (ii) or (iii) where the price is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. (c) The Contractor shall require subcontractors to certify that to the best of their knowledge and belief the cost and pricing data submitted under (b) above is accurate, complete, and current as of the date of execution, which date shall be as close as possi ble to the date of agreement on the negotiated price of the contract modification. (d) The Contractor shall insert the substance of this clause including this paragraph (d) in each subcontract hereunder which exceeds $100,000. (c) The requirement for inclusion of the above clauses in contracts with foreign governments or agencies thereof may be waived in exceptional cases by the Head of a Procuring Activity, stating in writing his reasons for such determination. CODIFICATION: § 7.104-42 was added, 28 F.R. 2099, Mar. 5, 1963, and subsequently amended in the following respects: 1. Paragraph (a) was amended, 28 F.R. 4886, May 16, 1963. 2. Paragraph (b) was amended, 28 F.R. 6068, June 14, 1963. In accordance with the requirements of § 1.1703 of this chapter, insert the clause set forth in § 1.1705-2 of this chapter. [28 F.R. 2581, Mar. 16, 1963] § 7.104-46 Value engineering program requirement with incentive. In accordance with the requirements of § 1.1703 of this chapter, insert the applicable clause set forth in § 1.1705-3 of this chapter. [28 F.R. 2581, Mar. 16, 1963] § 7.105-6 Bill of materials. A bill of materials consists of a report by a supplier which specifies the quantities of various materials required to produce a designated quantity of supplies of a particular kind. A bill of materials, with respect to all or part of the supplies to be furnished pursuant to a contract, shall be required only if the contracting officer shall determine that such bill is necessary to develop materials or components requirements for production and maintenance programs, for industrial § 7.105-7 Material inspection and receiving report. MATERIAL INSPECTION AND RECEIVING REPORT (JULY 1958) At the time of each delivery under this contract the Contractor shall prepare and furnish to the Government, in the manner and to the extent required by the Contracting Officer, a Material Inspection and Receiving Report (DD Form 250 or comparable form). The Government shall furnish the required forms to the Contractor upon request. [27 F.R. 11653, Nov. 27, 1962] § 7.105-9 Taxes where foreign agreements do not apply. In accordance with the instructions of § 11.404 of this chapter, in contracts to be performed outside the United States, its possessions and Puerto Rico, the clause set forth therein may be inserted. [26 F.R. 9638, Oct. 12, 1961] § 7.106 Price escalation clauses (established prices). This section and §§ 7.106-1 through 7.106-4 set forth uniform clauses for use when it is desired to provide for price escalation in the event of changes in the contractor's established prices. Each clause is preceded by a statement of the conditions under which it may be used. No escalation clause hereunder shall be used in any fixed-price incentive or redeterminable contracts. [28 F.R. 2100, Mar. 5, 1963] § 7.107 Price escalation clause (labor and material). (a) The following price escalation clause is authorized for use in negotiated fixed-price supply contracts, other than fixed-price incentive or redeterminable contracts, where (1) the price exceeds $50,000, (2) the period of performance exceeds six months, (3) there is no major element of design engineering or developmental work involved in producing the items being procured, and (4) one or more identifiable labor or material cost factors are subject to change. [Paragraph (a) amended, 28 F.R. 2100, Mar. 5, 1963] § 7.108 Incentive price revision clauses. [28 F.R. 2100, Mar. 5, 1963] Prior Amendments 1962: 27 F.R. 3451, Apr. 11; 27 F.R. 11653, Nov. 27. § 7.108-1 Firm targets. When in accordance with the provisions of Subpart D, Part 3 of this chapter, the fixed-price incentive contract described in § 3.404-4(a) (2) of this chapter is to be used, the following clause shall be made a part of the contract. As to each item which is to be subject to incentive price revision, the contract schedule shall set forth the target cost, target profit, and target price. INCENTIVE PRICE REVISION (FIRM TARGET) (Nov. 1962) (a) General. The supplies or services identified in the Schedule as Items are subject to price revision in accordance with the provisions of this clause; provided that in no event shall the total final price of such items exceed percent (%) of the total target cost. Any supplies or services which are to be ordered separately under, or otherwise added to, this contract, and which are to be subject to price revision When the total final negotiated cost is- Less than the total target cost.. in accordance with the provisions of this clause, shall be identified as such in a modification to this contract. (b) Submission of data. Within -- (--) days after the end of the month in which the Contractor has delivered the last unit of supplies and completed the services called for by those items referred to in paragraph (a) above, the Contractor shall submit, in such form as the Contracting Officer may require, (i) a detailed statement of all costs incurred up to the end of that month in performing all work under such items, and (ii) an estimate of costs of such further performance, if any, as may be necessary to complete performance of all work with respect to such items. (c) Price revision. Upon submission of the data required by paragraph (b) above, the Contractor and the Contracting Officer shall promptly establish the total final price in accordance with the following: (1) On the basis of the information required by paragraph (b) above, together with any other pertinent information, there shall be established by negotiation the total final cost reasonably incurred or to be incurred for and properly allocable to the supplies delivered (or services performed) and accepted by the Government, which are subject to price revision under this clause. (2) The total final price shall be established by adjusting the total final negotiated cost by an amount for profit or loss determined as follows: (3) The total final price of the items referred to in paragraph (a) above shall be evidenced by a modification to this contract signed by the Contractor and the Contracting Officer. Such price shall not be subject to revision notwithstanding any changes in the cost of performing the contract, with the following exceptions: (i) insofar as the parties may agree in writing, prior to the determination of the total final price, (A) to exclude any specific elements of cost from the total final price and (B) to a procedure to provide subsequent disposition of such elements; and (ii) to the extent any adjustment or credit is explicitly permitted or required by this or any other clause of this contract. (d) Subcontracts. No subcontract placed under this contract shall provide for payment on a cost-plus-a-percentage-of-cost basis; and the Contractor shall not, without the prior written consent of the Contracting Officer, place any subcontract which is on a cost-plus-a-fee basis and which would involve a total price in excess of $10,000, including the fee. The Contracting Officer may, in his discretion, ratify in writing any such cost-plus-a-fee subcontract and such action shall constitute the consent of the Contracting Officer as required by this paragraph (b). (e) Adjustments of payments. Pending execution of the contract modification referred to in subparagraph (c) (3) above, the Contractor shall submit invoices or vouchers in accordance with billing prices as provided in this paragraph. The billing prices shall be the target prices set forth in this contract; provided, that if at any time it appears that the then current billing prices do not provide for payments consistent with the provisions of subparagraph (f) (3) below, the parties may agree to revised billing prices, which shall be reflected in a modification to |