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The mere fact that losses occur under a Government contract is not, by itself, a sufficient basis for the exercise of the authority conferred by the Executive Order. Whether, in a particular case, appropriate action such as amendment without consideration, correction of a mistake or ambiguity in a contract, or formalization of an informal commitment, will protect the foreign policy interests of the United States is a matter of sound judgment to be made on the basis of all of the facts of such case. Although it is obviously impossible to predict or enumerate all the types of cases with respect to which action may be appropriate, examples of certain cases or types of cases where action may be proper are set forth in §§ 7-50.204-2 through 7-50.204-4. Even if all of the factors contained in any of the examples are present, other factors or considerations in a particular case may warrant denial of the request. These examples are not intended to exclude other cases where the approving authority determines that the circumstances warrant action.

§ 7-50.204-2 Amendments without consideration.

(a) Where an actual or threatened loss under a Foreign Assistance contract, however caused, will impair the productive ability of a contractor whose continued performance on any Foreign Assistance contract or whose continued operation as a source of supply is found to be essential to pro

tect the foreign policy interests of the United States, the contract may be adjusted but only to the extent necessary to avoid such impairment to the contractor's productive ability.

(b) Where a contractor suffers a loss (not merely a diminution of anticipated profits) on a Foreign Assistance contract as a result of Government action, the character of the Government action will generally determine whether any adjustment in the contract will be made and its extent. Where the Government action is directed primarily at the contractor and is taken by the Government in its capacity as the other contracting party, the contract may be adjusted if fairness so requires; thus where such Government action, although not creating any liability on its part, increases the cost of performance, considerations of fairness may make appropriate some adjustment in the contract.

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A contract may be amended or modified to correct or mitigate the effect of a mistake, including the following examples:

(a) A mistake or ambiguity which consists of the failure to express or to express clearly in the written contract the agreements as both parties understood them;

(b) A mistake on the part of the contractor which is so obvious that it was or should have been apparent to the contracting officer; and

(c) A mutual mistake as to a material fact.

Amending contracts to correct mistakes with the least possible delay normally will protect the foreign policy interests of the United States by expediting the procurement program and by giving contractors proper assurance that such mistakes will be corrected expeditiously and fairly.

§ 7-50.204-4 Informal commitments.

Informal commitments may be formalized under certain circumstances to permit payment to persons who have taken action without a formal contract; for example, where any person, pursuant to written or oral instructions from an officer or official of

the Agency and relying in good faith upon the apparent authority of the officer or official to issue such instructions, has arranged to furnish or has furnished property or services to the Agency and/or to a Foreign Assistance contractor or subcontractor without formal contractual coverage for such property or services. Formalization of commitments

under such circum

stances normally will protect the foreign policy interests of the United States by assuring persons that they will be treated fairly and paid expeditiously.

§ 7-50.205 Limitations upon exercise of authority.

(a) The Executive Order is not authority for:

(1) The use of the cost-plus-a-percentage-of-cost system of contracting;

(2) The making of any contract in violation of existing law relating to limitation on profit or fees;

(3) The negotiation of purchases of or contracts for property or services required by law to be procured by formal advertising and competitive bidding; or

(4) The waiver of any bid, payment, performance or other bond required by law.

(b) No amendments, or modifications shall be entered into under the authority of the Executive Order:

(1) Unless, with respect to cases falling within section 4 of the Executive Order, a finding is made that the action is necessary to protect the foreign policy interests of the United States;

(2) Unless other legal authority in the Agency is deemed to be lacking or inadequate;

(3) Except within the limits of the amounts appropriated and the statutory contract authorization.

(c) No contract shall be amended or modified unless the request therefor has been filed before all obligations (including final payment) under the contract have been discharged.

(d) No informal commitment shall be formalized unless:

(1) A request for payment has been filed within six months after arranging to furnish or furnishing property

or services in reliance upon the commitment; and

(2) It is found that at the time the commitment was made it was impracticable to use normal procurement procedures.

§ 7-50.206 Contractual requirements.

Every contract amended or modified pursuant to this part shall contain: (a) A citation of the Act and Executive Order.

(b) A brief statement of the circumstances justifying the action;

(c) A recital of the finding, with respect to cases falling within section 4 of the Executive Order, that the action is necessary to protect the foreign policy interests of the United States.

§ 7-50.207 Submission of requests by contractors.

§ 7-50.207-1 Filing requests.

Any person (hereinafter called the "contractor") seeking an adjustment under standards set forth in § 7-50.204 may file a request in duplicate with the cognizant contracting officer or his duly authorized representative. If such filing is impracticable, requests will be deemed to be properly filed if filed with the Director, Office of Contract Management of the Agency for forwarding to the cognizant contracting officer.

§ 7-50.207-2 Form of requests by contractors.

The contractor's request shall normally consist of a letter to the contracting officer stating:

(a) The precise adjustment requested;

(b) The essential facts summarized in chronological narrative form;

(c) The contractor's conclusions based on such facts and showing, in terms of the standards set forth in § 750.204, why the contractor considers himself entitled to the adjustment requested.

(d) Whether all obligations have been discharged under the contracts involved;

(e) Whether final payment has been made under the contracts involved;

(f) Whether any proceeds from the request will be subject to any assignment or other transfer, and to whom; and

(g) Whether the contractor has sought the same, or a similar or related, adjustment from the General Accounting Office or any part of the Government, or anticipates doing so.

§ 7-50.207-3 [Reserved]

§ 7-50.207-4 Facts and evidence.

(a) General. The contracting officer or the approving authority may, where considered appropriate, request the contractor to furnish the facts and evidence as described in this paragraph (a), and in addition, where applicable, as described in paragraphs (b), (c), (d), or (e) of this section. In complying with such requests, the contractor may also submit other statements and evidence which he may consider helpful to the case.

(1) If written contracts are involved, a brief description of the contracts, indicating the dates of execution and amendments thereto, the items being procured, the price or prices and delivery schedule and revisions thereof, and such other special contractual provisions as may be relevant to the request.

(2) A history of performance indicating when work under the contracts or commitments was begun, the progress made to the present, an exact statement of the contractor's remaining obligations, and the contractor's expectations regarding completion thereof.

(3) A statement of payments received, payments due, and payments yet to be received or to become due, including advance and progress payments, and amounts withheld by the Government, and information as to other obligations of the Government, if any, which are yet to be performed under the contract.

(4) A statement giving a detailed analysis of the monetary elements of the request including precisely how the actual or estimated dollar amount of the request was arrived at, the effect of approval or denial on the contractor's profits before Federal income taxes, and whether the costs for which reimbursement is requested

have been included as a part of his gross costs in the statutory renegotiation proceedings, together with the contractor's renegotiation status for the relevant years.

(5) If a written contract is involved, a statement of the contractor's understanding of why the subject matter of the request cannot now, and could not at the time it arose, be disposed of under the terms of the contract itself.

(6) The best evidence available to the contractor in support of any facts alleged by the contractor, including contemporaneous memoranda, correspondence, affidavits, and any other material tending to establish matters of fact.

(7) Relevant financial statements, cost analyses, or other such data, preferably certified by a certified public accountant, including such additional financial data as is necessary to explain fully and to support the monetary elements of the request for adjustment.

(8) A list of persons (either within the Agency, in the employ of the contractor, or otherwise connected with the contract) who have some factual knowledge of the subject matter, including where possible the name, office or title, address and telephone number of each such person.

(9) A statement and evidence of steps to mitigate loss and reduce claims to a minimum.

(10) Such other statements or evidence as may be requested by the contracting officer.

(b) Amendments without consideration under § 7-50.204-2(a). In addition to the facts and evidence listed in paragraph (a) of this section, where a request involves possible amendment without consideration, the contractor may be asked to furnish such of the following as is deemed appropriate to the request:

(1) A statement and evidence of the contractor's original breakdown of estimated costs, including contingency allowances and profit;

(2) A statement and evidence of the contractor's present estimate of total costs under the contracts involved if enabled to complete, broken down between costs accrued to date of request, and runout costs, and as between costs

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for which the contractor has made payment and those for which he is indebted at the time of the request;

(3) A statement and evidence of the contractor's estimate of the final price of the contracts involved giving effect to all escalation, changes, extras and the like, known or contemplated by the contractor;

(4) A statement of any claims known or contemplated by the contractor against the Government involving the contracts in question, other than those stated in response to paragraph (b)(3) of this section.

(5) An estimate of the contractor's total profit or loss under contracts involved if enabled to complete at the estimated final contract price (see paragraph (b)(3) of this section) broken down between profit or loss to date, and runout profit or loss;

(6) An estimate of the total profits from other Government business, and all other sources, during the period from the date of the first contract involved to the estimated date of completion of all the contracts involved;

(7) A statement of the amount of any tax refunds and an estimate of those anticipated during or for the period from the date of the first contract involved through the estimated completion date of all the contracts involved;

(8) A statement in detail as to efforts the contractor has made to obtain funds from commercial sources to enable him to complete performance of the contracts involved;

(9) A statement of the minimum amount necessary as an amendment without consideration to enable the contractor to complete performance of the contracts involved, and the detailed basis for that amount;

(10) An estimate of the time required to complete each contract, if the request is granted;

(11) A statement of the factors which have caused the loss under the contracts involved;

(12) A statement as to the course of events anticipated if the request is denied;

(13) Balance sheets, preferably certified by a certified public accountant, as of the end of the contractor's fiscal year preceding the date of the first

contract, as of the end of each subsequent fiscal year, as of the date of the request, and projected as of the date of completion of all the contracts involved assuming the contractor is enabled to complete the contracts at the final prices estimated pursuant to paragraph (b)(3) of this section, together with income statements for annual periods subsequent to the date of the first balance sheet (balance sheets and income statements should be both consolidated, and by affiliates, and should show all transactions between the contractor and his affiliates, stockholders, and partners, including loans to the contractor guaranteed by any stockholder or partner); and

(14) A list of all salaries, bonuses and all other forms of compensation of the principal officers or partners and of all dividends and other withdrawals, and all payments to stockholders in any form since the date of the first contract involved.

(c) Amendments without consideration under § 7-50.204-2(b). In addition to the facts and evidence listed in paragraph (a) of this section, where a request involves possible amendment without consideration because of Government action, the contractor may be asked to furnish such of the following as is deemed appropriate to the request:

(1) A clear statement of the precise Government action which the contractor considers caused a loss under the contract with evidence to support each essential fact;

(2) A statement and evidence of the contractor's original breakdown of estimated costs, including contingency allowances and profit;

(3) The estimated total loss suffered under the contract, with detailed supporting analysis; and

(4) The estimated loss resulting from the Government action, with detailed supporting analysis.

(d) Correction of mistakes. In addition to the facts and evidence listed in paragraph (a) of this section, where a request involves possible correction of a mistake, the contractor may be asked to furnish such of the following as is deemed appropriate to the request:

(1) A statement and evidence of the precise mistake or error that was made, the ambiguity that exists, or the misunderstanding that arose, showing of what it consisted and how it occurred, and the intention of the parties;

(2) A statement explaining when the mistake was discovered, when notice of mistake was given to the contracting officer, and whether given before completion of work under, or the effective date of termination of the contract;

(3) An estimate of loss of profit under the contract with detailed supporting analysis; and

(4) An estimate of the increase in cost to the Government resulting from the adjustment requested with detailed supporting analysis.

(e) Formalization of informal commitments. In addition to the facts and evidence listed in paragraph (a) of this section, where a request involves possible formalization of an informal commitment, the contractor may be asked to furnish such of the following as is deemed appropriate to the request:

(1) Copies or any written instructions or assurances, or a statement under oath as to any oral instructions or assurances made to the contractor, with identification of the Government officer or official making such statement;

(2) A statement as to when the property or services were furnished or arranged to be furnished, and to whom;

(3) Evidence that the contractor relied upon the instructions or assurances, with a full description of the circumstances which led him so to rely, and that the contractor intended, at the time of performing the work, to be compensated directly for it by the Government and did not anticipate recovery of the costs in some other way; (4) A cost breakdown supporting the amount claimed as a fair compensation for the work performed; and

(5) A statement and evidence of why it was impracticable to provide for the work performed in an appropriate contractual instrument.

§ 7-50.208 Processing cases.

§ 7-50.208-1 Investigation.

The Director, Office of Contract Management, shall be responsible for assuring that the cognizant contracting officer in all cases shall make a thorough investigation of all facts and issues relevant to each case. Facts and evidence shall be obtained from contractor and Government personnel, and shall include signed statements of material facts within the knowledge of the individuals where documentary evidence is lacking, and audits where considered necessary to establish financial or cost facts. The investigation shall establish both the facts essential to meeting the standards for deciding the particular case and the essential facts as to who has authority to approve the request.

§ 7-50.208-2 Intra-agency coordination.

Prior to the submission of a case to the approving authority recommending extraordinary contractual relief, the claim will be fully developed by the Office of Contract Management and concurrences or comments obtained from the Office of General Counsel and the Inspector General for the proposed relief to be granted. Such concurrences or comments shall be incorporated in or accompany the action memorandum submitted consideration to the approving authority in accordance with § 7-50.208-3. (41 CFR 7-1.008-51)

for

[41 FR 39320, Sept. 15, 1976, as amended at 48 FR 30368, July 1, 1983]

§ 7-50.208-3 Submission of cases to the approving authority.

Cases to be submitted for consideration shall be forwarded by means of an action memorandum signed by the Director, Office of Contract Management. The action memorandum shall state:

(a) The nature of the case;

(b) The basis for authority to act under § 7-50.201;

(c) The findings of fact essential to the case (see § 7-50.207-4) arranged chronologically with cross references to supporting enclosures;

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