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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

tract (or to require repayment of any fixed fee theretofore paid) in such amount as may be equitable under the circumstances, or (iii) may terminate this contract for default as provided in the clause of this contract entitled "Termination." Failure to agree to the amount of any such increased cost to be charged to the Contractor or to such reduction in, or repayment of, the fixed fee shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled “Disputes."

(c) Notwithstanding the provisions of paragraph (b) hereof, the Government may at any time require the correction or replacement by the Contractor, without cost to the Government, of supplies or lots of supplies which are defective in material or workmanship, or otherwise not in conformity with the requirements of this contract, if such defects or failures are due to fraud, lack of good faith or willful misconduct on the part of any of the Contractor's directors or officers, or on the part of any of his managers, superintendents, or other equivalent representatives, who has supervision or direction of (i) all or substantially all of the Contractor's business, or (ii) all or substantially all of the Contractor's operations at any one plant or separate location in which this contract is being performed, or (iii) a separate and complete major industrial operation in connection with the performance of this contract. The Government may at any time also require correction or replacement by the Contractor, without cost to the Government, of any such defective supplies or lots of supplies if the defects or failures are caused by one or more individual employees selected or retained by the Contractor after any such supervisory personnel has reasonable grounds to believe that such employee is habitually careless or otherwise unqualified.

(d) Corrected supplies or replaced supplies shall be subject to the provisions of this clause in the same manner and to the same extent as supplies originally delivered under this contract.

(e) The Contractor shall make his records of all inspection work available to the Government during the performance of this contract and for such longer period as may be specified in this contract.

(f) Except as provided in this clause and as may be provided in the Schedule, the Contractor shall have no obligation or liability to correct or replace supplies or lots of supplies which at the time of delivery are defective in material or workmanship or otherwise not in conformity with the requirements of this contract.

(8) Except as otherwise provided in the Schedule, the Contractor's obligation to correct or replace Government-furnished property (which is property in the possession of or acquired directly by the Government and delivered or otherwise made available to the Contractor) shall be governed by the provisions of the clause of this contract entitled “Government Property".

(End of clause)

(b) When it is desired to require contractors to maintain an inspection system in accordance with Military Specification MIL-145208 (see 14_303), the clause in (a) above shall be inserted in the contract except that the following shall be added as the third sentence of paragraph (a).

The inspection system shall be in accordance with the edition of Military Specification MIL145208 in effect on the date of this contract. (1967 AUG)

7203.6 Assignment of Claims. In accordance with 7–103.8, insert the clause therein.

7–203.7 Examination of Records by Comptroller General. In accordance with 7-104.15, insert the clause therein.

7–203.8 Subcontracts.

(a) In accordance with 23–201.2, and subject to the instructions in (b) below, insert the following clause.

7-203.8

ARMED SERVICES PROCUREMENT REGULATION

CONTRACT CLAUSES AND SOLICITATION PROVISIONS

SUBCONTRACTS (1979 MAR)

(a) The Contractor shall notify the Contracting Officer reasonably in advance of entering into any subcontract (as used in this clause, the term "subcontract" includes, but is not limited to, purchase orders, changes, and/or modifications thereto) which (1) is cost-reimbursement type, time and materials or labor-hour, or (ii) is fixed-price type and exceeds in dollar amount either $25,000 or five percent (5%) of tht total estimated cost of this .contract, or (iii) provides for the fabrication, purchase, rental, installation, or other acquisition of special test equipment having a value in excess of $1,000 or of any items of industrial facilities.

(b) In the case of a proposed subcontract, including but not limited to purchase orders, changes, and/or modifications thereto) which (i) is cost-reimbursement type, time and materials, or labor-hour, and would involve an estimated amount in excess of $10,000, including any fee, or (ii) is proposed to exceed $100,000, or (iii) is one of a number of subcontracts under this contract with a single subcontractor for the same or related supplies or services which, in the aggregate are expected to exceed $100,000; the advance notification required by (a) above shall include:

(1) a description of the supplies or services to be called for by the subcontract;
(2) identification of the proposed subcontractor and an explanation of why and how the

proposed subcontractor was selected, including the degree of competition obiained;
(3) the proposed subcontract price, together with the Contractor's cost or price analysis

thereof; (4) the subcontractor's current, complete, and accurate cost or pricing data and Cer

tificate of Current Cost or Pricing Data, when such data and cenificate are required,

by other provisions of this contract, to be obtained from the subcontractor; (5) identification of the type of subcontract to be used; (6) a memorandum of negotiation which sets forth the principal elements of the subcon

tract price negotiations. A copy of this memorandum shall be retained in the contractor's file for the use of Government reviewing authorities. The memorandum shall be in sufficient detail to reflect the most significant considerations controlling the establishment of initial or revised prices. The memorandum should include an explanation of why cost or pricing data was, or was not required, and, if it was not required in the case of any price negotiation in excess of $100.000, a statement of the basis for determining that the price resulted from or was based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation. If cost or pricing dala was submitted and a certificate of cost or pricing data was required, the memorandum shall reflect the extent to which reliance was not placed upon the fac. tual cost or pricing data submitted and the extent to which this data was not used by the contractor in determining the total price objective and in negotiating the final price. The memorandum shall also reflect the extent to which it was recognized in the negotiation that any cost or pricing dala submitted by the subcontractor was not accurate, complete, or current; the action taken by the contractor and the subcontractor as a result; and the effect, if any, of such defective data on the toual price negotiated. Where the total price negotiated differs significantly from the Contractor's total price objective, the memorandum shall explain this difference;

7-203.8
ARMED SERVICES PROCUREMENT REGULATION

CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(7) when incentives are used, the memorandum of negotiation shall contain an explana

lion of the incentive fee/profit plan identifying each critical performance element, management decisions used to quantify each incentive element, reasons for incentives on particular performance characteristics, and a brief summary of trade oft pos

sibilities considered as to cost, performance, and time; and (8) the subcontractor's Disclosure Suatement or Certificate relating to Cost Accounting

Suandards when such data are required by other provisions of this contract to be ob

tained from the subcontractor. (c) The Contractor shall obtain the written consent of the Contracting Officer prior to placing any subcontract for which advance notification is required under (a) above. The Contracting Or. ficer may, in his discretion, ratify in writing any such subcontract: such action shall constitute the consent of the Contracting Officer as required by this paragraph (c).

(d) The Contractor agrees that no subcontract placed under this contract shall provide for pay. ment on a cost-plus-a-percentage of cost basis.

(e) Neither consent by the Contracting Officer to any subcontract or any provisions thereof nor approval of the Contractor's procurement system shall be construed to be a determination; (i) of the acceptability of any subcontract terms or condition, (ii) of the acceptability of any subcontract price or of any amount paid under any subcontract, or (iii) to relieve the Contractor of any responsibility for performing this contract; unless such approval or consent specifically provides otherwise.

(0) The Contractor shall give the Contracting Officer immediate notice in writing of any action or suit filed, and prompt notice of any claim made against the Contractor by any subcontractor or vendor which, in the opinion of the Contractor, may result in litigation, related in any way to this contract with respect to which the Contractor may be entitled to reimbursement from the Government.

(8) Notwithstanding (c) above, the Contractor may enter into subcontracts within (i) and (ii) of (a) above without the consent of the Contracting Officer if the Contracting Officer has approved in writing the Contractor's procurement system and the subcontract is within the scope of the approval. (This subparagraph (8) however, shall not be applicable to those subcontracts subject to subparagraph (k) below, if any.)

(h) The Contractor shall (i) insert in each incentive price revision or price redetermination subcontract hereunder the substance of the "Limitation on Payments" paragraph set forth in the appropriate clause prescribed by paragraph 7-108 or 7-109 of the Armed Services Procurement Regulation, including subparagraph (4) thereof, 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) thereof relating to tax credits, and (ii) include in each costreimbursement type subcontract hereunder a requirement that each price redetermination and incentive price revision subcontract thereunder will contain the substance of the "Limitation on Payments" provision, including subparagraph (4) thereof, modified as outlined in (i) above,

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ARMED SERVICES PROCUREMENT REGULATION

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(i) To facilitale small business participation in subcontracting under this contract, the Contrac. lor agrees to provide progress payments on the fixed-price subcontracts of those subcontractors which are small business concerns, in conformity with the standards for customary progress pay. ments stated in paragraphs 503 and 514 of Appendix E of the Armed Services Procurement Regulation, as in effect on the date of this contract. The Contractor further agrees that the need for such progress payments will not be considered as a handicap or adverse factor in the award of subcontracts

(j) The Government reserves the right to perform contractor procurement system reviews as set forth in DAR section XXIII.

(End of clouse)

(b) Insert the following additional subparagraph to the clause in (a) above in accordance with 23-201.2(d).

(k) Notwithstanding approval of the Contractor's procurement system, the Contractor shall not enter into certain subcontracts or classes of subcontracts set forth elsewhere in this contract without the prior written consent of the Contracting Officer. With respect to subcontracts so identified, the advance notification requirements of paragraph (a) above shall be fully applicable even though the Contractor's procurement system has been approved and those subcontracts are within the scope of the approval.

(c) In contracts with educational institutions, change "(iii)" in paragraph (a) of the clause in (a) above to read:

(iii) provides for the fabrication, purchase, rental,

installation, or other acquisition of equipment or of industrial facilities. (1975 OCT)

(d) In accordance with 23–201.4, insert the Equal Opportunity Pre-Award Clearance of Subcontracts clause in 7-104.22.

7-203.9 Utilization of Small Business Concerns. In accordance with 1-707.3(a) and (b), insert one or both of the clauses in 7-104.14.

7-203.10 Termination. In accordance with 8-702(a), insert the following

clause.

TERMINATION (1973 APR)

(a) The performance of work under the contract may be terminated by the Government in ac. cordance with this clause in whole, or from time to time in part:

(i) whenever the Contractor shall default in performance of this contract in accordance

with its terms (including in the term "default" any such failure by the Contractor to make progress in the prosecution of the work hereunder as endangers such per. formance), and shall fail to cure such default within a period of ten days (or such longer periods as the Contracting Officer may allow) after receipt from the Contracıing Officer of a notice specifying the default; or

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ARMED SERVICES PROCUREMENT REGULATION

CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(ii) whenever for any reason the Contracting Officer shall determine that such termina

tion is in the best interest of the Government. Any such termination shall be effected by delivery to the Contractor of a Notice of Termination specifying whether termination is for the default of the Contractor or for the convenience of the Government, the extent to which performance of work under the contract is terminated, and the date upon which such termination becomes effective. If, after notice of termination of this contract for default under (i) above, it is determined for any reason that the Contractor was not in default pursuant to (i), or that the Contractor's failure to perform or to make progress in performance is due to causes beyond the control and without the fault or negligence of the Contractor pursuant to the provisions of the clause of this contract relating to excusable delays, the Notice of Termination shall be deemed to have been issued under (ii) above, and the rights and obligations of the parties hereto shall in such event be governed accordingly.

(b) After receipt of a Notice of Termination and except as otherwise directed by the Contracting Officer, the Contractor shall:

(i) stop work under the contract on the date and to the extent specified in the Notice of

Termination; (ii) place no further orders or subcontracts for materials, services, or facilities, except as

may be necessary for completion of such portion of the work under the contract as is

not terminated; (iii) terminate all orders and subcontracts to the extent that they relate to the per

formance of work terminated by the Notice of Termination; (iv) assign to the Government, in the manner and to the extent directed by the Contract

ing Officer, all of the right, title, and interest of the Contractor under the orders or subcontracts so terminated, in which case the Government shall have the right, in its discretion, to settle or pay any or all claims arising out of the termination of such or

ders and subcontracts; (v) with the approval or ratification of the Contracting Officer, to the extent he may

require, which approval or ratification shall be final and conclusive for all purposes of this clause, settle all outstanding liabilities and all claims arising out of such termination of orders and subcontracts, the cost of which would be reimbursable in

whole or in part, in accordance with the provisions of this contract; (vi) transfer title (to the extent that title has not already been transferred) and in the

manner, to the extent, and at the times directed by the Contracting Officer, deliver to the Government (A) the fabricated or unfabricated parts, work in process, completed work, supplies, and other material produced as a part of, or acquired in respect of the performance of, the work terminated by the Notice of Termination, (B) the completed or partially completed plans, drawings, information, and other property which, if the contract had been completed, would be required to be furnished to the Government, and (C) the jigs, dies, and fixtures, and other special tools and tooling acquired or manufactured for the performance of this contract for

the cost of which the Contractor has been or will be reimbursed under this contract; (vii) use his best efforts to sell in the manner, at the times, to the extent, and at the price

or prices directed or authorized by the Contracting Officer, any property of the types referred to in (vi) above; provided, however, that the Contractor (A) shall not be required to extend credit to any purchaser, and (B) may acquire any such property under the conditions prescribed by and at a price or prices approved by the Contracting Officer; and provided further that the proceeds of any such transfer or disposition shall be applied in reduction of any payments to be made by the Government to the Contractor under this contract or shall otherwise be credited to the price or cost of the work covered by this contract or paid in such other manner as the Con

tracting Officer may direct; (viii) complete performance of such part of the work as shall not have been terminated by

the Notice of Termination; and (ix) take such action as may be necessary, or as the Contracting Officer may direct, for

the protection and preservation of the property related to this contract which is in the possession of Contractor in which the Government has or may acquire an interest.

7-203.10

ARMED SERVICES PROCUREMENT REGULATION

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