163.29 Termination financing. It is recognized that adequate protecon against the financial impact of terination of Government contracts and bcontracts should encourage suppliers invest their own funds in performance ader such contracts and that financing r termination purposes will be an imortant aid to ultimate reconversion of dustry to peacetime activities. Acrdingly, termination financing may be ade available, with appropriate proction of the Government's interest, ther in connection with or independatly of performance financing. 163.30 Report of adverse developments-prompt decisions. When materially adverse developments oncerning a borrower having a guaraned loan, or concerning a contractor aving advance payments or progress ayments, become known to a procuring r contract administration activity, perinent facts, including report of remedial r protective action taken or proposed, hould be reported by the procuring or contract administration activity to the contract financing office of the Department principally concerned with the contract financing, so that timely appropriate protective or remedial action may be taken by coordinated action of all concerned. However, the filing of such reports shall not relieve the personnel responsible for administration of the contract from taking such action as is deemed proper, prudent, and beneficial to the Government. When there are reasons to doubt the prudence of continuing progress payments or advance payments in cases involving performance difficulties or financial deterioration, decision must be made promptly and with proper regard to the harmful effects of delay on the continued operation of the contractors concerned. [32 F.R. 11951, Aug. 18, 1967] § 163.31 Reports. Each Department shall submit reports of financing activities at such times and in such form as may be prescribed by the Assistant Secretary of Defense (Installations and Logistics) and approved by or for the Assistant Secretary of Defense (Comptroller). [32 F.R. 11951, Aug. 18, 1967] § 163.32 Deviations-amendments. Actions in the exercise of the judgment and discretion allowed by these regulations are not deviations. Actions contrary to or inconsistent with or varying from these regulations would be deviations. Deviations will be permitted only when necessary in exceptional circumstances, after (a) the proposed deviation has been presented to the Contract Finance Committee, (b) the recommendations of that Committee have been obtained, and (c) the approval of the Assistant Secretary of Defense (Installations and Logistics) or his designated representative has been given. The above procedure will be followed also for amendments to this part (see § 163.4.) The provisions of Subchapter A of this chapter pertaining to deviations (§§ 1.109-2 and 1.109-3 of this chapter) and to amendments (§ 1.105 of this chapter) do not apply to these contract financing regulations. [32 F.R. 11951, Aug. 18, 1967] It is important that this part and the clauses set forth herein be applied fairly and uniformly for all contractors. When a serious question of interpretation or application of this part arises within a procuring activity, and is regarded as being of general importance, if the circumstances reasonably permit the obtaining of an advance opinion on the question from Departmental headquarters, the question should be presented, through procurement channels, to the procurement policy office at headquarters of the Department primarily interested. If the circumstances do not reasonably permit request for advance opinion, report of an interpretation made (if regarded as important and of general interest for uniform application or interpretation of this part) should be made to the appropriate one of the Departmental headquarters procurement policy offices. Those offices are expected to take appropriate and timely action to obtain the views of interested offices of the other Departments, including the contract financing offices (§ 163.26). When questions submitted are considered to be of importance in the general interest of uniformity and of fair and effective admin istration of this part, appropriate r sion of this part will be considered in manner outlined in § 163.4. In period tween any amendments of this part, contemplated that information on imp tant interpretations of general inter reported to or made at Departme headquarters, will be made available procuring activities for dissemination interested purchasing offices. [32 F.R. 11951, Aug. 18, 1967] § 163.33a Foreign procurement. The regulations in this part ap equally to domestic and foreign proc ment, with the exceptions and qualifi tions stated in this section and S$ 163.33a-1 to 163.33a-3. The enfor ability of a contract provision in foreign jurisdiction is dependent on l law and procedure. It may someti become necessary to take action in í eign countries to enforce collate security or other contract financing p tective provisions, or to recover prope pursuant to a progress payment cla and to collect contract financing inde edness. In such cases, the nature extent of remedies available for enfor ment of contract provisions is necessa determined by the laws, rules and p cedures of the country in which the re is sought. § 163.33a-1 Progress payments on c tracts for foreign performance. When progress payments (Subpart of this part) are contemplated for c tracts to be performed wholly or par in a foreign country, appropriate le advice should be obtained with resp to the validity, enforceability and eff tiveness of the contemplated progr payment clause (§§ 163.79-1, 163.7 and 163.80) and of any proposed gu antees, pledges or other special prot tive arrangements, within the fore country involved. Such legal adv should also cover the need, if any, for ditional protective provisions (§ 163. 6) or for deviations (§ 163.78-9) from uniform clauses, that may be requi to comply with the applicable fore law and to provide for the most effect protection and enforcement of the int ests of the United States. Secti 163.86 requires that proposed deviatio (§ 163.78-9) must have prior appro of the contract financing office (§ 163.2 after the coordination mentioned § 163.87. $163.33a-2 Advance payments on contracts for foreign performance. • When advance payments are proposed Subpart D of this part) for contracts to be performed wholly or partly in a foreign country, the recommendation $163.62) for advance payments should nclude appropriate legal advice along the lines of that outlined in § 163.33a-1. When advance payments are proposed o be made on contracts with foreign jovernments, it is expected that the adance payment arrangement, if approved $163.56), would not include provisions enerally unsuitable for government-toovernment agreements, such as those br special bank accounts, unilateral avithdrawal of funds, liens, insurance, idditional security, or representations, arranties and covenants of the kinds set forth in § 163.64-2 (p) and (r). It is recognized that advance payments to forign governments, when authorized, will eed to be adapted to the special circumtances of each case to provide appropriate protection in the light of the reationship of the United States to each ffected foreign government and with que recognition of the sovereign status of the contracting parties. 163.33a-3 Guaranteed loans for foreign contract performance. When contracts or subcontracts are to be performed in a foreign country, financing by means of loans guaranteed by the Departments seldom will be praclicable because of difficulties of loan administration and enforcement. When pans are to be utilized for financing of such contracts or subcontracts, it is considered generally preferable that the loans be provided within the internal financial system of the foreign Country concerned, without Department guarantee. 1950, as amended, each Federal Reserve Bank is designated and authorized to act, on behalf of each guaranteeing agency, as fiscal agent of the United States in the making of contracts of guarantee and in otherwise carrying out the purposes of section 301 of the Defense Production Act of 1950, as amended, in respect of private financing institutions. Pursuant to Regulation V of the Board of Governors of the Federal Reserve System, any private financing institution may submit to the Federal Reserve Bank of its district an application for guarantee of a loan or credit. This application is in substantially standard form, as approved by the Board of Governors of the Federal Reserve System, after consultation with the guaranteeing agencies. Forms of application, and information and guidance concerning applications, are available at all Federal Reserve Banks. § 163.36 Board of Governors of the Federal Reserve System. Under section 302(c) of Executive Order No. 10480, all actions and operations of Federal Reserve Banks, as fiscal agents, are subject to the supervision of the Board of Governors of the Federal Reserve System (hereinafter referred to as "Federal Reserve Board"). The Federal Reserve Board is authorized, after consultation with the heads of the guaranteeing agencies, (a) to prescribe such regulations governing the actions and operations of fiscal agents as it may deem necessary, (b) to prescribe, either specifically or by maximum limits or otherwise, rates of interest, guarantee and commitment fees, and other charges which may be made in connection with loans, discounts, advances, or commitments guaranteed by the guaranteeing agencies through such fiscal agents, and (c) to prescribe regulations governing the forms and procedures (which shall be uniform to the extent practicable) to be utilized in connection with such guarantees. but considers Government guarantee necessary, it may file application for guarantee with the Federal Reserve Bank of its district. The Federal Reserve Bank promptly submits copy of the application to the Federal Reserve Board listing defense contracts, for transmittal to the interested guaranteeing agency, so that determination may be made as to eligibility of the prospective borrower. For the purpose of expediting, the Federal Reserve Bank may also, pursuant to general instructions of the guaranteeing agencies, submit schedules of defense contracts to the interested contracting officers, who are expected at once to take appropriate steps for determination of eligibility, and to submit their findings and report, including certificate of eligibility where appropriate, to the designated central procurement office, or contract financing office as the case may be, within the guaranteeing agency. Concurrently with the process for determination of eligibility, the Federal Reserve Bank makes any necessary credit investigation, to the extent and in the manner that it considers investigation or verification appropriate to supplement information furnished by the applicant financing institution, all with a view to expediting necessary defense financing in such a way as to afford the best reasonable protection against monetary loss. The report and recommendation of the Federal Reserve Bank are sent to the Federal Reserve Board, which transmits them to the interested guaranteeing agency, in Washington. If the application is approved on such terms and conditions as may be deemed appropriate by the responsible officer or official within the guaranteeing agency, the guaranteeing agency then authorizes the Federal Reserve Bank, by standard form of authorization transmitted through the Federal Reserve Board, to execute and deliver to the financing institution a standard form of guarantee agreement, with the terms and conditions approved for the particular case. The Federal Reserve Bank, as fiscal agent for the guaranteeing agency, then issues the guarantee to the financing institution which makes the loan. Substantially the same procedure may be followed on application for guarantee of loans to be made to a potential defense contractor who is actively negotiating or bidding for defense business, except that the guarantee is not authorized until the prospective defense contract has b executed. § 163.38 Loan guarantees to other G ernment agencies. Loan guarantees are not issued to ot Departments or Agencies of the G ernment. [32 F.R. 11951, Aug. 18, 1967] § 163.39 Loan guarantees for ter nated contracts. (a) Guaranteed loans ordinarily p vide for financing based on the b rower's recoverable investment in fense production contracts, includi those contracts which have been terr nated for the convenience of the G ernment. Guaranteed loans also may established after total or partial tern nation of contracts for the convenien of the Government, or before su termination when it is known that te mination of particular contracts for t convenience of the Government is abo to occur. Such guaranteed loans are e pected to provide necessary financi pending termination settlements a payments, and also to provide any fun necessary for continuing performance defense production contracts that a eligible for financing under the guara teed loan. (b) The procedure on applications f such guarantees will be substantially t same as that outlined in § 163.37, exce that certificates of eligibility (§§ 163. to 163.49 (k) will not be required for co tracts which have been wholly term nated, nor for the terminated portion contracts which have been partial terminated. It is of course expect that necessary precautions, appropria to the circumstances of individual case will be taken, as in other cases, to avo losses and to cause such loans to be sel liquidating from the proceeds of defen production contracts. This type of lo guarantee, intended primarily for co tract termination financing, is not pr vided before the imminence of particul contract terminations, for the reaso outlined in § 163.47(b). Further reaso include the difficulty of determinir whether contract terminations will occ in the future and will require guarantee loan financing, and the expense and ad ministrative burden that would be in volved in establishing commitment which may in fact never be used. 163.40 Guaranteeing agency. Where a prospective borrower under a 7-loan has defense contracts or subconracts in which more than one of the guaranteeing agencies are interested, the guaranteeing agency in such case will e in general that agency which, as of he time of the application for the uarantee, has the preponderance of nterest in such contracts and subconracts on the basis of the dollar amount f the prospective borrower's unfilled and mpaid balances of such contracts and ubcontracts and estimated claims under erminated contracts (exclusive of conracts with advance payments, if such dvance payments are not to be liquilated by the proposed guaranteed loan). f the application is approved and a quarantee agreement is executed on bealf of such agency having the preonderance of interest, that agency will ear all losses and expenses and receive ll revenues under such guarantee withut allocation to other agencies of the Government. In this connection, among he Military Departments (§ 1.201-5 of his chapter), single service procurement ontracts are deemed those of the purhasing department. In exceptional acases, one Department may act for thers, and sharing arrangements are permitted. 32 F.R. 11951, Aug. 18, 1967] 163.40-1 Effect on preponderance of progress payments or denial of certificate of eligibility. Among the Departments, the deternination of preponderance of interest, inder § 163.40, is made without regard o the existence of progress payments on articular contracts, and without regard do the issuance or nonissuance of certifcates of eligibility on particular conracts. 132 F.R. 11951, Aug. 18, 1967] 163.40-2 Shifting of preponderance. During the course of a guaranteed pan, preponderance of interest in the orrower's defense production contracts hay shift from one of the Departments, is guaranteeing agency, to another Department. When such preponderance has shifted materially so that substantial preponderance is in one of the Departments other than the guaranteeing agency, action on requests for increases in the amount of guaranteed loans, and on requests for extension of maturity for a period of more than 6 months, ordi narily will be taken by the Department then having such preponderance of interest. However, in the above situation, action will be taken by the Department which has guaranteed the loan, if the loan is in distress, with fairly foreseeable losses, and the requested extension or increase is for the purpose of orderly liquidation of the loan in a manner designed to reduce the amount of the loss. If such a loan is not in distress, and losses are not fairly foreseeable, and borrower's the greater part of the defense production contracts are determined to be eligible for a continuing guaranteed loan, and the circumstances of the case are such that favorable action would have been taken by the then guaranteeing agency if it had remained preponderantly interested in the borrower's defense production contracts, similar favorable action will be taken by the Department then having such preponderance of interest. In these cases, while new application for guarantee is required, the file of the contract financing office which has authorized the existing guarantee will be transferred to the contract financing office of the Department then having preponderant interest in the case, and the information to be submitted with the application need be only current financial information, data concerning the borrower's defense production contracts, and other pertinent facts concerning the borrower and his operations, to the extent necessary to supplement and bring up to date the information previously furnished to the guarantor. In order not to disturb or impair any security for the existing loan, and for the convenience of all concerned, it is preferable that the new guarantee merely replace the former guarantee, with appropriate recitals as to cancellation of the former guarantee, and with appropriate revision of the existing loan agreement and of such collateral security instruments as may require revision. [32 F.R. 11951, Aug. 18, 1967] § 163.41 100 percent guarantees. It is the policy of the guaranteeing agencies that 100 percent guarantees shall be limited to the greatest extent compatible with the requirements of the national defense. Applications for 100 percent guarantees will be approved only in cases in which the guaranteeing agency determines that the circumstances are exceptional, that the operations of the borrower are vital to the |