CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(3) The total final price of the items referred to in paragraph (a) above shall be evidenced by a modification to this contract signed by the Contractor and the Contracting Officer. Such price shall not be subject to revision notwithstanding any changes in the cost of performing the contract, with the following exceptions:

(i) insofar as the parties may agree in writing, prior to the determination of the total final price, (A) to exclude any specific elements of cost from the total final price and (B) to a procedure to provide subsequent disposition of such elements; and

(ii) to the extent any adjustment or credit is explicitly permitted or required by this or any other clause of this contract.

(4) When the Contractor fails to submit the data required by paragraph (c) above within the time required therein and it is later determined that the Government has overpaid the Contractor, the excess shall be repaid to the Government immediately. Unless repaid within thirty (30) days after the end of the data submittal period, the amount of such excess shall bear interest at the rate established in accordance with the Interest clause in ASPR 7-104.39. Interest shall be computed for the period from the date the data was due to the date of repayment.

(e) Subcontracts. No subcontract placed under this contract shall provide for payment on a cost-plus-a-percentage-of-cost basis.

(f) Adjustment of Payments. Pending execution of the contract modification referred to in subparagraph (d)(3) above, the Contractor shall submit invoices or vouchers in accordance with billing prices as provided in this paragraph. The billing prices shall be the target prices set forth in this contract; provided, that if at any time it appears that the then current billing prices will be substantially greater than the estimated final price in light of information provided by the Contractor in accordance with the provisions of subparagraph (g)(2) below, a reduction in the billing prices shall be negotiated. Similarly, the parties may negotiate an increase in billing prices by any or all of the difference between the target price and the ceiling price upon submission of factual data from the Contractor showing that final costs under this contract will be substantially greater than target cost. Any adjustment of billing prices shall be reflected in a modification to this contract, and shall not affect the determination of the total final price under paragraph (d) above. After execution of the contract modification referred to in subparagraph (d)(3) above, the total amount paid or to be paid on all invoices or vouchers shall be adjusted to reflect the total final price and any additional payments, refunds, or credits, resulting therefrom shall be promptly made.

(g) Quarterly Limitation on Payments Statement.

(1) This paragraph (g) shall not apply after final price revision.

(2) Within forty-five (45) days after the end of each quarter of the Contractor's fiscal year, beginning for the quarter in which a delivery is first made (or services are first performed) and accepted by the Government under this contract, and as of the end of each quarter, the Contractor shall submit to the Contract Administration Office, with a copy to the purchasing activity and the cognizant contract auditor, a cumulative statement setting forth:

(i) the total contract price of all supplies delivered (or services performed) and accepted by the Government for which final prices have been established;

(ii) the total costs (estimated to the extent necessary) reasonably incurred for and properly allocable solely to the supplies delivered (or services performed) and accepted by the Government for which final prices have not been established;

(iii) that portion of the total target profit which is in direct proportion to the supplies delivered (or services performed) and accepted by the Government for which final prices have not been established, increased or decreased in accordance with the incentive profit formula set forth in (d)(2) above when the amount of costs stated under (ii) above differs from the aggregate target costs of such supplies or services; and

(iv) the total amount of all invoices or vouchers for supplies delivered (or services performed) and accepted by the Government (including amounts applied or to be applied to liquidate progress payments).

(3) Notwithstanding any provision of this contract authorizing greater payments, if on any quarterly statement the amount of (2)(iv) above exceeds the sum of (2)(i), (ii), and (iii) above, the Contractor shall immediately refund or credit to the Government against existing unpaid invo

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ARMED SERVICES PROCUREMENT REGULATION

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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

ices or vouchers covered by such statement the amount of such excess less (i) the cumulative total of any previous refunds or credits under this clause (exclusive of any tax credits under Section 1481 of the Internal Revenue Code of 1954) and (ii) any applicable tax credits under Section 1481 of the Internal Revenue Code of 1954. If any portion of such excess has been applied to the liquidation of progress payments, such amount (less all tax credits under the Internal Revenue Code) may be added or restored to the unliquidated progress payment account, to the extent consistent with the "Progress Payments" clause of this contract, instead of direct refund thereof.

(4) When the Contractor fails to submit the quarterly statement within forty-five (45) days after the end of each quarter and it is later determined that the Government has overpaid the the Contractor, the excess shall be repaid to the Government immediately. Unless repaid within thirty (30) days after the end of the statement submittal period, the amount of such excess shall bear interest at the rate established in accordance with the Interest clause in ASPR 7-104.39. Interest shall be computed for the period from the date the quarterly statement was due to the date of repayment.

(5) The Contractor shall (i) insert in each price redetermination or incentive price revision subcontract hereunder the substance of this paragraph (g), including this subparagraph (5), modified to omit mention of the Government and reflect the position of the Contractor as purchaser and of the subcontractor as vendor, and to omit that portion of subparagraph (3) relating to tax credits, and (ii) include in each cost-reimbursement type subcontract hereunder a requirement that each price redetermination and incentive price revision subcontract thereunder will contain the substance of this paragraph (g), including this subparagraph (5) modified as outlined in (i) above.

(h) Disagreements. If the Contractor and the Contracting Officer fail to agree upon the total final price within sixty (60) days after the date on which the data required by (c) above are to be submitted, or within such further time as may be specified by the Contracting Officer, such failure to agree shall be deemed to be a dispute concerning a question of fact within the meaning of the "Disputes" clause of this contract and the Contracting Officer shall promptly issue a decision thereunder.

(i) Termination. If this contract is terminated prior to establishment of the total final price, prices of supplies or services subject to price revision under this clause shall be established pursuant to this clause for (i) completed supplies accepted by the Government and services performed and accepted by the Government, and (ii) in the event of a partial termination, supplies and services which are not terminated. The termination shall be otherwise accomplished pursuant to other applicable provisions of this contract.

(j) Equitable Adjustment Under Other Clauses. If an equitable adjustment in the contract price is made under any other clause of this contract before the total final price is established, the adjustment shall be made in the total target cost and may be made in the maximum dollar limit on the total final price, the total target profit or both. If such an adjustment is made after the total final price is established, adjustment shall be made only in the total final price.

(k) Exclusion From Target Price and Total Final Price. Whenever any clause of this contract provides that the contract price does not or will not include an amount for a specific purpose, such provision shall mean that neither any target price nor the total final price includes or will include any amount for such purpose.

(1) Separate Reimbursement. The cost of performance of an obligation that any clause of this contract expressly provides is at Government expense shall not be included in any target price or in the total final price, but shall be reimbursed separately.

(m) Taxes. As used in the "Federal, State, and Local Taxes" clause of this contract or any other clause of this contract that provides for certain taxes or duties to be included in, or excluded from, the contract price, the term "contract price” includes the total target price, or if it has been established, the total final price. When a provision in such clause or clauses requires that the contract price be increased or decreased as a result of changes in the obligation of the Contractor to pay or bear the burden of certain taxes or duties, such increase or decrease shall be made in the total target price or, if it has been established, in the total final price, so as not to affect the contractor's profit or loss on this contract.

(End of clause)

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ARMED SERVICES PROCUREMENT REGULATION

CONTRACT CLAUSES AND SOLICITATION PROVISIONS

In contracts of the Department of the Navy, add the words “and the office or offices designated in this contract to make payments thereunder" after the words "cognizant contract auditor" in paragraph (g)(2) above. In the event the contract calls for parts or other supplies or services which are to be ordered under a provisioning document or Government option and the prices of such supplies or services are to be made subject to incentive price revision in accordance with the above clause, the following provision (n) shall be included in such clause:

(n) Parts. Parts, other supplies, or services, which are to be furnished under this contract pursuant to a provisioning document or Government option, shall be subject to price revision in accordance with the provisions of this clause, and any prices established for such parts, other supplies, or services, pursuant to such provisioning document or Government option, shall be deemed to be target prices. Target cost and profit covering such parts, other supplies, or services may be established either separately, in the aggregate, or in any combination thereof, as the parties may agree. (1970 SEP)

7-108.2 Successive Targets. When in accordance with the provisions of Section III, Part 4, the fixed-price incentive contract described in 3-404.4(a)(3) is to be used, the following clause shall be made a part of the contract. As to each item which is to be subject to incentive price revision, the contract schedule shall set forth the initial target cost, initial target profit, and initial target price.

INCENTIVE PRICE REVISION (SUCCESSIVE TARGETS) (1978 SEP)

(a) General. The supplies or services identified in the Schedule as Items — are subject to price revision in accordance with the provisions of this clause; provided, that in no event shall the total final price of such items exceed dollars (S............). The prices of these items as shown in the Schedule are the initial target prices, which include an initial target profit of ........... percent (—%) of the initial target cost. Any supplies or services which are to be ordered separately under, or otherwise added to, this contract, and which are to be subject to price revision in accordance with the provisions of this clause, shall be identified as such in a modification to this contract. (b) Definition of Cost. For the purposes of this clause, "cost" or "costs" means allowable costs in accordance with Section XV of the Armed Services Procurement Regulation as in effect on the date of this contract.

(c) Submission of Data for Establishment of Firm Fixed-Price or Final Profit Adjustment Formula.

(1) Within — (—) days after the end of the month in which the Contractor has completed ., the Contractor shall submit:

(Footnote for preceding paragraph)

• The degree of completion may be based on a percentage of contract performance or any other reasonable basis.

(i) a proposed firm fixed-price or total firm target price for supplies delivered and to be delivered and the services performed and to be performed;

(ii) a detailed statement of all costs incurred in the performance of this contract through the end of the month specified above, on DD Form 633-6 or in such other form as the parties may agree, together with sufficient supporting data to disclose unit costs and cost trends for:

(A) supplies delivered and services performed, and

(B) inventories of work in process and undelivered contract supplies on hand (estimated to the extent necessary);

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ARMED SERVICES PROCUREMENT REGULATION

CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(iii) an estimate of costs of all supplies delivered and to be delivered and all services performed and to be performed under this contract, using the statement of costs incurred plus an estimate of costs to complete performance, on DD Form 633–6 or in such other form as the parties may agree, together with:

(A) sufficient data to support the accuracy and reliability of such estimate, and

(B) an explanation of the differences between such an estimate and the original estimate used in establishing the initial target prices set forth in this contract for the same supplies or services.

(2) In addition to the data submitted under subparagraph (1) above, the Contractor shall submit the following:

(i) supplemental statements of costs incurred subsequent to the end of the month specified in (1) above for:

(A) supplies delivered and services performed, and

(B) inventories of work in process and undelivered contract supplies on hand (estimated to the extent necessary); and

(ii) any other relevant data which may reasonably be required by the Contracting Officer;

as and to the extent that such information becomes available prior to the conclusion of negotiations establishing the total firm target price.

(d) Establishment of Firm Fixed-Price or Final Profit Adjustment Formula. Upon submission of the data required by paragraph (c) above, the Contractor and the Contracting Officer shall promptly establish either a firm fixed-price or a profit adjustment formula for determining final profit in accordance with the following:

(1) A total firm target cost shall be negotiated, based upon the data submitted under paragraph (c) above.

(2) If the total firm target cost is more than the total initial target cost, the total initial target profit will be decreased, or if the total firm target cost is less than the total initial target cost, the total initial target profit will be increased by percent (%) of the difference between the total initial target cost and the total firm target cost** and the resulting amount shall be the total firm target profit, provided, that in no event will such total firm target profit be less than ......... percent (%) or more than percent (%) of the total initial target cost.

(Footnote for preceding paragraph)

** The language may be changed as necessary to set forth the negotiated adjustment pattern where the percentage figure to be used for adjustment of the initial target profit is not the same for all levels of cost variation.

(3) If the total firm target cost plus the total firm target profit present a reasonable price for performance of that part of the contract subject to price revision under this clause, the parties may agree on a firm fixed-price. In this event, the firm fixed-price shall be evidenced by a modification to this contract signed by the Contractor and the Contracting Officer.

(4) Failure of the parties to agree as to a firm fixed-price shall not constitute a dispute under the "Disputes" clause of this contract. In such event or, if establishment of a firm fixed-price is considered to be inappropriate, the Contractor and the Contracting Officer shall establish a profit adjustment formula for determining final profit or loss in accordance with the following:

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Less than the total firm target cost

Total firm target profit plus

percent (%) of the amount by which the total final negotiated cost is less than the total firm target cost.

The total firm target cost, total firm target profit, and profit adjustment formula for determining final profit shall be evidenced by a modification to this contract signed by the Contractor and the Contracting Officer.

(5) When the Contractor fails to submit the data required by paragraph (c) above within the time required therein and it is later determined that the Government has overpaid the Contractor, the excess shall be repaid to the Government immediately. Unless repaid within thirty (30) days after the end of the data submittal period, the amount of such excess shall bear interest at the rate established in accordance with the Interest clause in ASPR 7-104.39. Interest shall be computed for the period from the date the data was due to the date of repayment.

(e) Submission of Data for Final Price Revision. Unless a firm fixed-price has been agreed to pursuant to paragraph (d) above, the Contractor shall submit on DD Form 633-6 or in such form as the Contracting Officer may require and within ............. (-) days after the end of the month in which the Contractor has delivered the last unit of supplies and completed the services called for by those items referred to in paragraph (a) above, (i) a detailed statement of all costs incurred up to the end of that month in performing all work under such items, (ii) an estimate of costs of such further performance, if any, as may be necessary to complete performance of all work with respect to such items, and (iii) a list of all residual inventory and an estimate of the value thereof. (f) Final Price Revision. Unless a firm fixed-price has been agreed to pursuant to paragraph (d) above, the Contractor and the Contracting Officer shall, as soon as practicable after submission of the data required by paragraph (e) above, establish the total final price in accordance with the following:

(1) On the basis of the information required by paragraph (e) above, together with any other pertinent information, there shall be established by negotiation the total final negotiated cost incurred or to be incurred for the supplies delivered (or services performed) and accepted by the Government, which are subject to price revision under this clause.

(2) The total final price shall be established by adjusting the total final negotiated cost by an allowance for final profit or loss determined in accordance with the formula agreed to pursuant to subparagraph (d)(4) above.

(3) The total final price of the items referred to in paragraph (a) above shall be evidenced by a modification to this contract signed by the Contractor and the Contracting Officer. Such price shall not be subject to revision notwithstanding any changes in the cost of performing the contract with the following exceptions:

(i) insofar as the parties may agree in writing, prior to the determination of the total final price,

(A) to exclude any specific elements of cost from the total final price and

(B) to a procedure to provide subsequent disposition of such elements; and

(ii) to the extent any adjustment or credit is explicitly permitted or required by this or any other clause of this contract.

(g) Subcontracts. No subcontract placed under this contract shall provide for payment on a cost-plus-a-percentage-of-cost basis.

(h) Adjustment of Payments. Pending execution of the contract modification referred to in subparagraph (f)(3) above, the Contractor shall submit invoices or vouchers in accordance with billing prices as provided in this paragraph. The billing prices shall be the initial target prices set forth in this contract until firm target prices are established pursuant to paragraph (d) above; thereafter, the firm target prices shall be used for billing; provided, that if at any time it appears that the then current billing prices will be substantially greater than the estimated final price in light of information provided by the Contractor in accordance with the provisions of subparagraph (i)(3) below, a reduction in the billing prices shall be negotiated. Similarly, the parties may negotiate an increase in billing prices by any or all of the difference between the target price and the ceiling price upon submission of factual data from the Contractor showing that the final costs

7-108.2

ARMED SERVICES PROCUREMENT REGULATION