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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(f) Notification to the Contractor of an increase or decrease in the funds available for performance of this contract as a result of a clause other than this clause (e.g., exercise of an option for increased quantities or the “Changes" clause) shall not constitute the notification contemplated by paragraph (b) of this clause.

(End of clause)

(b) CANCELLATION OF ITEMS (1974 APR)

(a) This clause applies only in the event this contract is awarded on the alternative basis for award described in the Schedule as "Multi-Year Procurement."

(b) As used herein, the term "cancellation" means that the Government is cancelling, pursuant to this clause, its Program Year requirements for items as set forth in the Schedule for all Program Years subsequent to that in which notice of cancellation is provided. Such cancellation shall occur only if, by the date or within the time period specified in the Schedule, or such further time as may be agreed to, the Contracting Officer (i) notifies the Contractor that funds will not be available for contract performance for any subsequent Program Year; or (ii) fails to notify the Contractor that funds have been made available for performance of the Program Year requirement for the succeeding Program Year.

(c) Except for cancellation pursuant to this clause or for termination pursuant to the “Default" clause, any reduction by the Contracting Officer in the quantities called for under this contract shall be considered a termination in accordance with the “Termination for Convenience of the Government" clause of this contract.

(d) In the event of cancellation pursuant to this clause, the Contractor will be paid, as consideration therefor, a cancellation charge not to exceed the cancellation ceiling described and separately set forth in the Schedule as being applicable at the time of cancellation.

(e) The cancellation charge is intended to cover (i) only costs reasonably necessary for production which would have been equitably amortized in the unit prices for the entire multi-year contract period, but which, because of the cancellation, are not so amortized and (ii) a reasonable profit on such costs. The cancellation charge shall be computed and claim therefor made as would be applicable under the “Termination for Convenience of the Government" clause of this contract. The Contractor shall submit the claim promptly but in no event later than one year (i) from the date of notification of the nonavailability of funds, if issued pursuant to paragraph (b)(i), or (ii) from the date specified in the schedule by which notification of the availability of additional funds for the next succeeding program year is required to be issued, whichever is earlier, unless one or more extensions in writing are granted by the Contracting Officer, upon request of the Contractor made in writing within such one year period or authorized extension thereof. The claim may include reasonable preproduction and other nonrecurring costs, incurred by the Prime Contractor or his subcontractor, applicable to and which normally would be amortized in all items to be furnished under the multi-year requirements, such as plant rearrangement, special tooling, preproduction engineering, initial rework, initial spoilage and pilot runs, as well as costs not amortized by the level contract unit price solely because the cancellation had precluded anticipated benefits of Contractor or subcontractor learning. The claim shall not include any amount for:

(i) labor, materials, or other expenses incurred by the Contractor or its subcontractors

for production of the canceled items; (ii) any item or cost for which payment has already been made to the Contractor; or

(iii) anticipated profit on the canceled items. (f) If this contract includes an option to increase quantities in which the period for exercise of the option is limited to the date set forth in the contract for notifying the Contractor that funds are available for the requirement of the next succeeding program year, the Contractor agrees not to include in the price for option quantities any costs of a startup or nonrecurring nature, which costs have been fully provided for in the unit prices of the firm quantities of the Program Years, and further agrees that the prices offered for option quantities will reflect only those recurring costs, and a reasonable profit thcrcon, which are necessary to furnish the additional option quantities. Therefore, any quantities added to the original contract quantities through exercise of the Government option in the "Option to Increase Quantities" clause of this contract shall not be

7-104.47

ARMED SERVICES PROCUREMENT REGULATION

CONTRACT CLAUSES AND SOLICITATION PROVISIONS

subtracted from what would otherwise be considered the quantity canceled for the purpose of computing allowable cancellation charges.

(End of clause)

7-104.48 New Material. In accordance with 1-1208, insert the following clause.

NEW MATERIAL (1965 JAN)

Except as to any supplies and components which the Specification or Schedule specifically provides need not be new, the Contractor represents that the supplies and components including any former Government property identified pursuant to the “Government Surplus" clause of this contract to be provided under this contract are new (not used or reconditioned, and not of such age or so deteriorated as to impair their usefulness or safety). If at any time during the performance of this contract, the Contractor believes that the furnishing of supplies or components which are not new is necessary or desirable, he shall notify the Contracting Officer immediately, in writing, including the reasons therefor and proposing any consideration which will flow to the Goverment if authorization to use such supplies is granted.

(End of clause)

7-104.49 Government Surplus. In accordance with 1-1208, insert the following clause.

GOVERNMENT SURPLUS (1965 JAN)

(a) In the event the bid or proposal is based on furnishing items or components which are former Government surplus property or residual inventory resulting from terminated Government contracts, a complete description of the items or components, quantity to be used, name of Government agency from which acquired, and date of acquisition shall be set forth on a separate sheet to be attached to bid or proposal. Notwithstanding any information provided in accordance with this provision, items furnished by the Contractor must comply in all respects with the specifications contained herein.

(b) Except as disclosed by the Contractor in (a) above, no property of the type described herein shall be furnished under this contract unless approved in writing by the Contracting Officer.

(End of clause)

7-104.50 Management Systems. In accordance with 1-331(e), insert the following clause.

MANAGEMENT SYSTEMS REQUIREMENTS (1971 NOV)

The Contractor shall utilize the management systems listed on the DD Form 1660, Managemont Systems Summary List, attached hereto and made a part hereof. Compliance with this clause shall not relieve the Contractor from complying with any other provision of this contract.

(End of clause)

7 104.51 Production Progress Report. In accordance with 25–202, insert the Rollowing clause.

PRODUCTION PROGRESS REPORTS (1971 APR)

(#) The contractor shall prepare and submit to the Contracting Officer Production Progress Koperts in accordance with the instructions set forth elsewhere in this contract.

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ARMED SERVICES PROCUREMENT REGULATION

CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(b) During any delay in furnishing a Production Progress Report required under this contract, the Contracting Officer may withhold from payment an amount not exceeding $10,000 or 5% of the amount of this contract, whichever is less.

(End of clause)

7-104.52 Reserved.
7-104.53 Reserved.
7-104.54 Reserved.
7-104.55 First Article Approval.

(a) In accordance with 1-1903, insert the following clause when the contractor is responsible for conducting first article approval test:

FIRST ARTICLE APPROVAL-CONTRACTOR TESTING (1969 SEP)

(a) The first article is ......... unit(s) of Lot/Item .......... which shall be tested in accordance with the provisions contained or referenced in this contract. At least ... .......... (-) calendar days prior to the beginning of first article approval tests, the Contractor shall furnish written notice to the Contracting Officer of the time and location of the testing so that the Government may witness such testing if it so elects.

(b) Within ........... (-) calendar days from the date of this contract, the first article approval test report shall be forwarded to ................ (Set forth address of office to receive the report.) marked "FIRST ARTICLE: Contract No. ........., Lot/Item No. .........." The Contracting Officer shall, by written notice to the Contractor within ........ (-) calendar days after receipt of such test report by the Government, approve, conditionally approve, or disapprove such first article. The notice of approval or conditional approval shall not relieve the Contractor from complying with all requirements of the specifications and all other terms and conditions of this contract. A notice of conditional approval shall state any further action required of the Contractor. A notice of disapproval shall cite reasons therefor.

(c) If the first article is disapproved by the Government, the Contractor may be required, at the option of the Government, to repeat any or all of the first article approval tests. After each notification by the Government of the requirement for additional tests, the Contractor shall at no additional cost to the Government make any necessary changes, modifications, or repairs to the first article or select another first article for testing. Thereafter, the Contractor shall perform the required additional approval tests and deliver another report to the Government under the terms and conditions and within the time specified by the Government. The Government shall take action on this report within the time limit specified in (b) above. All costs related to additional approval tests shall be borne by the Contractor. The Government reserves the right to require an equitable reduction of contract price for any extension of the delivery schedule or for any additional costs to the Government related to additional approval tests.

(d) If the Contractor fails to deliver any first article approval test report within the time or times specified, or if the Contracting Officer disapproves any first article, the Contractor shall be deemed to have failed to make delivery within the meaning of the "Default" clause of this contract, and this contract shall be subject to termination for default: provided, that failure of the Government in such an event to terminate this contract for default shall not relieve the Contractor of his responsibility to meet the delivery schedule for production quantities.

(e) Where the approved first article is not consumed or destroyed in testing, and unless otherwisc provided in this contract, the first article may be delivered as part of the contract quantity if it mccts all terms and conditions of the contract for acceptance.

(f) In the event the Contracting Officer does not approve, conditionally approve, or disapprove the first article within the time specified in (b) or (c) above, the Contracting Officer shall, upon timely written request made by the Contractor, make a determination of the delay occasioned the Contractor thereby, and shall equitably adjust the delivery or performance dates or the contract pricc, or both, and any other contractual provision affected by such delay, in accordance with the procedures provided in the "Changes" clause. Failure to agree to any adjustment shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes."

7-104.55

ARMED SERVICES PROCUREMENT REGULATION

CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(8) Prior to approval of the first article, the acquisition of materials or components for, or the commencement of production of, the balance of the contract quantity shall be at the sole risk of the Contractor; and costs incurred on account thereof shall not be allocable to this contract (i) for the purpose of progress payments prior to approval of the first article, if this contract contains the clause entitled "Progress Payments," or (ii) for the purpose of termination settlements, if this contract is terminated for the convenience of the Government prior to approval of the first article.

(End of clause)

At the option of the contracting officer, the following paragraph may be added to the clause:

(h) The first article offered must be manufactured at the facilities in which that item is to be produced under the contract, or if the first article is a component not manufactured by the Contractor, such component must be manufactured at the facilities in which the component is to be produced for the contract. A certification by the Contractor to this effect must accompany each first article which is offered. (1974 APR)

(b) In accordance with 1-1903, insert the following clause when the Government is responsible for conducting first article approval test:

FIRST ARTICLE APPROVAL-GOVERNMENT TESTING (1969 SEP)

(a) The first article is ........... unit(s) of Lot/Item ......... and shall, within ..........(-) calendar days from the date of this contract, be delivered to the Government at .............................. (set forth consignee and address) for first article approval tests. The documentation accompanying the first article shall contain this contract number and the Lot/ltem identification. The performance or other characteristics which the first article must meet, and the tests to which it will be subjected, are contained or referenced in this contract.

(b) The Contracting Officer shall, by written notice to the Contractor within ..........(-) calendar days after rece cipt of the first article ne Government, approve, conditional

ove, conditionally approve, or disapprove the first article. The notice of approval or conditional approval shall not relieve the Contractor trom complying with all requirements of the specifications and all other terms and conditions of this contract. A notice of conditional approval shall state any further action 1044uod of the contractor. A notice of disapproval shall cite reasons therefor.

( il the hest article is disapproved by the Government, the Contractor may be required, at the option in the covernment, to submit an additional first article for first article approval test. After pintu h a tion by the Government to submit an additional first article, the Contractor shall at 144 dana post to the Government make any necessary changes, modifications, or repairs to the menta le, or select another first article for testing. Such additional first article shall be Iue d to the Clovernment under the terms and conditions and within the time specified in the

l ew the Clovernment shall take action on this first article within the time limit specified w hat that the counts of additional first article approval tests and all costs related to such tests

hald had Dawne hy the contractor The Government reserves the right to require an equitable adM y hu the intact price for any extension of the delivery schedule necessitated by addiwant that the approval tests

th att how fails to deliver any lirst article for test within the time or times specified, full r funike dhe approves any first article, the Contractor shall be decmed to have be * r them within the meaning of the "Default" clause of this contract, and this conWrestl

e mination for default, provided, that failure of the Government in such 4 14 t u nate this countract for default shall not relieve the Contractor of his responsibility Hi th the hell hestul for production quantities,

When the next article 10 consumed or destroyed in testing, and unless otherwise pro

the nuutine, the untractor (1) may deliver an approved first article as a part of the con1 4 44**NN*

all forms and conditions of this contract for acceptance, and (ii) shall be

7-104.55

ARMED SERVICES PROCUREMENT REGULATION

CONTRACT CLAUSES AND SOLICITATION PROVISIONS

responsible for removal and disposition of any first article from the Government test site at his ex

pense.

(f) In the event the Contracting Officer does not approve, conditionally approve, or disapprove the first article within the time specified in (b) or (c) above, the Contracting Officer shall, upon timely written request made by the Contractor, make a determination of the delay occasioned the Contractor thereby, and shall equitably adjust the delivery or performance dates, or the contract price, or both, and any other contractual provision affected by such delay, in accordance with the procedures provided in the "Changes" clause. Failure to agree to any adjustment shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes."

(8) The Contractor shall be responsible for spare parts support and repair of the first article during any first article approval test.

(h) Prior to approval of the first article, the acquisition of materials or components for, or the commencement of production of, the balance of the contract quantity shall be at the sole risk of the Contractor, and costs incurred on account thereof shall not be allocable to this contract (i) for the purpose of progress payments prior to approval of the first article, if this contract contains the clause entitled "Progress Payments," or (ii) for the purpose of termination settlements, if this contract is terminated for the convenience of the Government prior to approval of the first article,

(End of clause)

At the option of the contracting officer, the following paragraph may be added to the clause:

(i) The first article offered must be manufactured at the facilities in which that item is to be produced under the contract, or if the first article is a component not manufactured by the Contractor, such component must be manufactured at the facilities in which the component is to be produced for the contract. A certification by the Contractor to this effect must accompany each first article which is offered.(1974 APR)

(c) In accordance with 1-1902(c), the following paragraph may be substituted for paragraph (g) of the clause in (a) above or paragraph (h) of the clause in (b) above.

(8) or (h) Prior to approval of the first article(s), the Contractor may, upon written authorization by the Contracting Officer, acquire specific materials or components or commence production to the extent essential to meet production quantity delivery requirements. Until first article approval is granted, only costs for the first article and costs incurred in accordance with such authorization shall be allocable to this contract (i) for the purpose of progress payments if this contract contains a clause entitled "Progress Payments," or (ii) for the purpose of termination settlements, if this contract is terminated for the convenience of the Government. In the event first article tests reveal deviations from contract requirements, the Contractor shall, at the location designated by the Government, make the required changes in, or replace all items manufactured under this contract, at no change in contract price. (1974 APR)

7-104.56 Reserved.
7-104.57 Reserved.
7-104.58 Identification of Expenditures in the United States.
(a) In accordance with 6-807, insert the following clause.

IDENTIFICATION OF EXPENDITURES IN THE UNITED STATES (1966 OCT)

(a) On each invoice, voucher, or other request for payment under this contract, the Contractor shall identify that part of the requested payment which represents estimated expenditures in the

7-104.58

ARMED SERVICES PROCUREMENT REGULATION

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