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(a) The Contractor shall procure and thereafter maintain workmen's compensation employer's liability, comprehensive general liability (bodily injury) and comprehensive automobile liability (bodily injury and property damage) insurance, with respect to performance under this contract, and such other insurance as the Department may from time to time require with respect to performance under this contract; provided, that the Contractor may with the approval of the Department maintain a self-insurance program, and provided further, that with respect to workmen's compensation the Contractor is qualified pursuant to statutory authority. All insurance required pursuant to the provisions of this paragraph shall be in such form, in such amounts, and for such periods of time, as the Department may from time to time require or approve, and with insurers approved by the Department.

(b) The Contractor agrees, to the extent and in the manner required by the Department, to submit for the approval of the Department any other insurance maintained by the Contractor in connection with the performance of this contract and for which the Contractor seeks reimbursements hereunder.

(c) The Contractor shall be reimbursed: (1) for the portion allocable to this contract of the reasonable cost of insurance as required or approved pursuant to the provisions of this clause, and (11) for liabilities to third persons for loss of or damage to property (other than property (A) owned, occupied or

used by the Contractor or rented to the

Contractor or (B) in the care, custody, or control of the Contractor), or for death or bodily injury, not compensated by insurance or otherwise, arising out of the performance of this contract, whether or not caused by the negligence of the Contractor, his agents, servants or employees, provided such liabilities are represented by final judgments or by settlements approved in writing by the Government, and expenses incidental to such liabilities, except liabilities (I) for which the Contractor is otherwise responsible under the express terms of the clause or clauses, if any, specified in the Schedule, or (II) with respect to which the Contractor has failed to insure as required or maintain insurance as approved by the Department or (III) which results from willful misconduct or lack of good faith on the part of any of the Contractor's directors or officers, or on the part of any of his managers, superintendents, or other equivalent representatives, who has supervision or direction of (1) all or substantially all of the Contractor's business, or (2) all or substantially all of the Contractor's operations at any one plant or separate location in which this contract is being performed, or (3) a separate and complete major industrial operation in connection with the performance of this contract. The foregoing shall not restrict the right of the Contractor to be reimbursed for the cost of insurance maintained by the Contractor in connection with the performance of this contract, other than insurance required to be submitted for approval or required to be procured and maintained pursuant to the provisions

of this clause, provided such cost would constitute Allowable Cost under the clause of this contract entitled "Allowable Cost, Fixed Fee and Payment." (d) The Contractor shall give the Government or its representatives immediate notice of any suit or action filed, or prompt notice of any claim made, against the Contractor arising out of the performance of this contract, the cost and expense of which may be reimbursable to the Contractor under the provisions of this contract, and the risk of which is then uninsured or in which the amount claimed exceeds the amount of coverage. The Contractor shall furnish immediately to the Government copies of all pertinent papers received by the Contractor. If the amount of the liability claimed exceeds the amount of

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(a) (1) The Contractor agrees to maintain books, records, documents and other evidence pertaining to the costs and expenses of this contract (hereinafter collectively called the "records") to the extent and in such detail as will properly reflect all net costs, direct and indirect, of labor, materials, equipment, supplies and services, and other costs and expenses of whatever nature for which reimbursement is claimed under the provisions of this contract. The Contractor's accounting procedures and practices shall be subject to the approval of the Comptroller of the Navy (Contract Audit Division); provided, however, that no material change will be required to be made in the Contractor's accounting procedures and practices if they conform to

coverage, the Contractor shall authorize represenatives of the Government to collaborate with counsel for the insurance carrier, if any, in settling or defending such claim. If the liability is not insured or covered by bond, the Contractor shall, if required by the Government, authorize representatives of the Government to settle or defend any such claim and to represent the Contractor in or take charge of any litigation in connection therewith: Provided, however, that the Contractor may, at his own expense, be associated with the representatives of the Government in the settlement or defense of any such claim or litigation.

RECORDS

generally accepted accounting practices and if the costs properly applicable to this contract are readily ascertainable therefrom.

(2) The Contractor agrees to make available at the office of the Contractor at all reasonable times during the period set forth in subparagraph (4) below any of the records for inspection, audit or reproduction by any authorized representative of the Department or of the Comptroller General.

(3) In the event the Comptroller General or any of his duly authorized representatives determines that his audit of the amounts reimbursed under this contract as transportation charges will be made at a place other than the office of the Contractor, the Contractor agrees to deliver, with the reimburse

ment voucher covering such charges or as may be otherwise specified within two years after reimbursement of charges covered by any such voucher, to such representative as may be designated for that purpose through the Comptroller of the Navy (Contract Audit Division); such documentary evidence in support of transportation costs as may be required by the Comptroller General or any of his duly authorized representatives.

(4) Except for documentary evidence delivered to the Government pursuant to subparagraph (3) above, the Contractor shall preserve and make available his records (1) for a period of three years from the date of final payment under this contract, and (ii) for such longer period, if any, as is required by applicable statute, by any other clause of this contract, or by (A) or (B) below.

(A) If this contract is completely or partially terminated, the records relating to the work terminated shall be preserved and made available for a period of three years from the date of any resulting final settlement. (B) Records which relate to (1) appeals under the Disputes clause of this contract, (ii) litigation or the settlement of claims arising out of the performance of this contract, or (iii) cost and expenses of this contract as to which exception has been taken by the Comptroller General or any of his duly authorized representatives, shall be retained by the Contractor until such appeals, litigation, claims, or exceptions have been disposed of.

(5) Except for documentary evidence delivered pursuant to subparagraph

(3) above, and the records described in subparagraph (4)(B) above, the Contractor may in fulfillment of his obligation to retain his records as required by this clause substitute photographs, microphotographs, or other authentic reproductions of such records, after the expiration of two years following the last day of the month of reimbursement to the Contractor of the invoice or voucher to which such records relate, unless a shorter period is authorized by the Contracting Officer with the concurrence of the Comptroller General or his duly authorized representative. (6) The provisions of this paragraph (a), including this subparagraph (6), shall be applicable to and included in each subcontract hereunder which is on a cost, cost-plus-a-fixed-fee, timeand-material or labor-hour basis.

(b) The Contractor further agrees to include in each of his subcontracts hereunder, other than those set forth in subparagraph (a)(6) above, a provision to the effect that the subcontractor agrees that the Comptroller General or the Department, or any of their 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 directly pertinent books, documents, papers, and records of such subcontractor involving transactions related to the subcontract. The term "subcontract," as used in this paragraph (b) only, excludes (1) purchase orders not exceeding $2,500 and (ii) subcontracts or purchase orders for public utility services at rates established for uniform applicability to the general public.

This amendment increases the total estimated cost of the contract by $12,631,650.00, the fixed fee by $785,000.00 and the total estimated cost plus fixed fee by $13,416,650.00.

1.-DEFINITIONS

2. CHANGES

GENERAL PROVISIONS

(Department of Defense Cost-Reimbursement Supply Contract)

INDEX OF CLAUSES

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As used throughout this contract, the following terms shall have
the meanings set forth below:

(a) The term "Secretary" means the Secretary, the Under Secre-
tary, or any Assistant Secretary of the Department, and the head
or any assistant head of the Federal agency; and the term "his duly
authorized representative" means any person or persons or board
(other than the Contracting Omcer) authorized to act for the
Secretary.

(b) The term "Contracting Officer" means the person executing
this contract on behalf of the Government, and any other officer or
civilian employee who is a properly designated Contracting Officer;
and the term includes, except as otherwise provided in this con-
tract, the authorized representative of a Contracting Omcer acting
within the limits of his authority.

(c) Except as otherwise provided in this contract, the term
"subcontracts" includes purchase orders under this contract.

2. CHANGES

The Contracting Officer may at any time, by a written order, and
without notice to the sureties, if any, make changes, within the
general scope of this contract, in any one or more of the following:
(1) drawings, designs, or specifications, where the supplies to be
furnished are to be specially manufactured for the Government in
accordance therewith; (11) method of shipment or packing: (111)
place of delivery; and (iv) the amount of Government-furnished
property. If any such change causes an increase or decrease in
the estimated cost of, or the time required for, the performance
any part of the work under this contract, whether changed or
t changed by any such order, or otherwise affects any other
provision of this contract, an equitable adjustment shall be made
(1) in the estimated cost or delivery schedule, or both, (11) in

DD FORM 748 (NAVY)

1 JUL 58

the amount of any fixed fee to be paid to the Contractor, and
(111) in such other provisions of the contract as may be so affected,
and the contract shall be modified in writing accordingly. Any
claim by the Contractor for adjustment under this clause must
be asserted within thirty (30) days from the date of receipt by
the Contractor of the notification of change: Provided, however,
That the Contracting Omcer, if he decides that the facts justify
such action, may receive and act upon any such claim asserted at
any time prior to final payment under this contract. Failure to
agree to any adjustment shall be a dispute concerning a question
of fact within the meaning of the clause of this contract entitled
"Disputes." However, nothing in this clause shall excuse the
Contractor from proceeding with the contract as changed.

3. LIMITATION OF COST

(a) It is estimated that the total cost to the Government, exclu-
sive of any fixed fee, for the performance of this contract will not
exceed the estimated cost set forth in the Schedule, and the Con-
tractor agrees to use its best efforts to perform the work specified
in the Schedule and all obligations under this contract within
such estimated cost. If at any time the Contractor has reason to
believe that the costs which it expects to incur in the performance
of this contract in the next succeeding thirty (30) days, when
added to all costs previously incurred, will exceed eighty-five per-
cent (85%) of the estimated cost then set forth in the Schedule,
or if at any time, the Contractor has reason to believe that the
total cost to the Government, exclusive of any fixed fee, for the
performance of this contract will be substantially greater or less
than the then estimated cost thereof, the Contractor shall notify
the Contracting Omcer in writing to that effect, giving its revised
estimate of such total cost for the performance of this contract.

(b) The Government shall not be obligated to reimburse the
Contractor for costs incurred in excess of the estimated cost set
forth in the Schedule, and the Contractor shall not be obligated to
continue performance under the contract or to incur costs in excess
of the estimated cost set forth in the Schedule, unless and until
the Contracting Officer shall have notified the Contractor in writing
that such estimated cost has been increased and shall have specified
in such notice a revised estimated cost which shall thereupon con-
stitute the estimated cost of performance of this contract. When
and to the extent that the estimated cost set forth in the Schedule
has been increased, any costs incurred by the Contractor in excess
of such estimated cost prior to the increase in estimated cost shall
be allowable to the same extent as if such costs had been incurred
after such increase in estimated cost.

4. ALLOWABLE COST, FIXED FEE, AND PAYMENT

(a) For the performance of this contract, the Government shall
pay to the Contractor:

(1) the cost thereof (hereinafter referred to as "allowable
cost") determined by the Contract-Audit Division of the
Comptroller of the Navy to be allowable in accordance
with-

(A) Part 2 of Section XV of the Armed Services Procure-
ment Regulation as in effect on the date of this
contract; and

(B) the terms of this contract; and

(11) such fixed fee, if any, as may be provided for in the
Schedule.

(b) Once each month (or at more frequent intervals, if approved
by the Contract-Audit Division of the Comptroller of the Navy,
the Contractor may submit to an authorized representative of the
Contract-Audit Division of the Comptroller of the Navy, in such
form and reasonable detall as such representative may require, an
invoice or public voucher supported by a statement of cost incurred
by the Contractor in the performance of this contract and claimed
to constitute allowable cost.

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