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may agree upon at the time of each option exercise.
ment may exercise the option for the first successive period
without obligation to exercise the option for the second period.
The exercise in each case shall be by written notice signed by
the Contracting Officer and furnished to the Contractor on or
(a) The Government-furnished property hereunder shall be all
existing Government-owned equipment and facilities on Kwajalein
Atoll which are required for the performance of this contract
and all existing Government-owned material on Kwajalein Atoll
which is required for performance of this contract.
(b) Upon depletion of existing supplies of Government-owned
material on Kwajalein Atoll, the Contractor shall procure supplies
for non-merchandizing functions within the inventory levels
established by the Contract Administrator through regular Navy
If the contractor determines that the required supplies
are not available from current Navy stocks at NSC Oakland,
procurement shall be from sources determined by the contractor
and consistent with the best interests of the Government.
Contractor shall procure supplies for the merchandizing facili
ties within the monetary inventory level established by the Con
Procurement of such supplies shall be through
channels determined by the Contractor and consistent with the
best interests of the Government.
(c) The Contractor's personnel shall be housed in Government
owned quarters on Kwajalein Atoll.
The assignment to quarters,
barracks, bachelor officer quarters or family housing shall be
made on an equitable basis considering the status, position and
requirements of individuals and available housing space.
family housing units are presently assigned to the Contractor and
occupied by its employees.
No less than 30 family units shall
be assigned to the Contractor for use by its employees after
such 50 family units occupied by Contractor's employees as of
1 July 1960 shall have been phased down to 30 by attrition or
expiration of contract of such employees occupying the excess
over 30. Notwithstanding the provisions of the above, the Con
tract Administrator may, when his judgment so determines, assign
additional quarters above 30 to the Contractor for his use, if
so desired by the Contractor, for such periods of time as may
be specifically designated.
A charge will be made for Contrac
tor employees occupying quarters at the rates set forth in
Schedule II of Exhibit C, and such charge will be deducted
from allowable wages under Schedule I of Exhibit C hereto.
Amounts so deducted from Employee's salaries will be credited
against amounts otherwise due the Contractor under this contract.
(a) The costs of performance of this contract, as referred to
in paragraph (a) of the "Allowable Cost, Fixed Fee, and Pay
ment," clause hereof, are hereby defined as the cost of labor,
materials, and other items of the nature described in sub
paragraphs (1) through (9) below, incurred by the Contractor
and which are claimed by the Contractor and accepted as such
costs by the Comptroller of the Navy (Contract Audit Division),
as chargeable in accordance with Part 2 of Section XV of the
Armed Services Procurement Regulation revised 2 November 1959.
(1) The cost of material including (1) the net cost after deducting all discounts, of material, foodstuffs and parts
purchased directly for performance of this contract, whether
or not such materials, foodstuffs and parts are purchased through commercial channels or through the Navy Supply System; (II) the
cost of materials and parts withdrawn from the Contractor's
Stores or stock; and (III) the cost of transporting material
purchased by the Contractor for the performance of this con
(2) The salaries and wages of all personnel employed in the
performance of this contract except those personnel permanently
located in the Contractor's Corpus Christi, Texas and Honolulu,
Hawaii Offices, but excluding corporate officers.
of any employee permanently assigned to said Corpus Christi,
Texas or Honolulu, Hawaii Office except corporate officers of
the contractor, shall be an allowable cost hereunder for such ·
temporary period of time as he is assigned solely to the perform
ance of this contract away from Corpus Christi, Texas or
Honolulu, Hawaii including necessary travel time.
porary assignments shall be made for business purposes only in
connection with the performance of this contract, and shall be
made in the sole discretion of the Contractor.
scales and fringe benefits allowable as costs hereunder shall
be those set forth in Exhibit C and/or D to the contract, how
ever, employees assigned temporarily to the performance of this
contract, the salary allowable as costs shall be that salary
normally paid by the Contractor for the performance of such
In the event any individual employed under this contract
is discharged because of inability to secure a security clear
ance from the United States Government, the salary and trans
portation of such individual during the time he was in the
employ of the Contractor shall be an allowable cost hereunder.
(3) The cost which the Government has agreed to assume under
the clauses hereof entitled "Government Property" and "Insurance
Liability to Third Persons", including the cost of such extra
hazardous insurance as may be approved by the Contracting
Officer under the provisions of subparagraph (9) of this section.
(4) Transportation and reasonable subsistence of personnel
employed in the performance of this contract while in travel
Transportation and subsistence costs of Corporate
Officers of the Contractor while in travel status in connection
with this contract.
(5) Charges for the use of equipment, other than Government
furnished equipment, utilized in the performance of the con
tract, provided, however that such charges shall not exceed the
cost of the services accomplished by the use of such equipment
if such services were procured commercially.
(6) The cost of maintaining offices in Oakland, California
and any other place or places as may be directed by the Contract
Administrator, in connection with the performance of this con
(7) For those employees required to wear specialized clothing
in the performance of their duties under this contract, the
cost of providing each such employee with an initial outfit
of three (3) sets.
(8) The costs of physical examination for new employees
where required by law to be paid by the employer.
(9) Such other items, not excluded by other provisions of
this contract or considered unallowable under Section XV,
Part 2, of the Armed Services Procurement Regulation, as
should, in the opinion of the Contracting Officer, be
included in the cost of the work called for by this contract.
Any such item allowed by the Contracting Officer shall be
specifically certified by the Contracting Officer as being
allowed under this subparagraph (9).
(b) The parties to this contract have mutually agreed that the
below listed costs shall be specifically unallowable under this
(1) Corpus Christi, Texas and Honolulu, Hawaii office
contractor fails to secure prior or advance
approval or authorization is expressly required
by any provision of this contract, unless such action
is subsequently ratified by the Contracting Officer.