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in performance of this contract unless he knows that the subassembly, component, or part being purchased does not contain jewel bearings. 137 FR 19815, Sept. 22, 1972) § 1-1.320 Subcontractor gifts and kick.

backs. Public Law 86-695, September 2, 1960 (41 U.S.C. 51-54), prohibits the payment, directly or indirectly, by or on behalf of a subcontractor in any tier urder 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 contractor, 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. 130 FR 9539. July 31, 1965) § 1-1.321 Stabilization of prices.

(a) Each solicitation for commodities or services issued after the effective date of this regulation shall include, to the extent practicable, the certification prescribed by this section. Where contracts for commodities or services are awarded without reference to a solicitation, the certification prescribed by this section, to the extent practicable, shall be included in the contract.

PRICE STABILIZATION CERTIFICATION The bidder or offeror (Contractor) certifies that he is in compliance with the price

stabilization requirements of Executive Order 11723, dated June 13, 1973, and amendments thereof, and the regulations of the Cost of Living Council as set forth in title 6, Code of Federal Regulations, part 140, or any additions or revisions to title 6.

(b) Where an offeror fails to execute the certification, such failure shall not be deemed to render the bid nonresponsive. In the event of such a failure, the offeror shall be given an opportunity to correct the omission.

(c) Where price analyses are made in accordance with $$ 1-2.407–2 and 13.807-2, any suspected violation shall be reported to the Internal Revenue Seryice through agency channels. 138 FR 15963, June 19, 1973)

EFFECTIVE DATE: $ 1-1.321 is effective until 11:59 p.m., e.s.t. August 12, 1973, or such other termination date as may be specified for Executive Order 11723, dated June 13, 1973. Executive Order 11723 superseded in part by Executive Order 11730, 38 FR 19345, July 19, 1973. § 1-1.322 Payment of interest on con.

tractors' claims. (a) It is the Government's policy to pay interest on a contractor's claim when such claim is ultimately decided in favor of the contractor pursuant to the disputes clause of his contract.

(b) In order to implement the policy set forth in paragraph (a) of this section, all contracts, except for small purchases covered by Subpart 1-3.6, which contain a disputes clause shall also include the payment of interest on contractors' claims clause set forth below: PAYMENT OF INTEREST ON CONTRACTORS'

CLAIMS (a) If an appeal is filed by the contractor from a final decision of the contracting officer under the disputes clause of this contract, denying a claim arising under the contract, simple interest on the amount of the claim finally determined owed by the Government shall be payable to the contractor. Such interest shall be at the rate determined by the Secretary of the Treasury pursuant to Public Law 92-41, 85 Stat. 97, from the date the contractor furnishes to the contracting officer his written appeal under the disputes clause of this contract, to the date of (1) a final judgment by a court of competent jurisdiction, or (2) mailing to the contractor of a supplemental agreement for execution either confirming completed negotiations between the parties or carrying out a decision of a board of contract appeals.

(b) Notwithstanding (a), above, (1) interest shall be applied only from the date payment was due, il such date is later than

the filing of appeal, and (2) Interest shall not tions terminated as provided in agency be paid for any period of time that the con procedures. Such agency proces tracting officer determines the contractor has

shall conform to the provisions of this unduly delayed in pursuing his remedies before a board of contract appeals or a court

§ 1-1.404. of competent jurisdiction.

§ 1-1.404_1 Selection. 137 FR 15152, July 28, 1972)

In selecting individuals to serve as conSubpart 1-1.4-Procurement Respon tracting officers or in positions which sibility and Authority

include authority to act as contracting

officers, consideration shall be given to SOURCE: The provisions of this Subpart

experience, training, education, business 1-1.4 appear at 32 FR. 16492, Dec. 1, 1967,

acumen, judgment, character, reputaunless otherwise noted.

tion, and ethics. In considering experi§ 1-1.400 Scope of subpart.

ence, training, and education, the followThis subpart deals with the procure ing shall be evaluated: ment responsibility and authority of the

(a) Experience in the field of procurehead of the procuring activity and con

ment involved (e.g., supply, construction, tracting officer as defined in $ $ 1-1.206

etc.) gained in a Government or nonand 1-1.207, and with the selection and

Government procurement office, or designation of contracting officers.


(b) Formal education or special § 1-1.401 Responsibility of the head of

training, including Government conthe procuring activity.

ducted or sponsored courses, in pertiThe head of the procuring activity is nent fields, such as business administraresponsible for the procurement of per tion, law, accounting, engineering, archisonal property and nonpersonal services tecture, or related fields; and (including construction) to the full ex- (c) Knowledge of applicable laws, Extent that responsibility has been as- ecutive orders, and regulations. signed to his activity.

§ 1-1.404–2 Designation. § 1-1.402 Authority of contracting offi. Designation of individuals to act as cers.

contracting officers may be accomplished Contracting officers are authorized to by delegation of authority to individuals enter into and administer contracts for or to positions. In the latter case, unless' personal property and nonpersonal serv- otherwise provided by the agency, any ices (including construction) on behalf individual authorized to serve in such a of che Government and make related position is a contracting officer. In either findings and determinations within the case, however, the instrument of desiglimitations of the authority delegated nation shall include, or make specific to them. In the exercise of such author reference to, any limitations on the scope ity, they are subject to the requirements of authority to be exercised, other than in § 1-1.403 and any further require those contained in applicable laws, reguments, consistent with the Federal Pro lations, or directives. Appropriate records curement Regulations, imposed by the shall be maintained, whether designation contracting agency.

be made by name or by reference to or$ 1-1.403 Requirements to be met be.

ganizational title or position designation. fore entering into contracts.

§ 1-1.404–3 Termination of designa. No contract shall be entered into un

tion. less all applicable requirements of law,

Unless otherwise provided in the in. Executive orders and regulations have

strument designating an individual as a

contracting officer (e.g. stipulation of a been met. The term "regulations" in.

specified term or a specific purpose), the cludes those issued by any regulatory

designation shall remain effective until agency whether or not incorporated or

the contracting officer is reassigned, his referenced in the Federal Procurement

employment is terminated, or his desigRegulations.

nation is revoked. No revocation shall § 1-1.404 Selection, designation, and

operate retroactively. termination of designation of con. § 1-1.4044 Assignment of duties to tracting officers.

contracting officers. Contracting officers shall be selected. In the assignment of duties, including designated as such, and their designa- execution and administration of con

tracts, consideration shall be given to the ability, training, and experience of the contracting officer. Duties involving contracts of large dollar value and complexity shall be given only to personnel with commensurate experience, training, and ability. § 1-1.405 Ratification of unauthorized

contract awards. Execution of otherwise proper con.. tracts made by individuals without contracting authority, or by contracting officers in excess of the limits of their delegated authority, may be later ratified. TO be effective, such ratification must be in the form of a written document clearly stating that ratification of a previously unauthorized act is intended and must be signed by a person authorized to ratify such acts. Generally such ratification may be made only by an official on whose behalf the contract was made and then only (1) if he could have given authority to enter into the contract before it was awarded and (2) if he still has power to do so at the time of ratification.

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The contracting officer or his authorIzed representative shall:

(a) Determine the adequacy of prime contractor's disclosure statements (see § 1-3.1203(a));

(b) Determine whether prime contractor's disclosure statements are in compliance with Part 1-15 and Cost Accounting Standards;

(c) Determine contractor compliance with Cost Accounting Standards and disclosure statements, if applicable; and

(d) Negotiate price adjustments and execute supplemental agreements pursuant to the Cost Accounting Standards clause set forth in Attachment B. 137 FR 13092, July 1, 1972)

Subpart 1-1.5—Contingent Fees § 1-1.500 Scope of subpart.

This subpart prescribes the use by executive agencies of the "covenant against contingent fees" and sets forth the policies, forms, methods, procedure, principles, and standards related thereto. The requirements of this subpart have as their objective the prevention of improper influence in connection with the obtaining of Government contracts, the elimination of arrangements which encourage the payment of inequitable and exorbitant fees bearing no reasonable

relationship to the services actually performed, and the prevention of unwarranted expenditure of public funds which inevitably results therefrom. The methods used to achieve these objectives are the requirement for disclosure of the details of arrangements under which agents represent concerns in obtaining Government contracts, and the prohibiting, by use of the covenant against contingent fees, of certain types of contractor-agent arrangements. § 1-1.501 Applicability.

The provisions of this subpart apply to all contracts for the procurement of personal property and nonpersonal se ices, including the procurement of construction. The Criminal Code will apply in any case involving actual criminal conduct. § 1-1.502 Improper influence.

The term "improper influence" means influence, direct or indirect, which induces or tends to induce consideration or action by any employee or officer of the United States with respect to any Government contract on any basis other than the merits of the matter. § 1-1.503 Covenant.

Executive agencies shall include in every negotiated or advertised contract a “covenant against contingent fees" substantially as follows (set forth as clause 11 of Standard Form 19, Invitation, Bid, and Award (Construction, Al. teration or Repair); as clause 17 of Standard Form 23-A, General Provi. sions (Construction Contract); and as clause 20 of Standard Form 32, General Provisions (Supply Contract)):

COVENANT AGAINST CONTINGENT FEES The Contractor warrants that no person or selling agency has been employed or retained to solicit or secure this contract upon an agreement or understanding for a commission, percentage, brokerage, or contingent fee, excepting bona fide employees or bons fide established commercial or selling agen. cles maintained by the Contractor for the purpose of securing business. For breach or violation of this warranty the Govern. ment shall have the right to annul this contract without liability or in its discretion to deduct from the contract price or consideration, or otherwise recover, the full amount of such commission, percentage, brokerage, or contingent fee. 131 F.R. 5880. Apr. 16, 1966)

§ 1-1.504 General principles and stand.

ards applicable to the covenant. § 1-1.504–) Cise of principles and

standards. The principles and standards set forth in this subpart are intended to be used as a guide in the negotiation, awarding, administration, and enforcement of Government contracts. 8 1-1.504–2 Contingent character of the

fee. Any fee whether called commission, percentage, brokerage, or contingent fee, or otherwise denominated, is within the purview of the covenant if, in fact, any portion thereof is dependent upon success in obtaining or securing the Government contract or contracts involved. The fact, however, that a fee of a contingent nature is involved does not preclude a relationship which qualifes under the exceptions to the prohibition of the covenant. § 1-1.504–3 Exceptions to the probiby

tion. There are excepted from the prohibi. tion of the covenant "bona fide employees" and "bona fide established commercial or selling agencies maintained by the contractor for the purpose of securing business." 8 1-1.5044 Bona fide employee.

(a) The term “bona fide employee." for the purpose of the exception to the prohibition of the covenant, means an individual (including a corporate officer) employed by a concern in good faith to devote his full time to such concern and no other concern and over whom the concern has the right to exercise supervision and control as to time, place, and manner of performance of work. It is recognized that a concern, especially a small business concern, may employ an individual who represents other concerns. The factors set forth in § 1-1.504-5(b), except (4) thereof, shall be applied to determine whether such an individual comes within the exception to the prohibition of the covenant.

(b) The hiring must contemplate some continuity and it may not be related only to the obtaining of one or more specific Government contracts.

(c) An employee is not “bona fide" who seeks to obtain any Government contract or contracts for his employer through the use of improper influence or who holds himself out as being able

to obtain any Government contract or contracts through improper Influence.

(d) A person may be a bona fide employee whether his compensation is on & fixed salary basis or, when customary in the trade, on a percentage, commission or other contingent basis, or a sion combination of the foregoing. 81-1.504–5 Bona fide established com.

mercial or selling agency maintained by the contractor for the purpose of

securing business. (a) An agency or agent is not "bona Aide" which seeks to obtain any Government contract or contracts for its principals through the use of improper influence or which holds itself out as being able to obtain any Government contract or contracts through improper influence.

(b) In determining whether an agency is a "bona fide established commercial or selling agency maintained by the contractor for the pupose of securing business," the factors set forth below shall be considered. They are necessarily incapable of exact measurement or precise definition and it is neither possible nor desirable to prescribe the relative weight to be given any single factor as against any other factor or as against all other factors. The conclusions to be reached In a given case will necessarily depend upon a careful evaluation of the agreement and other attendant facts and circumstances.

(1) The fees charged should not be Inequitable and exhorbitant in relation to the services actually rendered. That is, the compensation should be commensurate with the nature and extent of the services and should not be excessive as compared with the fees customarily allowed in the trade concerned for similar services related to commercial (nonGovernment) business. In evaluating reasonableness of the fee, there should be considered services of the agent other than actual solicitation, as for example, technical, consultant or managerial services, and assistance in the procurement of essential personnel, facilities, equip. ment, materials, or subcontractors for performance of the contract.

(2) The selling agency should have adequate knowledge of the products and the business of the concern represented. as well as other qualifications necessary



(3) There should ordinarily be & continuty of relationship between the contractor and the agency. The fact that the agency has represented the contractor over a considerable period of time. is a factor for favorable consideration. It is not intended, however, to disqualify newly established contractor-agent rela.. tionships where a continuing relationship is contemplated by the parties.

(4) It should appear that the agency is an established concern. The agency may be either one which has been in business for a considerable period of time or a new agency which is a presently going concern and which is likely to continue in business as a commercial or selling agency in the future. The business of the agency should be con. ducted in the agency name and characterized by the customary indicia of the conduct of a regular business.

(5) The fact that a selling agency confines its selling activities to the field of Government contracts does not, in and of itself, disquallfy it under the covenant. The fact, however, that the selling. agency is employed to secure business generally, that is, to represent the concern in connection with sales to the Govcrnment as well as regular commercial sales to non-Government activities is a factor entitled to favorable consideration in evaluating the case as one coming within the authorized exception. Arrangements confined, however, to obtaining. Government contracts, particularly those involving & selling agency organized immediately prior to or during periods of expanded procurement resulting from conditions of national emergency, must be closely scrutinized. & 1-1.504–6 Fecs for “information."

Contingent fees paid for "information" leading to obtaining a Government contract or contracts are included in the prohibition and, accordingly, are in breach of the covenant unless the agent qualifies under the exception as a bona fide employee or a bona fide established commercial or selling agency maintained by the contractor for the purpose of securing business. 8 1-1.505 Representation and agree

ment required from prospective on

tractor. Except as provided in $ 1-1.507-3. each executive agency shall inquire of and secure a written representation from prospective contractors as to whether they have employed or retained any company or person (other than a

full-time employee working solely for the prospective contractor) to solicit or secure the contract, and shall secure & written agreement to furnish information relating thereto as required by the contracting officer. Where an invitation for bids is issued, this Inquiry shall be made (and written representation and agreement secured) by requiring the bidder (or contractor) to check the appropriate box in the following statement (which appears on Standard Form 21, Bid Form (Construction Contract). Standard Form 30, Invitation and Bid (Supply Contract), and Standard Form 33, Invitation, Bid and Award (Supply Contract)) to be included in the invitation or bid form:

The bidder represents: (a) that he o has, o has not, employed or retained any company or person (other than a full-timo bona filde employee working solely for the bidder) to solicit or secure this contract, and, (b) that he has. O has not, paid or agreed to pay any company or person (other than a full-time bona ide employee working solely for the bidder) any fee, commission, percentage or brokerage fee, contingent upon or resulting from the award of this contract; and agrees to furnish information relating, to (a) and (b) above as requested by the Contracting Omcer. (Note: For interpretation of the representation, including tho term "bona fide employee," see Code of Federal Regulations, Title 41. Chapter 1, Subpart 1-1.5.) 81-1.506 Interpretation of the repro:

sentation. (a) For the purpose of the representation and agreement required from the prospective contractor, as described in $ 1-1.505, the definition of "bona fide. employee" is as specified in § 1-1.5044.

(b) The fact that the prospective contractor retains a person who does not devote his full time solely to the prospective contractor does not necessarily mean that the relationship involved is in violation of the covenant against contingent fees or that there is any stigma attached to the contractor-agent relationship. It does mean, however, that the prospective contractor must fill out the representation in the aiimative and, as required, furnish information, with respect to such employment of retention.

(c) If the representation would otherwise be answered in the affimative, the fact that the person employed or retained by the bidder or contractor is an attorney, or a public relations consúltant, or

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