who had developed the equipment, and thereby either assure to the Government the benefit of the techniques, tooling, and equipment already acquired by that supplier or avoid undue delay arising from a new supplier's having to acquire such techniques, tooling, and equipment. This exception should not be used to avoid duplication of private investment unless this duplication would be likely to result in additional cost to the Government.

(c) Limitations. The authority of this section requires a determination and findings by the Commandant which states:

(1) The supplies are of a technical or special nature requiring a substantial investment or an extended period of preparation for manufacture; and

(2) Procurement by formal advertising either:

(i) Would be likely to result in additional cost to the Government by reason of duplication of investment; or

(ii) Would result in duplication of necessary preparation which would unduly delay the procurement.

§ 12-3.251 Purchases in the interest of national defense or industrial mobilization.

(a) Authority. Pursuant to 10 U.S.C. 2304(a)(16), purchases and contracts may be negotiated if "he (the Commandant) determines that (1) it is in the interest of national defense to have a plant, mine, or other facility, or a producer, manufacturer or other supplier, available for furnishing property or services in case of a national emergency; or (2) the interests of industrial mobilization, in the case of such an emergency, or the interests of national defense in maintaining active engineering, research, and development, would otherwise be subserved."

(b) Application. The authority cited in this section may be used to effectuate such plans and programs as may be evolved under the direction of the Commandant to provide incentives to manufacturers to maintain and keep active, engineering and design staffs and manufacturing facilities available for maximum production. The following are illustrative of circumstances

with respect to which this authority may be used:

(1) When procurement by negotiation is necessary to keep vital facilities or suppliers in business or to make them available in the event of national emergency.

(2) When procurement by negotiation with selected suppliers is necessary in order to train them in the furnishing of critical supplies to prevent the loss of their ability and employee skills, or to maintain active engineering, research, and development work.

(3) When procurement by negotiation is necessary to maintain properly balanced sources of supply for meeting the requirements of procurement programs in the interest of industrial mobilization. (When the quanity required is substantially larger than the quantity which must be awarded in order to meet the objectives of this authority, that portion not required to meet such objectives will ordinarily be procured by formal advertising or by negotiation under another appropriate negotiation exception.)

(c) Limitations. The authority cited in this section shall not be used unless and until the Commandant has determined that:

(1) It is in the interest of national defense to have a particular plant, mine, or other facility or a particular producer, manufacturer, or other supplier available for furnishing supplies or services in case of national emergency and negotiation is necessary to that end; or

(2) The interests of industrial mobilization in the case of a national emergency would be subserved by negotiation with a particular supplier; or

(3) The interest of national defense in maintaining active engineering, research and development would be subserved by negotiation with a particular supplier.

(d) Reporting requirements. Reports required by section 2304(e) of 10 U.S.C. to be made to the Congress on May 19 and November 19 of each year will be made by the Chief, Procurement Division (Commandant (FSP)), by May 1 and November 1 of each year to the Department of Transportation, Director of Installations and Logistics, TAD-60, of the purchases and con

tracts made under 10 U.S.C. 2304(a)(16) since the date of last reporting.

(1) Reports shall contain the following information:

(i) Name of contractor.

(ii) Dollar amount of contract (including amendments).

(iii) Brief description of the work required to be performed under the contract. (When necessary, because of the national security, the word "classified" may be used in lieu of description.)

(2) Negative reports are not required.

§ 12-3.252 Negotiation of construction contracts for work to be performed in the United States, its possessions and Puerto Rico.

(a) Authority. Section 2304(a) (1), (2), (3), (10), (11), (12), or (15) of 10 U.S.C. shall be cited as authority for Coast Guard procurement under this section. The appropriate code provision shall be cited in the contract as authority for the negotiation.

(b) Limitation. Coast Guard contracts to be performed under this section may not be negotiated pursuant to 10 U.S.C. 2304(a)(6).

Subpart 12-3.3-Determinations, Findings and Authorities

§ 12-3.301 General.

The determinations and findings required to be made under FPR Part 1-3 by the Coast Guard shall cite the appropriate section of Chapter 137 of title 10 of the United States Code. Determinations and findings of all other Administrations shall cite the appropriate section of title 41 of the United States Code.

contract). [Alternate: * * I hereby determine that the use of (insert type of contract) is likely to be less costly than other methods.]

(When a cost-plus-a-fixed fee is involved, the following finding is also to be made:)

Pursuant to (insert "41 U.S.C. 254(b)" or "10 U.S.C. 2306(d)," as applicable), I hereby determine that the estimated cost of the contract, exclusive of the fee, is $- that the fee in the amount of $- is -% of the estimated cost, exclusive of fee, and that the fee is within statutory and administrative limitations.

Dated:

Subpart 12-3.4-Types of Contracts

§ 12-3.408 Letter contract.

(a) Request for approval. The use of letter contracts must be approved in advance on a case-by-case basis by the head of the procuring activity, and variations from the limitations set forth in paragraph (b) of this section must be approved by the head of the procuring activity. The request for approval must state: The necessity and advantage to the Government in issuing the letter contract; why no other type of contract is suitable; name and address of the proposed contractor; duration of proposed letter contract in number of days from date of execution; amount of letter contract and estimated amount of definitive contract showing source and citation of funds with statement that funds are available; the estimated delivery date or dates and the proposed type of definitive contract.

(b) Limitations. In addition to the limitations prescribed in FPR 13.408(c), the following apply to, and shall be expressly stated in, each letter contract:

(1) The period of effectiveness for the letter contract, including a specific date when definitization will be completed. This date shall not be later than the first to occur of the following:

(i) The expiration of 120 days from the date of the letter contract; or

(ii) The date by which 40 percent of the performance of the work will be completed.

(2) The maximum liability of the Government stated in the letter con

tract shall not exceed 50 percent of the total estimated cost of the procurement.

Amendments to letter contracts to accomplish new procurement are subject to the same limitations as new letter contracts.

(c) Content. In addition to the requirements in FPR 1-3.408(d), the letter contract shall also:

(1) Incorporate, by reference or otherwise, all clauses required by statute, FPR, DOTPR, and optional standard and special clauses determined to be applicable.

(2) State that the definitive contract shall contain all provisions under paragraph (c)(1) of this section.

(3) Contain an overall price ceiling or a maximum ceiling on fee, where a quoted price has been received and it is considered appropriate to limit the Government's ultimate liability.

§ 12-3.450 Delivery orders.

(a) Except as to specialized procurements for which other instructions have been issued, delivery orders shall be used without monetary limitation for ordering supplies and services (1) under an established contract: Provided, The order is issued in accordance with the terms and conditions of the contract and the order refers to the particular contract involved, (2) from another Government agency whether or not a contract number has been assigned.

(b) When the delivery order is issued to another Government agency and the precise extent of the work to be done is not known at time of issuance, an estimated delivery order may be issued. Each estimated delivery order shall contain a provision reading substantially as follows:

NOTICE: Funds are available in the estimated amount stated below. If at any time the amount to be vouchered under this order is expected to exceed the estimated amount, withhold performance and immediately notify the Contracting Officer.

§ 12-3.451 Letters of intent.

Letters of intent shall not be used.

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Subpart 12-3.6-Small Purchases

§ 12-3.603-2 Data to support small purchases.

DOT Form F 4230.1 titled "Small Purchase Summary" may be used to satisfy the foregoing documentation requirements.

§ 12-3.650 Purchase orders.

§ 12-3.650-1 "Minimum billing" quotations.

Occasionally an item can be obtained only from a supplier who quotes a minimum order price or a minimum order quantity, which either unreasonably exceeds the agency's needs or results in an unreasonable price for the quantity required. If practicable before placing the order the requiring activity should be informed in such cases of all facts regarding the quotation and consideration should be given to increasing the quantity, consolidation of orders, or other appropriate action. The file shall be documented to show the final action taken in such cases.

§ 12-3.650-2 Unpriced purchase orders.

(a) General. An unpriced purchase order is an order for supplies or services the price of which is not firmly established at the time of issuance of the order. Such orders shall contain a "Not To Exceed" provision. The contracting officer shall assure that suppliers receiving unpriced purchase orders are carefully selected.

(b) Conditions for use. An unpriced purchase order may be used only when all of the following conditions are present:

(1) The purchase will not exceed $10,000, and

(2) It is impractical to obtain pricing in advance of issuance of the purchase order, and

(3) The procurement is for (i) repairs to equipment requiring disassembly to determine the nature and extent of such repairs, (ii) sole source material for which cost cannot be readily established, or (iii) supplies or services

where prices are known to be competitive but exact prices are not known.

(c) Procedures. A realistic "Not To Exceed" limitation shall be placed on the order which shall be stated in the notice to supplier provision in the blank space provided. This amount shall be obligated subject to adjustment when the firm price is established. Each unpriced purchase order shall contain the following provision:

NOTICE TO SUPPLIER: This is a firm order if the total price does not exceed the amount of $--. If the amount to be invoiced will exceed the amount stated below, or if you cannot furnish the work described in exact accordance with the description and delivery schedule set forth herein, withhold performance and immediately notify the Contracting Officer giving your quotation or proposed substitution or changes. In no event will the total amount paid under this order exceed the amount stated unless and until the order has been amended in writing and signed by the Contracting Officer. The contracting officer or his designated representative shall certify that the invoiced price is fair and reasonable and process the invoice for payment. Suitable local records and controls of outstanding unpriced purchase orders shall be maintained to assure regular followup with suppliers until the order is firmly priced. These records should include any information available to support the fairness and reasonableness of the proposed monetary limitation. If the firm price exceeds the "not to exceed" price and the contracting officer determines, nevertheless, that such purchase be made from the supplier, the order shall be amended accordingly: Provided, That in no event may the amount of the order exceed $10,000. If the firm price does not exceed the "not to exceed" price, the order should not be amended for the sole purpose of changing the estimated price to a firm price.

§ 12-3.650-3 Estimated purchase orders.

(a) General. An estimated purchase order is an order of $2,000 or less for supplies or services the price of which is not firmly established at the time of issuance of the order but which, unlike the unpriced purchase order, provides for approval and payment of

billed prices without referral to the contracting officer. Such orders may be issued when it is not practical to obtain a firm price as when, for example, the need is urgent or the vendor is other than a local source and the administrative cost to secure a firm offer would be disproportionate to the value of the order.

(b) Preparation of order. The word "Estimated," the total price, and a provision reading substantially as follows shall be included on the order:

NOTICE TO SUPPLIER: This is a firm order if the amount to be invoiced does not exceed the estimated amount stated by 10 percent. In such cases, submit your invoice to the Paying Office. If the amount to be invoiced will exceed the stated limitations, withhold performance and immediately notify the Contracting Officer. In no event will the total amount paid under this order exceed the stated amount by 10 percent unless and until the order has been amended in writing and signed by the Contracting Officer.

§ 12-3.650-4 List of vendors.

Each procurement office shall establish such lists of vendors as are necessary for recurring requirements to assure access to adequate sources of supply. Where the number of firms on a list is considered excessive, the list may be reduced by any method which will promote competition commensurate with the dollar value of the purchase to be made. If a rotation method is used, the vendors known to regularly submit the lowest price shall be solicited.

§ 12-3.650-5 Follow-up.

Each procurement office shall establish and maintain a simple and effective followup system. It should permit maximum latitude for the exercise of initiative and judgment in the administration process and be designed to assure that, to the maximum practicable extent, purchase orders are completed in accordance with their terms. The system may use copies of purchase orders, one or more cards, or the like.

§ 12-3.650-6 Inspection and acceptance.

When inspection and acceptance are to be performed at destination, advance copies of the purchase order shall be furnished to consignee(s) for