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§ 12-1.5302 Solicited refunds.

Voluntary refunds may be requested during or after contract performance. They shall be requested only when it is considered that, the Government was overcharged under a contract or was inadequately compensated for the use of Government-owned property, or in the disposition of contractor inventory, retention by the contractor or subcontractor of the amount in question would be contrary to good conscience and equity. Generally, retention by the contractor or subcontractor shall not be considered contrary to good conscience and equity, and thus a voluntary refund shall not be requested unless the overcharged or inadequate compensation was due, at least in part, to the fault of the contractor or subcontractor. The decision to solicit a voluntary refund shall be made by the head of the procuring activity.

§ 12-1.5303 Disposition of voluntary refunds.

(a) If a refund is offered prior to final payment, it is preferable that the contract price be appropriately modified to reflect the refund. In such a case, the amount of the refund shall be credited to the applicable appropriation cited in the contract.

(b) In cases where the refund is to be made by check rather than by an adjustment in the contract price, the check shall be made payable to the Treasurer of the United States, and shall be forwarded in accordance with the procedures of each Administration.

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(a) Whenever procurement is to be made of items of equipment normally available for both lease and purchase, a determination shall be made as to whether acquisition by lease, purchase, or lease with option to purchase is most advantageous to the Government. The determination shall be supported by comparisons of costs of the various acquisition alternatives. The extent of the cost comparison required to support the determination will be a matter of judgment, depending primarily on the estimated cost of the equipment.

(b) For equipments of relatively high dollar values, considerations shall be given to including the following cost elements in the cost comparison:

(1) Purchase price delivered to the point of installation.

(2) Leasing cost including delivery charges to the Department and cost of return to the vendor.

(3) Present value of money to be used in the acquisition of the equipment. The present value computation is applicable to all costs over the life of the equipment.

(4) Maintenance costs to the Government under lease and under purchase. When maintenance is to be performed by the Government, these costs would include:

(1) Cost of direct labor.

(ii) Cost of parts and supplies, including investment costs and warehousing and distribution costs.

(iii) Cost of additional tools and repair equipment needed for maintenance of the equipment.

(iv) Cost of training maintenance personnel.

(v) Cost of repair manuals.

(vi) Cost of any applicable overhead. (5) Installation and dismantling costs.

(6) Residual value of equipment after expected use period, including possible continued use by the Government in another application or program.

(7) Operating costs (exclusive of maintenance costs) in those instances where, under the lease method, the vendor would perform part or all of the labor incident to the operation of the equipment.

(c) For equipments of small dollar value, the cost comparison can be limited to the cost of purchase and an estimate of installation and maintenance cost versus the cost of lease, as described in FPMR Subpart 101-25.5.

8 12-1.5405 Selecting the method of acquisition.

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(a) The purchase method is preferred when all of the following conditions exist:

(1) There is little or no doubt that the equipment to be procured can be efficiently and effectively utilized, cost and other factors considered.

(2) A comparative cost analysis of the alternative methods of acquisition indicates that a cost advantage will accrue over the anticipated useful life of the equipment by using the purchase method.

(3) The capabilities of the equipment will continue to be needed and will be sufficient to satisfy the requirements of the Government, current and projected, for a period beyond the point in time at which the purchase method begins to provide a cost advantage. The possibility that future technological advances would make the selected equipment comparatively less desirable before the cost advantage point is reached should not rule out purchase if the selected equipment is expected to be able to satisfy the Government's requirements economically.

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which each quantity is authorized. This procedure provides for solicitation of prices based either on award of the current 1-year program quantity only, or, in the alternative, on the total multi-year quantities. Award is made on whichever of these two alternative bases reflects the lowest unit prices to the Government. If award is made on the multi-year basis, funds are obligated only for the first year's quantity, with succeeding years' contract quantities funded annually thereafter. In the event funds are not made available to support one or more succeeding year's quantities, cancellation is effected. The contractor is protected against loss resulting from cancellation by contract provisions allowing reimbursement of unrecovered nonrecurring costs included in prices for canceled items.

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(a) Nonrecurring costs are distributed over a larger number of units, thus narrowing any price advantage of a firm already in production;

(b) There is greater assurance of depreciation recovery for capital investment; and

(c) The competitive base is broadened with better prospects for lower prices, where firms otherwise might be unwilling or unable to compete.

§ 12-1.5502-3 Cost savings factors to consider.

Another major objective is to obtain lower prices in those procurements which do not necessarily involve high startup cost but which do provide opportunity for substantial cost savings and other advantages through assurance of continuity of production over longer periods of time. In determining whether substantial cost savings and related advantages can be realized, consideration may be given to wheth

er:

(a) Production or performance closeout or shut-down costs, including employee severance pay, represent a substantial cost contingency in prices quoted on only 1 year's program;

(b) Stabilization of work forces will provide greater assurance of sustaining and improving production efficiency and quality;

(c) Substantial cost and quality advantage will accrue through avoidance of the possible need for establishing and "proving out" quality control techniques and procedures for a new contract each year;

(d) Costly preproduction or pilot testing will be avoided;

(e) The ability to recruit and retain highly skilled personnel will be enhanced through assurance to employees of longer periods of employment than would be the case in single-year procurement, thereby avoiding costs of repeated training of new personnel;

(f) The ability to vary production rates during peak and off-peak periods in each program year will result in economies; and

(g) Substantial in-house savings in maintenance and supply operations will accrue from standardization of supplies accomplished by procurement

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Total small business set-asides are compatible with the multi-year method of procurement and may be used when both procedures are appropriate. Partial set-aside procedures (both small business and labor surplus area) generally are not compatible with the multi-year procedure when high startup costs are involved because of the potential duplication of such costs by the set-aside contractor and the non-set-aside contractor. However, when the multi-year procedure is based not on high startup costs but on the opportunity for cost savings through assurance of continuity of production over longer periods of time, partial set-aside procedures are compatible with the multi-year procedure. Furthermore, even where high startup costs are involved, use of partial setaside procedures together with the multi-year procedure may be appropriate in exceptional circumstances, such as where criteria for partial set-asides are met under FPR 1-1.7 or 1-1.8, and it is likely that broader or more realistic competition will result from a combination of both procedures, and this broader competition is likely to more than offset any duplication of startup costs. When reviewing a proposed procurement involving possible use of this procedure, in addition to consideration of the criteria established in this subpart, the contracting officer shall invite the advice and counsel of the activity's small business specialist and the SBA representative, if one is assigned to that activity, permitting either or both to review all pertinent facts and make recommendations thereon.

§ 12-1.5502-5 Multi-year subcontracts.

The same benefits and advantages that are derived from multi-year prime contracts may frequently be increased by multi-year subcontracts thereunder. The prime contractor in the exercise of his management responsibilities must freely choose the subcontract types that best satisfy his needs. However, multi-year prime contractors should be encouraged to

employ multi-year subcontracts selectively and only when:

(a) The subcontract item is of stable design and specification;

(b) The quantity required is known and firm;

(c) Effective competition is assured; and

(d) The use of multi-year subcontracts can reasonably be expected to result in reduced prices.

In such cases, the prime contractor is adequately protected against cancellation since appropriate cancellation charges for such multi-year subcontractors are included within the cancellation charge of the multi-year prime contract. Multi-year subcontracts may be particularly desirable under a sole source multi-year prime contract since effective competition at the subcontract level may thereby be enhanced and the attendant cost reductions realized by the prime contractor and the Government.

§ 12-1.5503 Application-criteria.

Except as provided in DOTPR 121.5511 below, the multi-year procurement method should be used when all of the following criteria are present:

(a) Reduced unit prices can reasonably be anticipated over annual buys by reason of continuity of production or elimination of repetitive substantial startup costs, including such costs as preproduction engineering, special tooling, plant rearrangement, initial rework, initial spoilage, and pilot runs;

(b) There is reasonable expectation that effective competition can be obtained;

(c) There are known requirements for the quantities to be purchased under the multi-year contract;

(d) The design and specifications of the item are not expected to change to an extent that would involve a major impact on contract price; and

(e) The items being procured are not regularly manufactured and offered for sale in substantial quantities in the commercial market, except that (1) when quantities to be procured by the Government represent a substantial portion of the total market and would require special manufacturing runs for all or substantially all of the Govern

ment's requirements and (2) significant cost savings would result from multi-year procurement, this procedure may be authorized by the head of the procuring activity or his designee with the procurement file fully documented as to reasons why the expected substantial savings are not obtainable under annual procurements.

§ 12-1.5504 Method of solicitation.

Formal advertising, including twostep formal advertising, is the preferred method for use in multi-year procurement. In cases where the period of production is such that a contingency for labor and material costs is likely otherwise to be included in the multi-year contract price, the contracting officer should normally use a provision for price escalation.

§ 12-1.5505 Procedures.

Solicitations shall include the information described in §§ 12-1.5505-1 through 12-1.5505-9, as appropriate.

§ 12-1.5505-1 Requirements.

State the requirements, separately identified by a bid or proposal item in the schedule, for (a) the first program year; and (b) the multi-year procurement including the quantities for each program year thereunder.

§ 12-1.5505-2 Previous competition.

When previous production procurements of the item have been made with competition:

(a) Include a provision that a price may be submitted for the total requirements of the first program year, or for the total multi-year requirements, or both, or

(b) When competition in future procurements of the items would be impracticable after award of a contract covering the first program year quantity alone and the head of the procuring activity determines that, in order to eliminate the possibility of a first program year "buy-in," these provisions will be in the best interests of the Government-include provisions that a price may be submitted only for the total multi-year quantity and that prices on a single-year basis will not be considered for any purpose.

§ 12-1.5505-3 No previous competition. When there has been no previous competition for the production of the item:

(a) Include provisions that a price must be submitted for the total requirements of the first program year, that a price may be submitted for the total multi-year quantity, and that a bid or offer on the multi-year quantity only will be considered nonresponsive; and a provision that if only one responsive bid or offer on the multi-year requirements is received from a responsible bidder or offeror, the Government reserves the right to disregard the bid or offer on the multi-year quantity and to make an award only for the first program year requirements; or

(b) When competition in future procurements of the items would be impractical after award of a contract covering the first program year quantity alone and the head of the procuring activity determines that, in order to eliminate the possibility of a first program year "buy-in," these provisions will be in the best interest of the Government:

(1) Include provisions that a price may be submitted only for the total multi-year quantity and that prices on a single-year basis will not be considered for any purpose, and

(2) A provision that if only one responsive bid or offer on the multi-year requirements is received from a responsible bidder or offeror, the Government reserves the right to cancel the solicitation and resolicit single-year basis by whatever procedures are then appropriate.

8 12-1.5505-4 Pricing-unit price.

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Include a provision that the unit price of each item in the multi-year requirement shall be the same for all program years included therein.

8 12-1.5505-5 Comparison criteria.

Provide criteria for comparing the lowest evaluated submission on the first program year's requirement against the lowest evaluated submission on the multi-year requirements.

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