amount of the contract, the financial condition, integrity, and reliability of the contractor, prior audit experience, and the adequacy of the contractor's accounting system and other internal controls. The audits also include reviews of cost or pricing data for contractors' proposals for negotiated contracts (see § 1-3.809 of this title). In order that the Government may benefit to the maximum extent from such audits, a coordinated and cooperative effort shall be made by contracting officers, technical specialists, and finance and audit personnel. It is the responsibility of the contracting officer to have an audit clause inserted in all contracts subject to audit pursuant to § 14-51.103. § 14-51.102 Purpose of audit.

In addition to the provisions of §1-3.809 of this title, Contract audit as a pricing aid, audits are conducted to advise and make recommendations to the contracting officer concerning the:

(a) Propriety of amounts paid, or to be paid, to contractors where such amounts are based on a cost (including modifications or change orders for all types of contracts) or time determination or on variable features related to the results of contractors' operations;

(b) Adequacy of measures taken by contractors regarding the use and safeguarding of Government assets under their custody or control;

(c) Compliance by contractors with contractual provisions having financial implications, such as progress payments, advance payments, guaranteed loans, cash return provisions, and price adjustments;

(d) Reasonableness of contractors' settlement proposals in termination of contracts;

(e) Compliance with contract provisions; and

(f) Contractors' financial condition and ability to perform or to continue to perform under Government contracts.

§ 14-51.103 Types of contracts subject to audit.

(a) The following types of contracts estimated to cost in excess of $25,000 shall include the Examination of Records by the Secretary clause (§ 14-51.104):

(1) Cost-reimbursement type contracts (see §§ 1-3.405 and 1-3.814-2(e) of this title);

(2) Advertised or negotiated contracts involving the use or disposition of Government-furnished property;

(3) Where advance payments, progress payments based on costs, or guaranteed loans are to be made;

(4) Contracts for supplies or services containing a price warranty or price reduction clause;

(5) Contracts or leases involving income to the Government where the income is based on operations that are under the control of the contractor or lessee;

(6) Fixed-price contracts with escalation (see §§ 1-2.104-3 and 1-3.404-3 of this title), incentives (see §§ 1-3.404-4 and 1-3.407 of this title), and redetermination (see §§ 1-3.404-5 and 1-3.404-7 of this title);

(7) Requirements and indefinite quantity (call-type) contracts (see §§ 12.104-4 and 1-3.409 of this title);

(8) Time and materials and laborhour contracts (see §§ 1-3.406-1 and 13.406-2 of this title); and

(9) Leases (i) where the rental is subject to adjustment (such as for a change in real estate taxes or service costs) or (ii) where the rental is dependent upon actual costs.

(b) In some of the contracts listed in paragraph (a) of this section, it may be appropriate to contractually define the scope or extent of any audit, such as with respect to (1) the use or disposition of Government-furnished property or (2) variable or other special features of the contract, e.g., price escalation, and compliance with the price warranty or price reduction clauses. In such cases, the contract clause in § 14-51.104 may be appropriately modified with the concurrence of the Office of Survey and Review.

(c) Inclusion of the contract clause in. § 14-51.104 (whether or not modified) in contracts does not affect in any way the requirements for (1) use of the Examination of Records clause permitting review of contractor books and records by the Comptroller General (see §1-3.814-2(e) of this title) or (2) the clauses on Audit and Records pertaining to the verification of cost or pricing data (see § 1-3.814-2 of this title).

(d) A notice for each contract, change order, or modification entered into of the types described in paragraph (a) of this section and § 14-51.104-2 shall be forwarded to the Director, Audit Operations, Office of Survey and Review, within 15 days after the effective date of the contract. The notice shall include the following information:

(1) Contract identifying number,

(2) Contractor's name and address, (3) A brief description of the work involved,

(4) Effective date of the document, (5) Completion date (estimated) of the work involved,

(6) Estimated dollar amount.

In addition, a copy of a notice of termination of contracts of the types described in this § 14-51.103 shall be forwarded to the Director, Audit Operations, Office of Survey and Review, within 15 days after effective date of termination. Such notice shall contain the contract number and the contractor's name and address and the estimated dollar amount of the costs incurred by the contractor as of the effective date of termination.

§ 14-51.104 Contract clauses.

The following contract clauses are prescribed for use as indicated in this § 14-51.104.

§ 14-51.104-1

Examination of records

by the Secretary of the Interior. The following contract clause is prescribed for use in contracts listed in §14-51.103(a).

EXAMINATION OF RECORDS BY THE
SECRETARY OF THE INTERIOR

(a) The contractor shall maintain books, records, documents, and other evidence and accounting procedures and practices, sufficient to reflect properly all direct and indirect costs of whatever nature claimed to have been incurred and anticipated to be incurred for the performance of this contract. The foregoing constitute "records" for the purposes of this clause.

(b) The contractor's plants, or such part thereof as may be engaged in the performance of this contract, and his records shall be subject at all reasonable times to inspection and audit by the Secretary or his authorized representatives. In addition, the Secretary, or his authorized representatives, shall, until the expiration of 3 years from the date of final payment under this contract, or of the time periods for the particular records specified in Part 1-20 of the Federal Procurement Regulations, whichever expires earlier, have the right to examine those books, records, documents, papers, and other supporting data which involve transactions related to this contract along with the computations and projections used therein.

(c) The contractor shall preserve and make available his records (1) until the expiration of 3 years from the date of final payment under this contract, or of the time periods for the particular records specified

in Part 1-20 of the Federal Procurement Regulations, whichever expires earlier, and (2) for such longer period, if any, as is required by applicable statute, or by other clauses of this contract, or by (1) or (ii) below.

(i) If this contract is completely or partially terminated, the records relating to the work terminated shall be preserved and made available for a period of 3 years from the date of any resulting final settlement. (ii) Records which relate to (A) appeals under the "Disputes" clause of this contract, (B) litigation or the settlement of claims arising out of the performance of this contract, or (C) costs and expenses of this contract as to which exception has been taken by the contracting officer or any of his duly authorized representatives, shall be retained until such appeals, litigation, claims, or exceptions have been resolved.

(d) The contractor shall insert the substance of clause, including the whole of this paragraph (d), in each subcontract hereunder. When so inserted, changes shall be made to designate the higher-tier subcontractor at the level involved in place of the contractor; to add "of the Government prime contract" after "contracting officer"; and to substitute "the Government prime contract" in place of "this contract" in (B) of paragraph (c) above.

§ 14-51.104–2 Audit of contract changes or modifications.

The following clause shall be included in all contracts, which are estimated to exceed $100,000, except those listed in § 14-51.103:

AUDIT OF CHANGES OR MODIFICATIONS The "Examination by the Secretary of the Interior of Records of Contract Changes or Modifications" clause contained in the Interior Procurement Regulations at $14 51.104-3 shall be included in every change order or modification under this contract which results in a net price adjustment (increase or decrease) in excess of $100,000.

§ 14-51.104-3 Examination of contract changes or modifications records clause.

The following clause is prescribed for use in contract changes or modifications which result in a net price adjustment (increase or decrease) in excess of $100,000 in accordance with the "Audit of Changes or Modifications" in §14-51.104-2:

EXAMINATION BY THE SECRETARY OF THE INTERIOR OF RECORDS OF CONTRACT CHANGES OR MODIFICATIONS

(a) For the purpose of verifying that the cost or pricing data submitted in conjunc

tion with this contract change or modification were accurate, complete and current, the Secretary of the Interior or his authorized representatives, shall, until the expira

tion of 3 years from the date of final payment under the contract of which this change or modification is a part, or of the time periods for the particular records specified in Part 1-20 of the Federal Procurement Regulations, whichever expires earlier, have the right to examine those books, records, documents, papers and other supporting data which involve transactions related to this change or modification or which will permit adequate evaluation of the cost or pricing data submitted, along with the computations and projections used therein.

(b) If the contract of which this change or modification is a part is completely or partially terminated and the work so terminated is included in this change or modification the records relating thereto shall be preserved and made available for 3 years from the date of any resulting final settlement.

(c) If the records concerning this change or modification relate to (1) appeals under the contracts "Disputes" clause, (2) litigation or settlement arising out of the performance of the contract, or (3) costs and expenses of the contract to which the contracting officer or his authorized representative have taken exception, they shall be retained until such time as such appeals, litigation, claims, or exceptions have been resolved.

§ 14-51.105-1 Submission and processing of invoices or vouchers.

(a) Contractors shall be required to submit invoices or vouchers as directed by the contract provisions. The processing of invoices or vouchers prior to payment for work or services rendered shall include a review by the contracting officer, or his designated representative, to determine that the nature of items and amounts claimed are in consonance with the contract terms, represent prudent business transactions, and are within any stipulated contractual limitations. If the contractor has not deducted from his claim amounts which are questionable or which are required to be withheld, the contracting officer shall make the required deduction, except as provided in §14-51.105-2.

(b) Provisional approval by the contracting officer of any payment, including any specific approval as to the nature or amount of a cost shall be noted on (or attached to) the invoice or voucher (see, for example, § 1-15.107 of this title

regarding advance understandings on particular cost items). The invoice or voucher shall be forwarded to the appropriate accounting center and retained therein after certification and scheduling to a disbursing office for payment.

§ 14-51.105-2 Action upon receipt of an audit report.

Audit reports shall be furnished to the contracting officer. Upon receipt of an audit report, the contracting officer shall, pursuant to contract terms, determine the allowability of all costs covered by audit, giving full consideration to the auditor's recommendations. Where the contracting officer is in doubt or questions the recommendations of the auditor, deductions need not be made from invoices or vouchers for provisional payments. The contracting officer in such cases, however, shall confer with the auditor and other appropriate Government personnel (such as a price specialist or legal counsel) to determine what further action should be taken regarding the items of cost in question. If the contracting officer disagrees with the audit recommendations, the contracting officer shall prepare a statement for the contract file to support and justify his decision and for informational purposes shall forward a copy of such statement to the Director, Audit Operations, Office of Survey and Review. (See also § 1-3.811 of this title.)

§ 14-51.105-3

Suspensions and disap

provals of amounts claimed. The contracting officer shall notify the appropriate certifying officer in writing when amounts claimed for payment are (a) suspended tentatively, (b) disapproved as not being allowable according to contract terms, or (c) not reasonably incident or allocable to performance of the contract. Such notice by the contracting officer shall be the basis for the issuance by the certifying officer of a statement to be attached to each copy of the invoice or voucher from which the deduction has been made, explaining the reasons for the deduction.

§ 14-51.106 Waiver.

The contracting officer and the Director, Office of Survey and Review, may agree to limit the application of specific contract audit requirements in individual cases such as where the possible cost/ benefits ratio of the audit do not warrant the assignment of audit resources or where audit resources are unavailable; provided, that the stated urgency of a proposed procurement or other contract action shall not alone be justification for such a waiver and provided the waiver is made within the terms of the Federal

Procurement Regulations. As much time as possible should be allowed by contracting officers for the audit work. Except under unusual circumstances, at least 30 days should be allowed for the review of the contractors' proposals pursuant to § 1-3.809 of the Federal Procurement Regulations in this title.

14H-1.002

14H-1.003

14H-1.004

14H-1.006

14H-1.006-1 14H-1.006-2 14H 1.007 14H-1.007-1

14H-1.007-2

14H-1.007-3

14H-1.008

14H-1.009

14H-1.009-2

Subpart

14H-1.205

14H-1.206

Scope of subpart.

Purpose.

Authority.

Applicability.
Issuance.

Code arrangement.
Publication.

Arrangement.

General plan.
Numbering.

Citation.

Agency implementation.

Deviation.

Procedure.

14H-1.2-Definition of Terms
Procuring activity.

Head of the procuring activity. Subpart 14H-1.3-General Policies

Delegation and redelegation of authority and designation of contracting officers.

14H-1.451-2 Designation of contracting of

ficer positions.

14H-1.451-6 Limitation of contracting offcer authority.

AUTHORITY: The provisions of this Part 14H-1 issued under sec. 205 (c), 63 Stat. 390; 40 U.S.C. 486 (c).

SOURCE: The provisions of this Part 14H-1 appear at 34 F.R. 13659, Aug. 26, 1969, unless otherwise noted.

§ 14H-1.000 Scope of part.

(a) This part establishes a system for the codification and publication of policies and procedures of the Bureau of Indian Affairs (Bureau) regulations which implement, supplement or deviate from the Federal Procurement Regulations (FPR) and Interior Procurement Regulations (IPR), when appropriate.

(b) The Federal Procurement Regulations are published as Chapter 1 of this title. The Interior Procurement Regulations which implement and supplement the FPR are published as Chapter 14 of this title. The Bureau Procurement Regulations which implement and supplement the FPR and IPR are published as Chapter 14H of this title. It is the basic policy of the Bureau to apply the Federal Procurement Regulations and the Interior Procurement Regulations. Thus, as to most elements of the procurement process, substantive guidelines will be