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The contract clause prescribed by this section shall be included in: (a) Invitations for bids, (b) requests for proposals, and (c) contracts (including contracts resulting from unsolicited proposals) whenever it is possible that international air transportation of personnel (and their personal effects) or property will be required in the performance of the contract. The requirements of this section do not apply to small purchases made in accordance with Subpart 1-3.6.

PREFERENCE FOR U.S. FLAG AIR CARRIERS

(a) Pub. L. 93-623 requires that all Federal agencies and Government contractors and subcontractors will use U.S. flag air carriers for international air transportation of personnel (and their personal effects) or property to the extent service by such carriers is available. It further provides that the Comptroller General of the United States shall disallow any expenditure from appropriated funds for international air transportation on other than a U.S. flag air carrier in the absence of satisfactory proof of the necessity therefor.

(b) The contractor agrees to utilize U.S. flag air carriers for international air transportation of personnel (and their personal effects) or property to the extent service by such carriers is available.

(c) In the event that the contractor selects a carrier other than a U.S. flag air carrier for international air transportation, he will include a certification on vouchers involving such transportation which is essentially as follows:

CERTIFICATION OF UNAVAILABILITY OF U.S.
FLAG AIR CARRIERS

I hereby certify that transportation service for personnel (and their personal effects) or property by certificated air carrier was unavailable for the following reasons: ' (state reasons).

(d) The terms used in this clause have the following meanings:

(1) "International air transportation" means transportation of persons (and their personal effects) or property by air between a place in the United States and a place outside thereof or between two places both of which are outside the United States.

(2) "U.S. flag air carrier" means one of a class of air carriers holding a certificate of public convenience and necessity issued by

'See Federal Procurement Regulations (41 CFR 1-1.323-3) or section 1-336.2 of the Armed Services Procurement Regulation, as applicable.

the Civil Aeronautics Board, approved by the President, authorizing operations between the United States and/or its territories and one or more foreign countries.

(3) The term "United States" includes the fifty states, Commonwealth of Puerto Rico, possessions of the United States, and the District of Columbia.

(e) The contractor shall include the substance of this clause, including this paragraph (e), in each subcontract or purchase hereunder which may involve international air transportation.

[40 FR 60019, Dec. 31, 1975]

§ 1-1.323-3 Availability or unavailability of certificated air carrier.

Expenditures for service furnished by a noncertificated air carrier generally will be allowed only when service by a certificated air carrier or carriers is "unavailable" as indicated by the June 17, 1975, Comptroller General's memorandum (B-138942) entitled "Guidelines for Implementation of Section 5 of the International Air Transportation Fair Competitive Practices Act of 1974." The criteria contained in the memorandum are reproduced in this section.

(a) Passenger or freight service by a certificated air carrier is considered "available" even though:

(1) Comparable or a different kind of service by a noncertificated air car rier costs less, or

(2) Service by a noncertificated air carrier can be paid for in excess foreign currency, or

(3) Service by a noncertificated air carrier is preferred by the agency of traveler needing air transportation, or

(4) Service by a noncertificated air carrier is more convenient for the agency or traveler needing air transportation.

(b) Passenger service by a certificated air carrier will be considered to be "unavailable":

(1) When the traveler, while en route, has to wait 6 hours or more to transfer to a certificated air carrier to proceed to the intended destination, or

(2) when any flight by a certificated air carrier is interrupted by a stop anticipated to be 6 hours or more for refueling, reloading, repairs, etc., and no other flight by a certificated air carrier is available during the 6 hour period, or

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(3) when by itself or in combination with other certificated or noncertificated air carriers (if certificated air carriers are "unavailable") it takes 12 or more hours longer from the original airport to the destination airport to accomplish the agency's mission than would service by a noncertificated air carrier or carriers.

(4) When the elapsed traveltime on a scheduled flight from origin to destination airports by noncertificated air carrier(s) is 3 hours or less, and service by certificated air carrier(s) would involve twice such scheduled traveltime. [40 FR 60019, Dec. 31, 1975, as amended at 41 FR 53662, Dec. 8, 1976]

§ 1-1.323-4 Disallowance of expenditures.

The Act and the Comptroller General's memorandum provide that he will disallow any expenditures for commercial foreign air transportation on noncertificated air carriers unless there is included in the appropriate voucher a justification explaining why service by certificated air carriers was "unavailable." The justification requirement is satisfied by the contractor's use of the certification contained in the contract clause which is prescribed by § 11.323-2.

[40 FR 60019, Dec. 31, 1975]

§ 1-1.323-5 Air freight forwarders.

(a) International air freight forwarders, as defined in 14 CFR 297.1(c) and 297.2 (1974) that are engaged in foreign air transportation (49 U.S.C. 1301(21)(c) (1970)), may be used for Government-financed movements of property. The rule stated in § 1-1.3233 also applies to the use of underlying air carriers by international air freight forwarders engaged in such foreign air transportation.

(b) In order that bills submitted by international air freight forwarders engaged in international air transportation may be paid upon presentation, such carriers shall submit with their bills a copy of the airway bill or manifest showing the underlying air carriers utilized with such justification certifications as they may have for the use of underlying noncertificated air carriers. Use of the prescribed certifi

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This section implements the Privacy Act of 1974 (Pub. L. 93-579, December 31, 1974, 5 U.S.C. 552a) and OMB Circular No. A-108, July 9, 1975. In enacting this legislation, Congress stated that "the right to privacy is a personal and fundamental right protected by the Constitution of the United States." The Privacy Act concerns rights of a citizen or a resident alien under the Act and does not extend to the rights of proprietorships in their business capacity, partnerships, businesses, or corporations. Section 14.1208 supplements the provisions of this § 1-1.327 in regard to commercial automatic data processing services. [47 FR 20533, May 12, 1982]

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As used herein, the following terms have the meanings set forth below:

(a) The term "agency" means any executive department, military department, Government corporation, Government controlled corporation, or other establishment in the executive branch of the Government (including the Executive Office of the President), or any independent regulatory agency.

(b) The term "individual" means a citizen of the United States or an alien lawfully admitted for permanent residence.

(c) The term "maintain" includes maintain, collect, use, or disseminate.

(d) The term "record" means any item, collection, or grouping of information about an individual that is maintained by an agency, including, but not limited to, his education, financial transactions, medical history, and criminal or employment history and that contains his name, or the identifying number, symbol, or other identifying particular assigned to the

individual, such as a finger or voice print or a photograph.

(e) The term "system of records on individuals" means a group of any records under the control of any agency from which information is retrieved by the name of the individual or by some identifying number, symbol, or other identifying particular assigned to the individual.

(f) The term "operation of a system of records" means performance of any of the activities associated with maintaining the system of records, including the collection, use, and dissemination of records.

(g) The term "the Act" means the Privacy Act of 1974 (Pub. L. 93-579, December 31, 1974).

[40 FR 44502, Sept. 26, 1975]

§ 1-1.327-3 Statutory requirements.

(a) The purpose of the Act as it pertains to Government contracts is to guard the individual's right of privacy whenever an agency system of records on individuals is operated under contract and not by the agency. The individual's privacy is ensured by requiring the contractor to observe all the rules on privacy that apply to the agency which awards the contract. Except as otherwise provided by law, Federal agencies must maintain (see § 1-1.327-2(c)) any record of identifiable information on individuals in a manner that meets the following criteria. The action must be for a necessary and lawful purpose, the information must be current and accurate for its intended use, and adequate safeguards must be provided to prevent misuse of such information. Each agency that maintains a system of records on individuals is required, among other things, to establish rules of conduct for persons involved in the design, development, operation, or maintenance of any system of records on individuals, or in maintaining any record. Further, each agency is required to instruct each person involved regarding the rules and requirements of Section 3 of the Act (5 U.S.C. 552a), including any rules and procedures adopted by the agency pursuant to Section 3 and the civil and criminal penalties for noncompliance.

(b) The paragraph in Section 3 of the Act which pertains to Government contracts states as follows:

(m) GOVERNMENT CONTRACTORS.When an agency provides by a contract for the operation by or on behalf of the agency of a system of records to accomplish an agency function, the agency shall, consistent with its authority, cause the requirements of this section [Section 3 of the Privacy Act and the agency's implementing regulations] to be applied to such system. For purposes of subsection (i) of this section [the criminal sanctions set forth in 5 U.S.C. 552a(i)], any such contractor and any employee of such contractor, if such contract is agreed to on or after the effective date of this section [September 27, 1975], shall be considered to be an employee of an agency. However, the criminal penalties of the Act do not extend to contractors or their employees who design or develop systems of records pursuant to a Government contract.

(c) An agency which, within the limits of its authority, fails to require that systems of records on individuals operated on its behalf under contracts be maintained in accordance with the Act may be civilly liable to individuals injured as a consequence of any subsequent failure to maintain records in conformance with the Act. Any officer or employee of the agency may be criminally liable for violations of the Act. The reference in the Act to the contractor and his employees as employees of the agency is intended only for the purposes of the criminal penal ties of the Act and not to suggest that, by virtue of this language, they are employees for any other purposes.

[40 FR 44503, Sept. 26, 1975]

§ 1-1.327-4 Applicability.

(a) Whenever a Federal agency contracts for the design, development, op eration, or maintenance of a system of records on individuals on behalf of the agency in order to accomplish an agency function, the agency must apply the requirements of the Act to the contractor and his employees working on that contract. Systems of records on individuals operated under a contract which are designed to ac complish an agency function are deemed to be maintained by the

agency and are subject to Section 3 of the Act.

(b)(1) In order to establish the applicability of the clause in § 1-1.327-5, it is necessary for the agency awarding a contract to determine whether a purpose of any system of records on individuals which may be involved is to accomplish an agency function. For the Act to be applicable, the contract need not have as its sole purpose the design, development, or operation of such a system of records, but the contract should specifically state whether it involves the design, development, or operation of a system of records. The Act is not applicable to a system of records used by a contractor as a result of his management discretion. For example, it is not applicable to systems of personnel records maintained by contractors on their own behalf.

(2) Illustrations of systems of records to which the Act applies include the following:

(i) The determinations on benefits are made by Federal agencies;

(ii) Records are maintained for administrative functions of a Federal agency, such as personnel and payroll;

or

(iii) Health records are maintained by an outside contractor engaged to provide health services to agency personnel.

(3) Illustrations of systems of records to which the Act does not apply include the following:

(i) Records are maintained by the contractor on individuals whom the contractor employs in the process of providing goods and services to the Federal Government; or

(ii) An agency contracts with a State or private educational organization to provide training, and the records generated on contract students pursuant to their attendance (admission forms, grade reports) are similar to those maintained on other students and are commingled with their records other students.

[40 FR 44503, Sept. 26, 1975]

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(a) All procurement requirements shall be reviewed to determine whether the design, development, or operation of a system of records on individ

uals to accomplish an agency function will be required, and the related contract shall identify specifically which of those functions is to be performed by the contractor. If the design, development, or operation of such a system is required, related solicitations and contracts shall include the notification set forth in § 1-1.327-5(b) and the clause set forth in § 1-1.327-5(c). Pertinent implementing agency rules and regulations shall be made available in accordance with agency procedures. All contract work statements shall specifically identify: (1) The system or systems of records and (2) the work to be performed by the contractor in terms of any one of the following: (i) Design, (ii) development, or (iii) operation.

(b) The following notification shall be included in every solicitation and resulting contract, and in every contract awarded without a solicitation, when the statement of work requires the design, development, or operation of a system of records on individuals for an agency function:

PRIVACY ACT NOTIFICATION

This procurement action requires the contractor to do one or more of the following: design, develop, or operate a system of records on individuals to accomplish an agency function in accordance with the Privacy Act of 1974, Public Law 93-579, December 31, 1974 (5 U.S.C. 552a) and applicable agency regulations. Violation of the Act may involve the imposition of criminal penalties.

(c) The following clause shall be included in every solicitation and resulting contract, and in every contract awarded without a solicitation, when the statement of work requires the design, development, or operation of a system of records on individuals to accomplish an agency function.

PRIVACY ACT

(a) The contractor agrees:

(1) To comply with the Privacy Act of 1974 and the rules and regulations issued pursuant to the Act in the design, development, or operation of any system of records on individuals in order to accomplish an agency function when the contract specifically identifies (i) the system or systems of records and (ii) the work to be performed by the contractor in terms of any one or combi

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nation of the following: (A) Design, (B) development, or (C) operation;

(2) to include the solicitation notification contained in this contract in every solicitation and resulting subcontract and in every subcontract awarded without a solicitation when the statement of work in the proposed subcontract requires the design, development, or operation of a system of records on individuals to accomplish an agency function; and

(3) to include this clause, including this paragraph (3), in all subcontracts awarded pursuant to this contract which require the design, development, or operation of such a system of records.

(b) In the event of violations of the Act, a civil action may be brought against the agency involved where the violation concerns the design, development, or operation of a system of records on individuals to accomplish an agency function, and criminal penalties may be imposed upon the officers or employees of the agency where the violation concerns the operation of a system of records on individuals to accomplish an agency function. For purposes of the Act when the contract is for the operation of a system of records on individuals to accomplish an agency function, the contractor and any employee of the contractor is considered to be an employee of the agency.

(c) The terms used in this clause have the following meanings:

(1) "Operation of a system of records" means performance of any of the activities associated with maintaining the system of records including the collection, use, and dissemination of records.

(2) "Record" means any item, collection, or grouping of information about an individual that is maintained by an agency, including, but not limited to, his education, financial transactions, medical history, and criminal or employment history and that contains his name, or the identifying number, symbol, or other identifying particular assigned to the individual, such as a finger or voice print or a photograph.

(3) "System of records" on individuals means a group of any records under the control of any agency from which information is retrieved by the name of the individual or by some identifying number, symbol, or other identifying particular assigned to the individual.

[40 FR 44503, Sept. 26, 1975]

§ 1-1.328 Fraudulent claims.1

(a) Section 5 of the Contract Disputes Act of 1978 (41 U.S.C. 604) pro

1 See Temporary Regulation 55 in the Appendix to Chapter 1 for temporary changes to § 1-1.328.

vides that if a contractor is unable to support any part of its claim under the contract and such inability is attributable to misrepresentation of fact or fraud on the part of the contractor, it shall be liable to the Government for:

(1) An amount equal to the unsupported part of the claim, and

(2) Costs to the Government attributable to reviewing that part of the claim.

(b) "Misrepresentation of fact" is defined by the Contract Disputes Act of 1978 as a false statement of substantive fact, or any conduct which leads to a belief of a substantive fact material to proper understanding of the matter in hand made with intent to deceive or mislead.

(c) All instances of suspected fraudulent claims shall be reported to the Attorney General.

[45 FR 10790, Feb. 18, 1980]

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