order was issued, but he must comply with the requirements of such article in order for his protest or appeal to be effective.

(c) Method of issuance. (1) Whenever possible, prior agreement should be reached with the contractor regarding any price and time adjustments and a complete one-part change order should be issued prior to commencement of the changed work. If agreement cannot be reached within available time, the directive portion of the change order should be issued in any case prior to commencement of the changed work.

(2) When failure to reach mutual agreement on equitable adjustments prior to issuance of a change order is due to inability to obtain adequate proposals from the contractor or to reaching an impasse in negotiations, rather than to lack of available time, a complete onepart change order should be issued as a unilateral action with price and time adjustments based on the Government estimate.

(3) A two-part change order should be used when a complete one-part change order has not been issued under either subparagraph (1) or (2) above. The first part should set forth the details of the change and contain a statement that price and time adjustments will be settled by the parties at an early date. The second part should contain the adjustments in price and time. Where appropriate, the first part of a two-part change order may establish an interim price as a basis for such partial payments as can be thoroughly substantiated by cost estimates; the interim price should not include profit or items which might be controversial. Every effort should be made by the parties to reach agreement on part two of the two-part change order as expeditiously as possible. When the parties fail to reach agreement as to equitable adjustments due to inability to obtain adequate proposals from the contractor, the reaching of an impasse in negotiations, or for any other proper reason, the second part of a two-part change order should be issued as a unilateral action with price and time adjustments based on the Government estimate.

(4) In all cases where agreement is reached with the contractor on equitable price and time adjustments, the con

tractor's acceptance shall be indicated by his signature on the change order to establish that mutual agreement has been reached.

(5) According to the circumstances of the particular case, the contractor's protest or "appeal" from unilateral adjustments of price and time in a change order should be treated (i) as a claim for consideration and decision, based on findings of fact by the contracting officer, subject to further appeal, or (ii) as an appeal from the contracting officer's decision. The latter alternative should apply only when the unilateral adjustments were preceded by a full consideration of the details of the contractor's claim, a thorough effort to resolve differences by negotiation, and a decision by the contracting officer based upon formal findings of fact. See "Rules of Procedures in Contract Appeals," 10 CFR Part 3.

(d) Adjustment of price or time. Any equitable adjustment in price or time must be determined as of the date the change is directed. Estimated increased costs of performing the contract as changed, which are a direct result of the change order, are proper for consideration in an equitable adjustment in price. Ascertainment of costs which may be properly included in any equitable adjustment depends upon all of the facts surrounding a particular change. The following procedures shall be followed in establishing price and time adjustments for change orders:

(1) Contractor's proposal. The contractor shall be furnished details of the change and be requested to submit a statement that the directed change will not require a change in contract price or time or, if an increase or decrease in contract price or time will result, an estimate of cost, broken down as appropriate between features of work and into costs of labor, materials, equipment, construction equipment, taxes, bonds, insurance, overhead and profit, and the change in time for completion, if any.

(2) Government estimate. An independent Government estimate of the cost of the changed work shall be prepared on the basis, as applicable, of the costs of labor, materials, equipment, construction equipment, taxes, bonds, and insurance (direct costs) on which appropriate allowances for profit and overhead

should be made. The change in the time of performance, if any, should also be E estimated.

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(3) Use of actual costs. Costs actually incurred may be considered, to the extent that they are determined to be both necessary and reasonable, in determining price adjustments for changes that have been completed, but they are not to be used as the basis for price adjustments since the price adjustment must be determined as of the date the change was directed.

§ 9-1.5004-2 Unilateral-type

contract

modifications other than change orders.

Fixed-price contracts often include provisions other than Changes articles which contemplate, as a result of specified happenings or actions, unilateral equitable adjustments in the contract price or performance time in the event of failure to reach mutual agreement. To the extent applicable, the procedures for the handling of change order equitable adjustments specified in § 9-1.5004-1 shall be followed in the treatment of such other equitable adjustments. Such other adjustments include:

(a) Adjustments in price and time resulting from differences in physical conditions as described in the "Changed Conditions" article which appears in Standard Form 23-A: General Provisions (Construction Contract) and other contracts.

(b) Certain time extensions as covered by provisions of contract articles dealing with default terminations, delays, and time extensions.

(c) Time or price adjustments resulting from suspension, delay, or interruption of work covered by applicable contract articles.

(d) Adjustments in price and time resulting from removing or tearing out of construction work which subsequently is found to meet contract requirements as covered by inspection articles.

the general scope of the contract, changes in basic contract articles, or a deletion or addition of contract articles.

(2) A supplemental agreement shall not be used for work additions unless the added work is so closely related to work under the existing contract, or for other reasons, that it is impracticable to accomplish the new work under a separate fixed-price contract awarded as a result of formal advertising or invited proposal procedures. The use of a supplemental agreement for additional work shall be fully justified as being in the best interest of the Government and shall satisfy AEC requirements for procurement by negotiation.

(3) Whenever time will permit, a supplemental agreement shall be issued and signed by both parties prior to the commencement of any work covered by the modification. When construction must be started before a supplemental agreement can be completed, prior agreement shall be confirmed by letter or a letter-type supplemental agreement should be issued to authorize the start of work.

(b) Negotiation. Since a supplemental agreement concerns a change in contract terms or in work which is not within the general scope of the contract, any price and time adjustment must be acceptable to the contractor and the supplemental agreement must be effected by negotiation with the contractor. The following procedures shall be used:

(1) Contractor's proposal. The contractor shall be furnished a description of the change, together with any applicable revised plans and specifications, and be requested to submit a proposal for the changed work, including a detailed estimate of any change in price or time involved in the performance of the work.

(2) Government estimate. An independent Government estimate shall be prepared in accordance with applicable provisions of § 9-1.5004-1(d) (2).

(3) Agreement on price or time adjustment. In the event negotiation with the contractor does not result in reasonable reconciliation between the contractor's estimate and the Government estimate, the contracting officer must determine whether, under the circumstances, contracting with others for the

Additional performance bond protection in connection with and consent of surety to change orders and supplemental agreements to fixed-price contracts shall be obtained when they are determined to be appropriate on the basis of Part 9-10.

Subpart 9-1.51 [Reserved]

Subpart 9-1.52 [Reserved] Subpart 9-1.53-Novation Agreements and Change of Name Agreements

§ 9-1.5300 Scope of subpart.

This subpart prescribes the policy and procedures for (a) recognition of a successor in interest to contracts when such interests are required incidental to transfer of all the assets of a contractor or such part of his assets as is involved in the performance of the contract, and (b) a change of name of a contractor. § 9-1.5301 Agreement to recognize a successor in interest.

(a) The transfer of a Government contract by a contractor is prohibited by law (41 U.S.C. 15). However, the Government may recognize a third party as the successor in interest to a Government contract where the third party's interest is incidental to the transfer of all the assets of the contractor, or all that part of the contractor's assets involved in the performance of the contract. Examples include, but are not limited to:

(1) Sale of such assets;

(2) Transfer of such assets pursuant to merger or consolidation of corporation; and

(3) Incorporation of a proprietorship or partnership.

(b) A contractor who requests that a successor in interest be recognized shall be required to furnish the AEC office concerned (see § 9-1.5303(a)) one copy of each of the following documents as appropriate:

(1) A properly authenticated copy of the instrument by which the transfer of assets is to be effected, as, for example, a bill of sale, certificate of merger, indenture of transfer, or decree of court;

(2) A list of all contracts and purchase orders which have not been finally settled between the Atomic Energy Commission and the transferor, showing the contract number, the name and address of the purchasing office involved, the total dollar value of each contract as amended, the type of contract involved, and the balance remaining unpaid;

(3) A certified copy of the resolutions of the Board of Directors of the corporate parties authorizing the transfer of assets;

(4) A certified copy of the minutes of any stockholders' meetings of the corporate parties necessary to approve the transfer of assets;

(5) A properly authenticated copy of the certificate and articles of incorporation of the transferee if such corporation was formed for the purpose of receiving the assets involved in the performance of the Government contracts;

(6) Opinion of counsel for the transferor and transferee that the transfer is in accordance with applicable law and the effective date of transfer:

(7) Evidence of the capability of the transferee to perform the contracts;

(8) Balance sheets of the transferor and the transferee as of dates immediately prior to and after the transfer of assets;

(9) Evidence of security clearance requirements; and

(10) Consent of sureties on all contracts listed under subparagraph (2) of this paragraph where bonds are required.

(c) If it is consistent with the Government's interest to recognize a successor in interest to a contract, an agreement

will be executed with the transferor and the transferee, which shall ordinarily provide in part that:

(1) The transferee assumes all the transferor's obligations and liabilities under the contract;

(2) The transferor waives all rights under the contract as against the Government;

(3) The transferor guarantees performance of the contract by the transferee (a satisfactory performance bond may be accepted in lieu of such guarantee); and

(4) Nothing in the agreement shall relieve the transferor or the transferee from compliance with any Federal, State, or local law. All agreements, prior to execution, shall be reviewed by the Office of the General Counsel or the Office of the Chief Counsel, as the case may be, for legal sufficiency. A sample form for such an agreement for use when the transferor and transferee are corporations, and all the assets of the transferor are transferred, is set forth herein. This sample form may be adapted to fit specific cases and may be used as a guide in preparing similar agreements for use in other situations.

has acquired all the assets of the Transferor; 4. Whereas by virtue of said assignment, conveyance, and transfer, the Transferee has assumed all the duties, obligations, and liabilities of the Transferor under the contracts;

5. Whereas, the Transferee is in a position fully to perform the contracts, and such duties and obligations as may exist under the contracts;

6. Whereas, it is consistent with the Government's interest to recognize the Transferee as the successor party to the contracts;

7. Whereas, there has been filled with the Commission evidence of said assignment, conveyance, or transfer, as required by AECPR 9-1.5301 (b);

(Where a change of name is also involved, such as prior or concurrent change of name of the transferee, an appropriate recital shall be used; for example:)

8. Whereas, there has been filled with the Commission a certificate dated

19

-1)

signed by the Secretary of the State of to the effect that the corporate name of LMN Corp. was changed to XYZ Corp. on 19--;

Now, therefore, in consideration of the premises, the parties hereto agree as follows: 9. The Transferor hereby confirms said assignment, conveyance, and transfer to the Transferee, and does hereby release and discharge the Government from, and does hereby waive, any and all claims, demands, and rights against the Government which it now has or may hereafter have in connection with the contracts.

10. The Transferee hereby assumes, agrees to be bound by, and undertakes to perform each and every one of the terms, covenants, and conditions contained in the contracts. The Transferee further assumes all obligations and liabilities of, and all claims and demands against, the Transferor under the contracts, in all respects as if the Transferee were the original party to the contracts.

11. The Transferee hereby ratifies and confirms all actions heretofore taken by the Transferor with respect to the contracts with the same force and effect as if the action had been taken by the Transferee.

12. The Commission hereby recognizes the Transferee as the Transferor's successor in interest in and to the contracts. The Transferee hereby becomes entitled to all right, title, and interest of the Transferor in and to the contracts in all respects as if the Transferee were the original party to the contracts. The term "Contractor" as used in the contracts shall be deemed to refer to the Transferee rather than to the Transferor.

13. Except as expressly provided herein, nothing in this Agreement shall be construed as a waiver of any rights of the Government against the Transferor.

14. Notwithstanding the foregoing provisions, all payments and reimbursements heretofore made by the Commission to the Transferor and all other action heretofore taken by the Commission, pursuant to its obligations under any of the contracts, shall be deemed to have discharged protanto the Government's obligations under the contracts. All payments and reimbursements made by the Commission after the date of this Agreement in the name of or to the Transferor shall have the same force and effect as if made to said Transferee and shall constitute a complete discharge of the Government's obligations under the contracts, to the extent of the amounts so paid or reimbursed.

15. The Transferor and the Transferee hereby agree that the Government shall not be obligated to pay or reimburse either of them for, or otherwise give effect to, any costs, taxes, or other expenses, or any increases therein, directly or indirectly arising out of or resulting from (1) said assignment, conveyance, and transfer, or (ii) this Agreement, other than those which the Government, in the absence of said assignment, conveyance, and transfer or this Agreement, would have been obligated to pay or reimburse under the terms of the contracts.

16. The Transferor hereby guarantees payment of all liabilities and the performance of all obligations which the Transferee (1) assumes under this Agreement, or (11) may hereafter undertake under the contracts as they may hereafter be amended or modifled in accordance with the terms and conditions thereof; and the Transferor hereby waives notice of and consents to any such amendment or modification.

17. Except as herein modified, the contracts shall remain in full force and effect.

18. The term "the contracts" as used in this agreement means the contracts and purchase orders listed above [or in an attached exhibit]; and all other contracts and purchase orders, including modifications thereto, heretofore made between the AEC and the Transferor (whether or not performance and payments have been completed and releases executed, if the Government or the Transferor has any remaining rights, duties, or obligations thereunder), and modifications to such contracts and purchase orders hereafter made in accordance with their terms and conditions.

In witness whereof, each of the parties hereto has executed this Agreement as of the day and year first above written.

[CORPORATE By SEAL]

§ 9-1.5302

day of

Agreement to recognize change of name of contractor.

(a) A contractor who requests only that a change of name be recognized and states that the rights and obligations of the parties remain unaffected shall be required to furnish the AEC office (see § 9-1.5303 (a)) concerned one copy of each of the following:

(1) A copy of the instrument by which the change of name was effected, authenticated by a proper official of the State having jurisdiction;

(2) Opinion of counsel for the contractor as to the effective date of the change of name and that it was properly effected in accordance with applicable law; and

(3) A list of all contracts and purchase orders which have not been finally settled between the Atomic Energy Commission and the transferor, showing the contract number, the name and address of the procuring activity involved, the total dollar value of each contract as amended, and the balance remaining unpaid.