tract basis, the responsibility of negotiating the cost-sharing arrangement is that of the Contracting Officer. In the case of institutional cost-sharing arrangements (see paragraph (f) of this section) the responsibility for negotiating cost sharing is that of the Office of the Assistant Secretary for Health. Each research contract file should show whether the contracting officer considered cost sharing appropriate for that particular contract and, except when an institutional cost-sharing agreement is applicable, in what amount. If cost sharing was not considered appropriate, the file must indicate the factual basis for that decision, e.g., "Because the contractor will derive no benefits from this award that can be applied to his commercial activities, cost sharing is not considered appropriate.” The contracting officer may wish to coordinate with the project officer before documenting his decision. (3) If the contracting officer considers cost sharing to be appropriate for a research contract and the contractor refuses to accept this type of contract, the award may be made without cost sharing except when cost sharing is required by statute, if the contracting officer concludes that payment of the full cost of the research effort is necessary in order to obtain the services of that particular contractor. (d) Amount of cost sharing. When cost sharing is required by statute or determined to be appropriate, the following guidelines shall be utilized in determining the amount of cost participation by the contractor except where a institutional cost-sharing agreement is applicable (see paragraph (f) of this section). (1) Cost participation by educational institutions and other not-for-profit or nonprofit organizations should normally be at least 1 percent of total project cost. In many cases cost sharing of less than 5 percent of total project cost would be appropriate in view of the organizations' nonprofit status and their normally limited ability to recover the cost of such participation from non-Federal sources. However, in some cases it may be appropriate for educational institutions to provide a higher degree of cost sharing, such as when the cost of the research consists primarily of the academic year salary of faculty members (or when the equipment acquired by the institution for the project will be of significant value to the institution in its educational activites). These percentages listed above are not intended as a substitution for those set forth in any legislation and are not to be used in lieu of those contained in such legislation. (2) The amount of cost participation by commercial or industrial organizations should depend to a large extent on whether the research effort or results are likely to ehance the performing organization's capability, expertise, or competitive position, and the value of such enhancement to the performing organization. It should be recognized that those organizations which are predominantly engaged in research and development and have little or no production or other service activities may not be in a favorable position to derive a monetary benefit from their research under Federal agreements. Therefore, cost participation by commercial or industrial organizations could reasonably range from as little as 1 percent or less of the total project cost, to more than 50 percent of total project cost. (3) If the performing organization will not acquire title to or the right to use inventions, patents or technical information resulting from the research project it would generally be appropriate to obtain less cost sharing than in cases in which the performer acquires such rights. (4) When cost sharing is required by statute, cost participation of less than 1 percent may be appropriate if consistent with the provisions of the statute and: (1) A formal request for proposal is issued; (11) the contractor proposes to perform the research primarily as a service to the Government, or (ii) the contractor has little or no non-Federal sources of funds from which to make a cost contribution. (5) A fee or profit will usually not be paid to the performing organization if the organization is to contribute to the cost of the research effort, but the amount of cost sharing may be reduced to reflect the fact that the organization is foregoing its normal fee or profit in the research. However, if the research is expected to be of only minor value to the performing organization and if cost sharing is not required by statute, it may be appropriate for the performer to make a contribution in the form of a reduced fee or profit rather than sharing the costs of the project. (6) The organization's participation may be considered over the total term of the project so that a relatively high contribution in 1 year may be offset by a relatively low contribution in another. (7) A relatively low degree of cost sharing may be appropriate if, in the view of the operating agency, an area of research requires special stimulus in the national interest. (8) In the final analysis, the amount of cost participation should reflect the mutual agreement of the parties: Provided, That it is consistent with any statutory requirements. (e) Method of cost sharing. Cost sharing on individual contracts may be accomplished either by a contribution of part or all of one or more elements of allowable cost of the work being performed, or by a fixed amount or stated percentage of the total allowable costs of the project. Costs so contributed may not be charged to the Government under any other grant or contract (including allocations to other grants or contracts as part of any independent research and development program. (f) Institutional cost-sharing agreements. (1) An institutional cost-sharing agreement covers the aggregate of some or all of the research projects supported by HEW research contracts and grants at a given performing organization. With respect to contracts, such agreements will apply only to cost-sharing type research contracts resulting from unsolicited proposals and awarded without fee or profit. Eligibility for institutional cost-sharing agreements is limited to nonprofit institutions of higher education and other public or private nonprofit or not-for-profit organizations. Usually a single agreement will cover all applicable research projects at a given performing organization; however, in unusual cases, separatae agreements for individual departments or locations of the performing organization may be negotiated if deemed advantageous. (2) The institutional cost-sharing agreements establish an overall sharing ratio applicable to the aggregate of all covered projects. Individual awards will incorporate the institutional agreement by reference, but will not establish a specific sharing ratio for the individual project. The amount of sharing on any particular project will therefore be left to the discretion of the performing organization, and relatively high contributions on some projects may offset relatively low contributions on other projects: Provided, That: (i) the agreed aggregate contribution is made during each of the contractor's fiscal years, and (ii) a contribution, even if nominal, is made to each covered project. (3) (1) The Office of the Assistant Secretary for Health shall be responsible for negotiating all HEW institutional costsharing agreements. Such agreements, when negotiated, will be binding upon all HEW agencies. Eligible contractors wishing to negotiate institutional costsharing agreements should contact the Chief, Cost and Audit Management Branch, Division of Grants and Contracts, ORM-OAM, Office of the Assistant Secretary for Health, Room 18 A 30, Parklawn Building, 5600 Fishers Lane, Rockville, Maryland 20852. Institutional cost-sharing agreements already in existence at the effective date of this subpart (and therefore applicable only to grants) must be amended to include subsequently awarded contracts. (ii) All necessary implementing instructions to cover such matters as content of proposals, format of agreements, documentation, etc., shall be issued by the Office of the Assistant Secretary for Health subject to the prior approval of the Office of Grants and Procurement Management, OS. (lil) The Office of the Assistant Secretary for Health shall provide the Office of Grants and Procurement Management, OS, and the Department's operating agencies with current listings of all institutional cost-sharing agreements, indicating the date on which they became effective with respect to contracts. Copies of individual agreements will be made available to the Department's other agencies upon request. Each agency shall designate only one individual who shall be authorized to make such requests. (4) The amount of cost sharing negotiated under an institutional costsharing agreement will be determined in accordance with the appropriate guidelines contained in "A Guide to Institutional Cost Sharing Agreements" issued by the Cost and Audit Management Branch, Division of Grants and Contracts, ORM-OAM, Office of the Assistant Secretary for Health. The extent to which the performing organization shared in the costs of HEW-sponsored research in the past, and its anticipated ability to do so in the future, should also be taken into account. (g) Contract clauses. (1) In contracts for which cost sharing will be in ac The Contractor agrees to share in the cost of the work hereunder to the extent of not less than (Indicate percent of total cost or dollar amount, etc.) and shall maintain records of all costs so contributed, as well as costs to be paid by the Government. Such records shall be subject to audit. Costs contributed by Contractor shall not be charged to the Government under any other grant or contract (including allocation to other grants or contracts as part of an independent research and development program). (h) Contract award. In consonance with the Department's objectives of competition in procurement and support of the Small Business Program, award of contracts should not be made solely on the basis of ability or willingness to cost share. (Awards should be made primarily on the contractor's competence and only after adequate competition has been obtained among large and small business organizations whenever possible.) The offeror's willingness to share costs should not be considered in the technical evaluation process but as a business consideration, which is secondary to selecting the best qualified source. [37 FR 15860, Aug. 5, 1972, as amended at 39 FR 6609, Feb. 21, 1974] § 3-3.408 Letter contract. (a) Definition. A letter contract is a written preliminary contractual instrument which authorizes immediate commencement of work or services. (b) Policy. The policy of the Department of Health, Education, and Welfare is not to issue letter contracts. Exceptions to this policy will be permitted only in those cases where all matters of a substantive nature, such as statements of work, delivery schedules, and general and special clauses have been resolved and agreed upon. (c) Application. A letter contract may be entered into only when: (1) The urgency of the requirement necessitates that the contractor be given a binding commitment so that work can commence immediately, (2) preparation of a definitive contract in sufficient time to meet Departmental requirements is not possible, and (3) prior approval has been obtained. (For approval levels, see paragraph (d) of this section.) (d) Approval. (1) Any letter contract which obligates more than 50 percent of the estimated cost of the procurement or provides for a period of effectiveness of more than 90 days, must be approved by the Deputy Assistant Secretary for Grants and Procurement Management. When approval is recommended such requests shall be forwarded by the official set forth below, with his concurrence to the Office of Grants and Procurement Management. All requests must be in writing and originated by the contracting officer. Requests for authority to issue letter contracts which can be approved by any official designated below shall be processed in accordance with the procedures established by the head of the procuring activity. Office of the Secretary-Deputy Assistant Secretary for Administration. Office of the Assistant Secretary for HealthDirector. Office of Grants and Contracts. Office of Education-Assistant Commissioner for Business Management. National Institute of Education-Assistant Director of Administration. Social and Rehabilitation Service Assistant Administrator Financial Management. Social Security Administration-Director, Division of Operating Facilities. (2) Also, amendments to letter contracts which increase the funding under an existing letter contract to more than 50 percent of the estimated cost of the procurement or extend the period of effectiveness of the letter contract to more than 90 days must be approved by the Deputy Assistant Secretary for Grants and Procurement Management. (3) In no event will the individual signing the contractual document be the person who approves it. (e) Limitations. (1) A letter contract shall not be entered into without competition when competition is practicable. (2) A letter contract shall be superseded by a definitive contract at the earliest practicable date, but in no event later than 150 days after the date of execution of the letter contract. (3) The maximum fund liability of the Government, stated in the letter contract, will be limited to only that amount determined essential to cover the contractor's requirements for funds prior to definitization. (f) Information to be furnished when requesting authority to issue a letter contract. The following information should be included in any memorandum for approval to issue a letter contract: (1) Name and address of proposed contractor. (2) Location where contract is to be performed. (3) Contract number, including modification number, if possible. (4) Brief description of work and services to be performed. (5) Performance or delivery schedule. (6) Amount of letter contract. (7) Estimated total amount of definitized contract. (8) Type of definitive contract to be executed (fixed price, cost-reimbursement, etc.). (9) Statement of the necessity and advantage to the Government of the use of the proposed letter contract. (10) Statement of percentage of the estimated cost that the obligation of funds represents. In rare instances where the obligation represents 50 percent or more of the proposed estimated cost of the procurement, a justification for such obligation must be included which would indicate basis and necessity for the obligation, (e.g., the contractor requires a large initial outlay of funds for major subcontract awards or an extensive purchase of materials to meet an urgent delivery requirement). In every case, documentation must assure that the amount to be obligated is not in excess of an amount reasonably required to perform the work. (11) Period of effectiveness of the proposed letter contract. If more than 90 days, complete justification must be given. (12) Statement that the document meets the requirements of § 1-3.408(d) of this title. (13) Statement of any substantive matters that need to be resolved. (g) Approval for modifications to letter contracts. All letter contract modifications, other than those covered in paragraph (d) (2) of this section, must be approved by an official designated in paragraph (d)(1) of this section. The Deputy Assistant Secretary for Grants and Procurement Management will approve those modifications covered by paragraph (d) (2) of this section. Requests for authority to issue letter contract modifications shall be processed in the same manner as requests for authority to issue letter contracts (see paragraph (d)(1) of this section) and shall include the following: (1) Name and address of the contractor. (2) Description of work and services. (3) Date original request was approved and indicate approving official. (4) Letter contract number and date issued. (5) Complete justification as to why the letter contract cannot be definitized at this time. (6) Complete justification as to why the level of funding must be increased. (7) Complete justification as to why the period of effectiveness is increased beyond 90 days, if applicable. (8) If the funding of the letter contract is to be increased to more than 50 percent of the estimated cost of the procurement, the information set forth in paragraph (f) (10) of this section must be included in the memorandum. [38 FR 29467, Oct. 25, 1973] § 3-3.410 Other types of agreements. (a) Description. A basic agreement is not a contract. It is a written instrument of between understanding executed DHEW and a contractor which sets forth the negotiated contract clauses which shall be applicable to future procurements entered into between the parties while the basic agreement is in effect. A basic agreement will apply to a particular procurement by the execution of a formal contractual document which will provide for the scope of work, price, delivery, and additional matters peculiar to the requirements of the specific procurement involved, and shall incorporate by reference or append the contract clauses agreed upon in the basic agreement as required or applicable. Basic agreements may be used with fixed-price or cost-reimbursement type contracts and need not be limited to specific types of services and supplies or categories of procurements. (b) Applicability. (1) Basic agreements are appropriate for use when (i) past experience and future plans indicate that a substantial number of separate contracts may be entered into with a contractor during the life of the basic agreement; (ii) Peculiar recurring problems exist with a particular contractor regarding the standard general provisions or other terms and conditions of contracts and (iii) where it is beneficial for the contractor and the Government to do so. (2) Except where particular and unique circumstances exist regarding an individual contract, a basic agreement shall be modified only by a modification of the basic agreement itself and shall not be modified or superseded by individual contracts entered into under and subject to the terms of such basic agreement. Any provision of a contract which conflicts with the terms of a basic agreement must be approved by the Office of Grants and Procurement Management (OGPM). Basic agreements may be modified at any time, however, it is generally desirable to modify them as infrequently as possible. Changes to clauses or new clauses resulting from statutes or Executive Orders should be incorporated as soon after issuance as feasible. Clauses pertaining to subjects not covered in a basic agreement but applicable to the contract or modifications to the contracts being negotiated, and clauses required by statute or Executive Order, if any, which have become effective after the last modification to the basic agreement shall be included in the contract and modifications as if no basic agreement existed. Other changes should be incorporated on an annual basis unless one of the parties specifically requests earlier consideration. As a minimum, basic agreements should be reviewed annually before the anniversary of their effective date and revised to conform with the current requirements of this section. Unless otherwise designated by OGPM, the agency negotiating the basic agreement will be responsible for negotiating all modifications thereto. (3) Basic agreements shall continue in effect until terminated or superseded and shall provide for termination upon 30 days written notice by either party. Termination of a basic agreement will not affect any individual contract referencing or appending the basic agreement entered into prior to the effective date of termination. (4) A basic agreement shall be used to cover all subsequent procurements which fall within its scope. Provisions of the basic agreement, including supplements thereto, shall be incorporated into a formal contractual document covering a particular procurement by referring therein to the number of the basic agreement and each of its supplements. When an existing contract is amended to effect new procurement, the contract modification shall incorporate the most recent basic agreement, including supplements thereto, to apply only to the work added by the contract modification. (5) Contract modifications negotiated pursuant to the terms of an existing contract and not involving new procurement may, by mutual agreement of the parties and if determined to be in the interest of the Government, amend the existing contract to conform to a subsequently executed or supplemented basic agreement. (6) If a clause, which properly deviates from a prescribed clause, must be replaced the replacement clause may deviate to the same extent as the original clause, if the revision is not related to the deviation, and if the deviation has not expired or been rescinded. (7) Basic agreements may include negotiated overhead rates for cost-reimbursement type contracts. Where negotiated overhead rates are included the bases to which the rates apply and the period of applicability must also be stated. All pertinent provisions such as final rates for past periods, provisional rates for current or future periods, ceilings, and any specific items to be treated as indirect costs shall also be included as appropriate. (8) Normally a basic agreement will continue in effect until terminated or superseded. Basic agreements for a specified term are not, however, precluded. (c) Limitations. (1) Basic agreements shall neither cite appropriations to be charged nor be used alone for the purpose of obligating funds. (2) Basic agreements shall not in any manner provide for or imply any agreement on the part of the Government to |