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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(b) The following clause shall be used in all cost-reimbursement type supply contracts which are to be incrementally funded.

ost.

LIMITATION OF FUNDS (1966 OCT)

(a) It is estimated that the cost to the Government for the performance of this contract will not exceed the estimated cost set forth in the Schedule, and the Contractor agrees to use his best efforts to perform the work specified in the Schedule and all obligations under this contract within such estimated cost.

(b) The amount presently available for payment and allotted to this contract, the items covered thereby, and the period of performance which it is estimated the allotted amount will cover, are specified in the Schedule. It is contemplated that from time to time additional funds will be allotted to this contract up to the full estimated cost set forth in the Schedule, exclusive of any fee. The Contractor agrees to perform or have performed work on this contract up to the point at which the total amount paid and payable by the Government pursuant to the terms of this contract approximates but does not exceed the total actually allotted to the contract.

(c) If at any time the Contractor has reason to believe that the costs which he expects to incur in the performance of this contract in the next succeeding sixty (60) days, when added to all costs previously incurred, will exceed seventy-five percent (75%) of the total amount then allotted to the contract, the Contractor shall notify the Contracting Officer in writing to that effect. The notice shall state the estimated amount of additional funds required to continue performance for the period set forth in the Schedule. Sixty (60) days prior to the end of the period specified in the Schedule, the Contractor will advise the Contracting Officer in writing as to the estimated amount of additional funds, if any, that will be required for the timely performance of the work under the contract or for such further period as may be specified in the Schedule or otherwise agreed to by the parties. If, after such notification additional funds are not allotted by the end of the period set forth in the Schedule or an agreed date substituted therefor, the Contracting Officer will, upon written request by the Contractor, terminate this contract pursuant to the provisions of the Ter

ate. If the Contractor, in the exercise of his reasonable judgment, estimates that the funds available will allow him to continue to discharge his obligations hereunder for a period extending beyond such date, he shall specify the later date in his request, and the Contracting Officer, in his discretion, may terminate this contract on that later date.

(d) Except as required by other provisions of this contract specifically citing and stated to be an exception from this clause, the Government shall not be obligated to reimburse the Contractor for costs incurred in excess of the total amount from time to time allotted to the contract, and the Contractor shall not be obligated to continue performance under the contract (including actions under the Termination clause) or otherwise to incur costs in excess of the amount allotted to the contract, unless and until the Contracting Officer has notified the Contractor in writing that such allotment amount has been increased and has specified in such notice an increased amount constituting the total amount then allotted to the contract. To the extent the amount allotted exceeds the estimated cost set forth in the Schedule, such estimated cost shall be correspondingly increased. No notice, communication or representation in any other form or from any person other than the Contracting Officer shall affect the amount allotted to this contract. In the absence of the specified notice, the Government shall not be obligated to reimburse the Contractor for any costs in excess of the total amount then allotted to the contract, whether those excess costs were incurred during the course of the contract or as a result of termination. When and to the extent that the amount allotted to the contract has been increased, any costs incurred by the Contractor in excess of the amount previously allotted shall be allowable to the same extent as if such costs had been incurred after such increase in the amount allotted; unless the Contracting Officer issues a termination or other notice and directs that the increase is solely for the purpose of covering termination or other specified expenses.

(e) Change orders issued pursuant to the Changes clause of this contract shall not be considered an authorization to the Contractor to exceed the amount allotted in the Schedule in the absence of a statement in the change order, or other contractual modification, increasing the amount allotted.

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ARMED SERVICES PROCUREMENT REGULATION

CONTRACT CLAUSES AND SOLICITATION PROVISIONS (f) Nothing in this clause shall affect the right of the Government to terminate this ontract. In the event this contract is terminated, the Government and the Contractor shall negotiate an equitable distribution of all property produced or purchased under the contract based upon the share of costs incurred by each.

(g) In the event that sufficient funds are not allotted to this contract to allow completion of the work contemplated by this contract, the Contractor shall be entitled to that percentage of the fee set forth in the Schedule equivalent to the percentage of completion of the work contemplated by this contract.

(End of clause)

(c) In the foregoing clauses, the period of “sixty (60) days" and the percentage of "seventy-five percent (75%)" may be varied from thirty (30) to ninety (90) days and seventy-five percent (75%) to eighty-five percent (85%). In supply contracts which provide for cost sharing, one of the clauses set forth in 7-402.2 shall be used.

(d) In accordance with 1-318(a), the appropriate clause in 7-104.91 shall be included in all cost reimbursement type supply contracts for which no funds are available at time of award.

7–203.4 Allowable Cost, Fee, and Payment.

(a) Except as provided in (b) below, insert the following clause in all costreimbursement type supply contracts. Additional instructions for use are in (c) below.

ALLOWABLE COST, FIXED FEE, AND PAYMENT (1978 SEP)
(a) For the performance of this contract, the Government shall pay to the Contractor:

(i) the cost thereof (hereinafter referred to as “allowable cost") determined by the Con

tracting Officer to be allowable in accordance with:
(A) Part 2 of Section XV of the Armed Services Procurement Regulation as in effect

on the date of this contract; and (B) the terms of this contract; and (ii) such fixed fee, if any, as may be provided for in the Schedule. (b) Payments shall be made to the Contractor when requested as work progresses, but not more frequently than bi-weekly, in amounts approved by the Contracting Officer. The Contractor may submit to an authorized representative of the Contracting Officer, in such form and reasonable detail as such representative may require, an invoice or public voucher supported by a statement of cost for the performance of this contract and claimed to constitute allowable cost. For this purpose, except as provided herein with respect to pension, deferred

profit sharing, and employee stock ownership plan contributions, the term "costs" shall include only those recorded costs which result, at the time of the request for reimbursement, from payment by cash, check, or other form of actual payment for items or services purchased directly for the contract, together with (when the Contractor is not delinquent in payment of costs of contract performance in the ordinary course of business) costs incurred, but not necessarily paid, for materials which have been issued from the Contractor's stores inventory and placed in the production process for use on the contract, for direct labor, for direct travel, for other direct inhouse costs, and for properly allocable and allowable indirect costs, as is shown by records maintained by the Contractor for pur. poses of obtaining reimbursement under Government contracts plus the amount of progress payments which have been paid to Contractor's subcontractors under similar cost standards. In addition, when the aforementioned contributions are paid by the Contractor to the pension, profit sharing, or employee stock ownership plan funds less frequently than quarterly, accrued costs therefor shall be excluded from indirect costs for payment purposes until such costs are paid. If such contributions are paid on a quarterly or more frequent basis, accruals therefor may be included in indirect costs for payment purposes provided that they are paid to the fund within thir

of the period covered. If payments are not made to the fund within

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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

such thirty-day period, these contributions shall be ·xcluded from indirect cost for payment purposes until payment has been made. (See 15-205.600). The restriction on payment more frequently than bi-weekly and the requirement of prior payment for items or services purchased directly for the contract shall not apply where the Contractor is a small business concem.

(c) Promptly after receipt of each invoice or voucher and statement of cost, the Government shall, except as otherwise provided in this contract, subject to the provisions of (j) below, make payment thereon as approved by the Contracting Officer. Payment of the fixed fee, if any, shall be made to the Contractor as specified in the Schedule; provided, however, that after payment of eighty-five percent (85%) of the fixed fee set forth in the Schedule, the Contracting Officer may withhold further payment of fee until a reserve shall have been set aside in an amount which he considers necessary to protect the interests of the Government, but such reserve shall not exceed fifteen percent (15%) of the total fixed fee or one hundred thousand dollars ($100,000), whichever is less.

(d) Notwithstanding the provisions of paragraph (j) below, allowable indirect costs under this contract shall be obtained by applying overhead rate(s) established in accordance with paragraphs (e) and (f) below.

(e) Final annual overhead rates and the appropriate bases shall be established by procurement or audit determination in accordance with the procedures of Section III, Part 7, of ASPR in effect for the period covered by the proposal.

(f) The Contractor shall, within ninety (90) days after the expiration of each of its fiscal years for estimating, accumulating, and reporting contract costs, or some later date if approved by the Contracting Officer, submit to the Contracting Officer and to the cognizant audit activity a proposed final overhead rate(s) for that period based on the Contractor's actual cost experience during that period, together with supporting cost data specifying the contract(s) and/or subcontract(s) to which such rate(s) apply. Establishment of final annual overhead rate(s) shall be undertaken as promptly as practicable after receipt of the Contractor's proposal. The Contractor shall submit an executed Certificate of Current Cost or Pricing Data applicable to data furnished in connection with establishment of any final annual overhead rate(s).

(8) Final annual overhead rate(s) shall be set forth in a written overhead rate understanding executed by the Contractor and the appropriate Government representative. Such understanding is automatically incorporated in this contract upon execution and shall specify (i) the agreed upon final annual overhead rate(s), (ii) the base(s) to which the rate(s) apply, (ii) the periods for which the rate(s) apply, (iv) any specific overhead items treated as direct costs in the settlement, and (v) the affected contract(s) and/or subcontract(s), identifying any with advance agreements or special provisions and the rate(s) applicable thereto. The overhead rate understanding shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract.

(h) Pending establishment of final annual overhead rate(s) for any period, the Contractor shall be reimbursed at billing rate(s) established by the Contracting Officer or the auditor, subject to appropriate adjustment when final rate(s) for that period are established. Anticipated final annual rates will be used for billing rates. However, to prevent substantial over or under payment, billing rate(s) may at the request of either party be revised by mutual agreement, either retroactively or prospectively.

(i) Notwithstanding any other provisions of this clause, the quick closeout procedures set forth in Section III, Part 7, of ASPR in effect on the date of this contract, may be used when mutually agreeable to the Contractor and the Contracting Officer.

(j) At any time or times prior to final payment under this contract, the Contracting Officer may have the invoices or vouchers and statements of cost audited. Each payment theretofore made shall be subject to reduction for amounts included in the related invoice or voucher which are found by the Contracting Officer, on the basis of such audit, not to constitute allowable cost. Any payment may be reduced for overpayments, or increased for underpayments, on preceding invo ices or vouchers.

(k) On receipt and approval of the invoice or voucher designated by the Contractor as the "completion invoice" or "completion voucher" and upon compliance by the Contractor with all the provisions of this contract (including, without limitation, the provisions relating to patents and the provisions of (L) below), the Government shall promptly pay to the Contractor any balance of allowable cost, and any part of the fixed fee, which has been withheld pursuant to (c) above or

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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

otherwise not paid to the Contractor. The completion invoice or voucher shall be submitted by the Contractor promptly following completion of the work under this contract but in no event later than one (1) year (or such longer period as the Contracting Officer may in his discretion approve in writing) from the date of such completion.

(L) The Contractor agrees that any refunds, rebates, credits, or other amounts (including any interest thereon) accruing to or received by the Contractor or any assignee under this contract shall be paid by the Contractor to the Government, to the extent that they are properly allocable to costs for which the Contractor has been reimbursed by the Government under this contract. Reasonable expenses incurred by the Contractor for the purpose of securing such refunds, rebates, credits, or other amounts shall be allowable costs hereunder when approved by the Contracting Officer. Prior to final payment under this contract, the Contractor and each assignee under this contract whose assignment is in effect at the time of final payment under this contract shall execute and deliver:

(i) an assignment to the Government, in form and substance satisfactory to the Con

tracting Officer, of refunds, rebates, credits, or other amounts (including any interest thereon) properly allocable to costs for which the Contractor has been reimbursed

by the Government under this contract; and
(ii) a release discharging the Government, its officers, agents, and employees from all lia-

bilities, obligations, and claims arising out of or under this contract, subject only to
the following exceptions:
(A) specified claims in stated amounts or in estimated amounts where the amounts

are not susceptible of exact statement by the Contractor;
(B) claims, together with reasonable expenses incidental thereto, based upon liabili-

ties of the Contractor to third parties arising out of the performance of this contract; provided, that such claims are not known to the Contractor on the date of the execution of the release; and provided further that the Contractor gives notice of such claims in writing to the Contracting Officer not more than six (6) years after the date of the release or the date of any notice to the Contractor that the Government is prepared to make final payment, whichever is earlier;

and

(C) claims for reimbursement of costs (other than expenses of the Contractor by

reason of his indemnification of the Government against patent liability), including reasonable expenses incidental thereto, incurred by the Contractor under the

provisions of this contract relating to patents. (m) Any cost incurred by the Contractor under the terms of this contract which would constitute allowable cost under the provisions of this clause shall be included in determining the amount payable under this contract, notwithstanding any provisions contained in the specifications or other documents incorporated in this contract by reference, designating services to be performed or materials to be furnished by the Contractor at his expense or without cost to the Government.

(n) Any failure by the parties to agree on a final overhead rate under this clause shall be considered a dispute concerning a question of fact for decision by the Contracting Officer within the meaning of the “Disputes" clause of this contract.

(End of clause)

(b) When, in accordance with 3-405.4, incentive revision of the fee in a cost-reimbursement type supply contract is to be provided, insert the following clause. Additional instructions for use of the clause are in (c) below.

ALLOWABLE COST, INCENTIVE FEE, AND PAYMENT (1978 SEP).
(a)(1) For the performance of this contract, the Government shall pay to the Contractor:

(i) the cost thereof (hereinafter referred to as "allowable cost") determined by the Con

tracting Officer to be allowable in accordance with:
(A) Part 2 of Section XV of the Armed Services Procurement Regulation as in effect

on the date of this contract; and
(B) the terms of this contract; and

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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(ii) a fee determined as provided in this contract. (2) The target cost and target fee of this contract are set forth in the Schedule and shall be subject to adjustment in accordance with (n) and (o) below. As used throughout this contract the term

(i) "target cost" means the estimated cost of this contract initially negotiated, adjusted

in accordance with (n) below; and (ii) “target fee" means the fee which was initially negotiated on the assumption that this

contract would be performed for a cost equal to the estimated cost of this contract

initially negotiated, adjusted in accordance with (n) below. (b) Payments shall be made to the Contractor when requested as work progresses, but not more frequently than bi-weekly, in amounts approved by the Contracting Officer. The Contractor may submit to an authorized representative of the Contracting Officer, in such form and reasonable detail as such representative may require, an invoice or public voucher supported by a statement of cost for the performance of this contract and claimed to constitute allowable cost. For this purpose, except as provided herein with respect to pension, profit sharing, and employee stock ownership plan contributions, the term “costs" shall include only those recorded costs which result, at the time of the request for reimbursement, from payment by cash, check, or other form of actual payment for items or services purchased directly for the contract, together with (when the Contractor is not delinquent in payment of costs of contract performance in the ordinary course of business) costs incurred, but not necessarily paid, for materials which have been issued from the Contractor's stores inventory and placed in the production process for use on the contract, for direct labor, for direct travel, for other direct inhouse costs, and for properly allocable and allowable indirect costs, as is shown by records maintained by the Contractor for purposes of obtaining reimbursement under Government contracts plus the amount of progress payments which have been paid to Contractor's subcontractors under similar cost standards. In addition, when the aforementioned contributions are paid by the Contractor to the pension, profit sharing, or employee stock ownership plan funds less frequently than quarterly, accrued costs therefor shall be excluded from indirect costs for payment purposes until such costs are paid. If such contributions are paid on a quarterly or more frequent basis, accruals therefor may be included in indirect costs for payment purposes provided that they are paid to the fund within thirty (30) days after the close of the period covered. If payments are not made to the fund within such thirty-day period, these contributions shall be excluded from indirect cost for payment purposes until payment has been made. (See 15-205.600). The restriction on payment more frequently than bi-weekly and the requirement of prior payment for items or services purchased directly for the contract shall not apply where the Contractor is a small business concem.

(c) Promptly after receipt of each invoice or voucher and statement of cost, the Government shall, except as otherwise provided in this contract, subject to the provisions of ((j) below, make payment thereon as approved by the Contracting Officer. Normally, payment of fee shall be made to the Contractor as specified in the Schedule. However, when in the opinion of the Contracting Officer, the Contractor's performance or cost indicates that target will not be achieved, the Government shall pay on the basis of such lesser fee as is appropriate. Further when the Contractor demonstrates that his performance or cost clearly indicates that he will earn a fee significantly in excess of target fee, the Government may, in the sole discretion of the Contracting Officer, pay on the basis of such higher fee as is appropriate. After payment of eighty-five percent (85%) of the applicable fee, the Contracting Officer may withhold further payment of fee until a reserve shall have been set aside in an amount which he considers necessary to protect the interests of the Government, but such reserve shall not exceed fifteen percent (15%) of the total applicable fee or one hundred thousand dollars ($100,000) whichever is less.

(d) Notwithstanding the provisions of paragraph (j) below, allowable indirect costs under this contract shall be obtained by applying overhead rate(s) established in accordance with paragraphs (e) and (f) below.

(e) Final annual overhead rates and the appropriate bases shall be established by procurement or audit determination in accordance with the procedures of Section IU, Part 7, of ASPR'in effect for the period covered by the proposal.

(f) The Contractor shall, within ninety (90) days after the expiration of each of its fiscal years for estimating, accumulating, and reporting contract costs, or some later date if approved by the Contracting Officer, submit to the Contracting Officer and to the cognizant audit activity a proposed final overhead rate(s) for that period based on the Contracter's actual cost experience during that period, together with supporting cost data specifying the contract(s) and/or subcon

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ARMED SERVICES PROCUREMENT REGULATION

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