(b) Policy. Defense Manpower Policy No. 4 (revised 5 November 1953), issued by the Director of Defense Mobilization, directs the placement of supply contracts, at prices no higher than might otherwise be obtainable elsewhere, with such suppliers as will perform contracts substantially in current labor surplus areas. Accordingly, the Departments shall comply with the following: (1) Use their best efforts to award negotiated procurements to contractors located within labor surplus areas for performance substantially within such labor surplus areas to the extent that procurement objectives will permit; provided, that in no case shall price differentials be paid for the purpose of carrying out this policy. (2) Where deemed appropriate, set aside portions of procurements for negotiation exclusively with firms located in labor surplus areas at prices no higher than those paid on the non-set-aside portion; provided, that performance shall be substantially within labor surplus areas. (For detailed procedures see §§ 2.205, 3.105, and 3.219 of this subchapter.) (3) Assure that firms in labor surplus areas which are on appropriate bidders' lists are given the opportunity to submit bids or proposals on all procurements for which they are qualified and on which small business joint determinations have not been made. Whenever the number of firms on a bidders' list is excessive, a representative number of firms from labor surplus areas shall be included for the particular procurement. (4) In the event of tie bids or proposals on any procurement, the contract shall be awarded in accordance with § 2.406-4 of this subchapter. (5) Encourage prime contractors to award subcontracts to firms in labor surplus areas. (6) Cooperate with other agencies listed in Defense Manpower Policy No. 4 in achieving the objectives of this policy. (c) Application. The policy in paragraph (b) of this section shall be applicable to procurements estimated to be in excess of $25,000. (d) Implementation. (1) The Departments shall cause information identifying labor surplus areas as defined above to be disseminated to appropriate procurement personnel. When an en tire industry is depressed, the Director of Defense Mobilization may establish appropriate measures upon an industrywide, rather than a normal geographical, basis. Designations of such industries will be accomplished by ODM Notifications, and such industries will thereafter be given special treatment as specified therein. (2) Procedures shall be established with respect to the issuance of Invitations for Bids and Requests for Proposals, as set forth in §§ 2.205-3 and 3.105 of this subchapter. Awards of contracts involving labor surplus areas shall be made in accordance with § 3.219 of this subchapter. (3) Contract files shall be documented to indicate the extent to which labor surplus areas were considered and the action taken with regard thereto. [19 F. R. 685, Feb. 5, 1954] § 1.302-5 Foreign purchases. Foreign purchases shall be made in accordance with the provisions of Part 6 and upon compliance with any other applicable provisions of this subchapter. [19 F. R. 686, Feb. 5, 1954] § 1.304 Types of contracts. Only the fixed-price or lump-sum type of contract shall be used for procurement by formal advertising. For procurement by negotiation, it shall be the general practice for the fixed-price type of contract to be used (with or without provision for price revision), although under such method of procurement it shall be permissible to use any other method of contracting which complies with the applicable provisions of Subpart D of Part 3 of this subchapter. [15 F. R. 8027, Nov. 23, 1950] § 1.305 Specifications. There shall be one system of military specifications to be used by all Departments in accordance with policies and procedures to be established by the Assistant Secretary of Defense (Supply and Logistics). Existing or new specifications, and amendments thereto, may be used until superseded or revised. Applicable Federal specifications, as prepared by the Director of the Federal Supply Service, General Services Administration, are acceptable for use. If for administrative reasons an applicable Federal specification cannot be used to meet the particular or essential needs of a Department, Military specifications or purchase specifications of that Department may then be used: Provided, That such specifications shall include in substance all applicable provisions of the related Federal specification. [18 F. R. 3641, June 25, 1953] § 1.305-1 Inadequate specifications. Whenever a specification is found to be inadequate, immediate action shall be taken to effect the issuance of an amendment or a revision in accordance with established procedures to obviate the necessity for repeated departures from the specification. [18 F. R. 3641, June 25, 1953] § 1.305-2 Packaging specifications and requirements. Appropriate provisions shall be included in contracts to insure that Contractors will package the supplies in accordance with applicable specifications and requirements. [18 F. R. 3641, June 25, 1953] § 1.306 Place of delivery. § 1.306-1 Shipments originating within the continental United States for ultimate delivery within the continental United States. Unless there are valid reasons to the contrary (such as, but not restricted to, industry practice, applicability of State taxes, or destination unknown) the procurement of supplies from sources and for delivery within the continental limits of the United States shall be in accordance with the following policy: (a) When it is estimated that a contract will require no shipment to a single destination which will equal a minimum carload or truckload lot, delivery shall be made on the basis of all transportation charges paid to destination. (b) When it is estimated that a contract will require a shipment of a minimum carload or truckload lot, delivery shall be either on the basis of (1) f. o. b. carrier's equipment, wharf, or freight station (at the Government's option) at or near contractor's plant, at a specified city or shipping point, or (2) all transportation charges paid to destination, whichever is the more advantageous to the Government. In formally advertised procurements the Invitation for Bids shall provide that bidders may bid on either or both bases set forth in this paragraph. Bids shall be evaluated on the basis of overall cost to the Government. In the absence of specific information to the contrary, a minimum carload or truckload lot shall be deemed to be one which weighs approximately 20,000 pounds. [19 F. R. 8747, Dec. 21, 1954] § 1.306-2 Shipments originating within the continental United States for ultimate delivery outside the continental United States. Unless it is industry practice to quote the same price f. o. b. destination as f. o. b. origin (on a regional or nationwide basis), purchases of supplies within the continental United States for ultimate delivery to destinations outside of the continental United States, wherever possible, regardless of the quantity of the shipment, shall be made on the basis of delivery f. o. b. carrier's equipment, wharf, or freight station (at the Government's option), at or near contractor's plant, at a specified city or shipping point. Shipments included in this policy are those in which supplies are shipped directly to a port area for export or to storage areas for subsequent reshipment to a port area for export. [19 F. R. 8747, Dec. 21, 1954] § 1.306-3 Shipments originating outside the continental United States. In the case of shipments originating outside the continental limits of the United States, the policy with respect to place of delivery shall be in accordance with procedures prescribed by each respective Department. [17 F. R. 5646, June 24, 1952] § 1.307 Responsible prospective contractor. Prior to the award of any contract for supplies or services the Contracting Officer shall determine that the prospective contractor is responsible. A responsible contractor is one which meets all of the requirements set forth in this section. (a) Is a manufacturer, construction contractor, or regular dealer, if the contract or order calls for supplies (see §1.201-9); (b) Has adequate financial resources, or ability to secure such resources; (c) Has the necessary experience, organization, and technical qualifications, and has or can acquire the necessary facilities (including probable subcontractor arrangements) to perform the proposed contract; (d) Is able to comply with the required delivery or performance schedule (taking into consideration all existing business commitments); (e) Has a satisfactory record of performance, integrity, judgment, and skills; and (f) Is otherwise qualified and eligible to receive an award under applicable laws and regulations. [19 F. R. 8747, Dec. 21, 1954] (a) If § 1.307-1 Pre-award survey. the Contracting Officer finds that readily available information is not sufficient to enable him to determine that the prospective contractor meets all of the applicable requirements of § 1.307 he shall request a pre-award survey. A pre-award survey is a qualification check to determine that the prospective contractor is responsible. Preferably the survey should be made by technical and financial specialists in the appropriate fields, and may include an "on the spot" check of the facilities of the prospective contractor. Generally, a pre-award survey will not be necessary in determining that a prospective contractor is responsible when one or more of the following factors are applicable: (1) The supplies required are off-theshelf items to be obtained from a regular dealer or manufacturer. (2) The prospective supplier has proved his reliability and capability by satisfactory performance of an existing or recent similar contract or contracts. (3) The new purchase is an extension of a production or service currently being performed satisfactorily. (4) The purchase is to be made from a Federal Supply Schedule. (b) Normally, where the dollar amount of a procurement is not sufficient to justify the cost of a pre-award survey, Contracting Officers will not request such a survey. However, where a Contracting Officer has reason to believe that a prospective contractor may not be responsible, he may request a pre-award survey irrespective of the dollar amount of the procurement. [19 F. R. 8747, Dec. 21, 1954] § 1.307-2 Experience data. Departments are authorized to maintain such records and experience data as may be deemed desirable for the guidance of Contracting Officers in the placing of new procurements. In making use of such materials, Contracting Officers shall assure themselves that the information contained therein is current. The departments are encouraged to exchange and confer concerning such records and experience data to the extent that the information contained therein will be mutually useful. [19 F. R. 8747, Dec. 21, 1954] SUBPART D-PROCUREMENT RESPONSIBILITY AND AUTHORITY SOURCE: §§ 1.400 to 1.404 appear at 15 F. R. 8027, Nov. 23, 1950. This sub $ 1.400 Scope of subpart. part deals with the procurement responsibility and authority of (a) the head of each procuring activity, and (b) Contracting Officers; and imposes limitations upon the authority to enter into contracts. § 1.401 Responsibility of each procuring activity. Except as otherwise prescribed by procedures of each respective Department, the head of each procuring activity, as now or hereafter established, is responsible for the procurement of supplies and services under or assigned to the procurement cognizance of his activity. The head of each procuring activity is authorized, within limits imposed by his Department, to designate such person or persons as he may select as Contracting Officers, within the meaning of that term as used throughout this subchapter. § 1.402 General authority of contracting officers. In accordance with the provisions of § 1.401 and subject to the requirements prescribed in §§ 1.403 and 1.404, any Contracting Officer is hereby authorized to enter into contracts for supplies or services, in accordance with procedures prescribed by the Department concerned, on behalf of the Government and in the name of the United States of America, whether by formal advertising or by negotiation or by coordinated or interdepartmental procurement as provided in this subchapter. § 1.403 Requirements to be met before entering into contracts. Irrespective of whether procurement is to be effected by formal advertising or by negotiation, no contract shall be entered into unless: (a) All applicable requirements of law, of this subchapter, and of procedures prescribed by each respective Department have been met; and (b) Such business clearance or approval as is prescribed by applicable Department procedures has been obtained. § 1.404 Special requirements to be met before entering into negotiated contracts. In addition to the requirements set forth in § 1.403, no contract shall be entered into as a result of negotiation until such determinations and findings as may be required with respect to the circumstances justifying negotiation and with respect to the use of a special method of contracting have been made by the persons and in the manner prescribed in Subparts C and D of Part 3 of this subchapter. SUBPART E-CONTINGENT OR OTHER FEES SOURCE: §§ 1.500 to 1.509 appear at 18 F. R. 1988, Apr. 9, 1953, except as otherwise noted. § 1.500 Scope of subpart. This subpart sets forth the procedures to be followed and prescribes the form to be used for obtaining information concerning contingent or other fees paid by Contractors for soliciting or securing contracts from the Department of Defense, including the Departments of the Army, the Navy, and the Air Force. [18 F. R. 2500, Apr. 29, 1953] § 1.501 Effective date. This subpart is effective with respect to all contracts initiated, and all invitations for bids or requests for proposals prepared, on or after April 1, 1953. § 1.502 Applicability. This subpart applies to all contracts. § 1.503 Covenant against contingent fees clause. Every contract shall contain the clause entitled "Covenant against Contingent Fees" as set forth in § 7.103-20 of this subchapter. § 1.504 Improper influence. The term "improper influence" means influence, direct or indirect, which induces or tends to induce consideration or action by any employee or officer of the United States with respect to any Government contract on any basis other than the merits of the matter. § 1.505 General principles and standards applicable to the covenant. The principles and standards set forth in this subpart are intended to be used as a guide in the negotiation, awarding, administration or enforcement, of all contracts. § 1.505-1 Contingent character of the fee. Any fee whether called commission, percentage, brokerage, or contingent fee, or otherwise denominated, is within the purview of the covenant if, in fact, any portion thereof is dependent upon success in obtaining or securing the Government contract or contracts involved. The fact, however, that a fee of a contingent nature is involved does not preclude a relationship which qualifies under the exceptions to the prohibition of the covenant. § 1.505-2 Exceptions to the prohibition of the covenant. Excepted from the prohibition of the covenant are "bona fide employees" and "bona fide established commercial or selling agencies maintained by the contractor for the purpose of securing business." § 1.505-3 Bona fide employee. The term "bona fide employee”, for the purpose of the exception to the prohibition of the covenant, means an individual (including a corporate officer) employed by a concern in good faith to devote his full time to such concern and no other concern and over whom the concern has the right to exercise supervision and control as to time, place, and manner of performance of work. It is recognized that a concern, especially a small-business concern, may employ an individual who represents other concerns. The factors set forth in § 1.505-4, except paragraph (d) of § 1.505-4, shall be applied to determine whether such an individual comes within the exception to the prohibition of the covenant. (a) A person may be a bona fide employee whether his compensation is on a fixed salary basis, or when customary in the trade, on a percentage, commission or other contingent basis or a combination of the foregoing. (b) The hiring must contemplate some continuity and it may not be related only to the obtaining of one or more specific Government contracts. (c) An employee is not "bona fide" who seeks to obtain any Government contract or contracts for his employer through the use of improper influence or who holds himself out as being able to obtain any Government contract or contracts through improper influence. § 1.505-4 Bona fide established commercial or selling agency maintained by the Contractor for the purpose of securing business. In determining whether an agency is a "bona fide established commercial or selling agency maintained by the Contractor for the purpose of securing business," the factors set forth in paragraphs (a) through (e) of this section shall be considered. They are necessarily incapable of exact measurement or precise definition and it is neither possible nor desirable to prescribe the relative weight to be given any single factor as against any other factor or as against all other factors. The conclusions to be reached in a given case will necessarily depend upon a careful evaluation of the agreement and other attendant facts and circumstances. (a) The fees charged should not be inequitable and exorbitant in relation to the services actually rendered. That is, the compensation should be commensurate with the nature and extent of the services and should not be excessive as compared with the fees customarily allowed in the trade concerned for similar services related to commercial (nonGovernment) business. In evaluating reasonableness of the fee, there should be considered services of the agent other than actual solicitation, as for example, technical, consultant or managerial services, and assistance in the procurement of essential personnel, facilities, equipment, materials or subcontractors for performance of the contract. (b) The selling agency should have adequate knowledge of the products and the business of the concern represented, as well as other qualifications necessary to sell the products or services on their merits. (c) There should ordinarily be a continuity of relationship between the Contractor and the agency. The fact that the agency has represented the Contractor over a considerable period of time is a factor for favorable consideration. It is not intended, however, to disqualify newly established Contractoragent relationships where a continuing relationship is contemplated by the parties. (d) It should appear that the agency is an established concern. The agency may be either one which has been in business for a considerable period of time or a new agency which is a presently going concern and which is likely to continue in business as a commercial or selling agency in the future. The business of the agency should be conducted in the agency name and char acterized by the customary indicia of the conduct of a regular business. (e) The fact that a selling agency confines its selling activities to the field of Government contracts does not, in and of itself, disqualify it under the covenant. The fact, however, that the selling agency is employed to secure business generally, that is, to represent the concern in connection with sales to the Government as well as regular commercial sales to non-Government activities is a factor entitled to favorable consideration in evaluating the case as one coming within the authorized exception. Arrangements confined, however, to obtaining Government contracts, particularly those involving a selling agency organized immediately prior to or during periods of expanded procurement resulting from conditions of national emergency, must be closely scrutinized. However, any agency or agent is not "bona fide" which seeks to obtain any Government contract or contracts for its principals through the use of improper influence or which holds itself out as being able to obtain any Government contract or contracts through improper influence. § 1.505-5 Fees for information. Contingent fees paid for "information" leading to obtaining a Government contract or contracts are included in the prohibition and, accordingly, are in breach of the covenant unless the agent qualifies under the exception as a bona fide employee or a bona fide established commercial or selling agency maintained by the Contractor for the purpose of securing business. § 1.506 Representation and agreement required from prospective contractors. Except as provided in § 1.507-2, each Department shall inquire of and secure a written representation from prospective Contractors as to whether they have employed or retained any company or person (other than a fulltime employee working solely for the prospective Contractor) to solicit or secure the contract, and shall secure a written agreement to furnish information relating thereto as required by the Contracting Officer. Where an invitation for bids is issued, this inquiry shall be made (and written representation and agreement secured) by requiring the |