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from the contracting officer to the contractor of nonavailability of funds for contract performance for any subsequent program year, or failure of the contracting officer to notify the contractor that funds have been made available for performance of the succeeding program year's requirement. For each program year except the last, the contracting officer shall-establish a cancellation ceiling applicable to the remaining program years which are subject to cancellation. Cancellation ceilings will be lower for each succeeding program year in that such ceilings must exclude all amounts allocable to items included in prior program years. Such ceilings shall be expressed in the schedule and shall apply to all bidders alike. The reduction in the cancellation ceilings percentage for each program year shall be in direct proportion to the reduction in the quantity remaining subject to cancellation. For example, if the total nonrecurring costs are estimated at 10% of the total multiyear price and program year quantities for five years are 30, 30, 20, 10, and 10, the cancellation percentage, after deducting 3% for the first program year, would be 7%, 4%, 2%, and 1% of the total multiyear price applicable to the second, third, fourth, and fifth program years, respectively. In determining cancellation ceilings, the contracting officer must estimate reasonable preproduction, labor learning, and other non-recurring costs, to be incurred by an "average" prime or subcontractor which would be applicable to and which normally would be amortized in all items to be furnished under the multiyear requirements. They include such costs as plant rearrangement, initial spoilage, pilot runs, and unrealized labor learning. They shall not include any costs of labor or materials, or other expenses, (except as indicated above) which might be incurred for production of the items subject to cancellation for each program year. The total estimate must then be compared with the base estimate of the procurement cost to arrive at a reasonable percentage figure. To perform this calculation, it is essential that the contracting officer obtain in-house engineering cost estimates which will identify the detailed recurring and nonrecurring costs, and indicate labor learning implications. Cancellation dates for each program year's requirements shall be established with due regard for production lead time and the date by which funding therefor can reasonably be accomplished.

(b) Original cancellation ceilings may be revised if information developed after issuance of a solicitation discloses that such ceilings are not realistic. In the case of formal advertising, such changes shall be by amendment of the invitation for bids prior to bid opening. In two-step formal advertising, discussion conducted during the first step may indicate the need for revised ceilings in step two. Negotiations with offerors in a negotiated procurement may provide information requiring a change in cancellation ceilings for all offerors, prior to final negotiation and contract award. In order to assure that all interested sources of supply are thoroughly aware of how multiyear procurement is accomplished, use of presolicitation or preb id conferences may be advisable. During such conferences the contracting officer should ascertain whether escalation provisions are appropriate and whether the proposed cancellation ceiling is adequate.

$9-4.5508 Funds obligation--contingent liabilities.

For each program year's requirement, funds shall be obligated to cover the quantities to be delivered thereunder.

59-4.5509 Payment for cancellation.

In the event of a cancellation, the contractor is entitled to payment as consideration therefor in accordance with the terms of the cancellation clause in an amount not to exceed the cancellation ceiling.

$9-4.5510 Schedule provision limiting payment obligation.

The schedule shall contain a provision limiting the payment obligation of the Government to a monetary amount therein described as being available for contract performance. Such amount for the first program year's requirements shall be inserted by the contracting officer upon award of the contract and shall be modified for successive program years upon availability of funds for such years.

$9-4.5511 Termination for convenience.

In the event of a total termination for the convenience of the Government, including items subject to cancellation, the Government's obligation shall not exceed the amount set forth in the schedule as available for contract performance, plus the applicable amount established as the cancellation ceiling.

89-4.5512 Evaluation.

(a) Evaluation of offers in a multiyear procurement involves not only the determination of the lowest overall evaluated cost to the Government for both alternatives, the multiyear procurement and the first program year's procurement; it also involves the comparison of the cost of buying the total requirement under a multiyear procurement with cost of buying the total requirement in successive independent procurements. All the factors to be considered for the various evaluations involved shall be set forth in the solicitation.

(b) In the event the Government determines, prior to award, that only the first program year's quantities are actually required, the procurement will no longer be evaluated on a multiyear basis if the solicitation permits bids and offers on either the first program year requirements or the multiyear requirements or both, only bids or offers on the first program year requirements will be evaluated. If the solicitation does not permit the submission of prices on a singleyear basis, the single year requirement will be resolicitated.

(c) The cancellation ceiling shall not be a factor for evaluation. Unless Government administrative costs incident to annual procurement methods and contract administration can be reasonably established and supported, they shall not be used as a factor for evaluation. When administrative costs are to be used in evaluation the dollar amount to be used shall be stated in the solicitation.

(d) Delivery destinations may be unknown for certain quantities due to the extended duration of contract performance. In such cases, destinations shall be developed on the basis of best estimates; a definite place or places shall be designated in the solicitation as the point to which transportation costs will be computed (but only for the purpose of evaluating bids or proposals); and the solicitation shall contain the notice required by FPR 1-19.202-7.

(e) When Government production and research property is provided, the use of such property may be on a rent-free basis. In this event, the solicitation shall set forth a detailed description of the procedure to be followed and the factors to be considered for the elimination of competitive advantage. The amount added for evaluation to each of feror's unit price for the first program year requirement shall also be added to his unit price for the multiyear requirements.

(f) When the solicitation requires the submission of prices on the first program year's requirements, bids or offers which submit prices on the multiyear requirements only shall be rejected as nonresponsive.

(g) When the solicitation provides for submission of prices only for the total multiyear quantity, submission of prices for the singleyear quantity will be disregarded for any purpose but will not render the bid or offer nonresponsive as to any alternate multiyear submission by the same bidder or offeror.

(h) To determine the lowest evaluated unit price, compare the lowest evaluated bid or offer on the first program year alternative against the lowest evaluated bid or offer on a multiyear alternative as follows:

(1) Multiply the evaluated unit price for each item of the lowest evaluated bid or offer on the first program year alternative times the total number of units of that item required by the multiyear alternative, and then

(2) Take the sum of these products for all the items, plus the dollar amount of any administrative costs of the Government which are to be used in the evaluation, and finally

(3) Compare this result against the total evaluated price of the lowest bid or offer on the multiyear alternative.

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Award shall be made to that responsible offeror whose offer, conforming to the solicitation, will be most advantageous to the Government, price and other factors considered. In no event shall award be made at an unreasonable price.

$9-4.5514 Special clauses for use in multiyear contracts.

All multiyear awards made under the multiyear procurement method described herein shall contain the clauses set forth in $9-7.

Subpart 9-4.56 Contracts for Support Services

$9-4.5600

Scope.

This subpart provides policies and procedures to be followed within ERDA when contracting for support services.

89-4.5601 Definition.

For purposes of this subpart, the term "support services" includes:

(1) any examination, survey, study, review, analysis, assistance, consultation, or advice to support or improve the effectiveness, efficiency, and economy of technical or management operations;

and,

(2) any studies, reports, analysis, etc. intended to lead to the improvement of the ERDA organizational structure, business management systems, industrial processes, performance standards, methods, procedures, plant or office layout, managerial skills, or general administration.

$9-4.5602 Applicability.

The procedures contained herein apply only to support services contracts as defined in 99-4.5601 and do not apply to services for research and development or to plant or facility operation and maintenance services, architect-engineering and construction services, or stenographic services. However, the guidelines set forth in the federal personnel manual and related regulations apply to any kind of contract and no contract should violate those guidelines.

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$9-4.5603 Policy.

Headquarters and field organizations may award contracts for support services, providing the considerations and requirements set forth in 9-4.5604-1 through $9-4.5604-6 are met.

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In developing work requirements for support services, each requiring office and contracting office must remain alert to the potential for organizational conflicts of interest. Each situation requires a conscious determination as to what steps, if any, should be applied to insure that advice received from a contractor does not contain an element of self-interest because of potential future procurement opportunities related to the work under the proposed contract, and to insure that the contractor does not obtain an unfair competitive advantage over other firms by virtue of its performance under a contract. Where there is a potential conflict of interest or the appearance of a conflict of interest situation, an appropriate clause shall be included in the resulting contract (see ERDA-PR Subpart 9-1.54).

89-4.5604-2 Contract Term.

Support services contracts generally shall be for a period of no more than one year, with renewable options of no more than one year each, where appropriate, with exercise of the option predicated on performance.

$9-4.5603 Competition.

The provisions of statute and of this regulation requiring competition are fully applicable to contracts for support services. Therefore, unless otherwise provided by statute, competition must be obtained to the maximum practicable extent.

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Careful consideration should be given to the type of contract to be used and the identification of key milestones and objectives to

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