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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(3) The Contractor shall not be responsible under this clause for the correction of deficiencies in Government-furnished property, except for deficiencies in installation unless the Contractor performs or is obligated to perform any modifications or other work on such property. In that event, the Contractor shall be responsible for correction of deficiencies to the extent of such modifications or other work. (c) Deficiencies in Accepted Supplies or Services.

(1) Notice to Contractor; His Recommendation for Correction. If the Contracting Officer determines that a deficiency exists in any of the supplies or services accepted by the Government under this contract, he shall promptly notify the Contractor of the deficiency, in writing, within ** ............. Upon timely notification of the existence of such a deficiency, or if the Contractor independently discovers a deficiency in accepted supplies or services, the Contractor shall submit to the Contracting Officer within ***........ his recommendation for corrective actions, together with supporting information in sufficient detail for the Contracting Officer to determine what corrective action, if any, shall be undertaken.

(2) Direction to Contractor Concerning Correction of Deficiencies. Within ****.............. after receipt of the Contractor's recommendations for corrective action and adequate supporting information, the Contracting Officer, at his sole discretion, shall give the Contractor written notice not to correct any deficiency, or to correct or partially correct any deficiency within a reasonable time and at *****..

(3) Correction of Deficiencies by Contractor. The Contractor shall promptly comply with any timely written direction by the Contracting Officer to correct or partially correct a deficiency, at no increase in the contract price. The Contractor shall also prepare and furnish to the Government data and reports applicable to any correction required under this clause (including revision and updating of all other affected data called for under this contract) at no increase in the contract price.

(4) Modification of Contract With Respect to Uncorrected Deficiencies. In the event of timely notice of a decision not to correct or only to partially correct, the Contractor shall submit a technical and cost proposal within ****** ............... to amend the contract to permit acceptance of the affected supplies or services in accordance with the revised requirement and an equitable reduction in contract price shall promptly be negotiated by the parties and reflected in a supplemental agreement to this contract.

(d) Deficiencies in Supplies or Services Not Yet Accepted. If the Contractor becomes aware at any time before acceptance by the Government (whether before or after tender to the Government) that a deficiency exists in any supplies or services, he shall promptly correct the deficiency or, if he elects to invoke the procedures in (c) above, he shall promptly notify the Contracting Officer in writing of the deficiency, together with his detailed recommendation for corrective action. (e) No Extension in Time for Performance; No Increase in Contract Price.

(1) In no event shall the Government be responsible for extension or delays in the scheduled deliveries or periods of performance under this contract as a result of the Contractor's obligations to correct deficiencies, nor shall there be any adjustment of the delivery schedule or period of performance as a result of such correction of deficiencies unless provided by supplemental agreement with adequate consideration.

(2) It is hereby specifically recognized and agreed by the parties hereto that this clause shall not be construed as obligating the Government to increase the contract price of this contract. (f) Transportation Charges.

(1) When the Government returns supplies to the Contractor for correction or replacement pursuant to this clause, the Contractor shall be liable for transportation charges up to an amount equal to the cost of transportation by the usual commercial method of shipment from the place of delivery specified in this contract (irrespective of the f.o.b. point or the point of acceptance) to the Contractor's plant in addition to any charges provided for by (2) below. The Contractor shall also bear the responsibility for the supplies while in transit.

(2) When compliance with the terms of this clause by the Contractor involves shipment of corrected or replacement supplies from the Contractor to the Government, the Contractor shall be liable for transportation charges up to an amount equal to the cost of transportation by the usual commercial method of shipment from the Contractor's plant to the place of delivery specificd in this contract, (irrespective of the f.o.b. point or the point of acceptance) in addition to any charges provided for by (1) above. The Contractor shall also bear the responsibility for the supplics while in transit.

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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(g) Failure to Correct. If the Contractor fails or refuses to:

(i) present a detailed recommendation for corrective action in accordance with (c)

above,
(ii) correct deficiencies in accordance with (c)(3) above, or

(iii) prepare and furnish data and reports in accordance with (c)(3) above, the Contracting Officer shall give the Contractor written notice specifying the failure or refusal and setting a period after receipt of the notice within which it must be cured. If the failure or refusal is not cured within the specified period, the Contracting Officer may, by contract or otherwise, as required:

(A) obtain detailed recommendations for corrective action;
(B) (1) correct the supplies or services, or

(II) replace the supplies or services — and if the Contractor fails to furnish time-
ly disposition instructions, the Contracting Officer may dispose of nonconform-
ing supplies for the Contractor's account in a reasonable manner, in which case
the Government is entitled to reimbursement from the Contractor or from the
proceeds for the reasonable expenses of care and disposition, as well as for ex-

cess costs incurred or to be incurred; and (C) obtain applicable data and reports; and charge to the Contractor the cost occasioned to the Government pursuant to (i),

(ii), and (iii) above. (h) Correction of Deficient Replacements and Re-performances. Any supplies or parts thereof corrected or furnished in replacement and any services re-performed pursuant to this clause shall also be subject to all the provisions of the clause to the same extent as supplies or services initially accepted. The warranty with respect to such supplies, parts, or services shall be equal in duration to that set forth in (b)(2) above, and shall run from the date of delivery of such corrected or replaced supplies.

(i) All implied warranties of merchantability and "fitness for a particular purpose" are hereby excluded from any obligation under this contract.

(End of clause)

Footnotes for above clause:

* State the specific warranty period, e.g., "at the time of delivery," *within ..........(insert period of time) after delivery" or the specified event whose occurrence will terminate the warranty period, e.g., the number of miles or hours of use, or combination of any applicable events or periods of time (see 1-324.4(c)).

** Insert the specific period of time in which notice shall be given to the Contractor, e.g., "within .........(insert period of time) after delivery of the nonconforming supplies," "within ..........(insert period of time) of the last delivery under this contract," or "within ..........(insert period of time) after discovery of the deficiency" when a specific warranty period is expressed in paragraph (b) of the clause (see 1-324.4(d)).

*** Insert period of time within which the Contractor must respond
to a notice of deficiency.

**** Insert a specific time period.
***** Insert the locations where correction may be directed.

****** Insert period of time within which Contractor must submit
a proposal

(d) (1) When a contractor's rather than the Government's design is to be used, insert the word “design” before “material" in paragraph (a)(i) of the clause in (a) above or in paragraph (b) of the clause in (b) above.

(2) When purchasing commercial items using the clause in (a) above, the following paragraph shall normally be substituted for paragraph (a) of that clause; also, paragraph (i) of that clause shall be deleted and paragraph (j) re-lettered as

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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(i). When using the clause in (b) above, the following paragraph shall be substituted for paragraph (b) of that clause; also, paragraph (g) of that clause shall be deleted and paragraph (h) re-lettered as (g).

( ) Notwithstanding inspection and acceptance by the Government of supplies furnished under the contract or any provision of this contract concerning the conclusiveness thereof the Contractor warrants at the time of delivery* that all supplies:

(i) are of a quality to pass without objection in the trade under the contract description;
(ii) arc fit for the ordinary purposes for which such supplies are used;
(iii) run, within the variations permitted by the contract, if any, of even kind, quality, and

quantity within each unit and among all units;
(iv) arc adequately contained, packaged, and marked as the contract may require; and
(v) conform to the promises or affirmations of fact made on the container.

(End of clause paragraph)

(3) The following paragraph (e) may be substituted for paragraph (e) of the clause in (a) above when it is desirable to provide that necessary transportation incident to correction or replacement will be at the Government's expense. This may be appropriate, for instance, when the cost of a warranty would otherwise be prohibitive. The same substitution may be made for the last sentence in paragraph (c)(i) of the clause in (b) above, or for paragraph (f) of the clause in (c) above.

(e) When correction or replacement is required, and transportation of supplies in connection with such correction or replacement is necessary, transportation charges and responsibility for such supplies while in transit shall be borne by the Government.

(End of clause paragraph)

(4) The following paragraph may be substituted for paragraph (f) of the clause in (a) above when the supplies cannot be obtained from another source.

(f) If the Contractor does not agree as to his responsibility to correct or replace the supplies delivered, he shall nevertheless proceed in accordance with the written request issued by the Contracting Officer under paragraph (c) to correct or replace the defective or nonconforming supplies. In the event it is later determined that such supplies were not defective or nonconforming within the provisions of this clause, the contract price will be equitably adjusted.

(End of clause paragraph)

(5) The following paragraph should be added when one of the clauses in (a), (b), or (c) above is included in a fixed-price incentive contract.

All costs incurred or estimated to be incurred by the Contractor in complying with this clause shall be considered when negotiating the total final price under the Incentive Price Revision clause of this contract. After establishment of the total final price, Contractor compliance with this clause shall be at no increase in the total final price. Any equitable adjustments made pursuant to paragraph (c) of this clause shall be governed by the paragraph entitled “Equitable Adjustments Under Other Clauses" in the Incentive Price Revision clause of this contract.

(End of clause paragraph)

(6) The following paragraph should be added to the clauses in (a), (b), or (c) above when the recovery of the warranted item involves considerable Government expense for disassembly/reassembly of larger items.

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The Contractor shall be liable for reasonable costs of disassembly/reassembly of larger items necessary to remove the supplies to be inspected and/or returned for correction or replacement.

(End of clause paragraph)

7-106 Economic Price Adjustment Clauses (Established Prices).

7-106.1 Price Adjustment Clause for Basic Steel, Aluminum, Brass, Bronze or Copper Mill Products. In accordance with 3–404.3(c)(1)a, insert the following clause.

ECONOMIC PRICE ADJUSTMENT – BASIC STEEL, ALUMINUM, BRASS, BRONZE OR COPPER MILL PRODUCTS (1978 AUG)

(a) The Contractor warrants that the unit price stated herein for ........... is not in excess of the Contractor's applicable established price in effect on the date set for opening of bids (or the contract date if this is not a contract entered into by means of formal advertising) for like quantities of the same item. The term "unit price" excludes any part of the price which reflects requirements for preservation, packaging and packing beyond standard commercial practice. The term "established price" means one which (i) is an established catalog or market price for a commercial item sold in substantial quantities to the general public and (ii) meets the criteria of paragraph 3-807.7(b) of the Armed Services Procurement Regulation. Such price is the net price after applying any applicable standard trade discounts offered by the Contractor from his catalog, list, or schedule price.

(b) The Contractor shall promptly notify the Contracting Officer as to the amount and effective date of each decrease in any applicable established price, and each corresponding contract unit price shall be decreased by the same percentage that the said established price is decreased. Such decrease shall apply to items delivered on and after the effective date of the decrease in the Contractor's established price, and this contract shall be modified accordingly. The Contractor shall certify on each invoice that each unit price stated therein reflects all decreases required by this clause, or shall certify on the final invoice that all price decreases required by this clause have been applied in the manner herein required.

(c) If the Contractor's applicable established price is increased after the date set for opening of bids (or the contract date, if this is not a contract entered into by means of formal advertising), the corresponding contract unit price shall be increased, upon the Contractor's request in writing to the Contracting Officer, by the same percentage that the established price is increased and the contract shall be modified accordingly, provided that:

(1) The aggregate of the increases in any contract unit price under this clause shall not exceed ten percent (10%) of the original contract unit price:

(2) The incrcascd contract unit price shall be effective on the effective date of the increase in the applicable established price if the Contractor's written request is received by the Contracting Officer within 10 days thercaftor, but if not, the effective date of increased unit price shall be the date of roccipt by the Contracting Officer of such request;

(3) Thc incrcascd contract unit price shall not apply to quantities scheduled under the contract for delivery before the effective date of the increased contract unit price unless the Contractor's failure to deliver before such date results from causes beyond the control and without the fault of ncgligence of the Contractor, within the meaning of the “Default" clause of this contract.

(4) No modification incorporating an increase in a contract unit price shall be exccuted pursuant to this clause until the increase in the applicable established price has becn verificd by the Contracting Officer.

(d) Within 30 days after rcccipt of the Contractor's written request the Contracting Officer may canccl, without liability to either party, any portion of the contract affected by the requested incrcasc and undelivered at the time of such cancellation, except that the Contractor may thereafter deliver

iver any items which the Contractor certifics, by notice received by the Contracting Officer within 10 days after the Contractor receives the cancellation notice, were completed or in thc process of manufacture at the time of rcccipt of such cancellation notice, and the Govern

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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

ment shall pay for such items so delivered at the contract unit price increased to the extent provided by (c) above. Any standard steel supply shall be deemed to be in the process of manufacture when the steel therefor is in any state of processing after the beginning of the furnace melt.

(e) Pending any cancellation of this contract as provided in (d) above and thereafter if there is no cancellation, the Contractor shall continue deliveries according to the delivery schedule of the contract and shall be paid for such deliveries at the contract unit price increased to the extent provided by (c) above.

(End of clause)

7–106.2 Price Adjustment Clause for Nonstandard Steel Items. In accordance with 3–404.3(c)(1)b, insert the following clause.

ECONOMIC PRICE ADJUSTMENT – NONSTANDARD STEEL ITEMS (1978 AUG)

(a) The term “established price" as used in this clause is one which (i) is an established catalog or market price of a commercial item sold in substantial quantities to the general public and (ii) meets the criteria of Armed Services Procurement Regulation 3-807.7(b). Such a price is the net price after applying any applicable standard trade discounts offered by the Contractor from his catalog, list, or scheduled price. (But see Note (8)).

(b) Each contract unit price shall be subject to revision, pursuant to the provisions of this clause, to reflect changes in the cost of labor and steel. For the purpose of any such price revision, the proportion of the contract unit price attributable to costs of labor not otherwise included in the price of the steel item identified in paragraph (d) below shall be ................ percent, and the proportion of the contract unit price attributable to the cost of steel shall be ................ percent. (See Note(1).)

(c) For the purposes of this paragraph, the term "labor index" shall mean the average straight time hourly earnings of the Contractor's employees in the ............................ shop of the Contractor's .. ............................ plant (see Note (2)] for any particular month. The word "month" as used herein means “calendar month"; provided, however, that if the Contractor's accounting period does not coincide with the calendar month, then such accounting period shall be used throughout the clause in lieu of "month". Unless otherwise specified in this contract, the labor index shall be computed by dividing the total straight time earnings of the Contractor's employees in the particular shop identified above for any given month by the total number of straight time hours worked by such employees in that month. Any revision in a contract unit price to reflect changes in the cost of labor shall be computed solely by reference to the base labor index," which shall be the average of the labor indices for the three months consisting of the month of ...... 19–, (see Note (3)) the month immediately preceding and the month immediately following, and to the "current labor index," which shall be the average of the labor indices for the month in which delivery of supplies is required to be made in accordance with the terms of this contract and the month preceding.

(d) Any revision in a contract unit price to reflect changes in the cost of steel shall be computed solely by reference to the "base steel index," which shall be the Contractor's established price (see Note (8)] including all applicable extras of $.................... per ........................ (see Note (4)] for ............................ (see Note (5)) on ..........................., 19–, (see Note (6)) and the "current steel index," which shall be the Contractor's established price (see Note (8)] of said item including all applicable extras in effect ........................ days (see Note (7)) prior to the first day of the month in which delivery of supplies is required to be made in accordance with the terms of the contract.

(e) Each contract unit price shall be revised for each month in which, by the terms of this contract, delivery of supplies is required to be made, and such revised contract unit price shall apply to the deliveries of those quantities of supplies required to be made in that month regardless of when actual delivery be made of said quantities of supplies. Each revised contract unit price for any month shall be computed by adding together the following three amounts: (i) the amount representing the adjusted cost of labor) obtained by multiplying ............... percent of the contract unit price by a fraction, the numerator of which shall be the current labor index and the denominator of which shall be the base labor index; (ii) the amount (representing the adjusted

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ARMED SERVICES PROCUREMENT REGULATION

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