organization,

technical qualifications, skills, and facilities (see (a) (2) and (3), above), generally shall be a firm commitment or arrangement for the rental, purchase, or other acquisition thereof. § 1-1.310-6 Determination of responsibility.

(a) No contract shall be awarded to any person or firm unless the contracting officer has first determined that such person or firm is responsible within the meaning of sections 1-1.310-4 and 11.310-5. The signing of a contract shall be deemed to be a certification by the contracting officer that he has determined that the prospective contractor is responsible with respect to that contract.

(b) In any case where the procurement exceeds $10,000, and the contracting officer (or contracting agency) considers such a statement advisable for justification or other reasons, the contracting officer shall prepare, sign, and place in the contract file a statement of the facts on which the determination of responsibility was based. Relevant factors for consideration in determining whether such a statement is advisable would include the value, importance, or technical aspects of the procurement, or the fact that a pre-award on-site evaluation was considered necessary and that it was made. Any supporting documents or reports, including reports of preaward on-site evaluation and any information to support determinations of responsibility of subcontractors, should be filed with the statement.

§ 1-1.310-7 Information regarding responsibility.

Before making a determination of responsibility, the contracting officer shall have sufficient current information to satisfy himself that the prospective contractor meets the standards in section 1-1.310-5. Information from the following sources should be utilized before considering making a pre-award on-site evaluation:

(a) Information from the prospective contractor, including representations and other data contained in bids and proposals, or other written statements or commitments, such as financial assistance and subcontracting arrangements.

(b) Other existing information within the agency, including financial data, the list of debarred and ineligible bidders

In the case of a prospective contractor which is a small business concern, if the contracting officer is not satisfied that the prospective contractor meets the standards in section 1-1.310-5 only because of the lack of adequate capacity or credit, he shall, before making a responsibility determination, comply with the requirements concerning Certificates of Competency issued by the Small Business Administration (see Subpart 1-1.7).

§ 1-1.310-9 Pre-award on-site evaluation.

(a) A pre-award on-site evaluation is an inspection of facilities and equipment with which a prospective contractor proposes to perform a contract, including interviews with contractor personnel. It is made at the direction of the contracting officer, generally by Government specialists, to provide needed responsibility information.

(b) Pre-award

on-site evaluations need normally not be performed when the information sources stated in section 1-1.310-7 yield sufficient data to enable a contracting officer to make a determination regarding the responsibility of a prospective contractor. Generally, preaward on-site evaluations are not necessary in connection with contracts of less than $10,000.

(c) Pre-award on-site evaluations shall cover only those standards or portions thereof concerning which information available (from the sources listed in section 1-310-7) appears to be not current, sufficient, or reliable.

§ 1-1.310-10 Performance records.

Such records of contractor past performance shall be maintained as are considered necessary for the use of contracting officers in placing new procurements. Records in more complete detail should be maintained on contractors which have indicated by past actions that the character of their performance on contracts is questionable, and on new

contractors whose reliability has not been established. § 1-1.310-11 bility.

Subcontractor responsi

Generally, the evaluation of the qualifications of subcontractors is a function of the prime contractor. However, to the extent that a prospective contractor cannot meet the standard in section 1-1.310-5(a) (3) except by means of proposed subcontracting, the prospective prime contractor shall not be considered to be responsible unless recent performance history indicates an acceptable purchasing and subcontracting system or prospective major subcontractors are determined by the contracting officer to satisfy that standard.

§ 1-1.311 Priorities, allocations, and allotments.

In the interest of maintaining a minimum priorities and allocations system as a mobilization preparedness measure, agencies shall require contractors to use ratings and allotment authority to support defense needs to the extent required by regulations of the Business and Defense Services Administration, Department of Commerce.

§ 1-1.315 Use of liquidated damages provisions in procurement contracts.

§ 1-1.315-1 General.

This section 1-1.315 prescribes (a) policy which shall govern executive agencies in the use of liquidated damages provisions in contracts for supplies and services, including construction, entered into by formal advertising or by negotiation, and (b) a provision which shall be inserted in contracts for supplies and services, other than construction, when liquidated damages are stipulated.

§ 1-1.315-2 Policy.

(a) Liquidated damages provisions may be used only where both: (1) the time of delivery or performance is such an important factor in the award of the contract that the Government may reasonably expect to suffer damage if the delivery or performance is delayed, and (2) the extent or amount of such damage would be difficult or impossible of ascertainment or proof.

(b) In making decisions as to whether liquidated damages provisions are to be used, consideration should be given to their probable effect on such matters as pricing, competition, and the costs and difficulties of contract administration, as well as the availability of provision elsewhere in the contract for recovery of excess costs in termination cases.

(c) The rate of liquidated damages stipulated must be reasonable in relation to anticipated damages, considered on a case-by-case basis, since liquidated damages fixed without any reasonable reference to probable damages may be held to be not compensation for anticipated damages caused by delay, but a penalty, and therefore unenforceable.

(d) Where a liquidated damages provision is included in a contract and a basis for termination for default exists, appropriate action should be taken expeditiously by the Government to obtain performance by the contractor or to exercise its right to terminate as provided in the contract. If delivery or performance is desired after termination for default, efforts must be made to obtain either delivery or performance elsewhere within a reasonable time. Efficient administration of contracts containing liquidated damages provisions is impera

tive to prevent undue loss to defaulting contractors and to protect the interests of the Government.

(e) Whenever any contract includes a provision for liquidated damages for delay, the Comptroller General, on the recommendation of the head of the agency concerned, is authorized and empowered, by law, to remit the whole or any part of such damages as in his discretion may be just and equitable.

§ 1-1.315-3 Contract provisions.

(a) Supply or service contracts. When a liquidated damages provision is to be used in a supply or service contract which includes Standard Form 32, General Provisions (Supply Contract), the following provision shall be inserted in the invitation for bids and an appropriate rate(s) of liquidated damages (determined pursuant to section 1-1.3152) shall be stipulated:

LIQUIDATED DAMAGES

Article 11(f) of Standard Form 32, General Provisions (Supply Contract), is redesignated as Article 11(g) and the following is inserted as Article 11(f):

(f) (i) In the event the Government exercises its right of termination as provided in paragraph (a) above, the Contractor shall be liable to the Government for excess costs as provided in paragraph (b) above and, in addition, for liquidated damages, in the amount set forth elsewhere in this contract, as fixed, agreed, and liquidated damages for each calendar day of delay, until such time as the Government may reasonably obtain delivery or performance of similar supplies or services.

(ii) If the contract is not so terminated, notwithstanding delay as provided in paragraph (a) above, the Contractor shall continue performance and be liable to the Government for such liquidated damages for each calendar day of delay until the supplies are delivered or services performed.

(iii) The Contractor shall not be liable for liquidated damages for delays due to causes which would relieve him from liability for excess costs as provided in paragraph (c) of this clause.

(b) Construction contracts. Liquidated damages provisions for construction contracts are contained in the Termination for Default-Damages for Delay-Time Extensions clauses of both Standard Form 19, Invitation, Bid and Award (Construction, Alteration or Repair), and Standard Form 23A, General Provisions (Construction Contracts).

Subpart 1-1.4-[Reserved] Subpart 1-1.5—Contingent Fees § 1-1.500 Scope of subpart.

This subpart prescribes the use by executive agencies of the "covenant against contingent fees" and sets forth the policies, forms, methods, procedure, principles, and standards related thereto. The requirements of this subpart have as their objective the prevention of improper influence in connection with the obtaining of Government contracts, the elimination of arrangements which encourage the payment of inequitable and exorbitant fees bearing no reasonable relationship to the services actually performed, and the prevention of unwarranted expenditure of public funds which inevitably results therefrom. The methods used to achieve these objectives are the requirement for disclosure of the details of arrangements under which agents represent concerns in obtaining Government contracts, and the prohibiting, by use of the covenant against contingent fees, of certain types of contractor-agent arrangements.

The principles and standards set forth in this subpart are intended to be used as a guide in the negotiation, awarding, administration, and enforcement of Government contracts.

§ 1-1.504-2 Contingent character of the fee.

Any fee whether called commission, percentage, brokerage, or contingent fee, or otherwise denominated, is within the purview of the covenant if, in fact, any portion thereof is dependent upon success in obtaining or securing the Government contract or contracts involved. The fact, however, that a fee of a contingent nature is involved does not preclude a relationship which qualifies under the exceptions to the prohibition of the covenant.

§ 1-1.504-3 Exceptions to the prohibition.

There are excepted from the prohibition of the covenant "bona fide employees" and "bona fide established commercial or selling agencies maintained by the contractor for the purpose of securing business."

§ 1-1.504-4 Bona fide employee.

(a) The term "bona fide employee," for the purpose of the exception to the prohibition of the covenant, means an individual (including a corporate officer) employed by a concern in good faith to devote his full time to such concern and no other concern and over whom the concern has the right to exercise supervision and control as to time, place, and manner of performance of work. It is recognized that a concern, especially a small business concern, may employ an individual who represents other con

cerns.

The factors set forth in section 1-1.504-5 (b) except subparagraph (4) thereof, shall be applied to determine whether such an individual comes within the exception to the prohibition of the covenant.

(b) The hiring must contemplate some continuity and it may not be related only to the obtaining of one or more specific Government contracts.

(c) An employee is not "bona fide" who seeks to obtain any Government contract or contracts for his employer through the use of improper influence or who holds himself out as being able to obtain any Government contract or contracts through improper influence.

(d) A person may be a bona fide employee whether his compensation is on a fixed salary basis or, when customary in the trade, on a percentage, commission or other contingent basis, or a combination of the foregoing.

§ 1-1.504-5 Bona fide established commercial or selling agency maintained by the contractor for the purpose of securing business.

(a) An agency or agent is not "bona fide" which seeks to obtain any Government contract or contracts for its principals through the use of improper influence or which holds itself out as being able to obtain any Government contract or contracts through improper influence.

(b) In determining whether an agency is a "bona fide established commercial or selling agency maintained by the contractor for the purpose of securing business," the factors set forth below shall be considered. They are necessarily incapable of exact measurement or precise definition and it is neither possible nor desirable to prescribe the relative weight to be given any single factor as against any other factor or as against all other factors. The conclusions to be reached in a given case will necessarily depend upon a careful evaluation of the agreement and other attendant facts and circumstances.

(1) The fees charged should not be inequitable and exhorbitant in relation to the services actually rendered. That is, the compensation should be commensurate with the nature and extent of the services and should not be excessive as compared with the fees customarily allowed in the trade concerned for simi

lar services related to commercial (nonGovernment) business. In evaluating reasonableness of the fee, there should be considered services of the agent other than actual solicitation, as for example, technical, consultant or managerial services, and assistance in the procurement of essential personnel, facilities, equipment, materials, or subcontractors for performance of the contract.

(2) The selling agency should have adequate knowledge of the products and the business of the concern represented, as well as other qualifications necessary to sell the products or services on their merits.

(4) It should appear that the agency is an established concern. The agency may be either one which has been in business for a considerable period of time or a new agency which is a presently going concern and which is likely to continue in business as a commercial or selling agency in the future. The business of the agency should be conducted in the agency name and characterized by the customary indicia of the conduct of a regular business.

(3) There should ordinarily be a continuity of relationship between the contractor and the agency. The fact that the agency has represented the contractor over a considerable period of time is a factor for favorable consideration. It is not intended, however, to disqualify newly established contractoragent relationships where a continuing relationship is contemplated by the parties.

(5) The fact that a selling agency confines its selling activities to the field of Government contracts does not, in and of itself, disqualify it under the covenant. The fact, however, that the selling agency is employed to secure business generally, that is, to represent the concern in connection with sales to the Government as well as regula: commercial sales to non-Government activities is a factor entitled to favorable consideration in evaluating the case as one coming within the authorized exception. Arrangements confined, however, to obtaining Government contracts. particularly those involving a selling agency organized immediately prior to or during periods of expanded procurement resulting from conditions of national emergency, must be closely scrutinized.

§ 1-1.504-6 Fees for "information."

Contingent fees paid for "information" leading to obtaining a Government contract or contracts are included in the prohibition and, accordingly, are in breach of the covenant unless the agent qualifies under the exception as a bona fide employee or a bona fide established commercial or selling agency maintained by the contractor for the purpose of securing business.

§ 1-1.505 Representation and agreement required from prospective con

tractors.

Except as provided in section 1-1.507-3, each executive agency shall inquire of and secure a written representation from prospective contractors as to whether they have employed or retained any company or person (other than a full-time employee working solely for the prospective contractor) to solicit or secure the contract, and shall secure a written agreement to furnish information relating thereto as required by the contracting officer. Where an invitation for bids is issued, this inquiry shall be made (and written representation and agreement secured) by requiring the bidder (or contractor) to check the appropriate box in the following statement (which appears on Standard Form 21, Bid Form (Construction Contract), Standard Form 30, Invitation and Bid (Supply Contract), and Standard Form 33, Invitation, Bid and Award (Supply Contract)) to be included in the invitation or bid form:

The bidder represents: (a) that he has, has not, employed or retained any company or person (other than a full-time bona fide employee working solely for the bidder to solicit or secure this contract, and (b) that he has,☐ has not, paid or agreed to pay any company or person (other than a full-time bona fide employee working solely for the bidder any fee, commission, percentage or brokerage fee, contingent upon or resulting from the award of this contract; and agrees to furnish information relating to (a) and (b) above as requested by the Contracting Officer. (Note: For interpretation of the representation, including the term "bona fide employee," see Code of Federal Regulations, Title 41, Chapter I, Subpart 1-1.5.)

§ 1-1.506 Interpretation of the representation.

(a) For the purpose of the representation and agreement required from the