CONTRACT CLAUSES

7.402-5 Inspection and Correction of Defects.

INSPECTION AND CORRECTION OF DEFECTS (SEPTEMBER 1962)

(a) All work under this contract shall be subject to inspection and test by the Government (to the extent practicable) at all times (including the period of performance) and places, and in any event prior to acceptance. The Contractor shall provide and maintain an inspection system acceptable to the Government covering the work hereunder. The Government, through any authorized representative, may inspect the plant or plants of the Contractor or of any of its subcontractors engaged in the performance of this contract. If any inspection or test is made by the Government on the premises of the Contractor or a subcontractor, the Contractor shall provide and shall require subcontractors to provide all reasonable facilities and assistance for the safety and convenience of the Government inspectors in the performance of their duties. All inspections and tests by the Government shall be performed in such a manner as will not unduly delay the work. Except as otherwise provided in this contract, final inspection and acceptance shall be made at the place of delivery as promptly as practicable after delivery and shall be deemed to have been made no later than ninety (90) days after the date of such delivery, if final acceptance has not been made earlier within such period.

(b) At any time during performance of this contract, but not later than six (6) months (or such other period as may be provided in the Schedule) after acceptance of all the end items (other than designs, drawings, or reports) to be delivered under this contract, the Government may require the Contractor to remedy by correction or replacement, as directed by the Contracting Officer, any failure by the Contractor to comply with the requirements of this contract. Any time devoted to such correction or replacement shall not be included in the computation of the period of time specified in the preceding sentence, except as provided in (d) below. Except as otherwise provided in paragraph (c) below, the allowability of the cost of any such replacement or correction shall be determined as provided in the clause of this contract entitled "Allowable Cost, Fixed Fee, and Payment," but no additional fee shall be payable with respect thereto. Corrected articles shall not be tendered again for acceptance unless the former tender and the requirement of correction is disclosed. If the Contractor fails to proceed with reasonable promptness to perform such replacement or correction, the Government (i) may by contract or otherwise perform such replacement or correction and charge to the Contractor any increased cost occasioned the Government thereby, or may reduce any fixed fee payable under this contract (or require repayment of any fixed fee theretofore paid) in such amount as may be equitable under the circumstances, or (ii) in the case of articles not delivered, may require the delivery of such articles, and shall have the right to reduce any fixed fee payable under this contract (or to require repayment of any fixed fee theretofore paid) in such amount as may be equitable under the circumstances, or (iii) may terminate this contract for default. Failure to agree to the amount of any such increased cost to be charged to the Contractor or to such reduction in, or repayment of, the fixed fee shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes."

(c) Notwithstanding the provisions of paragraph (b) above, the Government may at any time require the Contractor to remedy by correction or replacement, without cost to the Government, any failure by the Contractor to comply with the requirements of this contract if such failure is due to fraud, lack of good faith, or willful misconduct on the part of any one of the Contractor's directors or officers, or on the part of any of its managers, superintendents, or other equivalent representatives, who has supervision or direction of (i) all or substantially all of the Contractor's business, or (ii) all or substantially all of the Contractor's operations at any one plant or separate location in which this contract is being performed, or (iii) a separate and complete major industrial operation in connection with the performance of this contract. The Government may at any time also require the Contractor to remedy by correction or replacement, without cost to the Government, any such failure caused by one or more individual employees selected or retained by the Contractor after any such supervisory personnel has reason[Contract clause continued on next page]

CLAUSES FOR COST-REIMBURSEMENT TYPE RESEARCH AND DEVELOPMENT CONTRACTS

able grounds to believe that any such employee is habitually careless or otherwise unqualified.

(d) The provisions of paragraph (b) above shall apply to any corrected or replacement end item or component until six (6) months after its acceptance.

(e) The Contractor shall make his records of all inspection work available to the Government during the performance of this contract and for such longer period as may be specified in this contract.

(f) Except as provided in this clause and as may be provided in the Schedule, the Contractor shall have no obligation or liability to correct or replace articles which at the time of delivery are defective in material or workmanship or otherwise not in conformity with the requirements of this contract.

(g) Except as otherwise provided in the Schedule, the Contractor's obligation to correct or replace Government-furnished property (which is property in the possession of or acquired directly by the Government and delivered or otherwise made available to the Contractor) shall be governed by the provisions of the clause of this contract entitled "Government Property."

In the foregoing clause, the words "Task Order" or other suitable designation may be substituted for "Schedule," as appropriate.

7.402-6 Assignment of Claims. In accordance with the requirements in 7.103-8, insert the clause set forth therein.

7.402-7 Examination of Records. Insert the clause set forth in 7.203-7. In the case of contracts which establish separate periods of performance, alternate subparagraph (a) (4), set forth in 7.203-7(b), may be substituted for the corresponding subparagraph of the clause prescribed in 7.203-7(a).

7.402-8 Subcontracts.

(a) In accordance with the requirements in 23.201-2, and subject to the instructions in (b) and (c), below, insert the following clause.

SUBCONTRACTS (AUGUST 1969)

(a) The Contractor shall give advance notification to the Contracting Officer of any proposed subcontract hereunder which (i) is cost-reimbursement, time and materials, or labor-hour, or (ii) is fixed-price type and exceeds in dollar amount either $25,000 or five percent (5%) of the total estimated cost of this contract, (iii) provides for the fabrication, purchase, rental, installation, or other acquisition of special test equipment having a value in excess of $1,000 or of any items of industrial facilities; or (iv) has experimental, developmental, or research work as one of its purposes.

(b) In the case of a proposed subcontract which (i) is cost-reimbursement, time and materials, or labor-hour which would involve an estimated amount in excess of $10,000, including any fee, (ii) is proposed to exceed $100,000, or (iii) is one of a number of subcontracts under this contract with a single subcontractor for the same or related supplies or services which, in the aggregate are expected to exceed $100,000, the advance notification required by (a) above shall include:

(1) a description of the supplies or services to be called for by the subcontract;
(2) identification of the proposed subcontractor and an explanation of why and how
the proposed subcontractor was selected, including the degree of competition
obtained;

(3) the proposed subcontract price, together with the Contractor's cost or price
analysis thereof;

(4) the subcontractor's current, complete, and accurate cost or pricing data and Certificate of Current Cost or Pricing Data when such data and certificate are required by other provisions of this contract to be obtained from the subcontractor; and

[Contract clause continued on next page]

CONTRACT CLAUSES

(5) identification of the type of subcontract to be used.

(c) The Contractor shall obtain the written consent of the Contracting Officer prior to placing any subcontract for which advance notification is required under (a) above. The Contracting Officer may, in his discretion, ratify in writing any such subcontract; such action shall constitute the consent of the Contracting Officer as required by this paragraph (c).

(d) The Contractor agrees that no subcontract placed under this contract shall provide for payment on a cost-plus-a-percentage-of-cost basis.

(e) The Contracting Officer may, in his discretion, specifically approve in writing any of the provisions of a subcontract. However, such approval or the consent of the Contracting Officer obtained as required by this clause shall not be construed to constitute a determination of the allowability of any cost under this contract, unless such approval specifically provides that it constitutes a determination of the allowability of such cost.

(f) The Contractor shall give the Contracting Officer immediate notice in writing of any action or suit filed, and prompt notice of any claim made against the Contractor by any subcontractor or vendor which in the opinion of the Contractor, may result in litigation, related in any way to this contract, with respect to which the Contractor may be entitled to reimbursement from the Government.

(g) Notwithstanding (c) above, the Contractor may enter into subcontracts within (i) and (ii) of (a) above, without the consent of the Contracting Officer, if the Contracting Officer has approved in writing the Contractor's procurement system and the subcontract is within the scope of such approval.

(h) The Contractor shall (i) insert in each price redetermination or incentive price revision subcontract hereunder the substance of the "Limitation on Payments" paragraph set forth in the appropriate clause prescribed by paragraph 7.108 of the NASA Procurement Regulation, including subparagraph (4) thereof, modified to omit mention of the Government and reflect the position of the Contractor as purchaser and of the subcontractor as vendor, and to omit that portion of subparagraph (3) thereof relating to tax credits, and (ii) include in each cost-reimbursement type subcontract hereunder a requirement that each price redetermination and incentive price revision subcontract thereunder will contain the substance of the "Limitation on Payments" provision, including subparagraph (4) thereof, modified as outlined in (i) above.

(i) To facilitate small business participation in subcontracting under this contract, the Contractor agrees to provide progress payments on the fixed-price types of subcontracts of those subcontractors which are small business concerns, in conformity with the standards for customary progress payments stated in paragraphs 503 and 514 of Appendix E of the Armed Services Procurement Regulation, as in effect on the date of this contract. The Contractor further agrees that the need for such progress payments will not be considered as a handicap or adverse factor in the award of subcontracts. (b) In contracts of the types listed in 23.201-2(b), insert the following paragraph (g) in lieu of paragraph (g) of the clause set forth in (a) above.

(g) Notwithstanding (c) above, the Contractor may enter into subcontracts within (i), (ii), or (iii) of (a) above without the prior written consent of the Contracting Officer, if the Contracting Officer has in writing approved the Contractor's procurement system and the subcontract is within the scope of such approval. (AUG 1969)

(c) In contracts without fee with educational institutions, change “(iii)” in paragraph (a) of the clause in (a) above to read:

(iii) provides for (A) the construction, purchase, rental, installation, or other acquisition of nonseverable industrial facilities, or (B) the fabrication, purchase, rental, installation, or other acquisition, of any item of either (1) severable industrial facilities having a value in excess of $1,000 or the amount, if any, specified in the Schedule or Task Order, whichever is the lesser, or (2) special test equipment having a value in excess of $1,000. (AUG 1969)

CLAUSES FOR COST-REIMBURSEMENT TYPE RESEARCH AND DEVELOPMENT
CONTRACTS

In (iii) (B)(1) thereof, the $1,000 limit may, in the discretion of the contracting
officer, be decreased where it is determined to be in the interest of the Gov-
ernment, in view of the circumstances of each particular contract, as, for
example, the nature of the contractor's operations, previous experience with
the contractor on comparable procurements, the contractor's accounting and
procurement systems, and the capability of the office administering the con-
tract to effect close surveillance of the contractor's procurement and accounting
practices. Also, in the discretion of the contracting officer, the cumulative
total of acquisitions of severable industrial facilities may be limited to a stated
dollar amount or an amount equal to a stated percentage of the estimated
cost, beyond which amount the contractor will be required to obtain written
consent of the contracting officer for any additional acquisitions of such
facilities.

7.402-9 Utilization of Small Business Concerns. In accordance with the requirements of 1.707-3 (a), insert the clause set forth therein. 7.402-10 Termination. In accordance with the requirements of 8.702, insert the appropriate clause set forth therein.

7.402-11 Disputes. Insert the clause set forth in 7.103-12. 7.402-12 Renegotiation. Insert the clause set forth in 7.103-13. 7.402-13 Buy American Act. In accordance with the requirements of Part 6, Subpart 1, insert the clause set forth in 6.104-5.

7.402-14 Convict Labor. In accordance with the requirements in Part 12, Subpart 2, insert the clause set forth in 12.203.

7.402-15 Walsh-Healey Public Contracts Act. Insert the clause set forth in 12.605.

7.402-16 Contract Work Hours Standards Act-Overtime Compensation. Insert the clause set forth in 12.303-1. Note the introductory language required by 12.303-2 for inclusion in contracts with a State or political subdivision thereof.

7.402-17 Equal Opportunity. Insert one or the other of the following clauses, as required by and in accordance with the instructions in 12.802: (i) the Equal Opportunity clause set forth in 12.802–1, or (ii) the Equal Opportunity in Federally Assisted Construction Contracts clause set forth in 12.802-2. 7.402-18 Officials Not To Benefit. Insert the clause set forth in 7.103-19. 7.402-19 Covenant Against Contingent Fees. Insert the clause set forth in 1.503.

7.402-20 Authorization and Consent. Insert the clause prescribed in 9.103(b).

7.402-21 Notice and Assistance Regarding Patent and Copyright Infringement. Insert the clause set forth in 9.105.

7.402-22 New Technology. In accordance with the requirements of 9.101-2, insert the clause set forth in 9.101-4.

7.402-23 Rights in Data. If data is to be delivered under the contract, insert the appropriate clause in accordance with the instructions in 9.203. 7.402-24 Security Requirements. Insert the clause set forth in 7.204–12. 7.402-25 Government Property. Insert the clause set forth in 13.703.

CONTRACT CLAUSES

7.402-26 Insurance-Liability to Third Persons.

(a) Except under the circumstances stated in (b) or (c) below, insert the clause set forth in 7.203-22.

(b) If the contractor claims total immunity from tort liability as a State agency or as a charitable institution, the clause set forth below shall be used in lieu of the clause contained in 7.203-22.

LIABILITY TO THIRD PERSONS (SEPTEMBER 1962)

(a) The Government does not assume any liability to third persons, nor will the Government reimburse the Contractor for his liability to third persons with respect to loss due to death, bodily injury, or damage to property resulting in any way from the performance of this contract or any subcontract thereunder.

(b) The Contractor shall give the Government or its representatives immediate notice of any suit or action filed, or prompt notice of any claim made, against the Contractor arising out of the performance of this contract, the cost and expense of which may be reimbursable to the Contractor under the provisions of this contract. The Contractor shall furnish immediately to the Government copies of all pertinent papers received by the Contractor. The Contractor shall, if required by the Government, authorize representatives of the Government to settle or defend any such claim and to represent the Contractor in or take charge of any litigation in connection therewith. The Contractor may, at his own expense, be associated with the representatives of the Government in the settlement or defense of any such claim or litigation.

(c) If the contractor claims partial immunity from tort liability as a State agency or as a charitable institution (as where work may be performed under the contract in a place or under the conditions where the contractor is not immune from tort liability), the paragraph (e) set forth below may be added to the Insurance Liability to Third Persons clause contained in 7.203-22. (e) Notwithstanding paragraphs (a) and (c) of this clause, (i) the Government does not assume any liability to third persons, nor will the Government reimburse the Contractor for his liability to third persons, with respect to loss due to death, bodily injury, or damage to property resulting in any way from the performance of this contract or any subcontract hereunder; and (ii) the Contractor need not procure or maintain insurance coverage as provided in paragraph (a) of this clause; provided, the Contractor may obtain any insurance coverage he deems necessary subject to approval by the Contracting Officer as to form, amount, and duration, in which event the Contractor shall be reimbursed (A) for the cost of such insurance and (B) to the extent provided in paragraph (c) above, for liabilities to third persons for which the Contractor has obtained insurance coverage as provided in this paragraph, but for which such coverage is insufficient in amount. (SEPTEMBER 1962)

7.402-27 Utilization of Concerns in Labor Surplus Areas. In accordance with the requirements of 1.805-3(a), insert the clause set forth therein.

7.402-28 Payment for Overtime Premiums. In accordance with the requirements of 12.102, insert the clause set forth in 12.102-6.

7.402-29 Competition in Subcontracting. Insert the clause set forth in 7.104-40.

7.402-30 Audit and Records. Insert the clause set forth in 7.104-42. 7.402-50 Payment of Royalties. In accordance with the instructions in 7.203-50, insert the clause set forth in 9.108-1, except that if the contractor is a member of the Manufacturers Aircraft Association, the clause set forth in 9.108-2 may be substituted therefor.