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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(f) The Contractor shall (i) promptly notify the Contracting Officer of any occurrence, action or claim he learns of that reasonably may be expected to involve indemnification under this clause, (ii) furnish evidence or proof of any claim, loss or damage in the manner and form required by the Government, and (iii) immediately furnish to the Government copies of all pertinent papers received by the Contractor. The Government may direct, participate in, and supervise the settlement or defense of any such claim or action. The Contractor shall comply with the Government's directions, and execute any authorizations required, in regard to such settlement or defense.

(8) The Contractor shall procure and maintain, to the extent available, such insurance against unusually hazardous risks as the Contracting Officer (or in contracts with Department of the Navy, The Department) may from time to time require or approve. All such insurance shall be in such form, in the amounts, for the periods of time, at such rates, and with such insurers, as the Contracting Officer (or in contracts with Department of the Navy, The Department) may from time to time require or approve. The obligations of the Government under this clause shall not apply to claims, loss or damage to the extent that insurance is available and is either required or approved pursuant to this paragraph. The Contractor shall be reimbursed the cost of any such insurance in excess of that maintained by the Contractor as of the date of this contract, to the extent the cost thereof is properly allocable to this contract and is not included in the contract price.

(End of clause)

7–303.62 Indemnification Under Public Law 85-804. In accordance with 10–702, insert the following clause.

INDEMNIFICATION UNDER PUBLIC LAW 85-804 – FIXED PRICE (1977 JAN)

(a) Pursuant to Public Law 85-804 (50 U.S.C. 1431 - 1435) and Executive Order 10789, as amended, and notwithstanding any other provision of this contract, but subject to the following paragraphs of this clause, the Government shall hold harmless and indemnify the Contractor against:

(i) claims (including reasonable expenses of litigation or settlement) by third per

sons (including employees of the Contractor) for death, personal injury, or loss

of, damage to, or loss of use of property; (ii) loss of or damage to property of the Contractor, and loss of use of such property

but excluding loss of profit; and (iii) loss of, damage to, or loss of use of property of the Government but excluding

loss of profit; to the extent that such a claim, loss or damage (A) arises out of or results from a risk defined in this contract to be unusually hazardous or nuclear in nature and (B) is not compensated by insurance or otherwise. Any such claim, loss or damage within deductible amounts of Contractor's insurance shall not be covered under this clause. (b) The Government shall not be liable for:

(i) claims by the United States (other than those arising through subrogation)

against the Contractor; or

(ii) losses affecting the property of such Contractor; when the claim, loss or damage was caused by the willful misconduct or lack of good faith on the part of any of the Contractor's directors or officers, or principal officials. For purposes of this clause, the term “principal officials" means any of the Contractor's managers, superintendents, or other equivalent representatives who have supervision or direction of:

(A) all or substantially all of the Contractor's business, or
(B) all or substantially all of the Contractor's operations at any one

plant or separate location in which this contract is being per

formed, or (C) a separate and complete major industrial operation in connection

with the performance of this contract. The Contractor shall not be indemnified under this clause for liability assumed under any contract or agreement unless such assumption of liability has been specifically authorized by the

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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

Secretary and approved by the Contracting Officer; (or in contracts with the Department of the Navy, The Department). When the Government has assumed liability for subcontracts, the term “Contractor" in this paragraph (b) shall include subcontractors.

(c) No payment shall be made by the Government under this clause unless the amount thereof shall first have been certified to be just and reasonable by the Secretary or his representative designated for such purpose. The rights and obligations of the parties under this clause shall survive the termination, expiration, or completion of this contract. The Government may discharge its liability under this paragraph by making payments to the Contractor or directly to parties to whom the Contractor may be liable.

(d) With the prior written approval of the Contracting Officer, the Contractor may include in any subcontract under this contract, the same provisions as those in this clause, whereby the Contractor shall indemnify the subcontractor against any risk defined in this contract to be unusually hazardous or nuclear in nature. Such a subcontract shall provide the same rights and duties, and the same provisions for notice, furnishing of evidence or proof, and the like, between the Con

established by this clause. The Contracting Officer may also approve similar indemnification of subcontractors at any tier upon the same terms and conditions. Subcontracts providing for indemnification within the purview of this clause shall provide for the prompt notification to the Contracting Officer of any claim or action against, or of any loss by, the subcontractor which is covered by this clause, and shall entitle the Government at its election, to control or assist in the settlement or defense of any such claim or action. The Government shall indemnify the Contractor with respect to his obligations to subcontractors under subcontract provisions thus approved by the Contracting Officer. The Government may discharge its obligations under this paragraph by making payments directly to subcontractors or to parties to whom the subcontractor may be liable.

(e) If insurance coverage or other financial protection program approved by the Secretary is reduced, the liability of the Government under this clause shall not be increased by reason of such reduction.

(f) The Contractor shall (i) promptly notify the Contracting Officer of any claim or action against, or of any loss by, the Contractor or any subcontractor which reasonably may be expected to involve indemnification under this clause, (ii) furnish evidence or proof of any claim, loss or damage covered by this clause in the manner and form required by the Government, and (iii) immediately furnish to the Government copies of all pertinent papers received by the Contractor. The Government may direct, control or assist in the settlement or defense of any such claim or action. The Contractor shall comply with the Government's directions, and execute any authorizations required in regard to such settlement or defense.

(End of clause)

7–303.63 Preference for United States Flag Air Carriers. In accordance with 1-336.1(b), insert the clause in 7-104.95.

7–303.64 Privacy Act. In accordance with 1-327.1, insert the clause in 7-104.96.

7-303.65 Preference for Domestic Specialty Metals. In accordance with 7-104.93, insert the applicable clause therein.

7–303.66 Exclusionary Policies and Practices of Foreign Governments. In accordance with 6-1312, insert the clause in 7-104.97.

7–303.67 Hazardous Material Identification and Material Safety Data. In accordance with 1-323.2(b), insert the clause in 7-104.98.

7–303.68 Geographic Distribution of Defense Subcontract Dollars. In accordance with 1-340, insert the clause in 7-104.78.

7–304 Additional Clauses. The following clauses shall be inserted in fixedprice research and development contracts in accordance with Departmental procedures when it is desired to cover the subject matter thereof.

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7–304.1 Changes.

ON PROVISIONS

CHANGES (1965 JUN)

The Contracting Officer may at any time, by a written order, and without notice to the sureties, if any, make changes, within the general scope of this contract, in any one or more of the following: (i) drawings, designs, or specifications; (ii) method of shipment or packing; and (iii) place of inspection, delivery, or acceptance. If any such change causes an increase or decrease in the cost of, or the time required for performance of, this contract, or otherwise affects any other provisions of this contract, whether changed or not changed by any such order, an equitable adjustment shall be made (i) in the contract price or time of performance, or both, and (ii) in such other provisions of the contract as may be so affected, and the contract shall be modified in writing accordingly. Any claim by the Contractor for adjustment under this clause must be asserted within thirty (30) days from the date of receipt by the Contractor of the notification of change; provided, however, that the Contracting Officer, if he decides that the facts justify such action, may receive and act upon any such claim asserted at any time prior to final payment under this contract. Failure to agree to any adjustment shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled “Disputes”. However, nothing in this clause shall excuse the Contractor from proceeding with the contract as changed.

(End of clause)

In the foregoing clause, the period of “thirty (30) days" within which any claim for adjustment must be asserted, may be varied in accordance with Departmental procedures. In accordance with 10 U.S.C. 2306(f), prior to the pricing of any change order that is expected to exceed $100,000, except where the price is 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, the contracting officer shall require the contractor to furnish a Certificate of Current Cost or Pricing Data (see 3-807.6) and shall assure the contract includes or is modified to include a defective pricing data clause (see 7-104.29).

7-304.2 Alterations in Contract. The clause in 7-105.1(a) may be inserted. 7-304.3 Approval of Contract. The clause in 7-105.2 may be inserted.

7-304.4 Bill of Materials. In accordance with 7-105.6, the clause set forth therein may be inserted.

7–304.5 Notice of Shipments. The clause in 7-105.4 may be inserted.

7-304.6 Reports of Work. In accordance with 7-404.6, the clause set forth therein may be inserted.

7-304.7 Liquidated Damages. In accordance with 1-310, the clause in 7-105.5 may be inserted.

7-304.8 Reserved.
7-304.9 Reserved.

7-304.10 Warranties. In accordance with 1-324, an appropriate warranty may be inserted.

7-304.11 Stop Work Orders. In accordance with 7–105.3, the clause set forth therein may be inserted.

7–304.12 Term of Performance or Delivery Date. Insert a clause in accordance with 1-305.5. Clauses in 7-104.92 shall be used as a guide.

7-304.12

ARMED SERVICES PROCUREMENT REGULATION

CONTRACT CLAUSES AND SOLICITATION PROVISIONS

Part 4-Cost-Reimbursement Type Research and Development Contracts

7-400 Scope of Part. This Part sets forth uniform contract clauses for use in cost-reimbursement type research and development contracts as defined in 7-401.

7-401 Applicability. As used throughout this part, the term “cost-reimbursement type research and development contract" shall mean any contract (other than a letter contract, notice of award, or modification not effecting new procurement) which (i) is entered into on a cost, cost-sharing or cost-plus-a-fee basis as covered in 3-405, and (ii) is for experimental, developmental, or research work.

7-402 Required Clauses. The following clauses shall be inserted, as required, in all cost-reimbursement type research and development contracts.

7-402.1 Definitions. In accordance with 7-103.1, insert the clause therein. 7-402.2 Limitation of Cost or Funds.

(a) The following clause shall be used in fully funded cost-reimbursement type research and development contracts which do not provide for cost-sharing. The words “exclusive of any fee", occurring twice in paragraph (a) of the clause, may be deleted in any contract not providing for the payment of a fee.

LIMITATION OF COST (1966 OCT)

(a) It is estimated that the total cost to the Government for the performance of this contract, exclusive of any fee, 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. If, at any time, the Contractor has reason to believe that the cost 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 estimated cost set forth in the Schedule, or if, at any time, the Contractor has reason to believe that the total cost to the Government for the performance of this contract, exclusive of any fee, will be greater or substantially less than the then estimated cost hereof, the Contractor shall notify the Contracting Officer in writing to that effect, giving the revised estimate of such total cost for the performance of this contract.

(b) 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 estimated cost set forth in the Schedule, 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 estimated cost set forth in the Schedule, unless and until the Contracting Officer shall have notified the Contractor in writing that such estimated cost has been increased and shall have specified in such notice a revised estimated cost which shall thereupon constitute the estimated cost of performance of this contract. No notice, communication or representation in any other form or from any person other than the Contracting Officer shall affect the estimated cost of 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 estimated cost set forth in the Schedule, 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 estimated cost set forth in the Schedule has been increased, any costs incurred by the Contractor in excess of the estimated cost prior to such increase shall be allowable to the same extent as if such costs had been incurred after the increase; 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

(c) Change orders issued pursuant to the Changes clause of this contract shall not be considered an authorization to the Contractor to exceed the estimated cost set forth in the Schedule in the absence of a statement in the change order, or other contract modification, incrcasing the estimated cost.

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CONTRACT CLAUSES AND SOLICITATION PROVISIONS

(d) In the event this contract is terminated or the estimated cost not increased 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.

(End of clause)

(b) The following clause shall be used in fully funded cost-reimbursement type research and development contracts which provide for cost-sharing. The contract schedule shall include a cost-sharing formula agreed upon by the parties prior to execution of the contract. This formula shall provide for the ratio of costsharing with regard to both the originally established total estimated cost and any increase thereto, pursuant to (b) of the clause.

LIMITATION OF COST (COST-SHARING) (1973 MAY)

(a) It is estimated that the cost to the Government for the performance of this contract (exclusive of any fee) will not exceed the estimated cost to the Government 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 to the Government plus the share of the cost of performance agreed to be borne by the Contractor, as set forth in the Schedule. If, at any time, the Contractor has reason to believe that the costs which he expects to be incurred 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 estimated total cost to the Government and to the Contractor then set forth in the Schedule, or if, at any time, the Contractor has reason to believe that the total cost for the performance of this contract (exclusive of any fee) will be greater or substantially less than the then estimated total cost thereof, the Contractor shall notify the Contracting Officer in writing to that effect, giving his revised estimate of such total cost for the performance of this contract.

(b) 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 estimated cost to the Government set forth in the Schedule, and the Contractor shall not be obligated to continue performance under the contract (including actions under the Terminations clause) or otherwise to incur costs in excess of the estimated total cost set forth in the Schedule, unless and until the Contracting Officer shall have notified the Contractor in writing that such estimated total cost has been increased and shall have specified in such notice a revised estimated total cost which shall thereupon constitute the estimated total cost of performance of this contract. The increase in such estimated total cost shall be allocated in accordance with the formula set forth in the Schedule governing such increases. No notice, communication or representation in any other form or from any person other than the Contracting Officer shall affect the estimated cost to the Government of 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 estimated cost to the Government set forth in the Schedule, 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 estimated total cost set forth in the Schedule has been increased, any costs incurred by the Contractor in excess of the estimated total cost prior to such increase shall be allowable to the same extent and in the same percentage as if such costs had been incurred after the increase; 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.

(c) Change orders issued pursuant to the Changes clause of this contract shall not be considered an authorization to the Contractor to exceed the estimated cost to the Government set forth in the Schedule in the absence of a statement in the change order, or other contract modification, increasing the estimated cost.

(d) In the event this contract is terminated or the estimated cost not increased, the Goverment 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.

(End of clause)

7-402.2
ARMED SERVICES PROCUREMENT REGULATION

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