§ 1.109-1 Applicability.

The regulations of this subchapter are not intended to stifle the development of new techniques or methods of procurement. Innovations to attain desirable objectives will occasionally necessitate deviations from the regulations of this subchapter, and it is the responsibility of contracting officers to request such deviations whenever they are required in the best interest of the Government. For the purpose of this section, a deviation shall be considered to be any of the following:

(a) When a contract clause is set forth in this subchapter for use verbatim, use of a contract clause covering the same subject matter which varies from the ASPR coverage, or use of a collateral provision which modifies either the clause or its prescribed application constitutes a deviation; however, in the case of a purchase or contract of an offshore contracting activity with a foreign contractor made outside the United States, its possessions, or Puerto Rico, such contract clauses may (subject to the direction of authority above the level of the contracting officer) be modified if no change in intent, principle, or substance is made (offshore contracting activities shall keep the cognizant unified Commander advised of significant deviations effected under this paragraph);

(b) When a contract clause is set forth in this subchapter but not for use verbatim, use of a contract clause covering the same subject matter which is inconsistent with the intent, principle and substance of the ASPR clause or related coverage of the subject matter;

(c) Omission of any mandatory contract clause constitutes a deviation;

(d) When a Standard, DD, or other form is prescribed by this subchapter or a Department of Defense Directive, use of any other form for the same purpose constitutes a deviation;

(e) Alteration of a Standard, DD, or other form (other than Departmental forms), except as authorized by this subchapter or a Department of Defense Directive constitutes a deviation;

(f) When limitations are imposed in this subchapter or a Department of Defense Directive upon the use of a contract clause, form, procedure, type of contract, or any other procurement action, including but not limited to the making or amendment of a contract, or actions taken in connection with the

solicitation of bids or proposals, award, administration or settlement of contracts, the imposition of lesser or greater limitations constitutes a deviation; or

(g) When a policy, procedure, method or practice of conducting procurement actions of any kind at any stage of the procurement process is covered by this subchapter, any policy, procedure, method, or practice which is inconsistent with that set forth constitutes a deviation.

(h) Issuance of any instructions described in § 1.108(a) (including an instruction for any additional contract clause, form, or type, or additional procurement policy, procedure, method or practice, not covered in ASPR or in Department of Defense Directives) constitutes a deviation unless permitted under § 1.108(a) (1) through (7).

[30 F.R. 14071, Nov. 9, 1965, as amended at 33 F.R. 7347, May 18, 1968]

§ 1.109-2 Deviations affecting one contract or transaction.

Deviations from this subchapter or a Department of Defense Directive which affect only one contract or procurement may be made or authorized in accordance with Departmental procedures: Provided, (a) Special circumstances justify a deviation and (b) written notice of such deviation is furnished to the Assistant Secretary of Defense (Installations and Logistics); and in the case of the Department of the Army, to the Assistant Secretary of the Army (I&L), Attn: ASPR Policy Member; the Department of the Navy, the Chief of Naval Material, Attn: Code MAT02G; Department of the Air Force, Director of Procurement Policy, DCS/S&L, Attn: AFSPPC; and the Defense Supply Agency, Executive Director, Procurement and Production, Attn: DSAH-PM. Such written notice shall be given in advance of the effective date of such deviations unless exigency of the situation requires immediate action. [36 F.R. 21120, Nov. 4, 1971]

§ 1.109-3 Deviations affecting more than one contract or contractor. Except as authorized in § 1.109-2, deviations from this subchapter or a Department of Defense Directive will not be effected unless approved in advance by the Assistant Secretary of Defense (Installations and Logistics): Provided, however, That unanimous approval by the members of the ASPR Committee will constitute approval of the Assistant

Secretary of Defense (Installations and Logistics) of all matters except those involving major policy. Written requests for such approval will be submitted to the Assistant Secretary of Defense (Installations and Logistics) through the ASPR Committee as far in advance as exigencies of the situation will permit, or alternatively, at the option of the Materiel Secretary concerned, through use of the Materiel Secretaries' Weekly Conference.

[26 F.R. 5296, June 14, 1961]

§ 1.109-4 Deviations required by Government-to-Government agreements. Notwithstanding §§ 1.109-2 and 1.1093, any deviation from this subchapter that is required in order to comply with a treaty or executive agreement to which the United States is a party is authorized unless the deviation would substantively affect a provision of this subchapter that is based on the requirements of a law enacted after execution of the treaty or executive agreement. In the latter event, the deviation shall, in accordance with Departmental procedures, be referred to the ASPR Committee for consideration, and the cognizant unified Commander shall be advised of such action. Any procurement action which constitutes a deviation from an ASPR provision based on such a requirement of law shall be held in abeyance pending consideration by the ASPR Committee. However, if the subject matter of the ASPR provision is not covered in such a treaty or executive agreement and it is decided to treat the subject matter of such an ASPR provision in the contract, the treatment must be in accord with the intent, principle, and substance of the ASPR provision; provided that, if such treatment involves a significant deviation from a clause set forth verbatim in this subchapter, the cognizant unified commander shall be advised.

[26 F.R. 5296, June 14, 1961]

§ 1.109-5 Request for approval of proposed deviation.

Request for approval of any deviation shall be forwarded to the approving authority through procurement channels. Each submission shall contain as a minimum:

(a) Identification of the requirement of this subchapter from which deviation is sought;

(b) A full description of the deviation and the circumstances in which it will be used;

(c) A description of the intended effect of the deviation;

(d) A copy of any pertinent document, including forms or clauses and the proposed contractor's request, if any;

(e) A statement of the period of time for which the deviation is needed; and (f) Detailed reasons supporting the request.

[25 FR 14815, Oct. 31, 1964]

§ 1.110 Reports of purchases and con

tracts.

Periodic and special reports on purchases and contracts are prescribed by the Department of Defense. These reports are designed to meet statutory and other Congressional requirements, requirements of Federal agencies, and provide all levels of management with data on which to formulate procurement policy as well as to determine the extent of adherence to prescribed policy. Basic to the preparation of all these regular and special reports, so far as they affect individual contracting officers, is DD Form 350 (Individual Procurement Action Report). Each item of this form enters into the preparation of reports furnished the President, the Congress, and other Federal agencies, and is used for management purposes within the Department of Defense. The accuracy, completeness, and timeliness of these reports are fully dependent on the careful preparation and prompt submission of DD Form 350.

[25 F.R. 14080, Dec. 31, 1960, as amended at 26 F.R. 9633, Oct. 12, 1961; 27 F.R. 8869, Sept. 6, 1962]

§ 1.111 Reports of suspected criminal conduct and non-competitive practices.

[25 F.R. 14080, Dec. 31, 1960]

§ 1.111-1 Reporting procedures.

Reports of suspected criminal conduct, noncompetitive practices, kickbacks, and other procurement irregularities shall be made by each Department in accordance with procedures set forth in Subpart F of this part.

[30 F.R. 5959, April 29, 1965]

§ 1.111-2 Noncompetitive practices.

(a) Unless bids or proposals are genuinely competitive, contract prices tend to be higher than they should be. If

the Secretary concerned or his representative considers that any bid received after formal advertising evidences a violation of the antitrust laws, he is required by 10 U.S.C. 2305 (d) to refer such bids to the Attorney General for appropriate action. Similarly, evidence of such violations in negotiated procurements should be referred to the Attorney General. Practices which are designed to eliminate competition or restrain trade and which may evidence possible violations of such laws include collusive bidding, follow-the-leader pricing, rotated low bids, uniform estimating systems, sharing of the business, identical bids, etc.

(b) Reports of identical or equal bids or proposals should not be submitted automatically, but only where there is some reason to believe that those bids or proposals may not have been arrived at independently. Such reports should be accompanied by conformed copies of the bid or proposal, other contract documents, and supporting data. The report should set forth:

(1) The noncompetitive pattern or situation under consideration;

(2) Purchase experience in the same product or service for a reasonable period of time (one or more years) prior to the receipt of the bids or proposals under consideration, including unit and total contract price and abstract of bids;

(3) Community of financial interest among bidders, insofar as is known;

(4) The extent, if any, to which specification requirements or patents restrict competition;

(5) Information which may be available with respect to the pricing system employed in bids or proposals believed to reflect noncompetitive practices; and

(6) Any other information deemed pertinent.

(c) The reports required by this section do not satisfy the reporting requirement contained in § 1.114.

[30 F.R. 5959, April 29, 1965]

§ 1.111-3 Subcontractor kickbacks.

The Anti-Kickback Act (41 U.S.C. 51) prohibits the payment, directly or indirectly, by or on behalf of a subcontractor in any tier under any Government negotiated contract of any fee, commission, compensation, gift, or gratuity to the prime contractor or any higher tier subcontractor or to any officer, partner,

employee, or agent of the prime contrac-i tor, of any higher tier subcontractor, as an inducement or acknowledgment for the award of a subcontract or order. The Act further provides that the amount of any such fee, commission, or compensation, or the cost or expense of any such gratuity or gift, whether heretofore, or hereafter paid by the subcontractor, shall not be charged, either directly or indirectly, as a part of the contract price charged by the subcontractor to the prime contractor or higher tier subcontractor. It also creates a conclusive presumption that the cost of any such prohibited payment has been included in the price of the subcontract or order and ultimately borne by the Government. The Act provides for the recovery on behalf of the United States of any such payment from either the subcontractor or recipient, by court action, or by setoff of moneys otherwise owing to the subcontractor either by the United States directly or by the prime contractor. The Act imposes criminal penalties on any person who knowingly, makes or receives, directly or indirectly, any such prohibited payment.

[30 F.R. 5959, Apr. 29, 1965]

§ 1.111-4

Contractor gratuities to Government personnel.

(a) The right of a contractor to proceed under the contract may be terminated if it is found, after notice and hearing, that the contractor, or his agent or other representative, offered or gave any gratuity, such as entertainment or a gift, to an officer, official, or employee of the Government to obtain a contract or favorable treatment in the awarding, amending, or making of determinations concerning the performance, of a contract.

(b) To constitute a violation under the Gratuities clause (§ 7.104-16 of this chapter) three elements must be present:

(1) The contractor must have a contract which contains the Gratuities clause;

(2) The contractor, his agent, or other representative must have offered or given a gratuity to an officer, official, or employee of the Government; and

(3) The gratuity must have been offered or given with the intent to obtain a contract or favorable treatment in the awarding or amending, or the making of

determinations concerning the performance, of a contract (in this respect, intent generally must be inferred because an admission is rarely obtainable).

A lack of any of these elements will cause an action taken by the Government pursuant to the Gratuities clause to fail. Procedural requirements for gratuities hearings are set out in § 30.4 of this chapter.

[30 F.R. 5959, Apr. 29, 1965]

§ 1.112 Federal procurement regulations and General Services Administration regulations relating to procurement of supplies and services.

Except for procurement of ADPE under delegation from GSA, all policy and procedural matter of Federal procurement regulations and General Services Administration regulations which are to be made applicable to the Department of Defense and are within the scope of this subchapter will be codified herein prior to compliance therewith by the Military departments. The applicable Department of Defense directives covering the assignments of responsibility for the purchasing of specific supplies under interagency purchase assignment will be incorporated by reference in this subchapter. For Department of Defense implementation of Federal supply schedules, see § 5.103 of this chapter. [37 FR 21482, Oct. 12, 1972] § 1.113 Standards of conduct. [30 F.R. 5960, Apr. 29, 1965]

§ 1.113-1 Government personnel.

All governmental personnel engaged in procurement and related activities shall conduct business dealing with industry in a manner above reproach in every respect. Transactions relating to expenditure of public funds require the highest degree of public trust to protect the interests of the Government. While many Federal laws and regulations place restrictions on the actions of governmental personnel, the latter's official conduct must, in addition, be such that the individual would have no reticence about making a full public disclosure thereof. See AR 600-50 (Part 579 of this title), for the Army; SECNAV Instr. 5370.2D of June 29, 1966, for the Navy; AFR 3030, for the Air Force; and DSAR 5500.1, for the Defense Supply Agency.

[33 F.R. 264, Jan. 9, 1968]

§ 1.113-2 Organizational conflicts of interest.

(a) Part 141 of this chapter-Rules for the Avoidance of Organizational Conflicts of Interest sets out some of the more essential policy considerations of the Department of Defense with respect to relationships with non-Federal institutions. Specifically, Part 141 of this chapter describes examples of various organizational conflicts of interest which might come into being, and rules for avoidance of such conflicts; and it provides that action must be taken to avoid placing a contractor in a position where his judgment might be biased or where he would have an unfair competitive advantage within the scope and intent of the rules. However, Part 141 of this chapter cannot of itself impose any obligations on the contractor; such obligations must be imposed by a contract clause designed to carry out the intent of Part 141 of this chapter. Furthermore, potential contractors must be advised in the solicitation as to the extent of applicability of the rules, and must be given an opportunity to negotiate on the terms of the clause and its application.

(b) (1) The contracting officer is responsible for applying the rules in Part 141 of this chapter to contracts under his cognizance and shall determine whether each proposed procurement is subject to Part 141 of this chapter.

(2) If the contracting officer initially determines with respect to a particular procurement that a potential conflict of interest exists, he shall, before issuing the solicitation, prepare a written analysis, including a statement as to which of the four rules (or other conflict of interest not stated in the rules) he considers applicable, and a recommended solicitation notice and clause designed to avoid the organizational conflict of interest. A standard form of solicitation notice or clause is not prescribed in this subchapter since such notices and clauses must be especially adapted to apply the principle of the rules to the specific facts of each contractual situation. The clause shall spell out the specific extent of any future restrictions on the contractor. The restrictions of the proposed clause shall also have a specific time period of effectiveness. As a general rule, the time effectiveness of any clause which excludes the contractor from participation in subsequent procurement shall have a

fixed term of reasonable duration as appropriate, except that where Rule 1 of Part 141 of this chapter (§ 141.2 (b) (1)) is involved the exclusion shall be permanent. A fixed term of reasonable duration is measured by the time required to avoid the circumstance of unfair competitive advantage. This is variable; for example, it may run to the date of award of the first production contract or for a stated period of time. (See Rules 2 and 3 of Part 141 of this chapter (§ 141.2(b) (2) and (3)). In no event shall an exclusion be stated in the clause without a specific date, or an event certain, terminating the effectiveness of the exclusion except where Rule 1 is involved.

(3) After approval by the Head of the Procuring Activity or his designee and before issuance of the solicitation, the contracting officer shall include the determination, together with the written analysis, in the negotiation file or record. The approved solicitation notice and proposed clause shall then be included in the solicitation, together with a clear statement that the proposed clause and the application of Part 141 of this chapter are subject to negotiation.

(4) In no case shall the clause included in a solicitation or in a contract (including letter contracts) pursuant to § 1.113-2 defer the determination of the application of Part 141 of this chapter to a time after the contract has been awarded.

(5) Where a contract contemplates a Rule 4 situation (§ 141.2 (b) (4)), it is incumbent on the contracting officer to assure himself that the agreement called for by Rule 4 (§ 141.2(b) (4)) is in fact executed, and that copies thereof are made available to the Government.

(c) The contracting officer shall not impose restrictions under Part 141 of this chapter in follow-on procurements on any prospective contractor in the absence of a specific contractual agreement with that contractor. If, during the effective period of any restriction, procurement responsibility for the system or item involved is transferred from the procuring activity which imposed the restriction that activity shall notify the transferee of the restriction and send it a copy of the contract under which it was imposed.

(d) The Departments shall maintain, in accordance with Departmental procedures, and for an appropriate period of

time as determined by the circumstances, a record of all solicitation notices and of all clauses incorporated in contracts pursuant to this section.

[36 F.R. 21120, Nov. 4, 1971]

§ 1.114 Reporting of identical bids.

(a) General. Executive Order 10936 dated April 24, 1961, as implemented by the Department of Justice, requires a report to be submitted to the Attorney General on each formally advertised procurement (including small business restricted advertising) over $10,000 which involves identical bids. Identical bids are two or more bids for the same line item which:

(1) Are identical on their face (regardless of evaluation factors such as discount, transportation, etc.) either as to unit price or total line item amount;

or

(2) Are identical as evaluated either as to unit price or total line item amount. A line item is an item of supply or service which independently can be made the subject of an award by the Government. However, the reporting requirements herein established for line items shall be applicable to invitations calling for line item bidding even though the invitations or bids contained qualifying or restrictive limitations on award (e.g., all or none bids or award on one item being conditioned on award of other items). This reporting requirement is in addition to the reports required by § 1.111–2.

(b) Information to be obtained from bidders. Each invitation for bids for a procurement estimated to exceed $10,000 shall include substantially the following: PARENT COMPANY AND EMPLOYER IDENTIFICATION NUMBER

(a) Bidder represents that he [] is, [ ] is not, owned or controlled by a parent company. For this purpose a parent company is defined as one which either owns or controls his activities and basic business policies of the bidder. To own another company means the parent company must own at least a majority (more than 50 percent) of the voting rights in that company. To control another company such ownership is not required; if another company is able to formulate, determine or veto basic business policy decisions of the bidder, such other company is considered the parent of the bidder. This control may be exercised through the use of dominant minority voting rights, use of proxy voting, contractual arrangements, or otherwise.