1.500

Subpart 5-Contingent or Other Fees

Scope of Subpart. This Subpart sets forth the procedures to be followed and prescribes the form to be used for obtaining information concerning contingent or other fees paid by contractors for soliciting or securing contracts from NASA.

1.501 (Reserved)

1.502 Applicability. This Subpart applies to all contracts.

1.503 Covenant Against Contingent Fees Clause. Every contract shall contain the clause set below:

forth

or

COVENANT AGAINST CONTINGENT FEES (FEBRUARY 1962) The Contractor warrants that no person selling agency has been employed or retained to solicit or secure this contract upon an agreement or understanding for a commission, percentage, brokerage, or contingent fee, excepting bona fide employees or bona fide established commercial or selling agencies maintained by the Contractor for the purpose of securing business. For breach or violation of this warranty, the Government shall have the right to annul this contract without liability or in its discretion, to deduct from the contract price or consideration, or otherwise recover, the full amount of such commission, percentage, brokerage, or contingent fee.

1.504 Improper Influence. The term "improper influence" means influence, direct or indirect, which induces or tends to induce consideration or action by any employee or officer of the United States with respect to any Government contract on any basis other than the merits of the matter.

1.505

General Principles and Standards Applicable to the Covenant. The principles and standards set forth in this Subpart are intended to be used as a guide in the negotiation, award, administration, or enforcement, of all contracts. 1.505-1 Contingent Character of the Fee. Any fee, whether called commission, percentage, brokerage, or contingent fee, or otherwise denominated, is within the purview of the covenant

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GENERAL PROVISIONS

if, in fact, any portion thereof is dependent upon success in obtaining or securing the Government contract or contracts involved. The fact, however, that a fee of a contingent nature is involved does not preclude a relationship which qualifies under the exceptions to the prohibition of the covenant. 1.505-2 Exceptions to the Prohibition of the Covenant. Excepted from the prohibition of the covenant are "bona fide employees" and "bona fide | established commercial or selling agencies maintained by the contractor for the purpose of securing business."

1.505-3 Bona Fide Employee. The term "bona fide employee," for the purpose of the exception to the prohibition of covenant, means an individual (including a corporate of ficer) employed by a concern in good faith to devote his full time to such concern and no other concern and over whom the concern has the right to exercise supervision and control as to time, place, and manner of performance of work. It is recognized that a concern, especially a small business concern, may employ an individual who represents ot her concerns. The factors set forth in 1.505-4, except (d) thereof, shall be applied to determine whether such an individual comes within the exception to the prohibition of the covenant.

or,

(a) A person may be a bona fide employee whether his compensation is on a fixed salary basis, when customary in the trade, on a percentage, commission, or other contingent basis or a combination of the foregoing.

(b) The hiring must contemplate some continuity and it may not be related only to the obtaining of one or more specific Government contracts.

(c) An employee is not "bona fide" who seeks to obtain any Government contract or contracts for his employer through the use of improper influence or who holds himself out as being able to obt ain any Government contract or contracts through improper influence.

80-137 0-81--9

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CONTINGENT OR OTHER FEES

exact

1.505-4 Bona Fide Established Commercial or Selling Agency Maintained by the Contractor for the Purpose of Securing Business. In determining whether an agency is a "bona fide established commercial or selling agency maintained by the contractor for the purpose of securing business," the factors set forth below shall be considered. They are necessarily incapable of measurement or precise definition, and it is neither possible nor desirable to prescribe the relative weight to be given any single factor as against any other factor or as against all other factors. The conclusions to be reached in a given case will necessarily depend upon a care ful evaluation of the agreement and other attendant facts and circumstances.

(a) The fees charged should not be inequitable and exorbitant in relation to the services actually rendered. That is, the compensation should be commensurate with the nature and extent of the services and should not be excessive as compared with the fees customarily allowed in the trade concerned for similar services related to commercial (non-Government) business. In evaluating reasonableness of the fee, there should be considered services of the agent other than actual solicitation as, for example, technical, consultant, or managerial services, and assistance in the procurement of essential personnel, facilities, materials,

equipment,

or

subcontractors for performance of the contract. (b) The selling agency should have adequate knowledge of the products and the business of the represented, well as qualifications necessary to sell the products or services on their merits.

conce rn

as

ot her

(c) There should ordinarily be a continuity of relationship between the contractor and the agency. The fact that the agency has represented the contractor over a considerable period of time is a factor for favorable consideration. It is not

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intended, however, to disqualify newly established contractor-agent relationships where a continuing relationship is contemplated by the parties.

(d) It should appear that the agency is an established concern. The agency may be either one which has been in business for a considerable period of time or a new agency which is a presently going concern and which is likely to continue in business as a commercial or selling agency in the future. The business of the agency should be conducted in the agency name and characterized by the customary indications of the conduct of a regular business.

(e) The fact that a selling agency confines its selling activities to the field of Government contracts does not, in and of itself, disqualify it under the covenant. The fact, however, that the selling agency is employed to secure business generally, that is, to represent the concern in connection with sales to the Government as well as regular commercial sales to non-Government activities, is a factor entitled to favorable consideration in evaluating the case as one coming within the authorized exception. Arrangements confined, however, to obtaining Government contracts, particularly those involving a selling agency organized immediately prior to or during periods of expanded procurement resulting from conditions of national emergency, must be closely scrutinized. However, any agency or agent is not "bona fide" which seeks to obtain any Government contract or contracts for its principals through the use of improper influence or which holds itself out as being able to obtain any Government contract or contracts through improper influence. 1.505-5 Fees for Information. Contingent fees paid for "information" leading to obtaining a Government contract or contracts are included in the prohibition and, accordingly, are in breach of the covenant unless the agent qualifies under the exception as a bona fide employee or a bona fide

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established

commercial

or

selling agency

maintained by the contractor for the purpose of securing business.

1.506 Representation and Agreement Required from Prospective Contractors.

1.506-1(a) General. Except as provided in 1.506-3, each contracting officer shall inquire of and secure a written representation from Frospective contractors as to whether they have employed or retained any company or person (other than a full-time employee working solely for the prospective contractor) to solicit or secure the contract, and shall secure a written agreement to furnish information relating thereto as required by the contracting officer. When the SF 33 is not used, the clause in (b) below shall be included in the solicitation. The Contractor's Statement of Contingent or Other Fees (Standard Form 119) shall be used without deviation when either part of the inquiry provided in (b) below is answered in the affirmative. The form shall also be used without deviation in any other case when a contracting officer desires to obtain such information. When further information is required, it may be obtained in a ny appropriate manner. Normally, submission of the form shall be required only of successful bidders and offerors, and contractors. (b) Contingent Fee. In accordance with (a) above, insert the following clause.

certifies as

CONTINGENT FEE (APRIL 1977) The of feror/Quoter represents and part of his proposal/quotation that: (Check all applicable boxes or blocks).

(a) He () has, () has not, employed or retained any company or person (other than a fulltime, bona fide employee working solely for the offeror/quoter) to solicit or secure this contract, and (b) he () has, () has not, paid or agreed to pay any company or person (other than a full-time bona fide employee working solely for

NASA PROCUREMENT REGULATION