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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

tract(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).

(g) 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, (iii) 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 o 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 invoices 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 fee, which has been withheld pursuant to (c) above or 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 con

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tract; 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. Except as provided in (p) below, payments under the assignment and claims excepted from the release shall be subject to adjustment by reason of the adjustment of fee in accordance with (0) below.

(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) When the work under this contract (including any supplies or services which are ordered separately under, or otherwise added to, this contract) is increased or decreased by contract modification or when any equitable adjustment in the target cost is authorized under any other clause of this contract, equitable adjustments in the target cost, target fee, minimum fee, maximum fee, or any or all of them, as appropriate, shall be set forth in an amendment or supplemental agreement to this contract.

(0) The fee payable hereunder shall be the target fee increased by (insert contractor's participation) cents for every dollar by which the total allowable cost is less than the target cost or decreased by (insert contractor's participation) cents for every dollar by which the total allowable cost exceeds the target cost. In no event shall the fee be greater than ............ percent nor less than ............ percent, of the target cost; and, except as provided in (p) below, within these limits such fee shall be subject to adjustment, by reason of increase or decrease of total allowable cost, on account of payments under the assignment required by (L)(i) above, and claims excepted from the release required by (L)(ii) above. If this contract is terminated in its entirety, the portion of the target fee payable shall not be subject to an increase or decrease as provided in this paragraph. The terminations shall be otherwise accomplished pursuant to other applicable provisions of this contract.

(p) For the purpose of the adjustment of the fee in accordance with (o) above, the term “total allowable cost" shall not include allowable costs arising out of:

(i) any of the causes covered by the clause hereof entitled "Excusable Delays" to the ex

tent they are beyond the control and without the fault or negligence of the Contrac

tor or any subcontractor; (ii) the taking effect, after the negotiation of the target cost of this contract, of a statute,

court decision, written ruling or regulation which results in the Contractor's being

required to pay or bear the burden of any tax or duty, or increase in the rate thereof; (iii) any direct cost attributed to the Contractor's assistance or participation in litigation

as required by the Contracting Officer pursuant to a provision of this contract, including the furnishing of evidence and information requested pursuant to the clause hereof entitled “Notice and Assistance Regarding Patent and Copyright Infringe

ment": (iv) the procurement and maintenance of additional insurance not included in the target

cost and required by the Contracting Officer or claims for reimbursement for liabilities to third persons pursuant to the clause hereof entitled "Insurance-Liability to

Third Persons": (v) any claim, loss or damage resulting from a risk for which the Contractor has been re

lieved of liability pursuant to the clause hereof entitled "Government Property." Except as otherwise specifically provided in this contract, all other allowable costs shall be included in the term "total allowable cost" for the purpose of the adjustment of the fee in ac. cordance with (o) above.

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(a) The total allowable cost and the adjusted fee determined as provided in this clause shall be evidenced by a modification to this contract signed by the Contractor and the Contracting Of. hicer.

(r) Compensation for supplies (including spare parts) and services which are to be furnished under this contract pursuant to a provisioning document or Goverment option shall be determined in accordance with the provisions of this clause notwithstanding any inconsistent provision in such provisioning document or Government option.

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

(Lad dl chouse)

(c) (1) For approvals with regard to fixed-price type subcontracts providing for progress payments, pursuant to paragraph (c) of the foregoing clauses, the standards shall be the same as those governing progress payments on fixed-price type prime contracts, as provided by E-514 of Appendix E.

(2) In paragraph (L) (ii) (B) of the foregoing clauses, the period of years may be increased to correspond with any statutory period of limitation applicable to claims of third parties against the contractor; provided, that a corresponding increase is made in the period of retention of records required in paragraph (d) of the clause set forth in 7-104.15.

(3) In respect to paragraph (c) of the clause set forth in (b) above, generally, the payment of fee provisions in the Schedule should be based on target fee.

(4) In the case of cost-sharing contracts and cost-reimbursement type supply contracts without fee:

(i) insert the following sentence in lieu of the second sentence of para

graph (c) of the clause set forth above, except that, if the contract does not provide for cost-sharing, delete the parenthetical references to the Government's share:

After payment of an amount equal to eighty percent (80%) of (the Goverment's share of) the total estimated cost of performance of this contract set forth in the Schedule, the Contracting Officer may withhold further payment on account of allowable cost 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 one percent (1%) of (the Government's share of) such total estimated cost or one hundred thousand dollars ($100,000), whichever is less. (1968 SEP)

(ii) delete the words “and any part of the fixed fee" from paragraph (k)

of the clause set forth in (a) above; (iii) in contracts which provide for cost-sharing, change paragraph (a) of

the clause set forth in (a) above as follows:

(a) the allowability of costs incurred in the performance of this contract shall be determined by the Contracting Officer in accordance with:

(i) Part 2 of Section XV of the Armed Services Procurement Regulation as in effect on

the date of this contract; and (ü) the terms of this contract.

and

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(iv) change the title of the clause set forth in (a) above to “Allowable

Cost and Payment".

(5) The contracting officer shall determine to his satisfaction that the estimated cost of the contract initially negotiated does not include amounts for the contingencies identified in paragraph (p) of the clause set forth in (b) above.

(6) The following shall be added to paragraph (p) of the clause set forth in (b) above if the contract contains an “Indemnification" clause in accordance with 10–701(b)(1) and 10-702(b)(1):

or (vi) any claim, loss, or damage resulting from a risk defined in the contract as

unusually hazardous or as a nuclear risk, against which the Goverment has expressly agreed to indemnify the Contractor. (1966 APR)

(7) The amount to be withheld under paragraph (c) of the clauses shall normally be the maximum authorized by the clause except that the administrative contracting officer may, if he believes that such amount exceeds the amount necessary to protect the interests of the Government, review the status of all funds being withheld from the contractor under the particular contract concerned and under any other contracts with the contractor which he is administering and make appropriate recommendations to the procuring contracting officer. The procuring contracting officer shall decide whether to reduce the rate of withholding or whether to release a portion of the amount already reserved under the contract, as appropriate, and shall promptly advise the administrative contracting officer.

(8) Add the following as paragraph (o) of the clause in (a) above or as paragraph (t) of the clause in (b) above when the contract includes requirements under the FMS program for more than one country, or one or more countries and the United States.

If this contract Includes requirements under the mis program for more than one
country, or one or more countries and the United States, the Contractor shall pre-
pare separate payment requests (1) for each country', requirements and, when appli-
cable, (11) for U.S. Government requirements. With Administrative Contracting
officer approval, a single request may be made, provided a supporting schedule is
attached breaking down the total billing for each country and, when applicable, the
U.S. requirement. For this purpose the Contractor shall allocate costs among cus-
tower countries in a manner acceptable to the Administrative Contracting office,
(1979 PEB)

(9) In contracts (other than facilities contracts) with educational institutions, change "Part 2" to "Part 3" in paragraph (a) (i) (A) of the clause in (a) above, and in paragraph (a) (1) (i) (A) of the clause in (b) above.

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7–203.5 Inspection of Supplies and Correction of Defects.

(a) Except as provided in (b) below, the following clause shall be inserted in all cost-reimbursement type supply contracts.

INSPECTION OF SUPPLIES AND CORRECTION OF DEFECTS (1974 OCT)

(a) All supplies (which term throughout this clause includes without limitation raw materials, components, intermediate assemblies, end products, and when the contract does not include the clause entitled "Warranty of Technical Data," technical data), shall be subject to inspection and test by the Government, to the extent practicable at all times and places including the period of manufacture, and in any event prior to acceptance. The Contractor shall provide and maintain an inspection system acceptable to the Government covering the supplies, fabricating methods, and special tooling hereunder. The Government, through any authorized representative, may inspect the plant or plants of the Contractor or of any of his subcontractors engaged in the performance of this contract. If any inspection or lest is, made by the Government on the premises of the Contractor or a subcontractor, the Contractor shall provide and shall require subcontractors to provide all reasonable facilities and assistance for the safety and convenience of the Government inspectors in the performance of their duties. All inspections and tests by the Government shall be performed in such a manner as will not unduly delay the work. Except as otherwise provided in this contract, acceptance of any supplies or lots of supplies shall be made as promptly as practicable after delivery thereof and shall be deemed to have been made no later than sixty (60) days after the date of such delivery, if acceptance has not been made earlier within such period.

(b) At any time during performance of this contract, but not later than six (6) months (or such other period as may be provided in the Schedule) after acceptance of the supplies or lots of sup plies last delivered in accordance with the requirements of this contract, the Government may require the Contractor to remedy by correction or replacement, as directed by the Contracting Officer, any supplies or lots of supplies which at the time of delivery thereof are defective in material or workmanship or otherwise not in conformity with the requirements of this contract. Except as otherwise provided in paragraph (c) hereof, the cost of any such replacement or correction shall be included in Allowable Cost determined as provided in the clause of this contract entitled "Allowable Cost, Fixed Fee and Payment," but no additional fee shall be payable with respect thereto. Such supplies or lots of supplies shall not be tendered thereafter for acceptance unless the former requirement of correction is disclosed. If the Contractor fails to proceed with reasonable promptness to replace or correct such supplies or lots of supplies, the Government (i) may by contract or otherwise replace or correct such supplies and charge to the Contractor any increased cost occasioned the Government thereby, or may reduce any fixed fee payable under this contract (or require repayment of any fixed fee theretofore paid) in such amount as may be equitable under the circumstances, or (ii) in the case of supplies not delivered, may require the delivery of such supplies, and shall have the right to reduce any fixed fee payable under this con

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