writing of the proposed change reasonably in advance and shall submit justification in sufficient detail to permit evaluation of the proposed change. Changes in the place of performance of work on any "make" item in the "make-or-buy” program are subject to this requirement. With respect to items deferred at the time of negotiation of this contract for later addition to the "make-orbuy" program, the Contractor shall notify the Contracting Officer of each proposed addition at the earliest possible time, together with justification in sufficient detail to permit evaluation. The Contractor shall not, without the written consent of the Contracting Officer, make changes or additions to the program. However, in his discretion, the Contracting Officer may ratify in writing any changes or additions. The "make-orbuy" program attached to this contract shall be deemed to be modified in accordance with the written consent or ratification by the Contracting Officer.

(a) On applicable contracts, the cognizant contract administration office will establish a procedure with the contractor to assure timely compliance with the terms of the contract clause. This procedure will include provisions for processing changes to the established "make-or-buy” program and for obtaining "make-or-buy" decisions for items reserved for deferred decisions or unidentified at the time of contract negotiations.

(b) When a "make-or-buy" program is agreed upon with a contractor, or there are changes or additions to a "make-orbuy" program, the consideration given each item on such program will be documented in the contract file. If a contract (including supplemental agreements for new procurement) except one specifically exempted by § 1-3.902–1(b), does not include the Changes to Makeor-Buy Program clause, the contracting officer will document the contract file with a written statement of facts to sustain and make clear the appropriateness of the determination not to include the clause. Such determination will be based on one of the following: (1) the contract is on a firm fixed-price basis; (2) the contract is not exempt but there are no items which can be identified as requiring a "make-or-buy" program as de

§ 1-3.903-2 Review and approval of subcontracts.

(a) When the prime contract is not to be placed on a firm fixed-price basis, review of subcontracts prior to placement may be desirable since the ultimate cost to the Government will depend in part on subcontract prices and performance. Contract provisions requiring advance notification to the contracting officer of proposed subcontracts for materials, components, and other purchases may be appropriate both for information as to sources and prices and to provide an opportunity for review and for approval or objection by the contracting officer prior to award of the subcontracts. Careful and thorough evaluation of subcontracts prior to placement is particularly necessary when:

(1) The prime contractor's purchasing system of performance thereunder is considered inadequate;

(2) Subcontracts are for items for which there is no competition or for which the proposed prices appear unreasonable, and the amounts involved are substantial (see § 1-3.807–10 (b));

(3) Close working arrangements or business or ownership affiliations exist between the prime and the subcontractor which may preclude the free use of competition or result in higher subcontract prices than would otherwise be obtained;

(4) A subcontract is being proposed at a price less favorable than that which has been given by the subcontractor to the Government, all other factors such as manufacturing period and quantity being comparable; or

(5) A subcontract is to be placed on a fixed-price incentive, time and material, labor-hour, fixed-price redeterminable, or cost-reimbursement basis.

(b) (1) Prime contract provisions relating to subcontracts, including those requiring advance notification, review, or approval thereof, should be consistent with the amount and character of subcontract work and with the overall character and type of the prime contract

and the conditions applicable to its use as described in Subpart 1-3.4; and should involve the Government to the minimum extent practicable in the contractor's exercise of management responsibility, but give reasonable assurance that adequate subcontracting opportunities have been afforded to small business and that the Government is receiving the greatest practical return for its expenditure. For example, if the contract is on a firm fixed-price basis except for a clause permitting price escalation resulting from cost increases for certain materials, the prime contract may limit the contracting officer's right of review of subcontracts to those for materials covered by the escalation clause. In the case of cost-reimbursement type contracts, advance notification, and prior consent or approval of subcontracts should be required. (Section 304 (b) of the Act (41 U.S.C. 254(b)) requires that all such contracts shall provide for advance notification of any subcontract thereunder on a cost-plus-a-fixed-fee basis and of any fixed-price subcontract or purchase order which exceeds in dollar amount either $25,000 or 5 per centum of the total estimated cost of the prime contract.)

(2) Provisions in prime fixed-price contracts relating to subcontract review may, as appropriate, be confined to one major subcontract or to certain classes of subcontracts; may set a floor above which advance approval of proposed subcontracts may be required before placement; or may be tailored to cover unusual or particular circumstances.

(3) In those instances where a contractor's purchasing system, including its small business program has been deemed adequate, review of subcontracts generally may not be necessary. However, contracting officers shall conduct periodic reviews of the application of the system to insure conformance therewith.

(4) In instances where subcontracts have been placed on a cost-reimbursement or time and materials basis, contracting officers should be skeptical of approving the repetitive or unduly protracted use of such types of contracts and should follow the principles of § 1-3.803(b).

(c) In cases where the prime contract reserves a right for the contracting officer to review or approve subcontracts,

(a) The provisions of this Subpart 1-4.4 apply to the procurement of utility services by executive agencies within the United States and its possessions and the Commonwealth of Puerto Rico.

(b) The Statement of Areas of Understanding between the Department of Defense and General Services Administration in the Matter of Procurement of Utility Services, as amended (15 F.R. 8227, 22 F.R. 871), shall govern the procurement of utility services by the Department of Defense.

(c) The provisions of this Subpart 1-4.4 do not apply to: (1) Utility services produced, distributed, or sold by a Federal agency (other than consolidated purchase, joint use, or cross-service by

one agency for another agency); or (2) utility services (other than those required for administrative purposes) obtained by purchase, exchange, or otherwise by Federal power or water marketing agencies as a direct incident to such agency's marketing or distribution program.

(d) GSA will, upon request, furnish the services provided for in this Subpart 1-4.4 to any other Federal agency, mixedownership Government corporation the District of Columbia, the Senate, the House of Representatives, or the Architect of the Capitol and any activity under his direction.

§ 1-4.403

Utility bills rendered to executive agencies.

Executive agencies shall notify the utility suppliers with which they do business to provide GSA from time to time, upon the request of GSA to the supplier, with duplicate copies of bills rendered to the individual agencies for utility services. The particular billing period will be mutually agreed upon between GSA and the supplier.

§ 1-4.404 GSA assistance.

(a) The Congress and the President, in the declaration of policy in the Federal Property and Administrative Services Act of 1949, stated an intent to provide for the Government an economical and efficient system for, among other things, the procurement of nonpersonal services, including contracting for and management of public utility services (40 U.S.C. 471). In order to implement this policy, GSA has established an experienced staff of utilities technical specialists and engineers, available to all agencies, to provide the necessary capabilities to facilitate more economical and efficient procurement and management of public utility services by Federal agencies.

(b) Agencies not having personnel technically qualified to deal with specialized utilities problems and requiring GSA technical assistance, and other agencies having technically qualified personnel but desiring GSA consulting assistance, should obtain assistance from the Transportation and Communications Service of GSA, in Washington, D.C., at the address listed below in § 1-4.405, or in the nearest of the 10 GSA regional offices through the TCS Regional Director.

It shall be the policy of executive agencies to obtain required utility services from sources of supply which are most advantageous to the Government in terms of economy, efficiency, or service, after investigating all appropriate sources. The supplier of a utility service is usually the sole source thereof. When more than one source of supply is available, the service may also be procured by negotiation since formal advertising is usually not feasible and practicable (see §§ 1-3.101 (a), (d); 1-3.202; 1-3.203; 1-3.210; and Subpart 1-3.3 of this chapter).

§ 1-4.406-2 Agency supply

ments.

arrange

In implementing the policy stated in § 1-4.406-1, use shall be made by agencies of: (a) GSA areawide contracts (§ 1-4.407); (b) GSA long-term contracts (§ 1-4.408); and (c) consolidated purchase, joint use, or cross-service by one agency for another agency (§ 1-4.409).

§ 1-4.407 GSA areawide contracts.

(a) GSA enters into areawide contracts with various utility suppliers for the furnishing of utility services to Federal agencies located within the service areas of such suppliers. GSA areawide contracts provide that the utility supplier, upon execution of a Government order in the form of an authorization prescribed by the contract, will furnish, without further negotiation, the services involved in accordance with such of the supplier's rate schedules as are applicable to such services and subject to all the provisions of the areawide contract.

(b) Unless it is determined that more advantageous competing services are available, each executive agency in the area covered by a GSA areawide contract shall procure utility services thereunder: Provided, however, That when it

is in the best interest of the Government, an agency may negotiate special rates or special services under an areawide contract or under a separate contract.

(c) When procuring utility services under a GSA areawide contract, each executive agency shall furnish or arrange to furnish to GSA an executed counterpart or conformed copy of the order authorizing service connection, disconnection, or change, as set forth in the particular contract.

(d) Upon request, GSA will furnish to Federal agencies a list of GSA areawide public utility contracts, showing in each case the kind of utility service, the serving utility, and the area served. GSA also will make available to Federal agencies, upon request, a copy of any areawide contract. Each contract includes the specimen order form authorizing service connection, disconnection, change.

§ 1-4.408 GSA long-term contracts.

or

Executive agencies ordinarily cannot obligate the Government for utility services beyond the current fiscal year. Therefore, affirmative action ordinarily is required in order to renew a contract beyond the current fiscal year. GSA, however, has special statutory authority to enter into long-term contracts for utility services for periods not exceeding 10 years (40 U.S.C. 481). GSA, either on its own initiative or upon request by an agency, will negotiate or assist in the negotiation of a long-term contract for the use and benefit of the agency, if a long-term contract is justified by one or more of the following circumstances:

(a) Where lower rates, larger discounts, or more favorable conditions of service can be obtained.

(b) Where a proposed connection charge, termination liability, or any other facilities charge to be paid by the Government would be eliminated or reduced.

(c) Where the utility supplier refuses to render the desired service except under a long-term contract.

procurement do not include cases where utility services are furnished without charge by another Government agency as an incident to space procurement.) A memorandum of understanding, specifying the services or facilities to be supplied and the estimated costs and other conditions under which they will be procured, shall be used in cases of consolidated purchase, joint use, or cross-service. A copy of each memorandum shall be retained in the procuring agency's file until the end of the retention period specified in § 1-4.410-6. These memorandums shall be subject to such on-site postreview or periodic reporting as may be required by GSA.

§ 1-4.410 Independent procurement by executive agencies.

§ 1-4.410-1 General.

(a) In the absence of available GSA areawide contracts (§ 1-4.407), GSA long-term contracts (§ 1-4.408), or consolidated purchase, joint use, or crossservice (§ 1-4.409), executive agencies may procure utility services and facilities, within the scope of their authority, by independent procurement for their own accounts, subject to the policy provisions of § 1-4.406, the procedural provisions of § 1-4.410, and the review provisions of § 1-4.411.

or

(b) Such procurement may be effected by formal bilateral written contract or by simple procurement documents, such as Government purchase orders or other written requests for service. A standard utility supplier application form similar document shall not be used, and if a Government purchase order or other written request for service will not be accepted by the utility supplier, the agency shall negotiate a formal bilateral written contract.

§ 1-4.410-2 Documentation of procurements from regulated utility suppliers.

Utility services may be procured by executive agencies by a simple procurement document, such as one of those mentioned in § 1-4.410-1, rather than by a formal bilateral written contract, when the utility supplier's rates are fixed or adjusted by a Federal, State, or other public regulatory body, except that a formal bilateral written contract shall be used under one or more of the following circumstances:

(a) The utility service is available from more than one source of supply, in which

case such service shall be procured as provided in § 1-4.406-1.

(b) The supplier requires the execution of a contract.

(c) The annual cost of the service to be procured is estimated by the using agency, at the time of initiation of the service or annual review of the expenditure, to be over $10,000.

(d) A proposed connection charge for connecting the using agency's facilities to the supplier's facilities, a termination liability for discontinuance of service or removal of facilities, the purchase cost or cumulative leasing cost of special facilities, or any other facilities charge to be paid by the agency (whether or not refundable) is estimated to exceed a total of $2,500.

(e) The executive agency concludes that a formal bilateral written contract is in the best interest of the Government. § 1-4.410-3 Documentation of

procurements from unregulated utility suppliers.

Utility services shall be procured by executive agencies by a formal bilateral written contract, rather than by a simple procurement document, such as one of those mentioned in § 1-4.410-1, when the utility supplier's rates are not fixed or adjusted by a Federal, State, or other public regulatory body, and one or more of the following circumstances exists:

(a) The utility service is available from more than one source of supply, in which case such service shall be procured as provided in § 1-4.406-1.

(b) The supplier requires the execution of a contract.

(c) The annual cost of the service to be procured is estimated by the using agency, at the time of initiation of the service or annual review of the expenditure, to be over $2,500.

(d) A proposed connection charge for connecting the using agency's facilities to the supplier's facilities, a termination liability for discontinuance of service or removal of facilities, the purchase cost or cumulative leasing cost of special facilities, or any other facilities charge to be paid by the agency (whether or not refundable) is estimated to exceed a total of $1,000.

(e) The executive agency concludes that a formal bilateral written contract is in the best interest of the Government.