-vent later than one (1) year (or such longer period as the Contracting Officer may in his discretion approve in writing) from the date of such completion.

(f) The Contractor agrees that any refunds, rebates, credits, or other amounts (including any interest thereon) accruing to or received by the Contractor or any assignee under this contract shall be paid by the Contractor to the Government, to the extent that they are properly allocable to costs for which the Contractor has been reimbursed by the Government, under this contract. Reasonable expenses incurred by the Contractor for the purpose of securing such refunds, rebates, credits, or other amounts shall be allowable costs hereunder when approved by the Contracting Officer. Prior to final payment under this contract, the Contractor and each assignee under this contract whose assignment is in effect at the time of final payment under this contract shall execute and deliver:

(i) an assignment to the Government, in form and substance satisfactory to the Contracting Officer, of refunds, rebates, credits, or other amounts (including any interest thereon) properly allocable to costs for which the Contractor has been reimbursed by the Government under this contract; and

(ii) a release discharging the Government, its officers, agents, and em-
ployees from all liabilities, obligations, and claims arising out of
or under this contract, subject only to the following exceptions--
(A) specified claims in stated amounts or in estimated amounts where
the amounts are not susceptible of exact statement by the Con-
tractor;

(B) claims, together with reasonable expenses incidental thereto, based upon liabilities of the Contractor to third parties arising out of the performance of this contract: Provided, That such claims are not known to the Contractor on the date of the execution of the release; And provided further, That the Contractor gives notice of such claims in writing to the Contracting Officer not more than six (6) years after the date of the release or the date of any notice to the Contractor that the Government is prepared to make final payment, whichever is earlier; and

(C) claims for reimbursement of costs (other than expenses of the
Contractor by reason of its indemnification of the Government
against patent liability), including reasonable expenses
incidental thereto, incurred by the Contractor under the pro-
visions of this contract relating to patents.

(g) Any cost incurred by the Contractor under the terms of this contract which would constitute allowable cost under the provisions of this clause shall be included in determining the amount payable under this contract, notwithstanding any provisions contained in the specifications or other documents incorporated in this contract by reference, designating services to be performed or materials to be furnished by the Contractor at its expense or without cost to the Government.

32.

INSPECTION OF SUPPLIES AND CORRECTION OF DEFECTS

(a) All supplies (which term throughout this clause includes without limitation raw materials, components, intermediate assemblies, and end products) shall be subject to inspection and test by the Government, to the extent practicable at all times and places including the period of manufacture, and in any event prior to acceptance. The Contractor shall provide and maintain an inspection system acceptable to the Government covering the supplies, fabricating methods, and special tooling hereunder. The Government, through any authorized representative, may inspect the plant or plants of the Contractor or of any of its subcontractors engaged in the performance of this contract. If any inspection or test is made by the Government on the premises of the Contractor or a subcontractor, the Contractor shall provide and shall require subcontractors to provide all reasonable facilities and assistance for the safety and convenience of the Government inspectors in the performance of their duties. All inspections and tests by the Government shall be performed in such a manner as will not unduly delay the work. Except as otherwise provided in this contract, acceptance of any supplies or lots of supplies shall be made as promptly as practicable after delivery thereof and shall be deemed to have been made no later than sixty (60) days after the date of such delivery, if acceptance has not been made earlier within such period.

If

(b) At any time during performance of this contract, but not later than six (6) months (or such other period as may be provided in the Schedule) after acceptance of the supplies or lots of supplies last delivered in accordance with the requirements of this contract, the Government may require the Contractor to remedy by correction replacement, as directed by the Contracting Officer, any supplies or lots of supplies ich at the time of delivery thereof are defective in material or workmanship or otherwise not in conformity with the requirements of this contract. Except as otherwise provided in paragraph (c) hereof, the cost of any such replacement or correction shall be included in Allowable Cost determined as provided in the clause of this contract entitled "Allowable Cost, Fixed Fee and Payment," but no additional fee shall be payable with respect thereto. Such supplies or lots of supplies shall not be tendered thereafter for acceptance unless the former requirement of correction is disclosed. the Contractor fails to proceed with reasonable promptness to replace or correct such supplies or lots of supplies, the Government (i) may by contract or otherwise replace or correct such supplies and charge to the Contractor any increased cost occasioned the Government thereby, or may reduce any fixed fee payable under this contract (or require repayment of any fixed fee theretofore paid) in such amount, as may be equitable under the circumstances, or (ii) in the case of supplies not delivered, may require the delivery of such supplies, and shall have the right to reduce any fixed fee payable under this contract (or to require repayment of any fixed fee theretofore paid) in such amount as may be equitable under the circumstances, or (iii) may terminate this contract for default as provided in the clause of this contract entitled "Termination." Failure to agree to the amount of any such increased cost to be charged to the Contractor or to such reduction in, or repayment of, the fixed fee shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes."

(c) Notwithstanding the provisions of paragraph (b) hereof, the Government may at any time require the correction or replacement by the Contractor, without cost to the Government, of supplies or lots of supplies which are defective in material or workmanship, or otherwise not in conformity with the requirements of this contract, if h defects or failures are due to fraud, lack of good faith or willful misconduct on part of any of the Contractor's directors or officers, or on the part of any of its managers, superintendents, or other equivalent representatives, who have supervision or

direction of (i) all or substantially all of the Contractor's business, or (ii) all substantially all of the Contractor's operations at any one plant or separate Location in which this contract is being performed, or (iii) a separate and complete major industrial operation in connection with the performance of this contract. Fraud, lack of good faith or willful misconduct on the part of any of such supervisory personnel shall be deemed to include the selection of individual employees or the retention of employees after any of such supervisory personnel has reason to believe that such employees are habitually careless or otherwise unqualified.

(a) Corrected supplies or replaced supplies shall be subject to the provisions of this clause in the same manner and to the same extent as supplies originally delivered under this contract.

(e) The Contractor shall make its records of all inspection work available to the Government during the performance of this contract and for such longer period as may be specified in this contract.

(f) Except as provided in this clause and as may be provided in the Schedule, the Contractor shall have no obligation or liability to correct or replace supplies or lots of supplies which at the time of delivery are defective in material or workmanship or otherwise not in conformity with the requirements of this contract.

(g) Except as otherwise provided in the Schedule, the Contractor's obligation to correct or replace Government-furnished property (which is property in the possession of or acquired directly by the Government and delivered or otherwise made available to the Contractor) shall be governed by the provisions of the clause of this contract entitled "Government Property."

(a)(1) The Contractor agrees to maintain books, records, documents and other
evidence pertaining to the costs and expenses of this contract (herein-
after 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 Contract-Audit Division of the
Comptroller of the Navy: Provided, however, That no material change will
be required to be made in the Contractor's accounting procedures and
practices if they conform to generally accepted accounting practices and
if the costs properly applicable to this contract are readily ascertain-
able 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 reimbursement 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 Contract-Audit Division of the Comptroller of the
Navy such documentary evidence in support of transportation costs as
may be required by the Comptroller General or any of his duly authorized
representatives.

or,

(4) Except for documentary evidence delivered to the Government pursuant
to subparagraph (3) above, the Contractor shall preserve and make
available its records for a period of three years (unless a longer
period of time is provided by applicable statute or by any other clause
in this contract) from the date of the voucher or invoice submitted
by the Contractor after the completion of the work under the contract
and designated by the Contractor as the "completion voucher" or "com-
pletion invoice" in the event this contract has been completely
terminated, from the date of the termination settlement agreement;
provided, however, that records which relate to (A) appeals under the
clause of this contract entitled "Disputes", (B) litigation or the
settlement of claims arising out of the performance of this contract,
or (C) costs or expenses of the 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, but in no event
for less than the three-year period mentioned above.

(5)

Except for documentary evidence delivered pursuant to subparagraph (3)
above, and the records described in the proviso of subparagraph (4)
above, the Contractor may in fulfillment of its obligation to retain
its records as required by this clause substitute photographs, micro-
photographs 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, time-and-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 (i) 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