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PROCUREMENT BY NEGOTIATION 3.854–3 Definitive Contracts and Supplemental Agreements.

(a) This paragraph pertains to contracts and supplemental agreements which do not require the approval of the Director of Procurement pursuant to 50.105 and are in an amount of $1,000,000 or over, exclusive of supplemental agreements covering overruns or incremental funding actions. Such contracts and supplemental agreements will not be distributed, or information given to any source outside NASA that the contractual instrument has been signed by both parties, until the procedures described in (1) and (2) below are carried out:

(1) The Procurement Officer will furnish to the installation Public Information Office the following information:

(i) whether the contract initiates a new contract or additional work or

services under an existing contract; (ii) type of contract (FP, CPFF, CPIF, etc.) (iii) dollar amount authorized for the instant action and estimated

total cost of the contract if this is different; (iv) name and address of the contractor; (v) location where the work is to be performed; (vi) brief description of the work, including identification of the pro

gram and project; and (vii) for the purpose only of responding to queries, a list of the un

successful offerors and addresses.

(2) Upon receipt of the above information, the installation Public Information Office will immediately prepare a news release in the form of a priority TWX which will contain as a minimum the information set forth in (1) above, and transmit it to the Assistant Administrator for Public Affairs and the Assistant Administrator for Legislative Affairs, NASA Headquarters. The information will not be otherwise released by the installation Public Information Office, nor will the contract instrument be released before 2:30 p.m. Washington, D.C. time of the next working day, unless clearance has been received earlier from the office of the Assistant Administrator for Public Affairs. If individual circumstances clearly indicate a need for earlier action, exception must be obtained from the Director of Procurement.

(b) Contracts and supplemental agreements which require the approval of the Director of Procurement pursuant to 50.105 will be accompanied, when forwarded for such approval, by a draft news release prepared by the installation Public Information Office and furnished to the procurement office for inclusion in the submission file. The news release will contain as a minimum the information required by (a) (1) above. At the time the contract or supplemental agreement is approved by the Director of Procurement, the news release, together with a notice as to whether the contract or supplemental agreement is subject to conditional approval, will be forwarded immediately to the Assistant Administrator for Public Affairs and the Assistant Administrator for Legislative Affairs, preceded by telephonic notice to both offices.

3.854–4 Unsuccessful Offerors. For releasing information to unsuccessful offerors, see 3.106–3.

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Subpart eMake-or-Buy Programs Policies and Procedures. 3.900 Scope of Subpart.

(a) This Subpart sets forth policies and procedures for obtaining, evaluating, and agreeing to contractors' proposed "make-or-buy" programs. These techniques are required only where the work is complex, the dollar value is substantial, and there is not adequate price competition. The evaluation of and agreement upon a contractor's proposed make-or-buy program shall be accomplished during negotiations to the extent practicable.

(b) Although there is a relationship among the evaluation and agreement upon a contractor's make-or-buy program, the review and approval of procurement systems and consent to subcontracts (see Part 23), each is a separate and distinct action and the factors to be considered in each vary.

(c) In order to form a basis for contract negotiations, the make-or-buy program submitted with the contractor's proposal should (i) sufficiently identify the important segments of the total effort, and (ii) establish the framework for determining the contractor's in-house effort, the subcontract effort, and the plant workload with attendant overhead costs.

3.901 Make-or-Buy Programs.

3.901-1 General. The Government buys management from the prime contractor along with goods and services, and places responsibility on him to manage programs to the best of his ability, including placing and administering subcontracts as necessary to assure performance at the lowest overall cost to the Government. Although the Government does not expect to participate in every management decision, it may reserve the right to review the contractor's management efforts, including the proposed make-or-buy program.

3.901–2 Definition and Criteria.

(a) A make-or-buy program is that part of a contractor's written plan which identifies the major subsystems, assemblies, subassemblies, and components to be manufactured, developed, or assembled in his own facilities, and those which will be obtained elsewhere by subcontract. A "make" item is any item produced, or work performed, by the contractor or his affiliates, subsidiaries, or divisions.

(b) Regardless of the type of contract contemplated, information with respect to prospective contractors' make-or-buy programs shall be required in all negotiated procurements except:

(i) when a proposed contract has a total estimated value of less than

$1,000,000, unless the contracting officer specifically determines that

such information is appropriate; (ü) in research and development contracts, unless the contract is for

prototypes or hardware and it can reasonably be anticipated that

significant follow-on quantities of the product will be procured; (ii) when the contracting officer determines that the price is based on

adequate price competition, or established catalog or market prices of commercial items sold in substantial quantities to the general

public, or on prices set by law or regulation; or (iv) when the contracting officer determines that the work is not



(c) Information with respect to make-or-buy programs and the program required to be included in any contract (see 3.901-4) shall be confined to items which, because of their complexity, quantity, or cost or because their production requires additional facilities, normally would require company management review of the make-or-buy decision. As a general guideline, the make-or-buy program should not include items or work efforts costing less than 1% of the total estimated contract price or $500,000, whichever is less. Raw materials and off-the-shelf items shall not be included.

3.901-3 Procedure.

(a) When submission of information with respect to a prospective contractor's proposed make-or-buy program is required, the solicitation shall so state and shall clearly set forth any special factors to be used in evaluating the program. After considering such factors as capability, capacity, availability of small business and labor surplus area concerns as subcontract sources, contract schedules, integration control, proprietary processes, and technical superiority or exclusiveness, the prospective contractor shall identify in his proposed make-or-buy program that work which he considers he or his affiliates, subsidiaries, or divisions (i) must perform as "must make,” (ii) must subcontract as "must buy," and (ii) can either perform or acquire by subcontract as "can make or buy.” The prospective contractor shall state the reasons for his recommendations of "must make" or "must buy" in sufficient detail for the contracting officer to determine that sound business and technical judgment has been applied to each major element of the program. When the make-orbuy program is to be incorporated into the contract and the design status of the article being procured does not permit accurate precontract identification of major items that should be included in the make-or-buy program, the prospective contractor shall be notified that such items must be added to the program, when identifiable, under the "Changes to Make-or-Buy Program" clause (3.901-4(b)). The prospective contractor shall be required to include in the information furnished with respect to his proposed make-or-buy program:

(i) a description by which each major item can be identified;
(ü) a recommendation to make or to buy each such item or defer the

(iii) a recommendation as to make-or-buy for any "can make or buy"

item; (iv) the proposed subcontractors, if known, including location and size

classification; (v) designation of the plants or divisions in which the contractor

proposes to make the item; and (vi) sufficient information to permit the contracting officer to evaluate

the proposed program in accordance with (b) below. Proposed make-or-buy programs shall be evaluated and negotiated as soon as practical after receipt of the contractors' proposals and in any event prior to



(b) In reviewing and evaluating a proposed make-or-buy program, the contracting officer shall assure that all appropriate items are included and shall delete items which should not be included. In conducting his review, the contracting officer shall obtain the advice of appropriate personnel including technical, small business and labor surplus area specialists, whose knowledge would contribute to the adequacy of the review. During such review primary consideration shall be given to the effect of the contractor's proposed make-orbuy program on price, quality, delivery, and performance. The contractor has the basic responsibility for make-or-buy decisions. The contractor's recommendations shall therefore be accepted unless they adversely affect the Government's interest or are inconsistent with Government policy. The evaluation of "must make” and “must buy" items should normally be confined to that necessary to assure that the items are properly categorized. The effect of the following factors on the interests of the Government shall also be considered:

(i) whether the contractor has justified the performance of work in

plant which differs significantly from his operations; (ü) the consequence of the contractor's projected plant work loading

with respect to overhead costs; (ii) the contractor's consideration of the competence, ability, experi

ence, and capacity available in other firms, especially small business and labor surplus area concerns (this is particularly significant if the contractor proposes to request additional Government facilities

in order to perform in-plant work); (iv) the contractor's make-or-buy history as to the type of item con

cerned; (v) whether small business and labor surplus area concerns will be

able to compete for subcontracts; and (vi) other elements, such as the nature of the items, experience with

similar items, future requirements, engineering, tooling, starting load costs, market conditions, and the availability of personnel and

materials. (c) Proposed "make" items normally shall not be agreed to when the products or services under consideration:

(i) are not regularly manufactured or provided by the contractor, and

are available quality, quantity, delivery, and other essential factors considered—from any other firm at prices no higher than if the

contractor should make or provide the products or services; or (ü) are regularly manufactured or provided by the contractor, but are

available quality, quantity, delivery, and other essential factors

considered—from any other firm at lower prices. Such items may be agreed to, however, if the contracting officer determines that the overall cost of the contract or of the program to the Government would be increased if the item were bought.


(d) Before agreeing to a "make-or-buy'' program to be incorporated into the contract (or, when the program is included in a contract, consenting to any change therein which, in his opinion, would reduce the anticipated participation of small business and labor surplus area concerns), the contracting officer shall invite the advice and counsel of the activity's small business and labor surplus area specialist, if any, by permitting him to review all pertinent facts and make recommendations thereon. Such review by the small business specialist should be concurrent with the review by the contracting officer. When urgent circumstances do not permit such a concurrent review, or where the small business specialist fails to respond on a timely basis, the contracting officer shall include an explanatory statement in the contract file and shall transmit a copy to the small business specialist.

3.901-4 Incorporation of the Make-or-Buy Program in Contracts.

(a) Where information with respect to a make-or-buy program has been required to be submitted in accordance with the foregoing, the make-or-buy program, as approved by the contracting officer, shall be included only in cost-reimbursement contracts except:

(i) cost-sharing contracts where the contractor's share is 25% or

more; (ii) cost-plus-incentive-fee contracts having a cost incentive which

provides for a swing from target fee of at least +3% and a contractor's overall share of cost of at least 10% (authority may be requested (see 1.109) to exclude the make-or-buy program from other cost-plus-incentive-fee contracts having different incentive and cost-sharing patterns, whenever the contracting officer finds that such other contracts provide sufficient incentive for control of

costs); and (ii) cost-plus-incentive-fee contracts to which 3.901–5 is applicable.

(b) The following clause shall be incorporated in all contracts in which a make-or-buy program has been included.


The Contractor shall perform this contract in accordance with the “make-or-buy" program incorporated in this contract except as hereinafter provided. If the Contractor proposes to change the “make-or-buy” program, he shall notify the Contracting Officer thereof in writing at a time reasonably in advance of the proposed change and shall therewith submit justification in sufficient detail to permit evaluation of the proposed change. Changes in the place of performance of work on any “make” items in the "make-or-buy" program are subject to this requirement. With respect to items deferred at the time of negotiation of this contract for later addition to the “make or-buy'' program, the Contractor shall notify the Contracting Officer of each proposed addition at the earliest possible time, together with justification in sufficient detail to permit evaluation. This contract shall be deemed modified in accordance with such proposed change or addition upon receipt by the Contractor of the Contracting Officer's written approval thereof.

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