Subpart 229.4-Contract Clauses

229.402 Foreign contracts.

229.402-1 Foreign fixed-price contracts.

(S-70) The contracting officer shall insert a clause substantially as shown at 252.229-7000, Fixed-Price, IntoPlane, Fuel Contracts at Overseas Locations, in solicitations and contracts when a fixed-price contract is contemplated for into-plane fueling at overseas locations.

229.402-70 Use of foreign tax clauses.

(a) Exclusion of specific taxes from he contract price. The contracting oficer shall not attempt to provide a contractor or prospective contractor Information as to foreign taxes or luties normally applicable to the acquisition. The contracting officer hall, however, at the time of negotiaion of a contract to be performed in a country or area listed in 229.101-70(c) btain from the appropriate Designatd Commanding Officer detailed infornation concerning the taxes and luties from which the Government of he United States is exempt under the rovisions of applicable international greements or foreign law. Informaion obtained by the contracting offier regarding exemptions shall be ade available to the contractor or rospective contractor and retained as art of the contract file.

(b) Tax exemption certificates and ther assistance. During the adminisration of the contract, the contractng officer shall, as appropriate, issue ax exemption certificates or use other rocedures, if available, to assist the ontractor in obtaining relief from forign taxes and duties which were exluded from the contract price. If, in ccordance with its contract, the conractor notifies the contracting officer hat a tax or duty has been assessed y a foreign government on the conractor which could result in an inrease in the contract price, the conracting officer shall immediately seek dvice and assistance in accordance with 229.101-70(d).

auditor shall be responsible for making recommendations to the ACO as to whether:

(1) A contractor's Disclosure Statement, submitted as a condition of contracting, adequately describes the actual or proposed cost accounting practices as required by Pub. L. 91379, 50 U.S.C. App. 2168, as implemented by the Cost Accounting Standards Board;

(2) A contractor's disclosed cost accounting practices are in compliance with FAR Part 31 and applicable cost accounting standards.

(3) A contractor's or subcontractor's failure to comply with applicable cost accounting standards or to follow consistently his disclosed cost accounting practices has resulted, or may result in, any increased cost paid by the Government; and

(4) A contractor's or subcontractor's proposed price changes, submitted as a result of changes made to previously

disclosed or established cost accounting practices, are fair and reasonable.

Subpart 230.70-Facilities Capital Employed for Facilities in Use

230.7001 Policy.

(a) It is the policy of the Depart ment of Defense to reeognize facilities capital employed as an element in establishing the price of certain negoti ated defense contracts when such contracts are priced on the basis of cost analysis. The inclusion of this recognition is intended to reward contractor investments, motivate increased productivity and reduced costs through the use of modern manufacturing technology, and to generate other efficiencies in the performance of defense contracts. The recognition of contractor investments in the development of the profit objective will result in a profit objective based on a combination of effort, risk, and investment factors.

(b) Separate recognition shall be given to the cost of capital and the special risk associated with the facilities capital employed for defense contract purposes.

(1) The risk aspect of facilities capital employed shall be recognized as a part of profit when the profit objec

tive is established in accordance with the guidelines set forth in 215 9051(d).

(2) Cost of money for facilities cap ital will be recognized as an allowable cost in those negotiated defense con tracts priced on the basis of cost anal ysis (see FAR 31.205-10(a)).

230.7002 Definitions, measurement, and

allocation.

Cost Accounting Standard (CAS. Na 414, "Cost of Money as an Element of the Cost of Facilities Capital" (See Ap pendix 0), establishes criteria for the measurement and allocation of the cost of capital committed to facilities as an element of contract cost for ha torical cost determination purposes. Important features of the CAS are ita definitions, techniques for application and a prescribed Form CASBCMP with instructions. This subpart adopts the techniques of CAS 414 as the ap proved methods of measurement and allocation of facilities cost of money to overhead pools at the business unit level, and adds only such supplementsry procedures as are necessary to extend those techniques to contract forward pricing and administration purposes. Therefore, these procedures are intended to be completely compati ble with, and an extension of, the definitions, criteria and techniques of CAS 414. Contractors who computerize their financial data are encouraged to meet the requirements of both CAS 414 and this Subpart from the same data bank and programs.

230.7003 Estimating business unit facili

ties capital and cost of money.

The method of estimating the bussness unit facilities capital and cost of money utilizes the techniques of CAS 414. Cost of money factors (CMP) by overhead pools at the business unit are developed using Form CASB-CMF Three elements are required to develop cost of money factors: Business unit facilities capital data, overhead allocation base data, and the interest rate promulgated by the Secretary of the Treasury pursuant to Pub. L. 9241. These elements are discussed below.

(a) Business unit facilities capital data. The net book value (acquisition cost less accumulated depreciation) is used for each cost accounting period. The net book value used is the total of (1) the net book value of facilities recorded on the accounting records of the business unit, (2) the capitalized value of leases (see FAR 31.205-2 and FAR 31.205-36), and (3) the net book value of facilities at the corporate or group level that support depreciation charges allocated to the business unit in accordance with the provisions of CAS 403. Projections of facilities capital will be supported by budget plans and/or similar type documentation and the estimated depreciation will be the same as used in projected overhead rates. Projections will accommodate changes in the level of facilities net book value, e.g., facilities additions, deletions of facilities by sale, abandonment or other disposal, idle facilities (see FAR 31.205-17).

(b) Overhead allocation bases. The base data used to compute the CMF must be the same as that used to compute the proposed overhead rates. CMF's should be submitted and evaluated as part of the proposal.

(c) Interest rate. For purpose of projection, the most recent interest rate promulgated by the Secretary of the Treasury will be used as the cost of money rate in Column 1 of Form CASB-CMF and the same rate must be used on the DD Form 1861 to determine Contract Facilities Capital Employed (see 230.7004 below). Where actual costs are used in definitization actions, the actual treasury rate(s) applicable to the period(s) of the incurred costs will be recognized by development of a composite rate.

(d) Determination of final cost of money. CMF's estimated in accordance with the above procedures are used to develop the facilities investment base used in the pre-negotiation profit objectives. Actual CMF's are required when it is necessary to determine final allowable costs for cost settlement and/or repricing in accordance with CAS 414 and FAR 31.205-10.

230.7004 Contract facilities capital estimates.

(a) After the appropriate Forms CASB-CMF have been analyzed and CMF's have been developed, the contracting officer is in a position to estimate the facilities capital cost of money and capital employed for a contract proposal. DD Form 1861 "Contract Facilities Capital and Cost of Money" has been provided for this purpose and, when properly completed, becomes a connecting link between the Forms CASB-CMF and DD Form 1547 "Weighted Guidelines Profit/Fee Objective." An evaluated contract cost breakdown, reduced to the contracting officer's prenegotiation cost objective, must be available. The procedure is similar to applying overhead rates to appropriate overhead allocation bases to determine contract overhead costs.

(b) DD Form 1861 provides for listing overhead pools and direct-charging service centers (if used) in the same structure they appear on the contractor's cost proposal and Forms CASBCMF. The structure and allocation base units-of-measure must be compatible on all three displays. The base for each overhead pool must be broken down by year to match each separate Form CASB-CMF. Appropriate contract overhead allocation base data are extracted by year from the evaluated cost breakdown or pre-negotiation cost objective, and are listed against each separate Form CASB-CMF. Each allocation base is multiplied by its corresponding cost of money factor to get the Facilities Capital Cost of Money estimated to be incurred each year. The sum of these products represents the estimated Contract Facilities Capital Cost of Money for the year's effort. Total contract facilities cost of money is the sum of the yearly amounts.

(c) Since the Facilities Capital Cost of Money Factors reflect the applicable cost of money rate in Column 1 of Form CASB-CMF, the Contract Facilities Capital Employed can be determined by dividing the contract Cost of Money by that same rate. DD Form 1861 is designed to record and compute all the above in the most direct way possible, and the end result is the

Contract Facilities Capital Cost of Money and Capital Employed which is carried forward to DD Form 1547.

230.7005 Pre-award facilities capital applications.

Facilities Capital Cost of Money and Capital Employed as determined above, are applied in establishing cost and price objectives as follows:

(a) Cost of money.

(1) Cost objective. This special, imputed cost of money shall be used, together with normal, booked costs, in establishing a cost objective or the target cost when structuring an incentive type contract. Target costs thus established at the outset, shall not be adjusted as actual cost of money rates become available for the periods during which contract performance takes place.

(2) Profit objective. Cost of money shall not be included as part of the cost base when measuring the contractor's effort in connection with establishing a pre-negotiation profit objective. The cost base for this purpose shall be restricted to normal, booked costs.

(b) Facilities capital employed. The profit objective as it relates to the risk associated with facilities capital employed shall be assessed and weighted in accordance with the profit guidelines set forth in 215.905-1(d).

230.7006 Post award facilities capital applications.

(a) Interim billings based on costs incurred. Contract Facilities Capital Cost of Money may be included in cost reimbursement and progress payment invoices. The amount that qualifies as cost incurred for purposes of the "Cost Reimbursement, Fee and Payment" or "Progress Payment" clause of the contract is the result of multiplying the incurred portions of the overhead pool allocation bases by the latest available Cost of Money Factors. Like applied overhead at forecasted overhead rates, such computations are interim estimates subject to adjustment. As each year's data are finalized by computation of the actual Cost of Money Factors under CAS 414 and FAR 31.20510, the new factors should be used to

calculate contract facilities cost of money for the next accounting period.

(b) Final settlement. Contract facilities capital cost of money for final cost determination or repricing is based on each year's final Cost of Money Fac tors determined under CAS 414 and supported by separate Forms CASBCMF. Contract cost must be separate ly computed in a manner similar to yearly final overhead rates. Also like overhead costs, the final settlement will include an adjustment from inter im to final contract cost of money However, estimated or target cost wil not be adjusted.

230.7007 Administrative procedures.

(a) Contractor submission of Forms CASB-CMF will normally be initiated under the same circumstances as For ward Pricing Rate Agreements (Set FAR 15.809), and evaluated as comple mentary documents and procedures Separate Forms are required for each prospective cost accounting period during which Government contract performance is anticipated. If the con tractor does not annually negotiate FPRA's, submissions may nevertheless be made annually or with individua contract pricing proposals, as agreed to by the contractor and the cognizant ACO. The cognizant ACO shall, with the assistance of the cognizant aud tor, evaluate the cost of money i tors, and retain approved factors with other negotiated forward pricing data and rates.

(b) When a contracting officer use the Weighted Guidelines method of determining a profit objective under the criteria of 15.902, he will complete th a DD Form 1861 "Contract Facilitie Capital and Cost of Money" after eva e uating the contractor's cost proposto and determining this pre-negotiatio cost objective, but before completing DD Form 1547 "Weighted Guideline Profit/Fee Objective". When ava able, a computer generated form is th ceptable, provided all essential ele ments of data are included and iden fied as DD Form 1861 data. At h option, a PCO may request the cog zant ACO to complete the DD For 1861 in connection with normal fie pricing support under FAR 15.805, and

The following definitions have been taken or developed from Cost Accounting Standard (CAS) 417, Cost of Money as an Element of the Cost of Capital Assets Under Construction (See Appendix O).

(a) Intangible capital asset. An asset that has no physical substance, has more than minimal value, and is expected to be held by an enterprise for continued use or possession beyond the current accounting period for the benefit it yields.

(b) Tangible capital asset. An asset that has physical substance, more than minimal value, and is expected to be held by an enterprise for continued use or possession beyond the current accounting period for the service it yields.

(c) Cost of money rate. The cost of money rate is either the interest rate determined by the Secretary of the

Treasury pursuant to Pub. L. 92-41 (85 Stat 97), or the time-weighted average of such rates for each cost accounting period during which the asset is being constructed, fabricated, or developed. The time-weighted average interest rate is calculated by multiplying the various rates in effect during the months of construction by the number of months each rate was in effect. The sum of the products is divided by the total number of months in which the rates were experienced.

(d) Representative investment. The representative investment is the calculated amount considered invested by the contractor in the project to construct, fabricate, or develop the asset during the cost accounting period. In calculating the representative investment, consideration must be given to the rate or expenditure pattern of the investment, i.e., if most of the investment was at the end of the cost accounting period, the representative investment calculation must reflect this fact.

(1) If the contractor experiences an irregular or uneven expenditure pattern in the construction, fabrication, or development of a capital asset, i.e., a majority of the construction costs were incurred toward the beginning, middle, or end of the cost accounting period, the contractor must either:

(i) Determine a representative investment amount for the cost accounting period by calculating the average of the month-end balances for that cost accounting period; or

(ii) Treat month-end balances as individual representative investment

amounts.

(2) If the construction, fabrication, or development costs were incurred in a fairly uniform expenditure pattern throughout the construction period, the contractor may:

(i) Determine a representative investment amount for the cost accounting period by averaging the beginning and ending balances of the construction, fabrication, or development cost account for the cost accounting period; or

(ii) Treat month-end balances as individual representative investment amounts.