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notify the contractor as to the Govern- et lor later addition to the "make-orshall inform the contractor as to any detracting Officer of each proposed the procuring activity and the contractory Oficer, make changes or additions will review the existing "make-or-buy" del program. However, in his discretion, program to determine whether it should betracting Oficer may ratlly in writing be agreed to when the products or serp. 13.902A Administration of

from other firms at prices no higher terms of the contract clause. This 1–Public Contracts, Property Management : Hederal Procurement Regulations ng to

dations thereon. Such review by SBA proval of the contractor's pur- specifical uctors should be concurrent with

the review by rystem shall not constitute ap- does not the procuring activity (or, in the case

did the "make-or-buy" program.

or-Buy E prop of changes, the contracting oficer).

officer
lities, Where urgent circumstances do not per- 3 Contract clause.

with a w
ilable mit such a concurrent review, or where filowing clause shall be incor.
SBA fails to respond on a timely basis

, anal cost-reimbursement, price of the

tain and cerns the contracting officer shall include an

tination, or incentive type con clause.
2 the

explanatory statement in the contract se to which a “make-or-buy" pro-
file and shall transmit a copy to the SBA bas been agreed upon:

on one
major representative. Where the SBA review

is one

asas 10 MAKE-OR-BUY PROGRAM rk in results in a disagreement between the

contra
3 sig procuring activity (or, in the case of structor agrees to perform this con-

Items
-plant changes, the contracting officer) and the scordance with the "make-or-buy" ing a
e not
SBA representatives regarding & "make-

fined
or-buy" program decision, SBA may at hente the "make-or-buy" program,

kter provided. If the Contractor de tion ! item

peal such decision to the head of the sun sky the Contracting oficer in § 1-3
create

procuring activity, or other appropriate to the proposed change reasonably
indi level above the contracting officer in ac-
to be

cordance with agency procedures. Decla Seat detal] to permit evaluation of
er the

sions by the procuring activity shall be el change. Changes in the place § 1-
ed fa final.
th) After agreement on the program extrement, with respect to items de

$1.
abcon-

is reached, the contracting officer shall
oposed
addi ment's approval of the program and

to
plant

ret
where requirement for further review during
livery, performance of the contract. For ex-

со
e as a ample, if follow-on procurements occur.

pg

&
k has
evious

be revised.
e na (29 FR 10155, July 24, 1964, A8 amended at
imilar 37 FR 23543, Nov. 14, 1972)
eering,

§ 1–3.902–2 Approval of programs.
t con-
sonnel

(a) Proposed "make" items shall not
review

ices under consideration:
deter-
(1) Are not regularly manufactured

pro
re in-

or provided by the contractor, and are should

available quality, quantity, delivery. atively

and other essential factors considered-
sidera-

than if the contractor makes or provides
pro-
obtain

the product or service;

(2) Are regularly manufactured or
appro-
would

provided by the contractor, and are
review.

available-quality. quantity, delivery. ke-or

and other essential factors considered-

from other firms at prices lower than
o any
sion of

if the contractor makes or provides the

product or service; or
1 busi Provided, That such items may be agreed
I invite to, notwithstanding paragraphs (a) (1)
BA by and (2) of this section, if in the opinion
(regu of the contracting officer the overall cost
review of the contract to the Government would
nmen be increased if the items were "bought".

Asetached to this contract, except as

me and shall submit justification

Limance of work on any "make" Item

-" to

& the time of negotiation of this

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program, the Contractor shall notify

en at the earllest possible time, tote mith justification in suficient detall yali evaluation. The Contractor shall Nikout the written consent of the Con

a

thanges or additions. The "make-orprogram attached to this contract shall tened to be modified in accordance with mitten consent or ratification by the practing Oficer.

(End of Clause)

Braun.
On applicable contracts, the cog-
sunt contract administration office

l establish a procedure with the con-
miestor to assure timely compliance with
recedure will include provisions to
Rocessing changes to the establishe
take-or-buy" program and for obtain

"make-or-buy" decisions for Iten reserved for deferred decisions or wi Ventiled at the time of

contre

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ice the

(b) When a "make-or-buy" progri w kateed upon with a contractor, or th de changes or additions to a "makeor" program, the consideration gi each item on such program will be de mented in the contract file. If a tract (including supplemental ax ments for new procurement) except

210

Chapter 1-Federal Procurement Regulations

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(b) Approval of the contractor's purchasing system shall not constitute approval of the "make-or-buy" program. $ 1-3.902–3 Contract clause.

The following clause shall be incor2porated in all cost-reimbursement, price

redetermination, or Incentive type contracts as to which a "make-or-buy” program has been agreed upon:

CHANGES TO MAKE-OR-BUY PROGRAM The Contractor agrees to perform this contract in accordance with the "make-or-buy" program attached to this contract, except as

hereinafter provided. If the Contractor desi stres to change the "make-or-buy" program,

be shall notiry the Contracting Oficer in writing of the proposed change reasonably in advance and shall submit justification 10 suficient detall to permit evaluation of the proposed change. Changes in the place of performance of work on any "make" Item In the "make-or-buy" program are subject to

this requirement. With respect to Items de40 ferred at the time of negotiation of this

GE contract for later addition to the “make-or3 buy" program, the Contractor shall notify

tho Contracting Officer of each proposed addition at the earliest possible time, together with justification in suficient detall to permit evaluation. The Contractor shall

not, without the written consent of the Con. upiter tracting omcer, make changes or additions 2007" to the program. However, in his discretion,

the Contracting Oncer may ratify in writing any changes or additions. The "make-orbuy" program attached to this contract shall be deemed to be modified in accordance with the written consent or ratifcation by the Contracting Officer.

(End of Clause) 50# $ 1-3.902-4 Administration of

prograin. (a) On applicable contracts, the cognizant contract administration office will establish a procedure with the contractor to assure timely compliance with the terms of the contract clause. This procedure will include provisions for processing changes to the established "make-or-buy" program and for obtainIng "make-or-buy” decisions for items reserved for deferred decisions or unIdentified at the time of contract negotiations.

(b) When a "make-or-buy" program Is agreed upon with a contractor, or there are changes or additions to a "make-orbuy" program, the consideration given each item on such program will be documented in the contract file. If a contract (including supplemental agreements for new procurement) except one

specifically exempted by $ 1-3.902–1(b),
does not include the Changes to Make-
or-Buy Program clause, the contracting
offlcer will document the contract file
with a written statement of facts to sus-
tain and make clear the appropriateness
of the determination not to include the
clause. Such determination will be based
on one of the following: (1) the contract
is on a firm fixed-price basis; (2) the
contract is not exempt but there are no
Items which can be identified as requir-
Ing a "make-or-buy" program as de-
fined in § 1-3.902-1(a); or (3) a devia
tion has been approved.
$ 1-3.903 Review and approval of con

tractor's purchasing system and sul

contracts. § 1-3.903-1 (Reserved) § 1-3.903–2 Review and approval o

subcontracts. (a) When the prime contract is no to be placed on a firm fixed-price basi review of subcontracts prior to place ment may be desirable since the ultima cost to the Government will depend part on subcontract prices and perforn ance.

Contract provisions requirie advance notification to the contractie officer of proposed subcontracts for m terials, components, and other purchas may be appropriate both for inform tion as to sources and prices and to pr vide an opportunity for review and approval or objection by the contracti officer prior to award of the subcontrac Careful and thorough evaluation of su contracts prior to placement is partic larly necessary when:

(1) The prime contractor's purch: Ing system of performance thereunde: considered inadequate;

(2) Subcontracts are for Items which there is no competition or which the proposed prices appear unr sonable, and the amounts involved substantial (see $ 1-3.807-10(b));

(3) Close working arrangements business or ownership affiliations e between the prime and the subcontra which may preclude the free use of c petition or result in higher subcont prices than would otherwise be obtain

(4) A subcontract is being prop at a price less favorable than that w has been given by the subcontracto the Government, all other factors suc manufacturing period and qua: being comparable; or

she

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ollar

imntire hever

SO."

ssing shall ceeds kely

cepted, will result in a contract sub
the requirements of the Cost Acco
Standards Board must, as a condition
tracting, submit a Disclosure Statem
required by regulations of the Boar
Disclosure Statement must be submis
à part of the offeror's proposal und
solicitation (see (I) below) unless
offeror, together with all divisions, su
ries, and affiliates under common conti
not receive net awards exceeding the
tary exemption for disclosure as esta
by the Cost Accounting Standards
(see (II) below); (ii) the offeror ex
the monetary exemption in the Feder
cal Year immediately preceding the
which this proposal was submitted
accordance with the regulations of ti
Accounting Standards Board, is not
quired to submit a Disclosure Stateme
(III) below); (iii) the offeror has

accon

onal itled ating h in Cost

for ficaand

ACristch in 7 all It in

submitted a Disclosure Statement di:
the practices used in connection w
pricing of this proposal (see (IV) bel
(iv) post award submission has been
\zed by the Contracting Officer. See
351.70 for submission of a copy of t
closure Statement to the Cost Acc
Standards Board.

Caution: A practice disclosed in
closure Statement shall not, by virtue
disclosure, be deemed to be a pro
proved, or agreed to practice for pric
posals or accumulating and reporti
tract performance cost data.

Check the appropriate box below:
01. CERTIFICATE OF CONCURRENT SUI

OF DISCLOSURE STATEMENT (S
The offeror hereby certifies that

,000,

contracts of $500,000 or less can be ex-
empted and requires an additional notice
to be inserted in solicitations.

(2) Nondefense contract. The exemp-
tions in § 1-3.1203(a) (1) also apply to
solicitations which are likely to result
in a negotiated nondefense contract ex-
ceeding $100,000. Additionally, the fol-
lowing nondefense procurements are ex-
empt:

(i) Contracts with educational Institutions subject to Subpart 1-15.3 (41 CFR § 1-15.3);

(ii) Contracts with State and local governments subject to Subpart 1–15.7 (41 CFR § 1-15.7);

(iii) Contracts with hospitals; and

(iv) Firm fixed-price contracts to be
awarded after receiving offers from at
least two firms not associated with each
other, providing that (A) the solicitation
to all competing firms is identical; (B)
price is the only consideration in select-
ing the contractor from among the com-
peting firms solicited; (C) the lowest
offer received in compliance with the
solicitation from among those solicited
is accepted: and (D) the profit center,
division, or similar organizational unit
of a company to which the contract is to
be awarded is not on the date of such
award performing a contract or subcon-
tract subject to the Cost Accounting
Standards clause. Under (D), perform-
ance of a contract or subcontract extends
from the date of award of the contract to
the date when the work required by the
contract is completed. Provided, That
the solicitation notice shall be inserted
in all such solicitations, and the notice
shall be withdrawn by the contracting
officer only if, on the date of contract
award, all of the criteria of this exemp-
tion are met.

(3) Notice for solicitations. Insert the
following notice in all solicitations which
are likely to result in a negotiated con-
tract exceeding $100,000, unless the pro-
curement is exempted under § 1-3.1203
(a) (1) or (a) (2):
DISCLOSURE STATEMENT-COST ACCOUNTING

PRACTICES AND CERTIFICATION
Any contract in excess of $100,000 resulting
from this solicitation except (1) when the
price negotiated is based on (a) established
catalog or market prices of commercial items
sold in substantial quantities to the general
public, or (b) prices set by law or regulation,
or (2) contracts which are otherwise exempt
(see 4 CFR 331.30(b) and FPR $ 1-3.1203(a)
(2)), shall be subject to the requirements of
the Cost Accounting Standards Board. Any
offeror submitting a proposal, which, if ac-

tabcomianset

utiicted Sonsetven(B) 1-1. mall rtial 04); ed to ction

the ded. Proartand

submitted, as a part of his propos this solicitation, coples of the I Statement(s) as follows: (1) origina copy to the cognizant Contractin and (ii) one copy to the cognizant auditor.

Date of Disclosure Statement(s)
Name(s) and Address(es) of
Contracting Officer(s) where filed:
The offeror further certifies that
used in estimating costs in pricin
posal are consistent with the cost
practices disclosed !n the Disclos
ment(s).

11. CERTIFICATE OF MONETARY E
The offeror hereby certifies th
gether with all divisions, subsid
affiliates under common control,
celve net awards of negotiated n
fense prime contracts subject
counting standards totaling more
000,000 in either Federal Fiscal /
1975 or net awards of negotiat
defense prime contracts and s
subject to cost accounting stande
more than $10,000,000 in Federal
1976 or in any subsequent Federa
preceding the year in which t
W&S submitted.

uted e the pos

ards miver ee 4

this hich

214

applicability. Waivers of cost accounting Board does recognize that in particular standards, rules, and regulations are

standards a "materiality" statement may be treated in § 1-3.1211.

useful, and ir such cases, it will include one. [41 FR 47237, Oct. 28, 1976)

See for example the addition at § 402.50(e).

(of 4 CFR.) (37 FR 4141, February 29, 1972.) $ 1-3.1202 Definitions.

In the Cost Accounting Standards Board When used in this subpart, the words Statement of Operating Policies, Proceand terms defined in 4 CFR Part 331 et dures, and Objectives, the following seq. shall have the meanings set forth statement of the Board's objective in therein (see also § 1-3.1220(b)). In addi regard to materiality was promulgated: tion, the words and terms defined in this

Materiality. The Board believes that the paragraph shall have the meanings set administration of its rules, regulations, and forth below:

Cost Accounting Standards should be reason(a) "Net awards" means the obligated able and not seek to deal with insignificant value of negotiated national defense amounts of cost. Although this rule of comprime contracts, awarded in the report

mon sense is already practiced by the Gov

ernment, the Board recognizes that, in paring period, minus cancellations, termi

ticular standards, a specific "materiality" nations, and other credit transactions

statement may be useful; and, in such cases, relating thereto.

it will include one. (b) "Company” includes all divisions, The Board expects that in implementing its subsidiaries, and affiliates of the con promulgations, it is appropriate to contractor under common control.

sider the following criteria in determining (c) "Contractor" and "subcontractor" whether a transaction or a decision about as the words pertain to contract require

an accounting practice is material in the ments under the clause entitled Cost Ac

context of any Board Issuance:

1. The absolute dollar amount involved. counting Standards (see § 1-3.1204–1)

The larger the dollar amount, the more likely apply to business units, such as a profit It is that & decision involving it will be center, division, subsidiary, or similar material. unit of a company, which perform the 2. The amount of total contract cost comcontract, even in those cases where the pare t with the amount under consideration. contract was entered into on behalf of The larger the portion of the total contract the overall company rather than the

cost which is represented by the item or

the decision under consideration, the more business unit.

likely it is to be material. [29 FR 10155, July 24, 1964, as amended at

3. The relationship between a cost item and 41 FR 47237, Oct. 28, 1976)

a cost objective. Decisions about direct cost $ 1-3.1202-1 Materiality.

items, especially if the amounts are them

selves part of a base for distribution of inMateriality shall be considered in the direct cost, will normally be more material application of regulations and standards than like decisions about indirect costs. of the Cost Accounting Standards Board. 4. The impact on Government funding. The criteria set forth in this § 1-3.1202-1

Decisions about accounting treatment will shall be used.

be more material if they influence the dis

tribution of costs between Government and (a) In promulgating its rules and regu

non-Government cost objectives than 1f all lations, the Board made the following

cost objectives have Government financial comment:

support. Materiality. The Board notes that many 5. The relationship to price. When contract commentators urged that a concept of ma pricing is based upon estimated cost, declteriality be incorporated in the Board's regu

sions about cost accounting treatment in lations, to the end that minimal or

estimates are more material than comparable insignificant modifications of or fallures to decisions about treatment of actual costs. use disclosed cost accounting practices would

When contract pricing is based on actual not be subject to price adjustment.

costs, decisions about accounting treatment The Board agrees that the administration

for actual costs are more material than comof its rules, regulations, and Cost Accounting

parable decisions about estimates. Standards should be reasonable and not seek

6. The cumulative effect of individually to deal with insignificant amounts of cost.

immaterial items. It is appropriate to conSince this rule of common sense is already sider whether individual variances (a) tend practiced by the Government, the Board does to offset one another, or (b) tend to be in the not believe that there is any need to attempt same direction and hence to accumulate to formulate and state an acceptable concept

Into a material amount. of materiality applicable to all Board rules, These criteria should be considered toregulations and standards, although the gether; no one criterion is wholly determinaBoard might consider doing so if subsequent tive of immateriality. In particular standevents indicate the necessity therefor. The ards the Board will give consideration to

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cepted, will result in a contract subjecu
the requirements of the Cost Account
Standards Board must, as a condition of
zacting, submit a Disclosure Statemen
required by regulations of the Board
Disclosure Statement must be submitted
1 part of the offeror's proposal under
solicitation (see (I) below) unless (i)
Peror, together with all divisions, subsid
ries, and affiliates under common control,
not receive net awards exceeding the mo
fars exemption for disclosure as establis
by the Cost Accounting Standards BC
See (II) below); (ii) the offeror excee
the monetary exemption in the Federal
cal Year immediately preceding the year
shich this proposal was submitted but
scordance with the regulations of the
decounting Standards Board, is not yet
quired to submit a Disclosure Statement
(DI) below); (iii) the offeror has alre
ubmitted a Disclosure Statement disclo
the practices used in connection with

ac

for

ollar

contracts of $500,000 or less can be ex1m

empted and requires an additional notice ntire

to be inserted in solicitations. never

(2) Nondefense contract. The exemp

tions in § 1-3.1203(a) (1) also apply to ssing

solicitations which are likely to result shall in a negotiated nondefense contract exceeds ceeding $100,000. Additionally, the folIkely lowing nondefense procurements are ex

empt:

(i) Contracts with educational Insti

tutions subject to Subpart 1-15.3 (41 con CFR § 1-15.3);

(ii) Contracts with State and local onal governments subject to Subpart 1-15,7 itled

(41 CFR § 1-15.7); zting

(iii) Contracts with hospitals; and h in (iv) Firm fixed-price contracts to be Cost awarded after receiving offers from at

least two firms not associated with each fica other, providing that (A) the solicitation and to all competing firms is identical; (B)

AC price is the only consideration in selectrist ing the contractor from among the comch in peting firms solicited; (C) the lowest 7 all

offer received in compliance with the it in solicitation from among those solicited ,000,

is accepted: and (D) the profit center,

division, or similar organizational unit tab

of a company to which the contract is to com be awarded is not on the date of such ian

award performing a contract or subconset tract subject to the Cost Accounting

Standards clause. Under (D), performuti ance of a contract or subcontract extends cted

from the date of award of the contract to Con the date when the work required by the set contract is completed. Provided, That ven

the solicitation notice shall be inserted (B)

in all such solicitations, and the notice 1-1.

shall be withdrawn by the contracting

officer only if, on the date of contract rtial award, all of the criteria of this exemp

tion are met. d to

(3) Notice for solicitations. Insert the tion

following notice in all solicitations which the

are likely to result in a negotiated conded. tract exceeding $100,000, unless the proPro

curement is exempted under § 1-3.1203 art

(a) (1) or (a) (2): and DISCLOSURE STATEMENT-COST ACCOUNTING

PRACTICES AND CERTIFICATION uted Any contract in excess of $100,000 resulting

the from this solicitation except (1) when the pos price negotiated is based on (a) established

catalog or market prices of commercial items ards

sold in substantial quantities to the general

public, or (b) prices set by law or regulation, Liver

or (2) contracts which are otherwise exempt
(see 4 CFR 331.30(b) and FPR $ 1-3.1203(a)

(2)), shall be subject to the requirements of this the Cost Accounting Standards Board. Any hich offeror submitting a proposal, which, if ac

214

pricing of this proposal (see (IV) below)
17) post award submission has been aut)
zed by the Contracting Officer. See 4!
351.70 for submission of a copy of the
closure Statement to the Cost Accoun
Standards Board.
Caution: A practice disclosed in a
closure Statement shall not, by virtue of
disclosure, be deemed to be a proper,
proved, or agreed to practice for pricing
posals or accumulating and reporting
tract performance cost data.

Check the appropriate box below:
U 1. CERTIFICATE OF CONCURRENT SUBMIS

OY DISCLOSURE STATEMENT (S)
The offeror hereby certifies that he
submitted, as a part of his proposal u
this solicitation, copies of the Discl
Statement(s) as follows: (1) original and
copy to the cognizant Contracting O
and (11) one copy to the cognizant cor

mall

04);

auditor
Date of Disclosure Statement(s):
Name(s) and Address(es) of Cogi
Contracting Officer(s) where filed:
The offeror further certifies that pre
used in estimating costs in pricing thi
posal are consistent with the cost acco
practices disclosed in the Disclosure
ment(s).
UA. CERTIFICATE OF MONETARY EXEM

The offeror hereby certifies that 1
gether with all divisions, subsidiarie
afiliates under common control, did
celve net awards of negotiated natio
lense prime contracts subject to c
counting standards totaling more th:
000,000 in either Federal Fiscal Year
1975 or net awards of negotiated 1
defense prime contracts and subc
subject to cost accounting standards
more than $10,000,000 in Federal Fis
1978 or in any subsequent Federal Fis
preceding the year in which this
was submitted.

ee 4

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