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(a) The Government does not assume any liability to third persons, nor will the Government reimburse the Contractor for his liability to third persons, with respect to loss due to death, bodily injury, or damage to property resulting in any way from the performance of this contract or any subcontract hereunder.

(b) The Contractor shall give the Government or its representatives immediate notice of any suit or action filed, or prompt notice of any claim made, against the Contractor arising out of the performance of this contract, the cost and expense of which may be reimbursable to the Contrac. tor under the provisions of this contract. The Contractor shall furnish immediately to the Government copies of all pertinent papers received by the Contractor. The Contractor shall, if required by the Government, authorize representatives of the Government to settle or defend any such claim and to represent the Contractor in or take charge of any litigation in connection therewith. The Contractor may, at his own expense, be associated with the representatives of the Government in the settlement or defense of any such claim or litigation.

(End of clause)

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7-402.27 Utilization of Labor Surplus Area Concerns. In accordance with 1-805.3, insert the clause in 7-104.20.

7-402.28 Payment for Overtime Premiums. In accordance with 12-102, insert the clause in 7-203.27.

7-402.29 Competition in Subcontracting. In accordance with 7-104.40, insert the clause therein.

7-402.30 Audit by Department of Defense. In accordance with 7-104.41(a), insert the clause therein.

7-402.31 Price Reduction for Defective Cost or Pricing Data. In accordance with 7-104.29(a), insert the clause therein.

7-402.32 Subcontractor Cost and Pricing Data. In accordance with 7-104.42(a), insert the clause therein.

7-402.33 Minority Business Enterprises. In accordance with 1-332, insert the appropriate clause or clauses in 7-104.36.

7-402.34 Affirmative Action for Disabled Veterans and Veterans of the Vietnam Era. Insert the clause in 7-103.27.

7-402.35 Affirmative Action for Handicapped Workers. Insert the clause in 7-103.28.

7-402.36 Clean Air and Water. In accordance with 1-2302.2, insert the clause in 7-103.29.

7-402.37 Notice of Intent to Disallow or Not Recognize Costs. Insert the clause in 7-203.35.

7-403 Clauses To Be Used When Applicable.
7-403.1 Clauses for Contracts Involving Construction Work.
(a) In accordance with 18–703, insert the clauses in 7-602.23.
(b) In accordance with 7-602.20 and 7-602.24, insert the clauses therein.

7-403.2 Filing of Patent Applications. In accordance with 9-106, insert the clause in 7-104.6.

7-403.3 Reporting of Royalties. In accordance with 9-110 (d), insert the clause in 7-104.8(a).

7-403.4 Excess Profit. In accordance with 7-104.11, insert the clause therein.

7-403.5 Excusable Delays. In accordance with 8–708, insert the clause in 7-203.11.





7-403.6 Preference for Certain Domestic Commodities. In accordance with Section VI, Part 3, insert the clause in 7-104.13.

7-403.7 Priorities, Allocations, and Allotments. In accordance with 1-307.2, insert the clause in 7-104.18.

7-403.8 Communist Areas. In accordance with 6–403, insert the clause in 7-103.15.

7-403.9 Negotiated Overhead Rates - Predetermined.
(a) In accordance with 3–704, insert the following clause.


(a) Notwithstanding the provisions of the clause of this contract entitled “Allowable Cost and Payment", the allowable indirect costs under this contract shall be obtained by applying predetermined overhead rates to bases agreed upon by the parties, as specified below.

(b) The Contractor, as soon as possible but not later than three (3) months after the expiration of his fiscal year shall submit to the Contracting Officer with a copy to the cognizant audit activity, a proposed predetermined overhead rate or rates based on the Contractor's actual cost experience during that fiscal year, together with supporting cost data. Negotiation of predetermined overhead rates by the Contractor and the Contracting Officer shall be undertaken as promptly as practicable after receipt of the Contractor's proposal.

(c) Allowability of costs and acceptability of cost allocation methods shall be determined in accordance with the Armed Services Procurement Regulation, Section XV, Part 3, as in effect on the date of this contract.

(d) Predetermined rate agreements in effect on the effective date of this contract shall be incorporated into the contract schedule. Rates for subsequent periods shall be negotiated and the results set forth in a written overhead rate agreement executed by both parties. Such agreement shall be automatically incorporated into this contract upon execution and shall specify (i) the agreed predetermined overhead rates, (ii) the bases to which the rates apply, (iii) the fiscal year unless the parties agree to a different period for which the rates apply, and (iv) the specific items treated as direct costs or any changes in the items previously agreed to be direct costs. The overhead rate agreement shall not change any monetary ceiling, contract obligation, or specific cost allowance or disallowance provided for in this contract.

(e) Pending establishment of predetermined overhead rates for any fiscal year or different period agreed to by the parties, the Contractor shall be reimbursed either at the rates fixed for the previous fiscal year or other period or at billing rates acceptable to the Contracting Officer subject to appropriate adjustment when the final rates for that fiscal year or other period are established.

(f) Any failure by the parties to agree on any predetermined overhead rate or rates under this clause shall not 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. If for any fiscal year or other period specified in the Schedule of this contract the parties fail to agree to a predetermined overhead rate or rates it is agreed that the allowable indirect costs under this contract shall be obtained by applying negotiated final overhead rates in accordance with the terms of the "Allowable Cost, Fee, and Payment" clause of the contract.

(g) Allowable indirect costs for the period until the end of the Contractor's fiscal year during which performance begins shall be obtained by applying the predetermined overhead rate set forth in the Schedule to the bases set forth therein.

(End of clause)

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(b) In the case of a facilities contract, change “Part 3" to “Part 5" in paragraph (c) of the clause in (a) above.

7-403.10 Notice to the Government of Labor Disputes. In accordance with 7-104.4, insert the clause therein.

7-403.11 Gratuities. In accordance with 7-104.16, insert the clause therein. 7-403.12 Limitation on Withholding of Payments.

(a) Except as provided in (b) below the following clause shall be inserted in contracts which include more than one clause or Schedule provision authorizing




the temporary withholding of amounts otherwise payable to the contractor for supplies delivered or services performed:


If more than one clause or Schedule provision of this contract authorized the temporary withholding of amounts otherwise payable to the Contractor for work performed under this contract, the total of the amounts so withheld at any one time shall not exceed the greatest amount which may be withheld under any one such clause or Schedule provision at that time; provided that this limitation shall not apply to:

(i) withholdings pursuant to any clause relating to wages or hours of employees;
(ii) withholding not specifically provided for by this contract; and
(iii) the recovery of overpayments.

(End of clause)

(b) The clause in (a) above is not required when: (i) the contracting officer or the procuring activity determines that the

withholding limitation in the said clause is incompatible with the pur

pose of the particular with holding provisions involved; or (ii) all of the contract clauses or Schedule provisions (in excess of one)

which provide for the withholding of payments either (A) are exempt from the limitations in the clause set forth in (a) above under the proviso thereof, or (B) provide that their withholding provisions do not require any additional withholdings where the amounts required to be withheld under them are being withheld under other

provisions of the contract. If it is determined that the withholding limitation in the clause set forth in (a) above is incompatible with the purpose of particular withholding provisions, the said clause may be omitted or modified to make it inapplicable to such withholding provisions.

7-403.13 Bills of Lading Covering Shipments To or From Contractor's Plant. In accordance with the requirements of 19-217.1(b), insert the clause in 7-203.14.

7-403.14 Changes to Make-or-Buy Program. In accordance with Section III, Part 9, insert the clauses in 7-204.20.

7-403.15 Quality Program. In accordance with 14-304, insert the clause in 7-104.28.

7-403.16 Flight Risks. In accordance with 10–504, insert the clause in 7-204.21.

7-403.17 Duty-Free Entry. In accordance with Section VI, Part 6, insert the appropriate clause or clauses in 7-104.31.

7-403.18 Duty-Free Entry of Listed Canadian Supplies. In accordance with 6-605, insert the clause in 7-104.32.

7-403.19 Taxes. In accordance with 11-403, insert one of the clauses in 7-204.24.

7-403.20 Advance Payments. When advance payments are to be made in accordance with Appendix E, Part 4, insert the clause in 7-104.34.

7-403.21 Workmen's Compensation and War Hazard Insurance Overseas. In accordance with 10-403, insert the clauses in 7-104.2(a) and/or 7-104.2(b) de

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pending on whether all contract employees are subject to the Defense Base Act or whether the Act has been waived as to all or part of the contract employees. Also insert the clause Reimbursement for War Hazard Losses in 7-104.2(c) and the language at 10-502 (b) and (c) according to the instructions stated in those paragraphs.

7-403.22 Required Source for Jewel Bearings and Related liems. In accordance with 1-2207.2 , insert the clause in 7-104.37.

7-403.23 General Services Administration Supply Sources. In accordance with 5-909, insert the clause in 7-204.28.

7-403.24 Safety Precautions for Ammunition and Explosives. In accordance with 7-104.79, insert the clause therein.

7-403.25 Interest. In accordance with E-620, insert the clause in 7-104.39.

7-403.26 United States Products (Military Assistance Program). In accordance with 6–703.4, insert the clause in 7-2003.51.

7-403.27 Value Engineering. Subject to the limitations in 1-1702, insert the appropriate clause(s) in 7-104.44, substituting the “Sharing" paragraph (e) in 7-204.32(b) or (c) for paragraph (e) of the clause in 7-104.44, as applicable.

7-403.28 Notice of Radioactive Materials. In accordance with 7-104.80, insert the clause therein.

7-403.29 Non-Use of Foreign Flag Vessels Engaged in Cuban and North Vietnam Trade. In accordance with 1-1404, insert the clause in 7-104.19 (d).

7-403.30 New Material. In accordance with 1-1208, insert the clause in 7-104.48.

7-403.31 Special Termination Costs. In accordance with 8-712, insert the clause in 7-108.3.

7-403.32 Management Systems Requirements. In accordance with 16-827.1, insert the clause in 7-104.50.

7-403.33 Special Test Equipment. Insert the clause in 7-104.26 in negotiated contracts which provide that the contractor will acquire special test equipment for the Government but do not specify the items to be acquired (see 13-306.3(c)).

7-403.34 First Article Approval. In accordance with Section I, Part 19, insert the appropriate clause in 7-104.55.

7-403.35 Order of Precedence. In accordance with 3-501(b)Sec.C(xxxi), insert the clause in 7-2003.41.

7-403.36 United States Products and Services (Balance of Payments Program). In accordance with Section VI, Part 8, insert the clause in 7-2003.53.

7-403.37 Identification of Expenditures in the United States. In accordance with 6-807, insert the clause in 7-104.58.

7-403.38 Reserved.

7-403.39 Cure of Laboratory Animals. In accordance with 7–303.44, insert the clause therein.

7-403.40 Frequency Authorization. In accordance with 7–104.61, insert the clause therein.

7-403.41 Material Inspection and Receiving Report. In accordance with 7-104.62, insert the clause therein.




7-403.42 Recovery of Nonrecurring Costs on Foreign Sales of Major Defense Equipment. In accordance with 4-109(a), insert the applicable clause in 7-104.64.

7-403.43 Use of Excess and Near Excess Currency. In accordance with 6-1110, insert the clause in 7-104.66.

7-403.44 Limitation of Liability. In accordance with 1-330, insert the appropriate clause in 7-104.45(a) or 7–204.33.

7-403.45 Aircraft, Missile, and Space Vehicle Accident Reporting and Investigation. In accordance with 7-104.81, insert the clause therein.

7-403.46 Procurement of Miniature and Instrument Ball Bearings. In accordance with 1-2207.3, insert the clause in 7-104.38.

7-403.47 Procurement of Precision Components for Mechanical Time Devices. In accordance with 1-2207.4, insert the clause in 7-104.46.

7-403.48 Payment of Interest on Contractors' Claims. In accordance with 1-333, insert the clause in 7-104.82.

7-403.49 Rights in Data. In accordance with 7-104.9 insert the appropriate clause, or clauses, therein.

7-403.50 Cost Accounting Standards. In accordance with 3–1204, insert the clauses in 7-104.83.

7-403.51 Contractor's Identification of Changes. In accordance with 26–802, insert a clause as provided in 7-104.86.

7-403.52 Cost/Schedule Control Systems. In accordance with 1-331(h) and 3-501(b) Section C (xlv), insert the clause in 7-104.87.

7-403.53 Engineering Change Proposals (ECP's). In accordance with 26–205, insert the clause in 7-104.89.

7-403.54 Change Order Accounting. In accordance with 26–205, insert the clause in 7-104.90.

7-403.55 Capture and Detention. In accordance with 10_406, insert the clause in 7-104.94.

7-403.56 Indemnification Under 10 USC 2354. In accordance with 10–701, insert the following clause.


(a) Pursuant to the authority of 10 U.S.C. 2354, 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 persons

(including employees of the Contractor) for death, bodily injury (including sickness

or disease), 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; to the extent that such a claim, loss or damage (A) arises out of the direct performance of this contract; (B) is not compensated by insurance or otherwise; and (C) results from a risk defined in this contract to be unusually hazardous. 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 any such claim, loss or damage that results from willful misconduct or lack of good faith 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)



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