poses, a provision substantially as set forth in § 2.201(b) (12)); (c) Guaranteed maximum shipping weights (and dimensions if applicable); (If shipping weights (and dimensions if applicable) of items to be procured are not shown in the solicitation and may vary among prospective suppliers with a resultant variation in transportation costs and such costs are made a factor in bid evaluation, the schedule will provide for insertion by the supplier of the applicable guaranteed maximum shipping weights (and dimensions if applicable) in spaces provided after each item (or elsewhere in the schedule) and a provision substantially as set forth in §2.201 (b) (13) of this subchapter shall also be included.); (d) Packing, crating and other preparations; (e) Transit arrangements (§ 1.1308); and (f) Any other shipping information required for evaluation. [26 F.R. 5301, June 14, 1961] § 1.1305-2 FOB origin or destination. Solicitations for supplies to be purchased either f.o.b. origin or f.o.b. destination in accordance with § 1.1302-1(b), shall include so much of the information contained in §§ 1.1305-3 and 1.1305-4 as is pertinent to the particular procurement and shall provide that bids or proposals may be submitted on either or both bases and that they will be evaluated on the basis of the lowest overall cost to the Government. [26 F.R. 5301, June 14, 1961] § 1.1305-3 FOB destination. Generally, solicitations for supplies to be purchased f.o.b. destination shall provide that supplies shall be delivered, all transportation charges paid by the contractor, to the specified destination. The solicitation shall inform prospective suppliers of any known shortage of transportation facilities at destination or other factors which may affect the supplier's transportation costs. When f.o.b. destination bids only are desired, the invitation for bids shall specify that bids submitted on a basis other than f.o.b. destination will be rejected as nonresponsive. [26 F.R. 5301, June 14, 1961] § 1.1305-4 FOB origin. Generally, solicitations for supplies to be purchased f.o.b. origin shall provide for delivery, at the Government's option, f.o.b. carrier's equipment, wharf, or freight station at a city or shipping point to be specified by the bidder or offeror at or near the contractor's plant. This will enable the military traffic management offices, in issuing routing instructions, to select the mode of transportation which will provide the required service at the lowest overall cost. When destinations are known, or if unknown but tentative destinations are designated (see § 1.1305-5), the solicitation shall state that bids or proposals will be evaluated on the basis of the lowest overall cost to the Government, taking account of transportation costs to the Government from point of origin to the designated domestic or overseas destinations. Thus, when material is to be purchased f.o.b. origin in accordance with § 1.1302-2 for ultimate delivery to known destinations outside the United States, the solicitation shall state that bids or proposals shall be evaluated so as to take into account the cost to the Government of shipment from the point of origin to the Overseas destinations (see § 1.1313). When f.o.b. origin bids only are desired, the invitations for bids will specify that bids submitted on a basis other than f.o.b. carrier's equipment, wharf, or freight stations at a specified city or shipping point at or near the contractor's plant, will be rejected as nonresponsive. [26 F.R. 5301, June 14, 1961] § 1.1305-5 Destination unknown. When the exact destinations of the supplies being purchased are not known at the time bids or proposals are solicited, but the general location of the destination, such as East Coast, Middle West, or West Coast, is known, a definite place or places shall be designated as the point to which transportation costs will be computed-but only for the purpose of evaluating bids or proposals. The solicitation shall specify that bids or proposals should be submitted f.o.b. origin and that shipments will be made on Government bills of lading. The solicitation shall state: For the purpose of evaluating (bids) (proposals), and for no other purpose, the final destination for the supplies will be considered to be as follows: (Name destinations) Invitations for bids shall contain a statement that bids submitted on a basis other than f.o.b. origin will be rejected as nonresponsive. [26 F.R. 5301, June 14, 1961] § 1.1309 Volume shipments within the United States. Procurements involving planned volume movements between points in the United States as defined in the Military Traffic Management Regulation (AR 55355 c.s.; OPNAVINST 4600.8; AFM 75-2, as amended; and NAVMC 1175), shall be referred at the earliest practicable time to the local transportation officer or traffic analyst serving the purchasing activity. This will permit a determination of the reasonableness of applicable current rates, and when appropriate negotiation of adjusted or modified rates, in accordance with the above regulation. Generally, carriers are required by both Federal and State laws to charge all shippers equally for like transportation and associated services. However, when Government traffic possesses more favorable transportation characteristics (greater volume, heavier loading, less likelihood of damage, etc.) than commercial traffic between the same origins and destinations, freight rates are often lower for the Government traffic, as in the case of quotations under Section 22 of the Interstate Commerce Act (49 U.S.C. 22). [26 F.R. 5302, June 14, 1961] § 1.1313 Transportation rates and related costs. [26 F.R. 5302, June 14, 1961] § 1.1313-1 Evaluation. To afford proper analysis and consideration of transportation factors, the contracting officer shall consider transportation rates and related costs in the evaluation of f.o.b. origin bids and proposals. The best available transportation rates and related costs in effect or to become effective prior to the expected date of initial shipment and on file or published at the date of the bid opening, shall be used in the evaluation. However, transportation rates and related costs filed or published after the bid opening, or the date proposals are due, shall not be used in the evaluation unless they cover traffic for which no applicable transportation rate or related cost was in existence on the bid opening or the date proposals were due. [26 F.R. 5302, June 14, 1961] [26 F.R. 5302, June 14, 1961] Subpart O-Options [Added] AUTHORITY: 1.1501 to 1.1506 issued under sec. 2202, 70A Stat. 120; 10 U.S.C. 2202. Interpret or apply secs. 2301-2314, 70A Stat. 127-133; 12 U.S.C. 2301-2314. SOURCE: §§ 1.1501 to 1.1506 appear at 26 F.R. 2601, Mar. 28, 1961, except as otherwise noted. § 1.1501 Scope of subpart. This subpart applies to contracts for supplies and services other than for (a) the construction, alteration, or repair of buildings, bridges, roads, or other kinds of real property and (b) research and development. It does not preclude the use of appropriate option provisions in such construction and research and development contracts. § 1.1502 Definition. As used in this subpart, an option clause is a provision in a contract under which, for a specified time, the Government may elect to purchase additional quantities of the supplies and services called for by the contract, or may elect to extend the period of performance of the contract. § 1.1503 Applicability. (a) Option clauses may be included in contracts where increased requirements within the period of contract performance are foreseeable, or where continuing performance beyond the original period of contract performance may be in the best interest of the Government. (b) Generally, option clauses will not be included in contracts where: (1) The supplies or services being purchased are readily available on the open market; (2) The contractor would be required to incur undue risks: e.g., the price or availability of necessary materials or labor is not reasonably foreseeable; (4) Market prices for the supplies or services involved are likely to change substantially. (c) Generally, options will definitely fix the amount of additional supplies or services, or the additional period of performance, which may be called for, and will not permit the Government to call for less than the full additional amount or period. (3) An indefinite quantity contract (d) Where exercise of the option (see § 3.409 (c) of this chapter) is would result in increased quantities of appropriate; or supplies, the option may be expressed in terms of (1) a definite percentage of specific contract line items, (2) a definite number of additional units of specific contract line items, or (3) additional numbered line items identified as the option quantity, with the same nomenclature as basic contract line items. Where exercise of the option would result in an increase in the performance of services by the contractor, the option may similarly be expressed in terms of percentages, increase in specific line items, or additional numbered line items, expressed in terms of the units of work used in the basic contract such as man hours, man years, square feet, pounds or tons handled, etc. Where exercise of the option would result in an extension of duration of the contract, the option may be expressed in terms of an extended terminal date or of an additional time period, such as days, weeks, or months. § 1.1504 Procedures. (a) Where a contract is to contain an option clause, the invitation for bids or request for proposals must contain an appropriate option provision. The contract shall limit the additional quantities of supplies or services which may be procured, or the duration of extention of the period of performance of the contract, under the option and will fix the period within which the option may be exercised. This period shall be set so as to afford the contractor adequate notice of the requirement for performance under the option but may extend beyond the contract completion date when exercise of the option would obligate funds not available in the fiscal year in which the contract would otherwise be completed. The quantities and the period under option and the period during which the option may be exercised shall be justified and documented by the contracting officer in the contract file. (b) Invitations for bids and requests for proposals that contain options for additional quantities shall generally state that evaluation will be on the basis of the quantity to be awarded exclusive of the option quantity. However, where it is anticipated that the Government may elect to exercise the option at time of award, invitations for bids and requests for proposals shall state that if the Government does so elect, evaluation will be on the basis of total quantity to be awarded, including the option quantity, but if the Government does not so elect, evaluation will be on the basis of the quantity to be awarded exclusive of the option quantity. (c) Invitations for bids or requests for proposals may state that bidders or offerors are required to quote separate prices on the option quantities or items and that such separate prices may vary depending on the date on which the option is exercised. § 1.1505 Exercise of options. (a) The exercise of an option by the Government requires the contracting officer's written notification to the contractor within the time period specified in the contract. (b) Where the contract provides for price escalation and the contractor requests revision of price pursuant to such provision, or the provision applies only to the option quantity, the effect of escalation on prices under the option must be ascertained before the option is exercised. (c) Options should be exercised only if it is determined that: (1) Funds are available, (2) The requirement covered by the option fulfills an existing need of the Government, and (3) The exercise of the option is most advantageous to the Government, price and other factors considered. (d) Insofar as price is concerned, the determination under paragraph (c) (3) of this section shall be made on the basis of one of the following: (1) A new formal advertisement, or request for proposals if appropriate, fails to produce a better price than that offered by the option. (Where the contracting officer anticipates that the option price will be the best price available, he should not use this method of testing the market but should use one of the methods in subparagraphs (2), (3), or (4) of this paragraph (see § 1.309)). (2) An informal investigation of prices, or other examination of the market, indicates clearly that a better price than that offered by the option cannot be obtained. (3) The time between the award of the contract containing the option and the exercise of the option is so short that it indicates the option price is the lowes price obtainable, considering such astors as market stability and a compartson of the time since award with the usual duration of contracts for such supplies and services. (4) Established prices are readily ascertainable and clearly indicate that formal advertising or informal solicitation can obviously serve no useful purpose. (e) Insofar as the "other factors" mentioned in paragraph (c)(3) of this section are concerned, the determination should, among other things, take into account the Government's need for continuity of operations and potential costs to the Government of disrupting operations, including the cost of relocating necessary Government-furnished equipment (as, for example, in certain repair and overhaul contracts for aircraft or other complex equipment). (f) When it has been determined that an option may properly be exercised in accordance with the principles set forth herein, such determination shall be set forth in writing and made a part of the contract file. Written notification to the contractor of the exercise of the option and any contract modification resulting therefrom shall cite the option clause contained in the original contract as authority for the procurement of the option quantity; and no citation under 10 U.S.C. 2304 (a) is required. Reporting, however, shall be in accordance with the instructions applicable to DD Form 350 (Individual Procurement Action Report). [Paragraph (f) added, 26 FR. 9634, Oct. 12, 1961] 62 OPON FOR INCREASED QUANTITY (JAN. 1961) The Government may increase the quantypes called for herein by the ed the Schedule and at the tur price spec.fed therein. The Contractor Ofree may exercise this option, at any the period specified in the Schedule by Living written notice to the Delivery of the items added by the exercise of this option shall continue Immediately after, and at the same rate as, belvery of like items called for under this Domtract unless the parties otherwise agree. b A clause substantially as follows may be used where the contract identifies the option quantity as a separately priced line item having the same nomenclature as a corresponding basic contract line item. OPTION FOR INCREASED QUANTITY (JAN. 1961) The Government may increase the quantity of supplies called for herein by requiring the delivery of the numbered line item identified in the Schedule as an option item, in the quantity and at the price set forth therein. The Contracting Officer may exercise this option, at any time within the period specified in the Schedule, by giving written notice to the Contractor. Delivery of the items added by the exercise of this option shall continue immediately after, and at the same rate as, delivery of like items called for under this contract unless the parties otherwise agree. (c) A clause substantially as follows may be used where it is intended to extend the services described in the Schedule. OPTION TO EXTEND SERVICES (JAN. 1961) The Government may require the Contractor to continue to perform any or all items of services under this contract within the limits stated in the Schedule. The Contracting Officer may exercise this option, at any time within the period specified in the Schedule, by giving written notice to the Contractor. The rates set forth in the Schedule shall apply to any extension made pursuant to this option provision. (d) A clause substantially as follows may be used to provide for continuing performance of the contract beyond its original term. OPTION TO EXTEND THE TERM OF THE This contract is renewable, at the option of the Government, by the Contracting Officer giving written notice of renewal to the Contractor within the period specified in the Schedule: provided, that the Contracting Oficer shall have given preliminary notice of the Government's intention to renew at least sixty (60) days before this contract is to expire. (Such a preliminary notice will not be deemed to commit the Government to renewal). If the Government exercises this option for renewal, the contract as renewed shall be deemed to include this option provision. However, the total duration of this contract, including the exercise of any options under this clause, shall not exceed years. Subpart P-Novation Agreements [Added] AUTHORITY: §§ 1.1601 to 1.1604 issued under sec. 2202, 70A Stat. 120; 10 U.S.C. 2202. Interpret or apply secs. 2301-2314, 70A Stat. 127-133; 10 U.S.C. 2301-2314. SOURCE: 1.1601 to 1.1604 appear at 27 F.R. 11647, Nov. 27, 1962. § 1.1601 Scope of subpart. This subpart prescribes the policy and procedures for (a) recognition of a successor in the interest to Government contracts when such interests are acquired incidental to a transfer of all the assets of a contractor or such part of his assets as is involved in the performance of the contracts, (b) a change of name of a contractor, and (c) single Department execution of novation agreements affecting more than one Department. § 1.1602 Agreement to recognize a successor in interest. (a) The transfer of a Government contract is prohibited by law. (41 U.S.C. 15.) However, the Government may recognize a third party as the successor in interest to a Government contract where the third party's interest is incidental to the transfer of all the assets of the contractor, or all that part of the contractor's assets involved in the performance of the contract. Examples include, but are not limited to: (1) Sale of such assets; (2) Transfer of such assets pursuant to merger or consolidation of corporation; and (3) Incorporation of a proprietorship or partnership. (b) When a contractor requests that the Government recognize a successor in interest the contractor shall be required to provide the Department concerned (see § 1.1604) with one copy of each of the following, as applicable: (1) A properly authenticated copy of the instrument by which the transfer of assets was effected, as for example, a bill of sale, certificate of merger, indenture of transfer, or decree of court; (2) A list of all contracts and pur chase orders which have not been finally settled between the Department concerned and the transferor, showing the contract number, the name and address of the purchasing office involved, the total dollar value of each contract as amended, the type of contract involved, and the balance remaining unpaid; (3) A certified copy of the resolutions of the boards of directors of the corporate parties authorizing the transfer of assets; (4) A certified copy of the minutes of any stockholders' meetings of the corporate parties necessary to approve the transfer of assets; (5) A properly authenticated copy of the certificate and articles of incorporation of the transferee if such corporation was formed for the purpose of receiving the assets involved in the performance of the Government contracts; (6) Opinion of counsel for the transferor and the transferee that the transfer was properly effected in accordance with applicable law and the effective date of transfer; (7) Evidence of the capability of the transferee to perform the contracts; (8) Balance sheets of the transferor and the transferee as of dates immediately prior to and after the transfer of assets; (9) Evidence of security clearance requirements; and (10) Consent of sureties on all contracts listed under subparagraph (2) of this paragraph where bonds are required. (c) When it is consistent with the Government's interest to recognize a successor in interest to a Government contract, the Department concerned shall execute an agreement with the transferor and the transferee, which shall ordinarily provide in part that: (1) The transferee assumes all the transferor's obligations under contract; the (2) The transferor waives all rights under the contract as against the Government; (3) The transferor guarantees performance of the contract by the transferee (a satisfactory performance bond may be accepted in lieu of such guarantee); and (4) Nothing in the agreement shall relieve the transferor or the transferee from compliance with any Federal law. A form for such an agreement for use when the transferor and tran force are corporations, and all the the |