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7-204.5 Patent Indemnity. In accordance with 9-103, insert the clause with additional applicable provisions in 7-104.5.

7-204.6 Filing of Patent Applications. In accordance with 9-106, insert the clause in 7-104.6.

7-204.7 Patent Rights. When experimental, developmental, or research work may be performed under the contract, insert the appropriate clause in 7-302.23. 7-204.8 Reporting of Royalties. In accordance with 9-110(d), insert the clause in 7-104.8(a).

7-204.9 Rights in Data. In accordance with 7-104.9 insert the appropriate clause, or clauses, therein.

7-204.10 Quality Program. In accordance with 14-304, insert the clause in


7-204.11 Excess Profit. In accordance with 7-104.11, insert the appropriate clause therein.

7-204.12 Military Security Requirements. In accordance with 7-104.12, insert the clause therein, deleting paragraphs (c) and (d) and substituting the following:

(c) If, subsequent to the date of this contract, the security classifications or security requirements under this contract are changed by the Government as provided in this clause, and if such changes cause an increase or decrease in the estimated cost or time required for performance of this contract, the estimated cost, fee, delivery schedule, or any other provision of the contract that may be affected, shall be subject to an equitable adjustment. Any such equitable adjustment shall be accomplished in the manner set forth in the "Changes" clause of this contract.

(d) The Contractor agrees to insert, in all subcontracts hereunder which involve access to clas sified information, provisions which shall conform substantially to the language of this clause, including this paragraph (d) but excluding the last sentence of paragraph (c) of this clause. (1971 APR)

7-204.13 Preference for Certain Domestic Commodities. In accordance with 6-305, insert the clause in 7-104.13.

7-204.14 Gratuities. Insert the clause in 7-104.16, except in contracts and purchase orders with foreign governments obligating solely funds other than those contained in Department of Defense appropriation acts.

7-204.15 Priorities, Allocations, and Allotments. In accordance with the requirements of 1-307.2, insert the clause in 7-104.18.

7-204.16 Reserved.

7-204.17 Employment of Ocean-Going Vessels-Ocean Transport of Government-Owned Supplies.

(a) In accordance with 1-1404(a), insert the clause in 7-104.19(a).
(b) In accordance with 1-1404(b)(1), insert the clause in 7-104.19(b).
(c) In accordance with 1-1404(b)(2), insert the clause in 7-104.19(c).
(d) In accordance with 1-1410, insert the clause in 7-104.19(d).




7-204.18 Limitation on Withholding of Payments. In accordance with 7-104.21, insert the clause therein.

7-204.19 Management Systems Requirements. In accordance with 16-827.1, insert the clause in 7-104.50.

7-204.20 Make-or-Buy Program.

(a) Changes to Make-or-Buy Program. In accordance with 3-902.4, insert the following clause.






The Contractor shall perform this contract in accordance with the "make-or-buy” program incorporated in this contract except as hereinafter provided. If the Contractor proposes to change the "make-or-buy" program, he shall notify the Contracting Officer thereof in writing at a time reasonably in advance of the proposed change and shall therewith submit justification in sufficient detail to permit evaluation of the proposed change. Changes in the place of performance of work on any "make" items in the “make-or-buy” program are subject to this requirement. With respect to items deferred at the time of negotiation of this contract for later addition to the "make-orbuy" program, the Contractor shall notify the Contracting Officer of each proposed addition at the earliest possible time, together with justification in sufficient detail to permit evaluation. This contract shall be deemed modified in accordance with such proposed change or addition upon receipt by the Contractor of the Contracting Officer's written approval thereof.

(End of clause)

(b) Price Adjustment for Make-or-Buy Changes. In accordance with 3-902.5, insert the following clause.


This clause applies only to items that are designated elsewhere in this contract as being "make" items or "buy" items subject to this clause. If the Contractor desires to "make" any designated "buy" item or to "buy" any designated “make” item, he shall give written notice to the Contracting Officer reasonably in advance of the proposed change and shall include significant and reasonably available cost and pricing data in sufficient detail to permit evaluation of the proposed change. Promptly thereafter, if the Contractor proceeds with the change, the Contractor and the Contracting Officer shall negotiate an equitable reduction in the contract price* to reflect any decrease in costs which should reasonably result from the change, and the contract shall be modified in writing accordingly. Failure to agree on an equitable reduction shall be a dispute concerning a question of fact within the meaning of the "Disputes" clause of this contract.

(End of clause)

*Substitute "target cost and target fee" for "contract price" in cost-plus-incentive-fee contracts.

7-204.21 Flight Risks. In accordance with 10-504, insert the following



(a) Notwithstanding any other provision of this contract, and particularly subparagraph (g)(1) of the "Government Property" clause and paragraph (c) of the "Insurance-Liability to Third Persons" clause, the Contractor shall not (i) be relieved of liability for, damage to, or loss or destruction of, aircraft sustained during flight, or (ii) be reimbursed for liabilities to third persons for loss of or damage to property, or for death or bodily injury, which are caused by aircraft during flight, unless the flight crew members have previously been approved in writing by. (See footnote at end of clause.)

(b) For purposes of this clause:

(i) Unless otherwise specifically provided in the Schedule, the term "aircraft" means any aircraft, whether furnished by the Contractor under this contract (either before or after acceptance by the Government) or furnished by the Government to the Contractor under this contract, including all Government Property placed or installed therein or attached thereto; provided, however, that such aircraft and property are not covered by a separate bailment agreement.

(ii) The term "flight" means any flight demonstration, flight test, taxi test, or other flight, made in the performance of this contract, or for the purpose of safeguarding the air




craft, or previously approved in writing by the
(See footnote at end of
clause.) As to land based aircraft, "flight" shall commence with the taxi roll from a
flight line and continue until the aircraft has completed the taxi roll to a flight line; as
to sea planes, “flight" shall commence with the launching from a ramp and continue
until the aircraft has completed its landing run and is beached at a ramp; as to
helicopters, "flight" shall commence upon engagement of the rotors for the purpose
of take-off and continue until the aircraft has returned to the ground and rotors are
disengaged; and for vertical take-off aircraft, "flight" shall commence upon disen-
gagement from any launching platform or device and continue until the aircraft has
been re-engaged to any launching platform or device.

(iii) The term "flight crew members" means the pilot, the co-pilot and, unless otherwise

specifically provided in the Schedule, the flight engineer, navigator, bombardiernavigator, and defense systems operator, when required, or assigned to their respective crew positions, to conduct any flight on behalf of the Contractor.

(c) If any aircraft is damaged, lost, or destroyed during flight, and if the amount of such damage, loss, or destruction exceeds one hundred thousand dollars ($100,000) or twenty percent (20%) of the estimated cost (exclusive of any fee) of this contract, whichever is less, and if the Contractor is not liable for the damage, loss or destruction pursuant to the "Government Property" clause of this contract together with paragraph (a) above, then an equitable adjustment for any resulting repair, restoration, or replacement that is required under this contract shall be made (i) in the estimated cost, delivery schedule, or both, and (ii) in the amount of any fee to be paid to the Contractor, and the contract shall be modified in writing accordingly; provided, in determining the amount of adjustment in the fee that is equitable, any fault of the Contractor, his employees, or any subcontractor, which materially contributed to the damage, loss, or destruction shall be taken into consideration. Failure to agree on any adjustment shall be a dispute concerning a question of fact within the meaning of the "Disputes" clause of this contract.

(End of clause)

*In the foregoing clause, insert in contracts of the Department of the Army, the Department of the Navy, the Department of the Air Force, and in contracts to be administered by the Defense Contract Administration Services the activity designated in combined regulation identified as Air Force Regulation 55-22, Army Regulation 95-20, NAVAIR Instruction 3710.1A, Defense Supply Agency Regulation 8210.1, dated 8 October 1971, subject, Requirements for Contractor Operating Procedures and Flight Crews, enclosure 1.


In the foregoing clause, the definition of “aircraft" may be appropriately modified in the Schedule if the contract covers helicopters, vertical take-off aircraft, lighter-than-air airships, or other nonconventional types of aircraft.

7-204.22 Duty-Free Entry.

(a) Duty-Free Entry for Designated Items. In accordance with 6-603.3(a), insert the clause in 7-104.31(a).

(b) Duty-Free Entry for Items Not Identified in the Contract. In accordance with 6-603.3(b), insert the clause in 7-104.31(b).

7-204.23 Duty-Free Entry of Listed Canadian Supplies. In accordance with 6-605.2, insert the clause in 7-104.32.

7-204.24 Taxes.

(a) Contractor Not a Foreign Government. In accordance with 11-403.2(c), insert the following clause.



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TAXES (1960 JUL)

Any tax or duty from which the United States Government is exempt by agreement with the Government of or from which the Contractor or any subcontractor hereunder is exempt shall not constitute an allowable cost under this contract.

under the laws of

(End of clause)

(b) Foreign Government as Contractor. In accordance with 11-403.2(d), insert the following clause.

TAXES (1960 JUL)

Any tax or duty from which the United States Government is exempt by agreement with the Government of ............. or from which any subcontractor hereunder is exempt under the laws of shall not constitute an allowable cost under this contract.

(End of clause)

7-204.25 Advance Payments. When advance payments are to be made in accordance with Appendix E, Part 4, insert the appropriate clauses in 7-104.34. 7-204.26 Frequency Authorization. In accordance with 7-104.61, insert the clause therein.

7-204.27 Required Source for Jewel Bearings and Related Items. In accordance with 1-2207.2, insert the clause in 7-104.37.

7-204.28 General Services Administration Supply Sources. In accordance with 5-909, insert the following clause.


The Contracting Officer may issue the Contractor an authorization to utilize General Services Administration supply sources for property to be used in the performance of this contract. All property acquired under such an authorization shall be subject to the provisions of the clause of this contract entitled "Government Property", except paragraphs (a) and (b) thereof.

(End of clause)

7-204.29 Special Termination Costs. In accordance with 8-712, insert the clause in 7-108.3.

7-204.30 Interest. In accordance with E-620, insert the clause in 7-104.39. 7-204.31 United States Products (Military Assistance Program). In accordance with 6-703.4, insert the clause in 7-2003.51.

7-204.32 Value Engineering.

(a) Use of the Incentive and Program Requirement Clauses. In accordance with 1-1702 and 1-1707, insert the applicable clause or clauses in 7-104.44(a) and (b), as modified in (b) or (c) below.

(b) Cost-Plus-Incentive-Fee Contracts. Substitute the following "Sharing" provision for paragraph (e) of the applicable clause in 7-104.44(a) and (b):

(e) Sharing. If a VECP submitted by the Contractor pursuant to this clause is accepted, the Contractor shall share in the savings realized by the Government in accordance with the following provisions:

(1) Instant Contract.

(i) Definitions:



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