(6) Complete justification as to why the level of funding must be increased. (7) Complete justification as to why the period of effectiveness is increased beyond 90 days, if applicable.

(8) If the funding of the letter contract is to be increased to more than 50 percent of the estimated cost of the procurement, the information set

forth in paragraph (f)(10) of this section must be included in the memorandum.

[38 FR 29467, Oct. 25, 1973, as amended at 43 FR 49000, Oct. 20, 1978]

§ 3-3.410 Other types of agreements. [39 FR 43545, Dec. 16, 1974]

§ 3-3.410-1 Basic agreement.

(a) Description. A basic agreement is not a contract. It is a written instrument of understanding executed between DHHS and a contractor which sets forth the negotiated contract clauses which shall be applicable to future procurements entered into between the parties while the basic agreement is in effect. A basic agreement will apply to a particular procurement by the execution of a formal contractual document which will provide for the scope of work, price, delivery, and additional matters peculiar to the requirements of the specific procurement involved, and shall incorporate by reference or append the contract clauses agreed upon in the basic agreement as required or applicable. Basic agreements may be used with fixed-price or cost-reimbursement type contracts and need not be limited to specific types of services and supplies or categories of procurements.

(b) Applicability. (1) Basic agreements are appropriate for use when (i) past experience and future plans indicate that a substantial number of separate contracts may be entered into with a contractor during the life of the basic agreement; (ii) peculiar recurring problems exist with a particular contractor regarding the standard general provisions or other terms and conditions of contracts and (iii) where it is beneficial for the contractor and the Government to do so.

(2) Except where particular and unique circumstances exist regarding an individual contract, a basic agree

ment shall be modified only by a modification of the basic agreement itself and shall not be modified or superseded by individual contracts entered into under and subject to the terms of such basic agreement. Any provision of a contract which conflicts with the terms of a basic agreement must be approved by the Office of Grants and Procurement Management (OGPM). Basic agreements may be modified at any time, however, it is generally desirable to modify them as infrequently as possible. Changes to clauses or new clauses resulting from statutes or Executive Orders should be incorporated as soon after issuance as feasible. Clauses pertaining to subjects not covered in a basic agreement but applicable to the contract or modifications to the contracts being negotiated, and clauses required by statute or Executive Order, if any, which have become effective after the last modification to the basic agreement shall be included in the contract and modifications as if no basic agreement existed. Other changes should be incorporated on an annual basis unless one of the parties specifically requests earlier consideration. As a minimum, basic agreements should be reviewed annually before the anniversary of their effective date and revised to conform with the current requirements of this section. Unless otherwise designated OGPM, the agency negotiating the basic agreement will be responsible for negotiating all modifications thereto.

by

(3) Basic agreements shall continue in effect until terminated or superseded and shall provide for termination upon 30 days written notice by either party. Termination of a basic agreement will not affect any individual contract referencing or appending the basic agreement entered into prior to the effective date of termination.

(4) A basic agreement shall be used to cover all subsequent procurements which fall within its scope. Provisions of the basic agreement, including supplements thereto, shall be incorporated into a formal contractual document covering a particular procurement by referring therein to the number of the basic agreement and each of its supplements. When an existing contract is amended to effect new procurement,

the contract modification shall incorporate the most recent basic agreement, including supplements thereto, to apply only to the work added by the contract modification.

(5) Contract modifications negotiated pursuant to the terms of an existing contract and not involving new procurement may, by mutual agreement of the parties and if determined to be in the interest of the Government, amend the existing contract to conform to a subsequently executed or supplemented basic agreement.

(6) If a clause, which properly deviates from a prescribed clause, must be replaced the replacement clause may deviate to the same extent as the original clause, if the revision is not related to the deviation, and if the deviation has not expired or been rescinded.

(7) Basic agreements may include negotiated overhead rates for cost-reimbursement type contracts. Where negotiated overhead rates are included the bases to which the rates apply and the period of applicability must also be stated. All pertinent provisions such as final rates for past periods, provisional rates for current or future periods, ceilings, and any specific items to be treated as indirect costs shall also be included as appropriate.

(8) Normally a basic agreement will continue in effect until terminated or superseded. Basic agreements for a specified term are not, however, precluded.

(c) Limitations. (1) Basic agreements shall neither cite appropriations to be charged nor be used alone for the purpose of obligating funds.

(2) Basic agreements shall not in any manner provide for or imply any agreement on the part of the Government to place future orders or contracts with the contractor involved, nor shall they be used in any manner to restrict competition.

(3) Basic agreements shall be utilized only in connection with negotiated contracts.

(d) Content and format. A basic agreement shall consist of: (1) An execution page, (2) contents page (Form HHS-556) may be used for this purpose, and (3) special provisions which are illustrated in Subpart 3-7.51. The

BETWEEN THE UNITED STATES OF AMERICA, AS REPRESENTED BY THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, and (Name of Contractor) THIS AGREEMENT, effective (Insert Date) by and between the UNITED STATES OF AMERICA, hereinafter called the "Government," as represented by the DEPARTMENT OF HEALTH AND HUMAN SERVICES, and (Name of Contractor), a corporation organized and existing under the laws of the (State/Commonwealth) of with its principal office in (City), (State), hereinafter called the "Contractor":

WITNESSETH THAT

WHEREAS, the Government and the Contractor desire to enter into a single basic agreement for use only in connection with negotiated (insert type of contract and categories of effort that the basic agreement will cover) entered into on or after the effective date of this Agreement, and prior to its termination; and

WHEREAS, the parties understand that this Agreement shall not in any manner provide for or imply any agreement on the part of the Government to place future orders or contracts with the Contractor.

NOW THEREFORE, the Government and the Contractor agree that the provisions and clauses of the Special Provisions, herein set forth, and the General Provisions (specify form number of applicable general provisions) attached hereto and as modified herein, shall be incorporated in and constitute the terms and conditions applicable to all negotiated (insert type of contract and categories of effort that the basic agreement will cover) entered into on or after the effective date of this agreement, and prior to its termination.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written:

UNITED STATES OF AMERICA

Name of Contractor

Signature of Contracting Officer

By

Signature of Authorized Official

90-136 0-82--6

Typed Name

Typed Name

(e) Procedures. (1) Negotiation of basic agreements may be undertaken by operating agencies of DHHS in behalf of the Department. When an operating agency decides to negotiate a basic agreement with an organization, prior authorization must be requested, in writing, from the Director, Division of Procurement Policy and Regulations Development (DPPRD), OGPM. When the Director, DPPRD, gives written authorization to the agency designated to conduct negotiations on behalf of the Department, all other agencies will be notified of this designation. If another agency elects, it may attend the negotiation or furnish special terms and conditions or provisions for inclusion in the proposed basic agreement by advising the designated negotiating agency in writing within ten (10) days from the date of the authorization. After review and resolution of all requests for inclusion of special terms and conditions or provisions, the designated negotiating agency will invite those operating agencies who expressed an interest in attending the negotiations and make the necessary arrangements for the negotiation of the basic agreement.

(2) Prior to the conclusion of negotiations, the designated negotiating agency shall furnish the other operating agencies a draft copy of the proposed basic agreement, together with:

(i) A resume of all salient features of the basic agreement which will facilitate review;

(ii) Any of the operating agency's guides or procedures which are being considered for incorporation into the basic agreement by reference;

(iii) A listing of nonstandard clauses used, the genesis of such clauses, and the reasons for such clauses in the basic agreement; and

(iv) The contractor's comments, including the basis for his requesting any deviation from the DHHS Procurement Regulations and the designated negotiating agency's position with respect thereto.

(3) The other operating agencies shall have fifteen (15) days from the date of the memorandum transmitting the aforesaid information to submit comments on the draft copy of the basic agreement. After receipt, analysis and resolution of the comments of the other operating agencies, the designated negotiating agency will proceed to conclude the negotiation of the basic agreement.

(4) After conclusion of the negotiation but prior to execution of the basic agreement, a copy of the basic agreement, together with the information specified in paragraph (e)(2) of this section, and the comments of the other operating agencies with the designated negotiating agency's analysis thereof and the basis for the action taken will be furnished to the Director, DPPRD, OGPM, for review by DPPRD, and the Office of General Counsel. Approval by the Deputy Assistant Secretary for Grants and Procurement Management or his designee must be given prior to the execution of the basic agreement. After approval and execution of the basic agreement, the designated negotiating agency will distribute the executed document to the other operating agencies, Office of General Counsel, and the Office of Grants and Procurement Management, OASAM. The basic agreement is mandatory for use by all agencies of the Department for all procurements falling within the scope of the basic agreement.

(f) Listing of basic agreements. Appendix A to this chapter lists all of the approved basic agreements. The appendix will be updated on a quarterly basis.

[39 FR 43545, Dec. 16, 1974]

Such letters of intent are often solicited by prospective contractors or may be originated by Government personnel.

(b) Policy. (1) The practice of issuing letters of intent is not authorized by the Federal Procurement Regulations and is therefore prohibited. HHS personnel shall not issue such letters for the following reasons:

(i) While such letters of intent may disclaim Government liability, they may induce potential contractors to initiate costly preparations in anticipation of contract award.

(ii) Procurements announced in such letters do not always materialize. The result may be costly to the Government, the prospective contractor, or both. If the author of the letter of intent is an authorized contracting agent of the Department, the Government may be bound by his action, even though the action is contrary to sound procurement practices and/or fiscal regulations. If the author of the letter of intent lacks procurement authority, the prospective contractor may incur substantial expenditures for which he may not recover from the Government, but for which he may seek to hold the unauthorized author personally liable. (See Subparts 1-1.4, of this Title and 3-1.4 of this chapter.)

(iii) The issuance of a letter of intent may violate the "Anti-Deficiency Act" (31 U.S.C. 665).

(2) It is recognized that potential contractors have a need to obtain procurement information at the earliest possible moment in order to make timely preparations. To this end, procurement personnel are expected to move as efficiently and expeditiously as possible on all procurement actions. It is not permissible, however, to issue letters of intent to circumvent the requirements of FPR and HHSPR.

(c) Exceptions. The prohibition against letters of intent does not preclude the award of contracts conditioned upon the availability of funds under conditions which warrant such contracts (see § 3-1.354 of this chapter).

[38 FR 1392, Jan. 12, 1973]

§ 3-3.450-2 Memorandums of understanding.

(a) Description. A "memorandum of understanding" is an unauthorized agreement, usually drafted during the course of negotiations, to modify mandatory FPR and HHSPR provisions in such a manner as to make them more acceptable to a prospective contractor. Such memorandums may bind the contracting officer and his successors not to exercise rights given the Government under the contract, or may contain other matters directly contrary to the language of the solicitation or prospective contractual document.

(b) Policy. Use of memorandums of understanding described in paragraph (a) of this section, is not authorized. Any change in a solicitation or contract shall be made by amendment or modification to that document. When a change to a prescribed contract clause is considered necessary, a deviation shall be requested in accordance with § 3-16.5003 of this chapter. [38 FR 1393, Jan. 12, 1973]

Subpart 3-3.6-Small Purchases

SOURCE: 35 FR 18115, Nov. 26, 1970, unless otherwise noted.

§ 3-3.600 Scope of subpart.

This subpart prescribes the policies and procedures for purchases of supplies and nonpersonal services when the aggregate dollar amount in any one transaction does not exceed $10,000. Purchases not in excess of $10,000 which are accomplished in accordance with the policies and procedures of this subpart 3-3.6 shall be termed "small purchases." Small purchase methods included in this subpart include solicitations made either orally, or in writing using a SF-18, and award via Standard Form 147 (Order for Supplies or Services); Standard Form 44 (Purchase Order-InvoiceVoucher); Blanket Purchase Agreements (BPA), or Imprest Funds. Procurements not in excess of $10,000 which are accomplished by formal negotiation methods than those prescribed in this subpart and which are negotiated pursuant to

more other

41 U.S.C. 252(c)(3), are also defined as small purchases. In arriving at the "aggregate dollar amount" involved, all supplies and services must be included which would be properly grouped together in a single advertisement for bids if the procurement were being effected by formal advertising. The amount of $10,000 includes the total price of the order including all estimated handling and freight charges to be paid to the prospective contractor. Requirements aggregating more than $10,000 shall not be broken down into several purchases which are $10,000 or less merely for the purpose of permitting negotiation or utilizing the small purchase methods authorized under §§ 1-3.6 and 3-3.6.

[41 FR 22351, June 3, 1976]

§ 3-3.601 Purpose and applicability.

(a) Purpose. The objective of the simplified small purchase methods prescribed herein is to reduce administrative costs to the extent possible within the limits of applicable laws and regulations.

(b) Applicability. (1) The policies and procedures in 1-3.6 and this subpart shall not be used for the following:

(i) Procurements which are accomplished through delivery orders issued under indefinite delivery contracts, e.g., definite quantity contracts, requirements contracts, and indefinite quantity contracts.

(ii) Procurements made by formal advertising or negotiation other than by § 1-3.203, which were initially estimated to exceed $10,000, but ultimately resulted in a preaward price of $10,000 or less.

(iii) Small purchases which are initially estimated not to exceed $10,000, but ultimately result in a preaward price in excess of $10,000. If the price exceeds $10,000, the authority of 41 U.S.C. 252(c)(3) may not be used.

(iv) Construction requirements estimated to exceed $2,000. However, if the initial estimate is $2,000 or less but the ultimate preaward dollar amount resulting from quotations received exceeds $2,000, but does not exceed $2,500, award may be made pursuant to the policies and procedures of § 13.6, this subpart, and the authority in

41 U.S.C. 252(c)(3) which is permitted by § 1-18.302. (See § 1-18.3 for policies and procedures pertaining to the procurement of construction by negotiation.)

(v) Procurement of architect-engineer professional services of any dollar amount. (See §§ 1-4.10 and 1-16.7 for policies, procedures, and forms pertaining to the procurement of A & E services.)

(2) This subpart does not preclude the use of bilateral purchase orders, Standard Forms 19 and 19B for construction contracts under $2,000 (see § 1-16.402-1), or a negotiated twoparty formal contract for procurement not in excess of $10,000 where the procurement requires a specific contract provision relating to technical inspection or test, specification changes, government furnished property, insurance, patents, price adjustments, or the like.

[41 FR 22352, June 3, 1976]

§ 3-3.602 Policy.

(a) Negotiation Authority. Negotiated contracts or purchases aggregating $10,000 or less shall be made under the authority of 41 U.S.C. 252(c)(3) and § 1-3.203 rather than under any of the other sections in § 1-3.2. For example, small purchases for expert or consultant services shall be made under 41 U.S.C. 252(c)(3) and 1-3.203 rather than 41 U.S.C. 252(c)(15) and 5 U.S.C. 3109, and small purchases which are set-aside for small business unilaterally or jointly shall be made under the authority of 41 U.S.C. 252(c)(3) and 13.203 rather than 41 U.S.C. 252(c)(1) or 41 U.S.C. 252(c)(15). The negotiation authority shall be cited on the face of the Standard Form 147.

(b) Placement of small purchases with small business concerns, labor surplus area concerns, and minority business enterprises shall be encouraged to the extent consistent with the objectives of this subpart. When source lists are maintained for procurements of $10,000 or less, these source lists should include known concerns in these categories. These concerns and enterprises shall be given opportunities, at least equal to other