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It shall be the policy of General Services Administration to make maximum practical use of partial payments as a financial aid to business concerns in participating in Government procurement. § 5-51.103 Use of partial payments.

Partial payments shall be made as provided in § 1-7.101-7 and applicable General Services Administration procedures and forms. A liberal policy shall be adopted in making partial payments. This should minimize the need for contractors to request progress payments. Subpart 5-51.2-Progress Payments § 5-51.200 Scope of subpart.

This subpart prescribes basic policies and procedures in providing contract financing in the form of progress payments.

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price contracts for domestically produced supplies and nonpersonal services. They do not apply to construction contracts, or to contracts for engineering, architectural, or similar services related to construction. Progress payments in construction contracts are provided for in clauses of the standard forms prescribed in Subpart 1-16.4.

§ 5-51.204 Requirement for use of progress payments.

(a) The contracting officer shall inIclude in the invitation for bids or request for proposals the provision set forth in § 5-51.205, unless he determines that progress payments would be impractical or not reasonably necessary. Ordinarily, it shall be considered practical or reasonably necessary to make progress payments unless one or more of the following factors are present:

(1) The procurement is not expected to result in a contract of $10,000 or more.

(2) The contracting officer determines that the time between starting performance (usually immediately following the date of award) and delivery of the first end items is of such short duration (90 days or less) as to obviate the need for progress payments.

(3) The contract provides for the placing of orders and the making of payments by more than one office.

(b) In unusual conditions, progress payments may be considered practical or reasonably necessary even though one or more of the exceptions of (a) (1), (2), or (3), above, may be applicable.

[25 F.R. 5576, June 21, 1960, as amended at 25 F.R. 11030, Nov. 19, 1960]

§ 5-51.205 Provision for invitations for bids or requests for proposals.

The following provision shall be included in the invitation for bids or request for proposals under the circumstances set forth in § 5-51.204:

AVAILABILITY OF PROGRESS PAYMENTS The Government will make provision for progress payments in any contract resulting from this invitation for bids (or request for proposals) by including an appropriate clause in the contract if:

(a) The period of time between starting performance and delivery of the first end items will exceed 6 months; or

Contract performance is likely to involve expenditures prior to delivery of the first end items, having a material impact on the contractor's working funds, or, in the case of progress payments first requested subse

quent to award, involves expenditures having such impact; and

(b) The bidder (offeror) or contractor makes a written request for progress payments and is found eligible for such payments under applicable regulations.

The need for progress payments on the foregoing basis will not be considered a handicap or an adverse factor in awarding contracts.

If a bidder (offeror) desires progress payments, and accompanies his bid (offer) with a written request therefor, the bidder (offeror) shall also check the appropriate box below:

Progress payments are desired but bid (offer) is not conditioned on receiving progress payments.

Bid (offer) is conditioned on receiving progress payments.

(NOTES: 1. If bid (offer) is conditioned on the availability of progress payments and bidder (offeror) is found ineligible for progress payments, the bid (offer) will be rejected. 2. Submission of a bid (offer) without requesting progress payments does not preclude the bidder (offeror) from later requesting progress payments in accordance with applicable regulations, prior to or after award of contract.)

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(a) Where contracts involve information of a classified nature, the release and control of such classified information shall be as provided for in this Subpart 5-53.2. Classified information shall be released only to those persons whose employment, in the performance of the contract, require access and knowledge or possession of such classified information in the interest of national defense.

(b) The provisions of this Subpart 5-53.2 implement and are based on the requirements of the Armed Forces Industrial Security Regulations and the Department of Defense Industrial Security Manual for Safeguarding Classified Information. By agreement, Department of Defense will act for and in behalf of GSA in rendering security services required for safeguarding classified defense information released by GSA.

(c) As used in this Subpart 5–53.2, the term "U.S. industry" pertains to those industries (including educational and research institutions) located within the United States, its possessions, and Puerto Rico. The term "security services" relates to those functions performed by DOD to protect classified information released to industry in connection with solicitations of bids or offers, awards, contract performance, or termination of contracts or subcontracts. § 5-53.202

Requests for release of classified information.

Prior to entering into discussion, or negotiation, or solicitation of bids for contracts involving the disclosure of classified defense information, the appropriate contracting officer shall pre

pare, in duplicate, Section I of GSA Form 1720, Request for Release of Classified Information to U.S. Industry. After signing as the requesting officer and obtaining approval from his immediate supervisor, he shall forward both copies to the GSA Security Officer. § 5-53.202-1 Authorization for release.

The GSA Security Officer, after determining that release of classified information is proper, shall complete the appropriate parts of Section II, GSA Form 1720, and return one copy to the contracting officer. In no event shall classified defense information be disclosed, or made accessible to any contractor or prospective contractor until the completed form has been received from the GSA Security Officer. Where only Item 14b, Section II, of the form has been checked, contracting officers shall be guided in their actions by the instructions on the reverse of the form. In the event that any contractor or individual coming within the scope of this Subpart 5-53.2, is found to be not eligible for security clearance, the GSA Security Officer shall advise the contracting officer.

§ 5-53.202-2

Termination of authorization for release.

Where information develops that a clearance should be withdrawn or revoked, the GSA Security Officer shall advise the contracting officer of the termination of authorization to release classified information. This shall include instructions as to actions to take in order to safeguard, withhold, or obtain return to classified information. Reasons for such termination may include:

(a) Failure of the contractor to maintain the physical standards required by the Industrial Security Manual for Safeguarding Classified Information.

(b) Information indicating contractor should no longer be eligible for clearance.

(c) Contractor no longer requires access to classified information.

§ 5-53.203 Processing security requirements check list.

(a) Prime contracts and subcontracts involving the access to classified information by the prime contractor or subcontractor also require preparation of DD Form 254, Security Requirements Check List, to identify and indicate to DOD and contractors the areas of classi

fied information involved. In the case of contracts for consultant and other services, a written notice of classification may be used in lieu thereof.

§ 5-53.203-1 Prime contracts.

(a) Except for procurement of a recurring nature (see § 5-53.205), the contracting officer shall prepare and furnish one copy of DD Form 254 to the prime contractor, and four copies to the GSA Security Officer immediately upon award. If practicable this may be done when requests for proposals or invitations for bids are issued. An additional copy shall be prepared and retained in the contract file, for periodic review pursuant to § 5-53.204. The areas of classified information shall be identified and indicated on the form. Where feasible, the contracting officer may develop the data for preparation of DD Form 254, based upon recommendations of the contractor(s) and the contractor may be required to assist in the preparation including the forms for subcontracts. In lieu of entering classified information on DD Form 254, such classified information shall be transmitted separately by letter or similar document, reference thereto being made on Item 15 of the form.

(b) DD Form 254 is not required in connection with research contracts or those for consultant or other services in which there is no requirement for a breakdown by Security classification of the various elements of the contract. Such contracts may be identified by a letter of notification of classification for the entire contract.

§ 5-53.203-2 Subcontracts.

When a prime contractor notifies the contracting officer that a subcontractor has been selected and the contract will involve access to classified information, a DD Form 254 shall be prepared and distributed in the same manner as shown in § 5-53.203-1 except that three copies (in lieu of one copy) shall be furnished to the prime contractor.

§ 5-53.204 Periodic review.

Contracting officers shall review DD Form 254 whenever a change in phase of performance occurs, or at other times at the discretion of the contracting officer, but in any event at least once a year, to determine whether the classified information can be downgraded or declassified. The contractor shall be in

formed of the results of the review by issuance of a revised check list, or by written instructions in lieu of DD Form 254 (where authorized), or, in the event the review results in no change in the classification specifications, by written notification to that effect. Upon termination or completion of the contract, a final check list shall be prepared. § 5-53.205 Recurring procurement.

When procurement is of a recurring nature a new DD Form 254 is not required if the end item is not changed and there is no change from the previous security classification.

§ 5-53.206 Control of classified information.

Pursuant to the appropriate security requirements clause (prescribed in Part 5-7), contractors, subcontractors, and prospective contractors are required to protect classified defense information in compliance with the Industrial Security Manual for Safeguarding Classified Information. GSA Administrative Manual, 8-16 thru 39, prescribes detailed instructions with respect to safeguarding of classified information within GSA.

§ 5-53.206-1 Records.

Contracting officers shall insure that a record is maintained of GSA classified information released to contractors or prospective contractors. GSA Form 1237, Classified Document Receipt, shall be used for transmission of classified matter to a contractor or prospective contractor pursuant to the GSA Administrative Manual, 8-29. Such material shall be addressed and delivered directly to the contractor.

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the return of such information is the responsibility of that agency.

§ 5-53.207-1 Return from prospective


Where a bid or proposal has not been submitted or is not to be submitted, any classified information furnished shall be required to be returned or surrendered prior to the time set for opening or the closing date for receipt of proposals or immediately thereafter. In connection with unsuccessful bidders or offerors, any classified information shall be required to be returned or surrendered within 15 days after contracts have been awarded. In either event the material may be destroyed when authorized in writing by the contracting officer.

§ 5-53.207-2 Return from contractors.

All classified information furnished a contractor shall be required to be returned or surrendered at the termination or completion of the contract or when otherwise directed by the contracting officer.

§ 5-53.207-3 Termination, revocation, or inactivation of facility security clearance.

(a) When a contracting officer has been advised (1) by the GSA Security Officer that authorization to release classified information has been withdrawn, or (2) by the cognizant security officer that the facility security clearances have been revoked or inactivated, immediate action shall be taken for the return or surrender of classified information.

(b) If the contracting officer is advised that a facility does not have adequate means for safeguarding classified information in its possession, additional classified information shall not be furnished. Any classified information previously furnished shall be required to be returned or surrendered as in (a), above, until the facility meets the standards required by the Industrial Security Manual for Safeguarding Classified Information. § 5-53.208 Breaches of security.

When an unauthorized disclosure of classified information is discovered, which apparently emanated from an industrial source and appears to have resulted from a violation of paragraphs 5 m, n, or o of the Industrial Security Manual for Safeguarding Classified Information, the GSA contracting officer or

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The Office of Comptroller, through its Audit Division, conducts audits (i.e., examinations) of contractors' records to the extent such audits are required by law, regulations, or sound business judgment. In order that the Government can benefit to the maximum extent from such audits, a coordinated and cooperative effort by contracting officers and audit personnel shall be made. It is the responsibility of the contracting officer to have an audit clause inserted in all contracts where audit is required under the conditions indicated in § 5-53.303.

§ 5-53.302 Purpose of audit.

Contract audits are conducted to determine:

(a) The propriety of amounts paid or to be paid by GSA to contractors where such amounts are based on a cost 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 advance of funds, cash return provisions, and price adjustments.

(d) The reasonableness of contractors' settlement proposals in termination of contracts.

(e) Compliance with other contract provisions and to recommend the taking of appropriate action where violations or irregularities are indicated.

§ 5-53.303 Types of contracts to be


(a) The criteria set forth in this § 5-53.303 shall be followed in determining those contracts in excess of $2,500 which shall be audited by GSA. When a decision has been made in accordance with this § 5-53.303 that an audit of contractors' records will be necessary,

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(iv) Negotiated contracts involving the use of property.


(2) Advertised contracts involving the use of Government-furnished property shall be audited prior to final payment.

(3) The contracting officer may, on the advice of the audit office, appropriate legal counsel, and the credit and finance office, determine that it is desirable to reserve the right to audit contracts to be entered into by negotiation (other than those cited in (1), above), or contracts to be entered into by formal advertising (other than those cited in (2), above). Features of the proposed contract such as escalation, benefit of a general price reduction, Government financial assistance, or guarantees may be reasons for reserving the right to examine a contractor's records.

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(a) The following contract clause is for use as prescribed in § 5-53.303:


The Contractor agrees that the Administrator of General Services or any of his duly authorized representatives shall, until the expiration of three years after final payment under this contract, have access to and the right to examine any books, documents, papers, and records of the Contractor involving transactions related to this contract.

The Contractor further agrees to include in all his subcontracts hereunder a provision to the effect that the subcontractor agrees that the Administrator of General Services or any of his duly authorized representatives shall, until the expiration of three years after final payment under the subcontract, have access to and the right to examine any books, documents, papers, and records of such subcontractor, involving transactions related to the subcontract. The term "subcontract" as used in this clause excludes (i) purchase orders not exceeding $2,500 and (ii) subcontracts or purchase orders for public utility services as rates established for uniform applicability to the general public.

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