this contract. Billing prices are for the sole purpose of providing for interim payments and shall not affect the determination of the total final price under paragraph (c) above. After execution of the contract modification referred to in subparagraph (c) (3) above, the total amount paid or to be paid on all invoices or vouchers shall be adjusted to reflect the total final price and any additional payments, refunds, or credits, resulting therefrom shall be promptly made.

(f) Limitation on payments. (1) This paragraph (f) shall not apply after final price revision.

(2) Within forty-five (45) days after the end of each quarter of the Contractor's fiscal year, beginning for the quarter in which a delivery is first made (or services are first performed) and accepted by the Government under this contract, and as of the end of each quarter, the Contractor shall submit to the Contracting Officer a cumulative statement setting forth:

(i) The total contract price of all supplies delivered (or services performed) and accepted by the Government for which final prices have been established;

(ii) The total costs (estimated to the extent necessary) reasonably incurred for and properly allocable solely to the supplies delivered (or services performed) and accepted by the Government for which final prices have not been established;

(iii) That portion of the total target profit which is in direct proportion to the supplies delivered (or services performed) and accepted by the Government for which final prices have not been established, increased or decreased in accordance with the incentive profit formula set forth in (c) (2) above when the amount of costs stated under (ii) above differs from the aggregate target costs of such supplies or services; and

(iv) The total amount of all invoices or vouchers for supplies delivered (or services performed) and accepted by the Government (including amounts applied or to be applied to liquidate progress payments).

of

(3) Notwithstanding any provision this contract authorizing greater payments, if on any quarterly statement the amount of (2) (iv) above exceeds the sum of (2) (i), (ii), and (iii) above, the Contractor shall immediately refund or credit to the Government against existing unpaid invoices or vouchers covered by such statement the amount of such excess less (i) the cumulative total of any previous refunds or credits under this clause (exclusive of any tax credits under Section 1481 of the Internal Revenue Code of 1954) and (ii) any applicable tax credits under Section 1481 of the Internal Revenue Code of 1954. If any portion of such excess has been applied to the liquidation of progress payments, such amount (less all tax credits under the Internal Revenue Code) may be added or restored to the unliquidated progress payment account, to the extent consistent with the "Progress Pay

ments" clause of this contract, instead of direct refund thereof.

(4) The Contractor shall (1) insert in each price redetermination or incentive price revision subcontract hereunder the substance of this paragraph (f), including this subparagraph (4), modified to omit mention of the Government and reflect the position of the Contractor as purchaser and of the subcontractor as vendor, and to omit that portion of subparagraph (3) relating to tax credits, and (ii) include in each cost-reimbursement type subcontract hereunder a requirement that each price redetermination and incentive price revision subcontract thereunder will contain the substance of this paragraph (f), including this subparagraph (4) modified as outlined in (i) above.

(g) Disagreements. If the Contractor and the Contracting Officer fail to agree upon the total final price within 60 days after the date on which the data required by (b) above are to be submitted, or within such further time as may be specified by the Contracting Officer, such failure to agree shall be deemed to be a dispute concerning a question of fact within the meaning of the "Disputes" clause of this contract and the Contracting Officer shall promptly issue a decision thereunder.

(h) Termination. If the contract is terminated prior to establishment of the total final price, prices of supplies or services subject to price revision under this clause shall be established pursuant to this clause for (i) completed supplies accepted by the Government and services performed and accepted by the Government and (ii) in the event of a partial termination, supplies and services which are not terminated. The termination shall be otherwise accomplished pursuant to other applicable provisions of this contract.

(i) Equitable adjustments under other clauses. If an equitable adjustment in the contract price is made under any other clause of this contract before the total final price is established, the adjustment shall be made in the total target cost and may be made in the total target profit. If such an adjustment is made after the total final price is established, adjustment shall be made only in the total final price.

(j) Exclusion from target price and total final price. Whenever any clause of this contract provides that the contract price does not or will not include an amount for a specific purpose, such provision shall mean that neither any target price nor the total final price includes or will include any amount for such purpose.

(k) Separate reimbursement. The cost of performance of an obligation that any clause of this contract expressly provides is at Government expense shall not be included in any target price or in the total final price, but shall be reimbursed separately to the extent reasonable and allocable.

(1) Taxes. As used in the "Federal, State, and Local Taxes" clause of this contract or any other clause of this contract that provides for certain taxes or duties to be included in, or excluded from, the contract price, the term "contract price" includes the total target price, or if it has been established, the total final price. When a provision in such clause or clauses requires that the contract price be increased or decreased as a result of changes in the obligation of the Contractor to pay or bear the burden of certain taxes or duties, such increase or decrease shall be made in the total target price or, if it has been established, in the total final price, so as not to affect the contractor's profit or loss on this contract.

In contracts of the Department of the Navy, add the words "with a copy thereof to the office or offices designated in this contract to make payments thereunder and to the cognizant Military Department auditor" after the words "Contracting Officer" in line 4 of paragraph (f) (2) in the clause above. In the event the contract calls for parts or other supplies or services which are to be ordered under a provisioning document or Government option and the prices of such supplies or services are to be made subject to incentive price revision in accordance with the above clause, the following provision (m) shall be included in such clause:

(m) Parts. Parts, other supplies, or services, which are to be furnished under this contract pursuant to a provisioning document or Government option, shall be subject to price revision in accordance with the provisions of this clause, and any prices established for such parts, other supplies, or services, pursuant to such provisioning document or Government option, shall be deemed to be target prices. Target costs and profit covering such parts, other supplies, or services may be established either separately, in the aggregate, or in any combination thereof, as the parties may agree. (Nov. 1962)

[28 F.R. 2100, Mar. 5, 1963]

§ 7.108-2 Successive 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) (3) 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 initial target cost, initial target profit, and initial target price.

INCENTIVE PRICE REVISION (SUCCESSIVE
TARGETS) (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 initial target cost. The prices of these items as shown in the Schedule are the initial target prices, which include an initial target profit of per

cent (%) of the initial 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 in accordance with the provisions of this clause, shall be identified as such in a modification to this contract.

(b) Submission of data for establishment of firm fixed price or final profit adjustment formula.

(1) Within

(----) days after the end of the month in which the Contractor has completed -%* the Contractor shall submit:

(1) A proposed firm fixed price or total firm target price for supplies delivered and to be delivered;

(ii) A detailed statement of all costs incurred in the performance of this contract through the end of the month specified above, on DD Form 784 or in such other form as the parties may agree, together with sufficient supporting data to disclose unit costs and cost trends for:

(A) Supplies delivered and services performed, and

(B) Inventories of work in process and undelivered contract supplies on hand (estimated to the extent necessary);

(iii) An estimate of costs of all supplies delivered and to be delivered and all services performed and to be performed under this contract, using the statement of costs incurred plus an estimate of costs to complete performance, on DD Form 784 or in such other form as the parties may agree, together with:

(A) Sufficient data to support the accuracy and reliability of such estimate, and

(B) An explanation of the differences between such an estimate and the original estimate used in establishing the initial target prices set forth in this contract for the same supplies or services.

(2) In addition to the data submitted under subparagraph (1) above, the Contractor shall submit the following:

(1) Supplemental statements of costs incurred subsequent to the end of the month specified in (1) above for:

*The degree of completion may be based on a percentage of contract performance or any other reasonable basis.

(A) Supplies delivered and services performed, and

(B) Inventories of work in process and undelivered contract supplies on hand (estimated to the extent necessary); and

(ii) Any other relevant data which may reasonably be required by the Contracting Officer;

as and to the extent that such information becomes available prior to the conclusion of negotiations establishing the total firm target price.

(c) Establishment of firm fixed price or final profit adjustment formula. Upon submission of the data required by paragraph (b) above, the Contractor and the Contracting Officer shall promptly establish either a firm fixed price or a profit adjustment formula for determining final profit in accordance with the following:

(1) A total firm target cost shall be negotiated, based upon the data submitted under paragraph (b) above.

(2) If the total firm target cost is more than the total initial target cost, the total initial target profit will be decreased, or if the total firm target cost is less than the total initial target cost, the total initial tar

When the total final negotiated cost is— Equal to the total firm target cost----Greater than the total firm target cost.

(3) If the total firm target cost plus the total firm target profit present a reasonable price for performance of that part of the contract subject to price revision under this clause, the parties may agree on a firm fixed price. In this event, the firm fixed price shall be evidenced by a modification to this contract signed by the Contractor and the Contracting Officer.

(4) Failure of the parties to agree as to a firm fixed price shall not constitute a dispute under the "Disputes" clause of this contract. In such event or, if establishment of a firm fixed price is considered to be inappropriate, the Contractor and the Contracting Officer shall establish a profit adjustment formula for determining final profit or loss in accordance with the following:

-

The total firm target cost, total firm target profit, and profit adjustment formula for determining final profit shall be evidenced by a modification to this contract signed by the Contractor and the Contracting Officer.

(d) Submission of data for final price revision. Unless a firm fixed price has been agreed to pursuant to paragraph (c) above, the Contractor shall submit in such form as the Contracting Officer may require and 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, (1) 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 cost of such further performance, if any, as may be necessary to complete performance of all work with respect to such items.

(e) Final price revision. Unless a firm fixed price has been agreed to pursuant to paragraph (c) above, the Contractor and the Contracting Officer shall, as soon as practicable after submission of the data required by paragraph (d) above, establish the total final price in accordance with the following:

(1) On the basis of the information required by paragraph (d) above, together with any other pertinent information, there shall be established by negotiation the total final negotiated 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 allowance for final profit or loss determined in accordance with the formula agreed to pursuant to subparagraph (c) (4) above.

(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:

*NOTE: The language may be changed as necessary to set forth the negotiated adjustment pattern where the percentage figure to be used for adjustment of the initial target profit is not the same for all levels of cost variation.

(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.

(f) 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 (f).

or

(g) Adjustment of payments. Pending execution of the contract modification referred to in subparagraph (c)(3) above, the Contractor shall submit invoices vouchers in accordance with billing prices as provided in this paragraph. The billing prices shall be the initial target prices set forth in this contract until firm target prices are established pursuant to paragraph (c) above; thereafter, the firm target prices shall be used for billing; 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 (h) (3) below, the parties may agree to revised billing prices, which shall be reflected in a modification to this contract. Billing prices are for the sole purpose of providing for interim payments and shall not affect the determination of any price under paragraph (c) or (e) above. After execution of the contract modification referred to in subparagraph (e) (3) above, the total amount paid or to be paid on all invoices or vouchers shall be adjusted to reflect the total final price and any additional payments, refunds, or credits resulting therefrom shall be promptly made.

(h) Limitation on payments. (1) This paragraph (h) shall not apply after a firm fixed price or a total final price is established pursuant to subparagraph (c)(3) or (e) (2).

(2) Within forty-five (45) days after the end of each quarter of the Contractor's fiscal year, beginning for the quarter in which a delivery is first made or services are first performed and accepted by the Government under this contract, and as of the end of each quarter, the Contractor shall submit to the Contracting Officer a cumulative statement setting forth:

(1) The total contract price of all supplies delivered (or services performed) and accepted by the Government for which final prices have been established;

(ii) The total costs (estimated to the extent necessary) reasonably incurred for

and properly allocable solely to the supplies delivered (or services performed) and accepted by the Government for which final prices have not been established;

(iii) That portion of the total firm target profit which is in direct proportion to the supplies delivered (or services performed) and accepted by the Government for which final prices have not been established, increased or decreased in accordance with the incentive profit formula set forth in subparagraph (c) (4) above when the amount of costs stated under (ii) above differs from the aggregate firm target costs of such supplies or services; and

(iv) The total amount of all invoices or vouchers for supplies delivered (or services performed) and accepted by the Government (including amounts applied or to be applied to liquidate progress payments).

(3) Notwithstanding any provision of this contract authorizing greater payments, if on any quarterly statement the amount stated in (2) (iv) above exceeds the sum stated in (2) (i), (ii), and (iii) above, the Contractor shall immediately refund or credit to the Government against existing unpaid invoices or vouchers covered by such statement the amount or such excess less (i) the cumulative total of any previous refunds or credits under this clause (exclusive of any tax credits under Section 1481 of the Internal Revenue Code of 1954) and (ii) any applicable tax credits under Section 1481 of the Internal Revenue Code of 1954. If any portion of such excess has been applied to the liquidation of progress payments, such amount (less all tax credits under the Internal Revenue Code) may be added or restored to the unliquidated progress payment account, to the extent consistent with the "Progress Payments" clause of this contract instead of direct refund thereof.

(4) The Contractor shall (1) insert in each price redetermination or incentive price revision subcontract hereunder the substance of this paragraph (h), including this subparagraph (4), modified to omit mention of the Government and reflect the position of the Contractor as purchaser and of the subcontractor as vendor, and to omit that portion of subparagraph (3) relating to tax credits, and (ii) include in each cost-reimbursement type subcontract hereunder a requirement that each price redetermination and incentive price revision subcontract thereunder will contain the substance of this paragraph (h), including this subparagraph (4) modified as outlined in (i) above.

(1) Disagreements. If the Contractor and the Contracting Officer fail to agree upon (i) total firm target cost and a final profit adjustment formula, (ii) a total final price, within 60 days after the date for the submission of the date required by paragraphs (b) and (d) respectively, or within such further time as may be specified by the Contracting Officer, such failure to agree shall be deemed to be a dispute concerning a question of fact within the meaning of the "Dis

putes" clause of this contract, and the Contracting Officer shall promptly issue a decision thereunder.

(1) Termination. If this contract is terminated prior to establishment of the total final price, prices of supplies or services subject to price revision under this clause shall be established pursuant to this clause for (1) completed supplies accepted by the Government and services performed and accepted by the Government, and (ii) in the event of a partial termination, supplies and services which are not terminated. The termination shall be otherwise accomplished pursuant to other applicable provisions of this contract.

(k) Equitable adjustments under other clauses. If an equitable adjustment in the contract price is made under any other clause of this contract before the total final price is established, the adjustment shall be made in the total target cost and may be made in the total target profit. If such an adjustment is made after the total final price is established, adjustment shall be made only in the total final price.

(1) Exclusion from target price and total final price. Whenever any clause of this contract provides that the contract price does not or will not include an amount for a specific purpose, such provision shall mean that neither any target price nor the total final price includes or will include any amount for such purpose.

(m) Separate reimbursement. The cost of performance of an obligation that any clause of this contract expressly provides is at Government expense shall not be included in any target price or in the total final price, but shall be reimbursed separately to the extent reasonable and allocable.

(n) Taxes. As used in the clause of this contract entitled "Federal, State, and Local Taxes" or any other clause of this contract that provides for certain taxes or duties to be included in, or excluded from, the contract price, the term "contract price" includes the total target price or if it has been established, the total final price. When a provision in such clause or clauses requires that the contract price be increased or decreased as a result of changes in the obligation of the Contractor to pay or bear the burden of certain taxes or duties, such increase or decrease shall be made in the total target price or, if it has been established in the total final price, so as not to affect the Contractor's profit or loss on this contract.

In contracts of the Department of the Navy, add the words "with a copy thereof to the office or offices designated in this contract to make payments thereunder and to the cognizant Military Department auditor" after the words "Contracting Officer" in line 5 of paragraph (h) (2). In the event the contract

calls for parts or other supplies or services which are to be ordered under a provisioning document or Government option and the prices of such supplies or services are to be made subject to incentive price revision in accordance with the above clause, the following provision (o) shall be included in such clause.

(0) Parts. Parts, other supplies, or services, which are to be furnished under this contract pursuant to a provisioning document or Government option, shall be subject to price revision in accordance with the provisions of this clause, and any prices established for such parts, other supplies, or services, pursuant to such provisioning document or Government option, shall be deemed to be initial target prices or target prices as agreed upon and stipulated in the pricing document supporting the provisioning or added items. Initial or firm target costs and profits and final prices covering such parts, other supplies, or services may be established either separately, in the aggregate, or in any combination thereof, as the parties may