may occur that actual costs and future cost of performance are higher than the estimated costs used to establish liquidation rates. In such cases (see paragraph (c) (vi) of the clause presented in § 1-30.510-1 (a) and paragraph (c)(iv) of the clause prescribed in § 1-30.5102(a)) appropriate increase of the liquidation percentage will be necessary to adjust for any under-liquidation that may have occurred, to bring the amount of unliquidated progress payments within the limits of paragraph (a) (3) of these clauses, and to assure the adequacy of future liquidations. Increase of the liquidation percentage will also become necessary even though the provisions of § 1-30.512-2 have not been applied in fixing the liquidation percentage, when progress payments are based on costs of direct labor and material only (§ 1-30.510-2) or any limited cost base (§ 1-30.511-5), and actual costs forming the base for progress payments are higher than the estimated eligible costs used in establishing the liquidation centage.

§ 1-30.525 Government title.

per

Since the clauses in § 1-30.510 give the Government title to all of the materials, work in process, and finished goods under contracts after the making of progress payments thereon, care should be taken to assure, to the extent reasonably necessary, that the title to the Government will be free of all encumbrances. The procedure in this respect will necessarily vary with the particular circumstances of individual cases. Ordinarily, in the absence of reason to believe that the Government title may be subject to encumbrance, the contractor's certificate will be relied on. If any arrangements or conditions are found that would impair the contractor's right of disposition of the property affected by the progress payments, appropriate arrangements should be made to establish and protect the Government title. The existence of any such encumbrance is a violation of the contractor's obligations under the contract.

§ 1-30.525-1 Loss, theft, destruction, or damage.

Paragraph (e) of the clauses presented in §§ 1-30.510-1(a) are not intended to

apply to normal spoilage. The risk of loss as to property affected by the Progress Payments clause is on the contractor, except to the extent that by some special provision of the contract (such as that relating to aircraft in the open) the Government shall have expressly assumed the risk of loss. Such express assumption of risk by the Government is not made in the Progress Payments clause, the Default clause, or the Termination clause. Because of problems of administering the contract, especially those connected with property responsibility and inventory control, the risk of loss on property to which the Government holds title because of progress payments must be on the contractor to the same extent that it would be if the contractor held title to the property. This risk of loss carries with it the accompanying duty to repay to the Government the amount of unliquidated progress payments based on cost allocable to lost, stolen, or destroyed property or to the damaged portion of the property. If the Government has expressly assumed particular risks of loss, then, to the extent of such express assumption of risk by the Government, the contractor would not be obligated to repay to the Government the amount of unliquidated progress payments based on costs allocable to such lost, stolen, destroyed, or damaged property. (See, however, paragraphs (c) (v) and (c) (vi) of the clauses prescribed in §§ 1-30.510-1(a) and 130.510-2(a), respectively, as to future payments on the contract after such loss, damage, theft, or destruction.) § 1-30.525-2

property.

Government-furnished

Contract provisions referring to or defining liability for Government-furnished property do not apply to property to which the Government shall have acquired title solely pursuant to the provisions of paragraph (d) of the Progress Payments clauses prescribed in § 1-30.510.

§ 1-30.525-3 Special tooling.

When the contractor furnishes special tooling, pursuant to a special tooling clause in the contract, and such special

tooling is not to be delivered to the Government as an end item under the contract, the handling and disposition of such special tooling should be governed by the Special Tooling clause of the contract, even though title to such special tooling is held by the Government pursuant to the Progress Payment clause of the contract.

§ 1-30.525-4 Termination for convenience of the Government.

After the giving of notice of termination under contract provision for Termination for Convenience of the Government, the property to which the Government has title pursuant to the Progress Payments clause and which is a part of termination inventory should be acquired or disposed of in accordance with the provisions of the Termination clause of the contract and of applicable laws and regulations. The acquisition or disposition of such termination inventory shall be governed by the Termination clause, even though title to all or a portion of such inventory is in the Government pursuant to the Progress Payments clause of the contract. § 1-30.525-5

Scrap-excess property.

(a) In the course of proper performance of contracts, contractors are permitted to sell or otherwise dispose of current production scrap in the ordinary course of business, notwithstanding the Government's title under the Progress Payments clause. Permission of the contracting officer for such disposal of scrap is not required. With the permission of the contracting officer and on terms approved by him, contractors may also acquire or dispose of materials, inventories, or work in process to which the Government has acquired title pursuant to the Progress Payments clause of the contract, including transfer of such property to other work of the contractor. Proceeds of scrap disposal will be credited against the costs of contract performance. Costs allocable to property, other than scrap, so transferred from the contract will be eliminated from the costs of contract performance, and the contractor shall be required to repay to the

Government an amount equal to the unliquidated progress payments allocable to the property so transferred from the contract.

(b) When (1) the contractor has completed all work called for by the contract, and (2) such work has been delivered to and accepted by the Government, and (3) progress payments made under the contract have been fully liquidated, and (4) the contractor has fully performed all his obligations under the contract (including the making of any payments to which the Government may be entitled under the contract, and including compliance with any other provisions of the contract, such as the Termination clause or the Government-furnished property clause), any excess property remaining is to be regarded as having not been allocated or properly chargeable to the contract under sound and generally accepted accounting principles and practices, and this outside the scope of the Progress Payments clause which would have vested title in the Government. Accordingly, the contractor holds title to such excess property and may deal with it as he desires.

§ 1-30.526 Consideration for progress

payments-awards.

When a Progress Payments clause is included at the inception of a contract, no separate consideration is charged for the Progress Payments clause, and there shall be no provision for interest or other specific charge for progress payments, or for a reduction in payments (other than any agreed discount for prompt payment) by reason of the making of progress payments. The worth of the Progress Payments clause to the contractor is expected to be reflected in one or both of (a) a bid or negotiated price that will be lower than such price would have been if provision had not been made for progress payments, or (b) contract terms and conditions, other than price, that are more beneficial to the Government than they would have been if provision had not been made for progress payments.

ress payments unless there has been material change from the circumstances contemplated by the parties when invitations for bids were issued or the contract was entered into without progress payment provision. However, cases do occur (a) in which the actual lead time or preparatory period between the beginning of work and the first delivery substantially exceeds the estimated lead time and in fact runs or will run over 6 months (§ 1-30.503), or (b) in which unusual circumstances bring about unexpected substantial accumulation of predelivery costs having material impact on the contractor's working funds (§ 130.505). These cases may arise from occurrences such as (a) uncertainties or errors in specifications, (b) contract change notices, (c) Government delays in testing, inspection, furnishing of material or equipment, furnishing of stock numbers, packaging or shipping instructions or shipping documents, or completion of contract supplements, (d) stretchouts or stop-work orders, (e) performance difficulties of subcontractors suppliers, and (f) causes beyond the control and without the fault or negligence of the contractor of the kinds mentioned in paragraph (c) of the Default clause provided in § 1-8.707. In these kinds of cases, requests of contractors for amendments to provide progress payments should be considered promptly, in the light of the circumstances then existing. If the circumstances then existing approximate conditions under which progress payments would have been properly provided in conformity with these regulations at contract inception, if the new circumstances had been foreseen, progress payments should be provided by amendment. In this connection see particularly §§ 1-30.202, 1-30.204, 1-30.205, 1-30.206, 1-30.207, 1-30.210, 1-30.210-1, and 1-30.528. § 1-30.528

Consideration for amendments providing for progress pay

ments.

Contracts may not be modified except in the interest of the Government. Contracts which do not provide for progress payments may be amended to provide for progress payments only when the

amendment provides now and valuable consideration moving to the Government. Appropriate price reduction may provide this consideration. In the varying circumstances of individual cases, the consideration for progress payments need not necessarily be monetary. Agreements by the contractor, incorporated in such an amendment, for the benefit of and substantially advantageous to the Government, may constitute sufficient consideration for an amendment providing for progress payments. When estimated financing costs have been included as an element (whether or not identified) in the contract price of a contract not providing for progress payments, it is fair to expect elimination of the applicable portion of that element of the price when progress payments are provided by amendment. The fair and reasonable consideration for the progress payment amendment should approximate in value as nearly as practically ascertainable the amount by which the contract price would have been smaller if a Progress Payments clause had been contained in the contract in the first instance. In the absence of definite information on this point, pertinent factors for estimating the fair and reasonable amount of consideration would include (a) the amounts of progress payments expected to be outstanding for an estimated period of time, (b) the cost of equivalent working funds to the contractor, and (c) the estimated profit rate expected to be earned by contract performance. If not accomplished by a contract price reduction, other concessions or agreement by the contractor, advantageous to the Government and incorporated in the amendment, may be fairly evaluated and accepted as being of value reasonably equivalent to a price reduction. This consideration should be such as is fair, equitable and reasonable in the light of the circumstances of each case. (See § 1-30.527.) This consideration should be for the progress payment amendment, and there shall be no provision for interest or other specific charge for progress payments, or for a reduction in payments after the progress payment amendment (other than any agreed discount for prompt payment) by reason of the making of progress payments.

SECTION II- GENERAL INSTRUCTIONS DATES Spaces are provided in the heading of Section II for the eatry of two dates. In the first space, enter the date of the first incurrence of costs of performance of the kind eligible for progress payments under the contract. In the second space, enter the date through which such costs have been accumulated for inclusion in this request and are therefore shown individually, as applicable item entries in Sections II and III.

LIMITED COSTS BASIS Certain contracts limit the progress payment base to incurred costs of direct labor and/or direct material or other specified costs which are less than incurred "Total costs". Then the contract includes such limitations only those costs eligible for progress payments under contract are to be identified and reported in Section U.

ITEM 7-1 If applicable, enter the rate used in computing general and administrative expenses and the computed dollar amount.

ITEM 7 Self-explanatory.

ITEM 8 Enter the percentage figure for progress payments stated in the contract (Paragraph (a) (1) (i) of the uniform progress payment clause) and the computed dollar amount based on that percentage, i.e., the com puted dollar amount of the entry in Item 78.

ITEMS 9 AND 10 Make no entry unless the contract requires progress payments to the contractor on account of progress payments to subcontractors. Include only progress payments on subcontracts which sonform to the progress payment provisions of the prime contract.

ITEM 9. Enter only progress payments actually paid.

ITEM 9-b. Enter total progress payments recouped from subcontractors. ITEM 9c Self-explanatory.

ITEM 9. d. Make no entry unless the prime contract specifies progress payments on account of unpaid subcontract progress payment billings which have been approved for current payment in the ordinary course of business. Include only such approved unpaid invoices.

ITEN 10 Self-explanatory.

ITEM 11 Self-explanatory.

ITEM 11-b Enter the percentage stated in the contract which limits aggregate progress payments (Paragraph (a) (4) of the uniform progress payment clause) which can be made and compute the dollar amount based on that percentage, i.e., the computed dollar amount of the entry

in item 3a.

ITEM 11c Self-explanatory.

ITEMS 12 AND 13 Self-explanatory.

SECTION III GENERAL INSTRUCTIONS This section is to be com pleted only when specifically requested by Government personnel re sponsible for administration of the contract. Completion of this sec tion will be requested when the rate or quality of contract performance is not sationary.then there is reason to believe that: (a) the conms involve oss to the contractor; or (b) insufficient costs have been allocated delivered items; or (c) outstanding progress pay ve fair value of the work accomplished on the portion of the contract or (2) the applicable percentage of allocated to unfinished work.

me

delin

TOTAL COST BASIS Certain contracts provide that per base will be total incurred costs. In such cases/tol)

penses incurred for performance of the contract

re reasonable, all

cable to the contract, consistent with sound and geally ing principles and practices, and which are not othe

epted account. uded by the con tract. (For exclusions, see the progress payment clause of the contract.)

MANUFACTURING AND PRODUCTION EXPENSE: GENERAL AND ADMINISTRATIVE EXPENSE Under certain conditions, eligible incurred costs include manufacturing and production expenses and general and administrative expenses which have been incurred for performance of the contract which are reasonable, allocable to the contract, and consistent with sound and gen erally accepted accounting principles and practices.

(NOTE: In connection with the first progress payment request on a contract, attach an explanation of the method, bases and period used in determining the amount of each of these two types of expenses. If the method, beses or periods used for computing these expenses dif fer in subsequent requests for progress payments under the contract, attach an explanation of such changes to the progress payment re quest involved.)

INCURRED COSTS INVOLVING SUBCONTRACTORS If the incurred costs eligible for progress payments under the contract include costs shown on invoices of subcontractors, suppliers and others that portion of the costs computed on the basis of such invoices can only include costs for: (1) completed work to which the prime contractor has acquired title; (2) materials delivered to which the prime contractor has acquired title; (3) services rendered; and (4) costs billed under cost reimbursement or time and materi al subcontracts for work to which the prime contractor has acquired title.

SECTION III SPECIFIC INSTRUCTIONS

ITEM 14 Of the costs reported in Item 78, compute and enter only costs which are applicable to items delivered, invoiced and accepted. to the applicable date. In order of preference, these costs are to be computed on the basis of one of the following: (a) the actual unit cost of items delivered, giving proper consideration to the deferment of the starting load costs; (b) projected unit costs (based on experienced costs, plus estimated costs to complete the contract), where the coa tractor maintains cost data which will clearly establish the reliability. of such estimates; and (c) the total contract price of items delivered. ITEM 15 Self-explanatory.

ITEM 16 Enter the percentage stated in the contract limiting unliquidated progress payments in relation to eligible costs (Paragraph (a)(3)(1) of the uniform progress payment clause). Compute and enter the dollar amount based on that percentage, i.e., the percentage of the entry in item

15.

ITEM 17 Enter the total billing price, as adjusted, of items delivered, accepted and invoiced to the applicable date.

ITEMS 18 AND 19 Self-explanatory.

ITEM 20 This entry is to be completed from the contractor's records. It is the total of all amounts which have been or are to be applied from previous billings to reduce outstanding progress payments, including amounts, if any, of payments OTHER than those applied from previous billings. (NOTE: If the entry includes reductions effected by means other than through previous billings, attach a statement showing details thereof.)

ITEM 21 Self-explanatory.

ITEM 22. Self-explanatory.

ITEM 22b Enter the percentage stated in the contract, limiting unliquidated progress payments to that percentage of the contract price of items which have not been delivered and accepted (Paragraph (a)(3)(1) of the uniform progress payment clause).

ITEM 22 c Self-explanatory. (NOTE: If the entry in this item is less than the entry in item 21, there has been an overpayment which requires adjustment.)

ITEM 23 Self-explanatory.