[Title 48 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2003 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

          48
          Chapter 29 to End
          Revised as of October 1, 2001

          Federal Acquisition Regulations System





          Containing a codification of documents 
          of general applicability and future effect

          As of October 1, 2001

          With Ancillaries

          Published by
          Office of the Federal Register
          National Archives and Records
          Administration

          A Special Edition of the Federal Register



[[Page ii]]

                                      




                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2001



 For sale by the Superintendent of Documents, U.S. Government Printing Office
  Internet: bookstore.gpo.gov   Phone: (202) 512-1800   Fax: (202) 512-2250
                    Mail: Stop SSOP, Washington, DC 20402-0001



[[Page iii]]




                            Table of Contents



                                                                    Page
  Explanation.................................................      vi

  Title 48:
          Chapter 29--Department of Labor                            3
          Chapter 34--Department of Education Acquisition 
          Regulation                                                61
          Chapter 35--Panama Canal Commission                       89
          Chapter 44--Federal Emergency Management Agency          173
          Chapter 51--Department of the Army Acquisition 
          Regulations                                              197
          Chapter 52--Department of the Navy Acquisition 
          Regulations                                              207
          Chapter 53--Department of the Air Force Federal 
          Acquisition Regulation Supplement [Reserved]
          Chapter 54--Defense Logistics Agency, Department of 
          Defense                                                  215
          Chapter 57--African Development Foundation               219
          Chapter 61--General Services Administration Board of 
          Contract Appeals                                         221
          Chapter 63--Department of Transportation Board of 
          Contract Appeals                                         261
          Chapter 99--Cost Accounting Standards Board, Office 
          of Federal Procurement Policy, Office of Management 
          and Budget                                               275
  Finding Aids:
      Table of CFR Titles and Chapters........................     493

[[Page iv]]

      Alphabetical List of Agencies Appearing in the CFR......     511
      List of CFR Sections Affected...........................     521



[[Page v]]


      


                     ----------------------------

                     Cite this Code:  CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 48 CFR 2901.100 
                       refers to title 48, part 
                       2901, section 100.

                     ----------------------------

[[Page vi]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, October 1, 2001, consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vii]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 1986, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, or 1973-1985, published in seven separate volumes. For 
the period beginning January 1, 1986, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Statutory 
Authorities and Agency Rules (Table I). A list of CFR titles, chapters, 
and parts and an alphabetical list of agencies publishing in the CFR are 
also included in this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-523-5227 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, Washington, DC 20408 or e-mail 
[email protected].

SALES

    The Government Printing Office (GPO) processes all sales and 
distribution of the CFR. For payment by credit card, call 202-512-1800, 
M-F 8 a.m. to 4 p.m. e.s.t. or fax your order to 202-512-2250, 24 hours 
a day. For payment by check, write to the Superintendent of Documents, 
Attn: New Orders, P.O. Box 371954, Pittsburgh, PA 15250-7954. For GPO 
Customer Service call 202-512-1803.

ELECTRONIC SERVICES

    The full text of the Code of Federal Regulations, the LSA (List of 
CFR Sections Affected), The United States Government Manual, the Federal 
Register, Public Laws, Public Papers, Weekly Compilation of Presidential 
Documents and the Privacy Act Compilation are available in electronic 
format at www.access.gpo.gov/nara (''GPO Access''). For more 
information, contact Electronic Information Dissemination Services, U.S. 
Government Printing Office. Phone 202-512-1530, or 888-293-6498 (toll-
free). E-mail, [email protected].

[[Page viii]]

    The Office of the Federal Register also offers a free service on the 
National Archives and Records Administration's (NARA) World Wide Web 
site for public law numbers, Federal Register finding aids, and related 
information. Connect to NARA's web site at www.nara.gov/fedreg. The NARA 
site also contains links to GPO Access.

                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

October 1, 2001.



[[Page ix]]



                               THIS TITLE

    Title 48--Federal Acquisition Regulations System is composed of 
seven volumes. The chapters in these volumes are arranged as follows: 
Chapter 1 (parts 1 to 51), chapter 1 (parts 52 to 99), chapter 2 (parts 
201 to 299), chapters 3 to 6, chapters 7 to 14, chapters 15 to 28 and 
chapter 29 to end. The contents of these volumes represent all current 
regulations codified under this title of the CFR as of October 1, 2001.

    The Federal acquisition regulations in chapter 1 are those 
government-wide acquisition regulations jointly issued by the General 
Services Administration, the Department of Defense, and the National 
Aeronautics and Space Administration. Chapters 2 through 99 are 
acquisition regulations issued by individual government agencies. Parts 
1 to 69 in each of chapters 2 through 99 are reserved for agency 
regulations implementing the Federal acquisition regulations in chapter 
1 and are numerically keyed to them. Parts 70 to 99 in chapters 2 
through 99 contain agency regulations supplementing the Federal 
acquisition regulations.

    The OMB control numbers for the Federal Acquisition Regulations 
System appear in section 1.106 of chapter 1. For the convenience of the 
user section 1.106 is reprinted in the Finding Aids section of the 
second volume containing chapter 1 (parts 52 to 99).

    The first volume, containing chapter 1 (parts 1 to 51), includes an 
index to the Federal acquisition regulations.

[[Page x]]





[[Page 1]]



            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

                 (This book contains chapter 29 to End)

  --------------------------------------------------------------------
                                                                    Part

chapter 29--Department of Labor.............................        2901

chapter 34--Department of Education Acquisition Regulation..        3401

chapter 35--Panama Canal Commission.........................        3501

chapter 44--Federal Emergency Management Agency.............        4401

chapter 51--Department of the Army Acquisition Regulations..        5108

chapter 52--Department of the Navy Acquisition Regulations..        5215
chapter 53--Department of the Air Force Federal Acquisition Regulation 
  Supplement [Reserved]

chapter 54--Defense Logistics Agency, Department of Defense.        5416

chapter 57--African Development Foundation..................        5706

chapter 61--General Services Administration Board of 
  Contract Appeals..........................................        6101

chapter 63--Department of Transportation Board of Contract 
  Appeals...................................................        6301

[[Page 2]]


chapter 99--Cost Accounting Standards Board, Office of 
  Federal Procurement Policy, Office of Management and 
  Budget....................................................        9900

[[Page 3]]



                     CHAPTER 29--DEPARTMENT OF LABOR

                          (Parts 2900 to 2999)

  --------------------------------------------------------------------

                          SUBCHAPTER A--GENERAL
Part                                                                Page
2901            Department of Labor Acquisition Regulation 
                    System..................................           5
2902            Definitions of words and terms..............          16
2903            Improper business practices and personal 
                    conflicts of interest...................          16
2904            Administrative matters......................          18
                   SUBCHAPTER B--ACQUISITION PLANNING
2905            Publicizing contract actions................          19
2906            Competition requirements....................          20
2907            Acquisition planning........................          20
2908            Required sources of supplies and services...          21
2909            Contractor qualifications...................          21
2910            Specifications, standards, and other 
                    purchase descriptions...................          23
          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES
2913            Small purchase and other simplified purchase 
                    procedures..............................          25
2914            Sealed bidding..............................          26
2915            Contracting by negotiation..................          27
2916            Types of contracts..........................          29
2917            Special contracting methods.................          29
                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS
2919            Small business and small disadvantaged 
                    business concerns.......................          31
2920            Labor surplus area concerns.................          35
2922            Application of labor laws to Government 
                    acquisitions............................          36
2923            Environment, conservation, and occupational 
                    safety..................................          37
2924            Protection of privacy and freedom of 
                    information.............................          38

[[Page 4]]

2925            Foreign acquisition.........................          38
             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS
2928            Bonds and insurance.........................          41
2929            Taxes.......................................          41
2930            Cost accounting standards...................          41
2931            Contract cost principles and procedures.....          41
2932            Contract financing..........................          41
2933            Protests, disputes, and appeals.............          43
             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING
2935            Research and development contracting........          46
2936            Construction and architect-engineer 
                    contracts...............................          46
2937            Service contracting.........................          48
                    SUBCHAPTER G--CONTRACT MANAGEMENT
2942            Contract administration.....................          50
2943            Contract modifications......................          50
2945            Government property.........................          51
2948            Value engineering...........................          52
2949            Termination of contracts....................          52
2951            Use of Government sources by contractors....          52
                     SUBCHAPTER H--CLAUSE AND FORMS
2952            Solicitation provisions and contract clauses          54
2953            Forms.......................................          54

[[Page 5]]


                          SUBCHAPTER A--GENERAL


PART 2901--DEPARTMENT OF LABOR ACQUISITION REGULATION SYSTEM--Table of Contents




                    Subpart 2901.1--Regulation System

Sec.
2901.100  Scope of subpart.
2901.101  Purpose.
2901.102  Authority.
2901.103  Applicability.
2901.103-70  Exclusions.
2901.104  Issuance.
2901.104-1  Publication and code arrangement.
2901.104-2  Arrangement of regulations.
2901.104-3  Copies.

                     Subpart 2901.2--Administration

2901.201  Maintenance of the FAR.
2901.201-1  The Civilian Agency Acquisition Council.

             Subpart 2901.3--Agency Acquisition Regulations

2901.301  Policy.
2901.302  Limitations.
2901.303  Codification and public participation.
2901.304  Agency control and compliance procedures.

            Subpart 2901.4--Deviations From the FAR and DOLAR

2901.403  Individual deviations.
2901.404  Class deviations.
2901.405  Deviations pertaining to treaties and executive agreements.

       Subpart 2901.6--Contracting Authority and Responsibilities

2901.601  General.
2901.602  Contracting officers.
2901.602-1  Authority.
2901.603  Selection, appointment, and termination of appointment.
2901.603-1  General.
2901.603-70  Modification of appointment.
2901.603-71  Ratification of unauthorized contract awards.
2901.603-72  Responsibility of other Government personnel.
2901.603-73  Contracting officer's representatives.
2901.603-74  Legal review and assistance.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8914, Mar. 5, 1985, unless otherwise noted.



                    Subpart 2901.1--Regulation System



2901.100  Scope of subpart.

    This subpart sets forth introductory information pertaining to the 
Department of Labor Acquisition Regulation, referred to as the DOLAR. 
This subpart explains the relationship of the DOLAR to the Federal 
Acquisition Regulation (FAR) and explains the DOLAR's purpose, 
authority, applicability, exclusions, and issuance.



2901.101  Purpose.

    (a) This subpart establishes chapter 29, the Department of Labor 
Acquisition Regulation, within title 48, the Federal Acquisition 
Regulations System, of the Code of Federal Regulations.
    (b) The purpose of the DOLAR is to implement the FAR, where further 
implementation is needed, and to supplement the FAR when coverage is 
needed for subject matter not covered in the FAR. The DOLAR is not by 
itself a complete document as it must be used in conjunction with the 
FAR.



2901.102  Authority.

    The DOLAR and amendments thereto are issued by the Procurement 
Executive pursuant to a delegation from the Secretary in accordance with 
the authority of DOL Temporary Regulation Number 44, dated February 18, 
1983, in accordance with section 1 of the Act of March 4, 1913 (29 
U.S.C. 551, 37 Stat. 736), as amended; 5 U.S.C. 301, and the Federal 
Property and Administrative Services Act of 1949, as amended, and other 
applicable law.



2901.103  Applicability.

    The FAR and DOLAR apply to all DOL acquisitions of supplies and 
services which obligate appropriated funds unless otherwise specified in 
this regulation.



2901.103-70  Exclusions.

    Certain DOL policies and procedures which might otherwise come 
within

[[Page 6]]

the scope of this regulation may be excluded from the DOLAR where there 
is appropriate justification, such as:
    (a) Subject matter that is procedural in nature and internal to the 
operation of the Department. These matters are contained in the 
Department of Labor Manual Series (DLMS).
    (b) Instructional or training material that more fully explains 
matters covered in the FAR and DOLAR.
    (c) Unless otherwise specifically stated, subject matter which deals 
with assistance programs where the award instruments are other than 
acquisition contracts. Administrative requirements governing all grants 
and agreements by which Department of Labor agencies award funds to 
State and Federal Governments, Indian and Native American entities, 
public and private institutions of higher education and hospitals, and 
other quasi-public and private nonprofit organizations are codified 
separately at part 29-70 of title 41 of the Code of Federal Regulations.



2901.104  Issuance.



2901.104-1  Publication and code arrangement.

    (a) The DOLAR and its subsequent changes are published when issued 
in daily issues of the Federal Register and in cumulative form in the 
Code of Federal Regulations.
    (b) The DOLAR is issued as chapter 29 of title 48 of the Code of 
Federal Regulations.



2901.104-2  Arrangement of regulations.

    (a) General. The DOLAR is divided into the same parts, subparts, 
sections, subsections and paragraphs as is the FAR. However, when the 
FAR coverage is adequate by itself, there will be no corresponding DOLAR 
part, subpart, etc.
    (b) Numbering. Where DOLAR implements the FAR, the implementing 
part, subpart, section or subsection of the DOLAR will be numbered and 
captioned, to the extent feasible, the same as the FAR part, subpart, 
section or subsection being implemented except that the implementation 
will be preceded with a 29 or a 290 such that there will always be four 
numbers to the left of the first decimal. For example, the DOLAR 
implementation of FAR 1.104-1 is shown as 2901.104-1 and DOLAR 
implementation of FAR subpart 24.1 is shown as subpart 2924.1. Material 
which supplements the FAR will be assigned the numbers 70 and up. For 
example, DOL regulations governing appointment and termination of 
appointment of contracting officers' representatives is identified as 
2901.603-70.
    (c) References and citations. (1) This regulation may be referred to 
as the Department of Labor Acquisition Regulation or the DOLAR.
    (2) References to FAR materials within this regulation will include 
FAR and the identifying number, for example, FAR 1.104-2(c)(2). 
References to DOLAR materials within the regulation will simply cite the 
identifying number, for example, 2901.104-2(c)(2).



2901.104-3  Copies.

    Copies of the DOLAR published in the Federal Register or Code of 
Federal Regulations may be purchased from the Superintendent of 
Documents, Government Printing Office, Washington, DC 20402. Requests 
should reference the DOLAR as chapter 29 of title 48. The Code of 
Federal Regulations is printed in paperback edition with updates as 
needed, and revised as of October 1 of each year. Requests for the CFR 
version of the DOLAR should reference chapter 29 of title 48.



                     Subpart 2901.2--Administration



2901.201  Maintenance of the FAR.



2901.201-1  The Civilian Agency Acquisition Council.

    (a) The Department of Labor shall be represented on the Civilian 
Agency Acquisition Council by a staff member of the Office of 
Procurement and Grant Policy, Directorate of Procurement and Grant 
Management, Office of the Assistant Secretary for Administration and 
Management, appointed for that purpose by the Director, Directorate of 
Procurement and Grant Management.

[[Page 7]]

    (b) The Office of Procurement and Grant Policy will be responsible 
for coordination with all interested DOL elements regarding proposed FAR 
revisions and advocating revisions sought by DOL.



             Subpart 2901.3--Agency Acquisition Regulations



2901.301  Policy.

    (a) The Department of Labor Acquisition Regulation (DOLAR) System 
consists of policies, procedures and regulations which implement or 
supplement the FAR at specific levels within the Department of Labor. 
The Federal Acquisition Regulation (FAR) and the DOLAR System govern the 
contracting process and control contracting relationships between 
contractors and the Departments' agencies and offices.
    (b) The DOLAR is issued pursuant to the authority of the Secretary 
of Labor under 5 U.S.C. 301, 29 U.S.C. 551, 40 U.S.C. 486(c), and other 
authority specifically stated, and is subject to the overall authority 
of the Administrator of General Services. See FAR 1.301(c)(3).



2901.302  Limitations.

    DOLAR System issuances are limited to:
    (a) Published, codified, Department-wide regulations which implement 
or supplement FAR policies and procedures and which affect organizations 
or individuals seeking to contract with the Department;
    (b) Published, codified, lower-level regulations of agencies and 
offices which contain additional policies and procedures that supplement 
the FAR to satisfy the specific and unique needs of the agency or 
office.



2901.303  Codification and public participation.

    (a) Published issuances under the DOLAR are codified under chapter 
29 in title 48, Code of Federal Regulations and parallel the FAR in 
format, arrangement and numbering system.
    (b) Regulations codified under chapter 29 are limited to those 
affecting private or public, profit or not for profit concerns, 
organizations or individuals desiring to enter into contracts with the 
Department. Public participation procedures used in the promulgation of 
codified regulations under the DOLAR System will follow procedures of 
FAR subpart 1.5.



2901.304  Agency control and compliance procedures.

    (a) The DOLAR System is under the direct oversight and control of 
the Director, Directorate of Procurement and Grant Management. 
Procedures for review and approval of issuances under the DOLAR System 
comply with FAR subparts 1.3 and 1.4. These procedures are contained in 
2901.6.
    (b) DOLAR System issuances shall comply with the restrictions in FAR 
1.304(b) and the limitations in 2901.302. DOL Agencies and offices may 
implement or supplement the FAR or DOLAR with internal instructions not 
applicable DOL-wide. Additionally, they may request publication in the 
DOLAR of procurement instructions and other procurement material 
considered of interest to the general public. Such instructions shall 
not duplicate higher-level coverage and shall be numbered in accordance 
with FAR 1.104-2 except that the numbers prescribed there and in 
2901.104-2 shall be suffixed by the alphabetic abbreviation or other 
symbol of the respective Agency issuing the instructions. Each DOL 
Agency and office shall establish, at the headquarters level, review and 
approval procedures for maintaining oversight and control of all DOLAR 
System issuances for their respective Agency or office. These procedures 
shall include methods to prevent unnecessary duplication of higher-level 
coverage; ensure consistency and uniformity among issuances; control the 
number of directives issued; update directives; and distribute copies.
    (c) DOL Agencies and offices shall submit all proposed instructions 
and materials that implement or supplement the DOLAR to the Director, 
Directorate of Procurement and Grant Management, for review in 
conjunction with the Solicitor prior to their publication. All 
issuances, whether or not published as a part of the DOLAR System, shall 
be submitted for review. In the case of internal procurement 
instructions, the purpose of the review is

[[Page 8]]

to ascertain that such instructions are consistent with the FAR and the 
DOLAR and that they do not contain information which should be issued as 
the DOLAR.



            Subpart 2901.4--Deviations From the FAR and DOLAR



2901.403  Individual deviations.

    (a) The Director, Directorate of Procurement and Grant Management, 
is authorized to approve deviations from FAR provisions (see FAR 1.403) 
or DOLAR provisions which affect only one contracting action.
    (b) Requests for deviations under paragraph (a) of this section 
shall be submitted by the head of the contracting activity and include 
justification as to why the deviation is required.
    (c) A copy of the approved deviation shall be included in the 
contract file.



2901.404  Class deviations.

    (a) The Director, Directorate of Procurement and Grant Management, 
is authorized to approve class deviations of FAR or DOLAR provisions 
which affect more than one contracting action.
    (b) Requests for deviations under paragraph (a) of this section, 
shall be submitted by the head of the contracting activity and include 
justification as to why the deviation is required and the number of 
contracting actions which will be affected.
    (c) A copy of each approved class deviation shall be referenced in 
the contract file.
    (d) Recommended revisions to the FAR and a copy of each approved 
class FAR deviation shall be transmitted to the FAR Secretariat by the 
Director, Directorate of Procurement and Grant Management, as required 
in FAR 1.404.



2901.405  Deviations pertaining to treaties and executive agreements.

    (a) The Director, Directorate of Procurement and Grant Management, 
is responsible for transmitting to the FAR Secretariat the information 
required in FAR 1.405 (d) and (e).



       Subpart 2901.6--Contracting Authority and Responsibilities



2901.601  General.

    This subpart deals with contracting authority and responsibilities 
of the head of the agency as defined in 2901.1 and 2902.1, FAR subpart 
1.6 and this subpart.



2901.602  Contracting officers.



2901.602-1  Authority.

    Information on the limits of contracting officers' authority shall 
be maintained by the head of each contracting activity as required in 
FAR 1.601-1. The Directorate of Procurement and Grant Management shall 
also maintain this information.



2901.603  Selection, appointment, and termination of appointment.



2901.603-1  General.

    (a) First tier delegation. The Assistant Secretary for 
Administration and Management (ASAM), acting through the Procurement 
Executive, is the chief departmental official for all acquisition and 
grant matters as outlined in Secretary's Order 4-76, for:
    (1) Prescribing policies, procedures, and standards regarding the 
solicitation, award, and administration of all DOL acquisitions and 
grants for financial assistance (e.g., cooperative agreements, grants, 
and similar instruments) obligating Federal funds for the purpose of:
    (i) Obtaining property and services for the DOL and/or third 
parties.
    (ii) Promoting DOL programs and objectives through financial 
assistance.
    (2) Acquiring property and services for the United States Government 
under Title I of the Federal Property and Administrative Services Act of 
1949 (63 Stat. 379).
    (3) Establishing reporting requirements necessary for effective 
departmental acquisitions and grant management and for complying with 
data needs promulgated by the Office of Management and Budget (OMB), the 
General Services Administration (GSA), the General Accounting Office 
(GAO), and other agencies. This includes the SF-1099 report, ``Income

[[Page 9]]

Other Than Wages,'' and ``Federal Procurement Data System'' (FPDS) and 
``Federal Assistance Award Data System'' (FAADS) input.
    (b) In the Department of Labor, contracting officer and grant 
officer authority and responsibility have been delegated from the 
Secretary of Labor through the Assistant Secretary for Administration 
and Management (ASAM) to the following officials or officers acting in 
their behalf:
    (1) The Assistant Secretary for Employment and Training.
    (2) The Assistant Secretary for Occupational Safety and Health.
    (3) The Deputy Under Secretary for Employment Standards.
    (4) The Assistant Secretary for Mine Safety and Health.
    (5) The Deputy Under Secretary for International Affairs.
    (6) The Commissioner of Labor Statistics.
    (7) The Inspector General.
    (8) The Regional Administrators--OASAM.
    (9) The Director, National Capital Service Center, OASAM.
    (c) Delegations and limitations. Subject to the limitations set 
forth in this paragraph and paragraph (g), the officials designated in 
paragraph (b) possess full authority to obligate the U.S. Government 
through the use of contracts, agreements, orders, grants, and/or other 
similar instruments. This authority includes obligating Federal funds 
for the purpose of obtaining property and services for the government 
and/or third parties, or for the purpose of promoting DOL programs or 
objectives through financial assistance. Each official designated in 
paragraph (b) (except the Inspector General), is delegated authority and 
responsibility for issuing purchase orders for purchases under GSA 
Federal Supply Schedules, FEDSTRIP, and from open-market sources not to 
exceed the small purchases limitation. Acquisition of typewriters, 
office copiers, adding machines, and calculators must be written against 
blanket purchase orders maintained for such equipment by the National 
Capital Service Center, OASAM. Acquisitions of copier equipment require 
prior approval of the Directorate of Administrative Services and Safety 
and Health Programs. Paragraph (g)(2) outlines limitations on the 
purchase, lease and renewal of lease(s) of ADP equipment, software and 
services. Approval authority for competitive acquisition of consulting 
and related services costing less than $50,000 cannot be redelegated by 
the head of the contracting activity. Other delegations in this section 
may be further redelegated by the designated officials within their 
areas of assigned responsibility, except that small purchase authority 
delegated to the Assistant Secretary for Employment and Training, the 
Assistant Secretary for Occupational Safety and Health, the Deputy Under 
Secretary for Employment Standards, and the Commissioner of Labor 
Statistics is limited to the National Office only and may not be 
redelegated to the Regional Offices. Before issuing redelegations, 
contracting officers should consider the following factors to determine 
the extent to which authority shall be redelegated:
    Volume of contracting programs; presence of, or capability of 
obtaining adequately trained personnel; consolidation of smaller 
contracting programs and offices on a geographical basis; and the 
overall strengthening of the acquisition process by the selection of 
qualified personnel. Criteria for selection, appointment and termination 
of Contracting/Grant Officers are contained in the Department of Labor 
Manual Series (DLMS-2) Chapter 800. Copies of the DLMS Chapter may be 
obtained upon written request from the Office of Procurement and Grant 
Policy, Directorate of Procurement and Grant Management, Office of the 
Assistant Secretary for Administration and Management, U.S. Department 
of Labor, 200 Constitution Avenue, NW., Washington, DC 20210. An 
information copy of every further redelegation must be furnished to the 
OASAM, Directorate of Procurement and Grant Management.
    (d) Responsibilities. The following redelegations are made subject 
to the requirements and exceptions outlined in paragraph (g) regarding 
prior approval requirements and the limitations on authority to issue 
purchase orders and contracts for the purchase, lease and renewal of 
lease(s) for ADP equipment,

[[Page 10]]

software and services; and acquisition of consulting and related 
services.
    (1) The Assistant Secretary for Employment and Training, or an 
officer acting in that capacity, is delegated authority and 
responsibility for:
    (i) Obtaining all program property and services required to fulfill 
the statutory and regulatory responsibilities imposed on the Assistant 
Secretary for Employment and Training.
    (ii) Approval of all grantee acquisitions of ADP equipment, software 
and services using grants-in-aid to State and local governments.
    (iii) Establishing and maintaining an imprest fund.
    (2) The Assistant Secretary for Occupational Safety and Health, or 
an officer acting in that capacity, is delegated authority and 
responsibility for:
    (i) Issuance of grant agreements with States as required under the 
statutory and regulatory requirements imposed on the Assistant Secretary 
for Occupational Safety and Health.
    (ii) Reimbursements to States, pursuant to section 7(c)(1) of the 
Occupational Safety and Health Act of 1970 (OSH Act of 1970) (29 U.S.C. 
656(c)(1)) for State services, facilities, and personnel used to carry 
out the statutory and regulatory responsibilities imposed on the 
Assistant Secretary for Occupational Safety and Health.
    (iii) Issuance of grants, pursuant to section 21(b) of the OSH Act 
of 1970 (29 U.S.C. 670(b)) for short term training of personnel.
    (iv) Issuance of grants to nonprofit organizations for 
implementation of the expanded Employer-Employee Training Program under 
section 21(c) of the OSH Act of 1970 (29 U.S.C. 670(c)).
    (3) The Deputy Under Secretary for Employment Standards, or an 
officer acting in that capacity, is delegated authority and 
responsibility for:
    (i) Entering into agreements with States to enhance Federal/State 
cooperative efforts for the administration of comparable employment 
standards programs.
    (ii) Procuring medical services necessary for the adjudication of 
claims for injury and occupational disease filed by Federal employees in 
accordance with the Federal Employees Compensation Act (5 U.S.C. 8101, 
et seq.) and the Federal Coal Mine Health and Safety Act of 1969, as 
amended (Pub. L. 91-173, 83 Stat. 742).
    (4) The Assistant Secretary for Mine Safety and Health, or an 
officer acting in that capacity, is delegated authority and 
responsibility for:
    (i) Acquisition of all program property and services required to 
fulfill the statutory and regulatory responsibilities imposed on the 
Assistant Secretary for Mine Safety and Health.
    (ii) Issuing grants as required by the Mine Safety and Health Act of 
1977 (30 U.S.C. 801 et seq.).
    (iii) The purchase, lease, or renewal of lease(s) of ADP equipment, 
software and services costing $100,000 or less without prior approval of 
the Directorate of Information Resources Management (DIRM), OASAM. 
Requirements shall not be fragmented in order to circumvent this 
$100,000 threshold. ADP equipment, software or services costing more 
than $100,000 require prior approval of DIRM. Prior approval of DIRM for 
ADP equipment, software, or services costing less than $100,000 is also 
required when costs involved exceed GSA blanket delegation thresholds 
granted under FIRMR 201-23.104.
    (5) The Deputy Under Secretary for International Affairs, or an 
officer acting in that capacity, is delegated authority and 
responsibility for:
    (i) Acquisition of supplies and services required in support of 
training and orientation of foreign nationals.
    (ii) Acquisition of supplies and services required in support of 
overseas exhibitions required under statutory and regulatory 
responsibilities imposed on the Deputy Under Secretary for International 
Affairs.
    (iii) International responsibilities not funded by an annual 
appropriation.
    (6) The Commissioner of Labor Statistics, or an officer acting in 
that capacity, is delegated authority and responsibility for:
    (i) Acquisition of supporting statistical economic research 
services, required under the statutory and regulatory responsibilities 
imposed on the Commissioner of Labor Statistics.
    (ii) Selling special statistics developed by the Bureau of Labor 
Statistics in accordance with the Act of April 13, 1934 (29 U.S.C. 9 et 
seq.).

[[Page 11]]

    (7) The Inspector General, or an officer acting in that capacity, is 
delegated authority and responsibility for contracting with State and 
local agencies for audit services in accordance with section 4 of the 
Federal Grant and Cooperative Agreement Act of 1977 (41 U.S.C. 503).
    (8) The Regional Administrators--OASAM, or officers acting in that 
capacity, are delegated authority and responsibility within their 
respective regions, for:
    (i) The acquisition of property and services required for the 
Regional Offices, including all imprest fund purchases, GSA Federal 
Supply Schedule purchases, and open-market purchases. The acquisition of 
records equipment when the cost does not exceed the small purchases 
limitation for a single system. Purchases for typewriters, office 
copiers, adding machines, and calculators must be written against 
blanket purchase orders maintained for such equipment by the National 
Capital Service Center, OASAM. The purchase of copier equipment requires 
prior approval of the Directorate of Administrative Services and Safety 
and Health Programs.
    (ii) Contracting for ADP operational services to support regional 
remote job entry capabilities. This authority does not include the 
purchase, lease, or renewal of lease(s) for ADP equipment or software. 
Prior approval of ADP operational services is required from DIT whenever 
a Delegation of Procurement Authority (DPA) or sharing clearance is 
required from the General Services Administration (GSA).
    (9) The Director, National Capital Service Center, OASAM, or an 
officer acting in that capacity, is delegated authority and 
responsibility for acquisition of all property and services on behalf of 
DOL activities except for those contracting and grant responsibilities 
designated above. This includes (except for the Mine Safety and Health 
Administration (MSHA)) acquisition authority for the purchase, lease, 
and renewal of lease(s) of all ADP equipment, software and all ADP 
services where Agencies have obtained prior approval from the 
Directorate of Information Resources Management (DIRM), OASAM, as 
appropriate.
    (e) Compliance responsibilities. Each official designated in 
paragraph (b) is responsible for:
    (1) Complying with the policies, procedures and reporting 
requirements established by the ASAM.
    (2) Complying with the policies, procedures and other requirements 
prescribed by OMB, GSA, and other central agencies, and such 
implementing instructions as the Department may issue. This specifically 
includes competition for services and products within the small 
purchases limitation and restrictions on the use of consultant 
contracts, audiovisual productions, etc.
    (3) Within the limitations specified in this subpart, obtaining all 
property and services required to fulfill the statutory and regulatory 
responsibilities of the Agency or Office.
    (f) Policy responsibilities. The following officials have 
acquisition policy responsibilities within the DOL:
    (1) The Director, Directorate of Procurement and Grant Management, 
OASAM, or an officer acting in that capacity, is responsible for:
    (i) Developing and publishing guidelines, policies, and regulations 
for DOL acquisition and grant operations.
    (ii) Reviewing and evaluating administrative procedures for DOL 
acquisition and grant operations.
    (iii) Providing technical advice and assistance to those DOL 
officials and officers with acquisition and grant responsibilities. This 
includes interpreting the Federal Acquisition Regulations and the 
Department of Labor Acquisition Regulations and obtaining legal advice 
and assistance from the Solicitor of Labor as required.
    (iv) Providing continuous coordination with appropriate DOL and 
Federal Agencies to ensure compliance with procurement and grant 
regulations.
    (v) Providing technical advice and support to the ASAM in complying 
with the reporting requirements outlined in paragraph (a)(3).
    (2) The Director, Directorate of Information Resources Management 
(DIRM), OASAM, or an officer acting in that capacity, is responsible 
for:
    (i) Reviewing and providing prior approval for the purchase, lease 
or renewal of lease(s) of ADP equipment, software and services costing 
$100,000

[[Page 12]]

or more (the purchase price is to be used to determine inclusion in this 
paragraph regardless of whether the item is to be purchased or leased) 
and for all ADP services. Requirements shall not be fragmented in order 
to circumvent this $100,000 threshold. Reviews involving lower amounts 
will be made when costs involved exceed GSA blanket delegation 
thresholds granted under FIRMR 201-23.104.
    (ii) Providing oversight, including periodic system reviews, to 
promote efficient and effective management of information technology 
resources.
    (iii) Reviewing ADP procurement requests for compliance with 
procurement policies, standards, and regulations.
    (iv) Representing DOL and agencies in DOL in liaison with GSA and 
OMB on ADP matters.
    (v) Developing and publishing policies and guidelines for managing 
information technology resources.
    (3) The Director, Office of Small and Disadvantaged Business 
Utilization (OSDBU), is responsible for:
    (i) Assuring participation of the Department in the Federal Small 
and Disadvantaged Business Program as specified in section 8(a) (small 
disadvantaged business set-asides) and section 15 (procurement in labor 
surplus areas) of the Small Business Act, as amended (15 U.S.C. 637(a) 
and 644), and Executive Orders 11625 (Minority Business Enterprises) and 
12138 (Women-Owned Business Enterprises).
    (ii) Assuring participation and input of each Program Agency in 
establishing DOL goals for increased opportunities for small and 
disadvantaged business concerns to participate in the Department's 
procurement and grant activities.
    (iii) Providing technical advice and assistance to Program Agencies 
in establishing Agency goals for utilizing small and disadvantaged 
businesses.
    (iv) Developing systematic procedures, guidelines and regulations 
for assuring the effective implementation of the provisions of the Small 
Business Act, as amended, and Executive Orders 11625 and 12138.
    (v) Maintaining liaison with the Small Business Administration (SBA) 
on matters regarding sections 8 and 15 of the Small Business Act, as 
amended (15 U.S.C. 637(a) and 644), and Executive Order 12138, and the 
Department of Commerce on matters relating to Executive Order 11625.
    (4) The Director, Office of Information and Public Affairs (OIPA), 
is responsible for:
    (i) Reviewing all purchase orders, requisitions and contracts for 
audiovisual productions including those which contain an audiovisual 
component along with other activities before the request is processed 
and approved by OASAM or another Agency to assure compliance with DOL 
and OMB requirements. All types of audiovisual productions are covered, 
including projects for training, education, internal communications, 
and/or public information purchases. Training and education products 
will not be reviewed for content but rather for the professional 
quality, effectiveness and cost of the communications material being 
produced. (See Guidelines for Management of Departmental Audiovisual 
Activities, issued pursuant to OMB Circular A-114 and Secretary's Order 
5-79.)
    (ii) Reviewing all purchase orders, requisitions, and contracts for 
the rental or purchase of major audiovisual equipment to be used in 
production work before the request is processed and approved by OASAM or 
another DOL Agency to assure compliance with DOL and OMB requirements. 
Production equipment includes motion picture and videotape cameras, 
editing equipment and duplication equipment for videotape and film. 
Review is not necessary for such equipment as still cameras, projectors 
and tape players, cassette tape players, etc.
    (5) The Procurement Review Board is responsible for:
    (i) Reviewing all requests to award contracts, grants, agreements, 
or modifications thereto (as described in this paragraph (f)(5)) and 
recommending approval or disapproval to the ASAM:
    (A) Requests for noncompetitive procurements, discretionary grants 
and agreements exceeding the small purchases limitation;
    (B) Noncompetitive consulting and related services requests, 
including purchase orders, and personnel appointments of consultants and 
experts;

[[Page 13]]

    (C) Competitive procurements for consulting and related services 
costing $50,000 or more and modifications thereto as described in 
paragraph (g) of this section;
    (D) Major procurements and those with high waste vulnerability; and
    (E) Requests for noncompetitive research, evaluation and 
demonstration projects after prior review by the Assistant Secretary for 
Policy.
    (ii) Assuring compliance with the scope of the Board's authority, 
with OMB and DOL guidelines for use of consulting and related services 
and other special acquisitions.
    (iii) Approval by the ASAM of requests identified in this paragraph 
(f)(5) do not constitute award of a contract. The contracting officer 
has final approval authority.
    (g) Exceptions to delegations of authority. The assignment of 
procurement responsibilities described in paragraph (b) are subject to 
the exclusions listed below:
    (1) Procurement of consulting and related services. (i) The ASAM 
retains authority and responsibility for approval of requests for 
consulting and related services for individuals and organizations under 
the following circumstances:
    (A) When acquisitions by either contract or purchase order are to be 
awarded without competition, regardless of amount, or for those 
competitive actions costing $50,000 or more; and
    (B) When modifications involving changes in dollar amounts, 
deliverables under contracts or (under rare circumstances) extensions to 
existing consulting and related services contracts are required.
    (ii) The heads of the contracting activities retain approval 
authority for the acquisition of consulting and related services costing 
less than $50,000 which are obtained through competitive procedures.
    (2) Automated data processing (ADP). The following requirements and 
limitations exist for the purchase or lease of ADP equipment, software 
and services:
    (i) Authority to issue purchase orders and contracts is limited only 
to those officials in paragraph (b) with procurement responsibility 
explicitly including this authority.
    (ii) Acquisition of ADP equipment, software and services costing 
$100,000 or more requires prior approval of DIRM, OASAM.
    (iii) Acquisition of ADP equipment, software and services costing 
less than $100,000 do not require prior approval of DIRM, OASAM, unless 
costs involved exceed GSA blanket delegation thresholds granted under 
FIRMR 201-23.104. However, agencies are responsible for complying with 
FIRMR documentation requirements.
    (3) Records equipment. The purchase of records equipment; defined as 
file cabinets, shelf files, visible files, mechanized files, files 
guides, folders, jackets, wallets, and similar items used in the 
creation and maintenance of records and in mail handling requires 
special authority. Federal Property Management Regulation 101-11.306 as 
implemented by the Department of Labor Manual Series (DLMS-1) requires 
that: Form DL 1-194 be completed by the Agency Records Officer and 
forwarded to the Departmental Records Officer, DIRM, OASAM, for approval 
prior to acquisition. Regional Administrators--OASAM are delegated this 
approval authority for their respective regions. In keeping with GSA 
Bulletins FPMR B-120 and B-122 which discourage the use of legal-size 
files, no new legal size records equipment is to be purchased.
    (4) The OSDBU will periodically monitor DOL Agency acquisition and 
grant functions which relate to the preferential programs to determine 
their effectiveness and adherence to Federal and DOL requirements.
    (5) The Assistant Inspector General for Audit will periodically 
audit Agency acquisition and grant functions to determine compliance 
with governing regulations, policies and procedures.
    (h) Rescission of authority. The ASAM acting through the Director, 
Directorate of Procurement and Grant Management, reserves the right to 
rescind the acquisition and grant authority delegated herein if it is 
determined that such action is in the best interest of the Government.

[50 FR 8914, Mar. 5, 1985, as amended at 51 FR 40372, Nov. 6, 1986]

[[Page 14]]



2901.603-70  Modification of appointment.

    To modify a contracting officer's authority, the present appointment 
shall be revoked and a new certificate issued.



2901.603-71  Ratification of unauthorized contract awards.

    (a) The Government is not generally bound by agreements or 
contractual commitments made to contractors or prospective contractors 
by persons to whom acquisition authority has not been delegated. Such 
unauthorized acts may be in violation of the Federal Property and 
Administrative Services Act of 1949, other Federal laws, the FAR, the 
DOLAR, and good acquisition practice; e.g., certain requirements of law 
and regulation necessary for the proper establishment of a contractual 
obligation may not be met, such as certification of the availability of 
funds, determinations and findings, competition of sources, 
determination of contractor responsibility, price/cost analysis, 
administrative approvals, negotiations of appropriate contract clauses, 
etc.
    (b) Unauthorized commitments shall not be ratified unless it would 
have been otherwise proper to enter into a contract prior to the 
commitment. As used herein, the phrase ``otherwise proper'' means that a 
ratification of an unauthorized commitment can be made only if there 
occurred no violation of any substantive legal requirements; e.g., there 
can be no ratification unless a sole source can be justified; a 
determination made that the contractor is not debarred or otherwise 
ineligible for award; the Organizational Conflict of Interest reviews 
and determinations, if required, are completed; and where all other 
substantive legal requirements have been met. Whenever it is discovered 
that any person is performing work as a result of an unauthorized 
commitment, that person shall be advised that such work is being 
performed at their own risk pending establishment of valid contractual 
coverage. The Head of the Contracting Activity (HCA) shall then be 
notified of the circumstances. If the HCA agrees that the work appears 
to be without valid authorization, the Director, Directorate of 
Procurement and Grant Management, shall be notified by the HCA in 
accordance with the procedures outlined in paragraph (c) of this 
section.
    (c) Requests received by contracting officers for ratification of 
commitments made by personnel lacking contracting authority shall be 
processed as follows:
    (1) The individual who made the unauthorized contractual commitment 
shall furnish the contracting officer all records and documents 
concerning the commitment and a complete, written statement of facts, 
including, but not limited to, a statement as to why the acquisition 
office was not used, why the proposed contractor was selected and a list 
of other sources considered, description of work to be performed or 
products to be furnished, estimated or agreed contract price, citation 
of appropriation available, and a statement as to whether the contractor 
has commenced performance. Under exceptional circumstances, such as when 
the person who made the unauthorized commitment is no longer available 
to attest to the circumstances of the unauthorized commitment, the 
Director, Directorate of Procurement and Grant Management, may waive the 
requirement that the responsible employee initiate and document the 
request; Provided the Head of the Contracting Activity determines in 
writing that the commitment was in fact made by an employee who shall be 
identified in the determination.
    (2) The request for ratification, an approved justification for 
noncompetitive acquisition, and the information required by paragraph 
(c)(1) of this section, must be forwarded to the HCA for concurrence, 
together with recommended corrective actions to preclude recurrence.
    (3) If the HCA concurs with the request for ratification, the 
request and concurrence shall be forwarded to the Director, Directorate 
of Procurement and Grant Management, for review by the Procurement 
Review Board (PRB). The PRB will review the request, the

[[Page 15]]

Justification for Non-Competitive Acquisition, any comments or 
information submitted by the contracting officer which should be 
considered in evaluation of the request, and the information submitted 
in accordance with paragraph (c)(2) of this section. Based upon this 
review and advice from the Office of the Solicitor, the PRB will proceed 
as follows:
    (i) If the request submitted does not appear to be justified, it 
will be returned to the concurring HCA without approval with an 
explanation of the decision not to ratify.
    (ii) If the request and the recommended corrective actions appear 
justified and adequate, the PRB may ratify the action, with the 
concurrence of the Assistant Secretary for Administration and 
Management, return the file to the contracting officer for action, and 
monitor the implementation of the corrective action plan. The 
contracting officer shall direct the disposition of all products and 
deliverables received by the Government as a result of an unauthorized 
commitment.
    (iii) A detailed record of the review shall be maintained for audit 
purposes.



2901.603-72  Responsibility of other Government personnel.

    (a) Responsibility for the decision of what to buy and when to buy 
rests with program and certain staff offices and the head of the agency 
or designee. Responsibility for determining how to buy, the conduct of 
the buying process, and execution of the contract rests with the 
contracting officer.
    (b) Personnel responsible for making decisions to buy should 
maintain a close and continuous relationship with their acquisition 
activity to ensure that acquisition personnel are made aware of 
contemplated acquisition actions. This will be mutually beneficial in 
terms of better planning for acquisition action and more timely, 
efficient and economical acquisition.
    (c) Personnel not delegated contracting authority may not commit the 
Government, formally or informally, to any type of contractual 
obligation. However, program personnel who must use the contracting 
process to accomplish their programs, must support the contracting 
officer in ensuring that:
    (1) Requirements are clearly defined and specified;
    (2) Competitive sources are solicited, evaluated, and selected;
    (3) Quality standards are prescribed, and met;
    (4) Performance or delivery is timely;
    (5) Files are documented to substantiate the judgments, decisions, 
and actions taken.



2901.603-73  Contracting officer's representatives.

    (a) A contracting officer may designate other Government personnel 
to act as authorized representatives for such functions as technical 
monitoring, inspection, approval of shop drawings, testing, approval of 
samples, and other functions of a technical nature not involving a 
change in the scope, price, terms or conditions of the contract or 
order. Such designation shall be in writing and shall contain specific 
instructions as to the extent to which the representative may take 
action for the contracting officer, but will not contain authority to 
sign contract documents. The responsibilities and limitations of the 
contracting officer's representatives may be set forth in the contract 
or in a separate letter, a copy of which shall be furnished to the 
contractor.
    (b) A person assigned to a contracting office and performing primary 
duties in a position within a contracting office, and under the 
supervision of a contracting officer, does not require written 
designation as a representative of the contracting officer nor 
designation in a contractual document to perform assigned duties. Such a 
person is considered to be an employee of the contracting officer, 
acting in the latter's behalf and, as such, has the authority and 
responsibility to perform, under the terms and conditions of employment, 
and to act as assigned by the contracting officer. The contracting 
officer, however, shall not authorize such an employee, acting as a 
representative for the contracting officer, to sign any contractual 
documents or letter in those instances where the signature of a 
contracting officer is required.

[[Page 16]]



2901.603-74  Legal review and assistance.

    Proposed acquisitions may be subject to legal review by the Office 
of the Solicitor of Labor. Internal DOL procedures are contained in the 
Department of Labor Manual Series (DLMS-2, Chapter 900, Section 910). 
Copies of the DLMS Chapter may be obtained upon written request from the 
Office of Procurement and Grant Policy, Directorate of Procurement and 
Grant Management, Office of the Assistant Secretary for Administration 
and Management, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Washington, DC 20210.

[51 FR 40373, Nov. 6, 1986]



PART 2902--DEFINITIONS OF WORDS AND TERMS--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                       Subpart 2902.1--Definitions



2902.101  Definitions.

    As used throughout this regulation, the following words and terms 
are used as defined in this subpart unless (a) the context in which they 
are used clearly requires a different meaning, or (b) a different 
definition is prescribed for a particular part or portion of a part:
    Contracting activity means an agency or office within the Department 
with delegated procurement authority to manage contracting functions 
associated with its mission. Within the Office of the Assistant 
Secretary for Administration and Management, the National Capital 
Service Center is the contracting activity.
    Head of procuring activity means the Assistant Secretary for 
Administration and Management; the Assistant Secretary for Employment 
and Training; the Assistant Secretary for Mine Safety and Health, and 
the Director, National Capital Service Center.
    Head of the agency (also called agency head) means the Assistant 
Secretary for Administration and Management.
    Head of the contracting activity (HCA) means the Assistant Secretary 
for Administration and Management; the Director, National Capital 
Service Center, and the head of each DOL Agency and Office listed in 
2901.603-1(b) who has overall responsibility for managing the 
contracting activity.
    Procurement Executive means the Director, Directorate of Procurement 
and Grant Management, and is synonymous with the term Senior Procurement 
Executive defined at FAR subpart 2.1. Responsibilities of the 
Procurement Executive include appointing the DOL advocate for 
competition.
    Procuring activity means the Office of the Assistant Secretary for 
Administration and Management; the Employment and Training 
Administration; the Mine Safety and Health Administration; and the 
National Capital Service Center.

[50 FR 8921, Mar. 5, 1985, as amended at 51 FR 40373, Nov. 6, 1986; 53 
FR 3839, Feb. 9, 1988]



PART 2903--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF INTEREST--Table of Contents




                       Subpart 2903.1--Safeguards

Sec.
2903.101  Standards of conduct.
2903.101-3  Agency regulations.

      Subpart 2903.2--Contractor Gratuities to Government Personnel

2903.203  Reporting suspected violations of the gratuities clause.
2903.204  Treatment of violations.

   Subpart 2903.3--Reports of Identical Bids and Suspected Antitrust 
                               Violations

2903.302  Reporting identical bids.
2903.302-2  Reporting requirements.

                     Subpart 2903.4--Contingent Fees

2903.409  Misrepresentation or violation of the Covenant Against 
          Contingent Fees.

            Subpart 2903.5--Other Improper Business Practices

2903.502  Subcontractor kickbacks.

  Subpart 2903.6--Contracts With Government Employees or Organizations 
                       Owned or Controlled by Them

2903.602  Exceptions.
2903.603  Responsibilities of the contracting officer.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

[[Page 17]]


    Source: 50 FR 8921, Mar. 5, 1985, unless otherwise noted.



                       Subpart 2903.1--Safeguards



2903.101  Standards of conduct.



2903.101-3  Agency regulations.

    All DOL personnel engaged in acquisition related activities shall 
conduct such activities in a manner above reproach in every respect. See 
part 0 of title 29, CFR. Transactions relating to expenditure of public 
funds require the highest degree of public trust to protect the 
interests of the Government. See 2903.6 for requirements concerning 
contracting with current or former DOL employees.



      Subpart 2903.2--Contractor Gratuities to Government Personnel



2903.203  Reporting suspected violations of the gratuities clause.

    (a) Action official. The Director, Directorate of Procurement and 
Grant Management, is the DOL official authorized to take action pursuant 
to FAR 3.204(c) against a contractor if it is determined that a 
violation of the clause at FAR 52.203-3, Gratuities, has occurred. This 
authority may not be redelegated.
    (b) Referral. Whenever a suspected violation of the clause at FAR 
52.203-3, Gratuities, becomes known to a DOL employee, the matter shall 
be reported to the cognizant contracting officer. The report shall be in 
writing and shall clearly state the circumstances surrounding the 
incident or incidences where it is alleged that the contractor offered 
or gave a gratuity to a DOL employee and intended by the gratuity to 
obtain a contract or favorable treatment under a contract. The date(s), 
location(s), and name(s) of all parties involved in the incident shall 
be included in the report. The report shall also include a recommended 
course of action in accordance with FAR 3.204(c) and shall be submitted 
through the head of the contracting activity to the Director, 
Directorate of Procurement and Grant Management for disposition.



2903.204  Treatment of violations.

    (a) Notice of contractor. After review of the report and 
consultation with the Office of the Solicitor and Office of the 
Inspector General, as appropriate, the Director, Directorate of 
Procurement and Grant Management shall determine further action to be 
taken. If requested, the contractor shall be provided with a formal 
notice which summarizes the events involving the suspected violations 
and affords the contractor the opportunity to take the action(s) listed 
under FAR 3.204(b). The notice shall contain a reasonable time limit for 
reply and shall be sent by certified mail, return receipt requested.
    (b) Action. Based on the contractor's response to the notice; the 
results of any further discussions with the contractor, the counsel, or 
witnesses; the review of additional documentary evidence; and other 
pertinent information, the Director, Directorate of Procurement and 
Grant Management, shall make a final and binding decision on the action 
to be taken in accordance with FAR 3.204(c) and shall provide the 
contractor with a formal notice of such action.

[50 FR 8921, Mar. 5, 1985, as amended at 51 FR 40373, Nov. 6, 1986]



   Subpart 2903.3--Reports of Identical Bids and Suspected Antitrust 
                               Violations



2903.302  Reporting identical bids.



2903.302-2  Reporting requirements.

    Potential anti-competitive practices, such as described in FAR 
3.301, and antitrust law violations as described in FAR 3.303, evidenced 
in bids or proposals shall be reported to the Office of the Solicitor 
through the Head of the Contracting Activity with a copy to the 
Director, Directorate of Procurement and Grant Management. The Office of 
the Solicitor will provide reports to the Attorney General as 
appropriate.

[[Page 18]]



                     Subpart 2903.4--Contingent Fees



2903.409  Misrepresentation or violation of the Convenant Against Contingent Fees.

    (a) Suspected misrepresentation or violations of the Convenant 
Against Contingent Fees shall be documented and reported promptly to the 
contracting officer for review and action under FAR 3.409.
    (b) Suspected fraudulent or criminal violations shall be documented 
in a report and submitted by the contracting officer to the Office of 
the Solicitor prior to initiation of any actions outlined in FAR 
3.409(b). A copy of the report shall be submitted to the Director, 
Directorate of Procurement and Grant Management.



            Subpart 2903.5--Other Improper Business Practices



2903.502  Subcontractor kickbacks.

    (a) Reports on suspected violations of the Antikickback Act as 
required by FAR 3.502(b) shall be prepared by the

contracting officer and submitted by the head of the contracting 
activity to the Office of the Solicitor for further action. A copy of 
the report shall be submitted to the Director, Directorate of 
Procurement and Grant Management.
    (b) The head of the contracting activity may initiate debarment or 
suspension action in accordance with FAR 9.406-2 or 9.407-2 and 2909.4 
of this chapter.



  Subpart 2903.6--Contracts With Government Employees or Organizations 
                       Owned or Controlled by Them



2903.602  Exceptions.

    (a) The Assistant Secretary for Administration and Management is 
authorized to except a contract from the policy in FAR 3.601.
    (b) Negotiated contracts or grants or amendments to existing 
contracts or grants which constitute new acquisition (including those 
for the rental of real or personal property) may be entered into with 
former employees of DOL or with firms in which former employees are 
known to have a substantial interest, within a period of 1 year 
subsequent to the termination of the individual's employment by DOL, 
only with the prior written approval of the Assistant Secretary for 
Administration and Management.



2903.603  Responsibilities of the contracting officer.

    Approval of a decision to grant an exception as provided in 2903.602 
shall be documented by a written determination and findings prepared by 
the contracting officer for signature by the Assistant Secretary for 
Administration and Management. The determination and findings shall 
document compliance with FAR 3.603 and 2909.5; specify the compelling 
reason(s) for award; and be placed in the contract file.



PART 2904--ADMINISTRATIVE MATTERS--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8922, Mar. 5, 1985, unless otherwise noted.



                   Subpart 2904.6--Contract Reporting



2904.601  Federal Procurement Data System.

    (a) DOL's data collection point is the Office of Procurement and 
Grant Policy, Directorate of Procurement and Grant Management, U.S. 
Department of Labor, 200 Constitution Avenue, NW., Washington, DC 20210.
    (b) The SF 279, Individual Contract Action Report (over $10,000), 
and SF 281, Summary of Contract Actions of $10,000 or less, are due 
monthly on the tenth day of the month.

[[Page 19]]



                   SUBCHAPTER B--ACQUISITION PLANNING


PART 2905--PUBLICIZING CONTRACT ACTIONS--Table of Contents




          Subpart 2905.2--Synopsis of Proposed Contract Actions

Sec.
2905.202  Exceptions.

                 Subpart 2905.4--Release of Information

2905.403  Requests from Members of Congress.
2905.404  Release of long-range acquisition estimates.
2905.404-1  Release procedures.

                   Subpart 2905.5--Paid Advertisements

2905.502  Authority.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8922, Mar. 5, 1985, unless otherwise noted.



          Subpart 2905.2--Synopsis of Proposed Contract Actions



2905.202  Exceptions.

    The Procurement Executive is authorized to make the determination 
prescribed in FAR 5.202(b). A written determination documenting the 
reasons why advance notice is not appropriate or reasonable shall be 
submitted by the HCA to the Director, Directorate of Procurement and 
Grant Management, for appropriate action including communication with 
the officials listed in FAR 5.202(b).

[51 FR 40374, Nov. 6, 1986]



                 Subpart 2905.4--Release of Information



2905.403  Requests from Members of Congress.

    In addition to having access to the information available to the 
general public, Members of Congress shall, upon their request, be given 
full and detailed information regarding any particular DOL procurement. 
The information provided shall be fully responsive to the member's 
request unless such a response would disclose classified matter, 
information not to be released pursuant to law, business confidential 
information or information which would be prejudicial to the competitive 
process. The contracting officer shall promptly consult with the Office 
of the Solicitor and the Office of Legislative and Intergovernmental 
Affairs to determine whether circumstances exist which will allow the 
release of additional information. In such instances, the Congressional 
requestor shall be furnished an interim reply providing the information 
which is readily releasable. The interim reply shall describe the 
problem which precludes release of any requested materials and describe 
generally what steps, if any, are being taken to make such information 
available.



2905.404  Release of long-range acquisition estimates.



2905.404-1  Release procedures.

    (a) Heads of contracting activities are authorized to release long-
range acquistion estimates under the conditions in FAR 5.404-1.
    (b) Offices contemplating the release of long-range acquisition 
planning estimates shall coordinate with the Office of Information and 
Public Affairs in advance of the release of such planning estimates.



                   Subpart 2905.5--Paid Advertisements



2905.502  Authority.

    When it is deemed necessary to use paid advertisements in newspapers 
and trade journals, written authority for such publication shall be 
obtained from the Head of the Contracting Activity or designee.



PART 2906--COMPETITION REQUIREMENTS--Table of Contents




  Subpart 2906.2--Full and Open Competition After Exclusion of Sources

Sec.
2906.202  Establishing or maintaining alternative sources.

[[Page 20]]

          Subpart 2906.3--Other Than Full and Open Competition

2906.303  Justifications.
2906.303-1  Requirements.

                  Subpart 2906.5--Competition Advocates

2906.501  Requirement.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 51 FR 40374, Nov. 6, 1986, unless otherwise noted.



  Subpart 2906.2--Full and Open Competition After Exclusion of Sources



2906.202  Establishing or maintaining alternative sources.

    The Procurement Executive is authorized to make the determination 
prescribed in FAR 6.202(b). A written determination shall be submitted 
by the HCA to the Director, Directorate of Procurement and Grant 
Management.



          Subpart 2906.3--Other Than Full and Open Competition



2906.303  Justifications.



2906.303-1  Requirements.

    (a) As prescribed in the Department of Labor Manual Series (DLMS) 2, 
Chapter 830, any proposed noncompetitive aquisitions in excess of the 
small purchases limitation must be fully justified, submitted to the DOL 
Procurement Review Board and approved by the Assistant Secretary for 
Administration and Management and, in the case of research contracts, by 
the Assistant Secretary for Policy.
    (b) The contracting officer is responsible for assuring that 
proposed acquisitions below the dollar level specified in paragraph (a) 
of this section are in compliance with FAR and DOLAR requirements 
regarding competition.



                  Subpart 2906.5--Competition Advocates



2906.501  Requirement.

    (a) The Competition Advocate for the Department of Labor is the 
Director, Office of Procurement and Grant Policy, Directorate of 
Procurement and Grant Management, OASAM.
    (b) The head of the agency has delegated the authority to the 
Procurement Executive to appoint the Agency and Procuring Activity 
Competition Advocates. The Procurement Executive has delegated authority 
to the Head of the Procuring Activity to appoint Procuring Activity 
Competition Advocates.



PART 2907--ACQUISITION PLANNING--Table of Contents




                    Subpart 2907.1--Acquisition Plans

Sec.
2907.102  Policy.

        Subpart 2907.3--Contractor Versus Government Performance

2907.307  Appeals.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                    Subpart 2907.1--Acquisition Plans



2907.102  Policy.

    DOL Agencies and Offices shall develop acquisition plans for major 
system acquisitions and major projects in accordance with FAR subpart 
7.1 when the potential benefit justifies their development. The 
Directorate of Procurement and Grant Management and the Procurement 
Review Board will review each DOL Agency/Office Annual Advance 
Procurement Plan to ensure compliance with this subpart.

[50 FR 8922, Mar. 5, 1985]



        Subpart 2907.3--Contractor Versus Government Performance



2907.307  Appeals.

    An appeal of a decision to convert to contract or to continue in-
house performance may be made by an affected party. Appeals shall be 
made in writing, be based only on specific alleged material deviation 
(or deviations), from OMB Circular A-76, and be supported by appropriate 
documentation. Appeals must be delivered within 15 working days of the 
announced decision, through the contracting officer

[[Page 21]]

and the Director, Directorate of Procurement and Grant Management, to 
the Under Secretary.

[50 FR 8922, Mar. 5, 1985]



PART 2908--REQUIRED SOURCES OF SUPPLIES AND SERVICES--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



      Subpart 2908.8--Acquisition of Printing and Related Supplies



2908.802  Policy.

    (a) The Office of Printing, Directorate of Administrative Services 
and Safety and Health Programs, has been designated as the DOL liaison 
with the Joint Committee on Printing (JCP) and the Public Printer, 
Government Printing Office (GPO), on all matters related to printing.
    (b) Except as provided in paragraphs 35-2 through 35-4 of the 
``Government Printing and Binding Regulations'' of the Congressional 
Joint Committee on Printing, inclusion of printing as defined in FAR 
8.801 in contracts for supplies and services is prohibited unless 
specifically approved in writing by the Directorate of Administrative 
Services and Safety and Health Programs.

[50 FR 8923, Mar. 5, 1985]



PART 2909--CONTRACTOR QUALIFICATIONS--Table of Contents




           Subpart 2909.1--Responsible Prospective Contractors

Sec.
2909.105  Procedures.
2909.105-1  Obtaining information.

        Subpart 2909.4--Debarment, Suspension, and Ineligibility

2909.400  Scope of subpart.
2909.404  Consolidated List of Debarred, Suspended, and Ineligible 
          Contractors.
2909.405  Effect of listing.
2909.405-1  Continuation of current contracts.
2909.406  Debarment.
2909.406-1  General.
2909.406-3  Procedures.
2909.407  Suspension.
2909.407-1  General.
2909.407-3  Procedures.

          Subpart 2909.5--Organizational Conflicts of Interest

2909.503  Waiver.
2909.507  Procedures.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8923, Mar. 5, 1985, unless otherwise noted.



           Subpart 2909.1--Responsible Prospective Contractors



2909.105  Procedures.



2909.105-1  Obtaining information.

    (a) In addition to the sources of information listed in FAR 9.105-
1(c) to support determinations of responsibility or nonresponsibility, 
the contracting officer shall use, if available, performance evaluation 
reports on section 8(a) contractors (section 8(a) of the Small Business 
Act as amended (15 U.S.C. 637(a)) and construction and architect-
engineer contractors (see 2936.201 and 2936.604).
    (b) Contracting officers may obtain credit reports prior to the 
issuance of any loan, loan guarantee, contract or grant through the 
credit bureau service. The National Capital Service Center will award a 
contract for the credit bureau service for use by all DOL contracting 
activities until such services become available through an established 
GSA Federal Supply Schedule.

[50 FR 8923, Mar. 5, 1985, as amended at 51 FR 40374, Nov. 6, 1986]



        Subpart 2909.4--Debarment, Suspension, and Ineligibility



2909.400  Scope of subpart.

    This subpart prescribes DOL policies and procedures governing the 
debarment and suspension of contractors, the listing of debarred and 
suspended contractors, contractors declared ineligible (see FAR 9.403) 
and distribution of the list.



2909.404  Consolidated List of Debarred, Suspended, and Ineligible Contractors.

    (a) The Directorate of Procurement and Grant Management, is 
responsible for accomplishing the actions required in FAR 9.404(c).

[[Page 22]]

    (b) The Directorate of Procurement and Grant Management, upon 
receipt of monthly issues of the consolidated list from GSA, shall 
distribute the issues to the heads of contracting activities.
    (c) Weekly supplements to monthly lists shall be furnished to the 
heads of contracting activities by the Directorate of Procurement and 
Grant Management.



2909.405  Effect of listing.

    The Director, Directorate of Procurement and Grant Management, is 
authorized to make the determinations listed in FAR 9.405(a). Requests 
for such determinations shall be submitted by the head of the 
contracting activity to the Director, Directorate of Procurement and 
Grant Management.



2909.405-1  Continuation of current contracts.

    The Director, Directorate of Procurement and Grant Management, is 
authorized to take the actions listed in FAR 9.405-1.



2909.406  Debarment.



2909.406-1  General.

    (a) The Director, Directorate of Procurement and Grant Management, 
is the debarring official for DOL and is authorized to debar a 
contractor for any of the causes in FAR 9.406-2, using the procedures in 
2909.406-3.
    (b) Exceptions to debarment made by another Executive Agency shall 
be made by the Director, Directorate of Procurement and Grant 
Management, in accordance with the conditions in FAR 9.406-1(c).



2909.406-3  Procedures.

    (a) Investigation and referral. Whenever a cause for debarment, as 
listed in FAR 9.406-2, becomes known to a DOL employee, the head of the 
contracting activity affected shall be notified. The head of the 
contracting activity shall consult with the Office of the Solicitor and 
the Office of the Inspector General, as appropriate, and submit a formal 
recommendation which documents the cause for debarment to the Director, 
Directorate of Procurement and Grant Management.
    (b) Notice of proposal to debar. Based upon review of the 
recommendation to debar and consultation with the Office of the 
Solicitor and Office of the Inspector General, as appropriate, the 
Director, Directorate of Procurement and Grant Management, shall 
initiate proposed debarment by taking the actions listed in FAR 9.406-
3(c) and advising the contractor of DOL's rules under 2909.4.
    (c) Factfinding proceedings. For actions listed under FAR 9.406-
3(b)(2), the Director, Directorate of Procurement and Grant Management, 
shall afford the contractor the opportunity to appear at an informal 
factfinding as required by FAR 9.406-3(b)(2)(i). The hearing shall be 
conducted by the Office of Administrative Law Judges and shall be held 
at a date and location convenient to the parties concerned. Subject to 
the provisions of 29 CFR part 18, the contractor and any specifically 
named affiliates, may be represented by counsel or any duly authorized 
representative. Witnesses may be called by either party. The proceedings 
shall be conducted expeditiously and in such a manner that each party 
will have a full opportunity to present all information considered 
pertinent to the proposed debarment. A transcript of the proceedings 
shall be made available to the contractor under the conditions in FAR 
9.406-3(b)(2)(ii).
    (d) Decision and notice. The Director, Directorate of Procurement 
and Grant Management, shall make a decision on imposing debarment in 
accordance with the procedures in FAR 9.406-3(d), findings of fact of 
the Administrative Law Judge, and the conditions in FAR 9.406-4 and 
9.406-5. Notice of the decision shall be provided to the contractor and 
any affiliates involved in accordance with the procedures in FAR 9.406-
3(e).



2909.407  Suspension.



2909.407-1  General.

    (a) The Director, Directorate of Procurement and Grant Management, 
is the suspending official for DOL and is authorized to suspend a 
contractor for any of the causes in FAR 9.407-2, using the procedures in 
2909.407-3.

[[Page 23]]

    (b) The Director, Directorate of Procurement and Grant Management, 
is authorized to make the statement regarding suspension by another 
agency suspending official under the conditions in FAR 9.407-1(d).



2909.407-3  Procedures.

    (a) Investigation and referral. Whenever a cause for suspension, as 
listed in FAR 9.406-2, becomes known to a DOL employee, the head of the 
contracting activity affected shall be notified. The head of the 
contracting activity shall consult with the Office of the Solicitor and 
the Office of the Inspector General, as appropriate, and submit a formal 
recommendation, which documents the cause for suspension, to the 
Director, Directorate of Procurement and Grant Management.
    (b) Notice of suspension. Based upon review of the recommendation to 
suspend and consultation with the Office of the Solicitor and the Office 
of the Inspector General, as required, the Director, Directorate of 
Procurement and Grant Management, shall initiate suspension by taking 
the actions listed in FAR 9.407-3(c) and advising the contractor of 
DOL's rules under 2909.4.
    (c) Factfinding proceedings. For actions listed under FAR 9.407-
3(b)(2), the Director, Directorate of Procurement and Grant Management, 
shall afford the contractor the opportunity to appear at an informal 
hearing as required by FAR 9.407-3(b)(2)(i). The hearing shall be 
conducted under the conditions in 2909.407-3(c).
    (d) Suspension decisions. The Director, Directorate of Procurement 
and Grant Management, shall make a final decision on suspension as 
prescribed in FAR 9.407-3(d). Notice of the decision shall be provided 
to the contractor and any affiliates involved in accordance with the 
provisions in FAR 9.407-3(d)(4).



          Subpart 2909.5--Organizational Conflicts of Interest



2909.503  Waiver.

    (a) The Director, Directorate of Procurement and Grant Management, 
is authorized to waive any general rule or procedure in FAR 9.5 when its 
application in a particular situation would not be in the Government's 
interest. Pursuant to FAR 9.503, this authority may not be redelegated.
    (b) Requests for waivers shall be made by the head of the 
contracting activity to the Director, Directorate of Procurement and 
Grant Management. Each request shall include:
    (1) An analysis of the facts involving the potential or actual 
conflict including benefits and detriments to the Government and 
prospective contractors;
    (2) A discussion of the factors which preclude avoiding, 
neutralizing, or mitigating the conflict; and
    (3) Identification of the provision(s) in FAR subpart 9.5 to be 
waived.
    (c) In making determinations under 2909.503(a), the Director, 
Directorate of Procurement and Grant Management, shall request the 
opinion of the Office of the Solicitor.



2909.507  Procedures.

    (a) If a prospective contractor disagrees with the decision of a 
contracting officer regarding an organizational conflict of interest 
provision and requests higher level review in accordance with FAR 
9.507(c)(4) the matter shall be referred to the Director, Directorate of 
Procurement and Grant Management for review and final decision.
    (b) Referrals shall be made by the head of the contracting agency 
concerned and include the contracting officer's decision and the 
position of the prospective contractor.
    (c) In making determinations under 2909.507(a), the Director, 
Directorate of Procurement and Grant Management, shall request the 
opinion of the Office of the Solicitor.



PART 2910--SPECIFICATIONS, STANDARDS, AND OTHER PURCHASE DESCRIPTIONS--Table of Contents




Sec.
2910.004  Selecting specifications or descriptions for use.
2910.004-70  Brand name products or equal.
2910.007  Deviations.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8924, Mar. 5, 1985, unless otherwise noted.

[[Page 24]]



2910.004  Selecting specifications or descriptions for use.

    (a) In accordance with FAR 10.1004(b)(2), purchase descriptions 
shall not specify a product, or specific feature of a product, peculiar 
to a manufacturer unless it is determined in writing by the Office 
initiating the purchase request that the product, or specific product 
feature, is essential to the Government's requirements and other similar 
products will not meet these requirements. This determination shall be 
in writing and shall accompany the purchase requisition.
    (b) A ``brand name or equal'' purchase description shall be used 
only under the conditions listed in FAR 10.004(b)(3) and in accordance 
with the policies and procedures in 2910.004-70.



2910.004-70  Brand name products or equal.

    (a) Limitations on use. The identification of a requirement in a 
purchase description by use of one or more brand name products followed 
by the words ``or equal'' shall be used only under the conditions listed 
in FAR 10.004(b)(3). A ``brand name product'' means a current commercial 
product of a manufacturer described by its brand name, make, model 
number, catalog designation, or other description by which it is 
regularly offered for sale to the public in the commercial market place.
    (b) Invitation requirements. (1) ``Brand name or equal'' purchase 
descriptions in invitations shall identify salient characteristics of 
the product (see 2910.004-70(b)(2)) and contain the following 
information to describe the specific item:
    (i) Identification of the item by generic descriptions;
    (ii) Make, model number, catalog designation (or other description), 
and identification of commercial catalog where it is listed; and
    (iii) Name of manufacturer, producer, or distributor of the item and 
complete address.
    (2) In accordance with the policy in FAR 10.002, whenever a ``brand 
name or equal'' purchase description is used, offerors shall be given 
the opportunity to offer products equal to the brand name if those 
products (including modifications thereto) satisfy the minimum needs of 
the Government. Therefore, all salient characteristics of the ``brand 
name or equal'' product which are determined by the office initiating 
the purchase request to be essential to the Government's minimum needs 
shall be identified separately under the heading of ``Salient 
Characteristics'' and included in the purchase description contained in 
the solicitation so the offeror understands the information to be 
submitted with its bid when offering an ``equal'' product for 
evaluation. In addition, the following certification shall be included 
at the end of each ``brand name or equal'' description in a solicitation 
for an offeror to identify its ``equal'' product:

    Offerors proposing to furnish an ``equal'' product, in accordance 
with the ``Brand Name or Equal'' provision of this solicitation, shall 
insert the following description for the product.

Bidding on:_____________________________________________________________

Manufacturer's Name:____________________________________________________

Address:________________________________________________________________

Product Name (if any):__________________________________________________

Product make, model, or catalog description:____________________________

_______________________________________________________________________
    Offerors shall also be responsible for submitting all additional 
information on the above product necessary for the Government to 
determine whether the product offered meets the salient characteristics 
of the ``brand name'' as listed in the solicitation.



2910.007  Deviations.

    (a) Heads of contracting activities are authorized to approve 
deviations and exceptions to specifications or standards listed in the 
Index of Federal Specifications and Standards when the exceptions listed 
under FAR 10.006 do not apply. The Director, Directorate of Procurement 
and Grant Management, shall be notified formally and provided a copy of 
each deviation or exception approved.
    (b) Heads of contracting activities are responsible for 
accomplishing the actions required under FAR 10.007.

[[Page 25]]


          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES


PART 2913--SMALL PURCHASE AND OTHER SIMPLIFIED PURCHASE PROCEDURES--Table of Contents




                         Subpart 2913.1--General

Sec.
2913.106  Competition and price reasonableness.
2913.107  Solicitation and evaluation of quotations.

                 Subpart 2913.3--Fast Payment Procedure

2913.301  General.

                      Subpart 2913.4--Imprest Fund

2913.403  Agency responsibilities.

                     Subpart 2913.5--Purchase Orders

2913.503  Obtaining contractor acceptance and modifying purchase orders.
2913.503-70  Duplicate purchase orders.
2913.505  Purchase order and related forms.
2913.505-2  Agency order forms in lieu of optional forms 347 and 348.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8925, Mar. 5, 1985, unless otherwise noted.



                         Subpart 2913.1--General



2913.106  Competition and price reasonableness.

    When other than the lowest responsive quotation from a responsible 
supplier is used as the basis for the purchase, the Contracting Officer 
shall include in the purchase file documentation of the reason(s) for 
rejecting any lower quotation and the name of the individual responsible 
for making the determination to reject such quotation.



2913.107  Solicitation and evaluation of quotations.

    Standard Form 18, Request for Quotations, shall be used as 
prescribed in FAR 13.107(a) unless an agency equivalent form has been 
authorized for use by the Director, Directorate of Procurement and Grant 
Management.



                 Subpart 2913.3--Fast Payment Procedure



2913.301  General.

    The fast payment procedure delineated in FAR subpart 13.3 shall not 
be utilized by DOL.



                      Subpart 2913.4--Imprest Fund



2913.403  Agency responsibilities.

    The DOL ``Imprest Fund Handbook'' incorporated in the Department of 
Labor Manual Series (DLMS 6, Chapter 1900, Handbook DLMS 6-5) contains 
internal DOL procedures for establishment, maintenance and use of 
imprest funds. Copies of the handbook may be obtained upon written 
request from the Directorate of Procurement and Grant Management, Office 
of the Assistant Secretary for Administration and Management, U.S. 
Department of Labor, 200 Constitution Avenue, NW., Washington, DC 20210.

[50 FR 8925, Mar. 5, 1985, as amended at 51 FR 40374, Nov. 6, 1986]



                     Subpart 2913.5--Purchase Orders



2913.503  Obtaining contractor acceptance and modifying purchase orders.



2913.503-70  Duplicate purchase orders.

    If the vendor reports non-receipt, loss or other inability to locate 
an original purchase order and requests another copy, the purchasing 
officer may issue to the vendor a duplicate copy as the vendor's basis 
of performance. This second issue should be conspicuously marked 
``Duplicate Copy.'' To avoid the possibility of a duplicate shipment, a 
letter of transmittal or a notation on the purchase order should read as 
follows:

    This is a duplicate copy of the lost original purchase order, 
furnished in accordance with

[[Page 26]]

your request of ---------- (Date). The Government will not be 
responsible for duplicate shipment.

[50 FR 8925, Mar. 5, 1985, as amended at 51 FR 40374, Nov. 6, 1986]



2913.505  Purchase order and related forms.



2913.505-2  Agency order forms in lieu of optional forms 347 and 348.

    Department of Labor Form 1-90 (DL Form 1-90), entitled ``Purchase 
Order'' may be used by DOL in lieu of Optional Forms 347 and 348 
prescribed in FAR 13.505.



PART 2914--SEALED BIDDING--Table of Contents




                  Subpart 2914.2--Solicitation of Bids

Sec.
2914.203  Methods of soliciting bids.
2914.203-2  Dissemination of information concerning invitation for bids.
2914.205  Solicitation mailing lists.
2914.205-1  Establishment of lists.

          Subpart 2914.4--Opening of Bids and Award of Contract

2914.404  Rejection of bids.
2914.404-1  Cancellation of invitations after opening.
2914.406  Mistakes in bids.
2914.406-3  Other mistakes disclosed before award.
2914.406-4  Disclosure of mistakes after award.
2914.407  Award.
2914.407-8  Protests against award.
2914.407-70  Award when only one bid is received.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8925, Mar. 5, 1985, unless otherwise noted.



                  Subpart 2914.2--Solicitation of Bids



2914.203  Methods of soliciting bids.



2914.203-2  Dissemination of information concerning invitation for bids.

    Procedures for obtaining approval for paid advertisements in 
newspapers are contained in 2905.502.



2914.205  Solicitation mailing lists.



2914.205-1  Establishment of lists.

    In accordance with FAR 14.205-1(b), prospective bidders which submit 
solicitation mailing list applications shall be notified by the 
Contracting Activity when added to a mailing list unless the bidder is 
expected to be issued a solicitation within thirty days after Government 
receipt of the application.



          Subpart 2914.4--Opening of Bids and Award of Contract



2914.404  Rejection of bids.



2914.404-1  Cancellation of invitations after opening.

    The head of the contracting activity (HCA) is authorized to make the 
written determination required by FAR 14.404-1(c).

[51 FR 40374, Nov. 6, 1986]



2914.406  Mistakes in bids.



2914.406-3  Other mistakes disclosed before award.

    (a) The Director, Directorate of Procurement and Grant Management, 
is authorized to make the administrative determinations under FAR 
14.406-3. This authority may not be redelegated except as set forth in 
paragraph (b) of 2914.406-3.
    (b) If (1) a bidder requests permission to withdraw a bid rather 
than correct it, and (2) the evidence is determined convincing as to the 
mistake or (3) the evidence reasonably supports the existence of a 
mistake but is not clear and convincing, the head of the contracting 
office is authorized to make a written determination permitting the 
bidder to withdraw the bid after review, in accordance with established 
procedures, and concurrence by the appropriate Office of the Solicitor. 
Copies of all determinations made pursuant to this authority shall be 
promptly transmitted to the Director, Directorate of Procurement and 
Grant Management. If evidence of the intended bid is clear and 
convincing, even though the bidder has not requested permission to 
correct the bid, the case shall be processed in accordance with 
paragraph (c) of 2914.406-3.

[[Page 27]]

    (c) Suspected or alleged mistakes in bids shall be processed in 
accordance with the requirements of FAR 14.406-3(g). The contracting 
officer shall submit a report together with the supporting data 
described in FAR 14.406-3(g)(3) through the head of the contracting 
activity to the Director, Directorate of Procurement and Grant 
Management.
    (d) The Director, Directorate of Procurement and Grant Management, 
is responsible for maintaining records of administrative determinations 
as required in FAR 14.406-3(h).



2914.406-4  Disclosure of mistakes after award.

    (a) The head of the contracting activity is authorized to make the 
administrative determinations in FAR 14.406-4 after concurrence is 
received from the Office of the Solicitor as required by FAR 14.406-
4(d). This authority may not be redelegated.
    (b) The contracting officer shall process a mistake and prepare a 
case file in accordance with the requirements of FAR 14.604-4(e). The 
file shall be submitted to the head of the contracting activity for 
determination.



2914.407  Award.



2914.407-8  Protests against award.

    See DOLAR subpart 2933.1, ``Protests''.

[51 FR 40374, Nov. 6, 1986]



2914.407-70  Award when only one bid is received.

    When only one bid is received in response to an invitation for bids, 
such bid may be considered and accepted if the contracting officer makes 
a written determination that (a) the specifications used in the 
invitation were not unduly restrictive, (b) adequate competition was 
solicited and it could have been reasonably assumed that more than one 
bid would have been submitted, (c) the price is reasonable, and (d) the 
bid is otherwise in accordance with the invitation for bids. Such a 
determination shall be placed in the contract file.



PART 2915--CONTRACTING BY NEGOTIATION--Table of Contents




  Subpart 2915.4--Solicitation and Receipt of Proposals and Quotations

2915.404  Presolicitation notices and conferences.
2915.405  Solicitations for information or planning purposes.
2915.405-1  General.
2915.413  Disclosure and use of information before award.
2915.413-1  Alternate I.

                  Subpart 2915.5--Unsolicited Proposals

2915.505  Content of unsolicited proposals.
2915.505-1  Unsolicited research proposals.
2915.506  Agency procedures.

                    Subpart 2915.6--Source Selection

2915.607  Disclosure of mistakes before award.
2915.608  Proposal evaluation.
2915.612  Formal source selection.

                    Subpart 2915.8--Price Negotiation

2915.803  General.
2915.804  Cost or pricing data.
2915.804-3  Exemptions from or waiver of submission of certified cost or 
          pricing data.
2915.805  Proposal analysis.
2915.805-5  Field pricing support.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8926, Mar. 5, 1985, unless otherwise noted.



  Subpart 2915.4--Solicitation and Receipt of Proposals and Quotations



2915.404  Presolicitation notices and conferences.

    A presolicitation conference (see FAR 15.404) shall not be used 
unless approved by the Head of the Contracting Activity or designee in 
accordance with Agency or Office procedures.



2915.405  Solicitations for information or planning purposes.



2915.405-1  General.

    The written determination justifying use of a solicitation for 
information or planning purposes under FAR 15.405-1 shall be approved by 
the Head of the Contracting Activity before issuance of the 
solicitation.

[[Page 28]]



2915.413  Disclosure and use of information before award.



2915.413-1  Alternate I.

    The Department of Labor shall employ the procedures in FAR Alternate 
I regarding disclosure and use of information.



                  Subpart 2915.5--Unsolicited Proposals



2915.505  Content of unsolicited proposals.



2915.505-1  Unsolicited research proposals.

    In addition to the contents required by FAR 15.505, unsolicited 
proposals for research should contain a commitment to provide cost-
sharing.



2915.506  Agency procedures.

    (a) The contact points for submission of unsolicited proposals are 
those officials (Heads of Contracting Activities) with program 
responsibility listed in subpart 2901.6.
    (b) Heads of Contracting Activities shall assure that unsolicited 
proposals are controlled, evaluated, safeguarded and disposed of in 
accordance with FAR subpart 15.5.



                    Subpart 2915.6--Source Selection



2915.607  Disclosure of mistakes before award.

    The Head of the Contracting Activity is authorized to make the 
determination permitting proposal correction in accordance with the 
conditions in FAR 15.607(c)(3) and consultation with the Office of the 
Solicitor.



2915.608  Proposal evaluation.

    The head of contracting activity (HCA) is authorized to make the 
determination required by FAR 15.608(b).

[51 FR 40374, Nov. 6, 1986]



2915.612  Formal source selection.

    (a) The Head of the Contracting Activity shall determine when a 
formal source selection process shall be used and shall establish 
procedures for implementing the requirements in FAR 15.612.
    (b) The procedures established under paragraph (a) of this section 
shall be forwarded for the review and approval of the Director, 
Directorate of Procurement and Grant Management.



                    Subpart 2915.8--Price Negotiation



2915.803  General.

    (a) Where the contractor insists on a price or demands a profit or 
fee that the contracting officer considers unreasonable, and the 
contracting officer has taken all authorized actions to resolve the 
matter (see FAR 15.803), the contract action shall be referred to the 
Head of the Contracting Activity for final resolution.
    (b) Resolution under paragraph (a) of this section, shall be 
documented and signed by the Head of the Contracting Activity, and 
included in the contract file.



2915.804  Cost or pricing data.



2915.804-3  Exemptions from or waiver of submission of certified cost or pricing data.

    (a) The Head of the Contracting Activity is authorized to approve 
the contracting officer's finding supporting the unreasonableness of the 
lowest price (see FAR 15.804-3(b)(2)(iii).
    (b) The Director, Directorate of Procurement and Grant Management, 
is authorized to waive the requirement for submission of certified cost 
or pricing data.
    (c) Requests for waiver under paragraph (b) of this section, shall 
be submitted in writing by the Head of the Contracting Activity and 
shall contain a statement as to the reasons the waiver is necessary and 
the efforts made to obtain the data from the contractor or prospective 
contractor.



2915.805  Proposal analysis.



2915.805-5  Field pricing support.

    (a) As prescribed in FAR 15.805-5(c), the contracting officer shall 
initiate a cost or pricing review by sending a written request to the 
Director, Directorate of Procurement and Grant Management, OASAM. The 
contracting officer shall allow at least 30 calendar

[[Page 29]]

days when assigning a deadline for receipt of the cost and price 
analysis report.
    (b) Upon receipt of the cost or pricing review report, the 
contracting officer and the price analyst (if assigned) shall discuss 
any questions regarding the contents of the report with the reviewer. If 
a question cannot be resolved, or agreement cannot be reached on a 
recommendation in the report, the contracting officer shall prepare a 
written statement for the contract file which discusses the issue(s) in 
question and supports a final decision on the matter. An information 
copy of the statement shall be promptly forwarded to the Director, 
Directorate of Procurement and Grant Management.



PART 2916--TYPES OF CONTRACTS--Table of Contents




                  Subpart 2916.2--Fixed Price Contracts

Sec.
2916.203  Fixed-price contracts with economic price adjustment.
2916.203-4  Contract clauses.

              Subpart 2916.3--Cost-Reimbursement Contracts

2916.306  Cost-plus-fixed-fee contracts.

  Subpart 2916.6--Time-and-Materials, Labor-Hour, and Letter Contracts

2916.603  Letter contracts.
2916.603-2  Application.

                       Subpart 2916.7--Agreements

2916.702  Basic agreements.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8929, Mar. 5, 1985, unless otherwise noted.



                  Subpart 2916.2--Fixed Price Contracts



2916.203  Fixed-price contracts with economic price adjustment.



2916.203-4  Contract clauses.

    An economic price adjustment clause based on cost indexes of labor 
or material may be used under the conditions listed in FAR 16.203-4(d) 
after approval by the Director, Directorate of Procurement and Grant 
Management, is obtained.



              Subpart 2916.3--Cost-Reimbursement Contracts



2916.306  Cost-plus-fixed-fee contracts.

    The Contracting Officer is authorized to approve the determination 
establishing the basis for application of the statutory price or fee 
limitation prescribed in FAR 16.306(c)(2).

[51 FR 40374, Nov. 6, 1986]



  Subpart 2916.6--Time-and-Materials, Labor-Hour, and Letter Contracts



2916.603  Letter contracts.



2916.603-2  Application.

    The Head of the Contracting Activity is authorized to extend the 
period for definitization of a letter contract required by FAR 16.603-
2(c) in extreme cases where it is determined in writing that such action 
is in the best interest of the Government.



                       Subpart 2916.7--Agreements



2916.702  Basic agreements.

    Copies of basic agreements negotiated with contractors in accordance 
with FAR 16.702 shall be furnished by the Head of the Contracting 
Activity to the Director, Directorate of Procurement and Grant 
Management, promptly after execution by the Government.



PART 2917--SPECIAL CONTRACTING METHODS--Table of Contents




                         Subpart 2917.2--Options

Sec.
2917.203  Solicitations.
2917.206  Evaluation.

               Subpart 2917.4--Leader Company Contracting

2917.402  Limitations.

     Subpart 2917.5--Interagency Acquisitions Under the Economy Act

2917.502  General.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8929, Mar. 5, 1985, unless otherwise noted.

[[Page 30]]



                         Subpart 2917.2--Options



2917.203  Solicitations.

    Option quantities in excess of the 50 percent limit prescribed in 
FAR 17.203(g)(2) may, in unusual circumstances, be approved by the Head 
of the Contracting Activity. The documentation required by FAR 17.205(a) 
shall include a written justification to fully support the need for such 
action.



2917.206  Evaluation.

    The Head of the Contracting Activity shall make the written 
determination required by FAR 17.206(a). This determination is required 
before use of the solicitation provision at FAR 52.217-5, Evaluation of 
Options, is authorized. See FAR 17.208(c).



               Subpart 2917.4--Leader Company Contracting



2917.402  Limitations.

    Use of leader company contracting for a product, subject to the 
limitations in FAR 17.402, shall require the advance authorization of 
the Director, Directorate of Procurement and Grant Management. 
Authorization requests shall document the circumstances requiring such 
action and shall be submitted by the Head of the Contracting Activity.



     Subpart 2917.5--Interagency Acquisitions Under the Economy Act



2917.502  General.

    The head of the contracting activity is authorized to make the 
determination prescribed in FAR 17.502 in accordance with the 
requirements contained in FAR 17.503.

[51 FR 40374, Nov. 6, 1986]

[[Page 31]]





                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS


PART 2919--SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS CONCERNS--Table of Contents




                        Subpart 2919.2--Policies

Sec.
2919.201  General policy.
2919.202  Specific policies.
2919.202-2  Locating small business sources.
2919.202-5  Data collection and reporting requirements.
2919.202-70  Annual plans and program goals.

              Subpart 2919.5--Set-Asides for Small Business

2919.501  General.
2919.503  Setting aside a class of acquisitions.
2919.503-70  Class set-aside for construction acquisitions.
2919.505  Rejection of set-aside recommendations.
2919.506  Withdrawal or modification of set-asides.

    Subpart 2919.6--Certificates of Competency and Determinations of 
                               Eligibility

2919.602  Procedures.
2919.602-1  Referrals.

      Subpart 2919.7--Subcontracting With Small Business and Small 
                     Disadvantaged Business Concerns

2919.705  Responsibilities of the contracting officer under the 
          subcontracting assistance program.
2919.705-3  Solicitations.
2919.705-4  Reviewing the subcontracting plan.
2919.705-5  Awards involving subcontracting plans.
2919.705-6  Postaward responsibilities of the contracting officer.
2919.708  Solicitation provisions and contract clauses.

   Subpart 2919.8--Contracting With the Small Business Administration

2919.802  Selecting firms for DOL acquisitions.
2919.803  Selecting acquisitions for the 8(a) program.
2919.810  Contract administration.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8929, Mar. 5, 1985, unless otherwise noted.



                        Subpart 2919.2--Policies



2919.201  General policy.

    (a) The Director, Office of Small and Disadvantaged Business 
Utilization (OSDBU), is responsible for performing all functions and 
duties prescribed in FAR 19-201(c) and for:
    (1) Developing and monitoring policies, procedures and regulations 
for effective administration of the Department's small business and 
small disadvantaged business program;
    (2) Coordinating issues with the small and disadvantaged business 
specialist (SDBS) in each contracting office regarding the Department's 
small and small disadvantaged business program;
    (3) Conducting surveys and reviews of DOL contracting offices 
related to the small business and small disadvantaged business program, 
recommending changes and corrective action, as appropriate; and
    (4) Representing the Department before other Government agencies on 
matters primarily affecting small business, small disadvantaged 
business, women-owned business, historically black colleges and 
universities (HBCU), and advising the Under Secretary and other 
officials on matters relating to the program.
    (b) The Head of the Contracting Activity, or designee, in addition 
to the requirements of FAR 19.201(b), shall be responsible for:
    (1) Establishing annual goals for the small disadvantaged business 
programs; and
    (2) Appointing, as prescribed in FAR 19.201(d), a small and 
disadvantaged business specialist (SDBS) for each contract office.
    (c) The small and disadvantaged business specialist (SDBS) shall 
serve as advisor to the Head of the Contracting Activity, and shall be 
the contracting activity's central point of contact for inquiries and 
advice pertaining to the small business and small disadvantaged business 
program. The SDBS shall be responsible for:

[[Page 32]]

    (1) Maintaining a program to locate capable small business, small 
disadvantaged business, and women-owned business sources to fulfill the 
Department's acquisition requirements;
    (2) Coordinating inquiries and requests for advice from small 
business, small disadvantaged business, women-owned business concerns 
and HBCU on DOL contracting and subcontracting opportunities and other 
acquisition matters;
    (3) Ensuring that contracting offices are kept abreast of new or 
revised small business, small disadvantaged business, women-owned 
business and HBCU regulations, policies, procedures and other related 
information;
    (4) Assisting in the Agency's advance acquisition planning process;
    (5) Reviewing all requirements to assure that small business, small 
disadvantaged business, women-owned business, businesses located in 
labor surplus areas (LSA) and HBCU will be afforded an equitable 
opportunity to compete, and as appropriate, initiating recommendations 
for small business set-asides;
    (6) Reviewing proposed requirements for possible breakout of items 
or services suitable for acquisition from participants of the small and 
disadvantaged business programs;
    (7) Attending, as appropriate, debriefings to unsuccessful small 
business and small disadvantaged business concerns to assist those firms 
in understanding requirements for responsiveness and responsibility so 
that the firm may be able to better qualify for future awards;
    (8) Participating in the evaluation of small business and small 
disadvantaged business subcontracting plans for prime contractors and 
other evaluation activities, as appropriate;
    (9) Maintaining a list of products and services which have been 
placed as repetitive small business set-asides;
    (10) Developing and maintaining records necessary to demonstrate 
maximum support for DOL's preferential programs, ensuring compilation of 
current, accurate, and complete data; and preparing all reports 
pertaining to program activities;
    (11) Participating in the development, implementation, and review of 
automated source systems to assure that the interest of small business, 
small disadvantaged business, women-owned business, and HBCU are fully 
considered;
    (12) Participating, as required, in governmental-industry 
conferences to assist small business, disadvantaged business, women-
owned business, and HBCU, including Congressionally-sponsored Federal 
acquisition conferences, minority business enterprises acquisition 
seminars, and business opportunity committee meetings;
    (13) Initiating action, in writing, with appropriate personnel to 
assure the availability of adequate specifications and drawings, when 
necessary, to obtain small business, small disadvantaged business, 
women-owned business and HBCU participation in current and future 
acquisitions.



2919.202  Specific policies.



2919.202-2  Locating small business sources.

    (a) It is the policy of the DOL to utilize the services of the SBA 
Procurement Automatic Source System (PASS) to identify small and small 
disadvantaged business sources. Obtaining sources from PASS or from 
local mailing lists does not negate the requirement that the contracting 
officer advertise the acquisition in accordance with FAR 5.
    (b) Historically black colleges and universities shall be considered 
as sources for fulfilling requirements except for small business set-
asides.



2919.202-5  Data collection and reporting requirements.

    In addition to the requirements of FAR 19.202-5, DOL Agencies/
Offices shall accurately measure the extent of participation by 
historically black colleges and universities in their acquisitions in 
terms of the total value of contracts placed with such organizations 
during each fiscal year, and report data to the OSDBU at the end of the 
second and fourth quarters of each fiscal year. The OSDBU shall forward 
the Department's consolidated data to the Department of Education.

[[Page 33]]



2919.202-70  Annual plans and program goals.

    (a) Heads of Contracting Activities shall develop annual goals for 
each category of the small business and small disadvantaged business 
utilization programs, which shall include projected acquisition awards 
to small businesses, minority businesses, 8(a) concerns, women-owned 
businesses, and HBCU.
    (1) To the greatest extent possible, the goals shall be based on 
advance procurement plans, budget justifications, and past performance.
    (2) Goals must comply with the criteria established by OSDBU.
    (b) Goals are to be submitted to the OSDBU upon request of the 
Director. OSDBU shall analyze and evaluate proposed goals, consolidate 
departmental goals and forward such to the Small Business Administration 
(SBA), the General Services Administration (GSA), and the Minority 
Business Development Agency (MBDA), Department of Commerce.
    (c) OSDBU may be required to negotiate final departmental goals, 
depending on SBA, GSA, and/or MBDA concurrence or nonconcurrence.



              Subpart 2919.5--Set-Asides for Small Business



2919.501  General.

    (a) The SDBS shall review individual requirements prior to issuance 
of solicitations to determine the suitability of the acquisition for 
award to the SBA under the section 8(a) Program (see FAR 19.803).
    (b) When the requirement cannot be awarded under section 8(a) 
procedures, the SDBS shall review individual requirements to determine 
the feasibility of small business set-asides in the order of precedence 
set forth in FAR 19.504. The SDBS recommendation shall be entered on 
Form DL1-2004, ``Small Business Determination,'' with the reasons for 
the ``pro'' or ``con'' set-aside recommendation. The form shall be 
placed in the contract file.
    (c) Upon receipt of the SDBS recommendation, the contracting officer 
shall promptly approve or disapprove the SDBS recommendation, stating in 
writing the reasons for any disapproval. If the contracting officer 
disapproves the SDBS recommendation, the proposed acquisition shall be 
promptly referred to the SBA PCR where available, for review; or where 
no SBA PCR is available, to the Head of the Contracting Activity. All 
negative recommendations shall be forwarded concurrently to the OSDBU.
    (d) All requirements expected to exceed $10,000 which have not been 
set-aside for small business shall be further reviewed by the SBA PCR, 
who shall indicate approval or disapproval of the SDBS/contracting 
officer's negative recommendation on Form DL 1-2004. If the SBA 
disapproves the SDBS/contracting officer's recommendation, the proposed 
action shall be appealed as provided in FAR 19.402(c)(3).
    (e) All future requirements for products or services previously 
acquired on a small business set-aside basis and which are not subject 
to simplified small purchase procedures, shall be acquired on the basis 
of a repetitive set-aside.



2919.503  Setting aside a class of acquisitions.



2919.503-70  Class set-aside for construction acquisitions.

    (a) Each requirement for construction, alterations, maintenance, and 
repair (including architect-engineer services), estimated to cost up to 
$2 million shall be set aside for exclusive small business 
participation. Such set-asides shall be considered to be unilateral 
small business set-asides, and shall be withdrawn only in accordance 
with the procedures of FAR 19.506 and 2919.506 if found not to serve the 
best interest of the Government.
    (b) Small business set-aside preferences for construction 
acquisitions in excess of $2 million shall be considered on a case-by-
case basis under conditions prescribed in FAR 19.502-2.



2919.505  Rejection of set-aside recommendations.

    The Under Secretary of Labor shall make final decisions on any 
appeals of the Administrator of SBA concerning a DOL contracting 
officer's adverse set-aside recommendation. The contracting officer's 
written justification in support of the decision to reject the

[[Page 34]]

set-aside recommendation shall be approved by the Head of the 
Contracting Activity. The justification shall then be forwarded for 
review through the Director, Directorate of Procurement and Grant 
Management, and the Director, OSDBU, to the Under Secretary of Labor.



2919.506  Withdrawal or modification of set-asides.

    Disagreements between the contracting officer and the SDBS 
concerning withdrawals or modifications of individual or class set-
asides shall be resolved by the SBA PCR in the National Office, or by 
the Head of the Contracting Activity where no SBA PCR is available. The 
SDBS shall concurrently notify the OSDBU of such disagreements.



    Subpart 2919.6--Certificates of Competency and Determinations of 
                               Eligibility



2919.602  Procedures.



2919.602-1  Referrals.

    Referrals by the contracting officer in accordance with FAR 19.602-1 
shall be approved by the head of the contracting activity prior to 
submission to the appropriate SBA office. The contracting officer shall 
forward copies of each referral to the Director, OSDBU.



      Subpart 2919.7--Subcontracting With Small Business and Small 
                     Disadvantaged Business Concerns



2919.705  Responsibilities of the contracting officer under the subcontracting assistance program.



2919.705-3  Solicitations.

    The contracting officer shall forward to the OSDBU any solicitation 
expected to result in a contract exceeding $500,000 ($1 million for 
construction of a public facility) prior to release to the public to 
ensure that appropriate subcontracting provisions are included in the 
Request for Proposals or Invitations for Bids. The OSDBU shall be 
allowed up to five working days for review of the solicitation, 
depending on the circumstances and complexity of the individual 
procurement.



2919.705-4  Reviewing the subcontracting plan.

    The OSDBU shall be afforded the opportunity to review subcontracting 
plans submitted by apparent successful offerors to determine if small 
and small disadvantaged businesses are afforded the maximum practicable 
opportunity to participate as subcontractors. OSDBU shall recommend to 
the contracting officer needed changes to subcontracting plans 
determined to be unacceptable.



2919.705-5  Awards involving subcontracting plans.

    The contracting officer shall forward for review, upon request of 
the Director, OSDBU, any acquisition package prior to execution of any 
negotiated contractual document requiring subcontracting plans.



2919.705-6  Postaward responsibilities of the contracting officer.

    (a) The contracting officer shall forward to the Director, OSDBU, a 
copy of any subcontracting plan that was incorporated into a contract or 
contract modification.
    (b) The contracting officer shall maintain a list of active prime 
contracts containing a subcontracting plan.
    (c) Contracting officers shall collect quarterly and semi-annually 
subcontracting data from contractors required to establish 
subcontracting plans in support of small and small disadvantaged 
business concerns. Copies of the semi-annual report, Standard Form 294 
(Subcontracting Report for Individual Contracts), and the quarterly 
report, Standard Form 295 (Summary Subcontracting Report), shall be 
forwarded to the Director, OSDBU, not later than the 30th day of the 
month following the close of the reporting period.



2919.708  Solicitation provisions and contract clauses.

    Advance approval is required prior to including any small and small 
disadvantaged business concerns incentive

[[Page 35]]

subcontracting provisions in any contract. Requests for approval shall 
be submitted by the Head of the Contracting Activity through the 
Director, Directorate of Procurement and Grant Management, to the 
Director, OSDBU.



   Subpart 2919.8--Contracting With the Small Business Administration



2919.802  Selecting firms for DOL acquisitions.

    Contracting opportunities marketed by individual 8(a) firms may be 
reserved for the firm or group of firms which identified the 
opportunity; however, each 8(a) firm or group of firms nominated by DOL 
for a specific requirement must be approved by SBA for that particular 
requirement prior to any DOL technical discussions with the firm(s).



2919.803  Selecting acquisitions for the 8(a) program.

    (a) Each DOL Agency shall identify in tentative Annual Advance 
Procurement Plans acquisitions to be fulfilled by 8(a) firms. Such 
tentative plans shall provide detailed descriptions of the nature of the 
services or work, or any other information pertinent to the requirement.
    (b) Project officers shall also be responsible for cooperating with 
the OSDBU to actively locate and identify qualified 8(a) sources and to 
structure and tailor acquisitions to permit their participation.



2919.810  Contract administration.

    (a) Contracting officers, or designees, shall conduct periodic 
evaluations relative to the performance of an 8(a) contract at various 
stages of the contract period of performance. Any problems encountered 
during the performance evaluation which cannot be resolved shall be 
referred to OSDBU for subsequent review and discussion with the 
appropriate SBA official.
    (b) The OSDBU and SBA are to be notified at least 45 days prior to 
initiating final action to terminate a section 8(a) contract.



PART 2920--LABOR SURPLUS AREA CONCERNS--Table of Contents




                         Subpart 2920.1--General

Sec.
2920.102  General policy.

                       Subpart 2920.2--Set-Asides

2920.201  Set-asides for labor surplus area concerns.
2920.201-1  Total set-asides.
2920.201-70  Set-asides for construction acquisitions.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8932, Mar. 5, 1985, unless otherwise noted.



                         Subpart 2920.1--General



2920.102  General policy.

    It is the policy of the Department of Labor (DOL) to award 
acquisitions with eligible labor-surplus area (LSA) concerns in 
accordance with FAR part 20. Responsibility for implementing the DOL LSA 
program is assigned to the Office of Small and Disadvantaged Business 
Utilization.



                       Subpart 2920.2--Set-Asides



2920.201  Set-asides for labor surplus area concerns.



2920.201-1  Total set-asides.

    Acquisitions shall be reviewed for potential combined small 
business/LSA set-aside consideration in accordance with FAR 19.501 and 
2919.501.



2920.201-70  Set-asides for construction acquisitions.

    (a) As prescribed in 2919.503-70, all acquisitions for construction, 
alterations, maintenance and repair (including architect-engineer 
services) estimated to cost up to $2 million shall be set-aside on a 
class basis for combined small business/LSA concern when the 
construction site is located in a LSA.
    (b) Small business/LSA set-aside preference for construction 
acquisitions in excess of $2 million shall be considered on a case-by-
case basis under conditions prescribed in FAR 20.201-1.

[[Page 36]]



PART 2922--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS--Table of Contents




                  Subpart 2922.1--Basic Labor Policies

Sec.
2922.101  Labor relations.
2922.101-3  Reporting labor disputes.
2922.101-4  Removal of items from contractor facilities affected by work 
          stoppage.
2922.103  Overtime.
2922.103-4  Approvals.

            Subpart 2922.6--Walsh-Healy Public Contracts Act

2922.604  Exemptions.
2922.604-2  Regulatory exemptions.
2922.608  Procedures.
2922.608-4  Award pending final determination.

              Subpart 2922.8--Equal Employment Opportunity

2922.803  Responsibilities.
2922.804  Affirmative action programs.
2922.804-2  Construction.
2922.805  Procedures.
2922.807  Exemptions.

       Subpart 2922.13--Special Disabled and Vietnam Era Veterans

2922.1303  Waivers.
2922.1306  Complaint procedures.

             Subpart 2922.14--Employment of the Handicapped

2922.1403  Waivers.
2922.1406  Complaint procedures.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8932, Mar. 5, 1985, unless otherwise noted.



                  Subpart 2922.1--Basic Labor Policies



2922.101  Labor relations.



2922.101-3  Reporting labor disputes.

    Potential or actual labor disputes that may interfere with contract 
performance shall be reported by the contracting activity to the Office 
of the Solicitor for legal advice or assistance.



2922.101-4  Removal of items from contractor facilities affected by work stoppage.

    Prior to initiating any action under FAR 22.101-4 for removal of 
items from contractors' facilities, the contracting officer shall obtain 
legal advice from the Office of the Solicitor.



2922.103  Overtime.



2922.103-4  Approvals.

    The Head of the Contracting Activity is authorized to approve the 
use of overtime in accordance with the limitations in FAR 22.103-4(a).



            Subpart 2922.6--Walsh-Healy Public Contracts Act



2922.604  Exemptions.



2922.604-2  Regulatory exemptions.

    The Secretary of Labor may exempt contracts from the Walsh Healy 
Public Contracts Act under FAR 22.604(c). A written finding justifying 
the exemption (see FAR 22.604-2(c)) shall be submitted by the Head of 
the Contracting Activity to the Director, Directorate of Procurement and 
Grant Management, for further action.



2922.608  Procedures.



2922.608-4  Award pending final determination.

    The contracting officer's certification for award under FAR 22.608-
4(a) shall be approved by the Head of the Contracting Activity.



              Subpart 2922.8--Equal Employment Opportunity



2922.803  Responsibilities.

    Matters involving the applicability of Executive Order 11246 and 
implementing regulations of the Secretary of Labor to an acquisition or 
a class of acquisitions shall be reduced to writing by the contracting 
officer and forwarded through the Head of the Contracting Activity to 
the Director, Directorate of Procurement and Grant Management, for 
resolution.

[[Page 37]]



2922.804  Affirmative action programs.



2922.804-2  Construction.

    Heads of Contracting Activities are responsible for maintaining 
lists of geographical areas subject to affirmative action requirements 
under FAR 22.804-2. Lists of areas for which OFCCP has designated 
specific affirmative action requirements are available through OFCCP. 
The list, including updates or revisions, shall be distributed to all 
contract offices which acquire construction.



2922.805  Procedures.

    The contract office shall maintain ample supplies of the poster 
(OFCCP-1420) entitled, ``Equal Opportunity is the Law'' for use as 
required in FAR 22-805(b). The poster (stock number 7690-00-926-8988) 
may be ordered from the nearest regional GSA Supply Depot.



2922.807  Exemptions.

    (a) The Assistant Secretary for Administration and Management shall 
make the determinations in FAR 22.807(a)(1).
    (b) Requests for exemptions under FAR 22.807 (a)(1), (a)(2), and 
(b)(5) shall be submitted in writing in accordance with FAR 22.807(c) by 
the contracting officer, through the Head of the Contracting Activity, 
to the Director, Directorate of Procurement and Grant Management, for 
further action.



       Subpart 2922.13--Special Disabled and Vietnam Era Veterans



2922.1303  Waivers.

    (a) The Assistant Secretary for Administration and Management is 
authorized to (1) waive any or all terms of the clause at FAR 52.222-35, 
Affirmative Action for Special Disabled and Vietnam Era Veterans, under 
the conditions prescribed in FAR 22.1303(a) and (2) waive any 
requirement in FAR subpart 22.13 as prescribed in FAR 22.1303(b).
    (b) Requests for waivers under paragraph (a) of this section shall 
be made in writing by the contracting officer and submitted through the 
Head of the Contracting Activity to the Director, Directorate of 
Procurement and Grant Management, for further action.



2922.1306  Complaint procedures.

    The contracting office shall forward complaints received about the 
Administration of the Vietnam Era Veterans Readjustment Assistance Act 
of 1972 directly to the Assistant Secretary for Veteran's Employment 
Service, DOL, as prescribed in FAR 22.1306.



             Subpart 2922.14--Employment of the Handicapped



2922.1403  Waivers.

    (a) The Assistant Secretary for Administration and Management is 
authorized to (1) waive any or all of the terms of the clause at FAR 
52.222-36, Affirmative Action for Handicapped Workers, under the 
conditions prescribed in FAR 22.1403(a) and (2) waive any requirement in 
FAR subpart 22.14 as prescribed in FAR 22.1403(b).
    (b) Requests for waivers under paragraph (a) of this section, shall 
be made in writing by the contracting officer and submitted through the 
Head of the Contracting Activity to the Director, Directorate of 
Procurement and Grant Management.



2922.1406  Complaint procedures.

    The contracting office shall forward complaints received about 
administration of section 503 of the Rehabilitation Act of 1973, as 
amended, directly to the OFCCP as prescribed in FAR 22.1406.



PART 2923--ENVIRONMENT, CONSERVATION, AND OCCUPATIONAL SAFETY--Table of Contents




        Subpart 2923.1--Pollution Control and Clean Air and Water

Sec.
2923.104  Exemptions.
2923.107  Compliance responsibilities.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8933, Mar. 5, 1985, unless otherwise noted.

[[Page 38]]



        Subpart 2923.1--Pollution Control and Clean Air and Water



2923.104  Exemptions.

    (a) The Assistant Secretary for Administration and Management is 
authorized to exempt controls from the requirements of FAR subpart 23.1 
under the conditions in FAR 23.104(c).
    (b) Requests for exemption shall be made in writing by the 
contracting officer and forwarded through the Head of the Contracting 
Activity to the Director, Directorate of Procurement and Grant 
Management, for further action.



2923.107  Compliance responsibilities.

    Conditions involving noncompliance with clean air or water standards 
in facilities used in performing nonexempt contracts shall be reported 
in writing by the contracting officer to the Head of the Contracting 
Activity for transmittal directly to the EPA Administrator in accordance 
with FAR 23.107. A copy of the report shall be promptly sent to the 
Director, Directorate of Procurement and Grant Management.



PART 2924--PROTECTION OF PRIVACY AND FREEDOM OF INFORMATION--Table of Contents




            Subpart 2924.1--Protection of Individual Privacy

Sec.
2924.103  Procedures.

               Subpart 2924.2--Freedom of Information Act

2924.202  Policy.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



            Subpart 2924.1--Protection of Individual Privacy



2924.103  Procedures.

    See 29 CFR part 70a.--Protection of Individual Privacy on Records, 
for the DOL Regulations relating to the maintenance or disclosure of 
information from systems of records on individuals.

[50 FR 8934, Mar. 5, 1985]



               Subpart 2924.2--Freedom of Information Act



2924.202  Policy.

    See 29 CFR part 70--Examination and Copying of Department of Labor 
Records, for the DOL regulations implementing the Freedom of Information 
Act.

[50 FR 8934, Mar. 5, 1985]



PART 2925--FOREIGN ACQUISITION--Table of Contents




               Subpart 2925.1--Buy American Act--Supplies

Sec.
2925.102  Policy.
2925.105  Evaluating offers.
2925.108  Excepted articles, materials, and supplies.

        Subpart 2925.2--Buy American Act--Construction Materials

2925.202  Policy.
2925.203  Evaluating offers.
2925.204  Violations.

               Subpart 2925.3--Balance of Payments Program

2925.302  Policy.
2925.304  Excess and non-excess foreign currencies.

        Subpart 2925.7--Restrictions on Certain Foreign Purchases

2925.703  Exceptions.

      Subpart 2925.9--Omission of the Examination of Records Clause

2925.903  Conditions for omission.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8934, Mar. 5, 1985, unless otherwise noted.



               Subpart 2925.1--Buy American Act--Supplies



2925.102  Policy.

    (a) The Assistant Secretary for Administration and Management shall 
make the determinations prescribed in FAR 25.102 (a)(2) and (a)(3).
    (b) The Director, Directorate of Procurement and Grant Management,

[[Page 39]]

shall make the determination prescribed in FAR 25.102(a)(4) in 
accordance with the procedures in 2925.108.
    (c) Determinations under paragraph (a) of this section shall be 
prepared by the contracting officer and submitted by the Head of the 
Contracting Activity to the Director, Directorate of Procurement and 
Grant Management, for further action.



2925.105  Evaluating offers.

    (a) In unusual circumstances, the Assistant Secretary for 
Administration and Management may determine to use evaluation 
differentials other than those prescribed in FAR 25.105 for a particular 
acquisition.
    (b) Requests for use of other evaluation differentials shall be 
directed by the Head of the Contracting Activity to the Director, 
Directorate of Procurement and Grant Management for further action.



2925.108  Excepted articles, materials, and supplies.

    (a) Determinations for additional articles, materials, and supplies 
not included in the list under FAR 25.108(d) shall be made by the 
Director, Directorate of Procurement and Grant Management.
    (b) Determinations shall be prepared by the contracting officer and 
submitted by the Head of the Contracting Activity for approval.
    (c) Contracting activities which have information justifying the 
removal of an item from the list under FAR 25.108(d) shall submit such 
information to the Director, Directorate of Procurement and Grant 
Management, for further disposition as prescribed in FAR 25.108(c).



        Subpart 2925.2--Buy American Act--Construction Materials



2925.202  Policy.

    (a) The Assistant Secretary for Administration and Management shall 
make the determinations prescribed in FAR 25.202(a)(2) and 2925.203.
    (b) The Director, Directorate of Procurement and Grant Management, 
shall make the determination prescribed in FAR 25.202(a)(3) in 
accordance with the procedures in 2925.108.
    (c) Determinations under paragraph (a) of this section shall be 
prepared by the contracting officer and submitted by the Head of the 
Contracting Activity to the Director, Directorate of Procurement and 
Grant Management, for further action.



2925.203  Evaluating offers.

    Unless the Assistant Secretary for Administration and Management 
determines otherwise, when the cost of a comparable domestic 
construction material exceeds by more than 6 percent for large business 
or 12 percent for small business or labor surplus area set-aside the 
cost of a foreign construction material proposed in an offer, use of the 
domestic construction material would unreasonably increase the cost of 
the contract and use of the foreign construction material is authorized 
and acceptable. This evaluation shall be made for each foreign 
construction material proposed in an offer and not specifically excepted 
by the solicitation. The cost of construction material shall be computed 
to include all delivery costs to the construction site, and the cost of 
foreign construction material shall also include any applicable duty 
(whether or not a duty-free entry certificate may be issued). The 
acceptable offer that remains low after adding (for evaluation purposes 
only) 6 percent or 12 percent, as applicable, of the cost of all foreign 
construction materials shall be considered the successful offer. The 
contract awarded under these circumstances shall contain a list of the 
authorized foreign construction materials as required by FAR 25.202(c) 
and the clause at FAR 52.225-5, Buy American Act--Construction 
Materials.



2925.204  Violations.

    Failure of the contractor to comply with the clause at FAR 52.225-5, 
Buy American Act--Construction Materials, shall be documented in a 
report by the contracting officer and submitted to the Head of the 
Contracting Activity for initiation of debarment action in accordance 
with subpart 2909.4.

[[Page 40]]



               Subpart 2925.3--Balance of Payments Program



2925.302  Policy.

    (a) The Director, Directorate of Procurement and Grant Management, 
shall make the determination prescribed in FAR 25.302(b)(3) and 
25.304(c). Differentials greater than 50 percent may be authorized as 
prescribed in FAR 25.302(c).
    (b) Determinations under paragraph (a) of this section shall be 
prepared by the contracting officer and submitted by the Head of the 
Contracting Activity to the Director, Directorate of Procurement and 
Grant Management, for further action.



2925.304  Excess and non-excess foreign currencies.

    The Director, Directorate of Procurement and Grant Management, shall 
consult with the Office of Management and Budget as required in FAR 
25.304(c) prior to making the determination in 2925.302(a).



        Subpart 2925.7--Restrictions on Certain Foreign Purchases



2925.703  Exceptions.

    (a) The Assistant Secretary for Administration and Management is 
authorized to approve exceptions, as prescribed in FAR 25.703, for all 
contracts other than small purchases.
    (b) Determinations under paragraph (a) of this section shall be 
prepared by the contracting officer and submitted by the Head of the 
Contracting Activity to the Director, Directorate of Procurement and 
Grant Management, for further action.



      Subpart 2925.9--Omission of the Examination of Records Clause



2925.903  Conditions for omission.

    (a) The Assistant Secretary for Administration and Management shall 
make the determination prescribed in FAR 25.903 (a)(1) and (a)(2).
    (b) Determinations under paragraph (a) of this section shall be 
prepared by the contracting officer in accordance with the requirements 
of FAR 25.904 and submitted by the Head of the Contracting Activity to 
the Director, Directorate of Procurement and Grant Management, for 
further action.
    (c) The report required by FAR 25.903(b) shall be prepared and 
forwarded by the Directorate of Procurement and Grant Management.

[[Page 41]]



             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS


PART 2928--BONDS AND INSURANCE--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                        Subpart 2928.2--Sureties



2928.203  Options in lieu of sureties.

    Upon receipt of any of the types of securities listed in FAR 28.203-
1 (except bonds or notes received in the District of Columbia) or FAR 
28.203-2, the contracting officer shall turn the securities over to the 
finance office.

[50 FR 8935, Mar. 5, 1985]



PART 2929--TAXES--Table of Contents




                         Subpart 2929.1--General

Sec.
2929.101  Resolving tax problems.

                  Subpart 2929.3--State and Local Taxes

2929.303  Applications of State and local taxes to Government 
          contractors and subcontractors.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                         Subpart 2929.1--General



2929.101  Resolving tax problems.

    Contract tax problems or questions shall be referred by the 
contracting officer to the Office of the Solicitor for resolution.

[50 FR 8935, Mar. 5, 1985]



                  Subpart 2929.3--State and Local Taxes



2929.303  Applications of State and local taxes to Government contractors and subcontractors.

    (a) Contractors to be treated as agents of the Government for the 
purposes set forth in FAR 29.303(a) shall require the written review and 
approval of the Assistant Secretary for Administration and Management.
    (b) Requests for approval under paragraph (a) of this section shall 
be submitted by the Head of the Contracting Activity, through the Office 
of the Solicitor, to the Director, Directorate of Procurement and Grant 
Management, for further action.

[50 FR 8935, Mar. 5, 1985]



PART 2930--COST ACCOUNTING STANDARDS--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                Subpart 2930.3--CAS Contract Requirements



2930.304  Waiver.

    (a) The Director, Directorate of Procurement and Grant Management, 
is authorized to waive CASB requirements as provided in FAR 30.304(c).
    (b) Requests for waivers under paragraph (a) of this section shall 
be prepared by the contracting officer as prescribed in FAR 30.304(a) 
and submitted by the Head of the Contracting Activity.

[50 FR 8935, Mar. 5, 1985]



PART 2931--CONTRACT COST PRINCIPLES AND PROCEDURES--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                     Subpart 2931.1--Applicabililty



2931.101  Objectives.

    Individual and class deviations concerning cost principles in FAR 
part 31 shall be processed as prescribed in subpart 2901.4.

[50 FR 8935, Mar. 5, 1985]



PART 2932--CONTRACT FINANCING--Table of Contents




                         Subpart 2932.1--General

Sec.
2932.102  Description of contract financing methods.

                    Subpart 2932.4--Advance Payments

2932.402  General.

[[Page 42]]

            Subpart 2932.5--Progress Payments Based on Costs

2932.502  Preaward matters.
2932.502-2  Contract finance office clearance.

                     Subpart 2932.6--Contract Debts

2932.605  Responsibilities and cooperation among Government officials.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8935, Mar. 5, 1985, unless otherwise noted.



                         Subpart 2932.1--General



2932.102  Description of contract financing methods.

    (a) Progress payments based on a percentage or stage of completion 
accomplished are authorized for use in contracts for construction, 
alteration, or repair.
    (b) The Head of the Contracting Activity, or designee, is authorized 
to approve the use of progress payments based on percentage or stage of 
completion accomplished for contracts other than those listed in 
paragraph (a) of this section.
    (c) Requests for approval under paragraph (b) of this section, shall 
be in the form of a written determination by the contracting officer 
that:
    (1) Use of progress payments based on costs (see FAR subpart 32.5) 
is impracticable; and
    (2) Adequate measures exist for determining percentage or stage of 
completion as a basis for determining payment.



                    Subpart 2932.4--Advance Payments



2932.402  General.

    (a) The Director, Directorate of Procurement and Grant Management, 
is authorized to approve findings and determinations and contract terms 
for advance payments as prescribed in FAR subpart 32.4.
    (b) The contracting officer shall review and analyze the 
contractor's application for advance payments to determine if it meets 
the information requirements of FAR 32.408. Applications which do not 
contain the required information shall not be processed until such 
information is obtained from the contractor.
    (c) The contracting officer shall submit a recommendation for 
approval or disapproval of the contractor's request through the Head of 
the Servicing Finance Office (see FAR 32.402(e)(2)) to the Head of the 
Contracting Activity for transmittal to the Director, Directorate of 
Procurement and Grant Management, under paragraph (a) of this section. 
Recommendations which do not contain the information required by FAR 
32.409-1 or FAR 32.409-2 will not be processed by the Directorate of 
Procurement and Grant Management.



            Subpart 2932.5--Progress Payments Based on Costs



2932.502  Preaward matters.



2932.502-2  Contract finance office clearance.

    (a) The contracting officer shall obtain the approval of the Head of 
the Contracting Activity before providing a progress payment rate higher 
than the customary rates prescribed in FAR 32.501-1.
    (b) For deviations to progress payment terms prescribed under FAR 
part 32, the contracting officer shall obtain approval as prescribed in 
2901.403.
    (c) The contracting officer shall obtain the approval of the 
servicing finance office for the contract before taking the action in 
FAR 32.502-2.



                     Subpart 2932.6--Contract Debts



2932.605  Responsibilities and cooperation among Government officials.

    (a) The DOL contracting officer has primary responsibility for 
determining the amount of contract debt and notifying the cognizant 
finance office of such debt due the Government. The servicing DOL 
finance office making payments under the contract has primary 
responsibility for debt collection.
    (b) Each DOL Agency/Office is responsible for developing an internal 
debt collection system and prescribing internal procedures for 
collection of debts, including contract debts covered under FAR subpart 
32.6. Agency/Office procedures should be in conformance

[[Page 43]]

with policies and procedures issued by DOL.



PART 2933--PROTESTS, DISPUTES, AND APPEALS--Table of Contents




                        Subpart 2933.1--Protests

Sec.
2933.102  General.
2933.103  Protests to the DOL Agency.
2933.104  Protests to the GAO.
2933.105  Protests to the General Services Administration Board of 
          Contract Appeals.

                  Subpart 2933.2--Disputes and Appeals

2933.203  Applicability.
2933.203-70  Department of Labor Board of Contract Appeals.
2933.209  Suspected fraudulent claims.
2933.211  Contracting officer's decision.
2933.212  Contracting officer's duties upon appeal.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                        Subpart 2933.1--Protests

    Source: 51 FR 40375, Nov. 6, 1986, unless otherwise noted.



2933.102  General.

    The Director, Office of Procurement and Grant Policy, Directorate of 
Procurement and Grant Management, shall be responsible for coordinating 
bid protests filed with the General Accounting Office (GAO). All 
communications relative to protests filed with GAO or GSBCA shall be 
coordinated with the Director, Office of Procurement and Grant Policy. 
Bid protests concerning automatic data processing (ADP) acquisitions 
filed with the General Services Administration Board of Contract Appeals 
(GSBCA) shall be coordinated by the contracting officer.



2933.103  Protests to the DOL Agency.

    When protests are filed with a DOL Agency and received before award, 
the contracting office shall obtain the advice of the Director, Office 
of Procurement and Grant Policy, before making the determination under 
FAR 33.103(a).



2933.104  Protests to the GAO.

    (a) Notice of protest. Upon being advised telephonically by GAO or 
the receipt of a protest before or after award, the Office of 
Procurement and Grant Policy shall inform the appropriate contracting 
officer and request preparation of the protest report required by FAR 
33.104(a)(2). For GAO protests concerning ADP acquisitions, the Office 
of Procurement and Grant Policy shall also inform the Director, 
Directorate of Information Resources Management, who, in turn, shall 
notify the appropriate DOL Agency Information Resources Management (IRM) 
contact. As required by FAR 33.104(a)(3) and 4 CFR 21.3, the contracting 
officer shall promptly notify all interested parties, including offerors 
(or the contractor, if the protest is after award) involved in or 
affected by the protest, that a protest has been filed with GAO and the 
basis for the protest. A written record of such notification shall be 
placed in the contract file. After receiving a copy of the protest from 
GAO and its request for an administrative report, the Office of 
Procurement and Grant Policy will promptly furnish the same to the 
contracting officer. The contracting officer shall promptly transmit by 
letter a copy of the protest to all interested parties previously 
notified and include a statement requiring furnishing of views and 
information directly to GAO. Copies of cover letters shall be sent to 
the Director, Office of Procurement and Grant Policy. Cover letters 
shall set forth a specified period of time for submission of comments 
(see FAR 33.104(a)(3)) and include instructions that any comments 
submitted to GAO should also be submitted simulaneously to the 
contracting officer and the Director, Office of Procurement and Grant 
Policy. Materials submitted by the protester may be withheld from 
interested parties in accordance with 4 CFR 21.3(b).
    (b) Submission of report. (1) All personnel shall handle protests on 
a priority basis. Within 25 work days after receipt by the Office of 
Procurement and Grant Policy of GAO's telephonic notice of the protest, 
or within 10 work days after receipt from GAO of a determination to use 
the express option, a complete report shall be submitted to GAO (see FAR 
33.104(a)(2)). If the specific circumstances of the protest require a 
longer period, the head of the

[[Page 44]]

contracting activity shall immediately notify the Office of Procurement 
and Grant policy which shall request, in writing, an extension of the 
time period in accordance with 4 CFR 21.3(d).
    (2) In addition to the requirements of FAR 33.104(a)(2), the report 
responsive to the protest shall be appropriately titled and dated; shall 
cite the GAO file number; and shall be signed by the contracting officer 
or the contracting officer's representative. Reports shall be prepared 
with the assistance of the Office of the Solicitor of Labor. If 
appropriate, the report shall contain a statement regarding any urgency 
for the acquisition and the extent to which a delay in award may result 
in significant performance difficulties or additional expense to the 
Government. If award is not urgent, a statement shall be included giving 
an estimate of the length of time an award may be delayed without 
significant expense or difficulty in performance. The head of the 
contracting activity shall submit an original and one copy of the 
contracting officer's report to the Director, Office of Procurement and 
Grant Policy, with a forwarding letter to GAO signed by the Assistant 
Secretary for Administration and Management. When the letter and report 
are dated and transmitted to GAO, the Director, Office of Procurement 
and Grant Policy, will inform the contracting officer. The contracting 
officer will then distribute copies of the report to all interested 
parties.
    (c) Notice to GAO. The Assistant Secretary for Administration and 
Management shall submit the report required by FAR 33.104(f). The report 
shall be submitted to the Comptroller General through the Director, 
Office of Procurement and Grant Policy, and the Director, Directorate of 
Procurement and Grant Management. For decisions concerning ADP 
acquisitions, the report shall also be submitted through the Director, 
Directorate of Information Resources Management.



2933.105  Protests to General Services Administration Board of Contract Appeals.

    (a) Notice of protest. Immediately upon receipt of a copy of a 
protest to the General Services Administration Board of Contract Appeals 
(GSBCA), the contracting officer shall inform the Office of Procurement 
and Grant Policy, the Directorate of Information Resources Management, 
and the Office of the Solicitor of Labor. The contracting officer shall, 
within 1 work day after receipt of a copy of the protest, provide oral 
or written notice to all parties required to be notified by FAR 
33.105(a)(2) and shall provide the GSBCA with a written list of all such 
parties to whom notice was provided within 5 work days after receipt of 
a copy of the protest. A copy of all notifications to interested parties 
and related correspondence with GSBCA shall be maintained in the 
contract file and a copy of the list of interested parties notified 
shall be provided to the Office of Procurement and Grant Policy 
simultaneously with submission to the GSBCA.
    (b) Submission of protest file. An original and one copy of a 
protest file (see FAR 33.105(b)) plus one copy for each interested party 
which has a notice of intervention or a motion to intervene in 
accordance with the requirements of Rule 5(a)(3) of GSBCA Rules of 
Procedure (48 CFR 6101.5(a)(3)) shall be prepared by the contracting 
officer. The protest file shall be organized to comply with the 
requirements of Rule 4(b) of the GSBCA Rules of Procedure (48 CFR 
6101.4(b)). The contracting officer shall submit the file to the GSBCA 
within 10 work days after filing of the protest and shall also send 
copies to the Director, Office of Procurement and Grant Policy, and to 
each interested party.
    (c) Hearings. The Solicitor of Labor, or the Solicitor's 
representative, is responsible for representing the contracting officer 
at all stages of proceedings on suspension of the agency's delegation of 
procurement authority (see FAR 33.105(d)), at all stages of proceedings 
on the merits of the protest (see FAR 33.105(e)), and with respect to 
any other proceedings which may be heard by the GSBCA. The head of the 
contracting activity shall be responsible for executing the 
determination required by FAR 33.105(d)(1). The Office of the Solicitor 
shall notify the contracting officer and the Directorate of Information 
Resources Management of

[[Page 45]]

the results of such proceedings, including any hearing.



                  Subpart 2933.2--Disputes and Appeals

    Source: 50 FR 8936, Mar. 5, 1985, unless otherwise noted. 
Redesignated at 51 FR 40375, Nov. 6, 1986.



2933.203  Applicability.

    (a) The Assistant Secretary for Administration and Management shall 
make the determination prescribed under FAR 33.203(b).
    (b) Determinations under paragraph (a) of this section shall be 
submitted by the Head of the Contracting Activity to the Director, 
Directorate of Procurement and Grant Management, for further action.

[50 FR 8936, Mar. 5, 1985. Redesignated and amended at 51 FR 40375, Nov. 
6, 1986]



2933.203-70  Department of Labor Board of Contract Appeals.

    (a) The Department of Labor Board of Contract Appeals (LBCA) is 
authorized by the Secretary to consider and determine appeals from 
decisions of contracting officers arising under a contract or relating 
to a contract made by the Department or any other executive agency when 
such agency or the Administrator of the Office of Federal Procurement 
Policy has designated the LBCA to decide the appeal.
    (b) The address of the LBCA is 1111 20th Street, NW., Washington, DC 
20036.
    (c) The LBCA rules of procedure are contained in 41 CFR part 29-60.



2933.209  Suspected fraudulent claims.

    The contracting officer shall refer all matters relating to 
suspected fraudulent claims by a contractor under the conditions in FAR 
33.009 to the Office of the Inspector General for further action or 
investigation.



2933.211  Contracting officer's decision.

    The written decision required by FAR 33.211(a)(4) shall include, in 
the paragraph listed under FAR 33.211(a)(4)(v), specific reference to 
the Department of Labor Board of Contract Appeals (LBCA), 1111 20th 
Street, NW., Washington, DC 20036, and its procedures under 41 CFR part 
29-60. The LBCA optional small claims (expedited) procedures and 
accelerated procedures under 41 CFR 29-60.211 shall also be referenced 
as required by FAR.

[50 FR 8936, Mar. 5, 1985. Redesignated and amended at 51 FR 40375, Nov. 
6, 1986]



2933.212  Contracting officer's duties upon appeal.

    (a) When a notice of appeal has been received, the contracting 
officer shall endorse on the appeal the date of mailing (or the date of 
receipt if the notice was not mailed) and forward it to the LBCA by 
certified mail within five (5) days of receipt. The Solicitor of Labor 
shall also be notified of the appeal by the contracting officer. See 41 
CFR 29-60.203.
    (b) The contracting officer shall prepare and transmit the data, 
documentation, and information required by 41 CFR 29-60.205 in the form 
of an appeal file and appellant or appellants counsel within 30 days 
after receipt of a notice of appeal or advice that an appeal has been 
docketed by the LBCA.

[[Page 46]]



             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING


PART 2935--RESEARCH AND DEVELOPMENT CONTRACTING--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



2935.015  Contracts for research with educational institutions and nonprofit organizations.

    (a) Heads of contracting activities shall furnish to the Director, 
Directorate of Procurement and Grant Management, copies of basic 
agreements pertaining to R&D with educational institutions and nonprofit 
organizations in accordance with 2916.702.
    (b) The Director, Directorate of Procurement and Grant Management, 
shall furnish the list required under FAR 35.015(b)(3) to the FAR 
Secretariat.

[50 FR 8936, Mar. 5, 1985]



PART 2936--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS--Table of Contents




     Subpart 2936.2--Special Aspects of Contracting for Construction

Sec.
2936.201  Evaluation of contractor performance.
2936.202  Specifications.
2936.209  Construction contracts with architect-engineer firms.

                    Subpart 2936.5--Contract Clauses

2936.516  Quantity surveys.

               Subpart 2936.6--Architect-Engineer Services

2936.602  Selection of firms for architect-engineer contracts.
2936.602-1  Selection criteria.
2936.602-2  Evaluation boards.
2936.602-3  Evaluation based functions.
2936.602-4  Selection authority.
2936.602-5  Short selection processes for contracts not to exceed 
          $10,000.
2936.603  Collecting data on and appraising firms' qualifications.
2936.604  Performance evaluation.
2936.606  Negotiations.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8936, Mar. 5, 1985, unless otherwise noted.



     Subpart 2936.2--Special Aspects of Contracting for Construction



2936.201  Evaluation of contractor performance.

    (a) The Head of the Contracting Activity shall establish procedures 
to evaluate construction contractor performance and prepare performance 
reports as required by FAR 36.201. Normally, the performance report 
shall be prepared by the contracting officer's authorized representative 
or other official who was responsible for monitoring contract 
performance and who is qualified to evaluate overall performance. DOL 
Agency/Office procedures shall prescribe instructions for review of the 
report, prior to distribution, as prescribed in FAR 36.201(b).
    (b) Performance reports shall be made using Standard Form 1420, 
Performance Evaluation (Construction), as prescribed in FAR 36.701(e). 
Details concerning unsatisfactory performance including Government 
notification to the contractor as required by FAR 36.201(a)(3), and 
written comments by the contractor, shall also be included in the 
report.
    (c) Performance reports shall be distributed to the Heads of 
Contracting Activities or designee for filing and other points required 
by DOL Agency/Office procedures. Copies of all reports shall also be 
promptly forwarded to the Director, Office of Procurement and Grant 
Policy, Directorate of Procurement and Grant Management, for central 
filing. All reports shall be retained for six years after the date of 
the report by the Office of Procurement and Grant Policy.
    (d) Before making a determination of prospective contractor 
responsibility, the contracting officer may contact the Office of 
Procurement and Grant Policy, Directorate of Procurement and Grant 
Management, for information regarding performance evaluation reports on 
file, unless other procedures are prescribed in DOL Agency/Office 
instructions.

[[Page 47]]



2936.202  Specifications.

    When ``brand name or equal'' product descriptions are necessary, the 
requirements of 2910.004-70 shall be followed.



2936.209  Construction contracts with architect-engineer firms.

    (a) As required by FAR 36.209, no contract for construction of a 
project shall be awarded to the firm that designed the project or its 
subsidiaries or affiliates without the written approval of the Director, 
Directorate of Procurement and Grant Management.
    (b) Requests for approval under paragraph (a) of this section, shall 
be made by the Head of the Contracting Activity, through the appropriate 
Office of the Solicitor, to the Director, Directorate of Procurement and 
Grant Management. The request shall include the reason(s) why award to 
the design firm is required; an analysis of the facts involving 
potential or actual organizational conflicts of interest including 
benefits and detriments to the Government and the prospective 
contractor; and the measures which are to be taken to avoid, neutralize, 
or mitigate conflicts of interest.



                    Subpart 2936.5--Contract Clauses



2936.516  Quantity surveys.

    The Head of the Contracting Activity is authorized to make the 
determination regarding the impracticability of Government performance 
of original and final surveys as prescribed in FAR 36.516.



               Subpart 2936.6--Architect-Engineer Services



2936.602  Selection of firms for architect-engineer contracts.



2936.602-1  Selection criteria.

    Heads of contracting activities are authorized to approve the use of 
design competition under the conditions in FAR 36.602-1(b).



2936.602-2  Evaluation boards.

    Heads of Contracting Activities shall establish procedures for 
providing permanent or ad hoc architect-engineer evaluation boards as 
prescribed in FAR 36.602-2. DOL Agency/Office procedures shall provide 
for the appointment of private practitioners of architecture, 
engineering, or related professions when such action is determined by 
the Head of the Contracting Activity to be essential to meet the 
Government's minimum needs.



2936.602-3  Evaluation based functions.

    The selection report required in FAR 36.602-3(d) shall be prepared 
for the approval of the Head of the Contracting Activity.



2936.602-4  Selection authority.

    The Head of the Contracting Activity is authorized to serve as the 
designated selection authority in accordance with FAR 36.602-4.



2936.602-5  Short selection processes for contracts not to exceed $10,000.

    The selection process prescribed in FAR 36.602-5(b) shall be used 
for architect-engineer contracts not expected to exceed $10,000.



2936.603  Collecting data on and appraising firms' qualifications.

    (a) Heads of Contracting Activities which acquire architect-engineer 
services shall establish procedures to comply with the requirements of 
FAR 36.603.
    (b) Copies of procedures established under paragraph (a) of this 
section shall be submitted to the Director, Directorate of Procurement 
and Grant Management, for review and approval. These procedures shall 
include a list of names, addresses, and telephone numbers of offices or 
boards assigned to maintain architect-engineer qualification data files. 
The list shall be updated annually and submitted to the Director, 
Directorate of Procurement and Grant Management, no later than 30 days 
after the beginning of each fiscal year.



2936.604  Performance evaluation.

    (a) The Head of the Contracting Activity shall establish procedures 
to evaluate architect-engineer contractor performance as required in FAR 
36.604. Normally, the performance report shall be prepared by the 
contracting officer's

[[Page 48]]

authorized representative or other official who was responsible for 
monitoring contract performance and who is qualified to evaluate overall 
performance. DOL Agency/Office procedures shall prescribe instructions 
for review of the report, prior to distribution, as prescribed in FAR 
36.604(b).
    (b) Performance reports shall be made using Standard Form 1421, 
Performance Evaluation (Architect-Engineer) as prescribed in FAR 
36.702(c). Details covering unsatisfactory performance including 
Government notification to the contractor as required by FAR 
36.604(a)(3) and written comments by the contractor shall also be 
included in the report.
    (c) Performance reports shall be distributed to the Head of 
Contracting Activities for filing, distribution points in FAR 36.604(c), 
and other points required by DOL Agency/Office procedures. Copies of all 
reports shall also be promptly forwarded to the Director, Office of 
Procurement and Grant Policy, Directorate of Procurement and Grant 
Management, for central filing. All reports shall be retained by the 
Office of Procurement and Grant Policy for six years after date of the 
report.
    (d) Evaluation boards or contracting offices may contact the Office 
of Procurement and Grant Policy, Directorate of Procurement and Grant 
Management, for information regarding performance evaluation reports on 
file, unless other procedures are prescribed in DOL Agency/Office 
instructions.



2936.606  Negotiations.

    When a proposal is solicited from an architect-engineer firm 
selected for negotiations, the contracting officer shall include in the 
request for proposals a reference to 2936.209 of this title as required 
by FAR 36.606(c).



PART 2937--SERVICE CONTRACTING--Table of Contents




               Subpart 2937.1--Service Contracts--General

Sec.
2937.103  Contracting officer responsibility.

                   Subpart 2937.2--Consulting Services

2937.205  Management controls.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



               Subpart 2937.1--Service Contracts--General



2937.103  Contracting officer responsibility.

    Personal services contracts (see FAR 37.104) are not authorized.

[50 FR 8938, Mar. 5, 1985]



                   Subpart 2937.2--Consulting Services



2937.205  Management controls.

    (a) Heads of contracting activities having a requirement for 
consulting or related services by either contract or purchase order to 
be awarded without competition (regardless of dollar amount) and 
competitive actions ($50,000 or more) are required to prepare a written 
justification for such services. This written justification shall be 
submitted to the Procurement Review Board (PRB) at least 60 days prior 
to the proposed effective date of the contract. Generally, requests for 
such services will be scheduled for review by the PRB within 21 working 
days. Heads of Contracting Activities retain final approval authority 
for all competitive acquisitions under $50,000. However, a copy of the 
justification for competitive acquisitions under $50,000 must be 
forwarded to the Assistant Secretary for Administration and Management 
and the Inspector General within ten days of approval. Regardless of the 
type of action planned, the justification shall include the following:
    (1) A statement of need which certifies that the requested services 
do not unnecessarily duplicate any previously performed work.
    (2) Nature and scope of the problem, the results expected, and the 
manner in which the project will relate to an impact on the Contracting 
Activity administration and/or program management.
    (3) That the services described in the request are not prohibited by 
OMB Circular A-120.
    (4) Extent to which in-house staff availability was assessed, and 
the reasons why procurement of outside services are necessary.

[[Page 49]]

    (5) Any additional information or data which support the requirement 
for a contract.
    (6) Name(s) and title(s) of official(s) who will be assigned as 
project officer(s) to work with the contractor, and who can be contacted 
for additional information.
    (b) In accordance with FAR 37.205(b)(7), all purchase requests for 
consulting services initiated in the fourth quarter of the fiscal year 
must be submitted to the Procurement Review Board for action and 
subsequent approval by the Assistant Secretary for Administration and 
Management.

[50 FR 8938, Mar. 5, 1985]

[[Page 50]]





                    SUBCHAPTER G--CONTRACT MANAGEMENT


PART 2942--CONTRACT ADMINISTRATION--Table of Contents




          Subpart 2942.2--Assignment of Contract Administration

Sec.
2942.202  Assignment of contract administration.
2942.203  Retention of contract administration.

      Subpart 2942.6--Corporate Administrative Contracting Officer

2942.602  Assignment and location.

                   Subpart 2942.7--Indirect Cost Rates

2942.703  Policy.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8938, Mar. 5, 1985, unless otherwise noted.



          Subpart 2942.2--Assignment of Contract Administration



2942.202  Assignment of contract administration.

    Unless otherwise prescribed in DOL Agency/Office procedures, the 
Head of the Contracting Activity is authorized to make the decision on 
withholding functions in FAR 42.202(b)(2).



2942.203  Retention of contract administration.

    Unless otherwise prescribed in DOL Agency/Office procedures, the 
Head of the Contracting Activity is authorized to perform the review in 
FAR 42.203(b).



      Subpart 2942.6--Corporate Administrative Contracting Officer



2942.602  Assignment and location.

    The Head of the Contracting Activity is authorized to approve the 
need for a corporate administrative contracting officer as prescribed in 
FAR 42.602(a)(2).



                   Subpart 2942.7--Indirect Cost Rates



2942.703  Policy.

    The Office of Cost Determination, Directorate of Procurement and 
Grant Management, is responsible for establishing billing rates and 
indirect cost rates as prescribed in FAR subpart 42.7.



PART 2943--CONTRACT MODIFICATIONS--Table of Contents




                      Subpart 2943.2--Change Orders

Sec.
2943.205  Contract clauses.

                          Subpart 2943.3--Forms

2943.301  Use of forms.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                      Subpart 2943.2--Change Orders



2943.205  Contract clauses.

    Heads of Contracting Activities may establish procedures, when 
appropriate, for authorizing the contracting officer to vary the 30-day 
period for submission of adjustment proposals to the clauses prescribed 
by FAR 43.205 (a)(1), (b)(1), (c), and (d).

[50 FR 8938, Mar. 5, 1985]



                          Subpart 2943.3--Forms



2943.301  Use of forms.

    FAR 43.301(a)(1)(vi) requires the use of Standard Form 30 (SF-30) to 
effect any obligation or deobligation of contract funds after award. The 
SF-30 also shall be used to deobligate funds when effecting contract 
closeout for a cost reimbursement contract when obligated funds exceed 
the final contract costs. In such an instance, the SF-30 may be issued 
as an administrative modification on a unilateral basis if the 
contractor's financial release has been separately obtained. The 
contracting officer shall include in any unilateral contract 
modification issued for contract close-out a statement that the 
contractor has signed a release of

[[Page 51]]

claims and indicate the date the release of claims was signed by the 
contractor.

[51 FR 40376, Nov. 6, 1986, as amended at 53 FR 3839, Feb. 9, 1988]



PART 2945--GOVERNMENT PROPERTY--Table of Contents




      Subpart 2945.3--Providing Government Property to Contractors

Sec.
2945.302  Providing facilities.
2945.302-1  Policy.

    Subpart 2945.4--Contractor Use and Rental of Government Property

2945.403  Rental--Use and Charges clause.
2945.405  Contracts with foreign governments or international 
          organizations.
2945.407  Non-Government use of plant equipment.

 Subpart 2945.6--Reporting, Redistribution, and Disposal of Contractor 
                                Inventory

2945.608  Screening of contractor inventory.
2945.608-6  Waiver of screening requirements.
2945.610  Sale of surplus contractor inventory.
2945.610-2  Exemptions from sale by GSA.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8938, Mar. 5, 1985, unless otherwise noted.



      Subpart 2945.3--Providing Government Property to Contractors



2945.302  Providing facilities.



2945.302-1  Policy.

    The Head of the Contracting Activity is authorized to make the 
determination for providing facilities to a contractor as prescribed in 
FAR 45.302-1(a)(4).



    Subpart 2945.4--Contractor Use and Rental of Government Property



2945.403  Rental--Use and Charges Clause.

    The Head of the Contracting Activity is authorized to make the 
determination for changing rent on the basis of use under the clause at 
FAR 52.245-9 as prescribed in FAR 45.403(a).



2945.405  Contracts with foreign governments or international organizations.

    The Head of the Contracting Activity shall establish procedures, 
when required, for processing requests of foreign governments or 
international organizations to use Government property and for 
recovering costs for such use (see FAR 45.405).



2945.407  Non-Government use of plant equipment.

    (a) The Director, Directorate of Procurement and Grant Management, 
is authorized to approve the non-Government use of plant equipment as 
prescribed in FAR 45.407.
    (b) Requests for approval under paragraph (a) of this section shall 
be submitted by the Head of the Contracting Activity.



 Subpart 2945.6--Reporting, Redistribution, and Disposal of Contractor 
                                Inventory



2945.608  Screening of contractor inventory.



2945.608-6  Waiver of screening requirements.

    (a) The Director, Directorate of Procurement and Grant Management, 
is authorized to waive screening requirements as prescribed in FAR 
45.608-6.
    (b) Requests for waiver shall be submitted by the Head of the 
Contracting Activity.



2945.610  Sale of surplus contractor inventory.



2945.610-2  Exemptions from sale by GSA.

    (a) The Assistant Secretary for Administration and Management is 
authorized to seek exemptions from sale as prescribed in FAR 45.610-2.
    (b) Requests for exemptions shall be submitted by the Head of the 
Contracting Activity to the Director, Directorate of Procurement and 
Grant Management, for further action.

[[Page 52]]



PART 2948--VALUE ENGINEERING--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                 Subpart 2948.1--Policies and Procedures



2948.102  Policies.

    (a) The Head of the Contracting Activity is authorized to make the 
determination to extend the sharing base of a value engineering change 
proposal (VECP) as prescribed in FAR 48.102(e).
    (b) The Head of the Contracting activity is authorized to extend the 
sharing base of a VECP to include the entire contracting activity or any 
part of it (see FAR 48.102(e)).
    (c) When the sharing base is extended under paragraph (a) or (b) of 
this section, the contracting officer shall specify the base in the 
contract schedule as required in FAR 48.104-1(a).

[50 FR 8939, Mar. 5, 1985]



PART 2949--TERMINATION OF CONTRACTS--Table of Contents




                   Subpart 2949.1--General Principles

Sec.
2949.106  Fraud or other criminal conduct.
2949.111  Review of proposed settlements.
2949.111-70  Settlement review boards.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8939, Mar. 5, 1985, unless otherwise noted.



                   Subpart 2949.1--General Principles



2949.106  Fraud or other criminal conduct.

    (a) Whenever fraud, such as falsified documents, false statements, 
or other criminal conduct related to the settlement of a terminated 
contract is suspected, the contracting officer shall discontinue 
negotiations and prepare a report of the facts. The report shall be 
submitted by the Head of the Contracting Activity to the Assistant 
Inspector General for Investigations along with copies of documents or 
other information connected with the suspected violation(s). A copy of 
the report shall also be submitted to the Director, Directorate of 
Procurement and Grant Management.
    (b) Depending on the findings of the Assistant Inspector General for 
Investigations, the Head of the Contracting Activity may initiate 
suspension or debarment action as prescribed in FAR subpart 9.4 and 
subpart 2909.4.



2949.111  Review of proposed settlements.

    All proposed settlement agreements shall be reviewed by the Office 
of the Solicitor and approved at a level higher than the contracting 
officer in accordance with DOL Agency procedures. Settlement agreements 
of $50,000 or more shall be approved by the Head of the Contracting 
Activity.



2949.111-70  Settlement review boards.

    (a) Heads of Contracting Activities shall establish settlement 
review boards for the review of each termination settlement or 
determination of amount due under the termination clause of a contract 
or approval or ratification of a subcontract settlement when the action 
involves $50,000 or more.
    (b) Settlement review boards may be established for actions below 
$50,000 when considered desirable by the Head of the Contracting 
Activity or when specifically requested by the contracting officer.



PART 2951--USE OF GOVERNMENT SOURCES BY CONTRACTORS--Table of Contents




       Subpart 2951.1--Contractor Use of Government Supply Sources

Sec.
2951.101  Policy.
2951.102  Authorization to use Government supply sources.
2951.102-70  Exclusive use on Government work.

    Subpart 2951.2--Contractor Use of Interagency Motor Pool Vehicles

2951.201  Policy.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8939, Mar. 5, 1985, unless otherwise noted.

[[Page 53]]



       Subpart 2951.1--Contractor Use of Government Supply Sources



2951.101  Policy.

    It is DOL policy that cost-type contractors should meet their 
requirements from Government sources of supply when these sources are 
available to them, and if it is economically advantageous or otherwise 
in the best interest of the Government.



2951.102  Authorization to use Government supply sources.

    (a) The Head of the Contracting Activity may authorize cost-type 
contractors and subcontractors, where all higher tier contracts and 
subcontracts are cost-type, to use Government supply sources in 
accordance with the requirements and procedures in FAR subpart 51. This 
authority may be redelegated to the level of contracting officer.
    (b) If the contracting officer decides to authorize a contractor to 
use Government supply sources under the conditions prescribed in FAR 
51.102, a written request for a FEDSTRIP activity address code (see FPMR 
101-26.203) shall be made directly to the DOL Agency, Headquarters 
Property Management Office.



2951.102-70  Exclusive use on Government work.

    Materials, supplies, and equipment acquired from Government sources 
of supply under the procedures described herein must be used exclusively 
in connection with Government work, except as otherwise authorized by 
the Head of the Contracting Activity.



    Subpart 2951.2--Contractor Use of Interagency Motor Pool Vehicles



2951.201  Policy.

    If it is in the Government's interest, the contracting officer may 
authorize cost-reimbursement contractors to obtain, for official 
purposes only, as defined in FAR 51.201(a), interagency motor pool 
vehicles and related services for short-term use under Federal Supply 
Schedule Industrial Group 751.

[[Page 54]]



                     SUBCHAPTER H--CLAUSE AND FORMS


PART 2952--SOLICITATION PROVISIONS AND CONTRACT CLAUSES--Table of Contents




Sec.
2952.000  Scope of part.

      Subpart 2952.1--Instructions for Using Provisions and Clauses

2952.102-1  Incorporation by reference.
2952.170  Deviations.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8940, Mar. 5, 1985, unless otherwise noted.



2952.000  Scope of part.

    This part implements FAR part 52 which sets forth contract clauses 
for use in connection with the acquisition of personal property and 
nonpersonal services (including construction).



      Subpart 2952.1--Instructions for Using Provisions and Clauses



2952.102-1  Incorporation by reference.

    (a) Preprinted standard general provisions sets will be maintained 
by the Office of Procurement and Grant Policy, Directorate of 
Procurement and Grant Management, and distributed to DOL contracting 
activities for use during the initial FAR and DOLAR familiarization 
period. Contracting activities will be responsible for inserting 
necessary additions and alterations into individual contracts to 
ascertain that the general provisions are current and appropriate to the 
circumstances of the individual contract.
    (b) At a later date, when the FAR general provisions are familiar to 
both DOL personnel and the Department's contractors, the general 
provisions will be incorporated by reference.



2952.170  Deviations.

    (a) Individual or class deviations of provisions and clauses in FAR 
part 52 shall be authorized by the Director, Directorate of Procurement 
and Grant Management, as prescribed in subpart 2901.4.
    (b) Any FAR provision or clause used with a deviation authorized in 
accordance with paragraph (a) of this section shall be identified as 
prescribed in FAR 52.103.



PART 2953--FORMS--Table of Contents




Sec.
2953.000  Scope of part.

                         Subpart 2953.1--General

2953.103  Exceptions.
2953.108  Recommendations concerning forms.
2953.170  Forms for collection of information.

                  Subpart 2953.2--Prescription of Forms

2953.200  Department of Labor forms.

                 Subpart 2953.3--Illustrations of Forms

2953.300  Scope of subpart.
2953.303  Agency forms.
2953.303-DL 1-1  Department of Labor Form DL 1-1, Requisition for 
          Equipment, Supplies, or Services.
2953.303-DL 1-90  Department of Labor Form DL 1-90, Purchase Order.
2953.303-DL 1-194  Department of Labor Form DL 1-194, Certification 
          Prior to Acquisition of Filing Equipment.
2953.303-DL 1-2004  Department of Labor Form DL 1-2004, Small Business 
          Procurement Determination.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 50 FR 8940, Mar. 5, 1985, unless otherwise noted.



2953.000  Scope of part.

    This part (a) prescribes Department of Labor (DL) forms for use in 
acquisition, (b) illustrates these forms, and (c) contains procedures 
for exceptions to forms prescribed in FAR part 53 or this part 2953.



                         Subpart 2953.1--General



2953.103  Exceptions.

    (a) Requests for exceptions to standard forms in FAR part 53 shall 
be submitted, as prescribed in FAR 53.103, to the Director, Directorate 
of Procurement and Grant Management, for further action.
    (b) Requests for exceptions to Department of Labor (DL) forms in 
part

[[Page 55]]

2953 shall be handled as deviations (see subpart 2901.4).



2953.108  Recommendations concerning forms.

    Recommendations concerning forms (see FAR 53.108) shall be made as 
prescribed in 2901.304(e).



2953.170  Forms for collection of information.

    In accordance with the Paperwork Reduction Act of 1980 and 5 CFR 
part 1320, DOL Agencies/Offices imposing forms under contracts or 
subcontracts requiring the collection of information on identical items 
from 10 or more members of the public must obtain approval from the 
Office of Management and Budget.



                  Subpart 2953.2--Prescription of Forms



2953.200  Department of Labor forms.

    This subpart prescribes Department of Labor (DL) forms for use in 
acquisition. Consistent with the approach used in FAR subpart 53.2, this 
subpart is arranged by subject matter, in the same order as, and keyed 
to, the parts of the DOLAR in which the form usage requirements are 
addressed.



                 Subpart 2953.3--Illustrations of Forms



2953.300  Scope of subpart.

    This subpart contains illustrations of Department of Labor (DL) 
forms used in acquisition.



2953.303  Agency forms.

    This section illustrates Department of Labor (DL) forms specified by 
the DOLAR for use in acquisitions. The forms are illustrated in 
numerical order. The subsection numbers correspond with the DL form 
numbers.

[[Page 56]]

2953.303-DL 1-1    Department of Labor Form DL 1-1, Requisition for 
        Equipment, Supplies, or Services.
        [GRAPHIC] [TIFF OMITTED] TC02FE91.000
        

[[Page 57]]




2953.303-DL 1-90    Department of Labor Form DL 1-90, Purchase Order.
[GRAPHIC] [TIFF OMITTED] TC02FE91.001


[[Page 58]]




                   PURCHASE ORDER TERMS AND CONDITIONS

152.252-2  CLAUSES INCORPORATED BY REFERENCE (Apr 1984). This contract 
        incorporates the following clauses by reference with the same 
        force and effect as if they were given in full text. Upon 
        request the Contracting Officer will make their full text 
        available:


        FEDERAL AQUISITION REGULATION (48 CFR CHAPTER 1) CLAUSES

52.203-1  Officials Not to Benefit (Apr 1984)

52.203-3  Gratuities (Apr 1984)

52.203-4  Covenant Against Contingent Fees (Apr 1984)

52.212-9  Variation in Quantity (Apr 1984) (In the preceding clause the 
        permissible variations are stated in the schedule)

52.215-1  Examination of Records by the Comptroller General

52.219-13  Utilization of Women-Owned Small Businesses

52.222-3  Convict Labor (Apr 1984)

52.222-4  Contract Work Hours and Safety Standards Act--Overtime 
        Compensation--General (Apr 1984)

52.222-20  Walsh-Healey Public Contracts Act

52.222-26  Equal Opportunity (Apr 1984)

52.222-36  Affirmative Action for Handicapped Workers (Apr 1984)

52.222-40  Service Contract Act of 1965--Contracts of $2,500 or Less 
        (Apr 1984)

52.222-41  Service Contract Act of 1965 (Apr 1984)

52.225-3  Buy American Act--Supplies (Apr 1984)

52.232-1  Payments (Apr 1984)

52.232-8  Discounts for Prompt Payment (Apr 1984) (With Alternate 1)

52.233-1  Disputes (Apr 1984)

52.243-1  Changes--Fixed Price (Apr 1984)

52.249-1  Termination for Convenience of the Government (Fixed Price) 
        Short Form) (Apr 1984)

[[Page 59]]

2953.303-DL 1-194    Department of Labor Form DL 1-194, Certification 
        Prior to Acquisition of Filing Equipment.
        [GRAPHIC] [TIFF OMITTED] TC02FE91.002
        

[[Page 60]]




2953.303-DL 1-2004    Department of Labor Form DL 1-2004, Small Business 
        Procurement Determination.
        [GRAPHIC] [TIFF OMITTED] TC02FE91.003
        

[[Page 61]]



       CHAPTER 34--DEPARTMENT OF EDUCATION ACQUISITION REGULATION

                          (Parts 3400 to 3499)

  --------------------------------------------------------------------

                          SUBCHAPTER A--GENERAL
Part                                                                Page
3401            ED Acquisition Regulation System............          63
3402            Definitions of words and terms..............          64
3403            Improper business practices and personal 
                    conflicts of interest...................          64
3404            Administrative matters......................          65
3405            Publicizing contract actions................          65
           SUBCHAPTER B--COMPETITION AND ACQUISITION PLANNING
3408            Required sources of supplies and services...          67
3409            Contractor qualifications...................          67
3410            Specification standards and other purchase 
                    descriptions............................          67
          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES
3413            Small purchase and other simplified purchase 
                    procedures..............................          69
3414            Sealed bidding..............................          69
3415            Contracting by negotiation..................          69
3416            Types of contracts..........................          70
3417            Special contracting methods.................          71
                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS
3419            Small business and small disadvantaged 
                    business concerns.......................          72
3424            Protection of privacy and freedom of 
                    information.............................          73
3425            Foreign acquisition.........................          73
             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS
3427            Patents, data, and copyrights...............          75
3428            Bonds and insurance.........................          75

[[Page 62]]

3432            Contract financing..........................          75
3433            Protests, disputes, and appeals.............          76
             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING
3437            Service contracting.........................          78
                    SUBCHAPTER G--CONTRACT MANAGEMENT
3442            Contract administration.....................          79
3443            Contract modifications......................          79
3445            Government property.........................          79
3447            Transportation..............................          80
                     SUBCHAPTER H--CLAUSES AND FORMS
3452            Solicitation provisions and contract clauses          81

[[Page 63]]


                          SUBCHAPTER A--GENERAL


PART 3401--ED ACQUISITION REGULATION SYSTEM--Table of Contents




Sec.
3401.000  Scope of part.

              Subpart 3401.1--Purpose, Authority, Issuance

3401.103  Applicability.
3401.104  Issuance.
3401.104-2  Arrangement of regulations.
3401.104-3  Copies.

             Subpart 3401.3--Agency Acquisition Regulations

3401.304  Agency control and compliance procedures.

                       Subpart 3401.4--Deviations

3401.401  Definition.
3401.403  Individual deviations.
3401.404  Class deviations.

             Subpart 3401.5--Agency and Public Participation

3401.501  Solicitation of agency and public views.
3401.501-2  Opportunity for public comments.

       Subpart 3401.6--Contracting Authority and Responsibilities

3401.601  General.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 53 FR 19119, May 26, 1988, unless otherwise noted.



3401.000  Scope of part.

    The Federal Acquisition Regulation System brings together, in title 
48 of the Code of Federal Regulations, the acquisition regulations 
applicable to all executive agencies of the Government. This part 
establishes a system of Department of Education (ED) acquisition 
regulations, referred to as the EDAR, for the codification and 
publication of policies and procedures of ED which implement and 
supplement the Federal Acquisition Regulation (FAR).



              Subpart 3401.1--Purpose, Authority, Issuance



3401.103  Applicability.

    The FAR and the EDAR apply to all acquisitions as defined in FAR 
part 2 except where expressly excluded.



3401.104  Issuance.



3401.104-2  Arrangement of regulations.

    The regulations in this chapter may be referred to as the Department 
of Education Acquisition Regulation or the EDAR. References to the EDAR 
are made in the same manner as references to the FAR (See FAR 1.104-
2(c)).



3401.104-3  Copies.

    Copies of the EDAR in the Federal Register and Code of Federal 
Regulations (CFR) form may be purchased from the Superintendent of 
Documents, Government Printing Office (GPO), Washington, DC 20402.



             Subpart 3401.3--Agency Acquisition Regulations



3401.304  Agency control and compliance procedures.

    The EDAR is subject to the same review procedures within the 
Department as other regulations of the Department.



                       Subpart 3401.4--Deviations



3401.401  Definition.

    A deviation from the EDAR has the same meaning as a deviation from 
the FAR.



3401.403  Individual deviations.

    An individual deviation from the FAR or the EDAR must be approved by 
the Head of the Contracting Activity (HCA).



3401.404  Class deviations.

    A class deviation from the FAR or the EDAR must be approved by the 
Procurement Executive.

[[Page 64]]



             Subpart 3401.5--Agency and Public Participation



3401.501  Solicitation of agency and public views.



3401.501-2  Opportunity for public comments.

    Unless the Secretary of Education (Secretary) approves an exception, 
the Department issues the EDAR, including any amendments to the EDAR, in 
accordance with the procedures for public participation in 5 U.S.C. 553.



       Subpart 3401.6--Contracting Authority and Responsibilities



3401.601  General.

    Contracting authority vests with the Secretary. The Secretary has 
delegated this authority to the Deputy Under Secretary for Management 
who has delegated this authority, with the right to redelegate, to the 
Procurement Executive and the HCA.



PART 3402--DEFINITIONS OF WORDS AND TERMS--Table of Contents




                       Subpart 3402.1--Definitions

Sec.
3402.101  [Reserved]

                   Subpart 3402.2--Definitions Clause

3402.201  Contract clause.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c), unless otherwise noted.



                       Subpart 3402.1--Definitions



3402.101  [Reserved]



                   Subpart 3402.2--Definitions Clause



3402.201  Contract clause.

    The contracting officer shall insert the clause in 3452.202-1, 
Definitions, in all solicitations and contracts in lieu of the clause in 
FAR 52.202-1, except--
    (a) A fixed-price research and development contract that is expected 
to be $2,500 or less; or
    (b) A purchase order.

[53 FR 19119, May 26, 1988]



PART 3403--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF INTEREST--Table of Contents




                       Subpart 3403.1--Safeguards

Sec.
3403.101  Standards of conduct.
3403.101-3  Agency regulations.

      Subpart 3403.2--Contractor Gratuities To Government Personnel

3403.203  Reporting suspected violations of the Gratuities clause.

        Subpart 3403.3--Reports of Suspected Antitrust Violations

3403.301  General.

                     Subpart 3403.4--Contingent Fees

3403.409  Misrepresentations or violations of the Covenant Against 
          Contingent Fees.

  Subpart 3403.6--Contracts With Government Employees or Organizations 
                       Owned or Controlled by Them

3403.602  Exceptions.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c)

    Source: 53 FR 19120, May 26, 1988, unless otherwise noted.



                       Subpart 3403.1--Safeguards



3403.101  Standards of conduct.



3403.101-3  Agency regulations.

    ED regulations on standards of conduct are in 34 CFR part 73.



      Subpart 3403.2--Contractor Gratuities to Government Personnel



3403.203  Reporting suspected violations of the Gratuities clause.

    (a) Suspected violations of the Gratuities clause must be reported 
to the HCA in writing detailing the circumstances.
    (b) The HCA evaluates the report with the assistance of the 
Designated Agency Ethics Officer. If the HCA determines that a violation 
may have occurred, the HCA refers the report to the Procurement 
Executive for disposition.

[[Page 65]]



        Subpart 3403.3--Reports of Suspected Antitrust Violations



3403.301  General.

    (a) [Reserved]
    (b) Any Departmental personnel who have evidence of a suspected 
antitrust violation in an acquisition shall--
    (1) Report that evidence through the HCA to the Office of the 
General Counsel for referral to the Attorney General; and
    (2) Provide a copy of that evidence to the Procurement Executive.



                     Subpart 3403.4--Contingent Fees



3403.409  Misrepresentations or violations of the Covenant Against Contingent Fees.

    Any Departmental personnel who suspect or have evidence of attempted 
or actual exercise of improper influence, misrepresentation of a 
contingent fee arrangement, or other violation of the Covenant Against 
Contingent Fees, shall report the matter promptly in accordance with the 
procedures in 3403.203.



  Subpart 3403.6--Contracts With Government Employees or Organizations 
                       Owned or Controlled by Them



3403.602  Exceptions.

    Exceptions under FAR 3.602 must be approved by the Deputy Under 
Secretary for Management.



PART 3404--ADMINISTRATIVE MATTERS--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                   Subpart 3404.1--Contract Execution



3404.170  Ratification of unauthorized contract awards.

    The execution of otherwise proper contracts made by individuals 
without contracting authority, or by contracting officers acting in 
excess of the limits of their delegated authority, may be later ratified 
by the Department. To be effective, a ratification must be--
    (a) A written document clearly stating that ratification of a 
previously unauthorized act is intended; and
    (b) Signed by the HCA, or higher level official of the Department, 
who could have granted authority to enter into the commitment at the 
time it was made and still has the power to do so.

[53 FR 19120, May 26, 1988]



PART 3405--PUBLICIZING CONTRACT ACTIONS--Table of Contents




          Subpart 3405.2--Synopses of Proposed Contract Actions

Sec.
3405.270  Notices to perform market surveys.

                   Subpart 3405.5--Paid Advertisements

3405.502  Authority.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



          Subpart 3405.2--Synopses of Proposed Contract Actions



3405.270  Notices to perform market surveys.

    (a) If a sole-source contract is anticipated, the issuance of a 
notice of a proposed contract action that is detailed enough to permit 
submission of meaningful responses and subsequent evaluation of the 
responses by the Government, constitutes an acceptable market survey.
    (b) The notice must include--
    (1) A clear statement of the supplies or services to be procured;
    (2) Any capabilities or experience required of a contractor and any 
other factors relevant to those requirements; and
    (3) The criteria, including relative weights, to be used in the 
evaluation of responses.

[53 FR 19120, May 26, 1988]

[[Page 66]]



                   Subpart 3405.5--Paid Advertisements



3405.502  Authority.

    Authority to approve publication of paid advertisements in 
newspapers is delegated to the HCA.

[53 FR 19120, May 26, 1988]

[[Page 67]]


           SUBCHAPTER B--COMPETITION AND ACQUISITION PLANNING


PART 3408--REQUIRED SOURCES OF SUPPLIES AND SERVICES--Table of Contents




    Authority: 5 U.S.C. 301, 40 U.S.C. 486(c).



      Subpart 3408.8--Acquisition of Printing and Related Supplies



3408.870  Printing clause.

    The contracting officer shall insert the clause in 3452.208-70, 
Printing, in all solicitations and contracts other than purchase orders.

[53 FR 19120, May 26, 1988]



PART 3409--CONTRACTOR QUALIFICATIONS--Table of Contents




        Subpart 3409.4--Debarment, Suspension, and Ineligibility

3409.403  [Reserved]
3409.406  Debarment.
3409.406-3  Procedures.

          Subpart 3409.5--Organizational Conflicts of Interest

3409.502  Applicability.
3409.503  Waiver.
3409.507  Procedures.
3409.570  Offeror certification provision.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c), unless otherwise noted.

    Source: 53 FR 19120, May 26, 1988, unless otherwise noted.



        Subpart 3409.4--Debarment, Suspension, and Ineligibility



3409.403  [Reserved]



3409.406  Debarment.



3409.406-3  Procedures.

    The debarring official may enter into a settlement with a contractor 
under which the contractor voluntarily excludes itself from, or 
restricts its participation in, Government contracting and 
subcontracting for a specified period.



          Subpart 3409.5--Organizational Conflicts of Interest



3409.502  Applicability.

    This subpart applies to all ED contracts except contracts with other 
Federal agencies. However, this subpart applies to contracts with the 
Small Business Administration (SBA) under the 8(a) program.



3409.503  Waiver.

    The HCA is designated as the official who may waive any general rule 
or procedure of FAR subpart 9.5 or of this subpart.



3409.507  Procedures.

    (a) If the effects of a potential or actual conflict of interest 
cannot be avoided, neutralized, or mitigated before award, the 
prospective contractor is not eligible for that award. If a potential or 
actual conflict of interest is identified after award and the effects 
cannot be avoided, neutralized, or mitigated, ED terminates the 
contract.
    (b) The Procurement Executive is designated as the official to 
conduct reviews and make final decisions under FAR 9.507(c)(4).



3409.570  Offeror certification provision.

    The contracting officer shall insert the provision in 3452.209-70, 
Organizational Conflict of Interest, in all solicitations.



PART 3410--SPECIFICATION STANDARDS AND OTHER PURCHASE DESCRIPTIONS--Table of Contents




                  Subpart 3410.7--Use of Metric System

Sec.
3410.701  Policy of the Department of Education with respect to use of 
          the metric system.
3410.702  Definitions.
3410.703  Responsibilities of the Department of Education with respect 
          to use of the metric system.

    Authority: 15 U.S.C. 205b.

[[Page 68]]


    Source: 58 FR 30088, May 25, 1993, unless otherwise noted.



                  Subpart 3410.7--Use of Metric System



3410.701  Policy of the Department of Education with respect to use of the metric system.

    It is the policy of the Department of Education to encourage use of 
the metric system in industry standards, consistent with the legal 
status of this system as the preferred system of weights and measures 
for United States trade and commerce.



3410.702  Definitions.

    Department means the United States Department of Education.
    Metric system (a) This term means the International System of Units 
established by the General Conference of Weights and Measures in 1960.
    (b) The units are listed in Federal Standard 376A, ``Preferred 
Metric Units for General Use by the Federal Government.''



3410.703  Responsibilities of the Department of Education with respect to use of the metric system.

    (a) Consistent with the Federal Acquisition Regulation System, 
contracting officers of the Department shall--
    (1) Accept, without prejudice, products and services dimensioned in 
metric units if they are offered at competitive prices and meet the 
needs of the Department; and
    (2) Ensure that acquisition planning considers these products and 
services.
    (b) Consistent with the policy in the Metric Conversion Act, as 
amended, and in 3410.701, if the metric system is the accepted system of 
weights and measures in a particular industry, the Department ensures 
that solicitations include specifications and purchase descriptions 
stated in metric units of measurement.
    (c) If the metric system is not the accepted system of weights and 
measures in a particular industry, the Department ensures that 
solicitations for procurements in excess of the small purchase threshold 
permit offerors to propose products or services in metric units of 
measurement, except when to do this would be detrimental to the purpose 
of the affected program.

[[Page 69]]



          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES


PART 3413--SMALL PURCHASE AND OTHER SIMPLIFIED PURCHASE PROCEDURES--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                         Subpart 3413.1--General



3413.107  Solicitation and evaluation of quotations.

    (a)-(c) [Reserved]
    (d) Information provided by ED. If ED provides information to a 
potential quoter concerning a request for quotations, that information 
must also be provided to all other potential quoters, by amending the 
request, if--
    (1) The information is necessary to quoters in submitting 
quotations; or
    (2) The lack of the information would be otherwise prejudicial to 
other potential quoters.
    (e) Late quotations. The procedures in FAR 15.412 must be used for 
quotations received after the time specified for receipt at the 
contracting activity, except that late quotations may be accepted if the 
contracting officer determines in writing prior to the award that it is 
in the best interest of the Government to do so.

[53 FR 19121, May 26, 1988]



PART 3414--SEALED BIDDING--Table of Contents




          Subpart 3414.4--Opening of Bids and Award of Contract

Sec.
3414.406  Mistakes in bids.
3414.406-3  Other mistakes disclosed before award.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



          Subpart 3414.4--Opening of Bids and Award of Contract



3414.406  Mistakes in bids.



3414.406-3  Other mistakes disclosed before award.

    (a)-(d) [Reserved]
    (e) Authority is delegated to the HCA to make determinations under 
FAR 14.406-3 (a) through (d).

[53 FR 19121, May 26, 1988]



PART 3415--CONTRACTING BY NEGOTIATION--Table of Contents




  Subpart 3415.4--Solicitation and Receipt of Proposals and Quotations

Sec.
3415.406-3  Part II--Contract clauses.
3415.407  Solicitation provisions.
3415.413-2  Alternate II.

                  Subpart 3415.5--Unsolicited Proposals

3415.505  Content of unsolicited proposals.
3415.506  Agency procedures.

                         Subpart 3415.9--Profit

3415.902  Policy.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 53 FR 19121, May 26, 1988, unless otherwise noted.



  Subpart 3415.4--Solicitation and Receipt of Proposals and Quotations



3415.406-3  Part II--Contract clauses.

    The contracting officer shall insert the clause in 3452.215-33, 
Order of Precedence, in all contracts other than purchase orders. The 
contracting officer shall use this clause in lieu of the clause in FAR 
52.215-33.



3415.407  Solicitation provisions.

    (a) The Freedom of Information Act (FOIA), 5 U.S.C. 552, may require 
ED to release data contained in an offeror's proposal even if the 
offeror has identified the data as restricted in accordance with the 
provision in FAR 52.215-12. The solicitation provision in 3452.215-70, 
Release of Restricted Data, informs offerors that ED is required to 
consider release of restricted data under FOIA and Executive Order 
12600.
    (b) The contracting officer shall insert the provision in 3452.215-
70, in all solicitations that include a reference

[[Page 70]]

to FAR 52.215-12, Restriction on Disclosure and Use of Data.



3415.413-2  Alternate II.

    The Department uses the Alternate II procedures in FAR 15.413-2.



                  Subpart 3415.5--Unsolicited Proposals



3415.505  Content of unsolicited proposals.

    (a)-(c) [Reserved]
    (d) Each unsolicited proposal must contain the following 
certification:

              Unsolicited Proposal Certification by Offeror

    This is to certify, to the best of my knowledge and belief, that:
    a. This proposal has not been prepared under Government supervision.
    b. The methods and approaches stated in the proposal were developed 
by this offeror.
    c. Any contact with employees of the Department of Education has 
been within the limits of appropriate advance guidance set forth in FAR 
15.504.
    d. No prior commitments were received from departmental employees 
regarding acceptance of this proposal.

Date:___________________________________________________________________

Organization:___________________________________________________________

Name:___________________________________________________________________

Title:__________________________________________________________________

(This certification must be signed by a responsible person authorized to 
enter into contracts on behalf of the organization)



3415.506  Agency procedures.

    (a) [Reserved]
    (b)(1) The HCA is the contact point to coordinate the receipt and 
handling of unsolicited proposals.
    (2) Offerors shall direct unsolicited proposals to the HCA.



                         Subpart 3415.9--Profit



3415.902  Policy.

    (a) [Reserved]
    (b) The contracting officer shall establish the profit or fee 
portion of the Government prenegotiation objective in accordance with 48 
CFR chapter 3, part 315, subpart 315.9 (Department of Health and Human 
Services Acquisition Regulation).



PART 3416--TYPES OF CONTRACTS--Table of Contents




              Subpart 3416.3--Cost-Reimbursement Contracts

Sec.
3416.303  Cost-sharing contracts.
3416.307  Contract clauses.

   Subpart 3416.6--Time-and-Materials, Labor-Hour and Letter Contracts

3416.603  Letter contracts.
3416.603-3  Limitations.

                       Subpart 3416.7--Agreements

3416.701  Contract clause.
3416.702  Basic agreements.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 53 FR 19121, May 26, 1988, unless otherwise noted.



              Subpart 3416.3--Cost-Reimbursement Contracts



3416.303  Cost-sharing contracts.

    (a) [Reserved]
    (b) Application. Costs that are not reimbursed under a cost-sharing 
contract may not be charged to the Government under any other grant, 
contract, cooperative agreement, or other arrangement.



3416.307  Contract clauses.

    (a) If the clause in FAR 52.216-7, Allowable cost and Payment, is 
used in a contract with a hospital, the contracting officer shall modify 
the clause by deleting the words ``subpart 31.2 of the Federal 
Acquisition Regulation (FAR)'' from paragraph (a) and substituting ``34 
CFR part 74, appendix E.''
    (b) The contracting officer shall insert the clause in 3452.216-70, 
Additional Cost Principles, in all solicitations of and resultant cost-
reimbursement contracts with nonprofit organizations other than 
educational institutional, hospitals, or organizations listed in 
Attachment C to Office of Management and Budget Circular A-122.

[[Page 71]]



   Subpart 3416.6--Time-and-Materials, Labor-Hour and Letter Contracts



3416.603  Letter contracts.



3416.603-3  Limitations.

    If the HCA is to sign a letter contract as the contracting officer, 
the Procurement Executive executes the written determination under FAR 
16.603-3.



                       Subpart 3416.7--Agreements



3416.701  Contract clause.

    The contracting officer shall insert the clause in 3452.216-71, 
Negotiated Overhead Rates--Fixed, in contracts with organizations that 
have fixed indirect cost rates with carryforward adjustments approved by 
the Government agency responsible for negotiating the organization's 
indirect cost rates.



3416.702  Basic agreements.

    (a)-(d) [Reserved]
    (e) Negotiated overhead rates. Basic agreements may include 
negotiated overhead rates for cost-reimbursement contracts. If a 
negotiated overhead rate is included, the bases to which the rate 
applies and the period of applicability must also be stated. All 
pertinent provisions such as final rates for past periods, provisional 
rates for current or future periods, ceilings, and any specific items to 
be treated as indirect costs must also be included.



PART 3417--SPECIAL CONTRACTING METHODS--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                         Subpart 3417.2--Options



3417.207  Exercise of options.

    If any provision in a contract requires that an option may only be 
exercised within a specified time after funds become available, the same 
provision must specify that the date on which funds are available means 
the date funds become available to the contracting officer for 
obligation.

[53 FR 19122, May 26, 1988]

[[Page 72]]



                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS


PART 3419--SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS CONCERNS--Table of Contents




      Subpart 3419.7--Subcontracting With Small Business and Small 
                     Disadvantaged Business Concerns

3419.705  Responsibilities of the contracting officer under the 
          subcontracting assistance program.
3419.705-2  Determining the need for a subcontracting plan.
3419.708  Solicitation provisions and contract clauses.

Subpart 3419.8--Contracting With the Small Business Administration (The 
                              8(a) Program)

3419.801  General.
3419.870  Acquisition of technical requirements.

    Authority: 5 U.S.C.; 40 U.S.C. 486(c).

    Source: 53 FR 19122, May 26, 1988, unless otherwise noted.



      Subpart 3419.7--Subcontracting With Small Business and Small 
                     Disadvantaged Business Concerns



3419.705  Responsibilities of the contracting officer under the subcontracting assistance program.



3419.705-2  Determining the need for a subcontracting plan.

    Incremental funding actions must be included in determining whether 
an acquisition meets the dollar threshold requiring a subcontracting 
plan.



3419.708  Solicitation provisions and contract clauses.

    (a) [Reserved]
    (b) If the clause ``Small Business and Small Disadvantaged Business 
Subcontracting Plan'' (see FAR 52.219-9) must be used in a solicitation, 
a notification must be included in the solicitation that advises 
prospective offerors that subcontracting plans may be requested from all 
concerns determined to be in the competitive range.



Subpart 3419.8--Contracting With the Small Business Administration (The 
                              8(a) Program)



3419.801  General.

    The signing of a contract document by the Small Business 
Administration (SBA) may be accepted by the contracting officer as the 
certification under FAR 19.801(b)(1).



3419.870  Acquisition of technical requirements.

    (a) Source selection. (1) Except where SBA selects a concern for an 
award under section 8(a) or under the circumstances in paragraph (a)(5) 
of this section, ED selects a nominee for an 8(a) award by SBA through a 
limited technical competition if technical aspects, methodology, or 
approach are of primary importance rather than price.
    (2) If limited technical competition is used, the concerns to be 
included are decided by the contracting officer in consultation with 
OSDBU and the Contracting Officer's Technical Representative (COTR).
    (3)(i) ED may require the concerns participating in the limited 
technical competition to submit written technical proposals. Otherwise, 
ED holds oral discussions with the participating concerns.
    (ii) In a limited technical competition, cost factors may not be 
included in the technical proposals nor considered during technical 
discussions of the proposals.
    (4) ED evaluates the concerns participating in a limited technical 
competition based on the written technical proposals or oral 
discussions. ED nominates, to SBA for subcontract award, the concern 
that the contracting officer determines to have the best technical 
capability to perform the contract requirements.
    (5) Instead of selecting a nominee through limited technical 
competition, ED may nominate one 8(a) concern to SBA if that concern has 
exclusive or predominant capability among 8(a)

[[Page 73]]

concerns by reason of experience, specialized facilities, or technical 
competence to perform the work within the time required.
    (6) Each concern nominated for a specific 8(a) requirement must be 
approved by OSDBU or SBA for that particular requirement before the 
contracting officer initiates negotiation of 8(a) award terms with the 
concern.
    (b) Negotiation of 8(a) award. The contracting officer shall give 
all possible assistance required by SBA with respect to SBA's 
negotiation of an 8(a) award.
    (c) Delegated 8(a) award administration. If SBA delegates 
responsibility to ED for administration of the 8(a) award, ED informs 
SBA of all 8(a) award modifications, progress payments, problems 
experienced by the subcontractor, and other pertinent matters requested 
by SBA.



PART 3424--PROTECTION OF PRIVACY AND FREEDOM OF INFORMATION--Table of Contents




            Subpart 3424.1--Protection of Individual Privacy

Sec.
3424.103  Procedures.

               Subpart 3424.2--Freedom of Information Act

3424.201  Authority.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



            Subpart 3424.1--Protection of Individual Privacy



3424.103  Procedures.

    (a) If the Privacy Act of 1974 applies to a contract, the 
contracting officer shall specify in the contract the disposition to be 
made of the system or systems of records upon completion of performance 
of the contract. For example, the contract may require the contractor to 
completely destroy the records, to remove personal identifiers, to turn 
the records over to ED, or to keep the records but take certain measures 
to keep the records confidential and protect the individuals' privacy.
    (b) If a notice of the system of records has not been published in 
the Federal Register, the contracting officer may proceed with the 
acquisition but shall not award the contract until the notice is 
published, unless the contracting officer determines, in writing, that 
portions of the contract may proceed without maintaining information 
subject to the Privacy Act. In this case, the contracting officer may--
    (1) Award the contract, authorizing performance only of those 
portions not subject to the Privacy Act; and
    (2) After the notice is published and effective, authorize 
performance of the remainder of the contract.

[53 FR 19123, May 26, 1988]



               Subpart 3424.2--Freedom of Information Act



3424.201  Authority.

    The Department's regulations implementing the Freedom of Information 
Act, 5 U.S.C. 552, are in 34 CFR part 5.

[53 FR 19123, May 26, 1988]



PART 3425--FOREIGN ACQUISITION--Table of Contents




               Subpart 3425.1--Buy American Act--Supplies

Sec.
3425.102  Policy.

               Subpart 3425.3--Balance of Payments Program

3425.302  Policy.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



               Subpart 3425.1--Buy American Act--Supplies



3425.102  Policy.

    (a) [Reserved]
    (b) The HCA approves determinations under FAR 25.120(a)(4).

[53 FR 19123, May 26, 1988]

[[Page 74]]



               Subpart 3425.3--Balance of Payments Program



3425.302  Policy.

    The HCA is designated to make all determinations under FAR 25.302. 
This authority may not be redelegated.

[53 FR 19123, May 26, 1988]

[[Page 75]]


             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS


PART 3427--PATENTS, DATA, AND COPYRIGHTS--Table of Contents




              Subpart 3427.4--Rights in Data and Copyrights

Sec.
3427.470  Publication and publicity clause.
3427.471  Paperwork Reduction Act clause.
3427.472  Advertising of awards clause.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 53 FR 19123, May 26, 1988, unless otherwise noted.



              Subpart 3427.4--Rights in Data and Copyrights



3427.470  Publication and publicity clause.

    The contracting officer shall insert the clause in 3452.227-70, 
Publication and Publicity, in all solicitations and contracts other than 
purchase orders.



3424.471  Paperwork Reduction Act clause.

    The contracting officer shall insert the clause in 3452.227-71, 
Paperwork Reduction Act, in all solicitations and contracts.



3427.472  Advertising of awards clause.

    The contracting officer shall insert the clause in 3452.227-72, 
Advertising of Awards, in all solicitations and contracts other than 
purchase orders.



PART 3428--BONDS AND INSURANCE--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                        Subpart 3428.3--Insurance



3428.370  Contract clause.

    The contracting officer shall insert the clause in 3452.228-70, 
Required Insurance, in all solicitations and resultant cost-
reimbursement contracts.

[53 FR 19123, May 26, 1988]



PART 3432--CONTRACT FINANCING--Table of Contents




                         Subpart 3432.1--General

Sec.
3432.170  Method of payment.

                    Subpart 3432.4--Advance Payments

3432.402  General.
3432.407  Interest.

                    Subpart 3432.7--Contract Funding

3432.704  Limitation of cost or funds.
3432.770  Prohibition against the use of ED funds to influence 
          legislation or appropriations.
3432.771  Provision for incremental funding.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(C).

    Source: 53 FR 19123, May 26, 1988, unless otherwise noted.



                         Subpart 3432.1--General



3432.170  Method of payment.

    The contracting officer shall insert the clause in 3452.232-72, 
Method of Payment, in all solicitations and contracts.



                    Subpart 3432.4--Advance Payments



3432.402  General.

    (a)-(d) [Reserved]
    (e) The HCA is designated to make determinations under FAR 
32.402(c)(1)(iii)(A). This authority may not be redelegated.



3432.407  Interest.

    The HCA is designated to authorize advance payments without interest 
under FAR 32.407(d).



                    Subpart 3432.7--Contract Funding



3432.704  Limitation of cost or funds.

    (a) Under the circumstances in FAR 32.704(a)(1), the contractor 
shall submit the following information in writing to the contracting 
officer:
    (1) Name and address of the contractor.

[[Page 76]]

    (2) Contract number and expiration date.
    (3) Contract items and amounts that will exceed the estimated cost 
of the contract or the limit of the funds allotted.
    (4) The elements of cost that changed from the original estimate 
(for example: labor, material, travel, overhead), furnished in the 
following format:
    (i) Original estimate.
    (ii) Costs incurred to date.
    (iii) Estimated cost to completion.
    (iv) Revised estimate.
    (v) Amount of adjustment.
    (5) The factors responsible for the increase, such as error in 
estimate or changed conditions.
    (6) The latest date by which funds must be available to the 
contractor to avoid delays in performance, work stoppage, or other 
impairments.
    (b) A fixed fee provided in a contract may not be changed if a cost 
overrun is funded. Changes in a fixed fee may be made only to reflect 
changes in the scope of work that justify an increase or decrease in the 
fee.



3432.770  Prohibition against the use of ED funds to influence legislation or appropriations.

    The contracting officer shall insert the clause at 3452.232-70, 
Prohibition Against the Use of ED Funds to Influence Legislation or 
Appropriations, in contracts with educational institutions, hospitals, 
and State and local governments. Contracts with commercial and nonprofit 
organizations shall be subject to the legislative lobbying prohibitions 
contained in FAR 31.205-22 and Office of Management and Budget Circular 
A-122, respectively.



3432.771  Provision for incremental funding.

    The contracting officer shall insert the provision in 3452.232-71, 
Incremental Funding, in a solicitation if a cost-reimbursement contract 
using incremental funding is contemplated.



PART 3433--PROTESTS, DISPUTES, AND APPEALS--Table of Contents




                        Subpart 3433.1--Protests

Sec.
3433.101  Definitions.
3433.103  Protests to the agency.

                  Subpart 3433.2--Disputes and Appeals

3433.203  Applicability.
3433.212  Contracting officer's duties upon appeal.
3433.214  Contract clause.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 53 FR 19124, May 26, 1988, unless otherwise noted.



                        Subpart 3433.1--Protests



3433.101  Definitions.

    Filed, as used in this subpart, means that a document has been 
received by the contracting officer, the General Accounting Office 
(GAO), or the General Services Administration Board of Contract Appeals 
(GSBCA).



3433.103  Protests to the agency.

    (a)(1) Protests to ED based on alleged improprieties in any type of 
solicitation that are apparent before bid opening or the closing date 
for receipt of proposals, must be filed before bid opening or the 
closing date for receipt of proposals. In the case of negotiated 
acquisitions, protests based on alleged improprieties that do not exist 
in the initial solicitation, but that are added later, must be filed not 
later than the next closing date for receipt of proposals following the 
addition. In other cases, protests to ED must be filed not later than 
ten (10) Federal Government working days after a basis for protest is 
known or should have been known, whichever is earlier.
    (b) With the concurrence of the HCA, the contracting officer is 
authorized to make a determination, using the criteria in FAR 33.103(a), 
to award a contract before resolution of a protest.



                  Subpart 3433.2--Disputes and Appeals



3433.203  Applicability.

    The General Services Administration Board of Contract Appeals 
(GSBCA) is designated to hear any appeal from a final decision of a 
contracting officer issued pursuant to the ``Disputes'' clause in a 
contract. The rules and regulations of the GSBCA are in 48 CFR

[[Page 77]]

chapter 5, appendix B, and govern the processing of these appeals.



3433.212  Contracting officer's duties upon appeal.

    The Office of the General Counsel is designated as the Government 
Trial Attorney to represent the Government in the defense of appeals 
before the GSBCA.



3433.214  Contract clause.

    The contracting officer shall use the clause in FAR 52.233-1, 
Disputes, with its Alternate I.

[[Page 78]]



             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING


PART 3437--SERVICE CONTRACTING--Table of Contents




               Subpart 3437.1--Service Contracts--General

Sec.
3437.102  Policy.

                   Subpart 3437.2--Consulting Services

3437.270  Consulting services reporting clause.
3437.271  Services of consultants clause.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 53 FR 19124, May 26, 1988, unless otherwise noted.



               Subpart 3437.1--Service Contracts--General



3437.102  Policy.

    If a service contract requires one or more end items of supply, FAR 
subpart 37.1 and this subpart apply only to the required services.



                   Subpart 3437.2--Consulting Services



3437.270  Consulting services reporting clause.

    The contracting officer shall include the clause in 3452.237-70, 
Identification of Reports Under Consulting Services Contracts, in all 
solicitations and contracts for consulting services.



3437.271  Services of consultants clause.

    The contracting officer shall insert the clause in 3452.237-71, 
Services of Consultants, in all solicitations and resultant cost-
reimbursement contracts.

[[Page 79]]



                    SUBCHAPTER G--CONTRACT MANAGEMENT


PART 3442--CONTRACT ADMINISTRATION--Table of Contents




                   Subpart 3442.7--Indirect Cost Rates

Sec.
3442.705  Final indirect cost rates.

                  Subpart 3442.70--Contract Monitoring

3442.7001  Withholding of contract payments clause.
3442.7002  Litigation and claims clause.
3442.7003  Delays clause.

Subpart 3442.71--Accessibility of Meetings, Conferences, and Seminars to 
                        Persons With Disabilities

3442.7101  Policy and clause.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 53 FR 19124, May 26, 1988, unless otherwise noted.



                   Subpart 3442.7--Indirect Cost Rates



3442.705  Final indirect cost rates.

    The Chief, Cost Determination Branch, Grants and Contracts Service, 
is delegated the authority to establish final indirect cost rates under 
FAR 42.705-1 and 42.705-2.



                  Subpart 3442.70--Contract Monitoring



3442.7001  Withholding of contract payments clause.

    (a) The contracting officer shall insert the clause in 3452.242-72, 
Withholding of Contract Payments, in all solicitations and contracts 
other than purchase orders.
    (b) ED may withhold contract payments if any report required to be 
submitted by the contractor is overdue, or if the contractor fails to 
perform or deliver work or services as required by the contract.
    (c) The contracting officer shall notify the contractor in writing 
that payments are being withheld in accordance with the clause.



3442.7002  Litigation and claims clause.

    The contracting officer shall insert the clause in 3452.242-70, 
Litigation and Claims, in all solicitations and resultant cost-
reimbursement contracts.



3442.7003  Delays clause.

    The contracting officer shall insert the clause in 3452.242-71, 
Notice to the Government of Delays, in all solicitations and contracts 
other than purchase orders.



Subpart 3442.71--Accessibility of Meetings, Conferences, and Seminars to 
                        Persons With Disabilities



3442.7101  Policy and clause.

    (a) It is the policy of ED that all meetings, conferences, and 
seminars be accessible to persons with disabilities.
    (b) The contracting officer shall insert the clause in 3452.242-73, 
Accessibility of Meetings, Conferences, and Seminars to Persons with 
Disabilities, in all solicitations and contracts.



PART 3443--CONTRACT MODIFICATIONS--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



3443.106  Contract clause.

    The contracting officer shall insert the clause in 3452.243-70, Key 
Personnel, in all solicitations and resultant cost-reimbursement 
contracts.

[53 FR 19125, May 26, 1988]



PART 3445--GOVERNMENT PROPERTY--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

[[Page 80]]



    Subpart 3445.4--Contractor Use and Rental of Government Property



3445.405  Contracts with foreign governments or international organizations.

    Requests by, or for the benefit of, foreign governments or 
international organizations to use ED production and research property 
must be approved by the HCA. The HCA shall determine the amount of cost 
to be recovered or rental charged, if any, based on the facts and 
circumstances of each case.

[53 FR 19125, May 26, 1988]



PART 3447--TRANSPORTATION--Table of Contents




    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).



                     Subpart 3447.70--Foreign Travel



3447.7000  Foreign travel clause.

    The contracting officer shall insert the clause in 3452.247-70, 
Foreign Travel, in all solicitations and resultant cost-reimbursement 
contracts.

[53 FR 19125, May 26, 1988]

[[Page 81]]



                     SUBCHAPTER H--CLAUSES AND FORMS


PART 3452--SOLICITATION PROVISIONS AND CONTRACT CLAUSES--Table of Contents




             Subpart 3452.2--Texts of Provisions and Clauses

Sec.
3452.202-1  Definitions.
3452.208-70  Printing.
3452.209-70  Organizational conflict of interest.
3452.215-33  Order of precedence.
3452.215-70  Release of restricted data.
3452.216-70  Additional cost principles.
3452.216-71  Negotiated overhead rates--fixed.
3452.227-70  Publication and publicity.
3452.227-71  Paperwork Reduction Act.
3452.227-72  Advertising of awards.
3452.228-70  Required insurance.
3452.232-70  Prohibition against the use of ED funds to influence 
          legislation or appropriations.
3452.232-71  Incremental funding.
3452.232-72  Method of payment.
3452.237-70  Identification of reports under consulting services 
          contracts.
3452.237-71  Services of consultants.
3452.242-70  Litigation and claims.
3452.242-71  Notice to the Government of delays.
3452.242-72  Withholding of contract payments.
3452.242-73  Accessibility of meetings, conferences, and seminars to 
          persons with disabilities.
3452.243-70  Key personnel.
3452.247-70  Foreign travel.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c).

    Source: 53 FR 19125, May 26, 1988, unless otherwise noted.



             Subpart 3452.2--Texts of Provisions and Clauses



3452.202-1  Definitions.

    As prescribed in 3402.201, insert the following clause in 
solicitations and contracts:

                         Definitions (Aug 1987)

    (a) The term Secretary or Head of the Agency (also called Agency 
Head) means the Secretary or Under Secretary of the Department of 
Education; and the term his/her duly authorized representative means any 
person, persons, or board authorized to act for these officials.
    (b) The term contracting officer means a person with the authority 
to enter into, administer, and/or terminate contracts and make related 
determinations and findings. The term includes certain authorized 
representatives of the contracting officer acting within the limits of 
their authority as delegated by the contracting officer.
    (c) The term Contracting Officer's Technical Representative means 
the person representing the Government for the purpose of technical 
monitoring of contract performance. The Contracting Officer's Technical 
Representative (COTR) is not authorized to issue any instructions or 
directions which effect any increases or decreases in the scope of work 
or which would result in the increase or decrease of the cost or price 
of this contract or a change in the delivery dates or performance period 
of this contract.
    (d) The term Department or ED means the Department of Education.
    (e) Except as otherwise provided in this contract, the term 
subcontract includes, but is not limited to, purchase orders and changes 
and modifications to purchase orders under this contract.

                             (End of clause)



3452.208-70  Printing.

    As prescribed in 3408.870, insert the following clause in all 
solicitations and contracts other than purchase orders:

                           Printing (Aug 1987)

    Unless otherwise specified in this contract, the contractor shall 
not engage in, nor subcontract for, and printing (as that term is 
defined in Title I of the Government Printing and Binding Regulations in 
effect on the effective date of this contract) in connection with the 
performance of work under this contract; except that performance 
involving the reproduction of less than 5,000 production units of any 
one page, or less than 25,000 production units in the aggregate of 
multiple pages, shall not be deemed to be printing. A production unit is 
defined as one sheet, size 8\1/2\ by 11 inches, and one side and color 
only.

                             (End of clause)



3452.209-70  Organizational conflict of interest.

    As prescribed in 3409.570, insert the following provision in all 
certifications:

[[Page 82]]

             Organizational Conflict of Interest (Oct 1987)

    The offeror certifies that it (__) is (__) is not aware of any 
potential organization conflict of interest that it may have under this 
procurement. If the offeror is aware of any potential conflict of 
interest, the offeror shall submit a disclosure statement fully 
describing the situation. An organizational conflict of interest is as 
defined and illustrated in FAR 9.5.

                           (End of provision)



3452.215-33  Order of precedence.

    As prescribed in 3415.406-3, insert the following clause in 
contracts:

                     Order of Precedence (Aug 1987)

    Any inconsistency in this contract shall be resolved by giving 
precedence in the following order:
    (a) The Schedule (exclusing the work statement or specification).
    (b) The contract clauses (Section I).
    (c) Any incorporated documents, exhibits, or attachment, excluding 
the work statement or specifications and the contractor's proposal, 
representations, and certifications,
    (d) The work statement or specifications, and
    (e) The contractor's proposal, as amended, including representations 
and certifications.

                             (End of clause)



3452.215-70  Release of restricted data.

    As prescribed in 3415.407, insert the following provision in 
solicitations:

                  Release of Restricted Data (Aug 1987)

    (a) Offerors are hereby put on notice that regardless of their use 
of the legend set forth in FAR 52.215-12, Restriction on Disclosure and 
Use of Data, the Government may be required to release certain data 
contained in the proposal in response to a request for the data under 
the Freedom of Information Act. the Government's determination to 
withhold or disclose a record will be based upon the particular 
circumstance involving the data in question and whether the data may be 
exempted from disclosure under the Freedom of Information Act. In 
accordance with Executive Order 12600 and to the extent permitted by 
law, the Government will notify the offeror before it releases 
restricted data.
    (b) By submitting a proposal or quotation in response to this 
solicitation:
    (1) The offeror acknowledges that the Department may not be able to 
withhold nor deny access to data requested pursuant to the Act and that 
the Government's FOI officials shall make that determination;
    (2) The offeror agrees that the Government is not liable for 
disclosure if the Department has determined that disclosure is required 
by the Act;
    (3) The offeror acknowledges that proposals not resulting in a 
contract remain subject to the Act; and
    (4) The offeror agrees that the Government is not liable for 
disclosure or use of unmarked data and may use or disclose the data for 
any propose, including the release of the information pursuant to 
requests under the Act.
    (c) Offerors are cautioned that the Government reserves the right to 
reject any proposal submitted with (1) a restrictive legend or statement 
differing in substance from the one required by the solicitation 
provision in FAR 52.515-12, Restriction on Disclosure and Use of Data, 
or (2) a statement taking exceptions to the terms of (a) or (b) of this 
provision.

                           (End of provision)



3452.216-70  Additional cost principles.

    Insert the following clause in solicitations and contracts as 
prescribed in 3416.307(b):

                  Additional Cost Principles (Aug 1987)

    (a) Bid and Proposal Costs. Bid and proposal costs are the immediate 
costs of preparing bids, proposals, and applications for potential 
Federal and non-Federal grants, contracts, and other agreements, 
including the development of scientific, cost and other data needed to 
support the bids, proposals and applications. Bid and proposal costs of 
the current accounting period are allowable as indirect costs; bid and 
proposal costs of past accounting periods are unallowable as costs of 
the current period. However, if the organization's established practice 
is to treat these costs by some other method, they may be accepted if 
they are found to be reasonable and equitable. Bid and proposal costs do 
not include independent research and development costs or pre-award 
costs.
    (b) Independent research and development costs. Independent research 
and development is research and development that is not sponsored by 
Federal and non-Federal grants, contracts, or other agreements. 
Independent research and development shall be allocated its 
proportionate share of indirect costs on the same basic as the 
allocation of indirect costs of sponsored research and development. The 
costs of independent research and development, including its 
proportionate share of indirect costs, are unallowable.

[[Page 83]]

                             (End of clause)



3452.216-71  Negotiated overhead rates--fixed.

    Insert the following clause in cost-reimbursement contracts as 
prescribed in 3416.701:

               Negotiated Overhead Rates--Fixed (Aug 1987)

    (a) Notwithstanding the provisions of the clause entitled 
``Allowable Cost and Payment'', the allowable indirect costs under this 
contract shall be obtained by applying negotiated fixed overhead rates 
for the applicable period(s) to bases agreed upon by the parties, as 
specified below. A negotiated fixed rate(s) is based on an estimate of 
the costs which will be incurred during the period for which the rate(s) 
applies. If the application of the negotiated fixed rates(s) against the 
actual bases during a given fiscal period produces an amount greater or 
less than the indirect costs determined for that period, the greater or 
lesser amount(s) will be carried forward to a subsequent period.
    (b) The contractor, as soon as possible but no later than six months 
after the close of its fiscal year, or such other period as may be 
specified in the contract, shall submit to the contracting officer or 
the duly authorized representative, with a copy to the cognizant audit 
activity, a proposed fixed overhead rate or rates based on the 
contractor's actual cost experience during the fiscal year, including 
adjustment, if any, for amounts carried forward, together with 
supporting cost data. Negotiation of fixed overhead rates, including 
carry-forward adjustments, if any, by the contractor and the contracting 
officer, or the duly authorized representative, shall be undertaken as 
promptly as practicable after receipt of the contractor's proposal.
    (c) Allowability of costs and acceptability of cost allocation 
methods shall be determined in accordance with part 31 of the Federal 
Acquisition Regulation (FAR) in effect on the date of this contract.
    (d) The results of each negotiation shall be set forth in an 
amendment to this contract, which shall specify (1) the agreed fixed 
overhead rates, (2) the bases to which the rates apply, (3) the fiscal 
year, unless the parties agreed to a different period, for which the 
rates apply, and (4) the specific items treated as direct costs or any 
changes in the items previously agreed to be direct costs.
    (e) Pending establishment of fixed overhead rates for any fiscal 
year or different period agreed to by the parties, the contractor shall 
be reimbursed either at the rates fixed for the previous fiscal year or 
other period or at billing rates acceptable to the contracting officer, 
subject to appropriate adjustment when the final rates for the fiscal 
year or other period are established.
    (f) Any failure of the parties to agree on any fixed rate or rates 
or to the amount of any carry-forward adjustment under this clause shall 
not be considered a dispute for decision by the contracting officer 
within the meaning of the Disputes clause of this contract. If for any 
fiscal year or other period specified in the contract, the parties fail 
to agree to a fixed overhead rate or rates, it is agreed that the 
allowable indirect costs under this contract shall be obtained by 
applying negotiated final overhead rates, in accordance with the terms 
of the Allowable Cost and Payment clause, in effect on the date of this 
contract.
    (g) Submission of proposed fixed, provisional, and/or final overhead 
rates, together with appropriate data in support thereof, to the 
contracting officer or the duly authorized representative and agreements 
on fixed, provisional, and/or final overhead rates entered into between 
the contractor and the contracting officer or the duly authorized 
representative, as evidenced by negotiated overhead rate agreements 
signed by both parties, shall satisfy the requirements of paragraphs 
(b), (c), (d), and (e) of this clause.

                             (End of clause)



3452.227-70  Publication and publicity.

    As prescribed in 3427.470, insert the following clause in all 
solicitations and contracts other than purchase orders:

                  Publication and Publicity (Aug 1987)

    (a) Unless otherwise specified in this contract, the contractor is 
encouraged to publish and otherwise promote the results of its work 
under this contract. A copy of each article or work submitted by the 
contractor for publication shall be promptly sent to the Contracting 
Officer's Technical Representative. The contractor shall also inform the 
representative when the article or work is published and furnish a copy 
in the published form.
    (b) The contractor shall acknowledge the support of the Department 
of Education in publicizing the work under this contract in any medium. 
This acknowledgment shall read substantially as follows:
    ``This project has been funded at least in part with Federal funds 
from the U.S. Department of Education under contract number __________. 
The content of this publication does not necessarily reflect the views 
or policies of the U.S. Department of Education nor does mention of 
trade names, commercial products, or organizations imply endorsement by 
the U.S. Government.''

[[Page 84]]

                             (End of clause)



3452.227-71  Paperwork Reduction Act.

    As prescribed in 3427.471, insert the following clause in all 
solicitations and contracts:

                   Paperwork Reduction Act (Aug 1987)

    (a) The Paperwork Reduction Act of 1980 (Pub. L. 96-511) applies to 
contractors that collect information for use or disclosure by the 
Federal Government.
    If the contractor will collect information requiring answers to 
identical questions from 10 or more people then no plan, questionnaire, 
interview guide, or other similar device for collecting information may 
be used without first obtaining clearance from the Deputy Under 
Secretary for Management (DUSM) or his/her delegate within the 
Department of Education (ED) and the Office of Management and Budget 
(OMB). Contractors and Contracting Officers' Technical Representatives 
shall be guided by the provisions of 5 CFR part 1320, Controlling 
Paperwork Burdens on the Public, and seek the advice of the Department's 
Paperwork Clearance Officer to determine the procedures for acquiring 
DUSM and OMB clearance.
    (b) The contractor shall obtain the required DUSM and OMB clearance 
through the Contracting Officer's Technical Representative before 
expending any funds or making public contacts for the collection of 
information described in paragraph (a) of this clause. The authority to 
expend funds and proceed with the collection shall be in writing by the 
contracting officer. The contractor must plan at least 120 days for DUSM 
and OMB clearance. Excessive delay caused by the Government which arises 
out of causes beyond the control and without the fault or negligence of 
the contractor will be considered in accordance with the Excusable 
Delays or Default clause of this contract.

                             (End of clause)



3452.227-72  Advertising of awards.

    As prescribed in 3427.472, insert the following clause in all 
solicitations and contracts other than purchase orders:

                    Advertising of Awards (Aug 1987)

    The contractor agrees not to refer to awards issued by the 
Department of Education in commercial advertising in such a manner as to 
state or imply that the product or service provided is endorsed by the 
Federal Government or is necessarily considered by the Government to be 
superior to other products or services.

                             (End of clause)



3452.228-70  Required insurance.

    As prescribed in 3428.370, insert the following clause in all 
solicitations and resultant cost-reimbursement contracts:

                      Required Insurance (Aug 1987)

    (a) The contractor shall procure and maintain such insurance as 
required by law or regulation, including but not limited to the 
requirements of FAR subpart 28.3 or by the written direction of the 
contracting officer. Prior written approval of the contracting officer 
shall be required with respect to any insurance policy the premiums for 
which the contractor proposes to treat as a direct cost under this 
contract and with respect to any proposed qualified program of self-
insurance. The terms of any other insurance policy shall be submitted to 
the contracting officer for approval upon request.
    (b) Unless otherwise authorized in writing by the contracting 
officer, the contractor shall not procure or maintain for its own 
protection any insurance covering loss or destruction of or damage to 
Government property.

                             (End of clause)



3452.232-70  Prohibition against the use of ED funds to influence legislation or appropriations.

    The following clause is to be used in accordance with 3432.770:

  Prohibition Against the Use of ED Funds to Influence Legislation or 
                        Appropriations (Apr 1987)

    No part of any funds under this contract shall be used to pay the 
salary and expenses of any contractor, or agency acting for the 
contractor, to engage in any activity designed to influence legislation 
or appropriations pending before the Congress.

                             (End of clause)



3452.232-71  Incremental funding.

    As prescribed in 3452.771, insert the following provision in 
solicitations:

                     Incremental Funding (Aug 1987)

    (a) Sufficient funds are not presently available to cover the total 
cost of the complete project described in this solicitation. However, it 
is the Government's intention to negotiate and award a contract using 
the incremental funding concepts described in the clause titled 
``Limitation of Funds'' in FAR 52.232-22. Under that clause, which will 
be included in the resultant contract, initial

[[Page 85]]

funds will be obligated under the contract to cover an estimated base 
performance period. Additional funds are intended to be allotted to the 
contract by contract modification, up to and including the full 
estimated cost of the entire period of performance. This intent 
notwithstanding, the Government will not be obligated to reimburse the 
contractor for cost incurred in excess of the periodic allotments, nor 
will the contractor be obligated to perform in excess of the amount 
allotted.
    (b) The Limitation of Cost clause in FAR 52.232-20 shall supersede 
the Limitation of Funds clause in the event the contract becomes fully 
funded.

                           (End of provision)



3452.232-72  Method of payment.

    As prescribed in 3432.170, insert the following clause in all 
solicitations and contracts:

                      Method of Payment (Aug 1987)

    (a) Payments under this contract will be made either by check or by 
wire transfer through the Treasury Financial Communications System at 
the option of the Government.
    (b) The contractor shall forward the following information in 
writing to (designated payment party) not later than seven days after 
receipt of notice of award.
    (1) Full name (where practicable), title, phone number, and complete 
mailing address of responsible official(s) to whom check payments are to 
be sent, and who may be contacted concerning the bank account 
information requested below.
    (2) The following bank account information required to accomplish 
wire transfers:
    (i) Name, address, and telegraphic abbreviation of the receiving 
financial institution:
    (ii) Receiving financial institution's nine-digit American Bankers 
Association (ABA) identifying number for routing transfer of funds. 
(Provide this number only if the receiving financial institution has 
access to the Federal Reserve Communications System.)
    (iii) Recipient's name and account number at the receiving financial 
institution to be credited with the funds.
    (iv) If the receiving financial institution does not have access to 
the Federal Reserve Communications System, provide the name of the 
correspondent financial institution through which the receiving 
financial institution receives electronic funds transfer messages. If a 
correspondent financial institution is specified, also provide the 
address and telegraphic abbreviation of that institution and its nine-
digit ABA identifying number for routing transfer of funds.
    (c) Any changes to the information furnished under paragraph (b) of 
this clause shall be furnished to (designated payment office) in writing 
at least 30 days before the effective date of the change. It is the 
contractor's responsibility to furnish these changes promptly to avoid 
payments to erroneous addresses or bank accounts.
    (d) The document furnishing the information required in paragraphs 
(b) and (c) must be dated and contain the signature, title, and 
telephone number of the contractor's official authorized to provide it, 
as well as the contractor's name and contract number.

                             (End of clause)



3452.237-70  Identification of reports under consulting services contracts.

    As prescribed in 3437.270, insert the following clause in all 
solicitations and contracts for consulting services:

 Identification of Reports Under Consulting Service Contracts (Aug 1987)

    The contractor shall set forth on the cover of every report 
submitted pursuant to this contract the following information:
    (a) Name and business address of the contractor; (b) contract 
number; (c) contract dollar amount; (d) whether the contract was 
competitively or noncompetitively awarded; (e) name of the Contracting 
Officer's Technical Representative and complete office identification 
and address; and (f) names of the managerial and professional personnel 
responsible for the content and preparation of the report.

                             (End of clause)



3452.237-71  Services of consultants.

    As prescribed in 3437.271, insert the following clause in all 
solicitations and resultant cost-reimbursement contracts:

                   Services of Consultants (Aug 1987)

    Except as otherwise expressly provided elsewhere in this contract, 
and notwithstanding the provisions of the clause of the contract 
entitled ``Subcontracts Under Cost-Reimbursement and Letter Contracts,'' 
the prior written approval of the contracting officer shall be required:
    (a) If any employee of the contractor is to be paid as a 
``consultant'' under this contract; and
    (b) For the utilization of the services of any consultant under this 
contract exceeding the daily rate set forth elsewhere in this contract 
or, if no amount is set forth, $150, exclusive of travel costs, or if 
the services of any consultant under this contract will exceed 10 days 
in any calendar year.

[[Page 86]]

    If that contracting officer's approval is required, the contractor 
shall obtain and furnish to the contracting officer information 
concerning the need for the consultant services and the reasonableness 
of the fees to be paid, including, but not limited to, whether fees to 
be paid to any consultant exceed the lowest fee charged by consultant to 
others for performing consultant services of a similar nature.

                             (End of clause)



3452.242-70  Litigation and claims.

    As prescribed in 3442.7002, insert the following clause in all 
solicitations and resultant cost-reimbursement contracts:

                    Litigation and Claims (Aug 1987)

    (a) The contractor shall give the contracting officer immediate 
notice in writing of:
    (1) Any action, filed against the contractor arising out of the 
performance of this contract, including any proceeding before any 
administrative agency or court of law, and also including, but not 
limited to, the performance of any subcontract hereunder; and
    (2) Any claim against the contractor for a cost which is allowable 
under the clause entitled ``Allowable Cost and Payment.''
    (b) Except as otherwise directed by the contracting officer, the 
contractor shall immediately furnish the contracting officer copies of 
all pertinent papers received under that action or claim.
    (c) If required by the contracting officer, the contractor shall:
    (1) Effect an assignment and subrogation in favor of the Government 
of all the contractor's rights and claim (except those against the 
Government) arising out of the action or claim against the contractor; 
and
    (2) Authorize the Government to settle or defend the action or claim 
and to represent the contractor in, or to take charge of, the action.
    (d) If the settlement or defense of an action or claim is undertaken 
by the Government, the contractor shall furnish all reasonable required 
assistance. However, if an action against the contractor is not covered 
by a policy of insurance, the contractor shall notify the contracting 
officer and proceed with the defense of the action in good faith.
    (e) To the extent not in conflict with any applicable policy of 
insurance, the contractor may, with the contracting officer's approval, 
settle any such action or claim.
    (f)(1) The Government shall not be liable for the expense of 
defending any action or for any costs resulting from the loss thereof to 
the extent that the contractor would have been compensated by insurance 
that was required by law, regulation, contract clause, or other written 
direction of the contracting officer, but which the contractor failed to 
secure through its own fault or negligence.
    (2) In any event, unless otherwise expressly provided in this 
contract, the contractor shall not be reimbursed or indemnified by the 
Government for any cost or expense of liability that the contractor may 
incur or be subject to by reason of any loss, injury, or damage, to the 
person or to real or personal property of any third parties as may arise 
from the performance of this contract.

                             (End of clause)



3452.242-71  Notice to the Government of delays.

    As prescribed in 3442.7003, insert the following clause in all 
solicitations and contracts other than purchase orders:

              Notice to the Government of Delays (Aug 1987)

    Whenever the contractor has knowledge that any actual or potential 
situation, including but not limited to labor disputes, is delaying or 
threatens to delay the timely performance of work under this contract, 
the contractor shall immediately give written notice thereof, including 
all relevant information with respect thereto, to the contracting 
officer.

                             (End of clause)



3452.242-72  Withholding of contract payments.

    As prescribed in 3442.7001, insert the following clause in all 
solicitations and contacts other than purchase orders:

               Withholding of Contract Payments (Aug 1987)

    Notwithstanding any other payment provisions of this contract, 
failure of the contractor to submit required reports when due or failure 
to perform or deliver required work, supplies, or services, or failure 
to meet any of the requirements of the contract, will result in the 
withholding of payments under this contract in such amounts as the 
contracting officer deems appropriate, unless the failure arises out of 
causes beyond the control, and without the fault of negligence, of the 
contractor, as defined by the clause entitled ``Excusable Delays'' or 
``Default'', as applicable. The Government shall promptly notify the 
contractor of its intention to withhold payment of any invoice or 
voucher submitted. Payment will be withheld until the failure is cured, 
a new delivery schedule is agreed upon, or payment is made as part of a 
termination settlement.

[[Page 87]]

                             (End of clause)



3452.242-73  Accessibility of meetings, conferences, and seminars to persons with disabilities.

    As prescribed in 3442.7101(b), insert the following clause in all 
solicitations and contracts:

  Accessibility of Meetings, Conferences, and Seminars to Persons With 
                         Disabilities (Aug 1987)

    The contractor shall assure that any meeting, conference, or seminar 
held pursuant to the contract will meet all applicable standards for 
accessibility to persons with disabilities pursuant to section 504 of 
the Rehabilitation Act of 1973, as amended (29 U.S.C. 794) and any 
implementing regulations of the Department.

                             (End of clause)



3452.243-70  Key personnel.

    As prescribed in 3443.106(b), insert the following clause in all 
solicitations and resultant cost-reimbursement contracts:

                        Key Personnel (Aug 1987)

    The personnel designated as key personnel in this contract are 
considered to be essential to the work being performed hereunder. Prior 
to diverting any of the specified individuals to other programs, or 
otherwise substituting any other personnel for specified personnel, the 
contractor shall notify the contracting officer reasonably in advance 
and shall submit justification (including proposed substitutions) in 
sufficient detail to permit evaluation of the impact on the contract 
effort. No diversion or substitution shall be made by the contractor 
without the written consent of the contracting officer; provided, that 
the contracting officer may ratify a diversion or substitution in 
writing and that ratification shall constitute the consent of the 
contracting officer required by this clause. The contract shall be 
modified to reflect that addition or deletion personnel.

                             (End of clause)



3452.247-70  Foreign travel.

    As prescribed in 3447.7000, insert the following clause in all 
solicitations and resultant cost-reimbursement contracts:

                        Foreign Travel (Aug 1987)

    Foreign travel shall not be undertaken without the prior written 
approval of the contracting officer. As used in this clause, ``foreign 
travel'' means travel outside the fifty States comprising the United 
States, the District of Columbia, and Canada.

                             (End of clause)

[[Page 89]]



                   CHAPTER 35--PANAMA CANAL COMMISSION

                          (Parts 3500 to 3599)

  --------------------------------------------------------------------

                          SUBCHAPTER A--GENERAL
Part                                                                Page
3501            Federal Acquisition Regulations System......          91
3502            Definitions of words and terms..............          97
3503            Improper business practices and personal 
                    conflicts of interest...................          98
3504            Administrative matters......................         101
           SUBCHAPTER B--COMPETITION AND ACQUISITION PLANNING
3505            Publicizing contract actions................         102
3506            Competition requirements....................         102
3507            Acquisition planning........................         104
3508            Required sources of supplies and services...         105
3509            Contractor qualifications...................         106
3510            Specifications, standards, and other 
                    purchase descriptions...................         113
          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES
3513            Small purchase and other simplified purchase 
                    procedures..............................         116
3514            Sealed bidding..............................         119
3515            Contracting by negotiation..................         120
3516            Types of contracts..........................         123
3517            Special contracting methods.................         125
                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS
3519            Small business and small disadvantaged 
                    business concerns.......................         127
3520            Labor surplus area concerns.................         127
3522            Application of labor laws to Government 
                    acquisitions............................         128
3524            Protection of privacy and freedom of 
                    information.............................         131

[[Page 90]]

3525            Foreign acquisition.........................         131
             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS
3527            Patents, data and copyrights................         136
3528            Bonds and insurance.........................         136
3529            Taxes.......................................         138
3531            Contract cost principles and procedures.....         139
3532            Contract financing..........................         139
3533            Protests, disputes, and appeals.............         142
             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING
3536            Construction and architect-engineer 
                    contracts...............................         143
3537            Service contracting.........................         148
                    SUBCHAPTER G--CONTRACT MANAGEMENT
3542            Contract administration.....................         151
3543            Contract modifications......................         151
3547            Transportation..............................         151
3551            Use of Government sources by contractors....         151
                     SUBCHAPTER H--CLAUSES AND FORMS
3552            Solicitation provisions and contract clauses         153
3553            Forms.......................................         168
             SUBCHAPTER I--AGENCY SUPPLEMENTARY REGULATIONS
3570            Acquisition of Panamanian supplies and 
                    services................................         171

[[Page 91]]


                          SUBCHAPTER A--GENERAL


PART 3501--FEDERAL ACQUISITION REGULATIONS SYSTEM--Table of Contents




Sec.
3501.000  Scope of part.

              Subpart 3501.1--Purpose, Authority, Issuance

3501.101  Purpose.
3501.102  Authority.
3501.103  Applicability.
3501.104  Issuance.
3501.104-1  Publication and code arrangement.
3501.104-2  Arrangement of regulations.
3501.104-3  Copies.
3501.105  OMB approval under the Paperwork Reduction Act.

                     Subpart 3501.2--Administration

3501.201  Maintenance of the FAR.
3501.201-1  The two councils.

             Subpart 3501.3--Agency Acquisition Regulations

3501.301  Policy.
3501.303  Publication and codification.
3501.304  Agency control and compliance procedures.

             Subpart 3501.4--Deviations From the FAR and PAR

3501.401  Definition.
3501.403  Individual deviations.
3501.404  Class deviations.
3501.405  Deviations pertaining to treaties and executive agreements.

       Subpart 3501.6--Contracting Authority and Responsibilities

3501.601  General.
3501.602  Contracting officers.
3501.602-3  Ratification of unauthorized commitments.
3501.602-370  Procedures.
3501.603  Selection, appointment, and termination of appointment.
3501.603-1  General.
3501.670  Legal review of proposed contract actions.
3501.670-1  Contract actions requiring legal review.
3501.670-2  Documents to be submitted for legal review.
3501.670-3  General Counsel's legal review.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7635, Mar. 2, 1990, unless otherwise noted.



3501.000  Scope of part.

    This part sets forth basic policies and general information about 
the Panama Canal Commission Acquisition Regulation, referred to as the 
PAR, and its relationship to the Federal Acquisition Regulation, 
referred to as the FAR.



              Subpart 3501.1--Purpose, Authority, Issuance



3501.101  Purpose.

    (a) The Federal Acquisition Regulations System brings together, in 
title 48 of the Code of Federal Regulations (CFR), the acquisition 
regulations of all executive agencies of the United States Government. 
This subpart establishes the PAR as chapter 35 of title 48, CFR. The 
FAR, which is the primary document for all agencies within this system, 
is issued as chapter 1 of title 48, CFR.
    (b) The purpose of the PAR is to implement the FAR where further 
implementation is needed and to supplement the FAR when coverage is 
needed for subject matter not contained in the FAR. The PAR is not, by 
itself, a complete regulation. It must be used in conjunction with, and 
is subordinate to, the FAR.



3501.102  Authority.

    The PAR and amendments thereto are issued by the Administrator of 
the Panama Canal Commission (Commission) pursuant to the authority of 
section 205(c) of the Federal Property and Administrative Services Act 
of 1949 (40 U.S.C. 486(c)), as amended, and other applicable law.



3501.103  Applicability.

    The FAR and the PAR apply to all acquisitions of the Commission, 
except where expressly excluded.



3501.104  Issuance.



3501.104-1  Publication and code arrangement.

    (a) The PAR is published in--

[[Page 92]]

    (1) The Federal Register;
    (2) Cumulated form at 48 CFR chapter 35; and
    (3) A separate loose-leaf form.



3501.104-2  Arrangement of regulations.

    (a) General. The PAR is divided into the same parts, subparts, 
sections, subsections and paragraphs as is the FAR. However, when the 
FAR coverage is adequate by itself, there will be no corresponding PAR 
coverage.
    (b) Numbering. (1) Where the PAR implements the FAR, the 
implementing part, subpart, section or subsection of the PAR will be 
numbered and captioned, to the extent feasible, the same as the FAR 
part, subpart, section or subsection being implemented except that the 
implementation will be preceded with a 35 or a 350 such that there will 
always be four numbers to the left of the decimal. For example, the PAR 
implementation of FAR 1.104-1 is shown as 3501.104-1 and the PAR 
implementation of FAR subpart 24.1 is shown as subpart 3524.1. 
Similarly, individual paragraphs at the section and subsection levels of 
the PAR correspond, to the extent feasible, to the FAR paragraph 
designations that are being implemented.
    (2) Material which supplements the FAR as new parts, subparts, 
sections, or subsections will be assigned the numbers 70 and up. For 
example, there is no FAR coverage on the preferential acquisition of 
supplies and services obtainable in the Republic of Panama as provided 
for in Article IX of the Agreement in Implementation of Article III of 
the Panama Canal Treaty of 1977. This supplementary material is 
identified as part 3570.
    (3) Because the PAR implements the FAR only where further 
implementation is necessary, there are gaps in the PAR numbering and 
paragraphing sequence. For example, the PAR skips from part 3510 to part 
3513, from subpart 3501.4 to subpart 3501.6, and from section 3501.301 
to section 3501.303 because the FAR coverage at parts 11 and 12, subpart 
1.5, and section 1.302, respectively, does not require further 
implementation. Similarly, section 3501.405 of the PAR begins at 
paragraph (d) because paragraphs (a), (b), and (c) at FAR 1.405 do not 
require further implementation.
    (c) References and citations. (2) This regulation may be referred to 
as the Panama Canal Commission Acquisition Regulation or the PAR. 
References to PAR material outside this regulation may be cited in 
informal documents as PAR followed by the identifying number. For 
example, this subparagraph would be informally cited as PAR 3501.104-
2(c)(2). In formal documents outside this regulation, such as legal 
briefs, references to PAR material should include reference to title 48 
of the Code of Federal Regulations. For example, this subparagraph would 
be formally cited as 48 CFR 3501.104-2(c)(2).
    (3) References to FAR or PAR material within this regulation will be 
made as follows:
    (i) FAR parts or subparts will be referred to in those terms 
followed by the identifying number--for example, FAR part 1; FAR subpart 
1.1. FAR subdivisions below the subpart level (i.e., sections, 
subsections, paragraphs, subparagraphs, or subdivisions) will simply 
state FAR followed by the identifying number--for example, FAR 1.104-
2(c)(3)(i).
    (ii) PAR parts or subparts will be referred to only as part or 
subpart followed by the identifying number--for example, part 1; subpart 
1.1. PAR subdivisions below the subpart level will simply indicate the 
identifying number--for example, this subdivision would be cited as 
3501.104-2(c)(3)(ii).



3501.104-3  Copies.

    Copies of the PAR in Federal Register and CFR form may be purchased 
from the Superintendent of Documents, Government Printing Office (GPO), 
Washington, DC 20402. Copies of the loose-leaf PAR are distributed 
within the Panama Canal Commission and may be obtained from the 
Administrative Services Division, Records Management Branch, telephone 
(507) 52-7642.



3501.105  OMB approval under the Paperwork Reduction Act.

    The information collection and recordkeeping requirements contained 
in

[[Page 93]]

the PAR have been approved by the Office of Management and Budget (OMB) 
in accordance with the Paperwork Reduction Act of 1980 (Pub. L. 96-511). 
OMB control number 3207-0007 is assigned to the following PAR sections:

                              PAR Sections

3513.107(a)(4)(i)
3513.107(a)(4)(ii)
3513.107(a)(4)(iii)
3513.107(a)(4)(iv)
3515.804-6
3536.571



                     Subpart 3501.2--Administration



3501.201  Maintenance of the FAR.



3501.201-1  The two councils.

    (e)(2) The Commission's Procurement Executive, in consultation with 
the General Counsel, is responsible for overseeing the development of 
the agency position on proposed revisions to the FAR and responding to 
the FAR Secretariat when such action is appropriate.



             Subpart 3501.3--Agency Acquisition Regulations



3501.301  Policy.

    (a)(1) The Procurement Executive, in consultation with the General 
Counsel and such other agency officials as may be appropriate, is 
responsible for the development, preparation, and maintenance of PAR 
issuances by the Administrator. In addition, the Procurement Executive 
is authorized to issue internal policies, procedures, instructions, and 
guidelines to clarify or implement the FAR or PAR within the Commission. 
Such internal issuances are subject to review by the General Counsel.
    (2) Heads of contracting activities and division chiefs are 
authorized to issue internal guidance of the type described in FAR 
1.301(a)(2).
    (b) Public participation in the promulgation of the PAR shall be in 
the same manner as specified for the FAR in FAR subpart 1.5. Where 
solicitation of public comment on significant revisions is impracticable 
prior to promulgation, the revisions may be set forth in temporary 
regulations. Comments will be solicited on the temporary regulations and 
considered prior to formulating the final regulations.



3501.303  Publication and codification.

    (a) The PAR is codified as chapter 35 in title 48, Code of Federal 
Regulations.
    (c) The PAR replaces the former Part 87--Procurement, of the Panama 
Canal Administration and Regulations (PCAR), in its entirety.



3501.304  Agency control and compliance procedures.

    (a) Whenever contracting activities and organizational components 
thereof wish to propose for publication in the Federal Register an 
agency acquisition regulation that they consider necessary to implement 
or supplement the FAR or PAR, they must prepare a memorandum that 
explains the need, background, justification, and significant aspects of 
the proposed regulation and send it to the Procurement Executive. The 
Procurement Executive and General Counsel will (1) review the proposed 
regulation to assure compliance with FAR part 1, and (2) either approve 
or disapprove it. If approved, the Procurement Executive will prepare 
the proposed regulation in Federal Register format for issuance by the 
Administrator.



             Subpart 3501.4--Deviations From the FAR and PAR



3501.401  Definition.

    A deviation from the PAR is defined in the same manner as a 
deviation from the FAR (see FAR 1.401).



3501.403  Individual deviations.

    Requests for individual deviations from the FAR and the PAR shall be 
submitted by the Head of the Contracting Activity (HCA) through the 
General Counsel to the Procurement Executive for approval. Requests 
submitted shall cite the specific part of the FAR or PAR from which it 
is desired to deviate, shall set forth the nature of the deviation(s), 
and shall give the reasons for the action requested. The Procurement 
Executive shall transmit copies of approved individual FAR deviations to 
the FAR Secretariat.

[[Page 94]]



3501.404  Class deviations.

    Requests for class deviations to the PAR shall be submitted in 
advance by the HCA through the General Counsel to the Procurement 
Executive for processing in accordance with FAR 1.404 and this section. 
Requests submitted shall include the same type of information as 
required for individual deviations as prescribed in 3501.403. The 
Procurement Executive may approve class deviations to the FAR and the 
PAR and shall transmit copies of approved class FAR deviations to the 
FAR Secretariat as required by FAR 1.404.



3501.405  Deviations pertaining to treaties and executive agreements.

    (d) The Procurement Executive is designated as the central control 
point within the Commission for transmittal of deviations from the FAR 
required to comply with treaties and executive agreements to which the 
United States is a party. Copies of the text of any deviation authorized 
in accordance with FAR 1.405 (b) or (c) shall be forwarded by the HCA to 
the Procurement Executive through the General Counsel for further 
transmittal to the FAR Secretariat.
    (e) When a deviation required to comply with a treaty or executive 
agreement is inconsistent with FAR coverage based on law, the 
Procurement Executive shall forward a request for deviation to the FAR 
Secretariat for processing as required by FAR 1.405(e).



       Subpart 3501.6--Contracting Authority and Responsibilities



3501.601  General.

    (a) Commission contracting activities are established within the 
General Services Bureau for the acquisition of supplies and services, 
and the Engineering and Construction Bureau for the acquisition of 
construction, including architect-engineer services and other services 
related to construction. The Directors of these bureaus are designated 
by the Administrator as Heads of Contracting Activities and are the 
officials who have the authority and responsibility to appoint 
contracting officers to contract for authorized supplies and services, 
including construction and architect-engineer services, that fall within 
the scope of their respective contracting activities.
    (b) In addition, bureau directors and heads of independent units are 
delegated contracting authority, not to exceed amounts established by 
the General Services Director, for the decentralized procurement of 
supplies and services on Division Purchase Orders (see 3513.505-71). 
This authority is granted to assist Commission activities in expediting 
minor purchases. Such authority may be redelegated pursuant to 3513.505-
71(b)(1)(ii).



3501.602  Contracting officers.



3501.602-3  Ratification of unauthorized commitments.

    (a) Definitions.
    Responsible contracting officer, as used in 3501.602-370, means the 
individual at the appropriate level of contracting authority who can 
execute any contractual document that may be required to formalize an 
unauthorized commitment. Depending on the circumstances, the term can 
apply to the existing contracting officer, the prospective contracting 
officer (when a purchase order or contract does not exist) or, in the 
case of a contracting officer who acted in excess of the limits of his 
delegated authority, the next individual in the chain of contracting 
authority who has the appropriate authority to execute the necessary 
contractual document.
    (b) Policy. (1) Unauthorized commitments do not legally obligate the 
Commission for the expenditure of funds. If an unauthorized commitment 
would have been valid had it been authorized by a contracting officer 
acting within the limits of his delegated authority, then the 
unauthorized commitment may be ratified in accordance with the 
procedures prescribed in 3501.602-370. If an unauthorized commitment is 
otherwise improper, it cannot be ratified and the Commission must deny 
legal liability, in which case the individual who made the unauthorized 
commitment may be personally liable for such action.

[[Page 95]]

    (2) The cognizant Head of the Contracting Activity (HCA) is the 
ratification official for the approval of unauthorized commitments and 
the Procurement Executive is the reviewing official for such approvals. 
The HCA may ratify an unauthorized commitment only if:
    (i) The conditions in FAR 1.602-3(c) are applicable, and
    (ii) The Procurement Executive concurs with the proposed 
ratification.



3501.602-370  Procedures.

    These procedures apply to all unauthorized commitments, whether 
written or oral and without regard to dollar value. Unauthorized 
commitments (other than claims to be processed in accordance with FAR 
subpart 33.2) shall be processed as follows:
    (a) Whenever it is discovered that any person is performing or has 
performed work as a result of an unauthorized commitment, that person 
shall be advised by the cognizant contracting office that such work is 
being or was performed at that person's own risk pending establishment 
of valid contractual coverage.
    (b) The individual who made the unauthorized commitment shall 
furnish to the responsible contracting officer all records and documents 
concerning the commitment and a complete, written statement of the facts 
including, but not limited to, a description of the work or product 
ordered; why the work or product was necessary to and for the benefit of 
the Commission; the estimated or agreed upon price; citation of funds 
available at time of commitment; the current status of performance by 
the actual or prospective contractor; the reason why normal acquisition 
procedures were not followed and, if a contract does not exist, a 
statement as to why the prospective contractor was selected including, 
if applicable, identification of other sources that were considered.
    (c) The responsible contracting officer shall--
    (1) Obtain from the head of the requisitioning office with 
appropriate approval authority:
    (i) Affirmation that the Commission has or will obtain a benefit 
from the unauthorized commitment,
    (ii) A written certification by the responsible funding 
certification officer that funds presently are available and were 
available at the time the unauthorized commitment was made, and when 
applicable,
    (iii) A statement of corrective action that office will take to 
preclude repetition of the incident;
    (2) Review and determine the adequacy of all facts, records, and 
documents furnished, and when necessary, obtain any additional material 
or information pertinent to the review and evaluation of the 
unauthorized commitment;
    (3) Determine whether the price is fair and reasonable, and state in 
the record the reason therefor;
    (4) Prepare, certify, and obtain any necessary written approval of a 
justification for other than full and open competition when required 
pursuant to FAR subpart 6.3;
    (5) State in the record the corrective action to be taken to 
preclude repetition of the incident if the individual that made the 
unauthorized commitment is under the supervision of the responsible 
contracting officer; and
    (6) Forward the request for ratification (i.e., all the information 
required in paragraphs (b) and (c) of this subsection) to the cognizant 
HCA, together with a written recommendation of an appropriate course of 
action including, at a minimum, a specific recommendation as to whether 
payment should be made and the reasons therefor.
    (d) The cognizant HCA, upon receipt and review of the request for 
ratification file, shall determine whether ratification is in order. If 
so, the HCA shall forward the file to the Procurement Executive for 
review. If not, the HCA shall return the file to the responsible 
contracting officer, together with a written explanation for the 
decision and instructions for disposition of the case.
    (e) The Procurement Executive shall review proposed ratifications 
submitted by HCAs. If the Procurement Executive concurs that 
ratification is in order, he shall obtain General Counsel concurrence 
that payment may be

[[Page 96]]

made and return the file to the cognizant HCA for that individual's 
ratification and subsequent return to the responsible contracting 
officer together with, when appropriate, instructions to issue a 
purchase order, contract, or contract modification, as applicable. If 
the Procurement Executive does not concur with the proposed 
ratification, he shall return the file to the HCA, together with a 
written explanation for the decision and instructions for disposition of 
the case. He will provide a copy to the General Counsel.



3501.603  Selection, appointment, and termination of appointment.



3501.603-1  General.

    Heads of Contracting Activities may appoint as contracting officers 
one or more capable and qualified individuals of their respective 
staffs. These appointments may be made by memoranda delegating 
contracting authority, including any limitations to such authority, to 
positions or to named individuals. Appointments shall be evidenced by a 
``Certificate of Appointment'', as required by FAR 1.603-3. If 
contracting authority is delegated to a position by memorandum, the 
``Certificate of Appointment'' shall state the name of the individual 
assigned to the position.



3501.670  Legal review of proposed contract actions.



3501.670-1  Contract actions requiring legal review.

    The following contract actions shall be submitted to the General 
Counsel for review for legal sufficiency:
    (a) All proposed contracts with an estimated cost of $100,000 or 
more (in advance of issuance);
    (b) All alleged mistakes in bids, other than apparent clerical 
mistakes that can be corrected pursuant to FAR 14.406-2;
    (c) All determinations and findings required under the FAR;
    (d) All proposed utility contracts;
    (e) All proposed contracts containing insurance requirements not 
prescribed in the FAR or this PAR;
    (f) In sealed bid procurements, all proposed awards to other than 
the lowest responsible and responsive bidder;
    (g) Rejections of all bids and cancellations of invitations for 
bids;
    (h) Proposed letter contracts;
    (i) Written protests, whether before or after award;
    (j) Unusual, novel, or unique proposed agreements, and unsolicited 
proposals that are to be negotiated pursuant to FAR subpart 15.5 and 
subpart 3515.5;
    (k) Proposed ADP contracts of $25,000 or more when purchase is to be 
from other than a Federal Supply Service contract source;
    (l) Termination actions, including pre-termination letters;
    (m) All actions taken under the Disputes clause, including final 
decisions;
    (n) Any action concerning suspension or debarment of an individual 
or concern;
    (o) Deviations from the FAR or PAR;
    (p) Any contract matter relating to litigation, disputes, or protest 
resolution before the courts of the United States or of the Republic of 
Panama, or before the Corps of Engineers Board of Contract Appeals or 
the Comptroller General of the United States;
    (q) Determinations of nonresponsibility;
    (r) Any proposed contract modification, including proceed orders, 
which may result in a change in the contract price of more than $25,000, 
or any proposed contract modification or proceed order granting a time 
extension of more than 20 calendar days;
    (s) Any proposed contract modification resulting from either a 
contractor's settlement proposal under the Termination for Convenience 
clause, or a contractor's claim under the Suspension of Work clause, 
regardless of the contract value or the terms of the proposed 
modification;
    (t) Freedom of Information Act and Privacy Act matters involving 
contractors or arising under or in relation to any contract;
    (u) Administrative setoffs to recoup Government funds under any 
contract; and
    (v) Requests for approval of advance payments on contracts other 
than those excluded in FAR 32.404.

[[Page 97]]



3501.670-2  Documents to be submitted for legal review.

    The following documents are to be submitted in connection with 
contract actions requiring legal review pursuant to 3501.670-1:
    (a) For proposed construction contracts, a copy of the solicitation 
documents, excluding drawings, prior to the time they are furnished to 
prospective offerors, when feasible;
    (b) For all other proposed contracts and agreements, a copy of the 
document to be used in the solicitation and/or award, including any 
other documents, excluding drawings, which support the proposed 
procurement action, prior to the time they are mailed to the prospective 
offerors, when feasible;
    (c) For all other contract actions not specified in paragraph (a) or 
(b) of this subsection, a copy of the document itself and copies of all 
other documents, excluding drawings, relating to the action.



3501.670-3  General Counsel's legal review.

    (a) The General Counsel shall conduct a review of the legal 
sufficiency of the contract action. The General Counsel shall provide to 
the contracting officer a written determination of whether the proposed 
action is legally sufficient, or the details of any insufficiency and a 
recommended course of action to overcome the insufficiency. A 
contracting officer shall not take action which is contrary to a written 
and timely determination of legal insufficiency from the General 
Counsel.
    (b) The General Counsel shall complete the legal review as quickly 
as possible, with due regard to those procurement actions where 
circumstances dictate an unusually short period for completing the 
action.



PART 3502--DEFINITIONS OF WORDS AND TERMS--Table of Contents




    Authority: 40 U.S.C. 486(c); Article XI of the Agreement in 
Implementation of Article III of the Panama Canal Treaty of 1977.



                       Subpart 3502.1--Definitions



3502.101  Definitions.

    Administrator means the chief executive officer of the Panama Canal 
Commission. The Administrator, subject to the direction and under the 
supervision of the Board of Directors, exercises general and active 
control over the Commission's offices, business and operations, and 
general supervision over its officials, agents, attorneys, and 
employees. As contemplated at FAR 2.101, unless otherwise indicated, 
``Administrator'' also means the Commission's Deputy Administrator.
    Agency head means the Administrator of the Panama Canal Commission.
    Bureau Director means an official appointed by the Administrator to 
direct and manage one of the Commission's three operating bureaus.
    Commission means the Panama Canal Commission.
    Designated Agency Ethics Official means an individual appointed by 
the Administrator pursuant to the ``Ethics in Government Act of 1978'' 
to coordinate and manage the agency's ethics program and to act as the 
principal contact with the Office of Government Ethics.
    Designated contractors (sometimes referred to as ``special regime 
contractors'') means:
    (a)(1) Natural persons who are nationals or permanent residents of 
the United States, or
    (2) Corporations or other legal entities organized under the laws of 
the United States, any state thereof, or the District of Columbia, and 
which are under the effective control of such natural persons--
    (i) To whom contracts are awarded by the Panama Canal Commission for 
work to be performed in whole or in part in the Republic of Panama, and
    (ii) Who are so designated in writing by the Commission.
    (b) The term also includes subcontractors of designated contractors 
(1) who are nationals or permanent residents of the United States, or 
(2) which are corporations or other legal entities organized under the 
laws of the

[[Page 98]]

United States, any state thereof, or the District of Columbia, and which 
are under the effective control of United States nationals or permanent 
residents.
    Head of Independent Unit means an official appointed by the 
Administrator to direct and manage one of the Administrator's staff 
offices.
    Head of the Contracting Activity (HCA) means the General Services 
Director and the Engineering and Construction Director.
    Implementing Agreement means the Agreement in Implementation of 
Article III of the Panama Canal Treaty (TIAS 10031), signed at 
Washington, DC on September 7, 1977.
    Inspector General means the Office of the Inspector General.
    Procurement Executive means an individual designated as the senior 
procurement executive pursuant to 41 U.S.C. 414(3), by the Administrator 
from members of his staff. The Procurement Executive is delegated 
agency-wide responsibility to oversee development of procurement 
systems, establish procurement policy, evaluate procurement system 
performance in accordance with approved criteria, carry out specific 
responsibilities as assigned in this PAR, enhance career management of 
the procurement work force, and certify to the Administrator that 
procurement systems meet approved criteria.
    Treaty means the Panama Canal Treaty (TIAS 10030), signed at 
Washington, DC on September 7, 1977.

[55 FR 7638, Mar. 2, 1990]



PART 3503--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF INTEREST--Table of Contents




Sec.
3503.000  Scope of part.

                       Subpart 3503.1--Safeguards

3503.101  Standards of conduct.
3503.101-3  Agency regulations.
3503.103  Independent pricing.
3503.103-2  Evaluating the certification.

      Subpart 3503.2--Contractor Gratuities to Government Personnel

3503.203  Reporting suspected violations of the Gratuities clause.
3503.204  Treatment of violations.

        Subpart 3503.3--Reports of Suspected Antitrust Violations

3503.301  General.

                     Subpart 3503.4--Contingent Fees

3503.408  Evaluation of the SF 119.
3503.408-1  Responsibilities.
3503.409  Misrepresentations or violations of the Covenant Against 
          Contingent Fees.

            Subpart 3503.5--Other Improper Business Practices

3503.502  Subcontractor kickbacks.
3503.502-2  General.

  Subpart 3503.6--Contracts With Government Employees or Organizations 
                       Owned or Controlled by Them

3503.600-70  Scope of subpart.
3503.600-71  Definitions.
3503.601  Policy.
3503.602  Exceptions.
3503.603  Responsibilities of the contracting officer.
3503.670  Exclusions.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7638, Mar. 2, 1990, unless otherwise noted.



3503.000  Scope of part.

    This part implements FAR part 3, cites Commission regulations on 
employee responsibilities and conduct, establishes responsibility for 
reporting violations and related actions, and provides for authorization 
of exceptions to policy.



                       Subpart 3503.1--Safeguards



3503.101  Standards of conduct.



3503.101-3  Agency regulations.

    Commission regulations on Employee Responsibilities and Conduct are 
contained in the Commission's ``Employee Code of Conduct''. All 
personnel involved in acquisition actions shall become familiar with the 
statutory and

[[Page 99]]

regulatory prohibitions governing employee conduct. Any problems or 
questions concerning standards of conduct shall be referred to the 
Designated Agency Ethics Official.



3503.103  Independent pricing.



3503.103-2  Evaluating the certification.

    (b)(3) Whenever an offer is rejected under FAR 3.103-2, or the 
Certificate of Independent Price Determination is suspected of being 
false, the contracting officer shall report the situation to the General 
Counsel through the cognizant Head of the Contracting Activity for 
referral to the Attorney General in accordance with FAR 3.303.



      Subpart 3503.2--Contractor Gratuities to Government Personnel



3503.203  Reporting suspected violations of the Gratuities clause.

    Any Commission employee who suspects that a violation of the 
Gratuities clause has occurred shall immediately report the suspected 
violation to the cognizant Head of the Contracting Activity. Upon being 
notified of the suspected violation, the HCA shall inform the Designated 
Agency Ethics Official and the Procurement Executive, by written 
memorandum, of the pertinent details of the suspected violation.



3503.204  Treatment of violations.

    (b) When the HCA determines that there is probable cause to believe 
that a violation of the Gratuities clause has been committed, the case 
shall be handled as provided in the Commission debarment and suspension 
procedures in subpart 3509.4.
    (c) The final decision as to which remedies the Commission may 
pursue if a violation of the Gratuities clause is found by the Debarment 
Committee (see 3509.406-3(b)), is reserved to the Administrator.



        Subpart 3503.3--Reports of Suspected Antitrust Violations



3503.301  General.

    (b) The contracting officer shall report any suspected violations of 
antitrust laws to the General Counsel through the cognizant Head of the 
Contracting Activity for referral to the Attorney General and the 
Commission's Debarment Committee in accordance with FAR subpart 3.3.



                     Subpart 3503.4--Contingent Fees



3503.408  Evaluation of the SF 119.



3503.408-1  Responsibilities.

    (b) The contracting officer's documentation of the evaluation of the 
Standard Form 119, Statement of Contingent or Other Fees, conclusions, 
and any proposed actions shall be reviewed by the cognizant Head of the 
Contracting Activity in coordination with the General Counsel.



3503.409  Misrepresentations or violations of the Covenant Against Contingent Fees.

    (a) Commission personnel who suspect or have evidence of attempted 
or actual exercise of improper influence, misrepresentations, or 
violations of the Covenant Against Contingent Fees shall report the 
matter promptly to the Designated Agency Ethics Official and the 
cognizant Head of the Contracting Activity.



            Subpart 3503.5--Other Improper Business Practices



3503.502  Subcontractor kickbacks.



3503.502-2  General.

    Any Commission employee who suspects that a violation of the Anti-
Kickback Act has occurred shall immediately report the suspected 
violation to the Designated Agency Ethics Official and the cognizant 
Head of the Contracting Activity. Suspected violations shall be treated 
in accordance with the debarment and suspension procedures at subpart 
3509.4.



  Subpart 3503.6--Contracts With Government Employees or Organizations 
                       Owned or Controlled by Them



3503.600-70  Scope of subpart.

    This subpart implements and supplements FAR subpart 3.6 and sets 
forth

[[Page 100]]

Commission policy and procedures for identifying and dealing with 
conflicts of interest and improper influence or favoritism in connection 
with contracts involving current or former Commission employees. This 
subpart does not apply to agreements with other departments or agencies 
of the Federal Government.



3503.600-71  Definitions.

    Commission employee means:
    (a) Any officer or employee of the Panama Canal Commission who is 
employed or appointed, with or without compensation, to serve more than 
130 days during any period of 365 consecutive days, or
    (b) Any officer or employee of the Commission who is retained, 
designated, appointed or employed to perform, with or without 
compensation, temporary duties either on a full-time or intermittent 
basis for not more than 130 days during any period of 365 consecutive 
days and who actually served more than 60 days during such 365-day 
period.



3503.601  Policy.

    Except as authorized at 3503.602 or excluded at 3503.670, no 
contract shall be awarded without competition to a--
    (a) Former Commission employee (or to a business concern or other 
organization owned or substantially owned or controlled by a former 
Commission employee) whose employment terminated within 365 calendar 
days before submission of an offer to the Commission; or
    (b) Prospective contractor which employs, or proposes to employ, a 
current Commission employee or a former Commission employee whose 
employment terminated within 365 calendar days before submission of an 
offer to the Commission, if either of the following conditions exist:
    (1) The current or former Commission employee is or was involved in 
developing or negotiating the offer for the prospective contractor.
    (2) The current or former Commission employee will be involved 
directly or indirectly in the management, administration, or performance 
of the contract.



3503.602  Exceptions.

    (a) The Director, Office of Executive Administration in his capacity 
as the Designated Agency Ethics Official may authorize an exception, in 
writing, to the policy in FAR 3.601 and 3503.601 for the reasons stated 
in FAR 3.602, if the exception would not involve a violation of 18 
U.S.C. 203, 18 U.S.C. 205, 18 U.S.C. 207, 18 U.S.C. 208, section 27 of 
the Office of Federal Procurement Policy Act, or Commission regulations 
in the ``Employee Code of Conduct''. The Director, Office of Executive 
Administration shall consult with the cognizant Bureau or Staff Director 
who originated the request and with the General Counsel before 
authorizing any exceptions.
    (b) This subpart does not apply to subcontracts, that is, agreements 
to undertake part of the work as an independent contractor. However, 
where subcontracts essentially create an ``employer-employee'' 
relationship between the Commission and the subcontractors, the subpart 
shall apply. In determining whether such a relationship exists, the 
contracting officer shall generally be guided by the standards of 
Chapter 304, Subchapter 1-4 of the ``Federal Personnel Manual'' in 
distinguishing between employees and independent contractors.



3503.603  Responsibilities of the contracting officer.

    Before awarding a contract, the contracting officer shall obtain an 
authorization under 3503.602 for any of the reasons stated in FAR 3.603.



3503.670  Exclusions.

    Former or current Commission employees who participated personally 
and substantially in the conduct of any Commission procurement of 
supplies or services, including those who were responsible for reviewing 
and approving the award, modification, or extension of any contract for 
such procurement, are excluded from the 365 calendar day ``before 
submission of an offer'' time period specified in 3503.601 (a) and (b). 
Instead, the time period for such employees shall be two years after the 
last date the employee participated personally and substantially in the

[[Page 101]]

conduct of any Commission procurement of supplies or services, or 
personally reviewed and approved the award, modification, or extension 
of any contract for such procurement. This two-year prohibition applies 
irrespective of whether the contract being sought is on a competitive or 
noncompetitive basis.



PART 3504--ADMINISTRATIVE MATTERS--Table of Contents




                   Subpart 3504.6--Contract Reporting

Sec.
3504.602  Federal Procurement Data System.
3504.903  Procedures.

    Authority: 40 U.S.C. 486(c).



                   Subpart 3504.6--Contract Reporting



3504.602  Federal Procurement Data System.

    (b) As indicated in the FPDS Reporting Manual, the Commission is 
exempt from the reporting requirements of the Federal Procurement Data 
System, except for the procurement data that is required to be provided 
in accordance with Public Law 96-39 (Trade Agreements Act of 1979) as 
prescribed by OFPP Policy Letter 80-8 (as amended).

[55 FR 7640, Mar. 2, 1990]



3504.903  Procedures.

    The Commission will report the information required under FAR 
4.902(b) directly to the IRS.

[55 FR 7640, Mar. 2, 1990]

[[Page 102]]



           SUBCHAPTER B--COMPETITION AND ACQUISITION PLANNING


PART 3505--PUBLICIZING CONTRACT ACTIONS--Table of Contents




Sec.
3505.000  Scope of part.

          Subpart 3505.2--Synopses of Proposed Contract Actions

3505.202  Exceptions.

                   Subpart 3505.5--Paid Advertisements

3505.502  Authority.
3505.503  Procedures.
3505.503-70  Authorization.

    Authority: 40 U.S.C. 486(c); Article IX of the Agreement in 
Implementation of Article III of the Panama Canal Treaty of 1977.

    Source: 55 FR 7640, Mar. 2, 1990, unless otherwise noted.



3505.000  Scope of part.

    This part implements FAR part 5 and provides Commission policies and 
procedures for publicizing contract opportunities, and provides for an 
additional exception to the requirements for use of ``Commerce Business 
Daily'' notices.



          Subpart 3505.2--Synopses of Proposed Contract Actions



3505.202  Exceptions.

    (a)(13) The contract action is one for which participation in the 
acquisition will be limited to sources in Panama pursuant to the 
conditions prescribed in 3570.102(e). The Procurement Executive will 
monitor and maintain a record of proposed contract actions that are 
exempt from the notice requirements of FAR 5.201 by operation of this 
exception.



                   Subpart 3505.5--Paid Advertisements



3505.502  Authority.

    (a) Newspapers. Authority to approve the publication of paid 
advertisements in newspapers is vested in the HCA or designee.



3505.503  Procedures.

    (a) General. When there is a reasonable probability that supplies or 
services (including construction) are available in Panama that are 
comparable in quality and price to those which may be obtained from 
other sources, and when local advertising is reasonably practical, the 
contracting officer shall request authorization from the HCA or designee 
to advertise the procurement action within the appropriate Panamanian 
market. The request for authorization shall include--
    (1) A description of the proposed procurement action and the 
supplies or services to be procured;
    (2) A description of how the determination was made that the 
Panamanian preference may apply; and
    (3) A summary of how the appropriate advertising market was 
identified.



3505.503-70  Authorization.

    The HCA or designee shall review the request for authorization of 
paid advertising and, if concurring, shall grant authorization in 
writing to the contracting officer to proceed. The written authorization 
shall specify any limitations on the advertising that are deemed 
appropriate. The HCA shall furnish a copy of each such authorization to 
the Procurement Executive.



PART 3506--COMPETITION REQUIREMENTS--Table of Contents




Sec.
3506.000  Scope of part.

          Subpart 3506.3--Other Than Full and Open Competition

3506.300  Scope of subpart.
3506.302-4  International agreement.
3506.303  Justifications.
3506.303-1  Requirements.
3506.303-2  Content.
3506.304  Approval of the justification.
3506.304-70  Class justifications.

                  Subpart 3506.5--Competition Advocate

3506.501  Requirement.


[[Page 103]]


    Authority: 40 U.S.C. 486(c); Article IX of the Agreement in 
Implementation of Article III of the Panama Canal Treaty of 1977.

    Source: 55 FR 7640, Mar. 2, 1990, unless otherwise noted.



3506.000  Scope of part.

    This part implements FAR part 6 and prescribes Commission policies 
and procedures related to competition requirements.



          Subpart 3506.3--Other Than Full and Open Competition



3506.300  Scope of subpart.

    This subpart provides guidance on:
    (a) The application of the Panama Canal Treaty of 1977 between the 
United States and Panama as an exemption to the requirement for full and 
open competition, and
    (b) The preparation and approval of individual and class 
Justifications for Other Than Full and Open Competition (JOFOC's).



3506.302-4  International agreement.

    (a) Authority. Article IX of the Agreement in Implementation of 
Article III of the Panama Canal Treaty of 1977 establishes that the 
Commission shall give preference to Panamanian supplies and services in 
its procurement activities. Such preference is understood to mean that 
if supplies or services (including construction) of comparable quality 
and price are available when required and can be obtained from sources 
both within and without the Republic of Panama, preference shall be 
afforded to those sources within the Republic of Panama to the maximum 
extent possible. When choosing between goods from sources within the 
Republic of Panama, preference shall be given to those with a larger 
percentage of components of Panamanian origin. This is not intended to 
require the purchase of Panamanian supplies and services, as defined 
herein, where superior quality or lower prices are available from other 
sources. Part 3570 sets forth specific guidance and policy with respect 
to the Commission's implementation of Article IX.
    (c) Limitations. Solicitations above the small purchase limitation 
that are intended for exclusive acquisition from sources in Panama shall 
be supported by a class or individual determination and findings as 
required by 3570.102(e).



3506.303  Justifications.



3506.303-1  Requirements.

    (c) The scope of the actual procurement shall not exceed the scope 
of the proposed procurement cited in the JOFOC. If a change to the 
contract exceeds this limitation, the contract change shall not be 
consummated until an amended JOFOC has been approved.
    (d) When contract actions are subject to the Agreement on Government 
Procurement and the authority of FAR 6.302-3(a)(2)(i) or 6.302-7 is 
being cited as the basis for not providing full and open competition, a 
copy of the justification shall be forwarded to the Procurement 
Executive as the point of contact with the Office of the United States 
Trade Representative.



3506.303-2  Content.

    In addition to the requirements of FAR 6.303-2, the justification 
shall include--
    (a) The type of contract;
    (b) A statement of delivery requirements;
    (c) The total estimated dollar value, including options, for the 
acquisitions covered by the justification; and
    (d) A copy of the approved Acquisition Plan when the acquisitions 
meet the criteria for a written Acquisition Plan under subpart 3507.1.



3506.304  Approval of the justification.

    (a) Except as noted at FAR 6.304(b), the approval of a justification 
for other than full and open competition shall be in writing and at the 
levels given below--
    (1) For a proposed contract not exceeding $100,000, the HCA is the 
approval authority. This approval is not required when the contract is 
one of those cited in FAR 6.304(a)(1) (i) through (iv).
    (2) For a proposed contract over $100,000, but not exceeding 
$1,000,000, the Competition Advocate is the approval authority.
    (3) For a proposed contract over $1,000,000, but not exceeding 
$5,000,000,

[[Page 104]]

the Procurement Executive is the approval authority.
    (4) For a proposed contract over $5,000,000, the Administrator is 
the approval authority.
    (b) Contracting officers shall consult with the Competition Advocate 
prior to submitting any justification for approval pursuant to paragraph 
(a) of this section.



3506.304-70  Class justifications.

    (a) Class justifications shall be approved in the same manner as 
individual justifications. To determine the approval level for a class 
justification, the aggregate estimated dollar value of all actions 
contemplated for one year shall be used to establish the appropriate 
dollar threshold for approval.
    (b) The following are examples of appropriate class justifications:
    (1) A basic ordering agreement (BOA) including all orders to be 
issued under the BOA for the term of the BOA;
    (2) Contracts to be awarded to more than one contractor to provide 
Government-furnished property for assembly into an end item, in which 
case the circumstances of the class justification must justify all the 
contracts proposed under the justification.
    (c) Requests for approval at any level must be submitted to the 
approval authority before release of the solicitation. The solicitation 
shall not be released until the justification is approved in writing 
(but see FAR 6.303-1(e)).
    (d) The Procurement Executive shall maintain a list of products, 
materials, and services that have been granted a class justification for 
exclusive acquisition from sources in Panama (see 3506.302-4(c)).



                  Subpart 3506.5--Competition Advocate



3506.501  Requirement.

    The Administrator shall designate in writing one Competition 
Advocate who shall serve as the agency and procuring activities 
competition advocate for all Commission acquisitions.



PART 3507--ACQUISITION PLANNING--Table of Contents




                    Subpart 3507.1--Acquisition Plans

Sec.
3507.103  Agency-head responsibilities.

        Subpart 3507.3--Contractor Versus Government Performance

3507.301  Policy.

    Authority: 40 U.S.C. 486(c).



                    Subpart 3507.1--Acquisition Plans



3507.103  Agency-head responsibilities.

    (c)(1) Formal acquisition planning provided at FAR subpart 7.1 is 
primarily designed for complex and costly acquisitions. However, the 
disciplines of the prescribed planning process are useful to all 
acquisitions, even if on a less formal basis.
    (2) Written acquisition plans shall be prepared for--
    (i) All development (see FAR 35.001) acquisitions whose estimated 
contractual cost is $1,000,000 or more annually;
    (ii) Supply, service, and construction acquisitions whose estimated 
contractual cost is $3,000,000 or more for any fiscal year. Excluded are 
repetitive requirements-type and fuel contracts.
    (d) The Acquisition Plan (AP) shall include all subsystems, 
Government-furnished property, major component contractual actions, and 
all other contracts which have a significant effect on the total 
program.
    (f) The planner for acquisitions requiring a formal, written plan 
shall be the program manager or other official having overall 
responsibility for the program concerned.
    (g)(1) The planner shall obtain the written concurrence of the 
appropriate contracting officer for each acquisition plan.
    (2) The Head of the Contracting Activity shall review and approve 
the acquisition plan and ensure that (i) the objectives of the AP are 
realistic and achievable, and (ii) solicitations and contracts are 
appropriately structured to equitably distribute the technical, 
financial, and business risks, considering the phase of the acquisition, 
the

[[Page 105]]

technical requirements, and business and legal constraints.
    (3) Acquisition plans shall be furnished by the cognizant HCA to the 
Procurement Executive.
    (j) When a need is urgent enough to require an unusually compressed 
delivery or performance schedule, and the preparation of a detailed 
written AP would interfere with the successful meeting of that schedule, 
the Procurement Executive may waive appropriate requirements of FAR 
subpart 7.1 and this subpart 3507.1. The waiver shall be in writing and 
shall specifically designate those requirements that are waived.

[55 FR 7641, Mar. 2, 1990]



        Subpart 3507.3--Contractor Versus Government Performance



3507.301  Policy.

    (a) For the purposes of OMB Circular No. A-76, a commercial source 
is defined as ``a business or other non-Federal activity located in the 
United States, its territories and possessions, the District of Columbia 
or the Commonwealth of Puerto Rico, which provides a commercial product 
or service.'' Accordingly, by virtue of the Commission's location in the 
Republic of Panama, FAR subpart 7.3 is not applicable to the Panama 
Canal Commission because commercial services would have to be contracted 
out to sources located in Panama. Commission policy regarding commercial 
services to be contracted out to sources in Panama is set forth in 
paragraph (b) of this section.
    (b) Commercial work and services shall be contracted out when there 
are available reliable local contractors and the expected cost is 
beneficial to the Commission. However, when commercial work/service to 
be done requires skills that the Commission should have and/or develop, 
then a careful evaluation shall be made before such work/service is 
contracted outside the agency. The cognizant Head of the Contracting 
Activity shall be the approving official for commercial work and 
services to be contracted out pursuant to this policy.

[55 FR 7641, Mar. 2, 1990]



PART 3508--REQUIRED SOURCES OF SUPPLIES AND SERVICES--Table of Contents




Sec.
3508.001  Priorities for use of Government supply sources.

         Subpart 3508.4--Ordering From Federal Supply Schedules

3508.404  Using schedules.
3508.404-1  Mandatory use.

    Authority: 40 U.S.C. 486(c); Article IX of the Agreement in 
Implementation of Article III of the Panama Canal Treaty of 1977.

    Source: 55 FR 7642, Mar. 2, 1990, unless otherwise noted.



3508.001  Priorities for use of Government supply sources.

    (a) Under Article IX of the Agreement in Implementation of Article 
III of the Panama Canal Treaty of 1977, the Panama Canal Commission is 
required under certain conditions to give preference, to the maximum 
extent possible, to procuring supplies and services obtainable in Panama 
(see 3506.302-4(a), subpart 3525.8, and part 3570). Therefore, when 
supplies or services are to be procured from sources in Panama under the 
preference requirement of Article IX, the mandatory use of sources for a 
like item of supply or service, as required by FAR part 8, shall not be 
applicable.



         Subpart 3508.4--Ordering From Federal Supply Schedules



3508.404  Using schedules.



3508.404-1  Mandatory use.

    When supplies or services are procured from sources in Panama under 
the preference requirement of Article IX, as stated in 3508.001(a), the 
mandatory use of a Federal Supply Schedule for a like item of supply or 
service shall not be applicable. When a procurement is not made under 
the Panamanian preference of Article IX, and delivery or performance is 
to be made in Panama, the mandatory supply schedule should be carefully 
evaluated for the following exceptions to mandatory use:
    (d) Geographic coverage. Each Federal Supply Schedule delineates the 
specific

[[Page 106]]

geographic area for which it is mandatory for use. The geographic area 
applies to the location where final delivery of the supplies is to be 
made, or the service to be performed, and not to the location of the 
ordering office. In most cases, the Republic of Panama will not be 
within the geographic limitations of the schedule and mandatory use will 
not be applicable. The mandatory use provisions of FAR 8.4 and 41 CFR 
101-26.4 are applicable to Commission offices located in the United 
States when ordering supplies or services to be delivered or performed 
in the United States for their own use.
    (e) Lower prices for identical items. The Commission may purchase 
products from any source pursuant to the conditions set forth in FAR 
8.404-1(e).



PART 3509--CONTRACTOR QUALIFICATIONS--Table of Contents




Sec.
3509.000  Scope of part.

           Subpart 3509.1--Responsible Prospective Contractors

3509.104-3  Application of standards.
3509.106  Preaward surveys.
3509.106-70  Professional type services preaward surveys.

               Subpart 3509.2--Qualification Requirements

3509.202  Policy.
3509.206  Acquisitions subject to qualification requirements.
3509.206-1  General.

         Subpart 3509.4--Debarment, Suspension and Ineligibility

3509.400  Scope of subpart.
3509.403  Definitions.
3509.404  List of parties excluded from Federal procurement and 
          nonprocurement programs.
3509.405  Effect of listing.
3509.405-1  Continuation of current contracts.
3509.405-2  Restrictions on subcontracting.
3509.406  Debarment.
3509.406-1  General.
3509.406-2  Causes for debarment.
3509.406-3  Procedures.
3509.406-70  Settlement.
3509.406-71  Voluntary exclusion.
3509.407  Suspension.
3509.407-2  Causes for suspension.
3509.407-3  Procedures.
3509.407-70  Settlement.
3509.407-71  Voluntary exclusion.
3509.470  Special notice.
3509.471  Equal application.

          Subpart 3509.5--Organizational Conflicts of Interest

3509.500  Scope of subpart.
3509.502  Applicability.
3509.503  Waiver.
3509.504  Contracting officer responsibilities.
3509.506  Information sources.
3509.507  Procedures.
3509.508  Solicitation provision and contract clause.
3509.508-1  Solicitation provision.
3509.508-2  Contract clause.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7642, Mar. 2, 1990, unless otherwise noted.



3509.000  Scope of part.

    This part implements FAR part 9 and provides Commission policy and 
procedures pertaining to: contractor's responsibility; debarment, 
suspension, and ineligibility; qualified products; and organizational 
conflicts of interest.



           Subpart 3509.1--Responsible Prospective Contractors



3509.104-3  Application of standards.

    (c) Satisfactory performance record. If the contracting officer 
invokes the presumption of nonresponsibility required by FAR 9.104-3(c), 
the contracting officer shall give notice, together with the reasons for 
invoking the presumption, to the Procurement Executive.



3509.106  Preaward surveys.



3509.106-70  Professional type services preaward surveys.

    (a) Generally, preaward surveys are not performed for acquisition of 
professional type services such as those provided by medical doctors, 
lawyers or other licensed and/or regulated professions.
    (b) To assist in making a determination of responsibility for 
professional type services, the types of information listed below shall 
be obtained from the offeror when applicable:
    (1) Organizational structure and plan contemplated to accomplish the 
service;

[[Page 107]]

    (2) Summary of experience in performing the same or similar service;
    (3) Resumes of key personnel with particular emphasis on academic 
accomplishments pertinent to the service to be performed;
    (4) Evidence of professional liability insurance, or evidence such 
insurance can be obtained;
    (5) Membership in professional organizations;
    (6) Information on pertinent state and local licenses; and
    (7) Information on the firm or key individuals that reflect their 
status or professional recognition in their field of endeavor, such as 
awards and published articles in professional journals or magazines.
    (c) When the statement of work includes a review of credentials by 
the requiring activity, this review should be considered a part of the 
preaward survey, and other information requested from the offeror should 
be minimized.



               Subpart 3509.2--Qualification Requirements



3509.202  Policy.

    (a)(1) The contracting officer shall ensure that the written 
justification required by FAR 9.202(a)(1) is prepared prior to 
establishing a requirement for testing or other quality assurance 
demonstration that must be completed by an offeror before the offeror is 
awarded a contract.



3509.206  Acquisitions subject to qualification requirements.



3509.206-1  General.

    (b) The contracting officer is designated to make the determination 
required by FAR 9.206-1(b).



         Subpart 3509.4--Debarment, Suspension and Ineligibility

    Source: 61 FR 3846, Feb. 2, 1996, unless otherwise noted.



3509.400  Scope of subpart.

    This subpart supplements, and shall be applied in conformity with, 
FAR subpart 9.4.



3509.403  Definitions.

    Debarring official means the Administrator of the Panama Canal 
Commission (hereinafter ``Commission''). In the event the Administrator 
is ineligible from participating personally in Commission actions with 
respect to the particular contractor, named individual or affiliate 
subject to the proposed debarment due to a conflict of interest or in 
view of a previously established recusal statement, the Commission 
Deputy Administrator shall be the debarring official.
    Fact-finding official means a person not employed by the Commission 
or any agency of the U.S. Government retained at Commission expense to 
conduct fact-finding under this subpart. The individual must have no 
prior knowledge of the particular subject matter and no conflict of 
interest with respect to any of the parties involved in the debarment or 
suspension action. He shall have knowledge of the laws and regulations 
governing the federal procurement system, and shall have experience in 
receiving evidence and formulating findings of fact.
    Suspending official means the Commission Administrator. In the event 
the Administrator is ineligible from participating personally in 
Commission actions with respect to the particular contractor, named 
individual or affiliate subject to the proposed suspension due to a 
conflict of interest or in view of a previously established recusal 
statement, the Commission Deputy Administrator shall be the suspending 
official.



3509.404  List of parties excluded from Federal procurement and nonprocurement programs.

    (c) The Commission Procurement Executive (hereinafter ``PE'') shall 
perform the actions required by FAR 9.404(c).



3509.405  Effect of listing.

    The PE is the designee of the agency head for the purposes of FAR 
9.405(a) and (d)(2) and (3) and may, upon the written recommendation of 
the pertinent Head of the Contracting Activity (hereinafter ``HCA''), 
make the determinations referenced therein.

[[Page 108]]



3509.405-1  Continuation of current contracts.

    The PE is the designee of the agency head for the purposes of FAR 
9.405-1(a) and (c) and may, upon the written recommendation of the 
pertinent HCA, take the actions referenced therein.



3509.405-2  Restrictions on subcontracting.

    (a) The PE is the designee of the agency head for the purposes of 
FAR 9.405-2(a) and may, upon the written recommendation of the pertinent 
HCA, take the action referenced therein.



3509.406  Debarment.



3509.406-1  General.

    (c) The PE is the designee of the agency head for the purposes of 
FAR 9.406-1(c) and may, upon the written recommendation of the pertinent 
HCA, take the action referenced therein.



3509.406-2  Causes for debarment.

    In addition to the causes listed in FAR 9.406-2, the use of a Panama 
Canal Commission employee or a member of the Commission's Board of 
Directors as an agent or advocate for a Commission contractor, or 
prospective contractor, shall be a cause for debarment.



3509.406-3  Procedures.

    (a) Investigation and referral.
    (1)(i) Any Commission official or employee who suspects or has 
knowledge of any conduct, statement, act, or omission of, or 
attributable to, a Commission contractor or a potential Commission 
contractor which could justify debarment under FAR subpart 9.4 or this 
subpart shall immediately report this information to the Commission 
General Counsel (hereinafter ``GC'') or to the appropriate contracting 
officer.
    (ii) Any Commission official or employee who suspects or has 
knowledge that a debarred individual or company has reestablished itself 
under a new name shall immediately report this information to the GC or 
to the appropriate contracting officer.
    (2) When the GC receives such information he shall refer the matter 
to the appropriate contracting officer for investigation and shall 
notify the PE and the pertinent HCA. When the contracting officer 
receives such information he shall notify the PE and the pertinent HCA.
    (3) The contracting officer shall, in coordination with the 
pertinent HCA, promptly investigate the matter, assemble all relevant 
information and prepare a written report containing all available 
evidentiary material, including copies of indictments and conviction 
notices when applicable, and the names of the owners and officers, as 
well as any affiliates, of the contractor in question. The written 
report shall include a recommendation whether a debarment action should 
be commenced and, if so, shall identify the causes for debarment, see 
FAR 9.406-2 and 3509.406-2 of this subpart, and identify each company 
and individual, including divisions of companies and affiliates, which 
the contracting officer recommends should be specifically named in the 
action.
    (4) The contracting officer shall submit his report to the pertinent 
HCA and a copy thereof to the PE and the GC. The HCA shall study the 
report and promptly advise the PE, in writing, whether or not he concurs 
in the contracting officer's recommendation and shall explain the 
reasons for his concurrence or nonconcurrence.
    (5) The PE shall study the contracting officer's report and the 
recommendation of the HCA. If the HCA and the PE agree that a debarment 
action should not be commenced, the PE shall so inform the debarring 
official and shall prepare a memorandum for record describing and 
closing the matter. If, however, either the HCA or the PE recommend that 
a debarment action should be commenced, the PE shall forward the 
contracting officer's report to the debarring official, together with 
the recommendation of the HCA as well as the PE's own written 
recommendation.
    (b) Decisionmaking process.
    (1) If the debarring official, after reviewing the contracting 
officer's report and the recommendations of the HCA and the PE, 
considering fully the provisions of FAR 9.402 and 9.406-1(a), and 
consulting with the GC, determines there is a reasonable basis to 
commence a debarment action, the debarring official shall instruct the 
PE to

[[Page 109]]

sign and send to each specifically named company, individual or 
affiliate to which the action is to apply, via certified mail, return 
receipt requested, either:
    (i) An informal notice of the Commission's intention to propose 
debarment, see 3509.406-3(b)(2) of this subpart; or
    (ii) A formal notice of the Commission's proposal to debar under FAR 
9.406-3(c).
    (2) An informal notice of the Commission's intention to propose 
debarment shall advise the addressee, in writing, of the following:
    (i) The issuance under FAR 9.406-3(c) of a formal notice of proposal 
to debar the addressee is seriously being considered by the Commission;
    (ii) The basic factual reasons for the contemplated debarment;
    (iii) The causes relied upon under FAR 9.406-2 and 3509.406-2 of 
this subpart;
    (iv) The Commission's procedures governing the debarment process;
    (v) The addressee's right to reply to the PE in writing within 21 
calendar days of receipt of the informal notice, and show cause why the 
Commission should not issue, to the addressee, a formal notice of 
proposal to debar under FAR 9.406-3(c) for the reasons and causes cited 
by the Commission;
    (vi) That, if the PE does not receive a reply from the addressee to 
the informal notice within 21 calendar days of the addressee's receipt 
of the informal notice, the Commission will issue to the addressee a 
formal notice of proposal to debar;
    (vii) The effect of the issuance of a formal notice of proposal to 
debar;
    (viii) The potential effect of an actual debarment; and
    (ix) That, while the Commission will carefully consider the content 
of a timely reply to the informal notice, the Commission reserves the 
right to issue a formal notice of proposal to debar without additional 
discussion or correspondence.
    (3) The PE shall study the timely reply of an addressee to an 
informal notice and shall forward the reply to the GC and the debarring 
official with the PE's evaluation and recommendation.
    (4) If, after reviewing a timely reply to an informal notice, as 
well as the views of the PE and the GC, the debarring official 
determines, considering fully the provisions of FAR 9.402 and 9.406-
1(a), that a formal debarment action should commence, the debarring 
official shall instruct the PE to sign and send a formal notice of 
proposal to debar to the addressee.
    (c) Notice of proposal to debar. In addition to the matters listed 
at FAR 9.406-3(c), a formal notice of proposal to debar shall advise the 
contractor and any specifically named individual or affiliate of the 
specific, fundamental allegations of material fact supporting the 
proposed debarment.
    (d) Debarring official's decision.
    (1) A submission in opposition to the Commission's formal notice of 
proposal to debar presented by a contractor, or any named individual or 
affiliate, shall include information and argument in opposition to the 
proposed debarment, including any additional specific information or 
documents that raise a genuine dispute over material facts. The 
submission shall be addressed to the PE.
    (2) If a timely submission in opposition to a formal notice of 
proposal to debar is not presented by a named contractor, individual or 
affiliate to whom a formal notice was sent, the PE shall, with respect 
only to each such contractor, individual or affiliate that failed to 
present a timely submission, study all the information in the 
administrative record and shall forward the entire record to the 
debarring official with an evaluation and recommendation whether to 
debar the nonresponding contractor, individual or affiliate and, if so, 
for what period of time.
    (3) If a timely submission in opposition to a formal notice of 
proposal to debar is submitted in actions based upon a conviction or 
civil judgment, the PE shall evaluate all the information in the 
administrative record, including the submission in opposition, and shall 
forward these materials to the debarring official with a recommendation 
whether to debar and, if so, for what period of time.
    (4)(i) If a timely submission in opposition to a formal notice of 
proposal to

[[Page 110]]

debar is presented in actions not based upon a conviction or civil 
judgment, the PE shall evaluate the formal notice of proposal to debar 
and the submission in opposition and shall determine, with the advice of 
the GC, if the submission raises a genuine dispute over any facts 
material to the proposed debarment. If it does not, the PE shall forward 
the entire administrative record, including the submission in 
opposition, to the debarring official with an evaluation and a 
recommendation whether to debar and, if so, for what period of time.
    (ii) If, however, the PE determines, in consultation with the GC, 
that a timely submission in opposition to a formal notice of proposal to 
debar in actions not based upon a conviction or civil judgment raises a 
genuine dispute over any fact material to the proposed debarment, the PE 
shall so advise the contractor, named individual or affiliate, and shall 
inquire whether a fact-finding hearing is desired. If a fact-finding 
hearing is not requested by the contractor, named individual or 
affiliate, the PE shall forward the entire administrative record, 
including the submission in opposition, to the debarring official with 
an evaluation and a recommendation whether to debar and, if so, for what 
period of time.
    (iii) If a fact-finding hearing is requested, the PE shall appoint a 
fact-finding official to whom all matters involving disputed material 
facts shall be referred. The PE will provide the fact-finding official 
with a copy of the entire administrative record including the submission 
in opposition. The fact-finding official shall study the Commission's 
notice(s) of proposal to debar and the submission(s) in opposition, and 
shall identify specifically the material facts in genuine dispute and so 
advise the pertinent contractor, named individual or affiliate, as well 
as the Commission's designated advocate in the Office of General 
Counsel. A fact-finding hearing shall be scheduled and conducted by the 
fact-finding official, and shall take place in a Commission facility in 
Panama unless the fact-finding official determines that fundamental 
fairness compels the use of another location. The rules governing the 
fact-finding hearing shall be established by the fact-finding official 
but shall conform fully with FAR 9.406-3(b)(2) and (d)(2) and (3).
    (5) The fact-finding official shall present written findings of fact 
and the transcribed record of the hearing, if made, to the debarring 
official within 21 calendar days from his receipt of the transcript or 
from the final day of the hearing if no transcript is ordered. The 
findings shall resolve each material fact previously determined to be in 
genuine dispute based on a preponderance of the evidence presented.
    (6) Upon receiving the complete administrative record and the 
evaluation and recommendation of the PE or, if there was a fact-finding 
hearing, upon receiving the hearing record and the findings of fact of 
the fact-finding official and the evaluation and recommendation of the 
PE, the debarring official shall, considering fully the provisions of 
FAR 9.402 and 9.406-1(a), make a final decision whether to impose 
debarment. If debarment is chosen, the debarring official shall also 
determine the period of debarment.
    (e) Notice of debarring official's decision. The debarring official 
shall promptly notify the contractor and any named individual or 
affiliate of the final decision in writing by certified mail, return 
receipt requested.



3509.406-70  Settlement.

    (a) At any time prior to the debarring official's issuance of a 
final decision whether to debar, the debarring official may, in the best 
interests of the U.S. Government, forgo or withdraw a proposed debarment 
by entering into a written agreement with the contractor, named 
individual or affiliate, in which the contractor, individual or 
affiliate agrees to perform, accomplish or implement such remedial 
measures or mitigating factors as are listed at FAR 9.406-1(a). The 
contractor, individual or affiliate shall also agree that its failure to 
observe any term or condition of the agreement shall constitute 
sufficient cause for the immediate imposition of debarment by the 
debarring official without entitlement to a fact-finding hearing.
    (b) The debarring official shall not enter into a settlement 
agreement if the proposed debarment is based on a

[[Page 111]]

conviction of or civil judgment for any of the causes in FAR 9.406-2(a).



3509.406-71  Voluntary exclusion.

    (a)(1) At any time prior to the debarring official's issuance of a 
final decision whether to debar, the debarring official may, in the best 
interests of the U.S. Government, forgo or withdraw a proposed debarment 
by entering into a written agreement with the contractor, named 
individual or affiliate, in which the contractor, individual or 
affiliate agrees to voluntarily refrain, for a specified period of time, 
from attempting to obtain, and from entering into, any contract, 
purchase agreement or other form of contractual relationship, regardless 
of dollar amount, with, as the debarring official may determine, either: 
(i) the Commission; or (ii) the Commission and one or more, or all, 
other agencies, departments or entities of the U.S. Government.
    (2) A voluntary exclusion will not be reported to the GSA nor appear 
in the ``List of Parties Excluded from Federal Procurement and 
Nonprocurement Programs,'' and if the contractor, individual or 
affiliate is currently listed due to a Commission notice of proposal to 
debar the PE will advise the GSA of the voluntary exclusion and request 
the immediate cessation of the listing. The contractor, individual or 
affiliate shall agree that its failure to observe any term or condition 
of the voluntary exclusion shall constitute sufficient cause for the 
immediate imposition of debarment by the debarring official without 
entitlement to a fact-finding hearing.
    (b) The debarring official shall not enter into a voluntary 
exclusion agreement if the proposed debarment is based on a conviction 
of or civil judgment for any of the causes in FAR 9.406-2(a).



3509.407  Suspension.



3509.407-2  Causes for suspension.

    In addition to the causes listed in FAR 9.407-2, the cause for 
debarment identified in 48 CFR (PAR) 3509.406-2 also applies to 
suspension actions.



3509.407-3  Procedures.

    (a) The procedures set forth in 48 CFR (PAR) 3509.406-3 for 
debarment also apply, insofar as they are compatible with the procedures 
set forth in FAR 9.407-3, to suspension actions except those procedures 
identified in paragraph (b) of this subsection.
    (b) The following procedures in 48 CFR (PAR) 3509.406-3 do not apply 
to suspension actions: 3509.406-3(b)(1)(i), 3509.406-3(b) (2) through 
(4) and 3509.406-3(c).
    (c) Notice of suspension. In addition to the matters listed at FAR 
9.407-3(c), in actions not based on an indictment, a notice of 
suspension shall advise the contractor and any specifically named 
individual or affiliate of the specific, fundamental allegations of 
material fact supporting the suspension.



3509.407-70  Settlement.

    Where a suspension is being considered, the suspending official may 
enter into a settlement agreement in the same manner and under the same 
terms as are provided in 48 CFR (PAR) 3509.406-70.



3509.407-71  Voluntary exclusion.

    Where a suspension is being considered, the suspending official may 
enter into a voluntary exclusion agreement in the same manner and under 
the same terms as are provided in 48 CFR (PAR) 3509.406-71.



3509.470  Special notice.

    The Commander in Chief, United States Southern Command, shall be 
notified by the Procurement Executive of the issuance of any Commission 
notice of proposal to debar and of any debarment or suspension decision 
made by the debarring or suspending official.



3509.471  Equal application.

    These procedures for debarment and suspension apply equally to all 
firms, individuals and affiliates doing business with the Panama Canal 
Commission regardless of their nationality, residence or location.


[[Page 112]]





          Subpart 3509.5--Organizational Conflicts of Interest



3509.500  Scope of subpart.

    This subpart establishes Commission policy and procedures for 
identifying, evaluating, and resolving organizational conflicts of 
interest. It is the Commission's policy to avoid, neutralize, or 
mitigate organizational conflicts of interest. If the Commission is 
unable to neutralize or mitigate the effects of a potential conflict of 
interest, it will disqualify the prospective contractor or will 
terminate the contract when potential or actual conflicts are identified 
after award.



3509.502  Applicability.

    This subpart applies to all Commission contracts except agreements 
with other Federal agencies.



3509.503  Waiver.

    The Commission's General Counsel is designated as the authority to 
waive any general rule or procedure of this subpart by determining that 
its application in a particular situation would not be in the 
Commission's interest. Any request for waiver must be in accordance with 
FAR 9.503.



3509.504  Contracting officer responsibilities.

    (a) Contracting officers will be responsible for determining the 
existence of actual and potential organizational conflicts of interest 
which would result from the award of the contract. The contracting 
officer will be guided by information submitted by offerors and by the 
contracting officer's own judgment. The contracting officer may obtain 
the advice of legal counsel and the assistance of technical specialists 
in evaluating potential organizational conflicts.
    (b) If it is determined that organizational conflicts of interest 
will be created by the award of the contract, the contracting officer 
may find an offeror nonresponsible.
    (c) Notwithstanding the existence of organizational conflicts of 
interest, it may be determined that the award of the contract would be 
in the best interest of the Commission. In that case, the contracting 
officer may, with the approval of the cognizant Head of the Contracting 
Activity, set terms and conditions which will reduce the organizational 
conflicts of interest to the greatest extent possible.
    (d) The contracting officer shall, in addition to any certifications 
required by this subpart, require in all solicitations for consulting 
services that the offeror submit as part of an offer a statement which 
discloses all relevant facts relating to existing or potential 
organizational conflicts of interest surrounding the contract, including 
disclosure of such conflicts of interest with respect to proposed 
subcontractors.



3509.506  Information sources.

    (a) Disclosure. At the request of the contracting officer, 
prospective Commission contractors responding to solicitations or 
submitting unsolicited proposals shall provide information to the 
contracting officer for use in identifying, evaluating, or resolving 
potential organizational conflicts of interest. The submittal may be a 
certification or a disclosure, pursuant to paragraphs (a)(1) or (2) of 
this section.
    (1) If the prospective contractor is not aware of any information 
bearing on the existence of any organizational conflict of interest, the 
contractor shall so certify.
    (2) Prospective contractors not certifying in accordance with 
paragraph (a)(1) of this section must provide a disclosure statement 
which describes concisely all relevant facts concerning any past, 
present, or planned interests relating to the work to be performed and 
bearing on whether they, including their chief executives, directors, or 
any proposed consultant or subcontractor, may have a potential 
organizational conflict of interest.
    (b) Failure to disclose information. Any prospective contractor 
failing to provide full disclosure, certification, or other required 
information will not be eligible for award. Nondisclosure or 
misrepresentation of any relevant information may also result in 
disqualification from award, termination of the contract for default, or 
debarment from Government contracts, as well as other legal action or 
prosecution. In response to solicitations requesting the

[[Page 113]]

information in paragraph (a) of this section, the Commission will 
consider any inadvertent failure to provide disclosure certification as 
a ``minor informality'' (as explained in FAR 14.405); however, the 
prospective contractor must correct the omission promptly.
    (c) Exception. When the contractor has previously submitted a 
conflict of interest certification or disclosure for a contract, only an 
update of such statement is required when the contract is modified.



3509.507  Procedures.

    (a) The contracting officer shall document in writing the resolution 
of any potential or actual conflicts of interest identified. This 
documentation shall be reviewed and approved by the General Counsel 
prior to award. If the organizational conflict of interest cannot be 
resolved, the contracting officer shall disqualify the prospective 
contractor from receiving the contract award.
    (b) The General Counsel shall review and make the final decision 
required at FAR 9.507(c)(4) on any contractor request for higher review 
of the contracting officer's decision.



3509.508  Solicitation provision and contract clause.



3509.508-1  Solicitation provision.

    The contracting officer shall insert the provision at 3552.209-70, 
Organizational Conflict of Interest Certification/Disclosure in 
solicitations that in the contracting officer's judgment may be 
susceptible to organizational conflicts of interest.



3509.508-2  Contract clause.

    The contracting officer shall insert the clause at 3552.209-71, 
Organizational Conflict of Interest, in solicitations and contracts that 
will include the provision at 3552.209-70, Organizational Conflict of 
Interest Certification/Disclosure.



PART 3510--SPECIFICATIONS, STANDARDS, AND OTHER PURCHASE DESCRIPTIONS--Table of Contents




Sec.
3510.001  Definitions.
3510.004  Selecting specifications or descriptions for use.
3510.004-70  Brand name or equal purchase descriptions.
3510.007  Deviations.
3510.011  Solicitation provisions and contract clauses.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7644, Mar. 2, 1990, unless otherwise noted.



3510.001  Definitions.

    Salient characteristics mean those particular characteristics that 
specifically describe the essential physical and/or functional features 
of a brand name product. They are those essential physical and/or 
functional features which are identified in the specifications as a 
mandatory requirement which a proposed ``equal'' product must possess in 
order for the product to be considered responsive. The term excludes 
those physical and/or functional features of a brand name product that:
    (a) Are not essential to the needs of the Commission, or
    (b) Do not affect the suitability of the product for its intended 
use.



3510.004  Selecting specifications or descriptions for use.



3510.004-70  Brand name or equal purchase descriptions.

    (a) Purchase descriptions which contain references to one or more 
brand name products followed by the words ``or equal'' may be used only 
under the conditions indicated in FAR 10.004(b) (2) and (3) and shall be 
in accordance with this subsection. The office initiating the ``brand 
name or equal'' purchase request is responsible for documenting to the 
contracting officer's satisfaction that the conditions for its use are 
valid. Where feasible, all known acceptable brand name products should 
be referenced.
    (b) The words ``or equal'' should not be added when the contracting 
officer has determined, with the concurrence of the General Counsel and 
the signed approval of the cognizant HCA, that only a particular product 
meets the essential requirements of the Commission.
    (c) Brand name or equal purchase descriptions shall include, in 
addition to those characteristics set forth in FAR

[[Page 114]]

10.004(b)(1) to the extent they are applicable, the following type of 
information to clearly identify the specific item named by brand(s) and 
its salient characteristics:
    (1) Complete common generic identification of the item required;
    (2) Applicable model, make, or catalog number for each brand name 
product referenced, and identity, if applicable, of the commercial 
catalog in which it appears;
    (3) Name of manufacturer, producer, or distributor of each brand 
name product reference (and address if company is not well known); and
    (4) All salient characteristics of the brand name product or 
products which have been determined by the initiating office, with the 
concurrence of the contracting officer, to be essential to meet the 
Commission's minimum physical and/or functional requirements. The 
purchase description shall state or otherwise indicate that the salient 
characteristics are mandatory features which proposed equal products 
must possess in order to be considered responsive.
    (d) Except as provided in paragraph (e) of this subsection, when a 
brand name or equal purchase description is included in a solicitation, 
the following shall be inserted after each item so described in the 
solicitation schedule for completion by the offeror:

To be completed by offeror:
Manufacturer's Name:____________________________________________________
Manufacturer's Address:_________________________________________________
Brand Name of Product (if any):_________________________________________
    Note: Offerors are cautioned and advised to read provision 3552.210-
70, Brand Name Products or Equal, located elsewhere in this 
solicitation, prior to completing the above. As indicated therein, 
offerors proposing to furnish an ``equal'' product must furnish all 
descriptive material necessary to determine the acceptability of such 
product.

    (e) Where component parts of an end item are described in the 
solicitation by a brand name or equal purchase description and the 
contracting officer determines that application of the provision at 
3552.210-70 to such component parts would be impracticable, the 
requirements of paragraph (d) of this subsection and 3510.011(h) shall 
not apply with respect to such component parts. However, if the 
provision is included in the solicitation for other reasons, there shall 
also be included in the solicitation a statement to identify either the 
component parts (described by brand name or equal purchase descriptions) 
to which the provision applies or those to which it does not apply. 
Depending upon whether the former or latter alternative is used, the 
statement should be substantially as follows:

    The provision 3552.210-70, Brand Name Products or Equal, located 
elsewhere in this solicitation, applies to the following component 
parts: (List the component parts to which the provision applies.)

    or

    The provision 3552.210-70, Brand Name Products or Equal, located 
elsewhere in this solicitation, does not apply to the following 
component parts: (List the component parts to which the provision does 
not apply.)


This paragraph (e) also applies to accessories related to an end item 
where a brand name or equal purchase description of the accessories is a 
part of the description of the end item.
    (f) When considered appropriate by the contracting officer, 
solicitations incorporating brand name or equal purchase descriptions 
may require the submission of offer samples in the case of offerors 
proposing to furnish ``equal'' products; such samples shall not be 
required from offerors who offer brand name products referenced in 
purchase descriptions.
    (g) Offers proposing to furnish products other than those 
specifically referenced by brand name shall be considered for award when 
the contracting officer determines under provision 3552.210-70 that the 
offered products meet the salient characteristics identified in the 
purchase description. Offers shall not be rejected as nonresponsive for 
failure of the product to equal a characteristic of a brand name product 
if such characteristic was not specified as a salient characteristic in 
the brand name or equal purchase description. However, if it is clearly 
established that the unspecified characteristic is essential to the 
intended use, the solicitation is defective and no award shall be made. 
In such cases, the contracting officer should resolicit the 
requirements, using a purchase description that sets forth all salient 
characteristics.
    (h) The brand name or equal policies and procedures in this 
subsection may

[[Page 115]]

be used in small purchase acquisitions to the extent that they are 
applicable and practicable.
    (i) This subsection is not applicable to construction contracts 
since the use of equal equipment, materials, articles, or processes are 
covered by FAR clause 52.236-5, Material and Workmanship.



3510.007  Deviations.

    Heads of Contracting Activities are designated to authorize the 
deviations permitted under FAR 10.007 and are responsible for ensuring 
that the actions required by FAR 10.007 are accomplished.



3510.011  Solicitation provisions and contract clauses.

    (h) The contracting officer shall insert the provision at 3552.210-
70, Brand Name Products or Equal, in solicitations that call for the 
delivery of a brand name or equal product, selecting the language that 
is appropriate for (1) invitation for bids, or (2) requests for 
proposals, as parenthetically indicated in the provision. (However, see 
3510.004-70(e) regarding the applicability of the provision to component 
parts of an end item and to accessories related to an end item.)

[[Page 116]]





          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES


PART 3513--SMALL PURCHASE AND OTHER SIMPLIFIED PURCHASE PROCEDURES--Table of Contents




Sec.
3513.000  Scope of part.

                         Subpart 3513.1--General

3513.105  Small business-small purchase set-asides.
3513.107  Solicitation and evaluation of quotations.

               Subpart 3513.2--Blanket Purchase Agreements

3513.201  General.
3513.203  Establishment of Blanket Purchase Agreements.
3513.203-1  General.
3513.204  Purchases under Blanket Purchase Agreements.

                     Subpart 3513.5--Purchase Orders

3513.505  Purchase order and related forms.
3513.505-2  Agency order forms in lieu of Optional Forms 347 and 348.
3513.505-70  Purchase requisition.
3513.505-71  Division Purchase Order.

    Authority: 40 U.S.C. 486(c).

    Source: 54 FR 7645, Mar. 2, 1990, unless otherwise noted.



3513.000  Scope of part.

    This part implements and supplements FAR part 13 and provides 
Commission policies and procedures relating to small business-small 
purchase set-asides, blanket purchase agreements, and purchase order 
forms.



                         Subpart 3513.1--General



3513.105  Small business-small purchase set-asides.

    (a) The requirements of Public Law 95-507 relating to setting aside 
acquisitions of supplies or services with an anticipated dollar value of 
$25,000 or less do not apply to such purchases when delivery or 
performance is to be made to or within the Republic of Panama. The 
requirements do apply to Commission offices located in the United States 
for the purchase of supplies or services for their own use and not for 
delivery or performance in Panama.



3513.107  Solicitation and evaluation of quotations.

    (a) Forms. (4) The following Commission forms may be used by the 
Logistical Support Division in lieu of Standard Form 18 for requesting 
small purchase price quotations:
    (i) Panama Canal Form No. 1821, Request For Quotation. This form may 
be used by the Purchasing and Contracts Branch for the solicitation of 
nonstock items and services. It must be used in conjunction with forms 
7071 and 7074 (see paragraph (a)(4)(iv) of this section).
    (ii) Panama Canal Form No. 1822, Request For Quotation Continuation. 
This form may be used with Panama Canal Form No. 1821 when additional 
space is needed.
    (iii) Panama Canal Form No. 2008, This Is A Request For Prices; It 
Is Not An Order. This form may be used by the Inventory Management 
Branch for the solicitation of standard stock items. It must be used in 
conjunction with forms 7071 and 7074 (see paragraph (a)(4)(iv) of this 
section).
    (iv) Panama Canal Commission Form 7071, General Contract Clauses And 
Provisions, Small Purchases; and Panama Canal Commission Form 7074, 
Information Sheet. These two forms shall be forwarded to prospective 
suppliers together with either Panama Canal Form No. 1821 or Panama 
Canal Form No. 2008, as applicable.



               Subpart 3513.2--Blanket Purchase Agreements



3513.201  General.

    (a) Except for the rental of construction equipment, blanket 
purchase agreements (BPA's) may be established only by contracting 
officers within the General Services Bureau. The contracting officers 
authorized to establish BPA's are:

[[Page 117]]

    (1) Chief, Inventory Management Branch for acquisition of inventory 
stocks;
    (2) Chief, New Orleans Branch for acquisition of parts in the New 
Orleans area for the Motor Transportation Division and such other items 
as may be designated by the General Services Director;
    (3) Chief, Construction Division, Engineering and Construction 
Bureau, for the rental of construction equipment; and
    (4) Chief, Purchasing and Contracts Branch for acquisition of 
supplies or services not covered under paragraphs (a) (1) through (3) of 
this section.

[55 FR 7645, Mar. 2, 1990; 55 FR 38331, Sept. 18, 1990]



3513.203  Establishment of Blanket Purchase Agreements.



3513.203-1  General.

    (a) Blanket purchase agreements may be established for supplies or 
services which are readily available and for which their purchase does 
not require detailed technical specifications, technical inspection, or 
complex terms and conditions.
    (b) Only the contracting officer (CO) and officials authorized by a 
CO and designated in the BPA shall be permitted to request deliveries. 
Delivery (call) orders shall usually be made by telephone or in person. 
Before placing a call order against the BPA, each requirement shall be 
screened for availability from Commission inventory sources and from the 
mandatory sources of supply prescribed in FAR part 8. Necessary controls 
shall be maintained by the person placing the call orders under the BPA 
to ensure that any limitation stated therein is not exceeded. The BPA 
identification number shall be specified each time a delivery is 
requested.
    (c) The procedure for establishing and using BPA's is prescribed in 
the Commission's Financial Systems Manual 14.020, covering BPA's in 
general, and 14.007, covering BPA's for automotive parts.



3513.204  Purchases under Blanket Purchase Agreements.

    (a) Individual call orders under a BPA shall not exceed the dollar 
limitation specified in the BPA, which limitation shall not exceed the 
dollar limitations established by the:
    (1) Engineering and Construction Director for the rental of 
construction equipment, and
    (2) General Services Director for all other BPA's.
    (b) Purchases under BPA's shall be documented on Panama Canal Form 
No. 3099, Request For Purchase/Call Order.



                     Subpart 3513.5--Purchase Orders



3513.505  Purchase order and related forms.



3513.505-2  Agency order forms in lieu of Optional Forms 347 and 348.

    The following Commission order forms may be used in lieu of Optional 
Forms 347 and 348 for the purposes described below:
    (a) Panama Canal Form No. 1010, Purchase Order. This form may be 
used by the Inventory Management Branch (1) for the small purchase 
acquisition of standard stock items, and (2) as a delivery order for 
ordering or scheduling deliveries against established contracts or from 
Government sources of supply.
    (b) Panama Canal Form No. 1820, Purchase Order. This form may be 
used by the Purchasing and Contracts Branch (1) for the small purchase 
acquisition of non-stock items and services, and (2) as a delivery order 
for ordering or scheduling deliveries against established contracts or 
from Government sources of supply.
    (c) Panama Canal Form No. 3083, Purchase Order Continuation. This 
form may be used with Panama Canal Form No. 1820 when additional space 
is needed.
    (d) Panama Canal Form No. 3163, Division Purchase Order. This form 
may be used by all activities having contracting authority for the 
decentralized procurement of supplies and services (see 3513.505-71).
    (e) Panama Canal Form No. 3163-MTD, Division Purchase Order. This 
form may

[[Page 118]]

be used by the Motor Transportation Division and the New Orleans Branch, 
Logistical Support Division for purchases of nonstandard stock 
automotive repair parts that do not exceed dollar amounts established by 
the General Services Director.



3513.505-70  Purchase requisition.

    Panama Canal Form No. 1821, Purchase Requisition, shall be used by 
requiring activities to request purchasing action by the Purchasing and 
Contracts Branch, Logistical Support Division. The procedure for using 
purchase requisitions is prescribed in the Commission's Financial 
Systems Manual 14.010.



3513.505-71  Division Purchase Order.

    (a) General. The Division Purchase Order (DPO), PCC Form No. 3163, 
may be used by all activities that have contracting authority for the 
decentralized procurement of supplies and services (see 3501.601(b)). 
When repetitive purchases within the authorized DPO dollar limitation 
are made for the same supplies or services, the activity shall request 
the Chief, Purchasing and Contracts Branch to establish a BPA (see 
subpart 3513.2). A detailed procedure for the use of the DPO is 
prescribed in the Commission's Financial Systems Manual 14.005, covering 
DPO's in general, and 14.007, covering DPO's for automotive parts.
    (b) Responsibilities. (1) Bureau directors and heads of independent 
units that use the DPO shall--
    (i) Ensure that, whenever practicable, the functions of procurement 
approval, receipt documentation, and payment approval in the use of a 
DPO are performed by three separate persons. In no case shall the same 
person be permitted to perform all three functions.
    (ii) Approve and sign all DPO's, subject to the conditions specified 
in paragraphs (b) (2)(iii) and (3) of this subsection, or appoint in 
writing by position or by name one or more purchasing agents to act as 
approval and signatory authority. Such appointees shall be at an 
organizational level sufficient to ensure responsible control over the 
obligation of funds that the DPO represents.
    (2) Designated purchasing agents shall--
    (i) Approve and sign DPO's within their delegated dollar authority.
    (ii) Supervise the use and issuance of DPO's and verify that such 
use and issuance are in compliance with the FAR, this PAR, and the 
Commission's Financial Systems Manual.
    (iii) Ensure that the following conditions exist before approving 
purchases to be made on DPO's:
    (A) There is a valid need for the supplies or services;
    (B) A unit fund controller has certified the availability of funds 
for the proposed purchase;
    (C) The vendor is reputable and the price is reasonable; and
    (D) The DPO is not being used as a means to purchase a known 
requirement in excess of the authorized DPO dollar limitation by 
fragmentizing the requirement (i.e., by breaking the total quantity of 
the requirement into smaller quantities that can be purchased on two or 
more DPO's, each of which does not exceed the authorized dollar 
limitation but which, collectively, will result in the purchase of the 
total quantity of the requirement).
    (3) Individuals authorized to approve and sign DPO's shall ensure 
that Government funds are not expended for standard stock items, 
unauthorized office supplies, furnishings, appliances, or for items that 
are intended solely for personal convenience or to satisfy personal 
desires of an official or that are nonessential to the needs of the 
Government and do not contribute to the fulfillment of the Commission's 
mission.
    (4) The General Services Director shall delegate authority for 
contracting by means of DPO's to bureau directors and heads of 
independent units. Such delegation shall be published from time to time 
in bulletin or memorandum form and shall conform to dollar limitations 
approved by the Administrator.
    (c) Panama Preference. DPO purchases shall conform to the Treaty 
preference given to supplies and services obtainable in Panama, as 
prescribed in subpart 3570.1.

[[Page 119]]



PART 3514--SEALED BIDDING--Table of Contents




Sec.
3514.000  Scope of part.

                  Subpart 3514.2--Solicitation of Bids

3514.201-6  Solicitation provisions.
3514.205  Solicitation mailing lists.
3514.205-1  Establishment of lists.

          Subpart 3514.4--Opening of Bids and Award of Contract

3514.404  Rejection of bids.
3514.404-1  Cancellation of invitations after opening.
3514.406  Mistakes in bids.
3514.406-3  Other mistakes disclosed before award.
3514.406-4  Mistakes after award.
3514.407  Award.
3514.407-1  General.
3514.407-6  Equal low bids.

    Authority: 40 U.S.C. 486(c); Article IX of the Agreement in 
Implementation of Article III of the Panama Canal Treaty of 1977.

    Source: 55 FR 7647, Mar. 2, 1990, unless otherwise noted.



3514.000  Scope of part.

    This part implements and supplements FAR part 14 by providing 
additional solicitation provisions and additional guidance on 
establishment of solicitation mailing lists, cancellation of invitations 
after opening, mistakes in bids, and contract award.



                  Subpart 3514.2--Solicitation of Bids



3514.201-6  Solicitation provisions.

    (a) In addition to the provisions prescribed in FAR 14.201-6, the 
contracting officer shall insert in all invitations for bids the 
provisions at--
    (1) 3552.214-70, Price--Sealed Bidding; and
    (2) 3552.214-73, Caution--Sealed Bidding.
    (b) The contracting officer shall insert the following provisions in 
all invitations for bids for construction. These provisions may also be 
used in invitations for bids for supplies or services if the contracting 
officer determines that their use is appropriate:
    (1) 3552.214-71, Additional Data To Be Submitted.
    (2) 3552.214-72, Rejection of Bids.
    (c) The contracting officer shall insert the provision at 3552.214-
74, All or None Award--Sealed Bidding, in invitations for bids for 
supplies or services if the contracting officer determines that award 
will be made on an ``all or none'' basis to one bidder for all items 
because of the nature of the items (e.g., supply items must interface or 
otherwise be fully compatible with each other; items covering services 
are so interrelated that it would be impracticable to split the award).
    (d)(1) The contracting officer shall insert the provision at 
3552.214-75, All or None Award--Sealed Bidding--Construction, in 
invitations for bids for construction work that is estimated to exceed 
$10,000 if the contracting officer determines:
    (i) To require bidding on all items, and
    (ii) That award will be made on an ``all or none'' basis to one 
bidder for all items.
    (2) If the construction work is not estimated to exceed $10,000, the 
contracting officer shall use the Alternate I version of provision 
3552.214-75.
    (3) If the contracting officer determines that:
    (i) The contract work, regardless of its estimated value, will be 
awarded to one bidder for all the work, and
    (ii) Bidding on all items will not be required, the Alternate II 
version of provision 3552.214-75 is to be used.

[55 FR 7647, Mar. 2, 1990; 55 FR 38331, Sept. 18, 1990]



3514.205  Solicitation mailing lists.



3514.205-1  Establishment of lists.

    (a) Each Commission contracting activity shall establish 
solicitation mailing lists as required by FAR 14.205-1.
    (b) In order to carry out the requirements of the Treaty to give 
preference to the acquisition of supplies and services obtainable from 
sources in the Republic of Panama, each Commission contracting activity 
shall develop solicitation lists of local companies which can provide 
such supplies or services.

[[Page 120]]



          Subpart 3514.4--Opening of Bids and Award of Contract



3514.404  Rejection of bids.



3514.404-1  Cancellation of invitations after opening.

    (c) The Procurement Executive, upon recommendation of the cognizant 
HCA, is authorized to make the determinations prescribed in FAR 14.404-
1(c) when an invitation is to be cancelled and all bids rejected after 
bid opening but prior to award.
    (e)(1) The Procurement Executive, upon recommendation of the 
cognizant HCA, may authorize the contracting officer to complete the 
acquisition through negotiation in the determination to cancel the 
invitation for bids when the conditions in FAR 14.404-1(c) (6) or (7) 
apply.



3514.406  Mistakes in bids.



3514.406-3  Other mistakes disclosed before award.

    The cognizant HCA is delegated the authority to make the 
administrative determinations in connection with mistakes in bids prior 
to award. This authority may not be redelegated. The General Counsel 
must review and concur with all determinations under FAR 14.406-3.



3514.406-4  Mistakes after award.

    (b) The cognizant HCA is authorized to make determinations on 
mistakes in bids disclosed after award. The General Counsel must review 
and concur with all determinations made under FAR 14.406.4.



3514.407  Award.



3514.407-1  General.

    (a) The contracting officer shall make a contract award to that 
responsible bidder whose bid, conforming to the invitation, will be most 
advantageous to the Government, considering only the price and price-
related factors contained in FAR 14.201-8. Particular attention shall be 
paid in supply contracts to evaluation of transportation costs to ensure 
that the award is made to the lowest overall responsive and responsible 
bidder.



3514.407-6  Equal low bids.

    (a) Contracts shall be awarded in the following order of priority 
when two or more low bids are equal in all respects:
    (1) Preference shall be given to the bidder whose supplies or 
services are obtainable in the Republic of Panama;
    (2) When two or more bidders offer supplies or services obtainable 
in Panama, preference shall be given to the bidder whose bid has a 
larger percentage of components of Panamanian origin;
    (3) If two or more bidders remain equally low after application of 
paragraphs (a) (1) and (2) of this subsection, the tie-breaking 
procedures prescribed in FAR 14.407-6(b) shall be followed;
    (4) The order of precedence established in FAR 14.407-6 (a) and (b).
    (c) When award is made by using the priorities under this 3514.407-
6, the contracting officer shall incorporate the written agreement 
prescribed in FAR 14.407-6(c) in the contract.



PART 3515--CONTRACTING BY NEGOTIATION--Table of Contents




Sec.
3515.000  Scope of part.

  Subpart 3515.4--Solicitation and Receipt of Proposals and Quotations

3515.407  Solicitation provisions.

                  Subpart 3515.5--Unsolicited Proposals

3515.500  Scope of subpart.
3515.502  Policy.
3515.503  General.
3515.504  Advance guidance.
3515.506  Agency procedures.
3515.506-1  Receipt and initial review.
3515.506-2  Evaluation.
3515.507  Contracting methods.
3515.508  Prohibitions.

                    Subpart 3515.8--Price Negotiation

3515.802  Policy.
3515.804  Cost or pricing data.
3515.804-2  Requiring certified cost or pricing data.
3515.804-3  Exemptions from or waiver of submission of certified cost or 
          pricing data.
3515.804-6  Procedural requirements.

                         Subpart 3515.9--Profit

3515.902  Policy.


[[Page 121]]


    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7648, Mar. 2, 1990, unless otherwise noted.



3515.000  Scope of part.

    This part implements and supplements FAR part 15 by providing 
additional solicitation provisions and by providing Commission policies 
and procedures on unsolicited proposals, price negotiations, and profit.



  Subpart 3515.4--Solicitation and Receipt of Proposals and Quotations



3515.407  Solicitation provisions.

    (a) In addition to the provisions prescribed in FAR 15.407, the 
contracting officer shall insert in solicitations the provisions at--
    (1) 3552.215-70, Price; and
    (2) 3552.215-71, Caution.
    (b) The contracting officer shall insert the provision at 3552.215-
72, All or None Award, in solicitations for supplies or services if the 
contracting officer determines that award will be made on an ``all or 
none'' basis to one offeror for all items because of the nature of the 
items (e.g., supply items must interface or otherwise be fully 
compatible with each other; items covering services are so interrelated 
that it would be impracticable to split the award). This provision may 
also be used in solicitations for construction if the contracting 
officer determines that its use is appropriate.



                  Subpart 3515.5--Unsolicited Proposals



3515.500  Scope of subpart.

    This subpart implements and supplements the policies and procedures 
governing unsolicited proposals prescribed in FAR subpart 15.5. It also 
establishes the Commission contact point for coordinating the receipt, 
evaluation, and disposition of unsolicited proposals.



3515.502  Policy.

    It is the policy of the Commission to receive, review, and consider 
for acceptance unsolicited proposals, as that term is defined in FAR 
15.501 and further described in FAR 15.503(c). As indicated in FAR 
15.502, such proposals may be accepted for sole source negotiation only 
when appropriate authority exists in FAR subpart 6.3 and when all 
conditions in FAR 15.507(b) have been complied with.



3515.503  General.

    (f) Unsolicited proposals for the performance of services are, 
except as discussed in this paragraph, unacceptable as the performance 
of services is unlikely to necessitate innovative and unique concepts. 
There may be rare instances in which an unsolicited proposal offers an 
innovative and unique approach to the accomplishment of a service. If 
such a proposal offers a previously unknown or an alternative approach 
to generally recognized techniques for the accomplishment of a specific 
service, and such approach will provide significantly greater economy or 
enhanced quality, it may be considered for acceptance, provided that 
such acceptance can be made in conformance with the policy in 3515.502.



3515.504  Advance guidance.

    (a) It is not uncommon for sales representatives and engineers to 
approach field personnel of the Commission to discuss their products or 
proposals. Bureau Directors and Heads of Independent Units shall take 
the necessary steps to ensure that Commission employees do not make any 
commitments, explicit or implied, on behalf of the Commission to 
eventually procure such products or proposals. Whenever any person 
orally makes an ``unsolicited proposal'', Commission personnel shall 
inform the offeror that unsolicited proposals must be in writing and 
that further information should be obtained from the Commission's 
Procurement Executive or Assistant Procurement Executive before the 
offeror proceeds with the submission of a written proposal. Commission 
personnel may provide copies, if practicable, of FAR subpart 15.5 and 
subpart 3515.5 of this regulation to persons interested in submitting 
unsolicited proposals.

[[Page 122]]



3515.506  Agency procedures.

    (a) In order to allow the Commission sufficient time to evaluate the 
unsolicited proposal and negotiate any resultant contract, prospective 
contractors should submit their proposals, in triplicate, well in 
advance of the time they desire to commence their effort or activity. A 
minimum of six months advance submission is suggested (see FAR 
15.505(c)(2)).
    (b) The Procurement Executive is the Commission contact point to 
coordinate the receipt and handling of unsolicited proposals within the 
commission.



3515.506-1  Receipt and initial review.

    (a) The Procurement Executive shall conduct an initial review of 
each unsolicited proposal to determine if it appears to (1) constitute a 
valid unsolicited proposal as described in FAR 15.503(c), and (2) meet 
the requirements contained in FAR 15.506-1(a). If so, the Procurement 
Executive shall acknowledge its receipt to the sender and initiate 
processing of the proposal for evaluation in accordance with 3515.506-2 
of this subpart. If the proposal does not meet the requirements of FAR 
15.506-1(a), or otherwise does not qualify as an unsolicited proposal, 
the Procurement Executive shall return it to the sender with appropriate 
comments.



3515.506-2  Evaluation.

    (a) Promptly after receipt of an unsolicited proposal deemed to 
satisfy the requirements of 3515.506-1(a), the Procurement Executive 
shall forward the original and all copies to the cognizant contracting 
officer for further coordination of the technical evaluation of the 
proposal. The cognizant contracting officer shall (1) determine the 
appropriate Commission organization that would fund the acquisition (see 
FAR 15.507(b)(3)) in the event the unsolicited proposal would be 
acceptable for a negotiated award pursuant to FAR 15.507(b), and (2) 
forward a copy to that organization for technical evaluation. If more 
than one organization has a potential interest in the proposal, or 
should otherwise be included in the evaluation phase because of its 
technical expertise, copies of the proposal shall be circulated to each 
such office.
    (b) Evaluating organizations shall complete their evaluations as 
quickly as practicable and forward them, together with all copies of the 
unsolicited proposal, to the cognizant contracting officer. Evaluations 
shall take into consideration the factors in FAR 15.506-2(a), shall be 
in writing, and shall include, in addition to a comprehensive technical 
analysis and conclusion(s), a recommendation as to the ultimate 
disposition of the proposal. When the recommendation is to accept the 
unsolicited proposal, the evaluation shall include the documentation 
required in FAR 15.507(b)(3).



3515.507  Contracting methods.

    (a) If the unsolicited proposal is not recommended for acceptance 
after technical evaluation, the cognizant contracting officer shall 
return the proposal and all copies thereof to the offeror, citing the 
reasons why the proposal is not acceptable. A copy of the letter shall 
be furnished to the Procurement Executive.
    (c) If the unsolicited proposal is acceptable as a basis for 
negotiation, the cognizant contracting officer shall:
    (1) Obtain the concurrence of the General Counsel before proceeding 
with negotiations, and
    (2) Advise the Procurement Executive in writing of such action.



3515.508  Prohibitions.

    (b) All unsolicited proposals received by units of the Commission 
shall be treated ``FOR OFFICIAL USE ONLY'' and shall be protected from 
unauthorized disclosure. No copies shall be made except as authorized by 
the Procurement Executive or cognizant contracting officer, as 
appropriate. All Commission personnel who handle a proposal are 
responsible for safeguarding the information therein, and shall not 
disclose the information to unauthorized personnel within or outside of 
the Commission.



                    Subpart 3515.8--Price Negotiation



3515.802  Policy.

    It is the policy of the Commission to obtain the cost or pricing 
data required pursuant to FAR 15.804 from all U.S. or

[[Page 123]]

foreign (including Panama) prime contractors and subcontractors.



3515.804  Cost or pricing data.



3515.804-2  Requiring certified cost or pricing data.

    When determining the contract amount for purposes of applying the 
dollar threshold at FAR 15.804-2(a) for requesting certified cost or 
pricing data, the value of the contract shall include any priced 
options. Exercise of a priced option is not considered a price 
adjustment and does not require submission of cost or pricing data.



3515.804-3  Exemptions from or waiver of submission of certified cost or pricing data.

    All findings rendered pursuant to FAR 15.804-3 (b)(2)(iii) and 
(c)(8) shall be approved by the cognizant HCA with the concurrence of 
the General Counsel. The exemptions permitted under FAR 15.804-3(g) and 
the waivers permitted under FAR 15.804-3(i) shall be authorized by the 
cognizant HCA with the concurrence of the General Counsel.



3515.804-6  Procedural requirements.

    For requests for proposals or modifications not exceeding $25,000, 
the contracting officer may require contractors to submit information 
for cost or price analysis on Panama Canal Form No. 6122, Cost 
Breakdown, at 3553.215.



                         Subpart 3515.9--Profit



3515.902  Policy.

    (a) The Commission shall use a structured approach to determine the 
profit or fee prenegotiation objective in acquisition actions of 
$500,000 or more that require cost analysis based on the profit analysis 
factors in FAR 15.905.
    (b) The following types of acquisitions are exempt from the 
requirements of the structured approach, but the contracting officer 
shall comply with FAR 15.905-1 when analyzing profit for these contracts 
or actions:
    (1) All actions which do not require cost analysis;
    (2) Architect-engineer contracts;
    (3) Construction contracts;
    (4) Contracts primarily requiring delivery of material supplied by 
subcontractors;
    (5) Termination settlements; and
    (6) Other professional services.
    (c) In developing a profit or fee prenegotiation objective, the 
contracting officer shall comply with the requirements in FAR 15.903.
    (d) When profit analysis is required, any amount proposed by the 
prospective contractor for the cost of money for facilities capital 
allowable under FAR 31.205-10 shall be deducted from the prenegotiation 
cost base objective before calculating the profit objective.
    (e) The cognizant HCA is responsible for establishing procedures to 
ensure compliance with this subpart.



PART 3516--TYPES OF CONTRACTS--Table of Contents




Sec.
3516.000  Scope of part.

              Subpart 3516.3--Cost-Reimbursement Contracts

3516.301  General.
3516.301-3  Limitations.

  Subpart 3516.6--Time-and-Materials, Labor-Hour, and Letter Contracts

3516.601  Time-and-materials contracts.
3516.603  Letter contracts.
3516.603-2  Application.
3516.603-3  Limitations.
3516.603-70  Information to be furnished when requesting authority to 
          issue a letter contract.
3516.603-71  Approval for modifications to letter contracts.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7650, Mar. 2, 1990, unless otherwise noted.



3516.000  Scope of part.

    This part implements and supplements FAR part 16. It provides 
Commission policies and procedures for preparation of determinations and 
findings authorizing use of cost-reimbursement contracts, and for use of 
time-and-materials and letter contracts.

[[Page 124]]



              Subpart 3516.3--Cost-Reimbursement Contracts



3516.301  General.



3516.301-3  Limitations.

    (c) The following format shall be used and executed by the 
contracting officer as the determination and findings authorizing the 
use of a cost-reimbursement contract:

                         PANAMA CANAL COMMISSION

                       Determination and Findings

              Authority to Use Cost-Reimbursement Contract

    I hereby find that:
    (1) The (Bureau/Division name) proposes to contract with (name of 
proposed contractor) for (describe work, service, or product) (identify 
program or project). The estimated cost is ($________) (if contract is 
CPFF type, insert, (``plus a fixed fee of ($________) which is ____ 
percent of the estimated cost exclusive of fee'').
    (2) (Set forth facts and circumstances that show why it is 
impracticable to acquire supplies or services of the kind or quality 
required without the use of the proposed type of contract or why the 
proposed method of contracting is likely to be less costly than other 
methods.)
    I hereby determine that:
    On the basis of the above findings, it is impracticable to acquire 
supplies or services of the kind or quality required without the use of 
a (cost, cost-sharing, or cost-plus-a-fixed fee*) type of contract, or 
the (cost, cost-sharing, or cost-plus-a-fixed fee*) method of 
contracting is likely to be less costly than other methods.

Date____________________________________________________________________
_______________________________________________________________________
            (Signature)

    *Contracting officer inserts appropriate type of contract.

    The determination and findings for all cost-reimbursement and 
incentive/award fee type contracts shall be reviewed and approved by the 
HCA.



  Subpart 3516.6--Time-and-Materials, Labor-Hour, and Letter Contracts



3516.601  Time-and-materials contracts.

    (c) Limitations. The format prescribed in 3516.301-3(c) shall be 
used and executed by the contracting officer as the determination and 
findings authorizing the use of either a time-and-materials contract or 
a labor-hour contract, except that in lieu of the final paragraph insert 
the following:

    I hereby determine that:
    On the basis of the above findings, no other type of contract will 
suitably serve for the acquisition of the required supplies or services.



3516.603  Letter contracts.



3516.603-2  Application.

    (a) It is the policy of the Panama Canal Commission to refrain from 
issuing letter contracts. Exceptions to this policy will be permitted 
only in those cases in which all matters of a substantive nature, such 
as statements of work, delivery schedules, and general and special 
clauses have been resolved and agreed upon. Exceptions to this policy 
must be approved by the Administrator.



3516.603-3  Limitations.

    The cognizant HCA is designated to execute the prescribed 
determination that no other contract is suitable. However, if the 
cognizant HCA is to sign the letter contract as the contracting officer, 
the Procurement Executive shall execute the determination.



3516.603-70  Information to be furnished when requesting authority to issue a letter contract.

    The following information should be included by the contracting 
officer in any memorandum requesting approval to issue a letter 
contract:
    (a) Name and address of proposed contractor.
    (b) Location where contract is to be performed.
    (c) Contract number, including modification number, if possible.
    (d) Brief description of work and services to be performed.
    (e) Performance or delivery schedule.
    (f) Amount of letter contract.
    (g) Estimated total amount of definitized contract.
    (h) Type of contract to be executed (fixed price, cost-
reimbursement, etc.)
    (i) Statement of the necessity and advantage to the Commission of 
the use of the proposed letter contract.

[[Page 125]]

    (j) Statement of the percentage of the estimated cost of the 
proposed acquisition that the obligation of funds represents. In those 
rare instances in which the obligation represents 50 percent or more of 
the proposed estimated cost of the acquisition, a justification for that 
obligation must be included describing the basis and necessity for the 
obligation (e.g., the contractor requires a large initial outlay of 
funds for major subcontract awards or an extensive purchase of materials 
to meet an urgent delivery requirement). In every case, documentation 
must ensure that the amount to be obligated is not in excess of an 
amount reasonably required to perform the work.
    (k) Period of effectiveness of the proposed letter contract.
    (l) Statement of any substantive matters that need to be resolved.



3516.603-71  Approval for modifications to letter contracts.

    All letter contract modifications must be approved by the cognizant 
HCA responsible for the acquisition. Requests for authority to issue 
letter contract modifications shall be processed in the same manner as 
requests for authority to issue letter contracts and shall include the 
following:
    (a) Name and address of the contractor.
    (b) Description of work and services.
    (c) Date original request was approved and approving official.
    (d) Letter contract number and date issued.
    (e) Complete justification as to why the letter contract cannot be 
definitized at this time.
    (f) Complete justification as to why the level of funding must be 
increased.
    (g) Complete justification as to why the period of effectiveness is 
increased, if applicable.
    (h) If the funding of letter contracts is to be increased to more 
than 50 percent of the estimated cost of the acquisition, the 
information required by 3516.603-70(j) must be included.



PART 3517--SPECIAL CONTRACTING METHODS--Table of Contents




                         Subpart 3517.2--Options

Sec.
3517.200  Scope of subpart.
3517.203  Solicitations.
3517.204  Contracts.
3517.207  Exercise of options.

     Subpart 3517.5--Interagency Acquisitions Under the Economy Act

3517.500  Scope of subpart.
3517.501  Definitions.
3517.502  General.
3517.504  Ordering procedures.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7651, Mar. 2, 1990, unless otherwise noted.



                         Subpart 3517.2--Options



3517.200  Scope of subpart.

    This subpart does not apply to contracts for services involving:
    (a) Construction, alteration, or repair of real property;
    (b) Architect-engineer services;
    (c) Automatic data processing equipment systems; and
    (d) Telecommunication equipment and services.

However, it does not preclude the use of options in those contracts.



3517.203  Solicitations.

    (g)(2) The use of options for increased quantities of supplies or 
services which exceed 50 percent of the base quantity specified in the 
contract for a particular period shall be approved by the cognizant HCA 
prior to issuing the solicitation. In the case of supplies, the 50 
percent limitation applies only to contracts which have a base quantity 
of more than one.



3517.204  Contracts.

    (e) The use of option periods which, when combined with the base 
contract period, results in a total contract period of performance 
exceeding twelve

[[Page 126]]

months shall be approved by the cognizant HCA prior to issuing the 
solicitation. In no event, however, shall the total of the base and 
option periods exceed sixty (60) months in duration.



3517.207  Exercise of options.

    (h) The contracting officer, if the contract so provides, may, 
subject to the conditions in FAR 17.204(d) and FAR 32.703-2, exercise an 
option contingent upon the availability of funds. Under no circumstances 
shall any action be taken which could be construed as creating a legal 
liability on the part of the Commission until a formal notice of 
availability of funds in the form of a contract modification has been 
issued by the contracting officer.



     Subpart 3517.5--Interagency Acquisitions Under the Economy Act



3517.500  Scope of subpart.

    This subpart prescribes policies and procedures applicable to the 
use of Interservice Support Agreements and Memorandums of Understanding.



3517.501  Definitions.

    Interservice Support Agreement (ISA) means an agreement entered into 
between the Panama Canal Commission and any other department or agency 
of the United States for the use of facilities, furnishing of supplies 
or services, or performance of functions. ISA's may be based upon 
Memorandums of Understanding.
    Memorandum of Understanding (MOU) means the basic document which 
outlines host-tenant relationships. MOU's serve as the standard for 
relationships between host units and supporting or supported activities.



3517.502  General.

    The General Services Director is the Commission official authorized 
to enter into ISA's. The Director, by written appointment, may delegate 
this authority to one or more contracting officers in the General 
Services Bureau. The determination and findings required by FAR 17.503 
shall be made by the General Services Director or the appointee(s), as 
applicable.



3517.504  Ordering procedures.

    (a) The procedures in FAR 17.504 shall apply to Commission ISA's.
    (b) When the other agency to an ISA is a DOD activity, the DOD forms 
and format normally shall be followed.

[[Page 127]]





                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS


PART 3519--SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS CONCERNS--Table of Contents




                        Subpart 3519.2--Policies

Sec.
3519.201  General policy.
3519.202-3  Equal low bids.

    Authority: 40 U.S.C. 486(c); Article IX of the Agreement in 
Implementation of Article III of the Panama Canal Treaty of 1977.



                        Subpart 3519.2--Policies



3519.201  General policy.

    (a) Any acquisition which requires the solicitation of bids, 
proposals, or quotes from sources within Panama and also from sources 
within the United States shall not be restricted by any United States 
statute that is inconsistent with Article IX of the Agreement in 
Implementation of Article III of the Panama Canal Treaty.
    (d) The Chief, New Orleans Branch, Logistical Support Division, 
shall discharge the functions of the Small and Disadvantaged Business 
Utilization Specialist (SDBUS).

[55 FR 7651, Mar. 2, 1990]



3519.202-3  Equal low bids.

    In the event of equal low bids, contracts shall be awarded in the 
order of priority set forth in 3514.407-6.

[55 FR 7651, Mar. 2, 1990]



PART 3520--LABOR SURPLUS AREA CONCERNS--Table of Contents




                         Subpart 3520.1--General

Sec.
3520.102  General policy.
3520.103  Contract clause.

                       Subpart 3520.2--Set-asides

3520.201  Set-asides for labor surplus area concerns.
3520.201-1  Total set-asides.

        Subpart 3520.3--Labor Surplus Area Subcontracting Program

3520.301  General.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7651, Mar. 2, 1990, unless otherwise noted.



                         Subpart 3520.1--General



3520.102  General policy.

    Subject to the order of precedence in FAR 19.504, the Panama Canal 
Commission shall award appropriate contracts to eligible labor surplus 
area (LSA) concerns and encourage contractors to place subcontracts with 
LSA concerns only when all of the following circumstances exist:
    (a) The acquisition is to be performed within the United States, its 
territories and possessions, the Commonwealth of Puerto Rico, and the 
Trust Territory of the Pacific Islands.
    (b) The concern, together with its first-tier subcontractors, will 
perform substantially in labor surplus areas as defined in FAR 20.101; 
and
    (c) The value of the acquisition is estimated to exceed the small 
purchase limitation in FAR part 13.



3520.103  Contract clause.

    (b) The contract clause at FAR         52.220-1, Preference for 
Labor Surplus Area Concerns, shall be included in solicitations and 
contracts only as prescribed by FAR 20.103(b) and under those conditions 
set forth in 3520.102.



                       Subpart 3520.2--Set-asides



3520.201  Set-asides for labor surplus area concerns.



3520.201-1  Total set-asides.

    The contracting officer shall set aside the entire amount of an 
individual acquisition or class of acquisitions for LSA concerns only 
under those conditions set forth in 3520.102.



        Subpart 3520.3--Labor Surplus Area Subcontracting Program



3520.301  General.

    The provisions of FAR subpart 20.3 apply only under those conditions 
set forth in 3520.102.

[[Page 128]]



PART 3522--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS--Table of Contents




Sec.
3522.000  Scope of part.

                  Subpart 3522.1--Basic Labor Policies

3522.100  Scope of subpart.
3522.103  Overtime.
3522.103-4  Approvals.

                      Subpart 3522.2--Convict Labor

3522.270  Applicability.

      Subpart 3522.3--Contract Work Hours and Safety Standards Act

3522.370  Applicability.

  Subpart 3522.4--Labor Standards for Contracts Involving Construction

3522.402  Applicability.

            Subpart 3522.6--Walsh-Healey Public Contracts Act

3522.603  Applicability.
3522.608  Procedures.
3522.608-3  Protests against eligibility.
3522.608-4  Award pending final determination.
3522.608-6  Postaward.

              Subpart 3522.8--Equal Employment Opportunity

3522.803  Responsibilities.
3522.804  Affirmative action programs.
3522.804-2  Construction.
3522.805  Procedures.
3522.807  Exemptions.
3522.808  Complaints.
3522.809  Enforcement.
3522.810  Solicitation provisions and contract clauses.

        Subpart 3522.10--Service Contract Act of 1965, as Amended

3522.1003  Applicability.

       Subpart 3522.13--Special Disabled and Vietnam Era Veterans

3522.1302  Applicability.
3522.1303  Waivers.
3522.1306  Complaint procedures.

             Subpart 3522.14--Employment of the Handicapped

3522.1402  Applicability.
3522.1403  Waivers.
3522.1406  Complaint procedures.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7652, Mar. 2, 1990, unless otherwise noted.



3522.000  Scope of part.

    This part prescribes--
    (a) Labor laws of the United States and their application to 
acquisitions conducted by the Panama Canal Commission; and
    (b) Contracting policy and procedures for the implementation of 
pertinent labor laws in contracts with United States and Panamanian 
business concerns. (See subpart 3525.8 for policies and procedures 
pertaining specifically to contracts with Panamanian business concerns 
or others to which Panamanian laws may apply.)



                  Subpart 3522.1--Basic Labor Policies



3522.100  Scope of subpart.

    The provisions of FAR subpart 22.1 shall apply specifically to 
contracts with United States business concerns to the extent prescribed 
throughout FAR part 22.



3522.103  Overtime.



3522.103-4  Approvals.

    (a) Overtime requests by contractors may be approved under the 
conditions contemplated in FAR 22.103-4(a). Such approvals are required 
under cost-reimbursement, time-and-materials, and labor-hour contracts 
since such contracts place substantial cost risk on the Government.
    (b) The Commission officials for approval of contractor requests for 
overtime in cost-reimbursement contracts as contemplated in FAR 22.103-4 
(a), (b), and (f) are the cognizant Heads of Contracting Activities.



                      Subpart 3522.2--Convict Labor



3522.270  Applicability.

    As indicated at FAR 22.202, the policies and procedures in FAR 
subpart 22.2 are applicable only to contracts which are to be performed 
within any State,

[[Page 129]]

the District of Columbia, the Commonwealth of Puerto Rico, the Virgin 
Islands, Guam, American Samoa, or the Trust Territory of the Pacific 
Islands. The policies and procedures do not apply to contracts which are 
to be performed within the Republic of Panama or within any other 
foreign country.



      Subpart 3522.3--Contract Work Hours and Safety Standards Act



3522.370  Applicability.

    As indicated at FAR 22.305, the policies and procedures in FAR 
subpart 22.3 shall not be applied to contracts to be performed solely 
within the Republic of Panama, other foreign countries, or within a 
territory under United States jurisdiction other than a State, the 
District of Columbia, Puerto Rico, the Virgin Islands, Outer Continental 
Shelf Lands as defined in the Outer Continental Shelf Lands Act (43 
U.S.C. 1331), American Samoa, Guam, Wake Island, and Johnston Island.



  Subpart 3522.4--Labor Standards for Contracts Involving Construction



3522.402  Applicability.

    (c) Contracts to be performed outside the United States. As 
indicated by paragraphs (a) through (d) at FAR 22.407, the requirements 
of FAR subpart 22.4 do not apply to contracts for construction to be 
performed within the Republic of Panama or within any other foreign 
country.



            Subpart 3522.6--Walsh-Healey Public Contracts Act



3522.603  Applicability.

    As indicated at FAR 22.603 and FAR 22.604-2, the requirements and 
procedures of FAR subpart 22.6 and this subpart 3522.6 do not apply to 
contracts for supplies that are manufactured in the Republic of Panama 
or elsewhere outside the United States, Puerto Rico or the Virgin 
Islands.



3522.608  Procedures.



3522.608-3  Protests against eligibility.

    The contracting officer shall forward the determination of 
eligibility, after concurrence by legal counsel, to the cognizant Head 
of Contracting Activity (HCA) for referral to the Department of Labor 
(DOL) or to the Small Business Administration if the offeror is a small 
business.



3522.608-4  Award pending final determination.

    (a) If an offeror's eligibility case is pending review by the DOL or 
SBA, the contracting officer shall obtain the concurrence of legal 
counsel and approval of the cognizant HCA prior to making an award.



3522.608-6  Postaward.

    (c) In the event of a violation of a stipulation required under the 
Act, the contracting officer shall, with concurrence by legal counsel 
and approval by the cognizant HCA, notify the appropriate regional 
office of the DOL.



              Subpart 3522.8--Equal Employment Opportunity



3522.803  Responsibilities.

    (d) If the applicability of Executive Order 11246 and implementing 
regulations are questioned by any commercial firm or other entity with 
whom the Panama Canal Commission has contracted or contemplates 
contracting, the contracting officer shall route the matter to the 
cognizant HCA, who shall obtain the opinion of legal counsel.



3522.804  Affirmative action programs.



3522.804-2  Construction.

    (b) The HCA having construction contract responsibility shall 
maintain and distribute a current list of geographical areas subject to 
affirmative action requirements to the principally affected contracting 
officers. The list may be obtained from the regional Office of Federal 
Contract Compliance Policy (OFCCP).

[[Page 130]]



3522.805  Procedures.

    (a) The contracting officer shall obtain a preaward clearance as 
required by FAR 22.805(a) (2), (3), and (5). Where, as contemplated in 
FAR 22.805(a)(7), there exists a potential delay in award of an urgent 
and critical contract, and where the OFCCP advises of its inability to 
timely complete the review, a written justification for award shall be 
forwarded to the cognizant HCA for approval of award without preaward 
clearance.
    (b) The contracting officer shall obtain and maintain an adequate 
supply of the posters entitled ``Equal Opportunity is the Law'' for 
distribution to contractors when applicable.



3522.807  Exemptions.

    (b) Panama Canal Commission contracts are exempt from the Equal 
Employment Opportunity provisions of Executive Order 11246 to the extent 
that work is performed outside the United States by employees who were 
not recruited within the United States. (See FAR 22.801 for the meaning 
of ``United States'' as used herein.)
    (c) Requests for exemption pursuant to FAR 22.807(c) shall be 
submitted to the Director, OFCCP, through the cognizant HCA.



3522.808  Complaints.

    Information regarding all complaints and subsequent referrals shall 
be forwarded to the cognizant HCA.



3522.809  Enforcement.

    The Procurement Executive is designated to make the determinations 
that may be exercised against contractors pursuant to FAR 22.809.



3522.810  Solicitation provisions and contract clauses.

    All solicitation provisions and contract clauses prescribed in FAR 
22.810 are applicable to contracts awarded by the Panama Canal 
Commission unless an exemption exists or has been obtained in accordance 
with FAR 22.807 and 3522.807.



        Subpart 3522.10--Service Contract Act of 1965, as Amended



3522.1003  Applicability.

    As indicated at FAR 22.1003-2, the policies and procedures in FAR 
subpart 22.10 do not apply to service contracts to be performed in the 
Republic of Panama or elsewhere outside the United States. (See FAR 
22.1001 for the meaning of ``United States'' as used herein.)



       Subpart 3522.13--Special Disabled and Vietnam Era Veterans



3522.1302  Applicability.

    Panama Canal Commission contracts are exempt from the provisions of 
the Vietnam Era Veterans Readjustment Assistance Act of 1972 to the 
extent that the work is performed outside the United States by employees 
who were not recruited in the United States. (See FAR 22.1308(a)(1) for 
the meaning of ``United States'' as used herein.)



3522.1303  Waivers.

    (a) The Administrator of the Panama Canal Commission is the ``agency 
head'' or the ``head of a civilian agency'' for purposes of the 
provisions of FAR 22.1303 (a) and (b)(1), respectively.
    (c) Requests for waivers shall be forwarded to the cognizant HCA for 
referral to the administrator for approval.



3522.1306  Complaint procedures.

    The contracting officer shall forward written complaints to the 
cognizant HCA for subsequent referral to the Director, OFCCP.



             Subpart 3522.14--Employment of the Handicapped



3522.1402  Applicability.

    (a) Panama Canal Commission contracts are exempt from the 
Rehabilitation Act of 1973 to the extent that the work is performed 
outside the United States by employees who were not recruited within the 
United States. (See FAR 22.1408(a)(1) for the meaning of ``United 
States'' as used herein.)

[[Page 131]]



3522.1403  Waivers.

    (a) The Administrator of the Panama Canal Commission is the ``agency 
head'' or the ``head of a civilian agency'' for purposes of the 
provisions of FAR 22.1403 (a) and (b)(1), respectively.
    (c) Requests for waivers shall be forwarded through the cognizant 
HCA to the Administrator for approval.



3522.1406  Complaint procedures.

    Complaints regarding administration of the Act shall be forwarded to 
the cognizant HCA prior to submission to the OFCCP.



PART 3524--PROTECTION OF PRIVACY AND FREEDOM OF INFORMATION--Table of Contents




            Subpart 3524.1--Protection of Individual Privacy

Sec.
3524.102  General.

               Subpart 3524.2--Freedom of Information Act

3524.270  Procedures.

    Authority: 40 U.S.C. 486(c).



            Subpart 3524.1--Protection of Individual Privacy



3524.102  General.

    Personal information obtained by the agency to be used in 
determining an individual's right to a benefit, or to otherwise incur an 
obligation, will be solicited directly from the subject of the record to 
the extent practicable. The system manager responsible for the 
maintenance and dissemination of personal information about individuals 
shall ensure that the information is collected and disclosed in 
compliance with the provisions of the Privacy Act of 1974 and part 10 of 
35 CFR, this agency's regulations implementing the Act.

[55 FR 7653, Mar. 2, 1990]



               Subpart 3524.2--Freedom of Information Act



3524.270  Procedures.

    Freedom of Information Act (FOIA) requests for contractual 
information shall be processed in accordance with part 9 of 35 CFR.
    (a) Upon receipt, all FOIA requests shall be forwarded immediately 
to the Agency Records Officer (Chief, Administrative Services Division) 
for acknowledgment and processing within the statutory time limitations 
as stipulated in the Act.
    (b) Prior to release of any contractual information to FOIA 
requesters, the Agency Records Officer shall coordinate with other 
agency offices or officials having a substantial subject matter 
interest.

[55 FR 7653, Mar. 2, 1990]



PART 3525--FOREIGN ACQUISITION--Table of Contents




Sec.
3525.000  Scope of part.

               Subpart 3525.1--Buy American Act--Supplies

3525.102  Policy.

        Subpart 3525.2--Buy American Act--Construction Materials

3525.202  Policy.

               Subpart 3525.3--Balance of Payments Program

3525.300-70  Applicability.
3525.302  Policy.

    Subpart 3525.4--Purchases Under the Trade Agreements Act of 1979

3525.402  Policy.

        Subpart 3525.670--Customs and Duties, Republic of Panama

3525.670-1  Policy.
3525.670-2  Procedures.

        Subpart 3525.8--International Agreements and Coordination

3525.801  International agreements.
3525.801-70  Language.
3525.801-71  Choice of law.
3525.801-72  Immunity.
3525.801-73  Designated contractors.
3525.801-74  Panamanian preference.
3525.801-75  Customary local business usage.
3525.801-76  Contract clauses.


[[Page 132]]


    Authority: 40 U.S.C. 486(c); Article VIII of the Panama Canal Treaty 
of 1977 and Articles IX, XI, and XVI of the Agreement in Implementation 
of Article III of the Panama Canal Treaty of 1977.

    Source: 55 FR 7654, Mar. 2, 1990, unless otherwise noted.



3525.000  Scope of part.

    This part provides policies and procedures related to the 
application of the Buy American Act, the Balance of Payments Act, and 
purchases under the Trade Agreements Act of 1979 to Commission 
acquisitions. This part also provides policies and procedures for the 
application of international agreements to Commission acquisitions.



               Subpart 3525.1--Buy American Act--Supplies



3525.102  Policy.

    The Buy American Act does not apply to purchases of supplies, or 
services that involve the furnishing of supplies, for use in the 
Republic of Panama because such use is outside the United States, as 
provided in FAR 25.102(a)(1).

[55 FR 7654, Mar. 2, 1990; 55 FR 38331, Sept. 18, 1990]



        Subpart 3525.2--Buy American Act--Construction Materials



3525.202  Policy.

    The Buy American Act does not apply to contracts for the 
construction, alteration, or repair of any public building or public 
work in the Republic of Panama. The Act applies only to acquisitions for 
use inside the United States, as provided in FAR 25.202.



               Subpart 3525.3--Balance of Payments Program



3525.300-70  Applicability.

    In accordance with Article IX of the Agreement in Implementation of 
Article III of the Panama Canal Treaty, the Balance of Payments 
provisions limiting purchase of foreign products or services shall not 
apply to purchases for use by the Commission of--
    (a) Articles, materials, or supplies that are produced in Panama 
(mined, produced, or manufactured);
    (b) End products, the largest percentage of which are components of 
Panamanian origin; and
    (c) Services which are available in Panama.



3525.302  Policy.

    (a) The cognizant HCA is the official designated to make the 
determination required by FAR 25.302(b)(3) that a requirement can only 
be filled by a foreign end product or service, and that it is not 
feasible to forego filling it or to provide a domestic substitute.
    (b)(6) The Procurement Executive is the official designated to make 
the determination, with the assistance of legal counsel, that the 
acquisition of foreign end products or services is required by a treaty 
or executive agreement between governments.



    Subpart 3525.4--Purchases Under the Trade Agreements Act of 1979



3525.402  Policy.

    (c) Pursuant to a delegation from the United States Trade 
Representative under the authority provided by section 302(b)(2) of the 
Trade Agreements Act, the Administrator of the Panama Canal Commission 
is authorized to waive, on a case-by-case basis, the purchasing 
prohibition of section 302(a)(1) of the Act. The Administrator has 
delegated this waiver authority to the Procurement Executive.



        Subpart 3525.670--Customs and Duties, Republic of Panama



3525.670-1  Policy.

    (a) Article XVI of the Agreement in Implementation of Article III of 
the Panama Canal Treaty provides that all property imported into the 
Republic of Panama for the official use or benefit of the Commission, 
including that imported by its contractors or subcontractors in 
connection with the various activities authorized under said Agreement, 
shall be exempt from the payment of all customs duties or other import 
taxes and charges and from all license requirements.

[[Page 133]]

    (b) All property imported into the Republic of Panama free of 
customs duties and other taxes may be exported free of customs duties, 
export permits, export taxes, and other assessments. All property 
acquired in the Republic of Panama by, or in the name of, the Commission 
may be exported free of customs duties, export licenses, and other 
export taxes or charges.



3525.670-2  Procedures.

    When requested by the contractor or its representative, the 
contracting officer will initiate a cargo certification document stating 
that the property being imported is for the official use or benefit of 
the Commission. The cargo certification document is then processed by 
the Cargo Documentation Section of the Commission's Administrative 
Services Division for presentation by the contractor or representative 
to the appropriate authorities in the Republic of Panama.



        Subpart 3525.8--International Agreements and Coordination



3525.801  International agreements.

    The Panama Canal Treaty and the Agreement in Implementation of 
Article III of the Treaty affect the contracting activities of the 
Commission. Contracting officers shall give particular attention to the 
provisions in these agreements that pertain to acquisition procedures, 
contractors' taxes, facilities, and other matters relating to 
contracting.



3525.801-70  Language.

    (a) Solicitations and contracts shall be issued in the English 
language.
    (b) All offers, correspondence and documents related to 
solicitations and contracts shall be submitted in the English language.
    (c) Where inconsistencies between the terms of solicitations or 
contracts and any translation into another language occur, the English 
language meaning shall control.



3525.801-71  Choice of law.

    All matters relating to the validity, construction, interpretation, 
performance, and enforcement of any contract awarded by the Commission 
shall be determined in accordance with the applicable Federal law of the 
United States.



3525.801-72  Immunity.

    Under Article VIII of the Treaty, agencies and instrumentalities of 
the Government of the United States of America operating in the Republic 
of Panama pursuant to the Treaty and related agreements shall be immune 
from the jurisdiction of the Republic of Panama, and their 
installations, official archives and documents, shall be inviolable.



3525.801-73  Designated contractors.

    (a) Definition.
    Designated contractors means:
    (1)(i) Natural persons who are nationals or permanent residents of 
the United States, or
    (ii) Corporations or other legal entities organized under the laws 
of the United States, any state thereof, or the District of Columbia, 
and which are under the effective control of such natural persons--
    (A) To whom contracts are awarded by the Commission, and
    (B) Who are so designated in writing by the Commission.
    (2) The term also includes subcontractors of designated contractors:
    (i) Who are nationals or permanent residents of the United States, 
or
    (ii) Which are corporations or other legal entities organized under 
the laws of the United States, any state thereof, or the District of 
Columbia, and which are under the effective control of United States 
nationals or permanent residents.
    (3) Because Article XI of the Treaty's Implementing Agreement (see 
paragraph (b) of this subsection and 3502.101) imposes certain 
obligations and confers certain benefits on designated contractors, all 
of which are dependent upon their or their employees' physical presence 
in Panama, the term is understood to mean only those contractors and/or 
subcontractors that will perform all or a portion of the contract work 
in the Republic of Panama. Such contractors are normally designated at 
the time of contract award.

[[Page 134]]

    (b) Obligations and benefits. Designated contractors are subject to 
the laws and regulations of the Republic of Panama except for certain 
obligations and benefits established in Article XI of the Agreement in 
Implementation of Article III of the Treaty. These obligations and 
benefits are cited below.
    (1) The contractor must engage exclusively in activities related to 
the execution of the work for which the contractor has been contracted 
by the Commission or related to other works or activities authorized by 
the Republic of Panama.
    (2) The contractor must refrain from carrying out practices which 
may constitute violations of the laws of the Republic of Panama.
    (3) The contractor shall enter and depart from the territory of the 
Republic of Panama in accordance with procedures prescribed for United 
States citizen employees in Article XII of the Implementing Agreement.
    (4) The contractor must obtain a document indicating his/her 
identity as a contractor, which the proper authorities of the United 
States shall issue when they are satisfied that the contractor is duly 
qualified. This certificate shall be sufficient to permit the contractor 
to operate under Panamanian law as a contractor of the United States. 
Nevertheless, the authorities of the Republic of Panama may require the 
registration of the appropriate documents to establish juridical 
presence in the Republic of Panama.
    (5) The contractor shall not be obliged to pay any tax or other 
assessment to the Republic of Panama on income derived under a contract 
with the Commission, so long as the contractor is taxed in the United 
States at a rate substantially equivalent to the corresponding taxes and 
assessments of the Republic of Panama.
    (6) The contractor may move freely within the Republic of Panama, 
and shall have exemptions from customs duties and other charges, as 
provided for United States citizen employees in the Implementing 
Agreement.
    (7) The contractor may use public services and installations in 
accordance with the terms and conditions of Article XIII of the 
Implementing Agreement and, on a non-discriminatory basis, shall pay the 
Republic of Panama highway tolls and taxes on plates for private 
vehicles.
    (8) The contractor shall be exempt from any taxes imposed on 
depreciable assets belonging to the contractor, other than real estate, 
which are used exclusively for the execution of contracts with the 
United States.
    (9) The contractor may use the services and facilities provided for 
in Articles X and XVIII of the Agreement in Implementation of Article IV 
of the Panama Canal Treaty, to the extent such use is authorized by the 
United States; provided, however, that after five years from the entry 
into force of the Implementing Agreement, the use of military postal 
services by such contractors shall be limited to that related to the 
execution of contracts with the United States.
    (c) Notification of designation. The contracting officer shall, 
through the Director, Office of Executive Administration, advise 
contractors that they are ``designated contractors'' within the meaning 
of Article XI of the Implementing Agreement and advise them to review 
their obligations thereunder. Such designations shall be communicated to 
the authorities of the Republic of Panama by the authorities of the 
United States. Contracting officers shall maintain current lists of 
``designated contractors'' at all times.
    (d) Withdrawal of designation. The Commission shall withdraw the 
designation of a contractor when any of the following circumstances 
occur:
    (1) Completion or termination of the contract with the Commission.
    (2) Proof that during the life of the contract such contractors have 
engaged in the Republic of Panama in business activities not related to 
their contracts with the United States nor authorized by the Republic of 
Panama.
    (3) Proof that such contractors are engaged in practices which in 
the view of the Republic of Panama constitute serious violations of the 
laws of the Republic of Panama.


[[Page 135]]



The authorities of the United States shall notify the authorities of the 
Republic of Panama whenever the designation of a contractor has been 
withdrawn. If, within sixty days after notification of the withdrawal of 
the designation of a contractor who entered the territory of the 
Republic of Panama in the capacity of a contractor, the authorities of 
the Republic of Panama require such contractor to leave its territory, 
the United States shall ensure that the Republic of Panama shall not 
incur any expense due to the cost of transportation.
    (e) Impact on subcontractors, employees, and dependents. The 
provisions of this 3525.801-73 shall similarly apply to the 
subcontractors and to the employees of the contractors and 
subcontractors and their dependents who are nationals or residents of 
the United States. These employees and dependents shall not be subject 
to the Panamanian Social Security system.



3525.801-74  Panamanian preference.

    (a) Article IX of the Agreement in Implementation of Article III of 
the Treaty provides that:

    In procuring supplies and services, the Commission shall give 
preference to those obtainable in the Republic of Panama. Such 
preference shall apply to the maximum extent possible when such supplies 
and services are available as required, and are comparable in quality 
and price to those which may be obtained from other sources. For the 
comparison of prices there shall be taken into account the cost of 
transport to the Republic of Panama, including freight, insurance and 
handling, of the supplies and services which compete with Panamanian 
supplies and services. In the acquisition of goods in the Republic of 
Panama, preference shall be given to goods having a larger percentage of 
components of Panamanian origin.

    (b) Part 3570 provides guidance on the implementation of the 
Panamanian preference provisions of the Treaty's Implementing Agreement.



3525.801-75  Customary local business usage.

    In acquisitions conducted in the Republic of Panama, customary local 
business usage, where not inconsistent with the applicable Federal law 
of the United States, may be followed. When conflicts develop between 
local business usage and the requirements of the Federal Acquisition 
Regulation, the matter shall be referred to the Procurement Executive, 
who shall seek the opinion of legal counsel, as a deviation for 
processing as required by 3501.405 and FAR 1.405.



3525.801-76  Contract clauses.

    As used in this subsection, the term ``foreign'' means any country 
other than the United States. The contracting officer shall insert the 
following clauses in solicitations and contracts, as indicated below:
    (a) In lieu of FAR clause 52.225-14, Inconsistency Between English 
Version and Translation of Contract, the clause at 3552.225-70, 
Language, whenever foreign offers are anticipated or contracts are 
awarded to foreign contractors.
    (b) The clause at 3552.225-71, Notice of Applicability of United 
States Federal Law, whenever foreign offers are anticipated or contracts 
are awarded to foreign contractors.
    (c) The clause at 3552.225-72, Designated Contractors, whenever the 
contract work is to be performed in whole or in part in the Republic of 
Panama and offers are anticipated from, or contracts are awarded to, 
U.S. contractors.
    (d) The clause at 3552.225-73, Responsibility for Observance of 
Laws, Orders, and Regulations, whenever the contract work is to be 
performed in whole or in part in the Republic of Panama.

[[Page 136]]





             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS


PART 3527--PATENTS, DATA AND COPYRIGHTS--Table of Contents




    Authority: 40 U.S.C. 486(c).



        Subpart 3527.3--Patent Rights Under Government Contracts



3527.304-3  Contracts for construction work or architect-engineer services.

    (b) The contracting officer shall insert the clause at 3552.227-70, 
Government Rights, in all solicitations and contracts for architect-
engineer services or for construction involving architect-engineer 
services, except those that call for or can be expected to involve only 
``standard types of construction'' to be built by previously developed 
equipment, methods, and processes. (See FAR 27.304-3(b) for the meaning 
of the term ``standard types of construction''.)

[55 FR 7656, Mar. 2, 1990]



PART 3528--BONDS AND INSURANCE--Table of Contents




                          Subpart 3528.1--Bonds

Sec.
3528.100  Scope of subpart.
3528.101  Bid or proposal guarantees.
3528.101-3  Contract clauses.
3528.102  Performance and payment bonds for construction contracts.
3528.102-1  General.
3528.102-3  Solicitation requirements.
3528.103  Performance and payment bonds for other than construction 
          contracts.
3528.103-2  Performance bonds.
3528.103-3  Payment bonds.
3528.103-70  Contract clauses.

                        Subpart 3528.2--Sureties

3528.201  Requirements for sureties.
3528.202  Acceptability of corporate sureties.
3528.202-70  Corporate seals.

                        Subpart 3528.3--Insurance

3528.301  Policy.
3528.305  Overseas workers' compensation and war-hazard insurance.
3528.309  Contract clause for workers' compensation insurance.
3528.370  Contract clause for special Panama insurance.

    Authority: 40 U.S.C. 486(c); Article XVIII of the Agreement in 
Implementation of Article III of the Panama Canal Treaty of 1977.

    Source: 55 FR 7656, Mar. 2, 1990, unless otherwise noted.



                          Subpart 3528.1--Bonds



3528.100  Scope of subpart.

    Bid or proposal guarantees, performance bonds, and payment bonds in 
Panama Canal Commission acquisitions may be required in contracts for 
construction as that term is defined at FAR 36.102, and in contracts for 
other than construction as explained at FAR 28.103.



3528.101  Bid or proposal guarantees.



3528.101-3  Contract clauses.

    (a) When a guarantee is required, the contracting officer shall 
insert the clause at 3552.228-70, Bid Guarantee Amount, in sealed bid 
solicitations and contracts, or the clause at 3552.228-75, Proposal 
Guarantee, in negotiated solicitations and contracts, as applicable.
    (b) If the contract is to be negotiated, the contracting officer 
shall insert the clause at 3552.228-75, Proposal Guarantee, in lieu of 
the bid guarantee clause at FAR 52.228-1.



3528.102  Performance and payment bonds for construction contracts.



3528.102-1  General.

    (a) The Miller Act (40 U.S.C. 270a-270f) requires performance and 
payment bonds for any construction contract (including contracts for 
alteration, or repair of any public building or public work) exceeding 
$25,000, except that this requirement may be waived by the contracting 
officer for work to be performed in a foreign country upon the finding 
contemplated in FAR 28.102-1(a)(1). It has been determined by the Panama 
Canal Commission General Counsel, however, that the contracting officer 
may also establish requirements for such bonds for lesser dollar value 
contracts when it

[[Page 137]]

has been determined that the financial protection against damages is in 
the best interests of the Government. Accordingly, the provisions of 
3528.102-3 regarding solicitation requirements must be followed.



3528.102-3  Solicitation requirements.

    When performance or payment bonds are required, the contracting 
officer shall insert the clauses at 3552.228-71, Bonds and Insurance, 
and 3552.228-72, Bonds, in the solicitation and contract.



3528.103  Performance and payment bonds for other than construction contracts.



3528.103-2  Performance bonds.

    (a) Contracts for high dollar acquisitions of vital supplies, such 
as cargo lot shipments of Bunker C fuel oil, is another situation that 
may warrant a performance bond.



3528.103-3  Payment bonds.

    (a) A payment bond may be considered to be in the Government's 
interest when substantial progress payments are made before delivery of 
end items starts (for example, in the acquisition of tugboats and 
dredges).



3528.103-70  Contract clauses.

    (a) Performance bonds. When a performance bond for other than 
construction contracts is required pursuant to FAR 28.103-2(a), but a 
payment bond is not required, the contracting officer shall insert the 
clause at 3552.228-76, Performance Bond, in all such solicitations and 
contracts. If a payment bond is also required (see FAR 28.103-3(a) and 
3528.103-3(a)), the contracting officer shall insert the clause at 
3552.228-77, Performance and Payment Bonds, in lieu of clause 3552.228-
76.
    (b) Payment bonds. When a payment bond for other than construction 
contracts is required pursuant to FAR 28.103-3(a) and 3528.103-3(a), the 
contracting officer shall insert the clause at 3552.228-77, Performance 
and Payment Bonds, in all such solicitations and contracts.



                        Subpart 3528.2--Sureties



3528.201  Requirements for sureties.

    (a) In addition to those acceptable forms of security enumerated in 
FAR 28.201, contracting officers may accept such Panamanian sureties as 
may be approved in accordance with 3528.202(b).
    (b) Contracting officers may not preclude the use by any offeror of 
any type of security or surety permitted by FAR subpart 28.2 or this 
subpart.

[55 FR 7656, Mar. 2, 1990; 55 FR 38331, Sept. 18, 1990]



3528.202  Acceptability of corporate sureties.

    (b) The authority delegated to contracting officers in FAR 28.202(b) 
to determine the acceptability of sureties not appearing on Treasury 
Department Circular 570 for contracts performed in a foreign country is 
vested in the Chief Financial Officer of the Panama Canal Commission. 
The procedure for approving such sureties is prescribed in the 
Commission's Financial Systems Manual 99.333.

[55 FR 7656, Mar. 2, 1990. Redesignated and amended at 55 FR 38331, 
Sept. 18, 1990]



3528.202-70  Corporate seals.

    (a) In the event that a ``Corporate Seal,'' as required in the 
instructions for preparation of any standard form or document, is not 
used due to the dictates of custom, practice, or law within Panama or 
other foreign countries, such bonds shall be accepted provided the 
contracting officer is satisfied, with the concurrence of legal counsel, 
that the person signing the bond is authorized to bind the surety (see 
FAR 4.102).
    (b) In the case of acquisitions conducted using the sealed bid 
method described in FAR part 14, bids which do not include required bid 
bonds must be rejected as nonresponsive except as provided in FAR 
28.101-4. See also FAR 14.405 regarding minor informalities or 
irregularities in bids.

[[Page 138]]



                        Subpart 3528.3--Insurance



3528.301  Policy.

    (b) In addition to the requirements of FAR 28.301(b), designated 
contractors (see 3525.801-73(a)), as prescribed at paragraph 7 of 
Article XVIII of the Agreement in Implementation of Article III of the 
Panama Canal Treaty of 1977, shall, upon initiation of work or 
construction activities, obtain appropriate insurance to cover civil 
liabilities in the Republic of Panama that may arise as a result of acts 
or omissions done in the performance of official duty by their 
employees. The insurance coverage shall include coverage for the 
tortious conduct of their employees. Such insurance may be obtained from 
insurance companies licensed to engage in such business within the 
Republic of Panama.



3528.305  Overseas workers' compensation and war-hazard insurance.

    (d) Pursuant to a waiver granted by the Secretary of Labor, 
effective January 22, 1980, the provisions of the Defense Base Act are 
not applicable to any public-work contract awarded by the Panama Canal 
Commission in the Panama Canal area with respect to non-U.S. citizen 
employees, i.e., any Panamanian or other foreign national, employed 
under such contracts. The waiver does not apply, however, to employees 
who are:
    (1) Hired in the United States by any contractor;
    (2) Residents of the United States; or
    (3) Citizens of the United States.

The waiver was granted with the proviso that the non-U.S. citizen 
employees thus exempted from the provisions of the Defense Base Act will 
be provided workers' compensation benefits prescribed in the Panamanian 
Social Security System.



3528.309  Contract clause for workers' compensation insurance.

    (a) In addition to FAR clause 52.228-3, Workers' Compensation 
Insurance (Defense Base Act), prescribed at FAR 28.309(a)(1), the 
contracting officer shall insert the clause at 3552.228-73, Non-U.S. 
Workers' Compensation Insurance, in all public-work solicitations and 
contracts in which the employment of Panamanian or other foreign 
nationals is anticipated (see 3528.305(d)).



3528.370  Contract clause for special Panama insurance.

    The contracting officer shall insert the clause at 3552.228-74, 
Special Panama Insurance, in all public-work solicitations and 
contracts:
    (a) Which are to be performed in whole or in part in the Republic of 
Panama, and
    (b) For which offers are anticipated from, or contracts are awarded 
to, U.S. contractors.



PART 3529--TAXES--Table of Contents




                    Subpart 3529.4--Contract Clauses

3529.402  Foreign contracts.
3529.402-1  Foreign fixed-price contracts.

    Authority: 40 U.S.C. 486(c); Articles XI and XII of the Agreements 
in Implementation of Articles III and IV of the Panama Canal Treaty of 
1977, respectively.



                    Subpart 3529.4--Contract Clauses



3529.402  Foreign contracts.



3529.402-1  Foreign fixed-price contracts.

    (a) Procedures regarding FAR clause 52.229-6. In recognition of the 
fundamental purpose of paragraph 2(e) of Articles XI and XII of the 
Agreements in Implementation of Articles III and IV of the Panama Canal 
Treaty of 1977, respectively, representatives of the Governments of the 
United States and Panama approved an Agreement on Taxation of 
Contractors on August 6, 1986. This taxation agreement impacts on U.S. 
contractors in certain circumstances. In order to alert prospective 
contractors to this possibility, the following procedures shall apply 
regarding FAR clause 52.229-6:
    (1) The contracting officer shall supplement FAR clause 52.229-6, 
Taxes--Foreign Fixed-Price Contracts, by inserting the following note at 
the end of the clause in all solicitations and contracts, unless the 
acquisition is a small purchase under FAR part 13 that:
    (i) Will not require the contractor's presence in Panama, or
    (ii) Does not solicit U.S. offerors:

[[Page 139]]

    Note: If the Contractor is a U.S. contractor, such contractor is 
advised that, pursuant to a taxation agreement between the Governments 
of the United States and Panama, U.S. contractors and subcontractors, 
including their U.S. citizen or U.S. permanent resident employees, may 
be required to file tax returns with, as well as provide corresponding 
U.S. tax information to, the Government of Panama on income arising 
under or relating to Panama Canal Commission contracts. This requirement 
is applicable when the contractor, subcontractor, or individual employee 
is present in the Republic of Panama in connection with one or more 
Commission contracts for more than 90 calendar days during the relevant 
tax year. This description of the stated requirement is not intended, 
nor should it be construed, to be a legal analysis of the taxation 
agreement. The Commission assumes no responsibility or liability for a 
contractor's or individual's obligation under the taxation agreement, 
nor for the interpretation of such agreement. A copy of the taxation 
agreement will be provided to the contractor or prospective contractor 
upon request to the contracting officer.
    (2) If clause 52.229-6 is incorporated by reference, rather than in 
full text, insert the note directly below the title of the clause.
    (3) Include elsewhere in the body of the solicitation the following 
note to alert offerors that clause 52.229-6 has been supplemented. In 
supply and service solicitations, this note should normally be inserted 
in Section B following the blanks provided for offerors to insert line 
item prices. In construction solicitations, the note should normally be 
attached to Standard Form 1442 or inserted in the solicitation's Special 
Conditions. In small purchase acquisitions, the note is to be included 
in the document requesting prices or by separate attachment to the 
document. If a U.S. contractor wins the small purchase award, the note 
shall be incorporated either (i) in full text, or (ii) by reference, on 
the purchase order or other award document.
    Note: Offerors' attention is directed to the note added at the end 
of clause 52.229-6, Taxes--Foreign Fixed-Price Contracts. The note is an 
advisory notice regarding possible tax obligations under certain 
circumstances of U.S. contractors, subcontractors, and their employees 
to the Government of Panama. If the circumstances appear to be 
applicable, offerors may obtain additional information by contacting the 
contracting office at the address or phone number provided elsewhere in 
this solicitation.
    (4) If additional information regarding the taxation agreement is 
requested of Panama Canal Commission employees, either before or after 
award, the individual who receives the request shall promptly notify the 
contracting officer and the Office of General Counsel who shall 
determine, in conjunction with the Office of Executive Administration, 
the appropriate action to be taken.
    (5) Contracting officers shall serve as the official liaison, for 
purposes of the taxation agreement, between offerors/contractors and the 
Commission. The taxation agreement provides for the classification of 
contractors into two categories, resident and non-resident, by 
representatives of the Governments of the United States and Panama 
according to criteria set forth in the agreement. The representative of 
the United States Government is the Assistant Director, Policy and 
Programs, Office of Executive Administration. Classifications, when 
confirmed by the two representatives, will be communicated to the 
respective contractors by the contracting officer.

[55 FR 7657, Mar. 2, 1990]



PART 3531--CONTRACT COST PRINCIPLES AND PROCEDURES--Table of Contents




    Authority: 40 U.S.C. 486(c).



         Subpart 3531.2--Contracts with Commercial Organizations



3531.205-46  Travel costs.

    (a) Fixed-price type contracts that provide for separate 
reimbursement of travel and per diem shall state that such reimbursement 
will not exceed rates established in applicable Federal Travel 
Regulations.
    (b) The clause at 3552.231-70, Travel Costs, shall be included in 
contracts as described in paragraph (a) of this subsection.

[55 FR 7658, Mar 2, 1990]



PART 3532--CONTRACT FINANCING--Table of Contents




Sec.
3532.000  Scope of part.

[[Page 140]]

                         Subpart 3532.1--General

3532.111  Contract clauses.

                    Subpart 3532.4--Advance Payments

3532.402  General.
3532.407  Interest.

                     Subpart 3532.6--Contract Debts

3532.600  Scope of subpart.
3532.601  Definition.
3532.602  General.
3532.603  Applicability.
3532.608  Negotiation of contract debts.
3532.608-70  Procedures.
3532.610  Demand for payment of contract debt.

                    Subpart 3532.7--Contract Funding

3532.705  Contract clauses.
3532.705-1  Clauses for contracting in advance of funds.

                  Subpart 3532.8--Assignment of Claims

3532.802  Conditions.
3532.806  Contract clause.

                     Subpart 3532.9--Prompt Payment

3532.901  Applicability.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7658, Mar. 2, 1990, unless otherwise noted.



3532.000  Scope of part.

    This part implements and supplements FAR part 32 and provides 
Commission policies and procedures for contract financing and other 
payment matters, including--
    (a) Advance payments;
    (b) Contract debts;
    (c) Assignment of claims; and
    (d) Prompt payment implementation.



                         Subpart 3532.1--General



3532.111  Contract clauses.

    (a)(7) The clause at 3552.232-70, Contract Payments, in 
solicitations and contracts for construction when the contracting 
officer determines that the value of materials delivered to the work 
site may be taken into account in preparing the progress payment 
estimate.
    (8) The clause at 3552.232-73, Invoices, in all solicitations and 
contracts except small purchases. The clause or a modified version of 
the clause may be used in small purchases.



                    Subpart 3532.4--Advance Payments



3532.402  General.

    (e)(1) The Procurement Executive is responsible for approving 
findings and determinations supporting the use of advance payments and 
approving contract terms concerning advance payments. These approvals 
must have the concurrence of the General Counsel.
    (2) The contracting officer shall coordinate proposed advance 
payment authorizations with the Accounting Division.



3532.407  Interest.

    (d) The Procurement Executive is authorized to approve advance 
payments without interest.



                     Subpart 3532.6--Contract Debts



3532.600  Scope of subpart.

    This subpart assigns responsibilities and provides procedures for 
the collection of contract debts, including collection of debts under 
contracts for the transportation of household goods.



3532.601  Definition.

    Responsible official, as used in this subpart, means the contracting 
officer.



3532.602  General.

    In addition to the examples cited in FAR 32.602, contract debts may 
include those arising from claims under contracts for the transportation 
of household goods.



3532.603  Applicability.

    When the Commission withholds payments due a contractor to satisfy a 
contractor's debt to the Government, the Debt Collection Act of 1982 and 
FAR subpart 32.6 apply. As a claim arising under a Government contract, 
any offset is governed by the Contract Disputes Act of 1979.

[[Page 141]]



3532.608  Negotiation of contract debts.



3532.608-70  Procedures.

    The Commission shall adhere to the following procedures prior to 
withholding a payment due a contractor to satisfy a debt owed by the 
contractor.
    (a) The Commission shall use all proper means available for 
collecting a contract debt as rapidly as possible. This includes direct 
communication to obtain full payment or to negotiate an appropriate 
settlement.
    (b) If the contractor fails to respond expeditiously and in good 
faith to contacts from the contracting officer, and if justifiable under 
the contract, the contracting officer shall promptly make a unilateral 
determination of the amount the contractor owes the Commission. The 
unilateral debt determination is made when neither payment nor a 
settlement has been reached. The unilateral debt determination is issued 
to the contractor by the contracting officer as a final decision under 
the Contract Disputes Act.
    (c) A demand for payment of the contract debt shall be made 
contemporaneously with the contracting officer's issuance of the 
unilateral debt determination to the contractor.



3532.610  Demand for payment of contract debt.

    (b) Demands for payment shall include, in addition to those items 
listed in FAR 32.610(b), the following:
    (1) The offer of an opportunity to inspect and copy the records of 
the Commission related to the debt, 31 U.S.C. 3716(a)(2).
    (2) The offer of an opportunity of a review of the Commission's 
decision relating to the debt, 31 U.S.C. 3716(3).
    (3) The offer of an opportunity to enter into an agreement with the 
Commission to repay the amount of the debt.
    (c) With respect to contracts for the transportation of household 
goods, claims by employees and, in turn, by the Commission, must be 
processed in a timely manner. The usual commercial terms for bills of 
lading require that any claim be filed against the contractor within 
nine months of shipment delivery. Government bills of lading are subject 
to these same rules and conditions. FAR clause 52.247-23, which is 
included in contracts for the transportation of household goods, 
specifies that the contractors will be notified of any damages within a 
maximum of 45 days from date of delivery.



                    Subpart 3532.7--Contract Funding



3532.705  Contract clauses.



3532.705-1  Clauses for contracting in advance of funds.

    In lieu of either of the clauses prescribed at FAR 32.705-1(a) and 
(b), the contracting officer may insert the clause at 3552.232-71, 
Availability of Funds, in solicitations and contracts--
    (a) That are to be awarded in one fiscal year with performance to 
begin in the following fiscal year, or
    (b) That are to extend into the following fiscal year, or
    (c) In situations when the circumstances in paragraphs (a) and (b) 
of this subsection both apply.



                  Subpart 3532.8--Assignment of Claims



3532.802  Conditions.

    (b) Panamanian firms may assign contracts to a local bank in 
accordance with recognized local banking practice.



3532.806  Contract clause.

    (a) In addition to the clauses prescribed in FAR 32.806, the 
contracting officer may insert the clause at 3552.232-72, Presentation 
of Statement of Release from Claims, in solicitations and contracts when 
appropriate, unless the contract will prohibit the assignment of claims.



                     Subpart 3532.9--Prompt Payment



3532.901  Applicability.

    In consonance with subpart 3570.1, Panamanian Preference, the 
Administrator has determined, pursuant to FAR 32.904, to extend coverage 
of the interest penalty provisions of FAR subpart 32.9 to contracts 
awarded to Commission vendors located in the Republic of Panama.

[[Page 142]]



PART 3533--PROTESTS, DISPUTES, AND APPEALS--Table of Contents




Sec.
3533.000  Scope of part.

                        Subpart 3533.1--Protests

3533.103  Protests to the agency.
3533.104  Protests to GAO.

                  Subpart 3533.2--Disputes and Appeals

3533.203  Applicability.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7659, Mar. 2, 1990, unless otherwise noted.



3533.000  Scope of part.

    This part prescribes Commission policies and procedures for filing 
protests and for processing contract disputes and appeals.



                        Subpart 3533.1--Protests



3533.103  Protests to the agency.

    (a) The cognizant Head of the Contracting Activity is the official 
designated to make the determination(s) required by FAR 33.103(a)(1), 
(2), or (3) whenever an award is contemplated notwithstanding the 
protest to the agency.
    (c)(1) Protests to the Commission based upon alleged improprieties 
in a solicitation which are apparent prior to bid opening or the closing 
date for receipt of initial proposals shall be filed with the 
contracting officer prior to bid opening or the closing date for receipt 
of initial proposals, or any extended bid opening or closing date for 
receipt of proposals.
    (2) All other protests to the Commission shall be filed with the 
contracting officer not later than 10 working days after the basis of 
the protest is known or should have been known.
    (d) The General Counsel shall review protests to the Commission as a 
matter of first priority, and advise the contracting officer 
expeditiously.
    (e) The contracting officer shall decide protests to the Commission 
within 10 working days from receipt of a protest and promptly inform the 
protestor and other interested parties of that decision.



3533.104  Protests to GAO.

    (a) General. Protests to the General Accounting Office (GAO) 
concerning Commission acquisitions shall be processed in accordance with 
FAR 33.104. The General Counsel shall prepare the report to GAO required 
at FAR 33.104(a)(5) and shall serve as the designated contact office for 
GAO. The contracting officer shall review protests to GAO as a matter of 
first priority, and shall advise, support, and furnish information to 
the General Counsel expeditiously.



                  Subpart 3533.2--Disputes and Appeals



3533.203  Applicability.

    Pursuant to an interagency agreement between the Panama Canal 
Commission and the Corps of Engineers Board of Contract Appeals 
(ENGBCA), the ENGBCA will hear appeals from final decisions of 
Commission contracting officers issued pursuant to the Contract Disputes 
Act.

[[Page 143]]


             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING


PART 3536--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS--Table of Contents




                         Subpart 3536.1--General

Sec.
3536.101  Applicability.
3536.103  Methods of contracting.

     Subpart 3536.2--Special Aspects of Contracting for Construction

3536.201  Evaluation of contractor performance.
3536.203  Government estimate of construction costs.
3536.207  Pricing fixed-price construction contracts.
3536.207-70  Use of indefinite-delivery contracts.
3536.209  Construction contracts with architect-engineer firms.
3536.270  Special aspects of contracting for construction in Panama.
3536.270-1  General.
3536.270-2  Special contract considerations.

   Subpart 3536.3--Special Aspects of Sealed Bidding in Construction 
                               Contracting

3536.303  Invitations for bids.
3536.370  Additive items.
3536.371  Solicitation provisions.

                Subpart 3536.5--Contract Clauses and Form

3536.570  Special Panama Canal Commission contract clauses.
3536.571  Special Panama Canal Commission form.

               Subpart 3536.6--Architect-Engineer Services

3536.602  Selection of firms for architect-engineer contracts.
3536.602-2  Evaluation boards.
3536.602-4  Selection authority.
3536.602-5  Short selection processes for contracts not to exceed 
          $10,000.
3536.604  Performance evaluation.
3536.605  Government cost estimate for architect-engineer work.
3536.606  Negotiations.
3536.606-70  Modifications.
3536.670  Government rights to plans, specifications, and drawings.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7660, Mar. 2, 1990, unless otherwise noted.



                         Subpart 3536.1--General



3536.101  Applicability.

    (a) Construction, which includes alteration, maintenance, and repair 
of real property, and architect-engineer contracts are subject to the 
requirements in other parts of this regulation, which shall be followed 
when applicable.
    (b) When a requirement in this part is inconsistent with a 
requirement in another part of this regulation, this part 3536 shall 
take precedence if the acquisition of architect-engineer services is 
involved.



3536.103  Methods of contracting.

    (a) Notwithstanding the exception in FAR 36.103(a) for contracts to 
be performed outside the United States, construction in Panama shall be 
acquired using sealed bid procedures, unless one of the four conditions 
in FAR 6.401(a) cannot be met. In that event, the contracting officer 
shall document the contract file in accordance with FAR 6.401.
    (b) Contracting officers shall acquire architect-engineer services 
by negotiation, and select sources in accordance with applicable law, 
FAR subpart 36.6, and subpart 3536.6 of this regulation.



     Subpart 3536.2--Special Aspects of Contracting for Construction



3536.201  Evaluation of contractor performance.

    (a) Preparation of performance evaluation reports. The authorized 
representative of the contracting officer (COR) shall prepare the 
contractor performance report prescribed in FAR 36.201 within two weeks 
after final acceptance of the work or contract termination. Prior to 
submitting any report of unsatisfactory performance to the reviewing 
official, the COR shall advise the contractor of any proposed 
unsatisfactory rating and include any written comments from the 
contractor regarding such rating in the report (see FAR 36.201(a)(3)).

[[Page 144]]

    (b) Review of performance reports. The contracting officer shall 
review each performance report.
    (c) Distribution and use of performance reports. Information from 
the performance report shall not be released outside of the Commission, 
except to other Government agencies at their written request, and on 
condition that the information will not be made available outside the 
Government. Requests from non-Government sources for information from 
performance reports shall be processed in accordance with 35 CFR part 9.



3536.203  Government estimate of construction costs.

    (c) The overall amount of the Government's estimate shall not be 
disclosed prior to award under any circumstance to persons other than 
Commission personnel whose official duties, as determined by the 
contracting officer, require knowledge of the estimate.



3536.207  Pricing fixed-price construction contracts.



3536.207-70  Use of indefinite-delivery contracts.

    Any of the forms of indefinite-delivery contracts described in FAR 
subpart 16.5 may be used to contract for construction when deemed 
appropriate by the contracting officer.



3536.209  Construction contracts with architect-engineer firms.

    No contract for construction shall be awarded to the firm, or its 
subsidiaries or affiliates, that designed the project except with the 
approval of the Head of Contracting Activity.



3536.270  Special aspects of contracting for construction in Panama.



3536.270-1  General.

    In contracts which are entered into with Panamanian or other foreign 
contractors for performance in Panama, the term ``United States'' shall 
appear before the word ``Government.''



3536.270-2  Special contract considerations.

    When construction is to be performed in the Republic of Panama by 
designated United States contractors, Panamanian contractors, or others, 
the solicitation and contract should include references to the 
applicable laws, regulations, treaties, and agreements of the United 
States and the Republic of Panama (see subpart 3525.8) relating to:
    (a) The duty-free importation of material and equipment;
    (b) The payment of taxes applicable to contractors, personnel, 
materials, and equipment (see parts 3525 and 3529);
    (c) The applicability of workmen's compensation laws and other labor 
laws to citizens of the United States, citizens of Panama, and citizens 
of other countries (see subpart 3528.3);
    (d) The provision of utility services;
    (e) The provision of Commission or Government-owned materials or 
services;
    (f) The disposition of surplus materials and equipment;
    (g) The need for civil liability insurance for employees of 
contractors and subcontractors (see 3528.301);
    (h) The handling of claims and litigation;
    (i) The requirements for bid or proposal guarantees, performance 
bonds, and payment bonds (see subpart 3528.1);
    (j) Acceptability of sureties not listed in Treasury Department 
Circular 570 (see subpart 3528.2);
    (k) Consideration of Panamanian preference in accordance with part 
3570;
    (l) Any other special solicitation provisions prescribed in subpart 
3536.3; and
    (m) Any other problems which can be foreseen and appropriately 
resolved contractually.



   Subpart 3536.3--Special Aspects of Sealed Bidding in Construction 
                               Contracting



3536.303  Invitations for bids.



3536.370  Additive items.

    Prior to the issuance of an invitation for bids, the contracting 
officer shall ascertain that adequate funds have been certified as being 
available for the proposed acquisition. However, if funds

[[Page 145]]

appear to be insufficient for all features of the Government's 
requirement, the contracting officer shall insert in the invitation a 
solicitation provision for a base bid and one or more additive items, as 
prescribed at 3536.371(a) (7) or (8).



3536.371  Solicitation provisions.

    (a) The contracting officer shall insert the following provisions in 
invitations for bids for construction when applicable:
    (1) The provision at 3552.214-70, Price--Sealed Bidding, as 
prescribed at 3514.201-6(a)(1);
    (2) The provision at 3552.214-71, Additional Data To Be Submitted, 
as prescribed at 3514.201-6(b)(1);
    (3) The provision at 3552.214-72, Rejection of Bids, as prescribed 
at 3514.201-6(b)(2);
    (4) The provision at 3552.214-73, Caution--Sealed Bidding, as 
prescribed at 3514.201-6(a)(2);
    (5) The provision at 3552.214-75, All or None Award--Sealed 
Bidding--Construction, as prescribed at 3514.201-6(d);
    (6) The provision at 3552.236-70, Mailing of Correspondence and 
Bids, in all invitations for bids for construction;
    (7) The provision at 3552.236-71, Additive Items, in invitations for 
bids for construction that contain one or more additive bid items to be 
awarded with the base bid item in the numerical order of priority that 
the additive bid items appear in the bid schedule within the funds 
available;
    (8) The provision at 3552.236-71, Additive Items--Alternate I, in 
invitations for bids for construction that contain one or more additive 
bid items to be awarded with the base bid item in any combination within 
the funds available; and
    (9) The provision at 3552.236-72, Cost Limitation, in invitations 
for bids for construction that contain one or more items subject to 
statutory cost limitations, except when a waiver has been granted 
pursuant to FAR 36.205.
    (b) The contracting officer shall insert the following provisions in 
negotiated solicitations for construction when applicable:
    (1) The provision at 3552.215-70, Price, as prescribed at 
3515.407(a)(1);
    (2) The provision at 3552.215-71, Caution, as prescribed at 
3515.407(a)(2); and
    (3) The provision at 3552.215-72, All or None Award, as prescribed 
at 3515.407(b).
    (c) The contracting officer shall insert the provision at 3552.209-
70, Organizational Conflict of Interest Certification/Disclosure, in 
invitations for bids and negotiated solicitations for construction when 
applicable, as prescribed at 3509.508-1.



                Subpart 3536.5--Contract Clauses and Form



3536.570  Special Panama Canal Commission contract clauses.

    The contracting officer shall insert the following clauses in 
solicitations and contracts for construction when applicable:
    (a) The clause at 3552.225-70, Language, as prescribed at 3525.801-
76(a);
    (b) The clause at 3552.225-71, Notice of Applicability of United 
States Federal Law, as prescribed at 3525.801-76(b);
    (c) The clause at 3552.225-72, Designated Contractors, as prescribed 
at 3525.801-76(c);
    (d) The clause at 3552.225-73, Responsibility for Observance of 
Laws, Orders, and Regulations, as prescribed at 3525.801-76(d);
    (e) The clause at 3552.228-70, Bid Guarantee Amount, or the clause 
at 3552.228-75, Proposal Guarantee, as prescribed at 3528.101-3(a). If 
the proposal guarantee clause is used, the bid guarantee clause at FAR 
52.228-1 shall not be used (see 3528.101-3(b));
    (f) The clause at 3552.228-71, Bonds and Insurance, as prescribed at 
3528.102-3;
    (g) The clause at 3552.228-72, Bonds, as prescribed at 3528.102-3;
    (h) In addition to FAR clause 52.228-3, Workers' Compensation 
Insurance (Defense Base Act), the clause at 3552.228-73, Non-U.S. 
Workers' Compensation Insurance, as prescribed at 3528.309(a);
    (i) The clause at 3552.228-74, Special Panama Insurance, as 
prescribed at 3528.370;
    (j) In addition to FAR clause 52.232-5, Payments Under Fixed-Price 
Construction Contracts, the clause at 3552.232-70, Contract Payments, as 
prescribed at

[[Page 146]]

3532.111(a)(7), the clause at 3552.232-72, Presentation of Statement of 
Release from Claims, as prescribed at 3532.806(a), and the clause at 
3552.232-73, Invoices, as prescribed at 3532.111(a)(8);
    (k) The clause at 3552.236-73, Scope of Work, in all solicitations 
and contracts for construction;
    (l) In addition to FAR clause 52.236-10, Operations and Storage 
Areas, the clause at 3552.236-74, Work Sites, Yards, Shops, and Offices, 
when a fixed-price construction contract is contemplated;
    (m) The clause at 3552.236-75, Work Time Limitations, in all 
solicitations and contracts for construction;
    (n) In lieu of FAR clause 52.236-13, Accident Prevention, insert the 
clause at 3552.236-76, Accident Prevention, when a fixed-price 
construction contract is contemplated;
    (o) The clause at 3552.236-77, Working in Confined Spaces, when the 
contracting officer anticipates that the contractor may have to work in 
confined or enclosed spaces;
    (p) The clause at 3552.236-78, Safety Sign, when the contracting 
officer determines that the location of the work site warrants its 
inclusion;
    (q) The clause at 3552.236-79, Protection of Material and Work, in 
all solicitations and contracts for construction;
    (r) The clause at 3552.236-80, Toilet Facilities, when the 
contracting officer determines that the location of the work site 
warrants its inclusion;
    (s) The clause at 3552.236-81, Drinking Water, when the contracting 
officer determines that the location of the work site warrants its 
inclusion;
    (t) In addition to FAR clause 52.236-15, Schedules for Construction 
Contracts, the clause at 3552.236-82, Contract Bid Breakdown, when a 
fixed-price construction contract is contemplated and the period of 
actual work performance is expected to exceed 60 days;
    (u) In addition to FAR clause 52.236-21, Specifications and Drawings 
for Construction, and FAR clause 52.236-5, Material and Workmanship, the 
clauses at: 3552.236-83, Descriptive Data and Correspondence, 3552.236-
84, Instruction Books, and 3552.236-85, Record Drawings, when a fixed-
price construction contract is contemplated;
    (v) The clause at 3552.236-86, Restricted Areas, when the 
contracting officer anticipates that any portion of the contract work 
may have to be performed in a restricted area;
    (w) The clause at 3552.243-70, Modification Proposals--Price 
Breakdown, as prescribed at 3543.205;
    (x) The clause at 3552.244-70, Subcontractors, in all solicitations 
and contracts for construction;
    (y) The clause at 3552.236-87, Surplus Space, in all solicitations 
and contracts for construction. The clause may also be used in 
solicitations and contracts for supplies or services if the contracting 
officer determines that its use is appropriate.
    (z) The clause at 3552.209-71, Organizational Conflict of Interest, 
as prescribed at 3509.508-2.



3536.571  Special Panama Canal Commission form.

    Panama Canal Form 3062, Submittal Data For Approval, shall be used 
by contractors as a transmittal document when data and/or samples are to 
be submitted for the contracting officer's approval pursuant to FAR 
clause 52.236-5 or clause 3552.236-83 of this regulation.



               Subpart 3536.6--Architect-Engineer Services



3536.602  Selection of firms for architect-engineer contracts.



3536.602-2  Evaluation boards.

    (a) The Panama Canal Commission Architect-Engineer Evaluation Board 
is established as a central board within the Commission under authority 
delegated to the Director, Engineering and Construction Bureau. The 
Board shall perform all Commission architect-engineer evaluations, data 
collection, and files maintenance. The Commission Board shall be 
composed of not less than three nor more than five voting members and 
one non-voting advisory member from the contracting office. The 
following constitutes the minimum composition of the Board:
    (1) Member and Chairman--A designee of the Chief, Engineering 
Division;

[[Page 147]]

    (2) Member--A professional engineer or architect from a division of 
one of the Commission's other bureaus, to be designated by the Chairman;
    (3) Member--A program official initiating the requirement or a 
designated representative; and
    (4) Advisory Member--A contracting officer or representative.
    (b) The Chief, Engineering Division may appoint additional voting 
members as may be appropriate for a particular project.
    (c) In the event of an emergency or extended absence, a member may 
designate, in writing, with the concurrence of the Chairman, an 
alternate experienced in architecture, engineering, or construction to 
serve in the member's absence.
    (d) The duties of the advisory member shall include, but not be 
limited to, assuring that--
    (1) The criteria set forth in the public notice are applied in the 
evaluation process; and
    (2) Actions taken during the evaluation process do not compromise 
subsequent procurement actions.



3536.602-4  Selection authority.

    The Director, Engineering and Construction Bureau shall serve as the 
Commission's selection authority for the evaluation board.



3536.602-5  Short selection processes for contracts not to exceed $10,000.

    Both short selection processes permitted by FAR 36.602-5 are 
authorized.



3536.604  Performance evaluation.

    Evaluation of architect-engineer contracts shall be in accordance 
with the procedures prescribed in 3536.201, except that SF 1421, 
Performance Evaluation (Architect-Engineer), shall be used in lieu of SF 
1420, and that a copy of the performance evaluation shall be provided to 
the Architect-Engineer Evaluation Board for its files pursuant to FAR 
36.604(c).



3536.605  Government cost estimate for architect-engineer work.

    (b) The overall amount of the Government's cost estimate shall not 
be disclosed under any circumstance to persons other than Government 
personnel whose official duties, in the judgment of the contracting 
officer, require knowledge of the estimate.



3536.606  Negotiations.

    (a) Negotiations shall be conducted with the first selected 
architect-engineer until a price which is fair and reasonable and not in 
excess of the Government estimate, revised to correct errors of fact or 
judgment, has been obtained. When the negotiations result in a price in 
excess of the Government estimate, as revised, the contracting officer 
shall terminate the negotiations and request a proposal from the 
architect-engineer next in order of preference.
    (1) In no event shall a contract for architect-engineer services for 
the preparation of designs, plans, drawings and specifications exceed 
the statutory limitation of six percent (6 percent) of the estimated 
construction costs of the project. If the contract also covers any type 
of services other than the preparation of designs, plans, drawings and 
specifications, the part of the contract price for such other services 
shall not be subject to the six percent (6 percent) limitation.



3536.606-70  Modifications.

    When a modification involves work not initially included in the 
contract, the limitation on the total contract price set forth in 
3536.606(a)(1) is applicable, as applied to the revised total estimated 
construction costs. When redesign is required and the contract is 
modified, the following method shall be used to insure that the six 
percent (6 percent) statutory limitation is not exceeded:
    (a) The estimated construction cost of the redesigned features will 
be added to the original estimated construction cost;
    (b) The contract cost for the original design will be added to the 
contract cost for redesign; and
    (c) The total contract design cost obtained by paragraph (b) of this 
subsection will be divided by the total construction cost obtained by 
paragraph (a) of this subsection. The resulting percentage may not 
exceed the six percent (6 percent) statutory limitation.

[[Page 148]]



3536.670  Government rights to plans, specifications, and drawings.

    All solicitations and contracts for architect-engineer services or 
for construction involving architect-engineer services, except those 
involving ``standard types of construction'', shall contain the clause 
at 3552.227-70, Government Rights, as prescribed at 3527.304-3(b).



PART 3537--SERVICE CONTRACTING--Table of Contents




Sec.
3537.000  Scope of part.

               Subpart 3537.1--Service Contracts--General

3537.102  Policy.
3537.104  Personal services contracts.
3537.104-70  Procedures.

            Subpart 3537.2--Advisory and Assistance Services

3537.200  Scope of subpart.
3537.202  Policy.
3537.204  Exclusions.
3537.206  Requesting activity responsibilities.
3537.206-70  Procedures.
3537.270  Duration.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7662, Mar. 2, 1990, unless otherwise noted.



3537.000  Scope of part.

    This part implements FAR part 37 and provides additional Commission 
policies and procedures for the acquisition of personal and nonpersonal 
services, including advisory and assistance services.



               Subpart 3537.1--Service Contracts--General



3537.102  Policy.

    (a) The Commission's policy regarding the contracting out of 
commercial services is set forth at 3507.301.



3537.104  Personal services contracts.

    (b) Authority for the acquisition by contract of the personal 
services of experts and consultants is found at 5 U.S.C. 3109 which 
provides that, when authorized by an appropriation or other statute, the 
head of an agency may acquire by contract the temporary (not to exceed 
one year) or intermittent services of experts or consultants. For the 
purpose of this section, the terms ``experts'' and ``consultants'' are 
not interchangeable. Consequently, their meanings are distinguishable 
from the meaning of the collective term ``Individual experts and 
consultants'' at FAR 37.203(a). As used herein, an ``expert'' is an 
individual who is a recognized professional or highly skilled 
practitioner normally used to perform or supervise an operating 
function, rather than to provide advisory or consulting services. A 
``consultant'', as used herein, is an individual possessing special, 
current knowledge or skill who primarily serves in an advisory capacity 
in a particular field, rather than in the performance or supervision of 
an operating function. Acquiring the personal services of individual 
experts or consultants shall be subject to the limitations applicable to 
advisory and assistance services at FAR 37.202(c). In addition, the 
services of individual experts and consultants shall be acquired through 
personal services contracts only--
    (1) When the services required cannot be obtained by appointment in 
accordance with standard Commission personnel procedures, and
    (2) If the nature of the duties to be performed is temporary (not 
more than one year) or intermittent (not cumulatively more than 130 days 
in one year). Accordingly, no such contract shall be entered into for 
longer than one year at a time.



3537.104-70  Procedures.

    Requests for the acquisition of personal services should include:
    (a) A description of the services to be performed;
    (b) Name and address of the person or firm;
    (c) Background material to show the unique qualifications of such 
person or firm to accomplish the requirement;
    (d) Place where the duties are to be performed and the period of 
service;
    (e) The estimated cost; and
    (f) Determinations that:
    (1) It is not feasible to obtain personnel with the necessary skills

[[Page 149]]

through standard Commission personnel appointment procedures;
    (2) A nonpersonal services contract is not practicable; and
    (3) Existing staffing is inadequate to furnish the services.



            Subpart 3537.2--Advisory and Assistance Services



3537.200  Scope of subpart.

    This subpart provides additional policy and management controls for 
the acquisition of personal and nonpersonal advisory and assistance 
services.



3537.202  Policy.

    (d) The acquisition of advisory and assistance services shall 
conform to the Competition in Contracting Act of 1984. Preference shall, 
however, be given to sources located in the Republic of Panama when the 
services are available as required and are comparable in quality and 
price to those which may be obtained from other sources (see part 3570). 
However, see subpart 3503.6 concerning contracts with current or former 
Commission employees.



3537.204  Exclusions.

    In addition to the exclusions or exemptions identified at FAR 
37.204, the services of arbitrators for the resolution of labor disputes 
are exempted from the definition of advisory and assistance services. As 
authorized by section 7121 of the Federal Service Labor-Management 
Relations Act, 5 U.S.C. 7121, the procedure for the contracting of 
arbitrators shall be governed by the negotiated grievance procedure set 
forth in the individual collective bargaining agreements between the 
Commission and the various certified representatives (i.e., unions).



3537.206  Requesting activity responsibilities.

    (c) Requests for the acquisition of advisory and assistance services 
shall include the documentation required at FAR 37.206 (a), (b), and 
(d), and shall be prepared by the initiating bureau director or head of 
independent unit and forwarded to the Administrator for approval, 
through, in turn, the Personnel Director; General Counsel; Chief 
Financial Officer; and the General Services Director for their review 
and concurrence. Before the proposal is routed to the Administrator, the 
General Services Director will add the cognizant contracting officer's 
determination as to whether or not the requested acquisition constitutes 
advisory and assistance services as described in FAR subpart 37.2. As 
mandated by FAR 37.207, the contracting officer's determination shall be 
final.

[55 FR 7662, Mar. 2, 1990; 55 FR 38331, Sept. 18, 1990]



3537.206-70  Procedures.

    (a) When a request has been approved pursuant to 3537.206(c), the 
initiating bureau director or head of independent unit shall--
    (1) Forward all papers to the cognizant contracting officer for 
processing the contract action. If not already included in the request 
for approval, the forwarding official shall provide the contracting 
officer with a work statement that is specific and complete, including: 
a detailed description of services to be performed; the place where the 
services are to be performed; the period of performance; the names and 
addresses of potential contractors (if applicable); and any other 
information the contracting officer considers to be pertinent.
    (2) Coordinate with the Director, Office of Executive Administration 
or the contracting officer, as applicable, to obtain certification as a 
Panama Canal Commission designated contractor, entry/exit permits, 
identification cards, and any other required legal documents.
    (3) Prepare replies to all inquiries from the General Accounting 
Office, the Office of Management and Budget, and the Congress, in 
coordination with the Personnel Director, Chief Financial Officer, 
General Counsel and the contracting officer, as may be necessary.
    (b) At the conclusion of the contract, the initiating bureau 
director or head of independent unit shall furnish to the contracting 
officer the written evaluation required at FAR 37.205.



3537.270  Duration.

    No contract for advisory and assistance services shall be entered 
into for

[[Page 150]]

longer than one year at a time. In unusual circumstances, and when 
approved by the Administrator, options for additional one-year 
extensions may be used when the need for continuity of services carries 
beyond a one-year period. In no case shall the total period under a 
specific contract exceed the basic year plus four additional optional 
years.

[[Page 151]]



                    SUBCHAPTER G--CONTRACT MANAGEMENT


PART 3542--CONTRACT ADMINISTRATION--Table of Contents




    Authority: 40 U.S.C. 486(c).



         Subpart 3542.12--Novation and Change-of-Name Agreements



3542.1200-70  Policy.

    When ``CORPORATE SEALS,'' as required in the instructions for 
preparation and execution of novation agreements in FAR 42.1204 and in 
agreements to recognize contractor's change of name in FAR 42.1205, are 
not used due to the dictates of custom, practice, or law within the 
Republic of Panama or other foreign countries, the contracting officer 
may execute such agreements, provided the contracting officer, with the 
concurrence of legal counsel, is satisfied that the persons signing such 
agreements are authorized to bind their companies.

[55 FR 7663, Mar. 2, 1990]



PART 3543--CONTRACT MODIFICATIONS--Table of Contents




    Authority: 40 U.S.C. 486(c).



                      Subpart 3543.2--Change Orders



3543.205  Contract clauses.

    The contracting officer shall insert the clause at 3552.243-70, 
Modification Proposals--Price Breakdown, in all solicitations and 
contracts for construction.

[55 FR 7664, Mar. 2, 1990]



PART 3547--TRANSPORTATION--Table of Contents




           Subpart 3547.3--Transportation in Supply Contracts

Sec.
3547.306  Transportation factors in the evaluation of offers.
3547.370  Solicitation provision.

    Authority: 40 U.S.C. 486(c); Article IX of the Agreement in 
Implementation of Article III of the Panama Canal Treaty of 1977.



           Subpart 3547.3--Transportation in Supply Contracts



3547.306  Transportation factors in the evaluation of offers.

    For purposes of evaluating comparability of costs of supplies 
obtainable in the Republic of Panama with those obtainable from other 
sources, pursuant to the Panamanian preference provisions of the Panama 
Canal Treaty's Implementing Agreement (see part 3570), consideration 
shall be given to transportation costs to the Republic of Panama, 
including freight, insurance and handling of supplies.

[55 FR 7664, Mar. 2, 1990]



3547.370  Solicitation provision.

    The contracting officer shall insert the provision at 3552.247-70, 
Evaluation of Delivery Terms in Contract Awards, in solicitations that 
include alternate terms of delivery, i.e., f.o.b. destination (New 
Orleans) and c.i.f. destination (Panama).

[55 FR 7664, Mar. 2, 1990]



PART 3551--USE OF GOVERNMENT SOURCES BY CONTRACTORS--Table of Contents




       Subpart 3551.1--Contractor Use of Government Supply Sources

Sec.
3551.102  Authorization to use Government supply sources.
3551.103  Ordering from Government supply sources.

    Authority: 40 U.S.C. 486(c).



       Subpart 3551.1--Contractor Use of Government Supply Sources



3551.102  Authorization to use Government supply sources.

    (a) When a contractor is performing one of the types of contracts 
specified in FAR 51.101, the contracting officer shall consider whether 
to allow the contractor to use Government supply sources. In addition to 
the factors listed for consideration at FAR 51.102(a),

[[Page 152]]

the contracting officer shall consider whether--
    (1) Materials necessary to the performance of the contract are not 
available locally except at Government sources; and
    (2) Materials, though available to the contractor, require such a 
long lead time for delivery that contractor performance is threatened if 
Government sources are not used.
    (e)(4) In those instances where contractor-furnished equipment and 
materials required by a contract have been authorized by the contracting 
officer to be obtained through Government sources as Government-
furnished equipment and materials, for reasons established by FAR part 
51, the contracting officer shall negotiate a change to the contract 
reducing the price by the commercial cost plus transportation costs.

[55 FR 7664, Mar. 2, 1990]



3551.103  Ordering from Government supply sources.

    (b) ``Contracting agency'' as used in FAR 51.103(b) shall mean the 
cognizant Commission contracting officer.

[55 FR 7664, Mar. 2, 1990]

[[Page 153]]





                     SUBCHAPTER H--CLAUSES AND FORMS


PART 3552--SOLICITATION PROVISIONS AND CONTRACT CLAUSES--Table of Contents




             Subpart 3552.2--Texts of Provisions and Clauses

Sec.
3552.209-70  Organizational Conflict of Interest Certification/
          Disclosure.
3552.209-71  Organizational Conflict of Interest.
3552.210-70  Brand Name Products or Equal.
3552.214-70  Price--Sealed Bidding.
3552.214-71  Additional Data To Be Submitted.
3552.214-72  Rejection of Bids.
3552.214-73  Caution--Sealed Bidding.
3552.214-74  All or None Award--Sealed Bidding.
3552.214-75  All or None Award--Sealed Bidding--Construction.
3552.215-70  Price.
3552.215-71  Caution.
3552.215-72  All or None Award.
3552.225-70  Language.
3552.225-71  Notice of Applicability of United States Federal Law.
3552.225-72  Designated Contractors.
3552.225-73  Responsibility for Observance of Laws, Orders, and 
          Regulations.
3552.227-70  Government Rights.
3552.228-70  Bid Guarantee Amount.
3552.228-71  Bonds and Insurance.
3552.228-72  Bonds.
3552.228-73  Non-U.S. Workers' Compensation Insurance.
3552.228-74  Special Panama Insurance.
3552.228-75  Proposal Guarantee.
3552.228-76  Performance Bond.
3552.228-77  Performance and Payment Bonds.
3552.231-70  Travel Costs.
3552.232-70  Contract Payments.
3552.232-71  Availability of Funds.
3552.232-72  Presentation of Statement of Release From Claims.
3552.232-73  Invoices.
3552.236-70  Mailing of Correspondence and Bids.
3552.236-71  Additive Items.
3552.236-72  Cost Limitation.
3552.236-73  Scope of Work.
3552.236-74  Work Sites, Yards, Shops, and Offices.
3552.236-75  Work Time Limitations.
3552.236-76  Accident Prevention.
3552.236-77  Working in Confined Spaces.
3552.236-78  Safety Sign.
3552.236-79  Protection of Material and Work.
3552.236-80  Toilet Facilities.
3552.236-81  Drinking Water.
3552.236-82  Contract Bid Breakdown.
3552.236-83  Descriptive Data and Correspondence.
3552.236-84  Instruction Books.
3552.236-85  Record Drawings.
3552.236-86  Restricted Areas.
3552.236-87  Surplus Space.
3552.243-70  Modification Proposals--Price Breakdown.
3552.244-70  Subcontractors.
3552.247-70  Evaluation of Delivery Terms in Contract Awards.

    Authority: 40 U.S.C. 486(c); Articles IX and XI of the Agreement in 
Implementation of Article III of the Panama Canal Treaty of 1977.

    Source: 55 FR 7664, Mar. 2, 1990, unless otherwise noted.



             Subpart 3552.2--Texts of Provisions and Clauses



3552.209-70  Organizational Conflict of Interest Certification/Disclosure.

    As prescribed in 3509.508-1, insert the following provision:

 Organizational Conflict of Interest Certification/Disclosure (Jan 1990)

    (a) An ``organizational conflict of interest'' exists when the 
nature of the work to be performed under a proposed Government contract 
may, without some restriction on future activities, (1) result in an 
unfair competitive advantage to the contractor, or (2) impair the 
contractor's objectivity in performing the contract work.
    (b) The offeror certifies, to the best of its knowledge and belief, 
that it [  ] is, [  ] is not (check applicable block) aware of any 
information bearing on the existence of any potential organizational 
conflict of interest. If the offeror is aware of information bearing on 
whether a potential conflict may exist, the offeror shall provide a 
disclosure statement with its offer which describes all relevant 
information concerning any past, present, or planned interests bearing 
on whether it (including its chief executives and directors, or any 
proposed consultant or subcontractor) may have a potential 
organizational conflict of interest.
    (c) The offeror should refer to FAR subpart 9.5 and PAR subpart 
3509.5 for policies and procedures for avoiding, neutralizing, or 
mitigating organizational conflicts of interest.
    (d) If the Contracting Officer determines that a potential conflict 
exists, the offeror shall not receive an award unless the conflict

[[Page 154]]

can be avoided or otherwise resolved through the inclusion of a special 
contract clause or other appropriate means. The terms of any special 
clause are subject to negotiation.

                           (End of provision)



3552.209-71  Organizational Conflict of Interest.

    As prescribed in 3509.508-2, insert the following clause:

             Organizational Conflict of Interest (Jan 1990)

    (a) The Contractor warrants that, to the best of the Contractor's 
knowledge and belief: (1) There are no relevant facts or circumstances 
which could give rise to an organizational conflict of interest, as 
defined in provision 3552.209-70, Organizational Conflict of Interest 
Certification/Disclosure, of the solicitation; or (2) That the 
Contractor has disclosed all such relevant information.
    (b) The Contractor agrees that if an actual or potential 
organizational conflict of interest is discovered after award, the 
Contractor will make a full disclosure in writing to the Contracting 
Officer. This disclosure shall include a description of actions which 
the Contractor has taken or proposes to take, after consultation with 
the Contracting Officer, to avoid, mitigate, or neutralize the actual or 
potential conflict.
    (c) Remedies--The Panama Canal Commission may terminate this 
contract for convenience, in whole or in part, if it deems such 
termination necessary to avoid an organizational conflict of interest. 
If the Contractor was aware of a potential organizational conflict of 
interest prior to award or discovered an actual or potential conflict 
after award and did not disclose or misrepresented relevant information 
to the Contracting Officer, the Government may terminate the contract 
for default, debar the Contractor from Government contracting, or pursue 
such other remedies as may be permitted by law or this contract.
    (d) The contractor further agrees to insert in any subcontract or 
consultant agreement hereunder, terms which shall conform substantially 
to the language of this clause, including this paragraph (d).

                             (End of clause)



3552.210-70  Brand Name Products or Equal.

    As prescribed in 3510.011(h), insert the following provision:

                 Brand Name Products or Equal (Jan 1990)

    (As used in this provision, the term ``brand name'' includes 
identification of products by make and model.)
    (a) If items called for by this (invitation for bids/request for 
proposals) have been identified in the schedule by a ``brand name or 
equal'' description, such identification is characteristic of products 
that will be satisfactory. (Bids/Proposals) offering ``equal'' products 
(including products of the brand name manufacturer other than the one 
described by brand name) will be considered for award if such products 
are clearly identified in the (bids/proposals) and are determined by the 
Government to meet fully the salient characteristics, requirements 
listed in the invitation.
    (b) Unless the (bidder/offeror) clearly indicates in its (bid/
proposal) that it is offering an ``equal'' product, its (bid/proposal) 
shall be considered as offering a brand name product referenced in the 
(invitation for bids/request for proposals).
    (c)(1) If the (bidder/offeror) proposes to furnish an ``equal'' 
product, the brand name, if any, of the product to be furnished shall be 
inserted in the space identified in the (bid/proposal). The evaluation 
of (bids/proposals) and the determination as to equality of the product 
offered shall be the responsibility of the Government and will be based 
on information furnished by the (bidder/offeror) or identified in its 
(bid/proposal) as well as other information reasonably available to the 
purchasing activity. Caution to (bidders/offerors): the purchasing 
activity is not responsible for locating or securing any information 
which is not identified in the (bid/proposal) and reasonably available 
to the purchasing activity. Accordingly, to ensure that sufficient 
information is available, the (bidder/offeror) shall furnish as part of 
its (bid/proposal) all descriptive material (such as cuts, 
illustrations, drawings, or other information) necessary for the 
purchasing activity to (i) determine whether the product offered meets 
the salient characteristics requirement of the (invitation for bids/
request for proposals), and (ii) establish exactly what the (bidder/
offeror) proposes to furnish and what the Government would be binding 
itself to purchase by making an award. The information furnished may 
include specific references to information previously furnished or to 
information otherwise available to the purchasing activity.
    (2) If the (bidder/offeror) proposes to modify a product so as to 
make it conform to the requirements of the (invitation for bids/request 
for proposals). It shall (i) include in its (bid/proposal) a clear 
description of such proposed modifications, and (ii) clearly mark any 
descriptive material to show the proposed modifications.
    (3) Modifications proposed after (bid/proposal) opening to make a 
product conform to a brand name product referenced in the (invitation 
for bids/request for proposals) will not be considered.

[[Page 155]]

                           (End of provision)



3552.214-70  Price--Sealed Bidding.

    As prescribed in 3514.201-6(a)(1), insert the following provision:

                    Price--Sealed Bidding (Jan 1990)

    Only bids stating a firm, fixed-price expressed in U.S. dollars 
shall be considered for award. Bids that qualify the bid price in terms 
of the rate of exchange between U.S. dollars and a foreign currency will 
be rejected as nonresponsive.

                           (End of provision)



3552.214-71  Additional Data To Be Submitted.

    As prescribed in 3514.201-6(b)(1), insert the following provision:

               Additional Data to Be Submitted (Jan 1990)

    Prior to award of the contract, the Contracting Officer may require 
the apparent low bidder to furnish the following information:
    (a) Evidence establishing that the bidder maintains a permanent 
place of business and has satisfactory and acceptable financial 
resources to meet obligations incident to the work.
    (b) A brief description of work experience by the bidder and the 
location of major projects.
    (c) A list of key personnel which the bidder has available for 
prosecution of the work to be performed, and a brief summary of such 
personnel's experience in work similar to that required by this 
contract.
    (d) A complete list and description of all equipment, shops, yards, 
and storage facilities that the bidder now has or will have available 
for commencement and prosecution of the work.
    (e) Evidence establishing that the bidder positively meets 
responsibility requirements, such as experience, which are included in 
the solicitation.

                           (End of provision)



3552.214-72  Rejection of Bids.

    As prescribed in 3514.201-6(b)(2), insert the following provision:

                      Rejection of Bids (Jan 1990)

    Any bid will be rejected that is conditioned upon or proposes that 
the Panama Canal Commission agree to the use of a price adjustment 
clause calling for an upward revision of the bid price or to the use of 
a cost-plus-fixed-fee or comparable pricing arrangement. The right is 
reserved, as the interest of the Panama Canal Commission may require, to 
reject any and all bids and to waive any informality in the bids. A bid 
may be rejected if the bidder fails to furnish a guaranty and submit the 
data required with the bid; or if the bidder cannot show to the 
satisfaction of the Contracting Officer that it has the experience and 
owns or controls by firm option, or can procure the necessary plant to 
commence work within the time prescribed in the specifications and, 
thereafter, to prosecute and complete the work at the rate or time 
specified; or if the bidder cannot show that he is not already obligated 
to perform other work contemplated in this Solicitation. Any unbalanced 
bid which, in the opinion of the Contracting Officer, jeopardizes the 
interests of the Panama Canal Commission will be subject to rejection 
for that reason.

                           (End of provision)



3552.214-73  Caution--Sealed Bidding.

    As prescribed in 3514.201-6(a)(2), insert the following provision:

                   Caution--Sealed Bidding (Jan 1990)

    Bidders are cautioned that any condition, qualification, provision, 
or comment in their bid, or in a letter transmitting their bid, which in 
any way modifies, takes exception to, or is inconsistent with the 
specifications, requirements, or any of the terms, conditions, or 
provisions of this solicitation, may require the rejection of their bid 
as nonresponsive.

                           (End of provision)



3552.214-74  All or None Award--Sealed Bidding.

    As prescribed in 3514.201-6(c), insert the following provision:

              All or None Award--Sealed Bidding (Jan 1990)

    Notwithstanding paragraph (c) of provision 52.214-10, Contract 
Award--Sealed Bidding, award will be made on an ``all or none'' basis to 
one bidder for all items, in the quantities and at the unit prices 
specified for each item. Consequently, for the purpose of determining 
the most advantageous bid in accordance with paragraph (a) of provision 
52.214-10, the word ``price'' as used therein shall be construed to mean 
the bidder's aggregate price for all items. Any bid which fails to quote 
on all items, in the quantities specified for each item, shall be 
rejected as nonresponsive.

[[Page 156]]

                           (End of provision)



3552.214-75  All or None Award--Sealed Bidding--Construction.

    As prescribed in 3514.201-6(d)(1), insert the following provision:

       All or None Award--Sealed Bidding--Construction (Jan 1990)

    Regarding paragraph (c) of provision 52.214-19, Contract Award--
Sealed Bidding--Construction, award will be made on an ``all or none'' 
basis to one bidder for all items. Consequently, for the purpose of 
determining the most advantageous bid in accordance with paragraph (a) 
of provision 52.214-19, the word ``price'' as used therein shall be 
construed to mean the bidder's aggregate price for all items. As 
indicated in paragraph (c) of provision 52.214-18, Preparation of Bids--
Construction, failure to bid on all items will disqualify the bid.

                           (End of provision)

                         Alternate I (Jan 1990)

    If the construction work is not estimated to exceed $10,000, 
substitute the following text in place of the basic text:
    A contract award will be made on an ``all or none'' basis to one 
bidder for all items at the prices specified for each item. The award 
will be made, without discussions, to the overall low, responsible 
bidder whose bid, conforming to the solicitation, will be the most 
advantageous to the Government considering only the bidder's aggregate 
price for all items and the price-related factors, if any, specified 
elsewhere in the solicitation. Consequently, bidders are required to bid 
on all items. Failure to do so will disqualify the bid.

                         Alternate II (Jan 1990)

    If the contracting officer determines that (a) the contract work, 
regardless of its estimated value, will be awarded to one bidder for all 
the work, and (b) bidding on all items will not be required, substitute 
the following text in place of the basic text:
    A contract award will be made on an ``all or none'' basis to one 
bidder for all the contract work. The award will be made, without 
discussions, to the overall low, responsible bidder whose bid, 
conforming to the solicitation, will be the most advantageous to the 
Government considering only the bidder's aggregate price for all items 
and the price-related factors, if any, specified elsewhere in the 
solicitation.



3552.215-70  Price.

    As prescribed in 3515.407(a)(1), insert the following provision:

                            Price (Jan 1990)

    Only offers stating a firm-fixed-price expressed in U.S. dollars 
shall be considered for award. Offers that qualify the offer price in 
terms of the rate of exchange between U.S. dollars and a foreign 
currency will be rejected as nonresponsive.

                           (End of provision)



3552.215-71  Caution.

    As prescribed in 3515.407(a)(2), insert the following provision:

                           Caution (Jan 1990)

    Offerors are cautioned that any condition, qualification, provision, 
or comment in their offer, or in a letter transmitting their offer, 
which in any way modifies, takes exception to, or is inconsistent with 
the specifications, requirements, or any of the terms, conditions, or 
provisions of this solicitation, may require the rejection of their 
offer as nonresponsive.

                           (End of provision)



3552.215-72  All or None Award.

    As prescribed in 3515.407(b), insert the following provision:

                      All or None Award (Jan 1990)

    Notwithstanding paragraph (d) of provision 52.215-16, Contract 
Award, a contract award will be made on an ``all or none'' basis to one 
offeror for all items, in the quantities and at the unit prices 
specified for each item. Consequently, for the purpose of determining 
the most advantageous offer in accordance with paragraph (a) of 
provision 52.215-16, the words ``cost or price'' as used therein shall 
be construed to mean the offeror's aggregate cost or price for all 
items. Therefore, offerors are cautioned to quote on all items, in the 
quantities specified for each item. Failure to do so will, in effect, 
eliminate the offeror from consideration for contract award in the event 
a contract is to be awarded on the basis of initial offers received 
without discussions, pursuant to paragraph (c) of provision 52.215-16.

                           (End of provision)



3552.225-70  Language.

    As prescribed in 3525.801-76(a), Language, insert the following 
clause:

                           Language (Jan 1990)

    All offers, correspondence and documents required by this 
solicitation or contract must be submitted in the English language. In 
the event of inconsistency between any terms of this solicitation or 
contract and

[[Page 157]]

any translation thereof into another language, the English language 
meaning shall control.

                             (End of clause)



3552.225-71  Notice of Applicability of United States Federal Law.

    As prescribed in 3525.801-76(b), insert the following clause:

     Notice of Applicability of United States Federal Law (Jan 1990)

    All matters relating to the validity, construction, interpretation, 
performance and enforcement of the contract shall be determined in 
accordance with applicable federal law of the United States of America.

                             (End of clause)



3552.225-72  Designated Contractors.

    As prescribed in 3525.801-76(c), insert the following clause:

                    Designated Contractors (Jan 1990)

    Article XI, ``Contractors and Contractors' Personnel,'' of the 
Agreement in Implementation of Article III of the Panama Canal Treaty of 
1977, prescribes, among other things, that--
    (a) Whenever contracts are awarded by the Commission to natural 
persons who are nationals or permanent residents of the United States or 
to corporations or other legal entities organized under the laws of the 
United States and under the effective control of such persons, such 
contractors shall be so designated by the United States and such 
designations shall be communicated to the authorities of the Republic of 
Panama.
    (b) Designated contractors shall be subject to the laws and 
regulations of the Republic of Panama except with respect to the special 
provisions established by the above named international agreement, which 
enumerate such obligations and benefits as, among others:
    (1) Designated contractors must, while in Panama, engage exclusively 
in the work for which they have been contracted by U.S. Government 
agencies; and,
    (2) Designated contractors shall be accorded the same rights 
established for U.S. citizens employed by the U.S. Government in Panama 
pertaining to Panamanian immigration requirements, relief from the 
payment of certain Panamanian taxes and duties, and the use of certain 
facilities located on U.S. military installations in Panama.
    (c) The provisions of Article XI shall be similarly applied to the 
subcontractors and to the employees of the contractors and 
subcontractors and their dependents who are nationals or residents of 
the United States. These employees and dependents shall not be subject 
to the Panamanian Social Security System.
    (d) Upon withdrawal of the designation of a contractor, the 
Commission shall notify the authorities of the Republic of Panama.

                             (End of clause)



3552.225-73  Responsibility for Observance of Laws, Orders, and Regulations.

    As prescribed in 3525.801-76(d), insert the following clause:

  Responsibility for Observance of Laws, Orders, and Regulations (Jan 
                                  1990)

    The Contractor shall be responsible for complying with all 
applicable laws, regulations, standards and requirements, including 
traffic and vehicular laws and regulations, prescribed by the Republic 
of Panama for contractors performing work for the Panama Canal 
Commission (hereinafter referred to as the Commission). The Contractor 
shall similarly be responsible for complying with all laws, Executive 
Orders, and United States Government rules and regulations which the 
Commission, as an agency of the United States Government performing work 
in the Republic of Panama, is required to follow. The areas of legal 
competence have been agreed to between both countries pursuant to and in 
accordance with the Panama Canal Treaty of 1977, including such 
executive agreements and implementing legislation as may be in effect. 
Failure of the Contractor to familiarize himself with all laws, orders, 
rules, regulations or standards promulgated by either country, which are 
or may become applicable to the work under this contract, shall not 
constitute a basis for adjustments under the contract.

                             (End of clause)



3552.227-70  Government Rights.

    As prescribed in 3527.304-3(b), insert the following clause:

                      Government Rights (Jan 1990)

    The Contractor may retain the entire right, title, and interest, 
throughout the world, to all drawings, designs, specifications, notes, 
and other works developed in the performance of this contract, provided 
that the Government shall have a nonexclusive, nontransferable, 
irrevocable, paid-up license to have and to use same on any other 
Government design or construction, and provided that the Contractor 
shall execute or have executed, upon request, and shall promptly deliver 
to the Federal agency, all instruments necessary to establish or to 
confirm said license.

[[Page 158]]

                             (End of clause)



3552.228-70  Bid Guarantee Amount.

    As prescribed in 3528.101-3(a), insert the following clause:

                     Bid Guarantee Amount (Jan 1990)

    (a) The amount of the bid guarantee required by clause 52.228-1, Bid 
Guarantee, shall be 20 percent of the total amount of the bid, excluding 
options and additives if any, or $3,000,000, whichever is less.
    (b) If the bidder elects to furnish the guarantee in the form of a 
bid bond, the bond shall be submitted on Standard Form 24. Corporations 
executing the bond as sureties must be among those appearing on the 
current U.S. Treasury Department Circular 570, entitled ``Companies 
Holding Certificates of Authority as Acceptable Sureties on Federal 
Bonds and as Acceptable Reinsuring Companies'', and must be acting 
within the limitations set forth therein. If the contract work is to be 
performed in Panama, corporations that appear on the Panama Canal 
Commission's list of locally acceptable sureties, and that act within 
the limitations set forth therein, may be used in lieu of those 
appearing on Circular 570.

                             (End of clause)



3552.228-71  Bonds and Insurance.

    As prescribed in 3528.102-3, insert the following clause:

                     Bonds and Insurance (Jan 1990)

    The bidder who is awarded the contract shall be required to furnish 
performance and payment bonds, certificates of Workman's Compensation, 
if required, and public liability and automobile insurance as stipulated 
in the General Conditions. The payment by the Commission of the bond 
premiums to the Contractor shall not be made as increments of the 
individual progress payments and shall not be in addition to the 
contract price.

                             (End of clause)



3552.228-72  Bonds.

    As prescribed in 3528.102-3, insert the following clause:

                            Bonds (Jan 1990)

    (a) Corporations executing the bond as sureties must be among those 
appearing either on the Panama Canal Commission's list of locally 
acceptable sureties or on the U.S. Treasury Department's Circular 570, 
and must be acting within the limitations set forth therein.
    (b) Payment Bond: If the contract exceeds $2,000, the Contractor 
shall furnish a payment bond with good and sufficient surety or sureties 
acceptable to the Commission for the protection of persons furnishing 
material or labor in connection with the performance of the work under 
this contract on Standard Form 25-A. The penal sum of such payment bond 
shall be as follows: (1) When the contract price is $1,000,000 or less, 
50 percent of the contract price; (2) when the contract price is in 
excess of $1,000,000, but no more than $5,000,000, 40 percent of the 
contract price; (3) or $2,500,000 when the contract price is more than 
$5,000,000.
    (c) Performance Bond: If the contract exceeds $2,000, the Contractor 
shall furnish a performance bond with good and sufficient surety or 
sureties acceptable to the Commission in connection with the performance 
of the work under this agreement on Standard Form 25. The penal sum of 
such performance bond shall be 100 percent of the contract price.
    (d) The bonds herein shall not be dated prior to the date of the 
contract and shall be furnished by the Contractor to the Commission not 
later than 10 calendar days after award.

                             (End of clause)



3552.228-73  Non-U.S. Workers' Compensation Insurance.

    As prescribed in 3528.309(a), insert the following clause:

           Non-U.S. Workers' Compensation Insurance (Jan 1990)

    (a) Pursuant to a waiver granted by the Secretary of Labor, the 
provisions of the Defense Base Act (see clause 52.228-3) are not 
applicable to any public-work contract awarded by the Panama Canal 
Commission in the Panama Canal area with respect to non-U.S. citizen 
employees of Commission contractors. The waiver does not apply, however, 
to such employees who are:
    (1) Hired in the United States by any contractor; or
    (2) Residents of the United States.
    (b) The waiver was granted with the proviso that non-U.S. citizen 
employees exempted from the provisions of the Defense Base Act by virtue 
of the waiver will be provided workers' compensation benefits prescribed 
in the Panamanian Social Security System. Accordingly, the Contractor 
shall provide workmen's insurance coverage (Seguros de Riesgos 
Profesionales) as provided by the Panamanian Social Security System in 
accordance with Cabinet Decree No. 68 of March 31, 1970, for all non-
U.S. citizen employees that are not covered by clause 52.228-3 of this 
contract. The Seguro de Riesgos Profesionales coverage shall be provided 
before the Contractor commences performance and shall be maintained 
until performance is completed.

[[Page 159]]

                             (End of clause)



3552.228-74  Special Panama Insurance.

    As prescribed in 3528.370, insert the following clause:

                   Special Panama Insurance (Jan 1990)

    (a) ``Designated contractors'' shall, upon initiation of work or 
construction activities, obtain appropriate insurance to cover civil 
liabilities in the Republic of Panama that may arise as a result of acts 
or omissions done in the performance of official duty by their 
employees. The insurance coverage shall include coverage for the 
tortious conduct of their employees. Such insurance may be obtained from 
insurance companies licensed to engage in such business within the 
Republic of Panama.
    (b) The Contractor shall include this clause in all subcontracts.

                             (End of clause)



3552.228-75  Proposal Guarantee.

    As prescribed in 3528.101-3 (a) and (b), insert the following 
clause:

                      Proposal Guarantee (Jan 1990)

    (a) Failure to furnish a guarantee in the proper form and amount, by 
the time set for the receipt of offers, may be cause for rejection of 
the proposal.
    (b) The offeror shall furnish a guarantee in the form of a firm 
commitment, such as a bid bond, postal money order, certified check, 
cashier's check, irrevocable letter of credit, or, under Treasury 
Department regulations, certain bonds or notes of the United States. The 
amount of this guarantee shall be 20 percent of the total amount of the 
proposal price, excluding options and additives if any, or $3,000,000, 
whichever is less. The Contracting Officer will return guarantees, other 
than bid bonds, (1) to unsuccessful offerors as soon as practicable 
after the completion of the evaluation process, and (2) to the 
successful offeror upon execution of contractual documents and bonds 
(including any necessary coinsurance or reinsurance agreements), as 
required by the proposal as accepted.
    (c) If the successful offeror, upon acceptance of its bid by the 
Government within the period specified for acceptance, fails to execute 
all contractual documents or give a bond(s) as required by the 
solicitation within the time specified, the Contracting Officer may 
terminate the contract for default.
    (d) Unless otherwise specified in the proposal, the offeror will (1) 
allow 60 days for acceptance of its proposal, and (2) give bond within 
10 days after receipt of the forms by the offeror.
    (e) In the event the contract is terminated for default, the 
Contractor is liable for any cost of acquiring the work that exceeds the 
amount of its proposal, and the proposal guarantee is available to 
offset the difference.
    (f) Regarding paragraph (b) of this clause, if a bid bond is 
furnished, it must be submitted on Standard Form 24. Corporations 
executing the bond as sureties must be among those appearing on the U.S. 
Treasury Department's Circular 570, entitled ``Companies Holding 
Certificates of Authority as Acceptable Sureties on Federal Bonds and as 
Acceptable Reinsuring Companies'', and must be acting within the 
limitations set forth therein. If the contract work is to be performed 
in Panama, corporations that appear on the Panama Canal Commission's 
list of locally acceptable sureties, and that act within the limitations 
set forth therein, may be used in lieu of those appearing on Circular 
570.

                             (End of clause)



3552.228-76  Performance Bond.

    As prescribed in 3528.103-70(a), insert the following clause:

                       Performance Bond (Jan 1990)

    (a) The Contractor shall furnish a performance bond with good and 
sufficient surety or sureties in connection with the work under this 
contract on Standard Form 25, which requires that the surety or sureties 
must be among those appearing on the current U.S. Treasury Department 
Circular 570 (published in the Federal Register), and any amendments 
thereto, and must be acting within the limitations set forth therein. If 
the contract work is to be performed in Panama, corporations that appear 
on the Panama Canal Commission's list of locally acceptable sureties, 
and that act within the limitations set forth therein, may be used in 
lieu of those appearing on Circular 570. The bond is to be completed in 
accordance with the instructions on the reverse side of Standard Form 
25.
    (b) The penal sum of such performance bond shall be 100 percent of 
the contract price. The bond must not be dated prior to the date of the 
contract and shall be furnished by the Contractor to the Contracting 
Officer not later than 30 calendar days after the date of receipt by the 
Contractor of notice of award of the contract. As used in Standard Form 
25, the term ``Government'' shall mean the ``Panama Canal Commission''.
    (c) Under the terms of Standard Form 25 and this contract, the penal 
obligation specified in paragraph (b) of this clause shall be in

[[Page 160]]

effect during the life of the contract and during all warranty periods 
stipulated in the contract.

                             (End of clause)



3552.228-77  Performance and Payment Bonds.

    As prescribed in 3528.103-70 (a) and (b), insert the following 
clause:

                Performance and Payment Bonds (Jan 1990)

    (a) General. (1) The bonds required by paragraphs (b) and (c) of 
this clause are to be completed in accordance with the instructions on 
the reverse side of the respective bond forms. Corporations executing 
the bonds as sureties must be among those appearing on the current U.S. 
Treasury Department Circular 570 (published in the Federal Register), 
and any amendments thereto, and must be acting within the limitations 
set forth therein. If the contract work is to be performed in Panama, 
corporations that appear on the Panama Canal Commission's list of 
locally acceptable sureties, and that act within the limitations set 
forth therein, may be used in lieu of those appearing on Circular 570.
    (2) The bonds must not be dated prior to the date of the contract 
and shall be furnished by the Contractor to the Contracting Officer not 
later than 30 calendar days after the date of receipt by the Contractor 
of notice of award of the contract.
    (b) Performance Bond. The Contractor shall furnish a performance 
bond on Standard Form 25 in connection with the performance of the work 
under this contract. The penal sum of such bond shall be 100 percent of 
the contract price.
    (c) Payment Bond. The Contractor shall furnish a payment bond on 
Standard Form 1416 for the protection of persons furnishing material 
and/or labor in the prosecution of the contract. The penal sum of such 
bond shall be as follows: (1) 50 percent of the contract price if such 
price is not more than $1,000,000; (2) 40 percent of the contract price 
if such price is more than $1,000,000 but not more than $5,000,000; or 
(3) $2,500,000 if the contract price is more than $5,000,000.

                             (End of clause)



3552.231-70  Travel Costs.

    As prescribed in 3531.205-46(b), insert the following clause:

                         Travel Costs (Jan 1990)

    Costs incurred by the Contractor for travel and per diem in the 
performance of this contract that are authorized elsewhere in this 
contract shall be reimbursed to the Contractor in accordance with the 
Federal Travel Regulations, prescribed by the General Services 
Administration, in effect on the dates of performance of this contract.

                             (End of clause)



3552.232-70  Contract Payments.

    As prescribed in 3532.111(a)7, insert the following clause:

                      Contract Payments (Jan 1990)

    (a) Contract payments, unless otherwise specified, will be made in 
United States currency, by check drawn on a local branch of a United 
States bank.
    (b) When the Contracting Officer determines that the value of 
materials delivered to the work site may be taken into account in 
preparing the progress payment estimate, the Contractor shall:
    (1) Compile the initial inventory list which shall be complete as 
regards to descriptions, quantities, nomenclatures, and prices, and 
shall be fully supported by certified invoices or other documentary 
evidence acceptable to the Contracting Officer. The list must be revised 
each month to show additions to the inventory, if any (supported by 
additional invoices), and deletions of material used during the month.
    (2) Submit monthly, subsequent lists for the material previously 
covered by certified invoices showing the exact status of remaining 
material based on a physical inventory.
    (3) Furnish inventory lists in duplicate at least five days prior to 
the date for submission of progress estimate for monthly payment.
    (c) In approving payments for material inventories, the Contracting 
Officer will authorize payment of 75 percent of the cost of material as 
part of the monthly payments, provided, however, that:
    (1) Any line item with a total value of less than $100 will be 
deleted; and
    (2) The total value of the inventory, exclusive of deleted line 
items, exceeds $1,000.

                             (End of clause)



3552.232-71  Availability of Funds.

    As prescribed in 3532.705-1, insert the following clause:

                    Availability of Funds (Jan 1990)

    The authorization of performance of work under this contract during 
the initial contract period and any extension period(s) is contingent 
upon the availability of funds to procure this service. If the contract 
is awarded or extended, the Panama Canal Commission's obligation beyond 
the end of the fiscal year (September 30) in which the award or 
extension is made is contingent upon the availability of funds from 
which payment for the contract services can be made. No legal liability 
on the part of the Panama Canal

[[Page 161]]

Commission for payment of any money beyond the end of each fiscal year 
(September 30) shall arise unless or until funds are made available to 
the Contracting Officer for performance and written notice of such 
availability is given to the Contractor.

                             (End of clause)



3552.232-72  Presentation of Statement of Release From Claims.

    As prescribed in 3532.806(a), insert the following clause:

       Presentation of Statement of Release From Claims (Jan 1990)

    As a condition for final payment, the Contractor shall present a 
release of all claims against the Government arising by virtue of this 
contract. The release shall be applicable to all claims except those 
that the Contractor has specifically excepted in stated amounts from the 
operation of the release. A release may also be required of the assignee 
if the Contractor's claim to amounts payable under this contract has 
been assigned under the Assignment of Claims Act of 1940 (31 U.S.C. 203 
and 41 U.S.C. 15). The release is due within 14 days of final 
acceptance.

                             (End of clause)



3552.232-73  Invoices.

    As prescribed in 3532.111(a)(8), insert a clause substantially as 
follows:

                           Invoices (Jan 1990)

    (a) Invoices shall be submitted in an original and two copies to the 
office designated elsewhere in this contract.
    (b) To constitute a proper invoice for supply or service (other than 
architect-engineer service) contracts, the invoice must include the 
items listed in paragraph (a)(4), subdivisions (i) through (viii) of 
clause 52.232-25, Prompt Payment. The invoice must be accompanied by a 
copy of the packing list, showing weights and measurements (gross and 
net) and contents of each package, if applicable. If items are mailed, 
the insurance parcel post receipt or copy thereof must accompany the 
invoice.
    (c) To constitute a proper invoice for construction contracts, the 
invoice must include the items listed in paragraph (a)(2), subdivisions 
(i) through (ix) of clause 52.232-27, Prompt Payment for Construction 
Contracts.
    (d) To constitute a proper invoice for architect-engineer services, 
the invoice must include the items listed in paragraph (a)(3), 
subdivisions (i) through (viii) of clause 52.232-26, Prompt Payment for 
Fixed-Price Architect-Engineer Contracts.
    (e) If this contract requires a written release from the Contractor 
with respect to claims, the release must accompany the invoice.

                             (End of clause)



3552.236-70  Mailing of Correspondence and Bids.

    As prescribed in 3536.371(a)(6), insert the following provision:

              Mailing of Correspondence and Bids (Jan 1990)

    (a) Prospective bidders may submit inquiries concerning the 
specifications by writing the following:

(For local bidders)
Specifications and Estimates Branch
Engineering Division
Engineering and Construction Bureau
Balboa, Republic of Panama

(For other bidders)
Specifications and Estimates Branch
Engineering Division
Engineering and Construction Bureau
APO Miami 34011-5000

    (b) Bids to be mailed shall be addressed as follows:

(For local bidders)
Contracting Officer
Engineering and Construction Bureau
Panama Canal Commission
Balboa, Republic of Panama

(For other bidders)
Contracting Officer
Engineering and Construction Bureau
Panama Canal Commission
APO Miami 34011-5000

                           (End of provision)



3552.236-71  Additive Items.

    As prescribed in 3536.371(a)(7), insert the following provision:

                        Additive Items (Jan 1990)

    (a) The low bidder for purposes of award shall be the conforming 
responsive bidder offering the lowest total price for the base bid item 
plus the largest number of additive bid items that can be awarded in the 
numerical order of priority listed in the schedule within the funds 
determined by the Contracting Officer to be available on the date of bid 
opening.
    (b) For example, when the amount of available funds is $100,000, and 
a bidder's base bid and bid for successive additives are $85,000, 
$10,000, $8,000, $6,000, and $4,000, respectively, the total amount of 
this bid for purposes of award would be $95,000 for the base bid plus 
the first additive, with the second, third and forth additives being 
omitted because the second additive ($8,000) would cause the total bid 
to exceed $100,000. If, for more than one

[[Page 162]]

bidder, the lowest total price for the base bid item plus the largest 
number of additive bid items that can be awarded are equal, then the low 
bidder for purposes of award shall be the one submitting the lowest 
price for the base bid item.
    (c) After the low bidder has been determined, the Contracting 
Officer shall be free to award the contract for the base bid item and 
any quantity of the additive bid items, but only in the numerical order 
of priority listed in the schedule, and provided that the total price is 
within the amount of funds available on the date of award and that the 
award does not exceed the price offered by any other conforming 
responsive bidder for the same bid items.
    (d) The Contracting Officer may reject a bid as nonresponsive if it 
is materially unbalanced as to prices for any of the different bid 
items. A bid is unbalanced when it is based on prices significantly less 
than cost for some work and prices which are significantly overstated 
for other work.

                           (End of provision)

                         Alternate I (Jan 1990)

    If the additives may be awarded with the base bid item in any 
combination, substitute the following text in place of the basic text:
    (a) The low bidder for purposes of award shall be the conforming 
responsive bidder offering the lowest total price for the base bid item 
plus, in the numerical order of priority listed in the schedule, the 
largest number of additive bid items that can be awarded within the 
funds determined by the Contracting Officer to be available on the date 
of bid opening.
    (b) If, for all bidders, inclusion of the next additive bid item in 
the listed order of priority would make the award exceed such available 
funds, it shall be omitted and the next subsequent additive bid item or 
items shall be included if the prices on one or more bids allow award 
thereon within the funds available. For example, when the amount of 
available funds is $100,000, and a bidder's base bid and bid for 
successive additives are $85,000, $10,000, $8,000, $6,000, and $4,000, 
respectively, the total amount of this bid item for purposes of award 
would be $99,000 for the base bid plus the first ($10,000) and fourth 
($4,000) additives. All bids shall be evaluated and the low bidder 
determined on the basis of the same additive bid items, as above 
provided. If, for more than one bidder, the lowest total price for the 
base bid item plus the largest number of additive bid items that can be 
awarded are equal, then the low bidder for purposes of award shall be 
the one submitting the lowest price for the base bid item.
    (c) After the low bidder has been determined, the Contracting 
Officer shall be free to award the contract for the base bid item and 
any quantity and combination of the additive bid items regardless of 
their numerical order of priority listed in the schedule, provided that 
the total price is within the amount of funds available on the date of 
award and that the award does not exceed the price offered by any other 
conforming responsive bidder for the same bid items.
    (d) The Contracting Officer may reject a bid as nonresponsive if it 
is materially unbalanced as to prices for any of the different bid 
items. A bid is unbalanced when it is based on prices significantly less 
than cost for some work and prices which are significantly overstated 
for other work.



3552.236-72  Cost Limitation.

    As prescribed in 3536.371(a)(9), insert the following provision:

                       Cost Limitation (Jan 1990)

    A bid which does not contain separate bid prices for the items 
identified as subject to a cost limitation may be considered 
nonresponsive. By signing its bid, the bidder certifies that each price 
bid on items subject to a cost limitation includes an appropriate 
apportionment of all applicable estimated costs, direct and indirect, as 
well as overhead and profit. Bids may be rejected which (1) have been 
materially unbalanced for the purpose of bringing affected items within 
cost limitations, or (2) exceed the cost limitations unless such 
limitations have been waived by the Commission's Procurement Executive 
prior to award.

                           (End of provision)



3552.236-73  Scope of Work.

    As prescribed in 3536.570(k), insert the following clause:

                        Scope of Work (Jan 1990)

    The Contractor shall furnish all plant, materials, equipment, 
supplies, labor and transportation, including, fuel, power, water 
(except any materials, equipment, utility or service, if any, specified 
herein to be furnished by the Commission), as required to accomplish all 
work under the contract, in strict accordance with the specifications, 
schedules, and drawings, all of which are made a part hereof, and 
including such detail drawings as may be furnished by the Contracting 
Officer from time to time during the prosecution of the work in 
explanation of said drawings.

                             (End of clause)



3552.236-74  Work Sites, Yards, Shops, and Offices.

    As prescribed in 3536.570(l), insert the following clause:

[[Page 163]]

            Work Sites, Yards, Shows, and Offices (Jan 1990)

    (a) The term ``work site'' will embrace all areas wherein operations 
are conducted by the Contractor in connection with the contract, 
including Commission work areas, plant, shops, yards, offices, camps and 
other facilities. The Contractor may be permitted to use areas within 
the Canal Operating Area for storage-of-work purposes on a temporary 
basis.
    (b) Prior to commencement of work, the Contractor shall, upon 
request, submit for the approval of the Contracting Officer, prints in 
quadruplicate, showing the locations of its major plant, offices, 
buildings, shops, storage yards, and other construction appurtenances 
which it proposes to construct. The Contractor shall remove any 
structure which it may construct in Canal Operating Areas, and restore 
the work site to its original condition after completion of the work.
    (c) If, at any time during the progress of the work, areas which 
have been allocated to the Contractor are not being used by the 
Contractor or are not essential to the future execution of the work, as 
determined by the Contracting Officer, the Contractor shall, when so 
directed, promptly clean up and vacate such areas at no expense to the 
Commission. The Contractor shall keep the buildings and grounds in use 
by the contractor at the work site in an orderly and sanitary condition, 
subject to the approval of the Contracting Officer.
    (d) Only equipment and materials required or used in connection with 
the work under the contract may be stored in Canal Operating Areas. Upon 
completion of the contract, and before final payment is made, the 
Contractor shall remove all equipment and materials from such areas.

                             (End of clause)



3552.236-75  Work Time Limitations.

    As prescribed in 3536.570(m), insert the following clause:

                    Work Time Limitations (Jan 1990)

    No work shall be done on Sundays or on days treated as a holiday for 
employees of United States Government agencies in the Republic of 
Panama, unless authorized or directed by the Contracting Officer. 
Requests by the Contractor to work on such days must be made in writing 
at least three days in advance.

                             (End of clause)



3552.236-76  Accident Prevention.

    As prescribed in 3536.570(n), insert the following clause:

                     Accident Prevention (Jan 1990)

    (a) In performing this contract, the Contractor shall provide for 
protecting the lives and health of employees and other persons; 
preventing damage to property, materials, supplies and equipment; and 
avoiding work interruptions. For these purposes, the Contractor shall--
    (1) Provide appropriate safety barricades, signs, and signal lights;
    (2) Comply with the standards issued by the Secretary of Labor at 29 
CFR part 1926 and 29 CFR part 1910; and
    (3) Ensure that any additional measures the Contracting Officer 
determines to be reasonably necessary for this purpose are taken.
    (b) The Contractor shall maintain an accurate record of exposure 
data on all accidents incident to work performed under this contract 
resulting in death, traumatic injury, occupational disease, or damage to 
property, materials, supplies, or equipment. The Contractor shall report 
this data in the manner prescribed by the Contracting Officer.
    (c) The Contracting Officer shall notify the Contractor of any 
noncompliance with these requirements and of the corrective action 
required. This notice, when delivered to the Contractor or the 
Contractor's representative at the site of the work, shall be deemed 
sufficient notice of the noncompliance and corrective action required. 
After receiving the notice, the Contractor shall immediately take 
corrective action. If the Contractor fails or refuses to take corrective 
action promptly, the Contracting Officer may issue an order stopping all 
or part of the work until satisfactory corrective action has been taken. 
The Contractor shall not base any claim or request for equitable 
adjustment for additional time or money on any stop order issued under 
these circumstances.
    (d) The Contractor shall call to the attention of the Contracting 
Officer or his representative any unsafe condition which is not within 
the power of the Contractor to correct but which could be corrected by 
others.
    (e) The Contractor shall, when performing work of an electrical 
nature, or when working in close proximity to electrical equipment or 
circuits, observe the following:
    (1) Be responsible for determining that the facility on which his 
men are to work is de-energized, isolated, and identified with accepted 
tag out/lock out procedures. The Commission will de-energize or isolate 
the cable, conductor, bus, circuit breaker, or line on which the 
Contractor desires to work. The Commission will also re-energize the 
cable, conductor, bus, circuit breaker, or line upon which the 
Contractor has completed work and which he certifies is ready for 
service.
    (2) When performing work, such as painting, roofing or modifying 
buildings, in close

[[Page 164]]

proximity to electric wires, work shall be scheduled in such a manner 
that these wires shall be de-energized during the period men are working 
around them. Arrangements shall be made with the Contracting Officer's 
representative for de-energizing such service wires and, unless 
otherwise specified, work requests shall be furnished by the Contractor 
to the Commission's Electrical Division to cover such work.
    (3) Painting, alterations, and additions to Commission facilities 
frequently require work to be performed in close proximity to electrical 
equipment and circuits within buildings. When such work, in the opinion 
of the Contracting Officer, requires the de-energization of circuits, 
arrangement for de-energizing services will be made by the Contracting 
Officer with the agency involved.
    (4) De-energization of circuits required in paragraphs (e)(2) and 
(3) of this clause shall be scheduled in such a manner that prolonged 
service interruptions shall be avoided.
    (f) In addition to the above, the Contractor shall:
    (1) Submit, within 30 calendar days after date of award, a written 
outline of his proposed safety program for the contract. The safety 
program shall include frequent and appropriate safety training sessions 
for employees as a regular and integral part of the contract activities.
    (2) Submit for approval a list of the personal protective equipment, 
by type and manufacturer, to be used by employees in hazardous 
occupations.
    (3) Confer with representatives of the Contracting Officer to 
discuss and develop mutual understandings relative to administration of 
the overall safety program.
    (g) The Contractor shall be responsible for its subcontractors' 
compliance with this clause.

                             (End of clause)

[55 FR 7664, Mar. 2, 1990; 55 FR 38331, Sept. 18, 1990]



3552.236-77  Working in Confined Spaces.

    As prescribed in 3536.570(o), insert the following clause:

                  Working in Confined Spaces (Jan 1990)

    The Contractor shall comply with the Commission's policy regarding 
work to be performed in confined or enclosed spaces. This policy is set 
forth in a pamphlet entitled ``Panama Canal Commission Confined Spaces 
Policy'', which will be made available to the Contractor, or a 
prospective contractor, upon request to the Contracting Officer or his 
representative.

                             (End of clause)



3552.236-78  Safety Sign.

    As prescribed in 3536.570(p), insert the following clause:

                         Safety Sign (Jan 1990)

    The Contractor shall construct a safety sign at the work site at a 
location directed by the Contracting Officer. The sign shall be 6 feet 
by 4 feet in size and shall conform to the requirements of the sketch 
attached at the end of these General Conditions. The sign shall be 
erected as soon as possible, but not later than 10 days after work is 
initiated at the work site. No separate payment will be made for 
erecting and maintaining the safety sign.

                             (End of clause)



3552.236-79  Protection of Material and Work.

    As prescribed in 3536.570(q), insert the following clause:

               Protection of Material and Work (Jan 1990)

    The Contractor shall protect and preserve all material, supplies and 
equipment of every description (including property which may be 
furnished or owned by the Commission) and all work performed. All 
reasonable requests of the Contracting Officer to enclose or specially 
protect such property shall be complied with. If, as determined by the 
Contracting Officer, material, equipment, supplies, and work performed 
are not adequately protected by the Contractor, such property may be 
protected by the Commission, and the cost thereof may be charged to the 
Contractor or deducted from any payments due the Contractor.

                             (End of clause)



3552.236-80  Toilet Facilities.

    As prescribed in 3536.570(r), insert the following clause:

                      Toilet Facilities (Jan 1990)

    Unless otherwise noted, the Contractor shall provide and maintain 
adequate toilet facilities at the work site for the use of all personnel 
engaged in the work under the contract. The number, types and locations 
of such toilet facilities shall be approved by the Contracting Officer. 
These facilities, where connection to the sanitary sewer system is 
possible, will be connected and disconnected to the sewer system by the 
Commission at the expense of the Contractor. The toilet facilities shall 
be maintained by the Contractor in a clean and sanitary condition.

[[Page 165]]

Upon completion of the work, all toilet facilities shall be removed by 
the Contractor.

                             (End of clause)



3552.236-81  Drinking Water.

    As prescribed in 3536.570(s), insert the following clause:

                        Drinking Water (Jan 1990)

    Unless otherwise noted, the Contractor shall provide suitable 
drinking water and sanitary dispensing facilities for the Contractor's 
employees.

                             (End of clause)



3552.236-82  Contract Bid Breakdown.

    As prescribed in 3536.570(t), insert the following clause:

                    Contract Bid Breakdown (Jan 1990)

    The Contractor shall, within 10 days after receipt of the Notice to 
Proceed, or on receipt of request, submit for approval a breakdown of 
its bid in a form to be outlined by the Contracting Officer. 
Supplementary bid breakdowns of all or part of the bid shall be 
furnished if requested by the Contracting Officer. Payments to the 
Contractor shall be based upon the information presented in the approved 
bid breakdown.

                             (End of clause)



3552.236-83  Descriptive Data and Correspondence.

    As prescribed in 3536.570(u), insert the following clause:

             Descriptive Data and Correspondence (Jan 1990)

    (a) All catalogs, operating instructions, descriptive literature, 
references, specifications, drawings and notes relevant to the equipment 
furnished under the specifications, and correspondence shall be in the 
English language. All drawings shall be prepared in accordance with 
American Standard Drafting Room Practice as approved by the American 
National Standard Institute (ANSI) standards and in accordance with the 
following:
    (1) All dimensions shall be given in feet and inches.
    (2) All weights shall be avoirdupois scales.
    (3) All volume measurements shall be in cubic feet, cubic inches or 
U.S. gallons (231 cu. in/gal).
    (4) All heat quantities shall be in British thermal units (Btu's).
    (5) All instruments shall read in units of the English system, 
except gallons shall be U.S. gallons as noted in paragraph (a)(3) of 
this clause.
    (b) When required by the various sections of these specifications or 
when requested by the Contracting Officer, seven (7) copies (unless 
otherwise specified) of the following items shall be submitted by the 
Contractor to the Contracting Officer for approval.
    (1) Material Lists: Before any materials, fixtures or equipment are 
purchased, the Contractor shall submit a complete list of materials, 
fixtures and equipment to be incorporated in the work, together with the 
names and addresses of the manufacturers and their catalog numbers and 
trade names. A separate complete list shall be furnished for the 
equipment called for under each section of the specifications. No 
consideration will be given to partial lists submitted from time to 
time.
    (2) Descriptive Data: In order to establish quality or suitability 
of materials, fixtures and equipment, the Contractor shall furnish 
detailed information and descriptive data for the various items. 
Approval of items will be based on manufacturer's published ratings. Any 
items which are not in accordance with the specifications will be 
rejected. The product of any reputable manufacturer regularly engaged in 
the commercial production of specified equipment will not be excluded on 
the basis of minor differences, provided all essential requirements of 
this specification relative to materials, capacity, and performance are 
met.
    (3) Samples: (i) The Contractor shall submit all samples within a 
reasonable time before use to permit inspection and testing. Samples of 
materials subject to laboratory tests require, generally, a minimum of 
20 days for tests after receipt of sample by the Contracting Officer. 
However, considerably more time may be required depending on the nature 
of the tests and the ability of the laboratory to take care of current 
testing requirements.
    (ii) Samples of the sizes and numbers required by the Contracting 
Officer or specified in the contract shall be submitted (except when 
this requirement is waived by the Contracting Officer) with label on 
each, giving contract number, specification paragraph, name and 
materials, trade name, name of manufacturer, place of origin, name and 
location of building on which to be used, and name of Contractor 
submitting same.
    (iii) Samples shall be so packed as to ensure delivery at 
destination in good condition and with all transportation charges 
prepaid by sender.
    (iv) Samples of materials not subject to destructive tests, when 
approved, will be kept on file in the office of the Contracting Officer 
until the completion of the work, except samples of hardware or other 
items approved by the Contracting Officer, which may be suitably marked 
for identification and installed in the work. If the Contractor desires 
an approved sample for the Contractor's own

[[Page 166]]

file or for a manufacturer, the Contractor shall submit sufficient 
additional samples to permit the desired distribution. Samples approved 
or rejected will be returned to the Contractor only at the Contractor's 
request and expense.
    (v) Samples selected will be tested in accordance with the 
requirements of the applicable material specifications. If a sample 
fails to meet specification requirements, the cost of testing shall be 
at the expense of the Contractor. Failure of samples to pass specified 
requirements will be sufficient cause for refusal to consider for this 
work any further samples from the manufacturer whose materials have 
failed to pass the required tests.
    (c) Submittals: Each submittal shall be accompanied by the required 
number of Panama Canal Form 3062, Submittal Data For Approval, fully 
executed and certified by the Contractor. When possible, a single 
transmittal shall be used for all work of a section of the 
specifications, but in no instance shall a transmittal include work of 
more than one section. Each copy of each item submitted for approval 
shall also be properly identified as to the subject matter indicated 
thereon, the item of equipment or material to which it pertains, and the 
contract number under which it is submitted. Each point of difference 
between the proposed equipment or material and the specified equipment 
or material shall be clearly indicated on the submittal. The submittals 
shall be complete and shall be checked by both the materials or 
equipment supplier and the Contractor, and shall contain all required 
and necessary detailed information. Fabrication of the equipment and 
construction where involved shall not start until the submittals have 
been approved.
    (d) If approved by the Contracting Officer, each copy of the 
submittal will be identified as having received such approval by being 
stamped either ``Approved'' or ``Approved as Noted'', and one set will 
be returned to the Contractor. Such approved submittals need not be 
resubmitted. If, however, the set returned to the Contractor is stamped 
``Disapproved'', such submittal shall be resubmitted as expeditiously as 
possible. If the Contractor desires to have more than one copy returned 
for the Contractor's use, the Contractor must increase the number of 
copies submitted accordingly and must so indicate on the transmittal 
form.
    (e) The approval of submittals by the Contracting Officer shall not 
be construed as a complete check, but will indicate only that, in 
general, the materials, equipment, system, arrangement, detailing and 
method of construction are satisfactory. Approval will not relieve the 
Contractor of the responsibility for any error or omission which may 
exist, and the Contractor shall be responsible for the dimensions and 
design of adequate connections, details, satisfactory construction, 
installation and operation of all work in accordance with the contract 
provisions. Approval shall be subject to final, in-place inspection of 
the work.

                             (End of clause)



3552.236-84  Instruction Books.

    As prescribed in 3536.570(u), insert the following clause:

                      Instruction Books (Jan 1990)

    The Contractor shall deliver to the Contracting Officer nine (9) 
copies (unless otherwise specified) of all instruction books as called 
for under the various sections of the Technical Conditions. The 
instruction books shall be submitted and approved before work can be 
started on installation of the equipment to which they pertain. Each 
copy of the instruction books shall provide legible, complete and clear 
instructions, descriptions and data for installation, operation, 
maintenance and repair of the equipment as well as replacement parts 
lists. Each copy of an instruction book shall be bound in separate 
durable covers. Method of binding shall be post type or equivalent to 
permit insertion of replacement pages. Ring or spiral type loose leaf 
binders are not acceptable. Each copy shall be properly and indelibly 
identified with the name of the project, the contract number, and the 
name and location of the equipment to which it pertains.

                             (End of clause)



3552.236-85  Record Drawings.

    As prescribed in 3536.570(u), insert the following clause:

                       Record Drawings (Jan 1990)

    The Contractor shall, during the progress of the work, keep a 
careful and current record, on a separate set of contract drawings, of 
all changes and corrections from the layouts shown on the drawings. 
These drawings shall be available for inspection at all times at the 
work site indicated by the drawings. If the Contracting Officer 
determines that the record drawings are seriously out of date, the 
Contracting Officer may require the Contractor to cease physical work on 
the portion of the work covered by the drawings until the drawings are 
brought up to date. Any costs of delays resulting from such actions by 
the Contracting Officer shall be borne by the Contractor. Upon 
completion, the Contractor shall revise one set of prints of contract 
drawings, furnished by the Contracting Officer, showing the work as 
actually constructed. These drawings shall be delivered to the 
Contracting Officer within 14 calendar days after receipt of the 
``Acceptance of Work'' letter. All revisions made to

[[Page 167]]

the contract drawings shall be shown so that they stand out against the 
unchanged items in the drawing.

                             (End of clause)



3552.236-86  Restricted Areas.

    As prescribed in 3536.570(v), insert the following clause:

                       Restricted Areas (Jan 1990)

    (a) If any of the work is located within a restricted area (such as 
locks areas, power stations, water purification plants, pump stations, 
and industrial areas), installation clearances, at no cost to the 
Contractor, will be required for all employees who must work in the 
restricted area. The Contractor shall submit to the Contracting Officer 
a listing of all employees to be cleared. The listing should be 
submitted at least 15 days before the anticipated starting date and 
should include the full name and cedula or identification card number of 
each employee and must be in alphabetical order.
    (b) Employees of the Contractor must carry their cedulas or 
identification cards at all times and produce them upon request of 
authorized personnel. The Contractor shall ensure that the Contractor's 
employees remain in the immediate area of work and do not wander 
indiscriminately about the restricted areas.

                             (End of clause)



3552.236-87  Surplus Space.

    As prescribed in 3536.570(y), insert the following clause:

                        Surplus Space (Jan 1990)

    Surplus space in Commission buildings, facilities, or land areas may 
be rented by Commission contractors, or by subcontractors through and in 
the name of a Commission contractor, for use in support of contract 
performance upon a written request by the Contractor to the Contracting 
Officer. The request shall include specific information regarding the 
location desired, the number of square feet required, and the type of 
activities to be conducted. If the request is accepted, the space 
assignment will be administered under the terms of a ``Letter of 
Authorization'' (LOA). Failure by the Contractor to comply with any of 
the terms of the LOA, or to completely remove itself from the rented 
space after the Contracting Officer has advised the Contractor that the 
LOA is terminated, shall be construed as a violation of this contract 
clause and shall entitle the Contracting Officer to take whatever action 
is appropriate under the contract, including termination for default and 
the withholding of final payment.

                             (End of clause)



3552.243-70  Modification Proposals--Price Breakdown.

    As prescribed in 3543.205 insert the following clause:

           Modification Proposals--Price Breakdown (Jan 1990)

    The Contractor shall furnish an itemized price breakdown, as 
required by the Contracting Officer, with the Contractor's proposal in 
connection with a contract modification. Unless otherwise directed, the 
breakdown shall be in sufficient detail to permit an analysis of all 
material, labor, equipment, subcontract and overhead costs as well as 
profit, and shall cover all work involved to accomplish the 
modification, whether deleted, added or changed. Any amount claimed for 
subcontracts shall be supported by a similar price breakdown. In 
addition, if the proposal includes a time extension, a justification 
therefore shall also be furnished. The proposal, together with the price 
breakdown and time extension justification, shall be furnished by such 
date as may be specified by the Contracting Officer.

                             (End of clause)



3552.244-70  Subcontractors.

    As prescribed in 3536.570(x), insert the following clause:

                        Subcontractors (Jan 1990)

    If subcontracts have been awarded for work under this contract, the 
Contractor shall submit to the Contracting Officer, within 30 calendar 
days after the date of award, a statement on the Commission's standard 
``Subcontractors'' form setting forth the name and address of the 
subcontractor, a summary description of the work subcontracted and a 
description of subcontractor's previous experience in related work. If, 
at any time, the Contracting Officer determines that any subcontractor's 
performance is unsatisfactory, the Contracting Officer will notify the 
contractor accordingly, and steps will be taken immediately for 
cancellation of such subcontract. Subletting by subcontractors shall be 
subject to the same regulations. Nothing contained in this contract 
shall create any contractual relation between the subcontractor and the 
Commission. Subcontractors and their employees shall be considered to be 
employees of the Contractor.

[[Page 168]]

                             (End of clause)



3552.247-70  Evaluation of Delivery Terms in Contract Awards.

    As prescribed in 3547.370, insert the following provision:

       Evaluation of Delivery Terms in Contract Awards (Jan 1990)

    (a) When competing offers are received which specify the two 
different allowable terms of delivery, the offers will be evaluated at 
the actual or constructive landed cost in the Republic of Panama in 
accordance with the procedures stated below. In this connection, and for 
evaluation purposes only, the point of delivery will be the Port of 
Balboa, Panama or the Port of Cristobal, Panama for all offerors. 
Therefore, offerors quoting on an f.o.b. destination New Orleans basis 
shall furnish the total cubic measurement for each item being offered in 
order to apply the following procedures:
    (1) F.o.b. Destination New Orleans: Offers quoting delivery in the 
United States are required on an f.o.b. destination New Orleans, 
Louisiana basis since transportation from New Orleans will be by a 
vessel, operating pursuant to a U.S. Government contract, which will 
discharge at the Port of Balboa. In order to compare these offers with 
offers quoting c.i.f. destination Panama, the following factors will be 
applied:
    (i) Ocean freight, New Orleans to Balboa $________ (Contracting 
Officer insert appropriate amount) per measurement ton of 40 cubic feet 
(MTON). This rate includes stevedoring and handling fees.
    (ii) A self-insured loss factor of one percent of the dollar value 
of the offer price.
    (iii) If the delivery port specified in the Commission solicitation 
is Cristobal, transportation from Balboa to Cristobal will be calculated 
at the rate of $________ (Contracting Officer insert appropriate amount) 
per MTON.
    (2) C.i.f. Destination Panama: Foreign offerors proposing to ship 
from foreign countries, U.S. offerors preferring to ship directly to 
Panama, and Panamanian offerors proposing to ship from stock within the 
Republic of Panama, are required to ship on a c.i.f. Balboa, Panama or 
Cristobal, Panama basis, as applicable.
    (b) Failure to furnish the total cubic measurements of the 
individual items could result in the rejection of the offer. Moreover, 
if actual total cubic measurements vary from the information furnished 
and the award was made to the Contractor on the constructive cost based 
on the erroneous information, the Contractor will be charged for the 
difference between the actual cost and the price of the next low 
responsive offeror.

                           (End of provision)



PART 3553--FORMS--Table of Contents




Sec.
3553.000  Scope of part.

                         Subpart 3553.1--General

3553.107  Obtaining forms.

                  Subpart 3553.2--Prescription of Forms

3553.200  Scope of subpart.
3553.213  Small purchase and other simplified purchase procedures (Forms 
          1010, 1820, 1821, 1822, 2008, 3083, 3163, 3163-MTD, 7071, 
          7074).
3553.215  Contracting by negotiation (Form 6122).
3553.236  Construction and architect-engineer contracts (Form 3062).

                  Subpart 3553.3--Illustration of Forms

3553.300  Scope of subpart.

    Authority: 40 U.S.C. 486(c).

    Source: 55 FR 7673, Mar. 2, 1990, unless otherwise noted.



3553.000  Scope of part.

    This part prescribes Panama Canal Commission forms to be used in 
various acquisitions and other information pertaining to the forms.



                         Subpart 3553.1--General



3553.107  Obtaining forms.

    Commission forms may be obtained from the cognizant Commission 
contracting office or by written request as indicated below:
    (a) For all forms prescribed at 3553.213, write to: Panama Canal 
Commission, Logistical Support Division, APO Miami 34011-5000;
    (b) For the forms prescribed at 3553.215 and 3553.236, write to: 
Panama Canal Commission, Construction Division, APO Miami 34011-5000.



                  Subpart 3553.2--Prescription of Forms



3553.200  Scope of subpart.

    This subpart prescribes Commission forms for use in the acquisition 
of supplies and services, including construction. The subpart is 
arranged by subject matter in the same order as, and is

[[Page 169]]

keyed to, the parts of the PAR in which the form usage requirements are 
addressed.



3553.213  Small purchase and other simplified purchase procedures (Forms 1010, 1820, 1821, 1822, 2008, 3083, 3163, 3163-MTD, 7071, 7074).

    The following forms are prescribed as stated below for use in small 
purchases, orders under existing contracts or agreements, and orders 
from required sources of supplies and services:
    (a) Panama Canal Form No. 1010, Purchase Order. This form may be 
used by the Inventory Management Branch in lieu of Optional Forms 347 
and 348 for the purposes specified in 3513.505-2(a).
    (b) Panama Canal Form No. 1820, Purchase Order. This form may be 
used by the Purchasing and Contract Branch in lieu of Optional Form 347 
for the purposes specified in 3513.505-2(b).
    (c) Panama Canal Form No. 1821, Purchase Requisition. This is a 6-
sheet snap-out form. The first, fifth, and sixth sheets are entitled 
``Purchase Requisition'' (the second, third and fourth sheets are 
explained in following paragraph (d)). The purchase requisition is an 
internal document that is prescribed for use only by Commission 
activities to request purchasing action by the Purchasing and Contracts 
Branch (see 3513.505-70).
    (d) Panama Canal Form No. 1821, Request for Quotation. This is a 6-
sheet snap-out form. The second, third and fourth sheets are entitled 
``Request for Quotation'' (the first, fifth, and sixth sheets are 
explained in paragraph (c) of this section). As specified at 
3513.107(a)(4)(i), this form may be used by the Purchasing and Contracts 
Branch in lieu of Standard Form 18 for the solicitation of nonstock 
items and services.
    (e) Panama Canal Form No. 1822, Request For Quotation Continuation. 
As specified at 3513.107(a)(4)(ii), this form may be used with Panama 
Canal Form No. 1821 when additional space is needed.
    (f) Panama Canal Form No. 2008, This Is A Request For Prices; It Is 
Not An Order. As specified at 3513.107(a)(4)(iii), this form may be used 
by the Inventory Management Branch in lieu of Standard Form 18 for the 
solicitation of standard stock items.
    (g) Panama Canal Form No. 3083, Purchase Order Continuation. As 
specified at 3513.505-2(c), this form may be used with Panama Canal Form 
No. 1820, in lieu of Optional Form 348, when additional space is needed.
    (h) Panama Canal Form No. 3163, Division Purchase Order. As 
specified at 3513.505-2(d), this form may be used by all activities 
having contracting authority in lieu of Optional Form 347 for the 
decentralized procurement of supplies and services.
    (i) Panama Canal Form No. 3163-MTD, Division Purchase Order. As 
specified at 3513.505-2(e), this form may be used by the Motor 
Transportation Division and the New Orleans Branch, Logistical Support 
Division in lieu of Optional Form 347 for purchases of nonstandard stock 
automotive repair parts that do not exceed dollar amounts established by 
the General Services Director.
    (j) Panama Canal Commission Form 7071, General Contract Clauses and 
Provisions, Small Purchases. As specified at 3513.107(a)(4)(iv), this 
form shall be forwarded to prospective suppliers together with either 
Panama Canal Form No. 1821 or Panama Canal Form No. 2008, as applicable.
    (k) Panama Canal Commission Form 7074, Information Sheet. As 
specified at 3513.107(a)(4)(iv), this form shall be forwarded to 
prospective suppliers together with either Panama Canal Form No. 1821 or 
Panama Canal Form No. 2008, as applicable.



3553.215  Contracting by negotiation (Form 6122).

    As specified at 3515.804-6, Panama Canal Form No. 6122, Cost 
Breakdown, may be used by the contracting officer to require contractors 
to submit information for cost or price analysis in connection with 
requests for proposals or modifications not exceeding $25,000.



3553.236  Construction and architect-engineer contracts (Form 3062).

    As specified at 3536.571, Panama Canal Form 3062, Submittal Data For 
Approval, shall be used by contractors as a transmittal document when 
data is to be submitted for the contracting officer's approval pursuant 
to FAR clause

[[Page 170]]

52.236-5 or clause 3552.236-83 of this regulation.



                  Subpart 3553.3--Illustration of Forms



3553.300  Scope of subpart.

    PAR forms are not illustrated in the PAR. Persons wishing to obtain 
copies of Commission forms prescribed in the PAR may do so in accordance 
with 3553.107.

[[Page 171]]



             SUBCHAPTER I--AGENCY SUPPLEMENTARY REGULATIONS


PART 3570--ACQUISITION OF PANAMANIAN SUPPLIES AND SERVICES--Table of Contents




Sec.
3570.000  Scope of part.

                  Subpart 3570.1--Panamanian Preference

3570.101  Determination and definitions.
3570.102  Policy.

    Authority: 40 U.S.C. 486(c); Article IX of the Agreement in 
Implementation of Article III of the Panama Canal Treaty of 1977.

    Source: 55 FR 7674, Mar. 2, 1990, unless otherwise noted.



3570.000  Scope of part.

    This part provides guidance on implementation of Article IX of the 
Agreement in Implementation of Article III of the Panama Canal Treaty of 
1977 as it relates to the preferential acquisition of supplies and 
services obtainable in the Republic of Panama. (The pertinent Article IX 
language is set forth at 3525.801-74.)



                  Subpart 3570.1--Panamanian Preference



3570.101  Determination and definitions.

    (a) It has been determined by the Administrator of the Panama Canal 
Commission that the acquisition of supplies and services obtainable in 
the Republic of Panama is required under the conditions contemplated by 
Article IX.
    (b) For the purposes of this determination, the following words and 
terms, as used in Article IX and this part 3570, shall have the meanings 
stated below:
    Comparable in quality and price means the supplies or services (1) 
must conform to the purchase description, specifications, or statement 
of work that sets forth the Commission's requirements; and (2) can be 
acquired at a price equal to or lower than the price for similarly 
conforming supplies or services obtainable from sources outside the 
Republic of Panama.
    Goods means manufactured or unmanufactured articles, materials and 
supplies.
    Obtainable in the Republic of Panama means the supplies or services 
can be obtained from sources in the Republic of Panama.
    Panamanian origin means goods that are grown, mined, or produced in 
the Republic of Panama; or in the case of goods which consist in whole 
or in part of materials from another country, have been substantially 
transformed by processes performed in the Republic of Panama into new 
and different articles of commerce with a name, character, or use 
distinct from that of the article or articles from which they were so 
transformed.
    Supplies, pursuant to the definition in FAR 2.101, means ``all 
property except land or interest in land.'' Accordingly, the term 
includes construction.



3570.102  Policy.

    (a) When supplies or services can be obtained from sources both 
within and without the Republic of Panama, and the following conditions 
exist, preference shall be afforded to those sources within Panama to 
the maximum extent possible:
    (1) The supplies or services can be provided at the time they are 
required;
    (2) The supplies or services are comparable in quality and price to 
those that can be obtained from sources outside Panama; and
    (3) The sources in Panama:
    (i) Are determined to be responsible prospective contractors 
pursuant to FAR subpart 9.1, and
    (ii) Can comply in all material respects with the terms and 
conditions of the acquisition document.
    (b) In the comparison of prices with respect to subparagraph (a)(2) 
of this section, there shall be taken into account the cost of transport 
to the Republic of Panama, including freight, insurance, and handling. 
The cost of insurance shall be calculated at one percent (1%) of the 
value of the supplies, or any supplies incidental to services, in the 
event the contract does not require insurance.

[[Page 172]]

    (c) When choosing between goods from sources within Panama that are 
otherwise equal, preference shall be given to those goods having a 
larger percentage of components of Panamanian origin.
    (d) When conducting an acquisition of supplies or services for which 
the estimated cost is not expected to exceed the small purchase 
limitation in FAR part 13, participation may be limited to sources in 
Panama unless the contracting officer determines that there is no 
reasonable expectation of obtaining quotations from two or more such 
sources that:
    (1) Will be responsive to the required delivery time, and
    (2) Will be comparable in quality and price to supplies or services 
from sources outside Panama.
    (e)(1) In order to conduct an acquisition of supplies or services 
above the small purchase limitation and limit participation in the 
acquisition to sources in Panama, the contracting officer shall:
    (i) Prepare and submit a class or an individual determination and 
findings to the Procurement Executive, and
    (ii) Obtain that official's written approval of such determination 
and findings.
    (2) The determination and findings must clearly document that:
    (i) An acquisition limited to such sources would result in obtaining 
supplies or services at the time they are required that would be 
comparable in quality and price to those obtainable from sources outside 
Panama, or
    (ii) An acquisition from sources outside Panama would be 
impracticable because of the nature of the acquisition (e.g., a 
requirements type contract where deliveries must be made within a very 
short time span by trucks or pipeline from stockpiles or storage 
facilities located in Panama).

[[Page 173]]



             CHAPTER 44--FEDERAL EMERGENCY MANAGEMENT AGENCY

                          (Parts 4400 to 4499)

  --------------------------------------------------------------------

                          SUBCHAPTER A--GENERAL
Part                                                                Page
4401            Federal Emergency Management Agency (FEMA) 
                    Acquisition Regulation System...........         175
4402            Definition of words and terms...............         178
4403            Improper business practices and personal 
                    conflicts of interest...................         178
           SUBCHAPTER B--COMPETITION AND ACQUISITION PLANNING
4405            Publicizing contract actions................         180
4406            Competition requirements....................         180
4408            Required sources of supplies and services...         180
4409            Contractor qualifications...................         181
4412            Contract delivery or performance............         181
          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES
4414            Sealed bidding..............................         183
4415            Contracting by negotiation..................         183
4416            Types of contracts..........................         185
4417            Special contracting methods.................         187
                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS
4419            Small business and small disadvantaged 
                    business concerns.......................         188
4424            Protection of privacy and freedom of 
                    information.............................         188
4426            Other socioeconomic programs................         188
             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS
4429            Taxes.......................................         189
4432            Contract financing..........................         189

[[Page 174]]

4433            Protests, disputes and appeals..............         189
             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING
4435            Research and development contracting........         190
4436            Construction and architect-engineer 
                    contracts...............................         190
4450            Extraordinary contractual actions...........         190
                     SUBCHAPTER H--CLAUSES AND FORMS
4452            Solicitation provisions and contract clauses         192

[[Page 175]]


                          SUBCHAPTER A--GENERAL


PART 4401--FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA) ACQUISITION REGULATION SYSTEM--Table of Contents




Sec.
4401.000  Scope of part.

              Subpart 4401.1--Purpose, Authority, Issuance

4401.101  Purpose.
4401.103  Applicability.
4401.104  Issuance.
4401.104-1  Publication and code arrangement.
4401.104-3  Copies.

             Subpart 4401.3--Agency Acquisition Regulations

4401.301  Policy.
4401.303  Codification and public participation.

                 Subpart 4401.4--Deviations From the FAR

4401.403  Individual deviations.
4401.404  Class deviations.
4401.405  Deviations pertaining to treaties and executive agreements.

       Subpart 4401.6--Contracting Authority and Responsibilities

4401.600-70  Scope of subpart.
4401.601  General.
4401.603  Selection, appointment, and termination of appointment.
4401.603-2  Selection.
4401.603-3  Appointment.

               Subpart 4401.7--Determinations and Findings

4401.707-70  Signature authority.

  Subpart 4401.70--Procurement Contracts Versus Assistance Instruments

4401.7000  Scope of subpart.
4401.7001  Procurement contracts.
4401.7001-1  Situations for use.
4401.7001-2  Examples.
4401.7002  Assistance.
4401.7002-1  Grants.
4401.7002-2  Cooperative agreements.
4401.7002-3  Examples of unsubstantial involvement.
4401.7002-4  Examples of substantial involvement.

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

    Source: 50 FR 31316, Aug. 1, 1985, unless otherwise noted.



4401.000  Scope of part.

    This part sets forth policies and procedures concerning the Federal 
Emergency Management Agency Acquisition Regulation (FEMAAR) System.



              Subpart 4401.1--Purpose, Authority, Issuance



4401.101  Purpose.

    FEMAAR is a supplement to the Federal Acquisition Regulation (FAR) 
and is established for the codification and publication of uniform 
policies and procedures for acquisitions by FEMA.



4401.103  Applicability.

    This regulation applies to all acquisitions within FEMA, but not to 
placement or administration of cooperative agreements or grants.



4401.104  Issuance.



4401.104-1  Publication and code arrangement.

    (a) The FEMAAR is published in (1) the daily issue of the Federal 
Register and (2) cumulated form in the Code of Federal Regulations 
(CFR).
    (b) The FEMAAR is issued as chapter 44 of title 48, CFR.



4401.104-3  Copies.

    Copies of the FEMAAR in Federal Register and CFR form may be 
purchased from the Superintendent of Documents, Government Printing 
Office, Washington, DC 20402. Agency offices may request copies of the 
FEMAAR from the Policy and Evaluation Division, Office of Acquisition 
Management.



             Subpart 4401.3--Agency Acquisition Regulations



4401.301  Policy.

    Policies, procedures, and guidance of an internal nature may be 
issued

[[Page 176]]

through internal FEMA issuances such as manuals, standard operating 
procedures, directives or instructions.



4401.303  Codification and public participation.

    If subject matter in FAR requires no implementation, the FEMAAR will 
not contain a corresponding part, subpart, section, or subsection 
number. FAR subject matter governs.



                 Subpart 4401.4--Deviations From the FAR



4401.403  Individual deviations.

    The Director, Office of Acquisition Management, must authorize 
individual deviations in advance. Requests for authorization must:
    (a) Cite the specific parts of the FAR or FEMAAR from which it is 
desired to deviate;
    (b) Describe the deviation fully;
    (c) Indicate the circumstances which require the deviation;
    (d) Give reasons supporting the action requested; and
    (e) Give reasons why the action is in the best interest of the 
Government.



4401.404  Class deviations.

    The Director, Office of Acquisition Management, must authorize class 
deviations in advance.



4401.405  Deviations pertaining to treaties and executive agreements.

    The Director, Office of Acquisition Management, is the central 
control point for all deviations including those pertaining to treaties 
and executive agreements.



       Subpart 4401.6--Contracting Authority and Responsibilities



4401.600-70  Scope of subpart.

    This subpart deals with the placement of contracting authority and 
responsibility within the agency, the selection and designation of 
contracting officers, and the authority of contracting officers.



4401.601  General.

    The Director, Office of Acquisition Management, is designated the 
head of contracting activities and FEMA's procurement executive. The 
Director, Office of Acquisition Management, shall establish policy 
throughout the agency; monitor the overall effectiveness and efficiency 
of the agency's contracting offices; establish controls to assure 
compliance with laws, regulations, and procedures; and delegate 
contracting officer authority. The Director, Office of Acquisition 
Management, shall exercise the authority delegated under 44 CFR 2.67 
FEMA Organization, Functions and Delegations.



4401.603  Selection, appointment, and termination of appointment.



4401.603-2  Selection.

    In the areas of experience, training, and education, the following 
shall be required unless contracting authority is limited to a 
simplified purchase procedures. Waiver of any of these criteria shall be 
in writing:
    (a) An individual contracting officer or an individual appointed to 
a position having contracting officer authority shall have a minimum of 
two years experience performing contracting, procurement, or purchasing 
functions in a Government or commercial contracting office. 
Additionally, where a contracting officer will work in a specialized 
field, experience in the field shall be a criterion for the appointment.
    (b) An individual contracting officer or an individual appointed to 
a position having contracting officer authority shall have the 
equivalent of a bachelor's degree from an accedited college or 
institution with major studies in business administration, law, 
accounting, or related fields. The appointing official may waive this 
requirement when a candidate is otherwise qualified by virtue of 
extensive contract-related experience and training, business acumen, 
judgment, character, reputation, and ethics.
    (c) An individual contracting officer or an individual appointed to 
a position having contracting authority shall have successfully 
completed training courses in both Government basic procurement and 
Government contract administration, each of not less than 80 class 
hours. Incumbents not meeting

[[Page 177]]

the special training requirements shall be given 24 months to meet the 
minimum qualification standards.



4401.603-3  Appointment.

    Except for disaster-related activities and unusual circumstances as 
determined by the head of the contracting activity, it is policy to 
delegate contracting officer authority to individuals rather than to 
positions. The head of the contracting activity is the appointing 
authority. Except where the delegation of authority specifically 
includes the authority for further redelegation, no other delegations or 
redelegations may be made. Delegations of contracting officer authority 
shall include a clear statement of such authority and its 
responsibilities and limitations.



               Subpart 4401.7--Determinations and Findings



4401.707-70  Signature authority.

    The head of the contracting activity shall sign all class 
Determination and Findings (D & F's) not otherwise reserved to the 
agency head.



  Subpart 4401.70--Procurement Contracts Versus Assistance Instruments



4401.7000  Scope of subpart.

    This subpart describes the situations appropriate for the use of 
procurement contracts, grants, or cooperative agreements and provides 
examples of each.



4401.7001  Procurement contracts.



4401.7000-1  Situations for use.

    Procurement contracts are to be used whenever the principal purpose 
of the instrument is acquisition by purchase, lease, or barter of 
property or services for the direct benefit or use of the Federal 
Government.



4401.7001-2  Examples.

    Procurement contracts normally will be used when the principal 
purpose of the relationship is:
    (a) Evaluation (including research if an evaluation character) of 
the performance of Government program, projects, or grantee activity 
initiated by FEMA.
    (b) Projects funded by administrative funds.
    (c) Technical assistance rendered on behalf of the Government to any 
third party including those receiving grants or cooperative agreements.
    (d) Surveys, studies, and research which provide specific 
information desired by the Government for its direct activities or for 
dissemination to the public.
    (e) Consulting or professional services of all kinds if provided to 
the Government or, on behalf of the Government, to any third party.
    (f) Planning for Government use.
    (g) Conferences conducted in behalf of the Government.
    (h) Production of publications or audiovisual materials required 
primarily for the conduct of the direct operations of the Government.
    (i) Design or development of items for Government use or pursuant to 
agency definition or specifications.
    (j) Generation of management information or other data for 
Government use.



4401.7002  Assistance.

    Assistance may take the form of either grants or cooperative 
agreements and include:
    (a) General financial assistance (stimulation or support) to 
eligible recipients under specific legislation authorizing such 
assistance.
    (b) Financial assistance (stimulation or support) to a specific 
program activity eligible for such assistance under specific legislation 
authorizing such assistance.



4401.7002-1  Grants.

    Grants are to be used whenever the principal purpose of the 
relationship is to transfer money, property, services, or anything else 
of value to a recipient to accomplish a public purpose. The support or 
stimulation to be accomplished by this transfer must be authorized by 
Federal statute and substantial involvement is not anticipated.

[[Page 178]]



4401.7002-2  Cooperative agreements.

    Cooperative agreements are to be used whenever the principal purpose 
of the relationship is the transfer of money, property, service, or 
anything else of value to recipients to accomplish a public purpose. The 
support or stimulation to be accomplished by this transfer must be 
authorized by Federal statute and substantial involvement is 
anticipated.



4401.7002-3  Examples of unsubstantial involvement.

    Involvement is not substantial and a grant is the proper instrument 
when the following types of involvement are planned:
    (a) Approval of recipient plans prior to award.
    (b) Normal Federal stewardship such as site visits, performance 
reporting, financial reporting, and audits to ensure that objectives, 
terms, and conditions of the grants are met.
    (c) Unanticipated involvement to correct deficiencies in project or 
financial performance from the terms of the grants.
    (d) General statutory requirements understood in advance of the 
award such as civil rights, environmental protection, and provision for 
the handicapped.
    (e) Review of performance after completion.
    (f) General administrative requirements, such as those included in 
OMB Circulars A-21, A-95, A-110, and A-102.



4401.7002-4  Examples of substantial involvement.

    Involvement is substantial and a cooperative agreement is the proper 
instrument when the following types of involvement are planned:
    (a) Agency review and approval of one stage before work can begin on 
a subsequent stage during the period covered by the cooperative 
agreement.
    (b) Agency and recipient collaboration or joint participation in the 
performance of the assisted activities.
    (c) Highly prescriptive agency requirements prior to award limiting 
recipient discretion with respect to scope of services offered, 
organizational structure, staffing, mode of operation and other 
management processes, coupled with close agency monitoring or 
operational involvement during performance over and above the normal 
exercise of Federal stewardship responsibilities to ensure compliance 
with these requirements.
    (d) General administrative requirements beyond those included in OMB 
Circulars A-102 and A-110.



PART 4402--DEFINITION OF WORDS AND TERMS--Table of Contents




    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



                       Subpart 4402.1--Definitions



4402.100  Definitions.

    Agency means the Federal Emergency Management Agency (FEMA).
    Director means the Director of the Federal Emergency Management 
Agency.
    Interagency agreement means an agreement between two or more 
agencies, bureaus, or departments of the Federal Government by which 
supplies, services, or property are provided to, or obtained from, one 
or more agencies, bureaus, or departments of the Federal Government. 
Funds are transferred between the parties as consideration for the 
supplies, services, or property.
    Memorandum of Understanding means an agreement between two or more 
agencies, bureaus, or departments of the Federal Government or other 
entity. Funds are not transferred between the parties.
    Program office means any office which generates requests for 
procurement actions.
    Project officer means the program office representative cognizant 
over the technical aspects of a given procurement action.

[50 FR 31318, Aug. 1, 1985]



PART 4403--IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF INTEREST--Table of Contents




                       Subpart 4403.1--Safeguards

Sec.
4403.101-2  Solicitation and acceptance of gratuities by Government 
          personnel.

[[Page 179]]

4403.101-3  Agency regulations.
4403.103  Independent pricing.
4403.103-2  Evaluating the certification.

      Subpart 4403.2--Contractor Gratuities to Government Personnel

4403.203  Reporting suspected violations of the Gratuities clause.
4403.204  Treatment of violations.

  Subpart 4403.6--Contracts With Government Employees or Organizations 
                       Owned or Controlled by Them

4403.602  Exceptions.

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

    Source: 50 FR 31319, Aug. 1, 1985, unless otherwise noted.



                       Subpart 4403.1--Safeguards



4403.101-2  Solicitation and acceptance of gratuities by Government personnel.

    Exceptions to the prohibition against soliciting or accepting 
gratuities are explained in 44 CFR part 3, subpart B.



4403.101-3  Agency regulations.

    FEMA ``Standards and Conduct'' are published in 44 CFR part 3. They 
include requirements for financial disclosure.



4403.103  Independent pricing.



4403.103-2  Evaluating the certification.

    The Director, Office of Acquisition Management, is authorized to 
make the determination described in FAR 3.103-2(b)(2).



      Subpart 4403.2--Contractor Gratuities to Government Personnel



4403.203  Reporting suspected violations of the Gratuities clause.

    Suspected violations shall be reported in the FEMA Office of the 
Inspector General. A report shall include all facts and circumstances 
relevant to the case.



4403.204  Treatment of violations.

    Following review and any necessary investigation, the Inspector 
General shall make recommendations to the Director or a designee. If 
action is to be taken against a contractor, the contractor shall be 
given the opportunity for a hearing in accordance with FAR 3.204(b).



  Subpart 4403.6--Contracts With Government Employees or Organizations 
                       Owned or Controlled by Them



4403.602  Exceptions.

    The Director, Office of Acquisition Management, may authorize an 
exception to the policy in FAR 3.601, based on facts and circumstances 
provided by the program office.

[[Page 180]]





           SUBCHAPTER B--COMPETITION AND ACQUISITION PLANNING


PART 4405--PUBLICIZING CONTRACT ACTIONS--Table of Contents




Sec.
4405.001  Policy.

             Subpart 4405.2--Synopsis of Proposed Contracts

4405.206  Synopsis of subcontract opportunities.

                   Subpart 4405.5--Paid Advertisements

4405.502  Authority.

    Authority: 40 U.S.C. 486(c); Reorganizational Plan No. 3 of 1978.

    Source: 50 FR 31319, Aug. 1, 1985, unless otherwise noted.



4405.001  Policy.

    The agency shall continually search for and develop information on 
sources (including small businesses owned and controlled by one or more 
socially or economically disadvantaged individuals) competent to provide 
supplies or services. Advance publicity, including use of the Commerce 
Business Daily to the fullest extent practicable, shall be used for this 
purpose. The search should include a review of data or brochures 
furnished by sources seeking to do business with the agency. It also 
should include program personnel, small business specialists, and 
contracting officers to obtain information and recommendations with 
respect to potential sources and to consider seeking other sources by 
publication of proposed procurements.



             Subpart 4405.2--Synopsis of Proposed Contracts



4405.206  Synopsis of subcontract opportunities.

    Unless it is not in the Government's interest, the contracting 
officer shall make the solicitation source list available to firms 
requesting it for subcontracting opportunities on contracts exceeding 
the small purchase threshold.



                   Subpart 4405.5--Paid Advertisements



4405.502  Authority.

    In accordance with 44 CFR 2.72(a) authority to approve publication 
of paid advertisement in newspapers has been delegated to the Director, 
Office of Administrative Support.



PART 4406--COMPETITION REQUIREMENTS--Table of Contents




    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



                  Subpart 4406.5--Competition Advocate



4406.501  Requirement.

    The Chief, Policy and Planning Division, Office of Acquisition 
Management is designated FEMA's Competition Advocate.

[50 FR 31319, Aug. 1, 1985]



PART 4408--REQUIRED SOURCES OF SUPPLIES AND SERVICES--Table of Contents




    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



      Subpart 4408.8--Acquisition of Printing and Related Supplies



4408.802  Policy.

    Contracting officers shall obtain approval from the Director, Office 
of Administrative Support, FEMA's central printing authority before 
contracting for printing.

[50 FR 31319, Aug. 1, 1985]

[[Page 181]]



PART 4409--CONTRACTOR QUALIFICATIONS--Table of Contents




        Subpart 4409.4--Debarment, Suspension, and Ineligibility

Sec.
4409.404  Consolidated list of debarred, suspended, and ineligible 
          contractors.
4409.406  Debarment.
4409.406-1  General.
4409.406-3  Procedures.
4409.407  Suspension.
4409.407-1  General.
4409.407-3  Procedures.

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

    Source: 50 FR 31319, Aug. 1, 1985, unless otherwise noted.



        Subpart 4409.4--Debarment, Suspension, and Ineligibility



4409.404  Consolidated list of debarred, suspended, and ineligible contractors.

    The Director, Office of Acquisition Management, will notify GSA, 
maintain records, establish procedures, and direct inquiries as required 
by FAR 9.404(c).



4409.406  Debarment.



4409.406-1  General.

    The Chief of Staff shall be the debarring official.

[50 FR 31319, Aug. 1, 1985, as amended at 55 FR 28207, July 10, 1990]



4409.406-3  Procedures.

    (a) Determination to debar or take other action concerning a firm or 
individual for a cause listed in FAR 9.406-2 shall be made by the Chief 
of Staff. Whenever cause for debarment becomes known to any contracting 
officer, the matter shall be submitted, with recommendations of the 
Director, Office of Acquisition Management, via the Office of General 
Counsel, to the Chief of Staff for appropriate action. The documented 
file of the case will be included in the submission.
    (b) If the Chief of Staff concurs in the proposed debarment, a 
notice of proposal to debar shall be issued by the Chief of Staff or 
designee.
    (c) The Chief of Staff or designee shall conduct any hearings 
requested in connection with debarment proceedings. The firm or 
individual shall have the opportunity to appear with witnesses and 
counsel to present facts or circumstances showing cause why such firm or 
individual should not be debarred. If the firm or individual elects not 
to appear, or if the firm or individual does not respond within 30 days 
from receipt of the written notice, the reviewing authority will make 
the decision based on the facts on record and such additional evidence 
as may be furnished by the parties involved. After consideration of the 
facts, the reviewing authority shall notify the firm or individual of 
the final decision.
    (d) Appeals may be taken within 30 days after receipt by the firm or 
individual of a decision to debar. Appeals shall be filed with the 
Director, FEMA, who shall make a decision based on the record. The 
Director's decision shall be final.

[50 FR 31319, Aug. 1, 1985, as amended at 55 FR 28207, July 10, 1990]



4409.407  Suspension.



4409.407-1  General.

    The Chief of Staff shall be the suspending official.

[50 FR 31319, Aug. 1, 1985, as amended at 55 FR 28207, July 10, 1990]



4409.407-3  Procedures.

    (a) Any contracting officer may recommend suspension of bidders. 
These recommendations shall be accompanied by the documented file in the 
case and be submitted through the Director, Office of Acquisition 
Management, via the Office of General Counsel, to the Chief of Staff. 
The Chief of Staff shall issue the notice of suspension.
    (b) The Director, Office of Acquisition Management, shall develop 
and maintain suspension procedures.

[50 FR 31319, Aug. 1, 1985, as amended at 55 FR 28207, July 10, 1990]



PART 4412--CONTRACT DELIVERY OR PERFORMANCE--Table of Contents




    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

[[Page 182]]



         Subpart 4412.3--Priorities, Allocations, and Allotments



4412.303  Procedures.

    Rejected rated orders or ACM orders shall be sent to the Department 
of Commerce through the head of the contracting activity.

[50 FR 31320, Aug. 1, 1985]

[[Page 183]]





          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES


PART 4414--SEALED BIDDING--Table of Contents




          Subpart 4414.4--Opening of Bids and Award of Contract

4414.401  Receipt and safeguarding of bids.
4414.402  Opening of bids.
4414.406  Mistakes in bids.
4414.406-3  Other mistakes disclosed before award.

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

    Source: 50 FR 31320, Aug. 1, 1985, unless otherwise noted.



          Subpart 4414.4--Opening of Bids and Award of Contract



4414.401  Receipt and safeguarding of bids.

    (a) Envelopes or other outer coverings containing identified bids 
shall be stamped or otherwise marked to show the office of receipt, the 
time of day received, and the date. The individual receiving the bids 
shall then initial under the marking.
    (b) A copy of the envelope or other covering bearing the 
documentation of a bid that was opened by mistake shall be retained in 
the file.



4414.402  Opening of bids.

    The contracting officer, or duly authorized representative, shall be 
designated as the bid opening officer.



4414.406  Mistakes in bids.



4414.406-3  Other mistakes disclosed before award.

    The Director, Office of Acquisition Management, is delegated the 
authority to make the determinations concerning mistakes in bid other 
than obvious clerical errors discovered prior to award. Each such 
determination shall be approved by the Office of General Counsel prior 
to notification of the bidder.



PART 4415--CONTRACTING BY NEGOTIATION--Table of Contents




  Subpart 4415.4--Solicitation and Receipt of Proposals and Quotations

Sec.
4415.413  Disclosure and use of information before award.
4415.413-2  Alternate II.
4415.413-70  Policy.
4415.413-71  Release of information during the solicitation phase.
4415.413-72  Disposition of unsuccessful proposals.

                  Subpart 4415.5--Unsolicited Proposals

4415.500  Scope of subpart.
4415.505-1  Content of unsolicited proposals.
4415.505-2  Unsolicited renewal proposals.
4415.506  Agency procedures.
4415.506-1  Receipt and initial review.

                    Subpart 4415.6--Source Selection

4415.612  Formal source selection.
4415.612-70  Scope.
4415.612-71  Key participants.

                    Subpart 4415.8--Price Negotiation

4415.803  General.

Subpart 4415.10--Preaward, Award and Postaward Notifications, Protests, 
                              and Mistakes

4415.1003  Debriefing of unsuccessful offerors.

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

    Source: 50 FR 31320, Aug. 1, 1985, unless otherwise noted.



  Subpart 4415.4--Solicitation and Receipt of Proposals and Quotations



4415.413  Disclosure and use of information before award.



4415.413-2  Alternate II.

    These alternate FAR procedures may be used if approved in writing by 
the head of the contracting activity.

[[Page 184]]



4415.413-70  Policy.

    It is FEMA policy to use information contained in proposals only for 
evaluation purposes unless information (a) is generally available to the 
public, (b) is already the property of the Government, (c) is already 
available to the Government with unrestricted use rights, or (d) is or 
has been made available to the Government without restriction.



4415.413-71  Release of information during the solicitation phase.

    No information shall be released during the solicitation phase, 
except as follows: Each solicitation for a negotiated acquisition shall 
name an individual in the contracting office to respond to inquiries 
concerning the solicitation and evaluation of proposals resulting from 
the solicitation. All questions whether of a procedural or substantive 
nature shall be directed to that individual. No one else shall exchange 
comments with offerors or potential offerors. Questions requiring 
clarification of substantive portions of the solicitation shall be 
answered by amendment of the solicitation. A copy of the amendment shall 
be sent to each recipient of the solicitation.



4415.413-72  Disposition of unsuccessful proposals.

    Unsuccessful proposals shall be disposed of as follows:
    (a) All but one copy of each unsuccessful proposal shall be 
destroyed as soon as practicable after contract award. The one remaining 
copy of each shall be retained in the official contract file.
    (b) Unsuccessful proposals shall not be used for purposes other than 
internal reference unless (1) written permission has been obtained from 
the offeror or (2) the proposal expressly states that unrestricted use 
is given to the Government regardless of its success in the competition.



                  Subpart 4415.5--Unsolicited Proposals



4415.500  Scope of subpart.

    This subpart sets forth procedures for controlling the receipt, 
evaluation, and timely disposition of unsolicited proposals.



4415.505-1  Content of unsolicited proposals.

    FEMA's Appropriation Act (Public Law 100--404, Section 407) requires 
the contractor to cost share if a research contract results from an 
unsolicited proposal. This requirement may be waived only when it would 
not be equitable for the Government to require cost sharing. To waive, 
(a) the offeror must certify in writing to the contracting officer that 
it has no commercial, production, educational, or service activities on 
which to use the results of the research and that it has no means of 
recovering any cost on such projects; and (b) the contracting officer 
must make a written determination that there is no measurable gain to 
the performing organization and no mutuality of interest. This 
determination shall be placed in the contract file. (See 4416.303.)

[50 FR 31320, Aug. 1, 1985, as amended at 55 FR 28207, July 10, 1990]



4415.505-2  Unsolicited renewal proposals.

    Renewal proposals, i.e., those for the extension or augmentation of 
current contracts, are subject to the same FAR and FEMA regulations, 
including the requirements of the Competition in Contracting Act, as are 
proposals for new contracts.

[55 FR 28207, July 10, 1990]



4415.506  Agency procedures.

    (a) The Office of Acquisition Management is the point of contact for 
the receipt, acknowledgment, and handling of unsolicited proposals. 
Unsolicited proposals and requests for additional information regarding 
their preparation shall be submitted to: Federal Emergency Management 
Agency, Office of Acquisition Management, Policy & Evaluation Division, 
500 C Street SW, room 726, Washington, DC 20472.
    (b) Unsolicited proposals submitted to FEMA program, regional or 
field offices, or misdirected proposals, shall be immediately fowarded 
by recipients to the Headquarters Office of Acquisition Management.

[[Page 185]]

    (c) Unsolicited proposals shall be submitted in an original and five 
copies at least six months in advance of the date the offeror desires to 
begin work so that there will be enough time to evaluate the proposal 
and negotiate a contract.

[50 FR 31320, Aug. 1, 1985, as amended at 55 FR 28207, July 10, 1990]



4415.506-1  Receipt and initial review.

    (a) The Office of Acquisition Management shall acknowledge an 
unsolicited proposal. Simultaneously, copies of the proposal shall be 
sent to the appropriate program offices for evaluation.
    (b) Information Requirements. The Office of Acquisition Management 
shall keep records of unsolicited proposals received and shall provide 
prompt status information to requestors. The records shall include, as a 
minimum, the number of unsolicited proposals received, funded, and 
rejected during the fiscal year, the identity of the proposers and the 
office to which each was referred. These numbers shall be broken out by 
source (large business, small business, university, or nonprofit 
institutions).

[50 FR 31320, Aug. 1, 1985, as amended at 55 FR 28207, July 10, 1990]



                    Subpart 4415.6--Source Selection

    Source: 55 FR 28207, July 10, 1990, unless otherwise noted.



4415.612  Formal source selection.



4415.612-70  Scope.

    (a) Formal source selection procedures shall apply to competitively 
negotiated acquisition when the estimated cost exceeds $25,000.
    (b) Formal source selection procedures do not apply to the 
acquisition of Architect-Engineer Services, acquisition from other 
Government agencies (including State and local), or any other 
acquisition which is specifically exempted by the Director.



4415.612-71  Key participants.

    (a) A proposal evaluation team shall be formed to conduct the 
technical evaluation of proposals. For acquisitions estimated to cost 
$10 million or less, the team shall be called the Technical Evaluation 
Panel (TEP) and shall consist of at least three (3) voting members. For 
acquisitions in excess of $10 milion, or those whose estimated cost does 
not exceed $10 million, but the selected source is likely to receive 
funding for future phase(s) of the same project, and the aggregate 
amount of such funding (including the current acquisition) is estimated 
to exceed $10 million, the team shall be called the Source Evaluation 
Board (SEB) and shall consist of at least five (5) voting members.
    (b) The Source Selection Official or the Contracting Officer, 
depending upon the dollar amount of the proposed award and any 
anticipated additions to it, shall select a source for contract award. 
For acquisitions estimated to exceed $10 million, the program head, 
i.e., Associate Director/Administrator, of the acquiring office shall be 
the Source Selection Official. For acquisitions estimated to cost $10 
million or less, the Contracting Officer shall be the Source Selection 
Official.



                    Subpart 4415.8--Price Negotiation



4415.803  General.

    When all efforts to get a contractor to agree to a reasonable price 
or fee have failed, the contracting officer shall refer the matter to 
the head of the contracting activity.



Subpart 4415.10--Preaward, Award and Postaward Notifications, Protests, 
                              and Mistakes



4415.1003  Debriefing of unsuccessful offerors.

    Any unsuccessful offeror may write for a debriefing within two 
months after contract award. The contracting officer shall provide the 
debriefing.



PART 4416--TYPES OF CONTRACTS--Table of Contents




              Subpart 4416.3--Cost-Reimbursement Contracts

Sec.
4416.303  Cost-sharing contracts.

[[Page 186]]

  Subpart 4416.6--Time-and-Materials, Labor-Hour, and Letter Contracts

4416.603  Letter contracts.
4416.603-3  Limitations.

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

    Source: 50 FR 31321, Aug. 1, 1985, unless otherwise noted.



              Subpart 4416.3--Cost-Reimbursement Contracts



4416.303  Cost-sharing contracts.

    (a) This subsection sets forth basis guidelines governing cost-
sharing contract.
    (b)(1) Cost sharing with non-Federal organizations shall be 
encouraged in contracts for basic or applied research in which both 
parties have considerable interest.
    (2) Contracting officers shall assure themselves of the following in 
determining contract type:
    (i) The research effort has more than minor relevance to the non-
Federal activities of the performing organization and is not primarily a 
service to the Government.
    (ii) The performing organization has adequate non-Federal sources of 
funds from which to make a cash contribution.
    (iii) The performing organization is engaged primarily in production 
or other service activities, as opposed to research and development, and 
is in a favorable position to make a cost contribution.
    (iv) The principal purpose of the contract is research.
    (v) Payment of the full cost of the project is not necessarily in 
order to obtain the services of the particular organization.
    (3) FEMA's Appropriation Act requires cost sharing by the contractor 
under research contracts resulting from unsolicited proposals. See 
4415.505-1.
    (c) Guidelines for determining the amount of cost sharing.
    (1) For educational institutions and other not-for-profit or non-
profit organizations, cost sharing may vary from 1 to 50 percent of the 
costs of the project. In some cases it may be appropriate for 
educational institutions to provide a higher degree of cost sharing, 
such as when the cost of the research consists primarily of the 
academic-year salary of faculty members, or when the equipment acquired 
by the institution for the project will be of significant value to the 
institution in its educational activities.
    (2) The amount of cost participation by commercial or industrial 
organizations may vary from 1 percent or less to more than 50 percent of 
total project cost, depending upon the extent to which the research 
effort is likely to enhance the performing organization's capability, 
expertise, or competitive position, and the value of such enhancement to 
the performing organization. Recognize, however, that organizations 
predominately engaged in research and development with little other 
activity may not be able to derive a monetary benefit from the research 
under Federal agreements.
    (3) A fee will usually not be paid to the performing organization if 
the organization is to contribute to the cost of the research effort, 
but the amount of cost sharing may be reduced to reflect the fact that 
the organization is foregoing normal fees on the research. However, if 
the research is expected to be of major value to the performing 
organization and if cost sharing is not required by statute, it may be 
appropriate for the performer to make a contribution in the form of a 
reduced fee rather than sharing the costs of the project.
    (4) Each cost-sharing contract negotiated shall contain the clause 
in 4452.216-70.

[50 FR 31321, Aug. 1, 1985, as amended at 55 FR 28208, July 10, 1990]



  Subpart 4416.6--Time-and-Materials, Labor-Hour, and Letter Contracts



4416.603  Letter contracts.



4416.603-3  Limitations.

    A letter contract may be used only if the head of the contracting 
activity executes a determination and finding that no other contract 
type is suitable.

[[Page 187]]



PART 4417--SPECIAL CONTRACTING METHODS--Table of Contents




    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



                        Subpart 4417.70--General



4417.7001  Preference for local contractors.

    (a) This subsection establishes policies relating to local 
contractor preference to receive contract awards resulting from 
competitive solicitations under a Presidentially declared major disaster 
or emergency operation.
    (b) The geographic areas to which local contractor preference shall 
apply are those affected by the Presidentially declared disaster and 
designated in the Federal Register by the Associate Director, State and 
Local Programs and Support, or his designee. Geographical areas shall be 
identified by county or other political subdivision.
    (c) Pursuant to the provisions of Pub. L. 93-288, the provisions set 
forth in 4452.217-70 shall be included in each competitive solicitation 
for disaster relief response.
    (d) If the contracting officer determines it to be in the best 
interest of the Government, the provision set forth in 4452.217-70 need 
not be included in solicitations. Such determination shall be documented 
in the contract file with a findings and determination signed by the 
contracting officer and approved by the head of the contracting 
activity.
    (e) If the contracting officer makes the determination of paragraph 
(d) of this section, local participation may be encouraged by:
    (1) Setting the procurement aside for labor surplus area if the 
disaster area has been established as a labor surplus area;
    (2) Advertising only in the local disaster area; and/or
    (3) Dividing large requirements into several smaller requirements.

[50 FR 31322, Aug. 1, 1985]

[[Page 188]]





                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS


PART 4419--SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS CONCERNS--Table of Contents




    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



                        Subpart 4419.2--Policies



4419.201  General policy.

    (a) The Director, Office of Personnel and Equal Opportunity, is also 
the Director, Office of Small and Disadvantaged Business Utilization.
    (b) The Chief, Policy and Evaluation Division, Office of Acquisition 
Management, is the small business technical advisor.
    (c) Each contracting officer is a small and disadvantaged business 
utilization specialist.

[50 FR 31322, Aug. 1, 1985, as amended at 55 FR 28208, July 10, 1990]



PART 4424--PROTECTION OF PRIVACY AND FREEDOM OF INFORMATION--Table of Contents




    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



               Subpart 4424.2--Freedom of Information Act



4424.202  Policy.

    FEMA's Freedom of Information Act policy is codified at 44 CFR part 
5.

[50 FR 31322, Aug. 1, 1985]



PART 4426--OTHER SOCIOECONOMIC PROGRAMS--Table of Contents




Sec.
4426.101  General policy.
4426.102  Accessibility of meetings, conferences and seminars to persons 
          with disabilities.

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



4426.101  General policy.

    Section 504 of the Rehabilitation Act of 1973, as amended, prohibits 
Federal agencies from discriminating against qualified persons on the 
grounds of disability. The law not only applies to internal employment 
practices but extends to agency interaction with members of the public 
who participate in FEMA programs. (FEMA's implementation of section 504 
of this Act is codified at 44 CFR part 16.)

[55 FR 28208, July 10, 1990]



4426.102  Accessibility of meetings, conferences and seminars to persons with disabilities.

    It is FEMA's policy to extend the provisions of the Rehabilitation 
Act of 1973, as amended, to vendors who interact with the public while 
under contract to FEMA. Therefore, FEMA Clause 4452.226-01, 
Accessibility of Meetings, Conferences, and Seminars to Persons with 
Disabilities, shall be included in FEMA contracts over $25,000 when in 
the performance of such contract the contractor will plan meetings, 
seminars and conferences which may be attended by persons with 
disabilities.

[55 FR 28208, July 10, 1990]

[[Page 189]]





             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS


PART 4429--TAXES--Table of Contents




    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



                         Subpart 4429.1--General



4429.101  Resolving tax problems.

    (a) The Office of General Counsel is responsible, with FEMA, for 
handling all tax problems. It also is responsible for asking the 
Department of Justice for representation of intervention in proceedings 
concerning taxes.
    (b) The contracting officer shall request, in writing, the 
assistance of the Office of General Counsel in resolving a tax problem. 
The request shall detail the problem and include supporting information. 
The Office of General Counsel shall inform the contracting officer of 
the disposition of the tax problem and the contracting officer will tell 
the contractor.

[50 FR 31322, Aug. 1, 1985]



PART 4432--CONTRACT FINANCING--Table of Contents




    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



                    Subpart 4432.4--Advance Payments



4432.402  General.

    The head of the contracting activity has responsibility and 
authority to make findings and determinations and to approve or 
disapprove contract terms.

[50 FR 31322, Aug. 1, 1985]



PART 4433--PROTESTS, DISPUTES AND APPEALS--Table of Contents




    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



                Subpart 4433.103--Protests to the Agency



4433.103  Protests to the agency.

    (a) Protests should be filed on a timely basis to the Contracting 
Officer specified in the solicitation or contract. Protests are 
considered timely if, when based on alleged improprieties in a 
solicitation which are apparent prior to the bid/proposal closing time, 
they are filed not later than the closing date, and in other cases they 
are filed within 10 working days after the basis of the protest is known 
or should have been known whichever is earlier.
    (b) If a protest is received prior to award, the Contracting Officer 
shall notify all offerors within one full working day after consultation 
with the Office of General Counsel (OGC). An award will not be made 
unless a written determination is approved by the Head of the 
Contracting Activity in accordance with the criteria set forth in FAR 
33.103.
    (c) If a protest is received after award, the Contracting Officer 
shall give careful consideration to suspending contract performance if 
it appears likely that the award may be invalidated and the Government's 
interest will not be harmed by a delay in the receipt of goods or 
services. The Contracting Officer's determination to suspend performance 
should be made in writing and approved by the Head of the Contracting 
Activity after consultation with OGC. If the decision is to proceed with 
contract award or continue with contract performance, the Contracting 
Officer shall include the written findings in the file and shall give 
written notice of the decision to the protestor and other interested 
parties.
    (d) The Contracting Officer/Contract Specialist shall prepare the 
final decision for approval by the Head of the Contracting Activity. The 
protestor shall be notified of the final decision regarding its protest 
within 30 working days after receipt of the protest.

[55 FR 28208, July 10, 1990]

[[Page 190]]





             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING


PART 4435--RESEARCH AND DEVELOPMENT CONTRACTING--Table of Contents




    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



4435.003  Policy.

    Cost-sharing policy for research and development contracts is stated 
in 4415.502-70.

[50 FR 31322, Aug. 1, 1985]



PART 4436--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS--Table of Contents




               Subpart 4436.6--Architect-Engineer Services

Sec.
4436.602-2  Evaluation boards.
4436.602-4  Selection authority.

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



               Subpart 4436.6--Architect-Engineer Services



4436.602-2  Evaluation boards.

    (a) Each architect-engineer evaluation board, permanent or ad hoc, 
shall have at least five voting members and one alternate. These will be 
Federal employees. A majority of the voting members will be from the 
program office.
    (b) During the selection process, a board member or advisor may 
have, or appear to have, a conflict of interest regarding a firm in the 
competition. Immediately upon becoming aware of a potential conflict or 
an appearance of a conflict, the member or advisor shall notify the 
board chairperson who shall, in turn, inform the Office of General 
Counsel. The Office of General Counsel shall make a final determination 
on the conflict issue.
    (c) The evaluation board is to be insulated from outside pressures. 
Information concerning board deliberations shall be divulged only to 
persons having a need-to-know.

[50 FR 31322, Aug. 1, 1985]



4436.602-4  Selection authority.

    (a) Heads of program offices which may require architect-engineer 
services are designated as selection authorities for acquisition of 
architect-engineer services.
    (b) A determination shall be sent to the contracting officer listing 
the selected firms in order of preference.

[50 FR 31322, Aug. 1, 1985]



PART 4450--EXTRAORDINARY CONTRACTUAL ACTIONS--Table of Contents




 Subpart 4450.2--Delegation of and Limitations on Exercise of Authority

Sec.
4440.201  Delegation of authority.
4450.202  Contract adjustment boards.

    Authority: 50 U.S.C. 1431-1435; E.O. 10789; E.O. 12148.



 Subpart 4450.2--Delegation of and Limitations on Exercise of Authority



4450.201  Delegation of authority.

    All authority granted by 48 CFR 50.101 may be exercised by the 
Director of the Federal Emergency Management Agency. Such authority to 
approve, authorize, and direct appropriate action under this Part and to 
make all appropriate determinations and findings which do not obligate 
the United States in excess of $50,000 are delegated to the Director, 
Office of Acquisition Management. Such authority to approve, and direct 
appropriate action under this Part and to make all appropriate 
determinations and findings which may obligate the United States in 
excess of $50,000 are delegated to the FEMA Contract Adjustment Board. 
The limitations contained in 48 CFR 50.201 and 50.202 apply.

[50 FR 31322, Aug. 1, 1985]



4450.202  Contract adjustment boards.

    As cases arise under the Act, the Director of FEMA may appoint, as 
needed, a FEMA Contract Adjustment Board consisting of one senior staff

[[Page 191]]

member, not otherwise involved with the action under consideration, from 
each of the following offices:
    (a) Acquisition Management, who shall act as Chairperson
    (b) General Counsel
    (c) Comptroller.

[50 FR 31322, Aug. 1, 1985]

[[Page 192]]





                     SUBCHAPTER H--CLAUSES AND FORMS


PART 4452--SOLICITATION PROVISIONS AND CONTRACT CLAUSES--Table of Contents




             Subpart 4452.2--Texts of Provisions and Clauses

Sec.
4452.216-70  Consideration and payment (Cost-Sharing).
4452.217-70  Preference for local contractors in Presidentially declared 
          major disasters or emergencies.
4452.226-1  Accessibility of meetings, conferences and seminars to 
          persons with disabilities.
4452.227-70  Reproduction of reports.
4452.227-71  Coordination of Federal reporting requirements.
4452.227-72  Publication.

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

    Source: 50 FR 31323, Aug. 1, 1985, unless otherwise noted.



             Subpart 4452.2--Texts of Provisions and Clauses



4452.216-70  Consideration and payment (Cost-Sharing).

    As prescribed in 4416.303, include the following clause in research 
and development contracts with non-Federal organizations:

           Consideration and Payment (Cost-Sharing) (Mar 1989)

    (a) The estimated cost for the performance of this contract is 
$________. The contractor agrees to bear without reimbursement by the 
Government ____% of the cost for performance hereunder. Such cost 
sharing shall be effected as set forth in paragraph (b) of this clause.
    (b) Public vouchers or invoice shall be submitted in an original and 
five (5) copies and shall show the total cost incurred for the period 
for which the voucher or invoice is submitted, the cumulative total of 
costs incurred through the billing period, and the percentage of costs 
to be reimbursed by the Government. However, the Government is not 
obligated to reimburse the contractor for the Government's share of the 
costs in excess of ________% of such amount. The Government shall not be 
obligated to reimburse the contractor for the Government's share of the 
costs in excess of $________ nor is the contractor obligated by this 
contract to expend his own funds in excess of $________.

                             (End of clause)

[55 FR 28208, July 10, 1990]



4452.217-70  Preference for local contractors in Presidentially declared major disasters or emergencies.

    Pursuant to the provisions of Pub. L. 93-288 and 4415.105-71, the 
following provisions shall be included in each competitive solicitation 
for on-site disaster relief response:

               Preference for Local Contractors (Apr 1984)

    In awarding any contract pursuant to this solicitation, the 
Government shall give preference to local organizations, firms, and 
individuals residing or doing business primarily in the geographic area 
identified as the disaster area.
    The contracting officer reserves the right to request offerors to 
furnish documentation to demonstrate eligibility for local contractor 
preference. To be eligible, the offeror shall have been residing (in the 
case of individuals) or doing the major portion of its business (in the 
case of business entities) in the disaster area.
    An offeror for which eligibility is established (local offeror) 
shall be permitted to meet the lowest price received from an otherwise 
eligible non-local offeror, provided that the proposed price from the 
local offeror does not exceed 130 percent of the price of the non-local 
offeror. The lowest priced local offeror within 130 percent of the 
lowest non-local offeror shall have the first chance to meet the non-
local price. If the local offeror meets the lowest non-local price and 
is determined to be responsible, award shall be made. If the non-local 
offer is not met, the next lowest local offeror within 130 percent shall 
have the chance to meet the lowest non-local price. This process shall 
continue until award is made to a local offeror within the 130 percent 
requirement or the supply of local offerors is exhausted and award made 
to the lowest non-local offeror.

                             (End of clause)



4452.226-1  Accessibility of meetings, conferences and seminars to persons with disabilities.

    Include the following clause in contracts under which the contractor 
will plan meetings, conferences and seminars which may be attended by 
persons with disabilities.

[[Page 193]]

  Accessibility of Meetings, Conferences, and Seminars to Persons With 
                         Disabilities (Jan 1989)

    The Contractor agrees as follows:
    (a) Planning. The Contractor will develop a plan to assure that any 
meeting, conference, or seminar held pursuant to this contract will meet 
or exceed the minimum accessibility standards set forth below. This plan 
shall include a provision for ascertaining the number and types of 
disabled individuals planning to attend the meeting, conference, or 
seminar. The plan shall be submitted to the Contracting Officer for 
approval prior to initiating action. A consolidated or master plan for 
contracts requiring numerous meetings, conferences, or seminars may be 
submitted in lieu of separate plans.
    (b) Facilities. Any facility to be utilized for meetings, 
conferences, or seminars in performance of this contract shall be 
accessible to persons with disabilities. The Contractor shall determine, 
by an on-site inspection if necessary, that the following minimum 
accessibility requirements are met, or suitable modifications are made 
to meet these requirements, before the meeting:
    (1) Parking. (i) Where parking is available on or adjacent to the 
site one 12' wide space must be set aside for the car of each mobility 
impaired attendee. The space need not be permanently striped but may be 
temporarily marked by signs, ropes, or other means satisfactory to carry 
out this provision.
    (ii) Where parking is not available on or adjacent to the site, 
valet parking or other alternative means must be available to assist 
disabled attendees. Alternate means must be satisfactory in the judgment 
of the Contracting Officer.
    (2) Entrances. (i) ``Entrances'' shall include at least one 
accessible entrance from the street/sidewalk level, and at least one 
accessible entrance from any available parking facility.
    (ii) The entrance shall be level or accessible by ramp with an 
incline that allows independent negotiation by a person in a wheelchair. 
In general, the slope of the incline shall be no more than 1" rise per 
foot of ramp length (1:12).
    (iii) Entrance doorways shall be at least 30" in clear width and 
capable of operation by persons with disabilities. Revolving doors, 
regardless of foldback capability, will not meet this requirement.
    (3) Meeting Rooms. (i) Meeting room access from the main entrance 
area must be level or at an independently negotiable incline 
(approximately 1:12) and/or served by elevators from the main entrance 
level. All elevators shall be capable of accommodating a wheelchair 29" 
wide by 45" long.
    (ii) Meeting rooms shall be on one level or, if on different levels, 
capable of being reached by elevators or by ramps that can be 
independently negotiated by a person in a wheelchair. Doorways to all 
meeting rooms shall be at least 30" in clear width.
    (iii) The interior of the meeting room shall be on one level or 
ramped so as to be independently negotiable for a person in a 
wheelchair.
    (iv) Stages, speaker platforms, etc. which are to be used by persons 
in wheelchairs must be accessible by ramps or lifts. When used, the 
ramps may not necessarily be independently negotiable if space does not 
permit. However, any slope over 1:12 must be approved by the Contracting 
Officer. Each case is to be judged on its own merits.
    (v) If a meeting room with fixed seating is utilized, seating 
arrangements for persons in wheelchairs shall be made so that these 
persons are incorporated into the group rather than isolated on the 
perimeter of the group.
    (4) Restrooms. (i) Restrooms shall have level access, signs 
indicating accessibility, and doorways at least 30" in clear width.
    (ii) Sufficient turning space within restrooms shall be provided for 
independent use by a person in a wheelchair 29" wide by 45" long. A 
space 60" by 60" or 63" by 56" of unobstructed floor space as measured 
12" above the floor is acceptable by standard; other layout will be 
accepted if it can be demonstrated that they are usable as indicated.
    (iii) There will be a restroom for each sex or a unisex restroom 
with at least one toilet stall capable of accommodating a wheelchair 29" 
wide by 45" long (by standard, the minimum is 3'-0" by 43'-83"), with 
outswinging door or private curtains. Wall mounted grab bars are 
required.
    (iv) When separate restrooms have been set up for mobility impaired 
persons, they shall be located adjacent to the regular restrooms and 
shall be fully accessible.
    (5) Eating Facilities. (i) Eating facilities in the meeting facility 
must be accessible under the same general guidelines as are applied to 
meeting rooms.
    (ii) If the eating facility is a cafeteria, the food service area 
(cafeteria line) must allow sufficient room for independent wheelchair 
movement and accessibility to food for persons in wheelchairs, and 
cafeteria staff shall be available to assist disabled persons.
    (6) Overnight Facilities. If overnight accommodations are required:
    (i) Sufficient accessible guest rooms to accommodate each attendee 
who is disabled shall be located in the facility where the meeting, 
conference, or seminar is held, or in a facility housing the attendees 
which is conveniently located hereby, whichever is satisfactory to the 
Contracting Officer.
    (ii) Overnight facilities shall provide for the same minimum 
accessibility requirements as the facility utilized for guest room 
access from the main entrance area shall be level, ramped at an 
independently negotiable

[[Page 194]]

incline (1:12), and/or served by elevators capable of accommodating a 
wheelchair 29" wide by 45" long.
    (iii) Doorways to guest rooms, including the doorway to the 
bathroom, shall be at least 30" in clear width.
    (iv) Bathrooms shall have wall mounted grab bars at the tub and 
water closet.
    (v) Guest rooms for persons with a disability shall be provided at 
the same rate as a guest room for other attendees.
    (7) Water Fountains. Water fountains shall be accessible to disabled 
persons, or have cup dispensers for use by persons in wheelchairs.
    (c) Provisions of Services for Sensory Impaired Attendees.
    (1) The Contractor, in planning the meeting, conference, or seminar 
shall include in all announcements and other materials pertaining to the 
meeting, conference, or seminar a notice indicating that services will 
be made available to sensory impaired persons attending the meeting, if 
requested within five (5) days of the date of the meeting, conference, 
or seminar. The announcement(s) and other material(s) shall indicate 
that sensory impaired persons may contact a specific person(s), at a 
specific address and phone number(s), to make their service requirements 
known. The phone number(s) shall include a teletype number for the 
hearing impaired.
    (2) The Contractor shall provide, at no cost to the individual, 
those services required by persons with sensory impairments to insure 
their complete participation in the meeting, conference, or seminar.
    (3) As a minimum, when requested in advance, the Contractor shall 
provide the following services:
    (i) For hearing impaired persons, qualified interpreters. Provisions 
will also be made for volume controlled phone lines and, if necessary, 
transportation to local teletype equipment to enable hearing impaired 
individuals to receive and send meeting related calls. If local teletype 
equipment is not available, the Contractor shall provide on-site 
teletype equipment. Also, the meeting rooms will be adequately 
illuminated so signing by interpreters can be easily seen.
    (ii) For vision impaired persons, readers and/or cassette materials, 
as necessary, to enable full participation. Also, meeting rooms will be 
adequately illuminated.
    (iii) Agenda and other conference material(s) shall be translated 
into a usable form for the visually and hearing impaired. Readers, 
braille translations, and/or tape recordings are all acceptable. These 
materials shall be available to sensory impaired individuals upon their 
arrival.
    (4) The Contractor is responsible for making every effort to 
ascertain the number of sensory impaired individuals who plan to attend 
the meeting, conference, or seminar. However, if it can be determined 
that there will be no sensory impaired person (deaf and/or blind) in 
attendance, the provision of those services under paragraph (c) for the 
non-represented group, or groups, is not required.

(Approved by the Office of Management and Budget under control number 
3067-0213)

                             (End of clause)

[55 FR 28208, July 10, 1990]



4452.227-70  Reproduction of reports.

    Include the following clause in the contract when the product is a 
report, data or other written material.

                   Reproduction of Reports (Apr 1984)

    Reproduction of reports, data, or other written material, if 
required herein, is authorized provided that the material produced does 
not exceed 5,000 production units of any page and that items consisting 
of multiple pages do not exceed 25,000 production units in aggregate. 
The aggregate number of production units is to be determined by 
multiplying pages times copies. A production unit is one sheet, size 
8\1/2\ x 11 inches or less, printed on one side only, and in one color. 
All copy preparation to produce camera-ready copy for reproduction must 
be set by methods other than hot metal typesetting. The reports should 
be produced by methods employing stencils, masters, and plates which are 
to be used on single-unit duplicating equipment no larger than 11 by 17 
inches with a maximum image of 10\3/4\ by 14\1/4\ inches and are 
prepared by methods or devices that do not utilize reusable contact 
negatives and/or positives prepared with a camera requiring a darkroom. 
All reproducibles (camera-ready copies for reproduction by photo offset 
methods) shall become the property of the Government and shall be 
delivered to the Government with the report, data, or other written 
material.

                             (End of clause)



4452.227-71  Coordination of Federal reporting requirements.

    The following clause shall be included in contracts when 
appropriate:

          Coordination of Federal Reporting Services (Apr 1984)

    In the event that it is a contractual requirement to collect 
information from 10 or more public respondents, the provisions of 44 
U.S.C. chapter 35 (Coordination of Federal Reporting Requirements), 
shall apply to this contract. The contractor shall obtain

[[Page 195]]

through the project Officer the required office of Management and Budget 
clearance before making public contacts for the collection of data or 
expending any funds for such collection. The authority to proceed with 
the collection of data from public respondents and the expenditure of 
funds therefore shall be in writing signed by the Contracting Officer.

                             (End of clause)



4452.227-72  Publication.

    The following clause shall be used in all contracts under which it 
is anticipated that a report will be a product.

                         Publication (Apr 1984)

    (a) Definition. For the purpose of this clause ``publication'' 
includes (1) any document containing information intended for public 
consumption or (2) the act of, or any act which may result in, 
disclosing information to the public.
    (b) General. The results of the research and development and studies 
conducted under this contract are to be made available to the public 
through dedication, assignment to the Government, or other such means as 
the Director of the Federal Emergency Management Agency shall determine.
    (c) Reports furnished the Government. All intermediate and final 
reports of the research and development and studies conducted hereunder 
shall indicate on the cover or other initial page that the research and 
development and studies forming the basis for the report were conducted 
pursuant to a contract with the Federal Emergency Management Agency. 
Such reports are official Government property and may not be published 
or reproduced (in toto, in verbatim excerpt, or in a form approximating 
either of these) as an unofficial paper or article. The contractor or 
technical personnel (each employee or consultant working under the 
administrative direction of the contractor or any subcontractor 
hereunder) may publish such reports in whole or in part in a non-
Government publication only in accordance with this paragraph (c) and 
paragraph (e)(1) of this clause.
    (d) Publication by Government. The Government shall have full right 
to publish all information, data, and findings developed as a result of 
the research and development and studies conducted hereunder.
    (e) Publication by contractor on technical personnel.
    (1) Publication in whole or in part of contractor's reports 
furnished the Government. Unless such reports have been placed in the 
public domain by Government publication, the contractor or technical 
personnel (each employee or consultant working under the administrative 
direction of the contractor or any subcontractor hereunder) may publish 
a report furnished the Government, in toto or in verbatim excerpt, but 
consistent with paragraph (c) of this clause may not secure copyright 
therein, subject to the following conditions and the conditions in 
paragraph (e)(4) and paragraph (f).
    (i) During the first six months after submission of the full final 
report, if written permission to publish is obtained from the 
contracting officer.
    (ii) After six months following submission of the full report, and 
if paragraph (e)(3) is inapplicable, if a foreword or footnote in the 
non-Government publication indicates the source of the verbatim 
material.
    (2) Publication, except vebatim excerpts, concerning or based in 
whole or in part on results of research and development and studies 
hereunder. The contractor or technical personnel may issue a publication 
concerning or based in whole or in part on the results of the research 
and development and studies conducted under this contract and may secure 
copyright therein, but in so publishing is not authorized thereby to 
inhibit the unrestricted right of the Director of the Federal Emergency 
Management Agency to disclose or publish, in such manner as he may deem 
to be in the public interest, the results of such research and 
development and studies to the following conditions and the requirement 
in paragraph (e)(4):
    (i) During the first six months after submission of the full final 
report, and if paragraph (e)(3) is inapplicable, if written waiver of 
the waiting period is obtained from the contracting officer.
    (ii) After six months following submission of the full final report, 
and if paragraph (e)(3) is inapplicable, subject to Government exercise 
of an option that the publication contain a foreword or initial footnote 
substantially as follows:

The (research) (development) (studies) forming (part of) the basis for 
this publication were conducted pursuant to a contract with the Federal 
Emergency Management Agency. The substance of such (research) 
(development) (studies) is dedicated to the public. The author and 
publisher are solely responsible for the accuracy of statements or 
interpretations contained therein.

    (3) General conditions if FEMA determines that contractor's final 
report contains patentable subject matter developed in contract 
performance. If the contracting officer determines that the contractor's 
full final report contains patentable subject matter developed in the 
performance of this contract and so notifies the contractor in writing 
prior to six months from date of submission of such report, no 
publication of verbatim excerpts from contractor's reports or 
publication concerning or based in whole or in part on the results of 
the research and development and

[[Page 196]]

studies hereunder shall be made without the written consent of the 
contracting officer.
    (4) Copies of contractor and technical personnel publications to be 
furnished the Government. The contractor or technical personnel will 
furnish the contracting officer six copies of any publications which are 
based in whole or in part on the results of the research and development 
and studies conducted under this contract.
    (f) Administratively confidential information. The contractor shall 
not publish or otherwise disclose, except to the Government and except 
matters of public record any information or data obtained hereunder from 
private individuals, organizations, or public agencies in a publication 
whereby the information or data furnished by any particular person or 
establishment can be identified, except with the consent of such person 
or establishment.
    (g) Inclusion of provisions in contractor's agreements. The 
contractor shall include provisions appropriate to effectuate the 
purposes of this clause in all contracts of employment with persons who 
perform any part of the research or development or study under this 
contract and in any consultant's agreements or subcontracts involving 
research or development or study thereunder.

                             (End of clause)

[[Page 197]]



       CHAPTER 51--DEPARTMENT OF THE ARMY ACQUISITION REGULATIONS

                          (Parts 5100 to 5199)

  --------------------------------------------------------------------
Part                                                                Page
5108            Required sources of supplies and services...         199
5119            Small business and small disadvantaged 
                    business concerns.......................         199
5145            Government property.........................         201
5152            Solicitations provisions and contract 
                    clauses.................................         202

[[Page 199]]



PART 5108--REQUIRED SOURCES OF SUPPLIES AND SERVICES--Table of Contents




    Authority: 5 U.S.C. 301, 10 U.S.C. 2202, DOD Directive 5000.35 and 
DOD FAR Supplement 201.301.



5108.070  Definitions.

    As used in this section:
    Memorandum of Understanding Planned Producer means an industrial 
firm which has indicated its willingness to produce specified military 
items in a declared national emergency by completing a Memorandum of 
Understanding with an accompanying Industrial Preparedness Program 
Production Capacity Survey (DD Form 1519 TEST). The firm is eligible to 
be solicited for all buys of the item(s) over $25,000 excluding 
acquisitions for which competition is restricted to the Restricted 
Specified Base or Limited Fee Planned Producers in accordance with an 
approved Justification and Approval.
    Limited Fee Planned Producer means an industrial firm which is 
contractually bound by inclusion of AFARS 5152.208-9001 in their 
contract to maintain production capacity for a negotiated length of 
time, to conduct subcontractor planning, and to produce specified 
military items in the event of a declared national emergency or in the 
event of a declared national emergency or contingencies short of a 
declared national emergency. The firm is eligible to be solicited for 
all buys of the item(s) over $25,000 except acquisitions for which 
competition is restricted to the Restricted Specified Base in accordance 
with an approved Justification and Approval.
    Restricted Specified Base Planned Producer means an industrial firm 
which is contractually bound to maintain production capacity for a 
negotiated length of time, to conduct subcontractor planning, and to 
produce specified military items in the event of a declared national 
emergency, or contingencies short of a declared national emergency. The 
firm is eligible to be solicited for all buys of the item(s) over 
$25,000.
    (g)(1)(i) Solicitation of Memorandum of Understanding Planned 
Producers in all acquisitions over $25,000 which are for items for which 
they have been designated as a Memorandum of Understanding Planned 
Producer except those restricted to the Restricted Specified Base 
Planned Producers or Limited Fee Planned Producers in accordance with an 
approved Justification and Approval.
    (ii) Solicitation of Limited Fee Planned Producers in all 
acquisitions over $25,000 which are for items for which they have been 
designated as a Limited Fee Planned Producer, except those restricted to 
the Restricted Specified Base.
    (iii) Solicitation of Restricted Specified Base Planned Producers in 
all acquisitions over $25,000 which are for items for which they have 
been designated as a Restricted Specified Base Planned Producer.
    (g)(4) The clause at 5152.208-9001 is to be used for all contracted 
planning efforts.

[54 FR 38682, Sept. 20, 1989]



PART 5119--SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS CONCERNS--Table of Contents




  Subpart 5119.10--Small Business Competitiveness Demonstration Program

Sec.
5119.1001  General.
5119.1002  Definitions.
5119.1003  Purpose.
5119.1004  Participating agencies.
5119.1005  Applicability.
5119.1070  Procedures.
5119.1070-2  Emerging small business set-aside.
5119.1070-3  Identification and reporting.
5119.1071  Solicitation provisions and contract clauses.

    Authority: 5 U.S.C. 301, 10 U.S.C. 2202, DOD Directive 5000.35, FAR 
1.301 and DOD FAR Supplement 201.301.

    Source: 54 FR 15410, Apr. 18, 1989, unless otherwise noted.



  Subpart 5119.10--Small Business Competitiveness Demonstration Program



5119.1001  General.

    This subpart implements Pub. L. 100-656, section 722, ``Expanding 
Small Business Participation in Dredging''

[[Page 200]]

(the Dredging Program). The Program will be conducted through 30 
September 1992.



5119.1002  Definitions.

    (S-90) ``Emerging Small Business Reserve Amount'' (ESBRA) means the 
dollar threshold for contracting opportunities in dredging, below which 
competition shall be conducted exclusively among emerging small business 
concerns. This amount is set forth in 5119.1070-2(a)(S-90).



5119.1003  Purpose.

    (c)(S-90) The purpose of the Dredging Program is to--
    (i) Expand small business and emerging small businesses (ESB) 
participation in contracting opportunities for dredging through 
restricted competition.
    (ii) Demonstrate the existence of a sufficient number of small 
businesses and ESBs which meet the current size standard for Standard 
Industrial Code (SIC) Code 1629 (Dredging and Surface Cleanup 
Activities) as an indicator of the adequacy of the current size 
standard.



5119.1004  Participating agencies.

    Participation in this Dredging Program is limited to the Department 
of the Army, Corps of Engineers.



5119.1005  Applicability.

    (S-90) The program shall apply to solicitations issued by the 
Department of the Army Corps of Engineers buying activities for the 
procurement of dredging under SIC 1629 (Dredging and Surface Cleanup 
Activities), limited to Federal Procurement Data Systems (FPDS) codes 
Y216 and Z216. This includes both maintenance dredging and new start 
(new work) construction dredging. Dredging to be performed by Government 
forces utilizing the Federally owned fleet pursuant to 33 U.S.C. 622 is 
not subject to the program.



5119.1070  Procedures.



5119.1070-2  Emerging small business set-aside.

    (a)(S-90) Solicitations for dredging shall be set-aside for 
exclusive competition among ESBs when the estimated award value is equal 
to or less than the emerging small business reserve amount (ESBRA) of 
$600,000. (Except that dredging acquisitions shall continue to be 
considered for placement under the 8(a) program (see FAR subpart 19.8) 
and for small disadvantaged business set-asides (see DFARS 219.502-72)). 
The ESBRA applies only to new awards. Modifications or follow-on awards 
to contracts having an initial award value in excess of the ESBRA are 
not subject to this requirement. The set-aside requirements in DFARS 
219.1070-2 (a) and (b) for designated industry groups acquisitions 
valued at $25,000 or less shall be complied with for all dredging 
program set-asides.
    (S-90) The contracting office shall include the applicable SIC Code 
and dollar size standard in the synopsis of proposed procurement as 
published in the Commerce Business Daily (CBD), in the presolicitation 
notice (construction contract) SF 1417 when issued, and in the 
solicitation documents.
    (S-91) The contracting officer shall consider use of the following 
initiatives to increase participation by small businesses and emerging 
small businesses:
    (1) Specifying of contract requirements and contractual terms and 
conditions which are conducive to competition among small business and 
emerging small business concerns, consistent with the mission or program 
requirements of the Department of the Army, Corp of Engineers.
    (2) Encouraging joint ventures, teaming agreements, and similar 
arrangements consistent with the Small Business Act (15 U.S.C. 637(d)) 
for the purpose of including small business concerns in contracting 
opportunities. However, no such joint venture shall exceed the 
applicable size standard.
    (3) Making maximum use of subcontracting through plans negotiated 
and enforced pursuant to section 8(d) of the Small Business Act. Goals 
may be specified in solicitations stating minimum percentages of 
subcontracting.



5119.1070-3  Identification and reporting.

    (b) Reporting shall be done in accordance with DFARS 204.6 
designated industry group requirements. Block

[[Page 201]]

B12A, DD Form 350, shall contain either the FPDS Code Y216 or Z216, as 
applicable, per 5119.1005 (S-90).



5119.1071  Solicitation provisions and contract clauses.

    (a) DFARS provision 252.219-7012 shall be inserted in all 
solicitations issued under the Small Business Dredging Program (SIC 
1629, limited to FPDS Service Codes Y216/Z216).
    (b) DFARS clause 252.219-7013 shall be inserted in all solicitations 
and contracts set-aside for emerging small businesses in accordance with 
5119.1070-2(a) (S-90).



PART 5145--GOVERNMENT PROPERTY--Table of Contents




5145.301  Definitions.
5145.302-3  Other contracts.
5145.303  Providing material.

    Authority: 5 U.S.C. 301, 10 U.S.C. 2202, DoD Directive 5000.35, and 
DoD FAR Supplement 201.301.

    Source: 54 FR 39538, Sept. 27, 1989, unless otherwise noted.



5145.301  Definitions.

    Other Government Property means all property, other than Special Use 
Property as defined below, which may be offered to a contractor for use 
in performance of installation support services contracts.
    Special Use Property means property that is (a) ``agency peculiar 
property'', (b) necessary for mobilization requirements; or (c) property 
for which it has been determined that title should remain with the 
Government.



5145.302-3  Other contracts.

    (S-90)(1) When it is determined that contractor use of existing 
Government facilities, other than special use property, in the 
performance of installation support services contracts, is in the best 
interest of the Government, the Government facilities will be offered to 
a contractor for use in the performance of the Government contract. 
Facilities provided to a contractor under this authority will not be 
replaced by the Government when they can no longer be used by the 
contractor. Nevertheless, it will be the contractor's responsibility to 
continue performance in accordance with the terms of the contract.
    (2)(i) New facilities shall not be purchased in order to provide 
them to contractors. Prior to offering existing facilities under this 
authority, a contracting officer shall make a written determination, 
based on the detailed justification provided by the approving officials 
and program/project manager, that such use is in the best interest of 
the Government. The written determination shall be kept in the contract 
file.
    (ii) Existing facilities offered for contractor use will be offered 
to all bidders/offerors for their consideration in the preparation of 
their bids and offers. Bidders/offerors may choose to use any or all of 
the facilities offered.
    (3) When it is determined that contractor use of special use 
property in the performance of installation support services contracts 
is in the best interest of the Government, such property will be 
provided. It will be accounted for and managed under the appropriate 
Government property clause. For example, FAR 52.245-2 for fixed-price 
contracts or FAR 52.245-5 for cost-reimbursement contracts and any 
appropriate provision from FAR 52.245-11, Facilities Use Clause.
    (S-91) Required Government property clauses for other than 
facilities contracts.
    (1) In addition to the clauses at FAR 52.245-2 and 52.245-19, the 
Contracting Officer shall insert the clause at 5152.245-9000, Government 
Property for Installation Support Services (Fixed-Price Contracts), in 
solicitations and contracts when a fixed-price contract is contemplated 
and Government property will be provided without being replaced by the 
Government.
    (2) The Contracting Officer shall insert the clause at 5152.245-
9001, Government Property for Installation Support Services (Cost-
Reimbursement Contracts), in solicitations and contracts when a cost-
reimbursement type contract is contemplated and the Government property 
will be provided without being replaced by the Government.

[[Page 202]]



5145.303  Providing material.

    (S-90) Existing Government material on hand or being used prior to 
conversion to contractor performance of commercial activities may be 
offered to contractors if it is determined to be in the best interest of 
the Government per FAR 45.303-1. If the material is to be provided 
without replacement by the Government, the solicitation must state that 
it will not be replaced. If it is determined that the Government will be 
responsible for replacement of any of the material, those items must be 
listed on a separate Technical Exhibit and the solicitation state that 
replacement will be by the Government. These items will be governed by 
the appropriate Government Property clause in the contract in accordance 
with FAR 52.245-2 for fixed-price and FAR 52.245-5 for cost-
reimbursement type contracts.



PART 5152--SOLICITATIONS PROVISIONS AND CONTRACT CLAUSES--Table of Contents




5152.208-9001  Industrial preparedness planning.
5152.245-9000  Government property for installation support services 
          (fixed-price contracts).
5152.245-9001  Government property for installation support services 
          (cost-reimbursement contracts).

    Authority: 5 U.S.C. 301, 10 U.S.C. 2202, DOD Directive 5000.35, and 
DOD FAR Supplement 201.301.



5152.208-9001  Industrial preparedness planning.

    As prescribed at 5108-070(g)(4) insert the following clause in full 
text in contracts where the contractor is designated a Limited Fee 
Planned Producer.

            Industrial Preparedness Planning (XXX 1989) (DEV)

    (a) The Government designates the contractor a Limited Fee Planned 
Producer (LFPP) for the item(s) listed in paragraph (e) of this clause. 
As an LFPP for the listed items, the contractor will be solicited for 
all acquisitions over $25,000 which are for the item(s), excluding those 
for which competition is restricted to the Restricted Specified Base 
pursuant to an approved Justification and Approval. The Government 
reserves the right to obtain the item(s) listed from sources other than 
the commercial marketplace, i.e. by assigning workload to a government-
owned facility.
    (b) The Contractor agrees to:
    (i) Update the Production Capacity Survey DD Form 1519 TEST for each 
item biennially;
    (ii) Accomplish subcontractor planning as required in paragraph (f) 
of this clause;
    (iii) Permit Government personnel access to records, manufacturing 
process data, plants and facilities in order to verify data on the 
Production Capacity Survey DD Form 1519 TEST.
    (iv) Maintain the surge/mobilization capacity set forth in the 
Production Planning Schedules during active production of the item and 
for a period of (negotiated number) years after physical completion of 
this production contract.
    (c) The Contractor is aware of the Government's dependence upon the 
Production Planning Schedules as a basis to take appropriate measures to 
ensure the adequacy of the United States Industrial Base. The Contractor 
also recognizes the Government's intention to convert Production 
Planning Schedule to contracts on a selective basis, as may be required 
to minimize materiel shortages during mobilization or to meet 
contingencies short of a declared national emergency. The Contractor 
agrees to accept contracts for the item(s) in accordance with the 
Production Planning Schedules. In the event mobilization or 
contingencies short of a declared national emergency occur after active 
production has ceased, and the allocated capacity is in use for the 
production of other item(s), the Contractor agrees to immediately 
discontinue production of such other item(s) if necessary to meet 
production schedules for the planned item(s). The Contractor further 
recognizes that it is the Government's intention to require that planned 
subcontractor support will be similarly converted to production 
subcontracts. Production delivery obligations under this clause are 
governed by Title I of the Defense Production Act of 1950, as amended 
(50 U.S.C. app. 2061, et seq.) (Defense Production Act) and as 
applicable are within the purview of the Defense Priorities and 
Allocation System.
    (d) For the listed item(s), the Contractor certifies by signing this 
contract that the plant capacity required to support the mobilization 
quantity listed on the Production Capacity Survey DD Form 1519 TEST will 
be dedicated exclusively for the production of that item at 
mobilization. Furthermore, the Contractor certifies that this capacity 
is not shared by any other mobilization production requirements.
    (e) This clause covers the item(s) listed below:

[[Page 203]]



------------------------------------------------------------------------
             Item schedule No.               Item nomenclature (sample)
------------------------------------------------------------------------
M11111....................................  Fuze, Rocket MK987.
M22222....................................  Machine Gun, MK35.
------------------------------------------------------------------------

    (f) Subcontractors, suppliers and vendors provide many of the 
components of military end items. The lack of critical components could 
be one of the major limitations of the United States' ability to support 
its Armed Forces warfighting capabilities. Therefore, the Government 
designated critical components and/or subassemblies in Block 27 of the 
attached Production Capacity Survey (DD Form 1519 TEST) are those for 
which the Contractor will conduct vertical planning if not produced in-
house. Additional critical components and/or subassemblies may be 
identified by the Contractor in block 21 of the attached Production 
Capacity Survey (DD Form 1519 TEST). Foreign producers (other than 
Canada) will not be considered as a source of supply for critical 
components. Mandatory vertical (subcontractor) planning will be 
accomplished by the ASPPO and the Contractor for all critical components 
identified on the Production Capacity Survey, (DD Form 1519 TEST), by 
using a sub-tier Production Capacity Survey (DD Form 1519 TEST). The 
Contractor agrees to coordinate completion of the DD Form 1519 TEST and 
finalize prime and subcontractor planning with the Armed Services 
Production Planning Officer (ASPPO) having cognizance over the prime 
contractor's facility.
    (g) After completion of active production of the item(s), the 
Government will annually, or as changes occur but not more than 
annually, furnish the Contractor updated technical data for the item. 
The Contractor agrees to review the technical data and to report to the 
Government within 60 days of receipt of the data, the impact of 
technical changes, if any, to the current Production Planning Schedules 
at no additional cost to the Government.
    (h) Retention by the Contractor of the surge/mobilization capacity 
set forth in the Production Planning Schedules after completion of 
active production of the planned item(s) will not necessarily require 
that the Contractor maintain such capacity in idle status. Contractor 
utilization of capacity allocated for planned production for production 
of other non-planned items is consistent with the intent of any 
postproduction provisions of this contract, provided no degradation of 
surge/mobility capacity occurs as a result, and provided that the 
approval of the Contracting Officer with property cognizance is obtained 
for the use of any Government-owned property.

[54 FR 38683, Sept. 20, 1989]



5152.245-9000  Government property for installation support services (fixed-price contracts).

    As prescribed in 5145.302-3(91), insert the following:

   Government Property for Installation Support Services (Fixed-Price 
                       Contracts) (Oct 1989) (DEV)

    The Government property listed at Technical Exhibit ____ is provided 
``as is'' to the contractor for use in the performance of this contract. 
This property may be used by the Contractor until the Contractor no 
longer desires to use it for contract performance or the Contracting 
Officer withdraws it from use under this contract in accordance with FAR 
52.245-2(b). The Contractor will comply with instructions from the 
Contracting Officer relative to disposition of the property. No 
equitable adjustment or other claim will be payable to the Contractor 
based upon the condition or availability of the property, except as 
provided in FAR 52.245-19. The Contractor remains responsible for 
performance of the required services under this contract regardless of 
the length of time which the property provided hereunder remains 
operational. Property provided by or obtained by the Contractor under 
this contract remains Contractor property. Except as provided herein, 
the property listed at Technical Exhibit ____ will be governed by FAR 
52.245-2, Government Property (Fixed-Price Contracts), and FAR 52.245-
19, Government Property Furnished ``as is''.

                             (End of clause)

[54 FR 39539, Sept. 27, 1989]



5152.245-9001  Government property for installation support services (cost-reimbursement contracts).

    As prescribed in 5145.302-3(S-91), insert the following clause:

      Government Property for Installation Support Services (Cost-
                Reimbursement Contracts) (Oct 1989) (DEV)

    (a) Government-furnished property. The Government property listed at 
Technical Exhibit ____ is provided to the contractor for use in the 
performance of this contract for installation support services. This 
property will be used, maintained and administered by the Contractor 
until it is no longer required by the Contractor. Cessation of such use 
of the property, and subsequent turn-in, must be approved by the 
Contracting Officer. The

[[Page 204]]

Contracting Officer will provide the Contractor with appropriate 
disposition instructions. The Contractor will continue to perform 
following such disposition with Contractor-owned property. No equitable 
adjustment or claim will be payable resulting from turn-in or 
unsuitability for intended use of this property. No change to this 
contract is indicated by approval of turn-in of the property. No delay 
claim or performance delay will be allowed based on unsuitability of 
property or turn-in. The Contractor's proposal includes an estimate of 
the costs for providing its own property for the period following turn-
in of Government property.
    (b) Changes in Government-furnished property. The Contracting 
Officer may, by written notice, decrease the Government-furnished 
property or substitute other property for the property being used by the 
contractor. In the case of this withdrawal of property by the 
Contracting Officer, an equitable adjustment may be appropriate. 
Nevertheless, even in the case of such withdrawal, the Contractor is 
obligated to continue performance under this contract.
    (c) Title in Government Property. (1) Title to the Property shall 
remain in the Government. Title to parts replaced by the Contractor in 
carrying out its normal maintenance obligations under paragraph (g) of 
this clause shall pass to and vest in the Government upon completion of 
their installation in the property.
    (2) Title to the property shall not be affected by their 
incorporation into or attachment to any property not owned by the 
Government, nor shall any item of the property become a fixture or lose 
its identity as personal property by being attached to any real 
property. The Contractor shall keep the property free and clear of all 
liens and encumbrances and, except as otherwise authorized by this 
contract or by the Contracting Officer, shall not remove or otherwise 
part with possession of, or permit the use by others of any of the 
property.
    (3) The Contractor may, with the written approval of the Contracting 
Officer, install, arrange, or rearrange, on Government furnished 
premises, readily removable machinery, equipment and other items 
belonging to the Contractor. Title to any such item shall remain in the 
Contractor even though it may be attached to real property owned by the 
Government, unless the Contracting Officer determines that it is so 
permanently attached that removal would cause substantial injury to 
Government property.
    (4) The Contractor shall not construct or install, at its own 
expense, any fixed improvement or structural alterations in Government 
buildings or other real property without advance written approval of the 
Contracting Officer. Fixed improvement or structural alterations as used 
herein, means any alteration or improvement in the nature of the 
building or other real property that, after completion, cannot be 
removed without substantial loss of value or damage to the premises. The 
term does not include foundations for production equipment.
    (d) Location of the property. The Contractor may use the property 
only at the installation location(s) specified in the schedule. Written 
approval of the Contracting Officer is required prior to moving the 
property to any other location. In granting this approval, the 
Contracting Officer may prescribe such terms and conditions as may be 
deemed necessary for protecting the Government's interest in the 
property involved. Those terms and conditions shall take precedence over 
any conflicting provisions of this contract.
    (e) Notice of use of the property. The Contractor shall notify the 
Contracting Officer in writing whenever any item of the property is no 
longer needed or usable for performing under this contract. The 
contracting officer will then make a decision as to disposition if 
agreement is reached with the Contractor that the property is no longer 
usable or suitable for its intended use.
    (f) Property Control. The Contractor shall maintain property control 
procedures and records, and a system of identification of the property, 
in accordance with the provisions of FAR subpart 45.5 in effect on the 
date of this contract.
    (g) Maintenance. (1) Except as otherwise provided in the Schedule, 
the Contractor shall protect, preserve, maintain (including normal parts 
replacement), and repair the property in accordance with sound 
industrial practice.
    (2) No later than 45 days after the execution of this contract, the 
Contractor shall submit to the Contracting Officer a written proposed 
maintenance program, including a maintenance records system, in 
sufficient detail to show the adequacy of the proposed program. If the 
Contracting Officer agrees to the proposed program, it shall become the 
normal maintenance obligation of the Contractor. The Contractor's 
performance according to the approved program shall satisfy the 
Contractor's obligations under paragraphs (g) (1) and (5) of this 
clause.
    (3) The Contracting Officer may at any time direct the Contractor in 
writing to reduce the work required by the normal maintenance program. 
If such order reduces the cost of performing the maintenance, an 
appropriate equitable adjustment may be made.
    (4) The Contractor shall perform any maintenance work directed by 
the Contracting Officer in writing. Work in excess of the maintenance 
required under paragraphs (g)(1) through (g)(3) of this clause shall be 
at Government expense. The Contractor shall notify the Contracting 
Officer in writing when sound industrial practice requires

[[Page 205]]

maintenance in excess of the normal maintenance program. The Contracting 
Officer shall then make a determination whether to repair the facilities 
or whether the Contractor should provide contractor property while 
continuing to perform.
    (5) The Contractor shall keep records of all work done on the 
property and shall give the Government reasonable opportunity to inspect 
such records. When property is disposed of under this contract, the 
Contractor shall deliver the related records to the Government, or, if 
directed by the Contracting Officer, to third persons.
    (6) The Contractor's obligation under this clause for each item of 
property shall continue until the item is removed, abandoned, or 
disposed of in accordance with Contracting Officer's instructions.
    (h) Access. The Government and any persons designated by it shall, 
at all reasonable times have access to the premises where any of the 
property is located.
    (i) Indemnification of the Government. The Contractor shall 
indemnify the Government and hold it harmless against claims for injury 
to persons or damage to property of the Contractor or others arising 
from the Contractor's possession or use of the property under this 
contract. Nevertheless, this provision applies only to injury arising 
out of use of property provided under this clause.
    (j) Representation and warranties. (1) The Government makes no 
warranty, express or implied, regarding the condition or fitness for use 
of any property. To the extent practical, the Contractor shall be 
allowed to inspect all the property to be furnished by the Government.
    (2) If, however, the Contractor receives property in a condition not 
suitable for the intended use, the Contractor shall, within 30 days 
after receipt and installation thereof, so notify the Contracting 
Officer, detailing the facts, and, as directed by the Contracting 
Officer, and at Government expense, either return such item or otherwise 
dispose of it or effect repairs or modifications. If the determination 
is made by the Contracting Officer to require turn-in rather than repair 
of the property, then the Contractor will continue to perform the 
contract by using its own property, for which reimbursement will be made 
in accordance with applicable cost principles.
    (k) Limited risk of loss. (1) The Contractor shall not be liable for 
loss or destruction of, or damage to, the Government property provided 
under this contract or for expenses incidental to such loss, 
destruction, or damage, except as provided in paragraphs (k) (2) and (3) 
of this clause.
    (2) The Contractor shall be responsible for loss or destruction of, 
or damage to, the Government property provided under this contract 
(including expenses incidental to such loss, destruction, or damage)--
    (i) That results from a risk expressly required to be insured under 
this contract, but only to the extent of the insurance required to be 
purchased and maintained or to the extent of insurance actually 
purchased and maintained, whichever is greater;
    (ii) That results from a risk that is in fact covered by insurance 
or for which the Contractor is otherwise reimbursed, but only to the 
extent of such insurance or reimbursement:
    (iii) For which the Contractor is otherwise responsible under the 
express terms of this contract;
    (iv) That results from willful misconduct or lack of good faith on 
the part of the Contractor's managerial personnel; or
    (v) That results from a failure on the part of the Contractor, due 
to willful misconduct or lack of good faith on the part of the 
Contractor's managerial personnel, to establish and administer a program 
or system for the control, use, protection, preservation, maintenance, 
and repair of Government property as required by paragraph (f) of this 
clause.
    (3)(i) If the Contractor fails to act as provided by paragraph 
(k)(2)(v) of this clause, after being notified (by certified mail 
addressed to one of the Contractor's managerial personnel) of the 
Government's disapproval, withdrawal of approval, or nonacceptance of 
the system or program, it shall be conclusively presumed that such 
failure was due to willful misconduct or lack of good faith on the part 
of the Contractor's managerial personnel.
    (ii) In such event, any loss or destruction of, or damage to, the 
Government property shall be presumed to have resulted from such failure 
unless the Contractor can establish by clear and convincing evidence 
that such loss, destruction, or damage--
    (A) Did not result from the Contractor's failure to maintain an 
approved program or system; or
    (B) Occurred while an approved program or system was maintained by 
the Contractor.
    (4) If the Contractor transfers Government property to the 
possession and control of a subcontractor, the transfer shall not affect 
the liability of the Contractor for loss or destruction of, or damage 
to, the property as set forth above. However, the Contractor shall 
require the subcontractor to assume the risk of, and be responsible for, 
any loss or destruction of, or damage to, the property while in the 
subcontractor's possession or control, except to the extent that the 
subcontract, with the advance approval of the Contracting Officer, 
relieves the subcontractor from such liability. In the absence of such 
approval, the subcontract shall contain appropriate provisions requiring 
the return of all Government property in as good condition as when 
received, except for reasonable wear and tear or for its use in 
accordance with the provisions of the prime contract.

[[Page 206]]

    (5) Upon loss or destruction of, or damage to, Government property 
provided under this contract, the Contractor shall so notify the 
Contracting Officer and shall communicate with the loss and salvage 
organization, if any, designated by the Contracting Officer. With the 
assistance of any such organization, the Contractor shall take all 
reasonable action to protect the Government property from further 
damage, separate the damaged and undamaged Government property, put all 
the affected Government property in the best possible order, and furnish 
to the Contracting Officer a statement of--
    (i) The lost, destroyed, or damaged Government property;
    (ii) The time and origin of the loss, destruction, or damage;
    (iii) All known interests in commingled property of which the 
Government property is a part; and
    (iv) The insurance, if any, covering any part of or interest in such 
commingled property.
    (6) The Contractor shall repair, renovate, and take such other 
action with respect to damaged Government property as the Contracting 
Officer directs. If the Government property is destroyed or damaged 
beyond practical repair, or is damaged and so commingled or combined 
with property of others (including the Contractor's) that separation is 
impractical, the Contractor may, with the approval of and subject to any 
conditions imposed by the Contracting Officer, sell such property for 
the account of the Government. Such sales may be made in order to 
minimize the loss to the Government, to permit the resumption of 
business, or to accomplish a similar purpose. The Contractor shall be 
entitled to an equitable adjustment in the contract price for the 
expenditures made in performing the obligations under this subparagraph 
(k)(6). However, the Government may directly reimburse the loss and 
salvage organization for any of their charges. The Contracting Officer 
shall give due regard to the Contractor's liability under this paragraph 
(k) when making any such equitable adjustment.
    (7) The Contractor shall not be reimbursed for, and shall not 
include as an item of overhead, the cost of insurance or of any reserve 
covering risk of loss or destruction of, or damage to, Government 
property, except to the extent that the Government may have expressly 
required the Contractor to carry such insurance under another provision 
of this contract.
    (8) In the event the Contractor is reimbursed or otherwise 
compensated for any loss or destruction of, or damage to, Government 
property, the Contractor shall use the proceeds to repair, renovate, or 
replace the lost, destroyed, or damaged Government property or shall 
otherwise credit the proceeds to, or equitably reimburse, the 
Government, as directed by the Contracting Officer.
    (9) The Contractor shall do nothing to prejudice the Government's 
rights to recover against third parties for any loss or destruction of, 
or damage to, Government property. Upon the request of the Contracting 
Officer, the Contractor shall, at the Government's expense, furnish to 
the Government all reasonable assistance and cooperation (including the 
prosecution of suit and the execution of instruments of assignment in 
favor of the Government) in obtaining recovery. In addition, where a 
subcontractor has not been relieved from liability for any loss or 
destruction of, or damage to, Government property, the Contractor shall 
enforce for the benefit of the Government the liability of the 
subcontractor for such loss, destruction, or damage.
    (1) Disposition of the facilities. (1) The provisions of this 
paragraph shall apply to facilities whose use has been terminated by 
either the Contracting Officer or the Contractor because the property is 
no longer suitable for intended use, no longer desired, or is withdrawn 
from use by the Government.
    (2) The Contractor shall dispose of the property provided hereunder 
in accordance with guidance provided by the Contracting Officer.
    (3) The Contracting Officer shall give disposition instructions 
within 60 days of agreement that the property should be returned to the 
Government.
    (4) The Government may remove or otherwise dispose of any facilities 
for which the Contractor's authority to use has been terminated.
    (5) When Government property is returned to the Government, upon 
termination of the contract relationship between Government and 
Contractor or when Government furnished property is replaced by 
Contractor property, the Contracting Officer may direct repair of 
Government property necessitated by the change from Government to 
Contractor property such as removal of fixtures. When Contractor 
property is removed from Government property at the end of contract 
performance, the Government property will be restored to its condition 
prior to installation of Contractor property in accordance with 
Contracting officer direction.

                             (End of clause)

[54 FR 39539, Sept. 27, 1989]

[[Page 207]]



       CHAPTER 52--DEPARTMENT OF THE NAVY ACQUISITION REGULATIONS

                          (Parts 5200 to 5299)

  --------------------------------------------------------------------
Part                                                                Page
5215            Contracting by negotiation..................         209
5231            Contract cost principles and procedures.....         211
5242            Contract administration.....................         212
5243            [Reserved]
5252            Solicitation provisions and contract clauses         213

[[Page 209]]



PART 5215--CONTRACTING BY NEGOTIATION--Table of Contents




  Subpart 5215.4--Solicitation and Receipt of Proposals and Quotations

Sec.
5215.402  General.
5215.407  Solicitation provisions.

                    Subpart 5215.6--Source Selection

5215.605  Evaluation factors.
5215.608  Proposal evaluation.

                    Subpart 5215.8--Price Negotiation

5215.804-3  Exemptions from or waiver of submission of certified cost or 
          pricing data.

    Authority: 5 U.S.C. 301, 10 U.S.C. 2202, DOD Directive 5000.35.

    Source: 53 FR 16280, May 6, 1988, unless otherwise noted.



  Subpart 5215.4--Solicitation and Receipt of Proposals and Quotations



5215.402  General.

    (a) Competition is the cornerstone of Navy acquisition policy. As 
such, the preferred and predominant method of pricing in the Navy is 
through the use of competition, without the need for cost or pricing 
data and cost analysis. The Navy has found that not only does 
competition generate more favorable prices, but significant time and 
effort can be saved by relying on the forces of competition to establish 
prices, as opposed to the use of detailed cost analysis. This approach 
is not only consistent with the Competition in Contracting Act (CICA), 
but it affords the opportunity for significant efficiencies and 
reduction of procurement leadtime as a result of minimizing the 
requirement for cost or pricing data and associated audit reports. As 
competition is increasingly relied upon and the need for cost or pricing 
data is reduced, there may be a corresponding requirement for performing 
a cost realism evaluation for many competitive procurements to guard 
against unrealistically low prices which can lead to quality 
deficiencies, late deliveries, performance shortfalls, and cost 
overruns. In performing cost realism evaluation, only the minimum 
selected data to perform the cost realism evaluation is to be obtained, 
as opposed to full cost or pricing data which would be required when it 
is necessary to perform cost-based negotiations, such as in the case of 
sole source negotiations.



5215.407  Solicitation provisions.

    (S-90) During acquisition planning, an assessment shall be made as 
to the likelihood that adequate price competition will exist. If it is 
anticipated that an award will be based on adequate price competition, 
the solicitation shall include the provision at 5252.215-9000. If the 
procurement schedule is critical, this provision with its Alternate I 
shall be used so that there will be a minimum delay in the event that 
adequate price competition does not materialize and it is necessary to 
obtain cost or pricing data. Contracting officers must be judicious in 
the use of the Alternate I provision, as it may cause offerors to incur 
certain costs in preparing standby cost or pricing data in anticipation 
that it may be subsequently requested.



                    Subpart 5215.6--Source Selection



5215.605  Evaluation factors.

    (S-90)(1) When a cost realism evaluation will be performed, the 
source selection evaluation criteria shall include a notice that the 
proposed costs may be adjusted, for purposes of evaluation, based upon 
the results of the cost realism evaluation.
    (2) Technical criteria may include quality standards that are based 
on either a minimally acceptable approach or a cost/benefit approach. 
When the quality desired is that necessary to meet minimum needs, 
proposals should be evaluated for acceptability and award made to the 
lowest priced, technically acceptable offer. When the quality desired is 
the highest affordable or that representing the best value, proposals 
should be evaluated on a cost/benefit basis that would permit an award 
based on paying appropriate premiums for measured increments of quality. 
When a cost/benefit approach is used, cost must carry a weight of not 
less than 40% unless thoroughly justified.

[[Page 210]]

    (3) Cost realism evaluation. (i) Cost realism evaluation involves a 
summary level review of the cost portion (excluding profit/fee) of the 
offerors' proposals to determine if the overall costs proposed are 
realistic for the work to be performed. Cost realism evaluation differs 
from the detailed cost analysis usually undertaken in a noncompetitive 
procurement to determine the reasonableness of the various cost elements 
and profit/fee to arrive at a fair and reasonable price. Data submitted 
only for cost realism evaluation generally will not be certified.
    (ii) The purpose of cost realism evaluation is to:
    (A) Verify the offeror's understanding of the requirements;
    (B) Assess the degree to which the cost/price proposal reflects the 
approaches and/or risk assessments made in the technical proposal as 
well as the risk that the offeror will provide the supplies or services 
for the offered prices/costs; and
    (C) Assess the degree to which the cost included in the cost/price 
proposal accurately represents the work effort included in the technical 
proposal.
    (iii) Some examples of data and information that may be obtained to 
perform cost realism evaluation are:
    (A) Manloading (quantity and mix of labor hours);
    (B) Engineering, labor and overhead rates; and
    (C) Make or buy plans.

A price analysis approach where there is adequate price history may also 
be a suitable and efficient means to evaluate cost realism. The amount 
of data required will be dependent upon the complexity of the 
procurement and the data already obtained by the contracting officer 
(e.g. information on recent Forward Pricing Rate Agreements (FPRAs)).
    (iv) Cost realism evaluation generally will be performed as a part 
of the proposal evaluation process (see 5215.605) for all competitive 
solicitations where a cost reimbursement contract is contemplated. For 
competitive solicitations contemplating a fixed price, labor hour, or 
time and material type contract, a cost realism evaluation would be the 
exception and not the rule, although its use may be appropriate where 
the proposal evaluation process will encompass both a cost/price 
evaluation and a technical evaluation. Also, where the contracting 
officer suspects a ``buy-in'' (see FAR 3.501) or a misunderstanding of 
the requirements as a result of reviewing the initial offers, data and 
information should be obtained and a cost realism evaluation performed.
    (v) When cost realism data are required, the contracting officer 
shall not request a formal field pricing report but rather, shall 
request a review of only those specific areas of information necessary 
to allow the contracting officer to perform a cost realism evaluation. 
For example, the contracting officer may only need to know the current 
or FPRA labor and/or overhead rates. In these instances, the request for 
information from DCAA may be oral or written.



5215.608  Proposal evaluation.

    (a) When a cost realism evaluation will be performed in accordance 
with 5215.605(S-90), the resulting realistic cost estimate shall be used 
in the evaluation of cost.



                    Subpart 5215.8--Price Negotiation



5215.804-3  Exemptions from or waiver of submission of certified cost or pricing data.

    (a) General. As explained in 5215.402, cost or pricing data would 
not normally be obtained because the predominant portion of Navy 
procurements are awarded on the basis of adequate price competition.
    (b)(1)(iii) Adequate price competition may also exist where price is 
a secondary factor in the evaluation of proposals, as long as price is a 
substantial factor. Price, as used herein, means cost plus any fee or 
profit applicable to the contract price. Thus, in competitive 
acquisitions where adequate price competition is contemplated, the 
contracting officer shall not require the submission of cost or pricing 
data whether certified or not, as defined in FAR 15.801, regardless of 
the type of contract.
    (b)(3) Examples of contract awards for which prices may be based on 
adequate price competition and/or to have

[[Page 211]]

been established by adequate price competition are:
    (i) Contracts for items for which there are a limited number of 
sources and the prices at which award will be made are within a 
reasonable amount of each other and compare favorably with independent 
Government estimates and with prior prices paid;
    (ii) Any contract, including cost-type contracts, when cost is a 
significant evaluation factor; and
    (iii) Contracts for which there are dual sources.



PART 5231--CONTRACT COST PRINCIPLES AND PROCEDURES--Table of Contents




         Subpart 5231.2--Contracts with Commercial Organizations

Sec.
5231.205  Selected costs.
5231.205-90  Shipbuilding capability preservation agreements.

    Authority:  5 U.S.C. 301, 10 U.S.C. 2501, 10 U.S.C. 7315, DoD 
Directive 5000.35.

    Source: 62 FR 66827, Dec. 22, 1997, unless otherwise noted.



         Subpart 5231.2--Contracts With Commercial Organizations



Sec. 5231.205  Selected costs.



Sec. 5231.205-90  Shipbuilding capability preservation agreements.

    (a) Scope and authority. Where it would facilitate the achievement 
of the policy objectives set forth in 10 U.S.C. 2501(b), the Navy may 
enter into a shipbuilding capability preservation agreement with a 
contractor. As authorized by section 1027 of the National Defense 
Authorization Act for Fiscal Year 1998 (Public Law 105-85), such an 
agreement permits the contractor to claim certain indirect costs 
attributable to its private sector work as allowable costs on Navy 
shipbuilding contracts.
    (b) Definition. Incremental indirect cost, as used in this 
subsection, means an additional indirect cost that results from 
performing private sector work described in a shipbuilding capability 
preservation agreement.
    (c) Purpose and guidelines. The purpose of a shipbuilding capability 
preservation agreement is to broaden and strengthen the shipbuilding 
industrial base by providing an incentive for a shipbuilder to obtain 
new private sector work, thereby reducing the Navy's cost of doing 
business. The Navy will use the following guidelines to evaluate 
requests for shipbuilding capability preservation agreements:
    (1) The Assistant Secretary of the Navy for Research, Development 
and Acquisition must make a determination that an agreement would 
facilitate the achievement of the policy objectives set forth in 10 
U.S.C. 2501(b). The primary consideration in making this determination 
is whether an agreement would promote future growth in the amount of 
private sector work that a shipbuilder is able to obtain.
    (2) An agreement generally will be considered only for a shipbuilder 
with little or no private sector work.
    (3) The agreement shall apply to prospective private sector work 
only, and shall not extend beyond 5 years.
    (4) The agreement must project an overall benefit to the Navy, 
including net savings. This would be achieved by demonstrating that 
private sector work will absorb costs that otherwise would be absorbed 
by the Navy.
    (d) Cost-reimbursement rules. If the Navy enters into a shipbuilding 
capability preservation agreement with a contractor, the following cost-
reimbursement rules apply:
    (1) The agreement shall require the contractor to allocate the 
following costs to private sector work:
    (i) The direct costs attributable to the private sector work;
    (ii) The incremental indirect costs attributable to the private 
sector work; and
    (iii) The non-incremental indirect costs to the extent that the 
revenue attributable to the private sector work exceeds the sum of the 
costs specified in paragraphs (d)(1)(i) and (d)(1)(ii) of this 
subsection.
    (2) The agreement shall require that the sum of the costs specified 
in paragraphs (d)(1)(ii) and (d)(1)(iii) of this subsection not exceed 
the amount of indirect costs that would have been allocated to the 
private sector work in accordance with the contractor's established 
accounting practices.

[[Page 212]]

    (3) The Navy may agree to modify the amount calculated in accordance 
with paragraph (d)(1) of this subsection if it determines that a 
modification is appropriate to the particular situation. In so doing, 
the Navy may agree to the allocation of a smaller or larger portion of 
the amount calculated in accordance with paragraph (d)(1) of this 
subsection, to private sector work.
    (i) Any smaller amount shall not be less than the sum of the costs 
specified in paragraphs (d)(1)(i) and (d)(1)(ii) of this subsection.
    (ii) Any larger amount shall not exceed the sum of the costs 
specified in paragraph (d)(1)(i) of this subsection and the amount of 
indirect costs that would have been allocated to the private sector work 
in accordance with the contractor's established accounting practices.
    (iii) In determining whether such a modification is appropriate, the 
Navy will consider factors such as the impact of pre-existing firm-
fixed-price Navy contracts on the amount of costs that would be 
reimbursed by the Navy, the impact of pre-existing private sector work 
on the cost benefit that would be received by the contractor, and the 
extent to which allocating a smaller or larger portion of costs to 
private sector work would provide a sufficient incentive for the 
contractor to obtain additional private sector work.
    (e) Procedure. A contractor may submit a request for a shipbuilding 
capability preservation agreement, together with appropriate 
justification, through the Deputy Assistant Secretary of the Navy for 
Ships, to the Assistant Secretary of the Navy for Research, Development 
and Acquisition, who has approval or disapproval authority. The 
contractor should also provide an informational copy of any such request 
to the cognizant administrative contracting officer.



PART 5242--CONTRACT ADMINISTRATION--Table of Contents




    Authority: 5 U.S.C. 301, 10 U.S.C. 2202, DOD Directive 5000.35



  Subpart 5242.90--Refunds Requirements (Spares and Support Equipment)



5242.9000  Requests for refunds.

    (a) Policy. (1) This subpart establishes uniform policy and 
procedures on requesting refunds for spare parts or items of support 
equipment. This policy is not intended to diminish the responsibility of 
Navy contracting personnel to properly price spare parts and items of 
support equipment. Further, it is not intended to serve as a mechanism 
for the recovery of excess profits.
    (2) In accordance with the guidance set forth in paragraph (c) of 
this section, contracting activities shall request a refund whenever the 
contract price of any spare part or item of support equipment 
significantly exceeds the item's intrinsic value as defined in the 
clause at 5252.242-9000. Refunds shall be requested only for the 
difference between the intrinsic value of the item at the time an 
agreement on price was reached and the contract price. Refunds will not 
be requested to recoup the amount of cost decreases that occur over time 
due to productivity gains (beyond economic quantity considerations) or 
changes in market conditions.
    (b) Examples. The following are examples of circumstances which may 
establish a basis for a refund request or pricing adjustment:
    (1) A technical or engineering analysis results in a determination 
that the intrinsic value is significantly lower than the historical 
price.
    (2) The price paid for an item bought competitively in similar 
quantity and circumstances (e.g., urgency, delivery terms) is 
significantly less than the former sole source price.
    (3) Prices paid to the manufacturer of an item indicate the amount 
previously charged by the prime contractor for the item significantly 
exceeded the intrinsic value of the prime contractor's efforts in 
providing the item.
    (c) Solicitation provisions. The contracting officer shall insert 
the clause at 5252.242-9000 in solicitations, Basic Ordering Agreements, 
and contracts (as defined in FAR 2.101) which contain

[[Page 213]]

or may contain requirements for spare parts or items of support 
equipment, except those contracts awarded as a result of competitive 
small purchase procedures and orders under federal supply schedules. If 
added to existing contracts, the clause will not apply to items or 
components ordered by the Government prior to the date of incorporation 
of the clause into the contract. Heads of Contracting Activities (HCAs) 
are delegated, without power of redelegation, authority to establish 
monetary thresholds below which refunds will not be requested.

[51 FR 46671, Dec. 24, 1986]

                          PART 5243  [RESERVED]



PART 5252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES--Table of Contents




             Subpart 5252.2--Texts of Provisions and Clauses

5252.215-9000  Submission of cost or pricing data.
5252.242-9000  Refunds.
5252.243-9000--5252.243-9001  [Reserved]

    Authority: 5 U.S.C. 301, 10 U.S.C. 2405, DOD Directive 5000.35, and 
DFARS subparts 201.3 and 243.1.

    Source: 53 FR 16282, May 6, 1988, unless otherwise noted.



             Subpart 5252.2--Texts of Provisions and Clauses



5252.215-9000  Submission of cost or pricing data.

    As prescribed at 5215.407, insert the following provision:

              Submission of Cost or Pricing Data (Nov 1987)

    (a) It is expected that this contract will be awarded based upon a 
determination that there is adequate price competition; therefore, the 
offeror is not required to submit or certify cost or pricing data (SF 
1411) with its proposal.
    (b) If, after receipt of the proposals, the contracting officer 
determines that adequate price competition does not exist in accordance 
with FAR 15.804-3, the offeror shall provide certified cost or pricing 
data as requested by the contracting officer.

                             (End of clause)

                         Alternate I (Nov 1987)

    As prescribed at 5215.407, substitute the following paragraph (b):
    (b) If, after receipt of the proposals, the contracting officer 
determines that adequate price competition does not exist, the offeror 
shall provide certified cost or pricing data as requested by the 
contracting officer. The offeror shall provide the requested data within 
\1\ calendar days from the date of the contracting officer's request.
---------------------------------------------------------------------------

    \1\ To be completed by the contracting officer.
---------------------------------------------------------------------------

                             (End of clause)



5252.242-9000  Refunds.

    As prescribed in 5242.9000 insert the following clause:

            Refunds (Spares and Support Equipment) (Dec 1986)

    (a) In the event that the price of a spare part or item of support 
equipment delivered under this contract significantly exceeds its 
intrinsic value, the contractor agrees to refund the difference. Refunds 
will only be made for the difference between the intrinsic value of the 
item at the time an agreement on price was reached and the contract 
price. Refunds will not be made to recoup the amount of cost decreases 
that occur over time due to productivity gains (beyond economic purchase 
quantity considerations) or changes in market conditions.
    (b) For purposes of this clause, the intrinsic value of an item is 
defined as follows:
    (1) If the item is one which is sold, or is substantially similar or 
functionally equivalent to one that is sold in substantial quantities to 
the general public, intrinsic value is the established catalog or market 
price, plus the value of any unique requirements, including delivery 
terms, inspection, packaging, or labeling.
    (2) If there is no comparable item sold in substantial quantities to 
the general public, intrinsic value is defined as the price an 
individual would expect to pay for the item based upon an economic 
quantity as defined in FAR 52.207-4, plus the value of any unique 
requirements, including delivery terms, inspection, packaging, or 
labeling.
    (c) At any time up to two years after delivery of a space part or 
item of support equipment, the contracting officer may notify the 
contractor that based on all information available at the time of the 
notice, the price of the part or item apparently exceeds its intrinsic 
value.
    (d) If notified in accordance with paragraph (c) of this clause, the 
contractor agrees to enter into good faith negotiations

[[Page 214]]

with the Government to determine if, and in what amount, the Government 
is entitled to a refund.
    (e) If agreement pursuant to paragraph (d) of this clause, cannot be 
reached, and the Navy's return of the new or unused item to the 
contractor is practical, the Navy, subject to the contractor's 
agreement, may elect to return the item to the contractor. Upon return 
of the item to its original point of government acceptance, the 
contractor shall refund in full the price paid. If no agreement pursuant 
to paragraph (d) of this clause is reached, and return of the item by 
the Navy is impractical, the contracting officer may, with the approval 
of the Head of the Contracting Activity, issue a contracting officer's 
final decision on the matter, subject to contractor appeal as provided 
in the Disputes clause.
    (f) The contractor will make refunds, as required under this clause, 
in accordance with instructions from the contracting officer.
    (g) The contractor shall not be liable for a refund if the 
contractor advised the contracting officer in a timely manner that the 
price it would propose for a spare part or item of support equipment 
exceeded its intrinsic value, and with such advice, specified the 
estimated proposed price, the estimated intrinsic value, and known 
alternative sources or items, if any, that can meet the requirement.
    (h) This clause does not apply to any spare parts or items of 
support equipment whose price is determined through adequate price 
competition. This clause also does not apply to any spare part or item 
of support equipment with a unit price in excess of $100,000; or in 
excess of $25,000 if the contractor submitted, and certified the 
currency, accuracy and completeness of, cost or pricing data applicable 
to the item.

                             (End of clause)



5252.243-9000--5252.243-9001  [Reserved]



 CHAPTER 53--DEPARTMENT OF THE AIR FORCE FEDERAL ACQUISITION REGULATION 
                         SUPPLEMENT  [RESERVED]

[[Page 215]]



       CHAPTER 54--DEFENSE LOGISTICS AGENCY, DEPARTMENT OF DEFENSE

                          (Parts 5400 to 5499)

  --------------------------------------------------------------------
Part                                                                Page
5416            Types of contracts..........................         217
5433            Protests, disputes and appeals..............         217
5452            Solicitation provisions and contract clauses         217

[[Page 217]]



PART 5416--TYPES OF CONTRACTS--Table of Contents




                  Subpart 5416.2--Fixed Price Contracts

Sec.
5416.203  Fixed-price contracts with economic price adjustment.
5416.203-1  Description.
5416.203-3  Limitations.
5416.203-4  Contract clauses.

    Authority: Fixed Price Contracts

    Source: 64 FR 41835, Aug. 2, 1999, unless otherwise noted.



                  Subpart 5416.2--Fixed Price Contracts



 5416.203  Fixed-price contracts with economic price adjustment.



 5416.203-1  Description.

    (a)(S-90) Adjustments based on established prices. Established 
prices may reflect industry-wide and/or geographically based market 
price fluctuations for commodity groups, specific supplies or services, 
or contract end items.
    (c)(S-90) Adjustments based on cost indexes of labor or materials. 
These price adjustments may also be based on increases or decreases in 
indexes for commodity groups, specific supplies or services, or contract 
end items.



 5416.203-3  Limitations.

    (S-90) A fixed price contract with economic price adjustment may 
also be used to provide for price adjustments authorized in this 
section.



 5416.203-4  Contract clauses.

    (S-90) When the contracting officer determines that an existing EPA 
clause is not appropriate, the contracting officer may develop and use 
another EPA clause in accordance with 5416.203-1 (a)(S-90) or (c)(S-90). 
Established prices and cost indexes need not reflect changes in the 
costs or established prices of a specific contractor. The established 
price or cost index may be derived from sales prices in the marketplace, 
quotes, or assessments as reported or made available in a consistent 
manner in a publication, electronic database, or other form, by an 
independent trade association, Governmental body, or other third party 
independent of the contractor. More than one established price or cost 
index may be combined in a formula for economic price adjustment 
purposes in the absence of an appropriate single price or cost index.



PART 5433--PROTESTS, DISPUTES AND APPEALS--Table of Contents




    Authority: 10 U.S.C. Chapter 137.



5433.214.  Alternative Dispute Resolution (ADR).

    The contracting officer shall insert the provision in 5452.233 in 
all solicitations unless the conditions at FAR 33.203(b) apply.

[66 FR 27474, May 17, 2001]



PART 5452--SOLICITATION PROVISIONS AND CONTRACT CLAUSES--Table of Contents




             Subpart 5452.2--Texts of Provisions and Clauses

5452.233-9001  Disputes: Agreement to Use Alternative Dispute Resolution 
          (ADR).
5452.249  Allocation.

    Authority: 5 U.S.C. 301, 10 U.S.C. 2202, 48 CFR part 1, subpart 1.3 
and 48 CFR part 201, subpart 201.3



             Subpart 5452.2--Texts of Provisions and Clauses



5452.233-9001  Disputes: Agreement to Use Alternative Dispute Resolution (ADR).

    As prescribed in 5433.214, insert the following provision:

  Disputes: Agreement to Use Alternative Dispute Resolution (ADR) (Apr 
                               2001)--DLAD

    (a) The parties agree to negotiate with each other to try to resolve 
any disputes that may arise. If unassisted negotiations are 
unsuccessful, the parties will use alternative dispute resolution (ADR) 
techniques to try to resolve the dispute. Litigation will only be 
considered as a last resort when ADR is unsuccessful or has been 
documented by the party rejecting ADR to be inappropriate for resolving 
the dispute.
    (b) Before either party determines ADR inappropriate, that party 
must discuss the use of ADR with the other party. The documentation 
rejecting ADR must be signed by an official authorized to bind the 
contractor (see FAR 52.233-1), or, for the Agency, by the

[[Page 218]]

contracting officer, and approved at a level above the contracting 
officer after consultation with the ADR Specialist and with legal 
counsel. Contractor personnel are also encouraged to include the ADR 
Specialist in their discussions with the contracting officer before 
determining ADR to be inappropriate.
    (c) If you wish to opt out of this clause, check here [ ]. Alternate 
wording may be negotiated with the contracting officer.

[66 FR 27474, May 17, 2001]



5452.249  Allocation.

    The Defense Fuel Supply Center is authorized to use the following 
clause in domestic and overseas petroleum solicitations/contracts, 
including those for Canal Zone and Puerto Rico, when a fixed-price 
contract is contemplated and the contract amount is expected to exceed 
the small purchase limitation.

                Allocation (DFSC 1995) (Deviation) (9F01)

    (a) Reduced Supplies.
    If, for any cause beyond the control and without the fault or 
negligence of the Contractor, the total supply of crude oil and/or 
refined petroleum product is reduced below the level that would have 
otherwise been available to the Contractor, the Contractor allocates to 
its regular customers its remaining available supplies of crude oil or 
product, then the Contractor may also allocate to the U.S. Government 
supplies to be delivered under this contract, provided--
    (1) Prompt notice of and evidence substantiating the necessity to 
allocate and describing the allocation rate for all the Contractor's 
customers are submitted to the Contracting Officer;
    (2) Allocation among the Contractor's regular customers is made on a 
fair and reasonable basis (except where allocation on a different basis 
is required by a governmental authority, agency or instrumentality); and
    (3) Reduction of the quantity of product due the Government under 
this contract shall not exceed the pro rata amount by which the 
Contractor reduces delivery to its other contractual customers.
    (b) Additional Supplies.
    If, after the event causing the shortage of crude oil and/or refined 
petroleum product as described in (a) above, additional supply becomes 
available to the Contractor, the Contracting Officer may choose any one 
of the following three possible courses of action:
    (1) Accept an updated pro rata reduction as outlined in (a);
    (2) Determine that continuance of the contract with the quantities 
as originally stated in the Schedule is in the best interests of the 
Government; or
    (3) Terminate the contract as permitted in (d) below.
    (c) Reduced Deliveries.
    If the Contractor believes that a law, regulation, or order of a 
foreign government requires the Contractor to deliver less than the 
quantity set forth in the Schedule for any location within that country, 
the Contractor may request allocation in accordance with (a) above. In 
addition to the criteria in (a) above, the Contractor's request shall 
cite--
    (1) The law, regulation or order, furnishing copies of the same;
    (2) The authority under which is imposed; and
    (3) The nature of the Government's waiver, exception, and 
enforcement procedure.
    The Contracting Officer will promptly review the matter and advise 
the Contractor whether or not the need to allocate has been 
substantiated. If the law, regulation, or order requiring the Contractor 
to reduce deliveries ceases to be effective, the Contractor shall resume 
deliveries in accordance with the original Schedule.
    (d) If, as a result of reduced deliveries permitted by (a), (b), or 
(c) above, the Contracting Officer decides that continuation of this 
contract is no longer in the best interests of the Government, the 
Government may terminate this contract or any quantity thereunder, by 
written notice, at no cost to the Government. However, the Government 
shall not be relieved of its obligation to pay for supplies actually 
delivered to and accepted by it.
    (e) Except as otherwise stated in (b) above, any volumes omitted 
pursuant to (a) or (b) above shall be deleted from this contract, and 
the Contractor shall have no continuing obligation, so far as this 
contract is concerned, to make up such omitted supplies.
    (f) For Posts, Camps, and Stations contracts, Department of Energy 
priority orders and allocation regulations will take precedence over any 
conflicting provisions of this clause.
    (g) For Bulk Fuels contracts, the provisions contained in (a) and 
(b) above shall be inoperative when the Secretary of Defense makes a 
written determination that it is essential to the National Defense that 
the Defense Fuel Supply Center be provided contract volumes exceeding 
the pro rata amount of product to which it would otherwise be entitled. 
However, in no case will the Contractor be required, under this 
contract, to supply more than 100% of the quantity specified in the 
Schedule.

                             (End of clause)

[60 FR 21992, May 4, 1995]

[[Page 219]]



               CHAPTER 57--AFRICAN DEVELOPMENT FOUNDATION

                          (Parts 5700 to 5799)

  --------------------------------------------------------------------

                   SUBCHAPTER B--ACQUISITION PLANNING
Part                                                                Page
5706            Competition requirements....................         220

[[Page 220]]





                   SUBCHAPTER B--ACQUISITION PLANNING


PART 5706--COMPETITION REQUIREMENTS--Table of Contents




    Authority: 40 U.S.C. 474.



          Subpart 5706.3--Other Than Full and Open Competition



5706.302-70  Impairment of foreign aid programs.

    (a) Full and open competition need not be obtained when it would 
impair or otherwise have an adverse effect on programs conducted for the 
purposes of foreign aid, relief and rehabilitation.
    (b) Application. This authority may be used for:
    (1) An award under section 506(a)(5) of the African Development 
Foundation Act involving a personal service contractor serving abroad;
    (2) An award of $100,000 or less for audit, evaluation or program 
support services to be provided abroad;
    (3) An award for which the President of the Foundation makes a 
formal written determination, with supporting findings, that compliance 
with full and open competition procedures would impair foreign 
assistance objectives, and would be inconsistent with the fulfillment of 
the Foundation program.
    (c) Limitation. (1) Offers shall be requested from as many potential 
offerors as is practicable under the circumstances.
    (2) The contract file must include an appropriate explanation and 
support justifying award without full and open competition, as provided 
in FAR 6.303, except that determinations made under paragraph (b)(3) of 
this section will not be subject to the requirement for contracting 
officer certification or to approvals in accord with FAR 6.304.

[53 FR 5578, Feb. 25, 1988]

[[Page 221]]



  CHAPTER 61--GENERAL SERVICES ADMINISTRATION BOARD OF CONTRACT APPEALS




                          (Parts 6100 to 6199)

  --------------------------------------------------------------------
Part                                                                Page
6101            Rules of procedure of the General Services 
                    Administration Board of Contract Appeals 
                    (standard proceedings)..................         223
6102            Rules of procedure of the General Services 
                    Administration Board of Contract Appeals 
                    (expedited proceedings).................         252
6103            Rules of procedure for transportation rate 
                    cases...................................         254
6104            Rules of procedure for travel and relocation 
                    expenses cases..........................         256
6105            Rules of procedure for decisions authorized 
                    by 31 U.S.C. 3529.......................         258

[[Page 223]]



PART 6101--RULES OF PROCEDURE OF THE GENERAL SERVICES ADMINISTRATION BOARD OF CONTRACT APPEALS (STANDARD PROCEEDINGS)--Table of Contents




Sec.
6101.0  Foreword.
6101.1  Scope of rules; definitions; construction; rulings and orders; 
          panels; situs [Rule 101].
6101.2  Time: enlargement; computation [Rule 102].
6101.3  Service of papers [Rule 103].
6101.4  Appeal file [Rule 104].
6101.5  Filing cases; time limits for filing; docketing [Rule 105].
6101.6  Appearances; notice of appearance [Rule 106].
6101.7  Pleadings in appeals [Rule 107].
6101.8  Motions [Rule 108].
6101.9  Election of hearing or record submission [Rule 109].
6101.10  Conferences; conference memorandum; prehearing order; 
          prehearing and presubmission briefs [Rule 110].
6101.11  Submission on the record without a hearing [Rule 111].
6101.12  Record of Board proceedings [Rule 112].
6101.13--6101.14  [Reserved]
6101.15  General provisions governing discovery [Rule 115].
6101.16  Depositions [Rule 116].
6101.17  Interrogatories to parties; requests for admission; requests 
          for production of documents [Rule 117].
6101.18  Sanctions and other proceedings [Rule 118].
6101.19  Hearings: scheduling; notice; unexcused absences [Rule 119].
6101.20  Subpoenas [Rule 120].
6101.21  Hearing procedures [Rule 121].
6101.22  Admissibility and weight of evidence [Rule 122].
6101.23  Exhibits [Rule 123].
6101.24  Transcripts of proceedings; corrections [Rule 124].
6101.25  Briefs and memoranda of law [Rule 125].
6101.26  Consolidation; separate hearings; separate determination of 
          liability [Rule 126].
6101.27  Stay or suspension of proceedings; dismissals in lieu of stay 
          or suspension [Rule 127].
6101.28  Dismissals [Rule 128].
6101.29  Decisions: format; procedure [Rule 129].
6101.30  Full Board consideration [Rule 130].
6101.31  Clerical mistakes [Rule 131].
6101.32  Reconsideration; amendment of decisions; new hearings [Rule 
          132].
6101.33  Relief from decision or order [Rule 133].
6101.34  Harmless error [Rule 134].
6101.35  Award of costs [Rule 135].
6101.36  Payment of Board awards [Rule 136].
6101.37  Record on review of a Board decision [Rule 137].
6101.38  Office of the Clerk of the Board [Rule 138].
6101.39  Seal of the Board [Rule 139].
6101.40  Forms [Rule 140].

Appendix to Part 6101--Form Nos. 1-5
Form 1--Notice of Appeal, GSA Form 2465.
Form 2--Notice of Appearance.
Form 3--Subpoena, GSA Form 9534.
Form 4--Government Certificate of Finality.
Form 5--Appellant/Applicant Certificate of Finality.

    Authority: 41 U.S.C. 601-613.

    Source: 61 FR 52349, Oct. 7, 1996, unless otherwise noted.



6101.0  Foreword.

    (a) The General Services Administration Board of Contract Appeals 
was established under the Contract Disputes Act of 1978, 41 U.S.C. 601-
613, as an independent tribunal to hear and decide contract disputes 
between government contractors and the General Services Administration 
(GSA) and other executive agencies of the United States.
    (b) As an agency board established under the Contract Disputes Act, 
the Board is required to ``provide to the fullest extent practicable, 
informal, expeditious and inexpensive resolution of disputes.'' 41 
U.S.C. 607(e). The rules in part 6101 represent the Board's concerted 
effort to be responsive to this charge in standard proceedings. In 
further response to this mandate, the Board also uses a variety of 
techniques intended to shorten and simplify, when appropriate, the 
proceedings normally used to resolve contract disputes. These techniques 
are described in part 6102.
    (c) As indicated in part 6102, the Board fully supports the use of 
alternative dispute resolution (ADR) in all appropriate cases. To 
encourage the prompt, expert, and inexpensive resolution of contract 
disputes as promoted by the Federal Acquisition Streamlining Act of 
1994, Public Law 103-355, 108 Stat. 3243, the Board will also make a 
Board Neutral available for an ADR proceeding, as described in 6102.4, 
either before or after the issuance of a decision by a contracting 
officer of any

[[Page 224]]

agency if a joint written request is submitted to the Office of the 
Clerk of the Board by the parties.
    (d) The Board also conducts proceedings as required under other 
laws. In all matters before it, the Board will act in accordance with 
this part and Part 6102 and applicable standards of conduct so that the 
integrity, impartiality, and independence of the Board are preserved.



Sec. 6101.1  Scope of rules; definitions; construction; rulings and orders; panels; situs [Rule 101].

    (a) Scope. The rules contained in this part and Part 6102 govern 
proceedings in all cases filed with the Board on or after October 7, 
1996, and all further proceedings in cases then pending, except to the 
extent that, in the opinion of the Board, their use in a particular case 
pending on the effective date would be infeasible or would work an 
injustice, in which event the former procedure applies. The Board will 
look to the rules in this part and Part 6102 for guidance in conducting 
other proceedings authorized by law.
    (b) Definitions--(1) Appeal; appellant. The term ``appeal'' means a 
contract dispute filed with the Board. The term ``appellant'' means a 
party filing an appeal.
    (2) Application; applicant. The term ``application'' means a 
submission to the Board of a request for award of costs, under the Equal 
Access to Justice Act, 5 U.S.C. 504, pursuant to 6101.35. The term 
``applicant'' means a party filing an application.
    (3) Board judge; judge. The term ``Board judge'' or ``judge'' means 
a member of the Board.
    (4) Case. The term ``case'' means an appeal, petition, or 
application.
    (5) Filing. (i) Any document, other than a notice of appeal or an 
application for award of costs, is filed when it is received by the 
Office of the Clerk of the Board during the Board's working hours. A 
notice of appeal or an application for award of costs is filed upon the 
earlier of:
    (A) Its receipt by the Office of the Clerk of the Board or
    (B) If mailed, the date on which it is mailed. A United States 
Postal Service postmark shall be prima facie evidence that the document 
with which it is associated was mailed on the date thereof.
    (ii) Facsimile transmissions to the Board and the parties are 
permitted. Parties are expected to submit their facsimile machine 
numbers with their filings. The Board's facsimile machine number is: 
(202) 501-0664. The filing of a document by facsimile transmission 
occurs upon receipt by the Board of the entire printed submission. 
Parties are specfically cautioned that deadlines for the filing of cases 
will not be extended merely because the Board's facsimile machine is 
busy or otherwise unavailable at the time on which the filing is due.
    (6) Party. The term ``party'' means an appeallant, applicant, 
petitioner, or respondent.
    (7) Petition; petitioner. The term ``petition'' means a request 
filed under 41 U.S.C. 605(c)(4) that the Board direct a contracting 
officer to issue a written decision on a claim. The term ``petitioner'' 
means a party submitting a petition.
    (8) Respondent. The term ``respondent'' means the Government agency 
whose decision, action, or inaction is the subject of an appeal, 
petition, or appplication.
    (9) Working day. The term ``working day'' means any date other than 
a Saturday, Sunday, or federal holiday.
    (10) Working hours. The Board's working hours are 8:00 a.m. to 4:30 
p.m., Eastern Time, on each working day.
    (c) Construction. The rules in this part and part 6102 shall be 
construed to secure the just, speedy, and inexpensive resolution of 
every case. The Board looks to the Federal Rules of Civil Procedure for 
guidance in construing those Board rules which are similar to Federal 
Rules.
    (d) Rulings, orders, and directions. The Board may apply the rules 
in this part and part 6102 and make such rulings and issue such orders 
and directions as are necessary to secure the just, speedy, and 
inexpensive resolution of every case before the Board. Any ruling, 
order, or direction that the Board may make or issue pursuant to the 
rules in this part and part 6102 may be made on the motion or request of 
any party or on the initiative of the Board.

[[Page 225]]

The Board may also amend, alter, or vacate a ruling, order, or direction 
upon such terms as are just. In making rulings and issuing orders and 
directions pursuant to the rules in this part and part 6102, the Board 
takes into consideration those Federal Rules of Civil Procedure which 
address matters not specifically covered in this part and part 6102.
    (e) Panels. Each case will be assigned to a panel consisting of 
three judges, with one member designated as the panel chairman, in 
accordance with such procedures as may be established by the Board. The 
panel chairman is responsible for processing the case, including 
scheduling and conducting proceedings and hearings. In addition, the 
panel chairman may, without participation by other panel members, decide 
an appeal under the small claims procedure (6102.2), rule on 
nondispositive motions (except for amounts in controversy under 
6102.2(a)(2)), and dismiss a case if no party objects (6101.28(c)). All 
other matters, except for those before the full Board under 6101.30, are 
decided for the Board by a majority of the panel.
    (f) Situs. The address of the Office of the Clerk of the Board is: 
Room 7022, General Services Administration Building, 18th and F Streets, 
NW., Washington, DC 20405. The Clerk's telephone number is: (202) 501-
0116. The Clerk's facsimile machine number is (202) 501-0664.



6101.2  Time: enlargement; computation [Rule 102].

    (a) Time for performing required actions. All time limitations 
prescribed in the rules in this part and part 6102 or in any order or 
direction given by the Board are maximums, and the action required 
should be accomplished in less time whenever possible.
    (b) Enlarging time. Upon request of a party for good cause shown, 
the Board may enlarge any time prescribed by the rules in this part and 
part 6102 or by an order or direction of the Board. The exception is the 
time limit for filing appeals (6101.5(b)(1)). A written request is 
required, but in exigent circumstances an oral request may be made and 
followed by a written request. An enlargement of time may be granted 
even through the request was filed after the time for taking the 
required action expired, but the party requesting the enlargement must 
show good cause for its inability to make the request before that time 
expired.
    (c) Computing time. Except as otherwise required by law, in 
computing a period of time prescribed by the rules in this part and part 
6102 or by order of the Board, the day from which the designated period 
of time begins to run shall not counted, but the last day of the period 
shall be counted unless that day is (1) a Saturday, a Sunday, or a 
federal holiday, or (2) a day on which the Office of the Clerk of the 
Board is required to close earlier than 4:30 p.m., or does not open at 
all, as in the case of inclement weather, in which event the period 
shall include the next working day. Except as otherwise provided in this 
paragraph, when the period of time prescribed or allowed is less than 11 
days, any intervening Saturday, Sunday, or federal holiday shall not be 
counted. When the period of time prescribed or allowed is 11 days or 
more, intervening Saturdays, Sundays, and federal holidays shall be 
counted. Time for filing any document or copy thereof with the Board 
expires when the Office of the Clerk of the Board closes on the last day 
on which such filing may be made.



6101.3  Service of papers [Rule 103].

    (a) On whom and when service must be made. When a party sends a 
document to the Board it must at the same time send a copy to the other 
party by mail or some other equally or more expeditious means of 
transmittal. Subpoenas (6101.20) and documents filed in camera 
(6101.12(h)) are exceptions to this requirement. Any papers required to 
be served on a party (except requests for discovery and responses 
thereto, unless ordered by the Board to be filed) shall be filed with 
the Board before service or within a reasonable time thereafter.
    (b) Proof of service. Except when service is not required, a party 
sending a document to the Board must indicate to the Board that a copy 
has also been sent to the other party. This may be done by certificate 
of service, by the notation of a photostatic copy (cc:), or

[[Page 226]]

by any other means that can reasonably be expected to indicate to the 
Board that the other party has been provided a copy.
    (c) Failure to make service. If a document sent to the Board by a 
party does not indicate that a copy has been served on the other party, 
the Board may return the document to the party that submitted it with 
such directions as it considers appropriate, or the Board may inquire 
whether a party has received a copy and note on the record the fact of 
inquiry and the response, and may also direct the party that submitted 
the document to serve a copy on the other party. In the absence of proof 
of service a document may be treated by the Board as not properly filed.



6101.4  Appeal file [Rule 104].

    (a) Submission to the Board by the contracting officer. (1) Within 
30 calendar days from receipt of notice that an appeal has been filed, 
or within such time as the Board may allow, the contracting officer 
shall file with the Board appeal file exhibits consisting of all 
documents and other tangible things relevant to the claim and to the 
contracting officer's decision which has been appealed, including:
    (i) The contracting officer's decision, if any, from which the 
appeal is taken;
    (ii) The contract, if any, including amendments, specifications, 
plans, and drawings;
    (iii) All correspondence between the parties that is relevant to the 
appeal, including the written claim or claims that are the subject of 
the appeal, and evidence of their certification, if any;
    (iv) Affidavits or statements of any witnesses on the matter in 
dispute and transcripts of any testimony taken before the filing of the 
notice of appeal;
    (v) All documents and other tangible things on which the contracting 
officer relied in making the decision, and any correspondence relating 
thereto;
    (vi) The abstract of bids, if relevant; and
    (vii) Any additional existing evidence or information deemed 
necessary to determine the merits of the appeal.
    (2) The contracting officer shall serve a copy of the appeal file on 
the appellant at the same time that the contracting officer files it 
with the Board, except that
    (i) The contracting officer need not serve on the appellant those 
documents furnished the Board in camera pursuant to 6101.12(h), and
    (ii) The contracting officer shall serve documents submitted under 
protective order only on those individuals who have been granted access 
to such documents by the Board. However, the contracting officer must 
serve on the appellant a list identifying the specific documents filed 
in camera or under protective order with the Board, giving sufficient 
details necessary for their recognition. This list must also be filed 
with the Board as an exhibit to the appeal file.
    (b) Submission to the Board by the appellant. Within 30 calendar 
days after filing of the respondent's appeal file exhibits, or within 
such time as the Board may allow, the appellant shall file with the 
Board for inclusion in the appeal file documents or other tangible 
things relevant to the appeal that have not been submitted by the 
contracting officer. The appellant shall serve a copy of its additional 
exhibits upon the respondent at the same time as it files them with the 
Board.
    (c) Submissions on order of the Board. The Board may, at any time 
during the pendency of the appeal, require any party to file other 
documents and tangible things as additional exhibits.
    (d) Organization of the appeal file. Appeal file exhibits may be 
originals or true, legible, and complete copies. They shall be arranged 
in chronological order within each submission, earliest documents first; 
bound in a loose-leaf binder on the left margin except where size or 
shape makes such binding impracticable; numbered; tabbed; and indexed. 
The numbering shall be consecutive, in whole arabic numerals (no 
letters, decimals, or fractions), and continuous from one submission to 
the next, so that the complete file, after all submissions, will consist 
of one set of consecutively numbered exhibits. In addition, the pages 
within each exhibit shall be numbered consecutively unless the exhibit 
already is paginated in a logical manner. Consecutive pagination of the 
entire file is not required. The index

[[Page 227]]

should include the date and a brief description of each exhibit and 
shall indicate which exhibits, if any, have been filed with the Board in 
camera or under protective order or otherwise have not been served on 
every other party.
    (e) Lengthy or bulky materials. The Board may waive the requirement 
to furnish other parties copies or duplicates of bulky, lengthy, or 
outsized materials submitted to the Board as exhibits.
    (f) Use of appeal file as evidence. All exhibits in the appeal file, 
except for those as to which an objection has been sustained, are part 
of the record upon which the Board will render its decision. Unless 
otherwise ordered by the Board, objection to any exhibit may be made at 
any time before the first witness is sworn or, if the appeal is 
submitted on the record pursuant to 6101.11, at any time prior to or 
concurrent with the first record submission. The Board may enlarge the 
time for such objections and will consider an objection made during a 
hearing if the ground for objection could not reasonably have been 
earlier known to the objecting party. If an objection is sustained, the 
Board will so note in the record.
    (g) When appeal file not required. Upon motion of a party, the Board 
may postpone or dispense with the submission of any or all appeal file 
exhibits.



6101.5  Filing cases; time limits for filing; docketing [Rule 105].

    (a) Filing cases. Filing of a case occurs as provided in 
6101.1(b)(5).
    (1) Notice of appeal. (i) A notice of appeal shall be in writing and 
should be signed by the appellant or by the appellant's attorney or 
authorized representative. If the appeal is from a contracting officer's 
decision, the notice of appeal should describe the decision in enough 
detail to enable the Board to differentiate that decision from any 
other; the appellant can satisfy this requirement by attaching to the 
notice of appeal a copy of the contracting officer's decision. If an 
appeal is taken from the failure of a contracting officer to issue a 
decision, the notice of appeal should describe in detail the claim that 
the contracting officer has failed to decide; the appellant can satisfy 
this requirement by attaching a copy of the written claim submission to 
the notice of appeal.
    (ii) A written notice in any form, including the one specified in 
the appendix to this part and part 6102, is sufficient to initiate an 
appeal. The notice of appeal should include the following information:
    (A) The number and date of the contract;
    (B) The name of the agency and the component thereof against which 
the claim has been asserted;
    (C) The name of the contracting officer whose decision or failure to 
decide is appealed and the date of the decision, if any;
    (D) A brief account of the circumstances giving rise to the appeal; 
and
    (E) An estimate of the amount of money in controversy, if any and if 
known.
    (iii) The appellant must send a copy of the notice of appeal to the 
contracting officer whose decision is appealed or, if there has been no 
decision, to the contracting officer before whom the appellant's claim 
is pending.
    (2) Petition. (i) A petition shall be in writing and signed by the 
petitioner or by the petitioner's attorney or authorized representative. 
The petition should describe in detail the claim that the contracting 
officer has failed to decide; the contractor can satisfy this 
requirement by attaching to the petition a copy of the written claim 
submission.
    (ii) The petition should include the following information:
    (A) The number and date of the contract;
    (B) The name of the agency and the component thereof against which 
the claim has been asserted; and
    (C) The name of the contracting officer whose decision is sought.
    (3) Application. An application for costs shall meet all 
requirements specified in 6101.35(c).
    (4) Other participation. The Board may, on motion, in its 
discretion, permit an entity to participate in a case in a special or 
limited way, such as by filing an amicus curiae brief.
    (b) Time limits for filing--(1) Appeals. (i) An appeal from a 
decision of a contracting officer shall be filed no later

[[Page 228]]

than 90 calendar days after the date the appellant receives that 
decision.
    (ii) An appeal may be filed with the Board should the contracting 
officer fail or refuse to issue a timely decision on a claim submitted 
in writing, properly certified if required.
    (2) Applications. An application for costs shall be filed within 30 
calendar days of a final disposition in the under-lying appeal, as 
provided in 6101.35(b).
    (c) Notice of docketing. Notices of appeal, petitions, and 
applications will be docketed by the Office of the Clerk of the Board, 
and a written notice of docketing will be sent promptly to all parties.



6101.6  Appearances; notice of appearance [Rule 106].

    (a) Appearances before the Board--(1) Appellant; petitioner; 
applicant. Any appellant, petitioner, or applicant may appear before the 
Board by an attorney-at-law licensed to practice in a state, 
commonwealth, or territory of the United States, or in the District of 
Columbia. An individual appellant, petitioner, or applicant may appear 
in his own behalf; a corporation, trust, or association may appear by 
one of its officers or by any other authorized employee; and a 
partnership may appear by one of its members or by any other authorized 
employee.
    (2) Respondent. The respondent may appear before the Board by an 
attorney-at-law licensed to practice in a state, commonwealth, or 
territory of the United States, or in the District of Columbia. 
Alternatively, if not prohibited by agency regulation or otherwise, the 
respondent may appear by the contracting officer or by the contracting 
officer's authorized representative.
    (b) Notice of appearance. Unless a notice of appearance is filed by 
some other person, the person signing the notice of appeal, petition, or 
application shall be deemed to have appeared on behalf of the appellant, 
petitioner, or applicant, and the head of the respondent agency's 
litigation office shall be deemed to have appeared on behalf of the 
respondent. A notice of appearance in the form specified in the appendix 
to this part and Part 6102 is sufficient. Attorneys representing parties 
before the Board are required to list the state bars to which they are 
admitted and their state bar numbers or other bar identifiers.
    (c) Withdrawal of appearance. Any person who has filed a notice of 
appearance and who wishes to withdraw from a case must file a motion 
which includes the name, address, telephone number, and facsimile 
machine number of the person who will assume responsibility for 
representation of the party in question. The motion shall state the 
grounds for withdrawal unless it is accompanied by a representation from 
the successor representative or existing co-counsel that the established 
case schedule will be met.



6101.7  Pleadings in appeals [Rule 107].

    (a) Pleadings required and permitted. Except as the Board may 
otherwise order, the Board requires the submission of a complaint and an 
answer. In appropriate circumstances, the Board may order or permit a 
reply to an answer.
    (b) Complaint. No later than 30 calendar days after the docketing of 
the appeal, the appellant shall file with the Board a complaint setting 
forth its claim or claims in simple, concise, and direct terms. The 
complaint should set forth the factual basis of the claim or claims, 
with appropriate reference to the contract provisions, and should state 
the amount in controversy, or an estimate thereof, if any and if known. 
No particular form is prescribed for a complaint, and the Board may 
designate the notice of appeal, a claim submission, or any other 
document as the complaint, either on its own initiative or on request of 
the appellant, if such document sufficiently states the factual basis 
and amount of the claim.
    (c) Answer. No later than 30 calendar days after the filing of the 
complaint or of the Board's designation of a complaint, the respondent 
shall file with the Board an answer setting forth simple, concise, and 
direct statements of its defenses to the claim or claims asserted in the 
complaint, as well as any affirmative defenses it chooses to assert. A 
dispositive motion or a motion for a more definite statement may be 
filed in lieu of the answer only with the permission of the Board. If no 
answer is timely filed, the board may enter a

[[Page 229]]

general denial, in which case the respondent may thereafter amend the 
answer to assert affirmative defenses only by leave of the Board and as 
otherwise prescribed by paragraph (f) of this section. The Board will 
inform the parties when it enters a general denial on behalf of the 
respondent.
    (d) Reply to an answer. If the Board orders or permits a reply to an 
answer, it shall be filed as directed by the Board.
    (e) Modifications to requirement for pleadings. If the appellant has 
elected the small claims procedure provided by 6102.2 or the accelerated 
procedure provided by 6102.3, the submission of pleadings shall be 
governed by the applicable section.
    (f) Amendment of pleadings. Each party to an appeal may amend its 
pleadings once without leave of the Board at any time before a 
responsive pleading is filed; if the pleading is one to which no 
responsive pleading is permitted, such amendment may be made at any time 
within 20 calendar days after it is served or, in small claims 
proceedings under 6102.2, within 10 working days after it is served. The 
Board may permit the parties to amend pleadings further on conditions 
fair to both parties. If a response to the unamended pleading was 
required by the rules in this part or by an order of the Board, a 
response to the amended pleading shall be filed no later than 30 
calendar days after the filing of the amended pleading or, in small 
claims proceedings, no later than 15 calendar days after the filing of 
the amended pleading. 6101.12(e) concerns amendments to pleadings to 
conform to the evidence.



6101.8  Motions [Rule 108].

    (a) How motions are made. Motions may be oral or written. A written 
motion shall indicate the relief sought and, either in the text of the 
motion or in an accompanying legal memorandum, the grounds therefor. In 
addition, a motion for summary relief shall comply with the requirements 
of paragraph (g) of this section. 6101.25 prescribes the form and 
content of legal memoranda. Oral motions shall be made on the record and 
in the presence of the other party.
    (b) When motions may be made. A motion filed in lieu of an answer 
pursuant to 6101.7(c) shall be filed no later than the date on which the 
answer is required to be filed or such later date as may be established 
by the Board. Any other dispositive motion shall be made as soon as 
practicable after the grounds therefor are known. Any other motion shall 
be made promptly or as required by this part.
    (c) Dispositive motions. The following dispositive motions may 
properly be made before the Board:
    (1) Motions to dismiss for lack of jurisdiction or for failure to 
state a claim upon which relief can be granted;
    (2) Motions to dismiss for failure to prosecute;
    (3) Motions for summary relief (analogous to summary judgment); and
    (4) Any other motion to dismiss.
    (d) Other motions. Other motions may be made in good faith and in 
proper form.
    (e) Jurisdictional questions. The Board may at any time consider the 
issue of its jurisdiction to decide a case. When all facts touching upon 
the Board's jurisdiction are not to record, or in other appropriate 
circumstances, a decision on a jurisdictional question may be deferred 
pending a hearing on the merits or the filing of record submissions.
    (f) Procedure. Unless otherwise directed by the Board, a party may 
respond to a written motion other than a motion pursuant to 6101.30, 
6101.31, 6101.32, or 6101.33 at any time within 20 calendar days after 
the filing of the motion. Responses to motions pursuant to 6101.30, 
6101.31, 6101.32, or 6101.33 may be made only as permitted or directed 
by the Board. The Board may permit hearing or oral argument on written 
motions and may require additional submissions from any of the parties.
    (g) Motions for summary relief. (1) A motion for summary relief 
should be filed only when a party believes that, based upon uncontested 
material facts, it is entitled to relief in whole or in part as a matter 
of law. A motion for summary relief should be filed as soon as feasible, 
to allow the Board to rule on the motion in advance of a scheduled 
hearing date.
    (2) With each motion for summary relief, there shall be served and 
filed a

[[Page 230]]

separate document titled Statement of Uncontested Facts, which shall 
contain in separately numbered paragraphs all of the material facts upon 
which the moving party bases its motion and as to which it contends 
there is no genuine issue. This statement shall include references to 
the supporting affidavits or declarations and documents, if any, and to 
the 6101.4 appeal file exhibits relied upon to support such statement.
    (3) An opposing party shall file with its opposition (or cross-
motion) a separate document titled Statement of Genuine Issues. This 
document shall identify, by reference to specific paragraph numbers in 
the moving party's Statement of Uncontested Facts, those facts as to 
which the opposing party claims there is a genuine issue necessary to be 
litigated. An opposing party shall state the precise nature of its 
disagreement and give its version of the facts. This statement shall 
include references to the supporting affidavits or declarations and 
documents, if any, and to the 6101.4 appeal file exhibits that 
demonstrate the existence of a genuine dispute. An opposing party may 
also file a Statement of Uncontested Facts as to any relevant matters 
not covered by the moving party's statement.
    (4) When a motion for summary relief is made and supported as 
provided in this section, an opposing party may not rest upon the mere 
allegations or denials of its pleadings, but the opposing party's 
response, by affidavits or as otherwise provided by this section, must 
set forth specific facts showing that there is a genuine issue of 
material fact. If the opposing party does not so respond, summary 
relief, if appropriate, shall be entered against that party. For good 
cause shown, if an opposing party cannot present facts essential to 
justify its opposition, the Board may defer ruling on the motion to 
permit affidavits to be obtained or depositions to be taken or other 
discovery to be conducted, or may made such other order as is just.
    (h) Effect of pending motion. Except as this part and part 6102 
provide or the Board may order, a pending motion shall not excuse the 
parties from proceeding with the case in accordance with this part and 
part 6102 and the orders and directions of the Board.



6101.9   Election of hearing or record submission [Rule 109].

    Each party shall inform the Board, in writing, whether it elects a 
hearing or submission of its case on the record pursuant to 6101.11. 
Such an election may be filed at any time unless a time for filing is 
prescribed by the Board. A party electing to submit its case on the 
record pursuant to 6101.11 may also elect to appear at a hearing solely 
to cross-examine any witness presented by the opposing party, provided 
that the Board is informed of that party's intention within 10 working 
days of its receipt of notice of the election of hearing by the other 
party. If a hearing is elected, the election should state where and when 
the electing party desires the hearing to be held and should explain the 
reasons for its choices. A hearing will be held if either party elects 
one. If a party's decision whether to elect a hearing is dependent upon 
the intentions of the other party, it shall consult with the other party 
before filing its election. If there is to be a hearing, it will be held 
at a time and place prescribed by the Board after consultation with the 
party or parties electing the hearing. The record submissions from a 
party that has elected to submit its case on the record shall be due as 
provided in 6101.11.



6101.10   Conferences; conference memorandum; prehearing order; prehearing and presubmission briefs [Rule 110].

    (a) Conferences. The Board may convene the parties in conference, 
either by telephone or in person, for any purpose. The conference may be 
stenographically or electronically recorded, at the discretion of the 
Board. Matters to be considered and actions to be taken at a conference 
may include:
    (1) Simplifying, clarifying, or severing the issues;
    (2) Stipulations, admissions, agreements, and rulings to govern the 
admissibility of evidence, understandings on matters already of record, 
or other similar means of avoiding unnecessary proof;

[[Page 231]]

    (3) Plans, schedules, and rulings to facilitate discovery;
    (4) Limiting the number of witnesses and other means of avoiding 
cumulative evidence;
    (5) Stipulations or agreements disposing of matters in dispute; or
    (6) Ways to expedite disposition of the case or to facilitate 
settlement of the dispute, including, if the parties and the Board 
agree, the use of alternative dispute resolution techniques, as provided 
in 6102.1 and 6102.4.
    (b) Conference memorandum. The Board may prepare a memorandum of the 
results of a conference or issue an order reflecting any actions taken, 
or both. A memorandum or order so issued shall be placed in the record 
of the case and sent to each party. Each party shall have 5 working days 
after receipt of a memorandum to object to the substance of it.
    (c) Prehearing order. The Board may issue a prehearing or 
presubmission order to govern the proceedings in a case.
    (d) Prehearing or presubmission briefs. A party may, by leave of the 
Board, file a prehearing or presubmission brief at any time before the 
hearing or upon or before the date on which first record submissions are 
due.



6101.11  Submission on the record without a hearing [Rule 111].

    (a) Submission on the record. (1) A party may elect to submit its 
case on the record without a hearing. A party submitting its case on the 
record may include in its written record submission or submissions:
    (i) Any relevant documents or other tangible things it wishes the 
Board to admit into evidence;
    (ii) Affidavits, depositions, and other discovery materials that set 
forth relevant evidence; and
    (iii) A brief or memorandum of law.
    (2) The Board may require the submission of additional evidence or 
briefs and may order oral argument in a case submitted on the record.
    (b) Time for submission. (1) If both parties have elected to submit 
the case on the record, the Board will issue an order prescribing the 
time for initial and, if appropriate, reply record submissions.
    (2) If one party has elected a hearing and the other party has 
elected to submit its case on the record, the party submitting on the 
record shall make its initial submission no later than the commencement 
of the hearing or at an earlier date if the Board so orders, and a 
further submission in the form of a brief at the time for submission of 
posthearing briefs.
    (c) Objections to evidence. Unless otherwise directed by the Board, 
objections to evidence (other than the appeal file and supplements 
thereto) in a record submission may be made within 10 working days after 
the filing of the submission. Replies to such objections, if any, may be 
made within 10 working days after the filing of the objection. The Board 
may rule on such objections in its opinion deciding the merits or 
otherwise disposing of the case.



6101.12  Record of Board proceedings [Rule 112].

    (a) Composition of the record for decision. (1) The record upon 
which any decision of the Board will be rendered consists of:
    (i) The notice of appeal, petition, or application;
    (ii) Appeal file exhibits other than those as to which objection has 
been sustained;
    (iii) Hearing exhibits other than those as to which an objection has 
been sustained;
    (iv) Pleadings;
    (v) Motions and responses thereto;
    (vi) Memoranda, orders, rulings, and directions to the parties 
issued by the Board;
    (vii) Documents and other tangible things admitted in evidence by 
the Board;
    (viii) Written transcripts or electronic recordings of proceedings;
    (ix) Stipulations and admissions by the parties;
    (x) Depositions, or parts thereof, received in evidence;
    (xi) Written interrogatories and responses received in evidence;
    (xii) Briefs and memoranda of law; and
    (xiii) Anything else that the Board may designate.
    (2) All other papers and documents in a case are part of the 
administrative

[[Page 232]]

record of the proceedings. The administrative record shall include file 
and hearing exhibits offered but not received in evidence in a case; it 
may also include correspondence with and between the parties, and 
depositions, interrogatories, offers of proof contained in the 
transcript, and other documents that are not part of the record for 
decision.
    (b) Time for entry into the record. Except as the Board may 
otherwise order, nothing other than posthearing briefs will be received 
into the record after a hearing is completed. In cases submitted on the 
record without a hearing, nothing will be received into the record after 
the time for filing of the last record submission. Briefs will be due as 
provided in 6101.25(b).
    (c) Closing of the record. Except as the Board may otherwise order, 
no proof shall be received in evidence after a hearing is completed or, 
in cases submitted on the record without a hearing, after notice by the 
Board to the parties that the record is closed and that the case is 
ready for decision.
    (d) Notice that the case is ready for decision. The Board will give 
written notice to the parties when the record is closed and the case is 
ready for decision.
    (e) Amendments to conform to the evidence. When issues within the 
proper scope of a case, but not raised in the pleadings, have been 
raised without objection or with permission of the Board at a hearing 
(see 6101.21(h)) or in record submissions, they shall be treated in all 
respects as if they had been raised in the pleadings. The Board may 
formally amend the pleadings to conform to the proof or may order that 
the record be deemed to contain pleadings so amended.
    (f) Enlargement of the record. The Board may at any time require or 
permit enlargement of the record with additional evidence and briefs. It 
may reopen the record to receive additional evidence and oral argument 
at a hearing.
    (g) Inspection of the record of proceedings; release of any paper, 
document, or tangible thing prohibited. Except for any part thereof that 
is subject to a protective order or deemed an in camera submission, the 
record of proceedings in a case shall be made available for inspection 
by any person. Such record shall be made available at the Office of the 
Clerk of the Board during the Board's normal working hours, as soon as 
practicable given the demands on the Board of processing the subject 
case and other cases. Except as provided in 6101.23(c) and 6101.37(d), 
no paper, document, or tangible thing which is part of the record of 
proceedings in a case may be released from the offices of the Board. 
Copies may be obtained by any person as provided in 6101.38(d). If such 
inspection or copying involves more than minimal costs to the Board, 
reimbursement will be required.
    (h) Protected and in camera submissions. (1) A party may by motion 
request that the Board receive and hold materials under conditions that 
would limit access to them on the ground that such documents are 
privileged or confidential, or sensitive in some other way. The moving 
party must state the grounds for such limited access. The board may also 
determine on its own initiative to hold materials under such conditions. 
The manner in which such materials will be held, the persons who shall 
have access to them, and the conditions (if any) under which such access 
will be allowed will be specified in an order of the Board. If the 
materials are held under such an order, they will be part of the record 
of the case. If the Board denies the motion, the materials may be 
returned to the party that submitted them. If the moving party asks, 
however, that the materials be placed in the administrative record, in 
camera, for the purpose of possible later review of the Board's denial, 
the Board will comply with the request.
    (2) A party may also ask, or the Board may direct, that testimony be 
received under protective order or in camera. The procedures under 
paragraph (h)(1) of this section shall be followed with respect to such 
request or direction.

[[Page 233]]



6101.13--6101.14  [Reserved]



6101.15  General provisions governing discovery [Rule 115].

    (a) Discovery methods. The parties may obtain discovery by one or 
more of the following methods:
    (1) Depositions upon oral examination or written questions;
    (2) Written interrogatories;
    (3) Requests for production of documents or other tangible things; 
and
    (4) Requests for admission.
    (b) Scope of discovery. Except as otherwise limited by order of the 
Board in accordance with this part and part 6102, the parties may obtain 
discovery regarding any matter, not privileged, which is relevant to the 
subject matter involved in the pending case, whether it relates to the 
claim or defense of a party, including the existence, description, 
nature, custody, condition, and location of any books, documents, or 
other tangible things, and the identity and location of persons having 
knowledge of any discoverable matter. It is not a ground for objection 
that the information sought will be inadmissible if the information 
sought appears reasonably calculated to lead to the discovery of 
admissible evidence.
    (c) Discovery limits. The Board may limit the frequency or extent of 
use of the discovery methods set forth in this section if it determines 
that:
    (1) The discovery sought is unreasonably cumulative or duplicative, 
or is obtainable from some other source that is more convenient, less 
burdensome, or less expensive;
    (2) The party seeking discovery has had ample opportunity by 
discovery in the case to obtain the information sought; or
    (3) The discovery is unduly burdensome and expensive, taking into 
account the needs of the case, the amount in controversy, limitations on 
the parties' resources, and the importance of the issues at stake.
    (d) Conduct of discovery. Parties may engage in discovery only to 
the extent the Board enters an order which either incorporates an agreed 
plan and schedule acceptable to the Board or otherwise permits such 
discovery as the moving party can demonstrate is required for the 
expeditious, fair, and reasonable resolution of the case.
    (e) Discovery conference. Upon request of a party or on its own 
initiative, the Board may at any time hold an informal meeting or 
telephone conference with the parties to identify the issues for 
discovery purposes; establish a plan and schedule for discovery; set 
limitations on discovery, if any; and determine such other matters as 
are necessary for the proper management of discovery. The Board may 
include in the conference such other matters as it deems appropriate in 
accordance with 6101.10.
    (f) Discovery objections. (1) In connection with any discovery 
procedure, the Board, on motion or on its own initiative, may make any 
order which justice requires to protect a party or person from 
annoyance, embarrassment, oppression, or undue burden or expense, 
including, but not limited to, one or more of the following:
    (i) That the discovery not be had;
    (ii) That the discovery be had only on specified terms and 
conditions, including a designation of the time and place, or that the 
scope of discovery be limited to certain matters;
    (iii) That the discovery be conducted with no one present except 
persons designated by the Board; and
    (iv) That confidential information not be disclosed or that it be 
disclosed only in a designated way.
    (2) Unless otherwise ordered by the Board, any objection to a 
discovery request must be filed within 15 calendar days after receipt. A 
party shall fully respond to any discovery request to which it does not 
file a timely objection. The parties are required to make a good faith 
effort to resolve objections to discovery requests informally.
    (3) A party receiving an objection to a discovery request, or a 
party which believes that another party's response to a discovery 
request is incomplete or entirely absent, may file a motion to compel a 
response, but such a motion must include a representation that the 
moving party has tried in good faith, prior to filing the motion, to 
resolve the matter informally. The motion to compel shall include a copy 
of each discovery request at issue and the response, if any.

[[Page 234]]

    (g) Failure to make or cooperate in discovery; sanctions. If a party 
fails
    (i) To appear for a deposition, after being served with a proper 
notice;
    (ii) To serve answers or objections to interrogatories submitted 
under 6101.17, after proper service of interrogatories; or
    (iii) To serve a written response to a request for inspection, 
production, and copying of any documents and things under 6101.17, the 
party seeking discovery may move the Board to impose appropriate 
sanctions under 6101.18.
    (h) Subpoenas. A party may request the issuance of a subpoena in aid 
of discovery under the provision of 6101.20.



6101.16  Depositions [Rule 116].

    (a) When depositions may be taken. Upon request of a party, the 
Board may order the taking of testimony of any person by deposition upon 
oral examination or written questions before an officer authorized to 
administer oaths at the place of examination. Attendance of witnesses 
may be compelled by subpoena as provided in 6101.20, and the Board may 
upon motion order that the testimony at a deposition be recorded by 
other than stenographic means, in which event the order may designate 
the manner of recording, preserving, and filing the deposition and may 
include other provisions to ensure that the recorded testimony will be 
accurate and trustworthy. If the order is made, a party may, 
nevertheless, arrange to have a stenographic transcription made at its 
own expense.
    (b) Depositions: time; place; manner of taking. The time, place, and 
manner of taking depositions, including the taking of depositions by 
telephone, shall be as agreed upon by the parties or, failing such 
agreement, as ordered by the Board. A deposition taken by telephone is 
taken at the place where the deponent is to answer questions.
    (c) Use of depositions. At a hearing on the merits or upon a motion 
or interlocutory proceeding, any part or all of a deposition, so far as 
admissible and as though the witness were then present and testifying, 
may be used against a party who was present or represented at the taking 
of the deposition or who had reasonable notice thereof, in accordance 
with any of the following provisions:
    (1) Any deposition may be used by a party for the purpose of 
contradicting or impeaching the testimony of the deponent as a witness.
    (2) The deposition of a party or of anyone who at the time of taking 
the deposition was an officer, director, or managing agent, or a person 
designated to testify on behalf of a public or private corporation, 
partnership or association, or governmental agency which is a party may 
be used by an adverse party for any purpose.
    (3) The deposition of a witness, whether or not a party, may be used 
by a party for any purpose in its own behalf if the Board finds that:
    (i) The witness is dead;
    (ii) The attendance of the witness at the place of hearing cannot be 
reasonably obtained, unless it appears that the absence of the witness 
was procured by the party offering the deposition;
    (iii) The witness is unable to attend or testify because of illness, 
infirmity, age, or imprisonment;
    (iv) The party offering the deposition has been unable to procure 
the attendance of the witness by subpoena; or
    (v) Upon request and notice, exceptional circumstances exist which 
make it desirable in the interest of justice and with due regard to the 
importance of presenting the testimony of witnesses orally in open 
hearing, to allow the deposition to be used.
    (4) If only part of a deposition is offered in evidence by a party, 
an adverse party may require the offering party to introduce any other 
part which in fairness ought to be considered with the part introduced.
    (d) Depositions pending appeal from a decision of the Board. (1) If 
an appeal has been taken from a decision of the Board, or before the 
taking of an appeal if the time therefor has not expired, the Board may 
allow the taking of depositions of witnesses to perpetuate their 
testimony for use in the event of further proceedings before the Board. 
In such case, the party that desires to perpetuate testimony may make a 
motion before the Board for leave to take the depositions as if the

[[Page 235]]

action were pending before the Board. The motion shall show:
    (i) The names and addresses of the persons to be examined and the 
substance of the testimony which the moving party expects to elicit from 
each; and
    (ii) The reasons for perpetuating the testimony of the persons 
named.
    (2) If the Board finds that the perpetuation of testimony is proper 
to avoid a failure or a delay of justice, it may order the depositions 
to be taken and may make orders of the character provided for in 6101.15 
and in this section. Thereupon, the depositions may be taken and used as 
prescribed in this part for depositions taken in actions pending before 
the Board. Upon request and for good cause shown, a judge may issue or 
obtain a subpoena, in accordance with 6101.20, for the purpose of 
perpetuating testimony by deposition during the pendency of an appeal 
from a Board decision.



6101.17  Interrogatories to parties; requests for admission; requests for production of documents [Rule 117].

    Upon order from the Board permitting such discovery, a party may 
serve on another party written interrogatories, requests for admission, 
and requests for production of documents.
    (a) Written interrogatories. Written interrogatories shall be 
answered separately in writing, signed under oath or accompanied by a 
declaration under penalty of perjury, and answered within 30 calender 
days after service. Objections shall be filed within the time limits set 
forth in 6101.15(f)(2). An interrogatory otherwise proper is not 
necessarily objectionable merely because an answer to the interrogatory 
may involve an opinion or contention that relates to fact or the 
application of law to fact, but the Board may order that such an 
interrogatory need not be answered until after designated discovery has 
been completed or until a conference has been held, or some other event 
has occurred.
    (b) Option to produce business records. Where the answer to an 
interrogatory may be derived or ascertained from the business records of 
the party upon which the interrogatory has been served, or from an 
examination, audit, or inspection of such business records, including a 
compilation, abstract, or summary thereof, and the burden of deriving or 
ascertaining the answer is substantially the same for the party serving 
the interrogatory as for the party served, it is a sufficient answer to 
such interrogatory to specify the records from which the answer may be 
derived or ascertained and to afford to the party serving the 
interrogatory reasonable opportunity to examine, audit, or inspect such 
records and to make copies, compilations, abstracts, or summaries 
thereof. Such specification shall be in sufficient detail to permit the 
interrogating party to locate and to identify, as readily as can the 
party served, the records from which the answer may be ascertained.
    (c) Written requests for admission. A written request for the 
admission of the truth of any matter, within the proper scope of 
discovery, that relates to statements or opinions of fact or of the 
application of law to fact, including the genuineness of any documents, 
is to be answered in writing and signed within 30 calendar days after 
service. Objections shall be filed within the time limits set forth in 
6101.15(f)(2). Otherwise, the matter therein may be deemed to be 
admitted. Any matter admitted is conclusively established for the 
purpose of the pending action, unless the Board on motion permits 
withdrawal or amendment of the admission. Any admission made by a party 
under this paragraph is for the purpose of the pending action only and 
is not an admission for any other purpose, nor may it be used against 
the party in any other proceeding.
    (d) Written requests for production of documents. A written request 
for the production, inspection, and copying of any documents and things 
shall be answered within 30 calendar days after service. Objections 
shall be filed within the time limits set forth in 6101.15(f)(2).
    (e) Change in time for response. Upon request of a party, or on its 
own initiative, the Board may prescribe a period of time other than that 
specified in this section.
    (f) Responses. A party that has responded to written 
interrogatories, requests for admission, or requests for

[[Page 236]]

production of documents, upon becoming aware of deficiencies or 
inaccuracies in its original responses, or upon acquiring additional 
information or additional documents relevant thereto, shall, as quickly 
as practicable, and as often as necessary, supplement its responses to 
the requesting party with correct and sufficient additional information 
and such additional documents as are necessary to give a complete and 
accurate response to the request.



6101.18  Sanctions and other proceedings [Rule 118].

    (a) Standards. All parties and their representatives, attorneys, and 
any expert/consultant retained by them or their attorneys, must obey 
directions and orders prescribed by the Board and adhere to standards of 
conduct applicable to such parties and persons. As to an attorney, the 
standards include the rules of professional conduct and ethics of the 
jurisdictions in which an attorney is licensed to practice, to the 
extent that those rules are relevant to conduct affecting the integrity 
of the Board, its process, and its proceedings. The Board will also look 
to voluntary professional guidelines in evaluating an individual's 
conduct.
    (b) Sanctions. When a party or its representative or attorney or any 
expert/consultant fails to comply with any direction or order issued by 
the Board (including an order to provide or permit discovery), or 
engages in misconduct affecting the Board, its process, or its 
proceedings, the Board may make such orders as are just, including the 
imposition of appropriate sanctions. The sanctions include:
    (1) Taking the facts pertaining to the matter in dispute to be 
established for the purpose of the case in accordance with the 
contention of the party submitting the discovery request;
    (2) Forbidding challenge of the accuracy of any evidence;
    (3) Refusing to allow the disobedient party to support or oppose 
designated claims or defenses;
    (4) Prohibiting the disobedient party from introducing in evidence 
designated documents or items of testimony;
    (5) Striking pleadings or parts thereof, or staying further 
proceedings until the order is obeyed;
    (6) Dismissing the case or any part thereof;
    (7) Enforcing the protective order and disciplining individuals 
subject to such other violation thereof, including disqualifying a 
party's representative, attorney, or expert/consultant from further 
participation in the case; or
    (8) Imposing such other sanctions as the Board deems appropriate.
    (c) Denial of access to protected material for prior violations of 
protective orders. The Board may in its discretion deny access to 
protected material to any person found to have previously violated the 
Board's protective order.
    (d) Disciplinary proceedings. (1) In addition to the other 
procedures in this section, the Board may discipline individual party 
representatives, attorneys, and experts/consultants for a violation of 
any Board order or direction or standard of conduct applicable to such 
individual where the violation seriously affects the integrity of the 
Board's process or proceedings. Sanctions may be public or private, and 
may include admonishment, disqualification from a particular matter, 
referral to an appropriate licensing authority, or such other action as 
circumstances may warrant.
    (2) The Board in its discretion may suspend an individual from 
appearing before the Board as a party representative, attorney, or 
expert/consultant if, after affording such individual notice and an 
opportunity to be heard, a majority of the members of the full Board 
determines such a sanction is warranted.



6101.19  Hearings: scheduling; notice; unexcused absences [Rule 119].

    (a) Scheduling of hearings. Hearings will be held at the time and 
place ordered by the Board and will be scheduled at the discretion of 
the Board. In scheduling hearings, the Board will consider the 
requirements of this part and part 6102, the need for orderly management 
of the Board's caseload, and the stated desires of the parties as 
expressed in their elections filed pursuant to 6101.9 or otherwise. The 
time or

[[Page 237]]

place for hearing may be changed by the Board at any time.
    (b) Notice of hearing. Notice of hearing will be by written order of 
the Board. Notice of changes in the hearing schedule will also be by 
written order when practicable but may be oral in exigent circumstances. 
Except as the Board may otherwise order, each party that plans to attend 
the hearing shall, within 10 working days of receipt of:
    (1) A written notice of hearing or
    (2) Any notice of a change in hearing schedule stating that an 
acknowledgment is required, notify the Board in writing that it will 
attend the hearing.
    (c) Unexcused absence from hearing. In the event of the unexcused 
absence of a party from a hearing, the hearing will proceed, and the 
absent party will be deemed to have elected to submit its case on the 
record pursuant to 6101.11.



6101.20  Subpoenas [Rule 120].

    (a) Voluntary cooperation in lieu of subpoena. Each party is 
expected to:
    (1) Cooperate by making available witnesses and evidence under its 
control, when requested by another party, without issuance of a 
subpoena; and
    (2) Secure voluntary attendance of third-party witnesses and 
production of evidence by third parties, and when practicable, without 
issuance of a subpoena.
    (b) General. Upon the written request of any party filed with the 
Office of the Clerk of the Board, or on the initiative of a judge, a 
subpoena may be issued that commands the person to whom it is directed 
to:
    (1) Attend and give testimony at a deposition in a city or county 
where that person resides or is employed or transacts business in 
person, or at another location convenient to that person that is 
specifically determined by the Board;
    (2) Attend and give testimony at a hearing; and
    (3) Produce the books, papers, documents, and other tangible things 
designated in the subpoena.
    (c) Request for subpoena. A request for a subpoena shall state the 
reasonable scope and general relevance to the case of the testimony and 
of any documentary evidence sought. A request for a subpoena shall be 
filed at least 15 calendar days before the testimony of a witness or 
documentary evidence is to be provided. The Board may, in its 
discretion, honor requests for subpoenas not made within this time 
limitation.
    (d) Form; issuance. Every subpoena shall be in the form specified in 
the appendix to this part and part 6102. Unless a party has the approval 
of a judge to submit a subpoena in blank (in whole or in part), a party 
shall submit to the judge a completed subpoena (save the ``Return on 
Service'' portion). In issuing a subpoena to a requesting party, the 
judge shall sign the subpoena. The party to whom the subpoena is issued 
shall complete the subpoena before service.
    (2) If the person subpoenaed is located in a foreign country, a 
letter rotatory or a subpoena may be issued and served under the 
circumstances and in the manner provided in 28 U.S.C. 1781-1784.
    (e) Service. (1) The party requesting a subpoena shall arrange for 
service. Service shall be made as soon as practicable after the subpoena 
has been issued.
    (2) A subpoena requiring the attendance of a witness at a deposition 
or hearing may be served at any place. A subpoena may be served by a 
United States marshal or deputy marshal, or by any other person who is 
not a party and not less than 18 years of age. Service of a subpoena 
upon a person named therein shall be made by personal delivery of a copy 
to that person and tender of the fees for one day's attendance and the 
mileage allowed by 28 U.S.C. 1821 or other applicable law; however, 
where the subpoena is issued on behalf of the Government, money payments 
need not be tendered in advance of attendance.
    (f) Proof of service. The person serving the subpoena shall make 
proof of service thereof to the Board promptly and in any event before 
the date on which the person served must respond to the subpoena. Proof 
of service shall be made by completion and execution and submission to 
the Board of the ``Return on Service'' portion of a duplicate copy of 
the subpoena issued by a judge. If service is made by a person other 
than a United States marshal or his deputy, that person shall make an 
affidavit as

[[Page 238]]

proof by executing the ``Return on Service'' in the presence of a 
notary.
    (g) Motion to quash or to modify. Upon written motion by the person 
subpoenaed or by a party, made within 14 calendar days after service, 
but in any event not later than the time specified in the subpoena for 
compliance, the Board may
    (1) Quash or modify the subpoena if it is unreasonable and 
oppressive or for other good cause shown, or
    (2) Require the party in whose behalf the subpoena was issued to 
advance the reasonable cost of producing subpoenaed documentary 
evidence. Where circumstances require, the Board may act upon such a 
motion at any time after a copy has been served upon opposing parties.
    (h) Contumacy or refusal to obey a subpoena. In a case of contumacy 
or refusal to obey a subpoena by a person who resides, is found, or 
transacts business within the jurisdiction of a United States district 
court, the Board shall apply to the court through the Attorney General 
of the United States for an order requiring the person to appear before 
the board to give testimony, produce evidence or both. If a person fails 
to obey such an order, the court may punish that person for contempt of 
court.



6101.21  Hearing procedures [Rule 121].

    (a) Nature and conduct of hearings. Except when necessary to 
maintain the confidentiality of protected material or testimony, or 
material submitted in camera, all hearings on the merits of cases shall 
be open to the public and conducted insofar as is convenient in regular 
hearing rooms. All other acts or proceedings may be done or conducted by 
the Board either in its offices or at other places.
    (b) Continuances; change of location. Whenever practicable, a 
hearing will be conducted in one continuous session or a series of 
consecutive sessions at a single location. However, the Board may at any 
time continue the hearing to a future date and may arrange to conduct 
the hearing in more than one location. The Board may also continue a 
hearing to permit a party to conduct additional discovery on conditions 
established by the Board. In exercising its discretion to continue a 
hearing or to change its location, the Board will give due consideration 
to the same elements (set forth in 6101.19(a)) that it considers in 
scheduling hearings.
    (c) Availability of witnesses, documents, and other tangible things. 
It is the responsibility of a party desiring to call any witness, or to 
use any document or other tangible thing as an exhibit in the course of 
a hearing, to ensure that whoever it wishes to call and whatever it 
wishes to use is available at the hearing.
    (d) Enlargement of the record. The Board may at any time during the 
conduct of a hearing require evidence or argument in addition to that 
put forth by the parties.
    (e) Examination of witnesses. Witnesses before the Board will 
testify under oath or affirmation. A party or the Board may obtain an 
answer from any witness to any question that is not the subject of an 
objection that the Board sustains.
    (f) Refusal to be sworn. If a person called as a witness refuses to 
be sworn or to affirm before testifying, the Board may direct that 
witness to do so and, in the event of continued refusal, the Board may 
permit the taking of testimony without oath or affirmation. 
Alternatively, the Board may refuse to permit the examination of that 
witness, in which event it may state for the record the inferences it 
draws from the witness's refusal to testify under oath or affirmation. 
Alternatively, the Board may issue a subpoena to compel that witness to 
testify under oath or affirmation, and in the event of the witness's 
continued refusal to swear or affirm, may seek enforcement of that 
subpoena pursuant to 6101.20(h).
    (g) Refusal to answer. If a witness refuses to answer a question put 
to him in the course of his testimony, the Board may direct that witness 
to answer and, in the event of continued refusal, the Board may state 
for the record the inferences if draws from the refusal to answer. 
Alternatively, the Board may issue a subpoena to compel that witness to 
testify and, in the event of the witness's continued refusal to testify, 
may seek enforcement of that subpoena pursuant to 6101.20(h).

[[Page 239]]

    (h) Issues not raised by pleadings. If evidence is objected to at a 
hearing on the ground that it is not within the issues raised by the 
pleadings, it may nevertheless be admitted by the Board if it is within 
the proper scope of the case. If such evidence is admitted, the Board 
may grant the objecting party a continuance to enable it to meet such 
evidence. If such evidence is admitted, the pleadings may be amended to 
conform to the evidence, as provided by 6101.12(e).
    (i) Delay by parties. If the Board determines that the hearing is 
being unreasonably delayed by the failure of a party to produce 
evidence, or by the undue prolongation of the presentation of evidence, 
it may, by written order or by ruling from the bench, prescribe a time 
or times within which the presentation of evidence must be concluded, 
establish time limits on the direct or cross-examination of witnesses, 
and enforce such order or ruling by appropriate sanctions.



6101.22  Admissibility and weight of evidence [Rule 122].

    (a) Admissibility. Any relevant evidence may be received. The Board 
may exclude relevant evidence to avoid unfair prejudice, confusion of 
the issues, undue delay, waste of time, or needless presentation of 
cumulative evidence. Hearsay evidence is admissible unless the Board 
finds it unreliable or untrustworthy.
    (b) Federal Rules of Evidence. As a general matter, and subject to 
the other provisions of this section, the Board will base its 
evidentiary rulings on the Federal Rules of Evidence.
    (c) Weight and credibility. The Board will determine the weight to 
be given to evidence and the credibility to be accorded witnesses.
    (d) Submission of evidence in camera. 6101.12(h) governs submissions 
in camera.



6101.23  Exhibits [Rule 123].

    (a) Marking of exhibits. (1) Documents and other tangible things 
offered in evidence by a party will be marked for identification by the 
Board during the hearing or, if it is convenient for the Board and the 
parties, before the commencement of the hearing. They will be numbered 
consecutively as the exhibits of the party offering them.
    (2) If a party elects to proceed on the record without a hearing 
pursuant to 6101.11, documentary evidence submitted by that party will 
be numbered consecutively by the Board as appeal file exhibits.
    (b) Copies as exhibits. Except upon objection sustained by the Board 
for good cause shown, copies of documents may be offered and received 
into evidence as exhibits, provided they are of equal legibility and 
quality as the originals, and such copies shall have the same force and 
effect as if they were the originals. If the Board so directs, a party 
offering a copy of a document as an exhibit shall have the original 
available at the hearing for examination by the Board and any other 
party. When the original of a document has been received into evidence 
as an exhibit, an accurate copy thereof may be substituted in evidence 
for the original by leave of the Board at any time.
    (c) Withdrawal of documentary exhibits and other papers. With the 
permission of the Board, a party may remove an exhibit during the course 
of a proceeding. Otherwise, except as provided in 6101.37(d), no 
withdrawal of any papers in the Board's file is permitted. Inspection of 
the file at the Board's offices is permitted by 6101.12(g).
    (d) Disposition of physical exhibits. Any physical (as opposed to 
documentary) exhibit may be disposed of by the Board at any time more 
than 90 calendar days after the expiration of the period for appeal from 
the decision of the Board, unless it has been earlier withdrawn by the 
party that submitted it.



6101.24  Transcripts of proceedings; corrections [Rule 124].

    (a) Transcripts Except as the Board may otherwise order, all 
hearings, other than those under the small claims procedure prescribed 
by 6102.2, will be stenographically or electronically recorded and 
transcribed. Any other hearing or conference will be recorded or 
transcribed only by order of the Board. Copies or transcriptions of 
stenographic or electronic recordings not ordered to be transcribed by 
the Board will be furnished to the parties

[[Page 240]]

or other persons only on conditions prescribed by the Board, which may 
include the payment of the costs of copying or transcription. Each party 
is responsible for obtaining its own copy of the transcript if one is 
prepared.
    (b) Corrections. Corrections to an official transcript will be made 
only when they involve errors affecting its substance. The Board may 
order such corrections on motion or on its own initiative, and only 
after notice to the parties giving them opportunity to object. Such 
corrections will ordinarily be made either by hand with pen and ink or 
by the appending of an errata sheet, but when no other method of 
correction is practicable the Board may require the reporter to provide 
substitute or additional pages.



6101.25  Briefs and memoranda of law [Rule 125].

    (a) Form and content of briefs and memoranda of law. Briefs and 
memoranda of law shall be typewritten on standard size 8\1/2\ by 11-inch 
paper. Otherwise, no particular form or organization is prescribed. 
Posthearing briefs should, at a minimum, succinctly set forth
    (1) The facts of the case with citations to those places in the 
record where supporting evidence can be found and
    (2) Argument with citations to supporting legal authorities. 
Memoranda of law should generally adhere as closely as practicable to 
the form and content of briefs.
    (b) Submission of posthearing briefs. Except as the Board may 
otherwise order, posthearing briefs shall be filed 30 calendar days 
after the Board's receipt of the transcript; reply briefs, if filed, 
shall be filed 15 calendar days after the parties' receipt of the 
initial posthearing briefs. The Board will notify the parties of the 
date of its receipt of the transcript. In the event one party has 
elected a hearing and the other party has elected to submit its case on 
the record pursuant to 6101.11, the filing of record submissions in the 
form of briefs shall be governed by this section.



6101.26  Consolidation; separate hearings; separate determination of liability [Rule 126].

    (a) Consolidation. When cases involving common questions of law or 
fact are pending, the Board may:
    (1) Order a joint hearing of any or all of the matters at issue in 
the cases;
    (2) Order the cases consolidated; or
    (3) Make such other orders concerning the proceedings therein as are 
intended to avoid unnecessary costs or delay.
    (b) Separate hearings. The Board may order a separate hearing of any 
case or cases or of any claims or issues or number of claims or issues 
therein. The Board may enter appropriate orders or decisions with 
respect to any claims or issues that are heard separately.
    (c) Separate determinations of liability. The Board may:
    (1) Limit a hearing to those issues of law and fact relating to the 
right of a party to recover, reserving the determination of the amount 
of recovery, if any, for other proceedings; and
    (2) In its decision of an appeal, irrespective of whether there is 
evidence in the record concerning the amount of recovery, and whether or 
not a stipulation or order has been made, reserve determination of the 
amount of recovery for other proceedings. In any instance in which the 
Board has reserved its determination of the amount of recovery for other 
proceedings, its decision on the question of the right to recover shall 
be final, subject to the provisions of 6101.30 through 6101.33.



6101.27  Stay or suspension of proceedings; dismissals in lieu of stay or suspension [Rule 127].

    (a) Stay of proceedings to obtain contracting officer's decision. 
The Board may in its discretion stay proceedings to permit a contracting 
officer to issue a decision when an appeal has been taken from the 
contracting officer's alleged failure to render a timely decision.
    (b) Suspension for other cause. The Board may suspend proceedings in 
a case for good cause. The order suspending proceedings will prescribe 
the duration of the suspension or the conditions on which it will 
expire. The order may also prescribe actions to be

[[Page 241]]

taken by the parties during the period of suspension or following its 
expiration.
    (c) Dismissal in lieu of stay or suspension. When circumstances 
beyond the control of the Board prevent the continuation of proceedings 
in a case, the Board may, in lieu of issuing an order suspending 
proceedings, dismiss the case without prejudice to reinstatement. Such a 
dismissal may require reinstatement by a date certain or within a 
certain period of time after the occurrence of a specified event. If the 
order of dismissal does not otherwise provide, it will be subject to the 
provisions of 6101.28(b).



6101.28  Dismissals [Rule 128].

    (a) Generally. A case may be dismissed by the Board on motion of 
either party. A case may also be dismissed for reasons cited by the 
Board in a show cause order to which response has been permitted. Every 
dismissal shall be with prejudice to reinstatement of the case unless a 
dismissal without prejudice has been requested by a party or specified 
in a show cause order.
    (b) Dismissal without prejudice. When a case has been dismissed 
without prejudice to its reinstatement and neither party has requested, 
within the period of time specified in this paragraph, that the case be 
reinstated, the case shall be deemed to have been dismissed with 
prejudice as of the expiration of 180 calendar days from the date of 
dismissal, or such other period as the Board may prescribe.
    (c) Issuance of order. An order of dismissal shall be issued by the 
panel of judges to which the case has been assigned if the motion is 
contested or if the Board is acting consequent to its own show cause 
order. An order of dismissal may be issued by the panel chairman alone 
if the motion to dismiss is not contested.



6101.29  Decisions: format; procedure [Rule 129].

    Except as provided in 6102.2 (small claims procedure), decisions of 
the Board will be made in writing upon the record as prescribed in 
6101.12. Each of the parties will be furnished a copy of the decision 
certified by the Office of the Clerk of the Board, and the date of the 
receipt thereof by each party will be established in the record.



6101.30  Full Board consideration [Rule 130].

    (a) Requests. (1) A request for full Board consideration is not 
favored. Ordinarily, full Board consideration will be ordered only when
    (i) It is necessary to secure or maintain uniformity of Board 
decisions, or
    (ii) The matter to be referred is one of exceptional importance.
    (2) A request for full Board consideration may be made by either 
party on any date which is both
    (i) After the panel to which the case is assigned has issued its 
decision on a motion for reconsideration or relief from decision and
    (ii) Within 10 working days after the date on which that party 
receives that decision. Any party making a request for full Board 
consideration shall state concisely in the motion the precise grounds on 
which the request is based.
    (3) The full Board on its own may initiate consideration of a matter
    (i) At any time while the case is before the Board,
    (ii) No later than the last date on which any party may file a 
motion for reconsideration or relief from decision or order, or
    (iii) If such a motion is filed by a party, within ten days after a 
panel has resolved it.
    (b) Consideration. Promptly after such a request is made, a ballot 
will be taken among the judges; if a majority of them favors the 
request, the request will be granted. The result of the vote will 
promptly be reported by the Board through an order. The concurring or 
dissenting view of any judge who wishes to express such a view may issue 
at the time of such order or at any time thereafter.
    (c) Decisions. If full Board consideration is granted, a vote shall 
be taken promptly on the pending matter. After this vote is taken, the 
Board shall promptly, by order, issue its determination, which shall 
include the concurring or dissenting view of any judge who wishes to 
express such a view.

[[Page 242]]



6101.31  Clerical mistakes [Rule 131].

    Clerical mistakes in decisions, orders, or other parts of the 
record, and errors arising therein through oversight or inadvertence, 
may be corrected by the Board at any time on its own initiative or upon 
motion of a party on such terms, if any, as the Board may prescribe. 
During the pendency of an appeal to another tribunal, such mistakes may 
be corrected only with leave of the appellate tribunal.



6101.32  Reconsideration; amendment of decisions; new hearings [Rule 132].

    (a) Grounds. Reconsideration may be granted, a decision or order may 
be altered or amended, or a new hearing may be granted, for any of the 
reasons stated in 6101.33(a) and the reasons established by the rules of 
common law or equity applicable as between private parties in the courts 
of the United States. Reconsideration, or a new hearing, may be granted 
on all or any of the issues. Arguments already made and 
reinterpretations of old evidence are not sufficient grounds for 
granting reconsideration. On granting a motion for a new hearing, the 
Board may open the decision if one has been issued, take additional 
testimony, amend findings of fact and conclusions of law, or make new 
findings and conclusions and direct the entry of a new decision.
    (b) Procedure. (1) Any motion under this section shall comply with 
the provisions of 6101.8 and shall set forth:
    (i) The reason or reasons why the Board should consider the motion; 
and
    (ii) The relief sought and the grounds therefor.
    (2) If the Board concludes that the reasons asserted for its 
consideration of the motion are insufficient, it may deny the motion 
without considering the relief sought and the grounds asserted therefor. 
If the Board grants the motion, it will issue an appropriate order which 
may include directions to the parties for further proceedings.
    (c) Time for filing. A motion for reconsideration, to alter or amend 
a decision or order, or for a new hearing shall be filed in an appeal or 
petition within 30 calendar days and in an application within 7 working 
days after the date of receipt by the moving party of the decision or 
order. Not later than 30 calendar days after issuance of a decision or 
order, the Board may, on its own initiative, order reconsideration or a 
new hearing or alter or amend a decision or order for any reason that 
would justify such action on motion of a party.
    (d) Effect of motion. A motion pending under this section does not 
affect the finality of a decision or suspend its operation.



6101.33  Relief from decision or order [Rule 133].

    (a) Grounds. The Board may relieve a party from the operation of a 
final decision or order for any of the following reasons:
    (1) Newly discovered evidence which could not have been earlier 
discovered, even through due diligence;
    (2) Justifiable or excusable mistake, inadvertence, surprise, or 
neglect;
    (3) Fraud, misrepresentation, or other misconduct of an adverse 
party;
    (4) The decision has been satisfied, released, or discharged, or a 
prior decision upon which it is based has been reversed or otherwise 
vacated, and it is no longer equitable that the decision should have 
prospective application;
    (5) The decision is void, whether for lack of jurisdiction or 
otherwise; or
    (6) Any other ground justifying relief from the operation of the 
decision or order.
    (b) Procedure. Any motion under this section shall comply with the 
provisions of 6101.8 and 6101.32(b), and will be considered and ruled 
upon by the Board as provided in 6101.32.
    (c) Time for filing. Any motion under this section shall be filed as 
soon as practicable after the discovery of the reasons therefor, but in 
any event no later than 120 calendar days or, in appeals under the small 
claims procedure of 6102.2, no later than 30 calendar days after the 
date of the moving party's receipt of the decision or order from which 
relief is sought. In considering the timeliness of a motion filed under 
this section, the Board may consider when the grounds therefor should 
reasonably have been known to the moving party.
    (d) Effect of motion. A motion pending under this section does not 
affect the

[[Page 243]]

finality of a decision or suspend its operation.



6101.34  Harmless error [Rule 134].

    No error in the admission or exclusion of evidence, and no error or 
defect in any ruling, order, or decision of the Board, and no other 
error in anything done or omitted to be done by the Board will be a 
ground for granting a new hearing or for vacating, reconsidering, 
modifying, or otherwise disturbing a decision or order of the Board 
unless refusal to act upon such error will prejudice a party or work a 
substantial injustice. At every stage of the proceedings the Board will 
disregard any error or defect that does not affect the substantial 
rights of the parties.



6101.35  Award of costs [Rule 135].

    (a) Applications for costs. An appropriate party in a proceeding 
before the Board may apply for an award of costs, including if 
applicable an award of attorney fees, under the Equal Access to Justice 
Act, 5 U.S.C. 504, or any other provision that may entitle that party to 
such an award, subsequent to the Board's decision in the proceeding. For 
purposes of this section, ``decision'' includes orders of dismissal 
resulting from settlement agreements that bring to an end the 
proceedings before the Board.
    (b) Time for filing. A party seeking an award may submit an 
application no later than 30 calendar days after a final disposition in 
the underlying appeal. In the case of an appeal that is adjudicated, the 
Board's decision becomes final (for purposes of this section) when it is 
not appealed to the United States Court of Appeals for the Federal 
Circuit within the time permitted for appeal or, if the decision is 
appealed, when the time for petitioning the Supreme Court for certiorari 
has expired. In the case of an appeal that is resolved as a result of 
settlement, the Board's disposition becomes final (for purposes of this 
section) after receipt by the applicant of the order granting or 
dismissing the appeal.
    (c) Application requirements. An application for costs shall:
    (1) Identify the applicant and the appeal for which costs are 
sought, and the amount being sought;
    (2) Establish that all applicable prerequisites for an award have 
been satisfied, including a succinct statement of why the applicant is 
eligible for an award of costs;
    (3) Be accompanied by an exhibit fully documenting any fees or 
expenses being sought, including the cost of any study, analysis, 
engineering report, test, project, or similar matter. The date and a 
description of all services rendered or costs incurred shall be 
submitted for each profession firm or individual whose services are 
covered by the application, showing the hours spent in connection with 
the proceeding by each individual, a description of the particular 
services performed by specific date, the rate at which each fee has been 
computed, any expenses for which reimbursement is sought, and the total 
amount paid or payable by the applicant on account of the sought-after 
costs. Except in exceptional circumstances, all exhibits supporting 
applications for fees or expenses sought shall be publicly available. 
The Board may require the applicant to provide vouchers, receipts, or 
other substantiation for any costs claimed and/or to submit to an audit 
by the Government of the claimed costs;
    (4) Be signed by the applicant or an authorized officer, employee, 
or attorney of the applicant;
    (5) Contain or be accompanied by a written verification under oath 
or affirmation, or declaration under penalty of perjury, that the 
information provided in the application is true and correct;
    (6) If the applicant asserts that it is a qualifying small business 
concern, contain evidence thereof; and
    (7) If the application requests reimbursement of attorney fees that 
exceed the statutory rate, explain why an increase in the cost of living 
or a special factor, such as the limited availability of qualified 
attorneys for the proceedings involved, justifies such fees.
    (d) Proceedings. (1) Within 30 calendar days after receipt by the 
respondent of an application under this section, the respondent may file 
an answer. The answer shall explain in detail any objects to the award 
requested and set out the legal and factual bases supporting the

[[Page 244]]

respondent's position. If the respondent contends that any fees for 
consultants or expert witnesses for which reimbursement is sought in the 
application exceed the highest rate of compensation for expert witnesses 
paid by the agency, the respondent shall include in the answer evidence 
of such highest rate.
    (2) Further proceedings shall be held only by order of the Board and 
only when necessary for full and fair resolution of the issues arising 
from the application. Such proceedings shall be minimized to the extent 
possible and shall not include relitigation of the case on the merits. A 
request that the Board order further proceedings under this section 
shall describe the disputed issues and explain why additional 
proceedings are necessary to resolve those issues.
    (e) Decision. Any award ordered by the Board shall be paid pursuant 
to 6101.36.



6101.36  Payment of Board awards [Rule 136].

    (a) Generally. When permitted by law, payment of Board awards may be 
made in accordance with 31 U.S.C. 1304. Awards by the Board pursuant to 
the Equal Access to Justice Act shall be directly payable by the 
respondent agency over which the applicant has prevailed in the 
underlying appeal.
    (b) Conditions for payment. Before a party may obtain payment of a 
Board award pursuant to 31 U.S.C. 1304, one of the following must occur:
    (1) Both parties must, by execution of a Certificate of Finality, 
waive their rights to relief under 6101.32 and 6101.33 and also their 
rights to appeal the decision of the Board; or
    (2) The time for filing an appeal must expire.
    (c) Procedure for filing of certificates of finality. Whenever the 
Board issues a decision or an order awarding a party any amount of 
money, it will attach to the copy of the decision sent to each party 
forms such as those illustrated in the appendix to this part and part 
6102. The conditions for payment prescribed in paragraph (b)(1) of this 
section are satisfied if each of the parties returns a completed and 
duly executed copy of this form to the Board. When the form is executed 
on behalf of an appellant or applicant by an attorney or other 
representative, proof of signatory authority shall also be furnished. 
Upon receipt of completed and duly executed Certificates of Finality 
from the parties, the Board will forward a copy of each such certificate 
(together with proof of signatory authority, if required) and a 
certified copy of its decision to the United States Department of the 
Treasury to be certified for payment.
    (d) Procedure in absence of certificate of finality. When one or 
both of the parties fails to submit a duly executed Certificate of 
Finality, but the conditions for payment have been satisfied as provided 
in paragraph (b)(2) of this section, the appellant or applicant may file 
a written request that the Board forward its decision to the United 
States Department of the Treasury for payment. Thereupon, the Board will 
forward a copy of that request and a certified copy of its decision to 
the United States Department of the Treasury to be certified for 
payment.
    (e) Stipulated award. When an appeal is settled, the parties may 
file with the Board a stipulation setting forth the amount of the award 
and stating
    (1) That they will not seek reconsideration of, or relief from, the 
Board's decision, and
    (2) That they will not appeal the decision. The Board will adopt the 
parties' stipulation by decision. The Board's decision under this 
paragraph is an adjudication of the case on the merits.



6101.37  Record on review of a Board decision [Rule 137].

    (a) Record on review. When a party has appealed a Board decision to 
the United States Court of Appeals for the Federal Circuit, the record 
on review shall consist of the decision sought to be reviewed, the 
record before the Board as described in 6101.12, and such other material 
as may be required by the Court of Appeals.
    (b) Notice. At the same time a party seeking review of a Board 
decision files a notice of appeal, that party shall provide a copy of 
the notice to the Board.
    (c) Filing of certified list of record materials. Promptly after 
service upon the

[[Page 245]]

Board of a copy of the notice of appeal of a Board decision, the Office 
of the Clerk of the Board shall file with the Clerk of the United States 
Court of Appeals for the Federal Circuit a certified list of all 
documents, transcripts of testimony, exhibits, and other materials 
constituting the record, or a list of such parts thereof as the parties 
may designate, adequately describing each. The Board will retain the 
record and transmit any part thereof to the Court upon the Court's order 
during the pendency of the appeal.
    (d) Request by attorney of record to review record. When a case is 
on appeal, an attorney of record may request permission from the Board 
to sign out the record on appeal to review and copy, for a reasonable 
period of time, if the attorney is unable to gain access to the record 
from another source.



6101.38  Office of the Clerk of the Board [Rule 138].

    (a) Open for the filing of papers. The Office of the Clerk of the 
Board shall receive all papers submitted for filing, and shall be open 
for this purpose from 8:00 a.m. to 4:30 p.m., Eastern Time, on each day 
that is not a Saturday, Sunday, federal holiday, a day on which the 
Office is required to close earlier than 4:30 p.m., or a day on which 
the Office does not open at all, as in the case of inclement weather.
    (b) Decisions and orders. The Office of the Clerk shall keep in such 
form and manner as the Board may prescribe a correct copy of each 
decision or order of the Board subject to review and any other order or 
decision which the Board may direct to be kept.
    (c) Docket. The Office of the Clerk shall keep a docket on which 
shall be entered the title and nature of all cases brought before the 
Board, the names of the persons filing such cases, the names of the 
attorneys or other persons appearing for the parties, and a record of 
all proceedings.
    (d) Copies and certification of papers. Upon the request of any 
person, copies of papers and documents in a case may be provided by the 
Office of the Clerk. If making such copies involves more than minimal 
costs to the Board, reimbursement will be required. When required, the 
Office of the Clerk will certify copies of papers and documents as a 
true record of the Board. Except as provided in 6101.23(c) and 
6101.37(d), the Office of the Clerk will not release original records in 
its possession to any person.



6101.39  Seal of the Board [Rule 139].

    The Seal of the Board shall be a circular boss, the center portion 
of which shall depict the Seal of the General Services Administration. 
The outer margin of the seal shall bear the legend ``Board of Contract 
Appeals.'' The Seal shall be the means of authentication of all records, 
notices, orders, dismissals, opinions, subpoenas, and certificates 
issued by the Board.



6101.40  Forms [Rule 140].

    The forms contained in the appendix to this part and part 6102 are 
sufficient under these parts and are intended to indicate the simplicity 
and brevity of statement which the rules in those parts contemplate. The 
subpoena form is a required form, and it may not be altered.

                  Appendix to Part 6101--Form Nos. 1-5

Form 1--Notice of Appeal, GSA Form 2465
Form 2--Notice of Appearance
Form 3--Subpoena, GSA Form 9534
Form 4--Government Certificate of Finality
Form 5--Appellant/Applicant Certificate of Finality

[[Page 246]]

[GRAPHIC] [TIFF OMITTED] TR07OC96.000


[[Page 247]]


[GRAPHIC] [TIFF OMITTED] TR07OC96.001


[[Page 248]]


[GRAPHIC] [TIFF OMITTED] TR07OC96.002


[[Page 249]]


[GRAPHIC] [TIFF OMITTED] TR07OC96.003


[[Page 250]]


[GRAPHIC] [TIFF OMITTED] TR07OC96.004


[[Page 251]]


[GRAPHIC] [TIFF OMITTED] TR07OC96.005


[[Page 252]]



PART 6102--RULES OF PROCEDURE OF THE GENERAL SERVICES ADMINISTRATION BOARD OF CONTRACT APPEALS (EXPEDITED PROCEEDINGS)--Table of Contents




Sec.
6102.1  Variation from standard proceedings [Rule 201].
6102.2  Small claims procedure [Rule 202].
6102.3  Accelerated procedure [Rule 203].
6102.4  Alternative dispute resolution [Rule 204].

    Authority: 41 U.S.C. 601-613.

    Source: 61 FR 52369, Oct. 7, 1996, unless otherwise noted.



6102.1  Variation from standard proceedings [Rule 201].

    The ultimate purpose of any Board proceeding is to resolve fairly 
and expeditiously any dispute properly before the Board. When, during 
the normal course of a Board proceeding, the parties agree that a change 
in established procedure will promote this end, the Board will make that 
change if it is deemed to be feasible and in the best interest of the 
parties, the Board, and the resolution of contract disputes. The 
following are examples of these changes:
    (a) Establishing an expedited schedule of proceedings, such as by 
limiting the times provided in part 6101 of this chapter for various 
filings, to facilitate a prompt resolution of the case;
    (b) Developing a record and rendering a decision on the issue of 
entitlement prior to reviewing the issue of quantum in a party's claim;
    (c) Developing a record and rendering a decision on any legal or 
factual issue in advance of others when that issue is deemed critical to 
resolving the case or effecting a settlement of any items in dispute; 
and
    (d) Developing a record regarding relevant facts through an on-the-
record round-table discussion with sworn witnesses, counsel, and the 
panel chairman rather than through formal direct and cross-examination 
of each of these same witnesses. This discussion shall be controlled by 
the panel chairman. It may be conducted, for example, through the 
presentation of narrative statements of witnesses or on an issue by 
issue basis. The panel chairman may also request that the parties' 
counsel or representatives present opening and/or closing statements in 
lieu of written briefs.



6102.2  Small claims procedure [Rule 202].

    (a) Election.--(1) The small claims procedure is available solely at 
the appellant's election, and only when there is a monetary amount in 
dispute and that amount is $50,000 or less. Such election shall be made 
no later than 30 calendar days after the appellant's receipt of the 
agency answer, unless the panel chairman enlarges the time for good 
cause shown.
    (2) At the request of the Government, or on its own initiative, the 
Board may determine whether the amount in dispute is greater than 
$50,000, such that the election is inappropriate. The Government shall 
raise any objection to the election no later than 10 working days after 
receipt of a notice of election.
    (b) Decision. The panel chairman may issue a decision, which may be 
in summary form, orally or in writing. A decision which is issued orally 
shall be reduced to writing; however, such a decision takes effect at 
the time it is rendered, prior to being reduced to writing. A decision 
shall be final and conclusive and shall not be set aside except in case 
of fraud. A decision shall have no value as precedent.
    (c) Procedure. Promptly after receipt of the appellant's election of 
the small claims procedure, the Board shall establish a schedule of 
proceedings that will allow for the timely resolution of the appeal. 
Pleadings, discovery, and other prehearing activities may be restricted 
or eliminated.
    (d) Time of decision. Whenever possible, the panel chairman shall 
resolve an appeal under this procedure within 120 calendar days from the 
Board's receipt of the election. The time for processing an appeal under 
this procedure may be extended if the appellant has not adhered to the 
established schedule. Either party's failure to abide by the Board's 
schedule may result in the Board drawing evidentiary inference adverse 
to the party at fault.

[[Page 253]]



6102.3  Accelerated procedure [Rule 203].

    (a) Election. (1) The accelerated procedure is available solely at 
the appellant's election, and only when there is a monetary amount in 
dispute and that amount is $100,000 or less. Such election shall be made 
no later than 30 calendar days after the appellant's receipt of the 
agency answer, unless the panel chairman enlarges the time for good 
cause shown.
    (2) At the request of the Government, or on its own initiative, the 
Board may determine whether the amount in dispute is greater than 
$100,000, such that the election is inappropriate. The Government shall 
raise any objection to the election no later than 10 working days after 
receipt of a notice of election.
    (b) Decision. Each decision shall be rendered by the panel chairman 
with the concurrence of one of the other judges assigned to the panel; 
in the event the two judges disagree, the third judge assigned to the 
panel will participate in the decision.
    (c) Procedure. Promptly after receipt of the appellant's election of 
the accelerated procedure, the Board shall establish a schedule of 
proceedings that will allow for the timely resolution of the appeal. 
Pleadings may be simplified, and discovery and other prehearing 
activities may be restricted or eliminated.
    (d) Time of decision. Whenever possible, the panel chairman shall 
resolve an appeal under this procedure within 180 calendar days from the 
Board's receipt of the election. The time for processing an appeal under 
this procedure may be extended if the appellant has not adhered to the 
established schedule. Either party's failure to abide by the Board's 
schedule may result in the Board drawing evidentiary inferences adverse 
to the party at fault.



6102.4  Alternative dispute resolution [Rule 204].

    (a) Availability of ADR procedures. The Board will make its services 
available for ADR proceedings in contract and procurement matters 
involving any agency, regardless of whether the agency uses the Board to 
resolve its Contract Disputes Act appeals.
    (1) ADR subsequent to docketing of case at the Board. Parties are 
encouraged to consider the feasibility of using ADR as soon as their 
case is docketed. If, however, at any time during the course of a Board 
proceeding, the parties agree that their dispute may be resolved through 
the use of an ADR technique, the panel chairman may suspend proceedings 
for a reasonable period of time while the parties and the Board attempt 
to resolve the dispute in this manner. The use of an ADR technique will 
not toll any relevant statutory time limit for deciding the case.
    (2) Other ADR. Upon request, the Board will make a Board Neutral 
available for an ADR proceeding involving any agency in any contract or 
procurement matter at any stage of a procurement, even if no contracting 
officer decision has been issued or is contemplated. To initiate an ADR 
proceeding, the parties shall jointly request the ADR in writing and 
direct such request to the Office of the Clerk of the Board. For 
agencies other than GSA, the Board will provide ADR services on a 
reimbursable basis.
    (b) Conduct of ADR--(1) Selection of Board Neutral. If ADR is agreed 
to by the parties and the Board, the parties may request the appointment 
of one or more Board judges to act as a Board Neutral or Neutrals. The 
parties may request that the Board's chairman appoint a particular judge 
or judges as the Board Neutral, or ask the Board's chairman to appoint 
any judge or judges as the Neutral. If, when ADR has been requested for 
a case that has already been docketed with the Board, as provided in 
paragraph (a)(1) of this section, the parties may request that the panel 
chairman serve as the Board Neutral. In such a situation, if the ADR is 
unsuccessful,
    (i) If the ADR has involved mediation, the panel chairman shall not 
retain the case, and
    (ii) If the ADR has not involved mediation, the panel chairman, 
after considering the parties' views, shall decide whether to retain the 
case.
    (2) Retention and confidentiality of materials. The Board will 
review materials submitted by a party for an ADR proceeding, but will 
not retain such materials after the proceeding is concluded

[[Page 254]]

or otherwise terminated. Material created by a party for the purpose of 
an ADR proceeding is to be used solely for that proceeding unless the 
parties agree otherwise. Parties may request a protective order in an 
ADR proceeding in the manner provided in 6101.12(h).
    (c) Types of ADR. ADR is not defined by any single procedure or set 
of procedures. The Board will consider the use of any technique proposed 
by the parties which is deemed to be fair, reasonable, and in the best 
interest of the parties, the Board, and the resolution of contract 
disputes. The following are examples of available techniques:
    (1) Mediation. The Board Neutral, as mediator, aids the parties in 
settling their case. The mediator engages in ex parte discussions with 
the parties and facilitates the transmission of settlement offers. 
Although not authorized to render a decision in the dispute, the 
mediator may discuss with the parties, on a confidential basis, the 
strengths and weaknesses of their positions. No judge who has 
participated in discussions about the mediation will participate in a 
Board decision of the case if the ADR is unsuccessful.
    (2) Neutral case evaluation. The parties agree to present to the 
Board Neutral information on which the Board Neutral bases a non-
binding, oral, advisory opinion. The manner in which the information is 
presented will vary from case to case depending upon the agreement of 
the parties. Presentations generally fall between two extremes, ranging 
from an informal proffer of evidence together with limited argument from 
the parties to a more formal presentation of oral and documentary 
evidence and argument from counsel, such as through a mini-trial.
    (3) Binding decision. One or more Board judges render a decision 
which, by prior agreement of the parties, is to be binding and non-
appealable. As in the non-binding evaluation of a case by a Board 
Neutral, the manner in which information is presented for a binding 
decision may vary depending on the circumstances of the particular case.
    (4) Other procedures. In addition to other ADR techniques, including 
modifications to those listed in this section, as agreed to by the Board 
and parties, the parties may use ADR techniques that do not require 
direct Board involvement.
    (5) Selective use of standard procedures. Parties considering the 
use of ADR are encouraged to adapt for their purposes any provisions in 
part 6101 which they believe will be useful. This includes but is not 
limited to provisions concerning record submittals, pretrial discovery 
procedures, and hearings.



PART 6103--RULES OF PROCEDURE FOR TRANSPORTATION RATE CASES--Table of Contents




Sec.
6103.1  Scope [Rule 301].
6103.2  Filing claims [Rule 302].
6103.3  Responses to claims [Rule 303].
6103.4  Reply to Audit Division and agency responses [Rule 304].
6103.5  Proceedings [Rule 305].
6103.6  Decisions [Rule 306].
6103.7  Reconsideration of Board decision [Rule 307].
6103.8  Payment of successful claims [Rule 308].

    Authority: 31 U.S.C. 3726(g)(1); 41 U.S.C. 601-613; Sec. 202(o), 
Pub. L. 104-316, 110 Stat. 3826.

    Source: 62 FR 25867, May 12, 1997, unless otherwise noted.



6103.1   Scope [Rule 301].

    (a) Authority. Section 202(o) of the General Accounting Office Act 
of 1996, Public Law 104-316, transfers certain functions of the 
Comptroller General contained in 31 U.S.C. 3726(g)(1) to the 
Administrator of General Services, who has redelegated those functions 
to the General Services Administration Board of Contract Appeals.
    (b) Type of claim; review of claim. These procedures are applicable 
to the review of claims made by a carrier or freight forwarder pursuant 
to 31 U.S.C. 3726(g)(1). The Board will issue the final agency decision 
on a claim based on the information submitted by the claimant, the Audit 
Division of the General Services Administration Office of Transportation 
and Property Management (the Audit Division), and the department or 
agency (the agency) for which the services were provided. The burden is 
on the claimant to establish

[[Page 255]]

the timeliness of its claim, the liability of the agency, and the 
claimant's right to payment.

[62 FR 25867, May 12, 1997, as amended at 64 FR 38143, July 15, 1999]



6103.2   Filing claims [Rule 302].

    (a) Form. A claim shall be in writing and must be signed by the 
claimant or by the claimant's attorney or authorized representative. No 
particular form is required. The request should describe the basis for 
the claim and state the amount sought. The request should also include:
    (1) The name, address, telephone number, and facsimile machine 
number, if available, of the claimant;
    (2) The Government bill of lading or Government transportation 
request number;
    (3) The claimant's bill number;
    (4) The Government voucher number and date of payment;
    (5) The Audit Division claim number;
    (6) The agency for which the services were provided; and
    (7) Any other identifying information.
    (b) When and where claims are filed. A claim is filed when it is 
received by the Office of the Clerk of the Board during the Board's 
working hours. Claims should be sent to the Board at the following 
address: Office of the Clerk of the Board, Room 7022, General Services 
Administration Building, 1800 F Street, NW, Washington, DC 20405. The 
Clerk's telephone number is: (202) 501-0116. The Clerk's facsimile 
machine number is: (202) 501-0664. The Board's working hours are 8:00 
a.m. to 4:30 p.m., Eastern Time, on each day other than a Saturday, 
Sunday, or federal holiday.
    (c) Notice of docketing. A claim will be docketed by the Office of 
the Clerk of the Board, and a written notice of docketing will be sent 
promptly to the claimant, the Director of the Audit Division, and the 
agency for which the services were provided. The notice of docketing 
will identify the judge to whom the claim has been assigned.
    (d) Service of copy. The claimant shall send to the Audit Division 
and the agency identified in paragraph (a)(6) of this section copies of 
all material provided to the Board. All submissions to the Board by a 
claimant shall indicate that a copy has been provided to the Audit 
Division and the agency.

[62 FR 25867, May 12, 1997, as amended at 64 FR 38143, July 15, 1999]



6103.3   Responses to claims [Rule 303].

    (a) Content of responses. Within 30 calendar days after docketing by 
the Board (or within 60 calendar days after docketing if the agency 
office for which the services were provided is located outside the 50 
states and the District of Columbia), the Audit Division and the agency 
for which the services were provided shall each submit to the Board:
    (1) A simple, concise, and direct statement of its response to the 
claim;
    (2) Citations to applicable statutes, regulations, and cases; and
    (3) Any additional information deemed necessary to the Board's 
review of the claim.
    (b) Service of copy. All responses submitted to the Board shall 
indicate that a copy has been sent to the claimant and to the Audit 
Division or the agency, as appropriate. To expedite proceedings, if 
either the Audit Division or the agency will not file a response (e.g., 
it believes its reasons for denying the claim were sufficiently 
explained in the material filed by the claimant), it should notify the 
Board, the claimant, and the Audit Division or the agency, as 
appropriate, that it does not intend to file a response.

[62 FR 25867, May 12, 1997, as amended at 64 FR 38143, July 15, 1999]



6103.4  Reply to Audit Division and agency responses [Rule 304].

    A claimant may file with the Board and serve on the Audit Division 
and the agency a reply to the Audit Division and agency responses within 
30 calendar days after receiving the responses (or within 60 calendar 
days after receiving the responses, if the claimant is located outside 
the 50 states and the District of Columbia). To expedite proceedings, if 
the claimant does not wish to respond, the claimant should so notify the 
Board, the Audit Division, and the agency.

[64 FR 38143, July 15, 1999]

[[Page 256]]



6103.5   Proceedings [Rule 305].

    (a) Requests for additional time. The claimant, the Audit Division, 
or the agency may request additional time to make any filing.
    (b) Conferences. The judge will not engage in ex parte 
communications involving the underlying facts or merits of the claim. 
The judge may hold a conference with the claimant, the Audit Division, 
and the agency at any time, for any purpose. The judge may provide the 
participants a memorandum reflecting the results of a conference.
    (c) Submissions. The judge may require the submission of additional 
information at any time. The claimant, the Audit Division, or the agency 
may request an opportunity to make additional submissions; however, no 
such submission may be made unless authorized by the judge.

[62 FR 25867, May 12, 1997, as amended at 64 FR 38143, July 15, 1999]



6103.6  Decisions [Rule 306].

    The judge will issue a written decision based upon the record, which 
includes submissions by the claimant, the Audit Division, and the 
agency, and information provided during conferences. The claimant, the 
Audit Division, and the agency will each be furnished a copy of the 
decision by the Office of the Clerk of the Board. In addition, all Board 
decisions are posted weekly on the Internet. The Board's Internet 
address is: www.gsbca.gsa.gov.

[62 FR 25867, May 12, 1997, as amended at 64 FR 38143, July 15, 1999]



6103.7  Reconsideration of Board decision [Rule 307].

    A request for reconsideration may be made by the claimant, the Audit 
Division, or the agency. Such requests must be received by the Board 
within 30 calendar days after the date the decision was issued (or 
within 60 calendar days after the date the decision was issued, if the 
claimant or agency office making the request is located outside the 50 
states and the District of Columbia). The request for reconsideration 
should state the reasons why the Board should consider the request. Mere 
disagreement with a decision or re-argument of points already made is 
not a sufficient ground for seeking reconsideration.

[62 FR 25867, May 12, 1997, as amended at 64 FR 38143, July 15, 1999]



6103.8  Payment of successful claims [Rule 308].

    The agency for which the services were provided shall pay amounts 
the Board determines are due the claimant.



PART 6104--RULES OF PROCEDURE FOR TRAVEL AND RELOCATION EXPENSES CASES--Table of Contents




Sec.
6104.1  Scope [Rule 401].
6104.2  Filing claims [Rule 402].
6104.3  Response to claim [Rule 403].
6104.4  Reply to agency response [Rule 404].
6104.5  Proceedings [Rule 405].
6104.6  Decisions [Rule 406].
6104.7  Reconsideration of Board decision [Rule 407].
6104.8  Payment of successful claims [Rule 408].

    Authority: 31 U.S.C. 3702; 41 U.S.C. 601-613; Sec. 201(n)(3), Pub. 
L. 104-316, 110 Stat. 3826.

    Source: 62 FR 25869, May 12, 1997, unless otherwise noted.



6104.1  Scope [Rule 401].

    (a) Authority. These procedures govern the Board's resolution of 
claims by federal civilian employees for certain travel or relocation 
expenses that were formerly settled by the Comptroller General under 31 
U.S.C. 3702. Section 201(n)(3) of the General Accounting Office Act of 
1996, Public Law 104-316, transfers the authority to resolve these 
claims to the Administrator of General Services, who has redelegated 
that function to the General Services Administration Board of Contract 
Appeals. The requirements contained in 31 U.S.C. 3702, including 
limitations on the time within which claims may be filed, apply to the 
Board's review of these claims.
    (b) Types of claims. These procedures are applicable to the review 
of two types of claims made against the United States by federal 
civilian employees:
    (1) Claims for reimbursement of expenses incurred while on official 
temporary duty travel; and

[[Page 257]]

    (2) Claims for reimbursement of expenses incurred in connection with 
relocation to a new duty station.
    (c) Review of claims. Any claim for entitlement to travel or 
relocation expenses must first be filed with the claimant's own 
department or agency (the agency). The agency shall initially adjudicate 
the claim. A claimant disagreeing with the agency's determination may 
request review of the claim by the Board. The burden is on the claimant 
to establish the timeliness of the claim, the liability of the agency, 
and the claimant's right to payment. The Board will issue the final 
decision on a claim based on the information submitted by the claimant 
and the agency.



6104.2  Filing claims [Rule 402].

    (a) Filing claims. A claim may be sent to the Board in either of the 
following ways:
    (1) Claim filed by claimant. A claim shall be in writing and must be 
signed by the claimant or by the claimant's attorney or authorized 
representative. No particular form is required. The request should 
describe the basis for the claim and state the amount sought. The 
request should also include:
    (i) The name, address, telephone number, and facsimile machine 
number, if available, of the claimant;
    (ii) The name, address, telephone number, and facsimile machine 
number, if available, of the agency employee who denied the claim;
    (iii) A copy of the denial of the claim; and
    (iv) Any other information which the claimant believes the Board 
should consider.
    (2) Claim forwarded by agency on behalf of claimant. If an agency 
has denied a claim for travel or relocation expenses, it may, at the 
claimant's request, forward the claim to the Board. The agency shall 
include the information required by paragraph (a)(1) of this section and 
by Sec. 6104.3.
    (3) Where claims are filed. A claim should be sent to the Board at 
the following address: Office of the Clerk of the Board, Room 7022, 
General Services Administration Building, 1800 F Street, NW, Washington, 
DC 20405. The Clerk's telephone number is: (202) 501-0116. The Clerk's 
facsimile machine number is: (202) 501-0664. The Board's working hours 
are 8:00 a.m. to 4:30 p.m., Eastern Time, on each day other than a 
Saturday, Sunday, or federal holiday.
    (b) Notice of docketing. A request for review will be docketed by 
the Office of the Clerk of the Board. A written notice of docketing will 
be sent promptly to the claimant and the agency contact. The notice of 
docketing will identify the judge to whom the claim has been assigned.
    (c) Service of copy. The claimant shall send to the agency employee 
identified in paragraph (a)(1)(ii) of this section, or the individual 
otherwise identified by the agency to handle the claim, copies of all 
material provided to the Board. If an agency forwards a claim to the 
Board, it shall, at the same time, send to the claimant a copy of all 
material sent to the Board. All submissions to the Board shall indicate 
that a copy has been provided to the claimant or the agency.



6104.3  Response to claim [Rule 403].

    (a) Content of response. When a claim has been filed with the Board 
by a claimant, within 30 calendar days after docketing by the Board (or 
within 60 calendar days after docketing, if the agency office involved 
is located outside the 50 states and the District of Columbia), the 
agency shall submit to the Board:
    (1) A simple, concise, and direct statement of its response to the 
claim;
    (2) Citations to applicable statutes, regulations, and cases; and
    (3) Any additional information deemed necessary to the Board's 
review of the claim.
    (b) Service of copy. A copy of these submissions shall also be sent 
to the claimant. To expedite proceedings, if the agency believes its 
reasons for denying the claim were sufficiently explained in the 
material filed by the claimant, it should notify the Board and the 
claimant that it does not intend to file a response.



6104.4  Reply to agency response [Rule 404].

    A claimant may file a reply to the agency response within 30 
calendar days after receiving the response (or

[[Page 258]]

within 60 calendar days after receiving the response, if the claimant is 
located outside the 50 states and the District of Columbia). If the 
claim has been forwarded by the agency, the claimant shall have 30 
calendar days from the time the claim is docketed by the Board (or 60 
calendar days after docketing, if the claimant is located outside the 50 
states and the District of Columbia) to reply. To expedite proceedings, 
if the claimant does not wish to reply, the claimant should so notify 
the Board and the agency.



6104.5  Proceedings [Rule 405].

    (a) Requests for additional time. The claimant or the agency may 
request additional time to make any filing.
    (b) Conferences. The judge will not engage in ex parte 
communications involving the underlying facts or merits of the claim. 
The judge may hold a conference with the claimant and the agency 
contact, at any time, for any purpose. The judge may provide the 
participants a memorandum reflecting the results of a conference.
    (c) Additional submissions. The judge may require the submission of 
additional information at any time.



6104.6  Decisions [Rule 406].

    The judge will issue a written decision based upon the record, which 
includes submissions by the claimant and the agency, and information 
provided during conferences. The claimant and the agency will each be 
furnished a copy of the decision by the Office of the Clerk of the 
Board. In addition, all Board decisions are posted weekly on the 
Internet. The Board's Internet address is: www.gsbca.gsa.gov.



6104.7  Reconsideration of Board decision [Rule 407].

    A request for reconsideration may be made by the claimant or the 
agency. Such requests must be received by the Board within 30 calendar 
days after the date the decision was issued (or within 60 calendar days 
after the date the decision was issued, if the claimant or the agency 
office making the request is located outside the 50 states and the 
District of Columbia). The request for reconsideration should state the 
reasons why the Board should consider the request. Mere disagreement 
with a decision or re-argument of points already made is not a 
sufficient ground for seeking reconsideration.



6104.8  Payment of successful claims [Rule 408].

    The agency shall pay amounts the Board determines are due the 
claimant.



PART 6105--RULES OF PROCEDURE FOR DECISIONS AUTHORIZED BY 31 U.S.C. 3529--Table of Contents




Sec.
6105.1  Scope [Rule 501].
6105.2  Request for decision [Rule 502].
6105.3  Additional submissions [Rule 503].
6105.4  Proceedings [Rule 504].
6105.5  Decisions [Rule 505].
6105.6  Reconsideration of Board decision [Rule 506].

    Authority:  31 U.S.C. 3529; 31 U.S.C. 3702; 41 U.S.C. 601-613; Secs. 
202(n), 204, Pub. L. 104-316, 110 Stat. 3826; Sec. 211, Pub. L. 104-53, 
109 Stat. 535.

    Source: 62 FR 25871, May 12, 1997, unless otherwise noted.



6105.1  Scope [Rule 501].

    These procedures govern the Board's issuance of decisions, upon the 
request of an agency disbursing or certifying official, or agency head, 
on questions involving payment of travel or relocation expenses that 
were formerly issued by the Comptroller General under 31 U.S.C. 3529. 
Section 204 of the General Accounting Office Act of 1996, Public Law 
104-316, transfers the authority to issue these decisions to the 
Director of the Office of Management and Budget, and authorizes the 
Director to delegate the authority to perform that function to another 
agency or agencies. The Director has delegated the authority to issue 
these decisions to the Administrator of General Services, who has 
redelegated that function to the General Services Administration Board 
of Contract Appeals.



6105.2  Request for decision [Rule 502].

    (a) Request for decision. (1) A disbursing or certifying official of 
an agency, or the head of an agency, may request from the Board a 
decision (referred to as a ``Section 3529 decision'') on a question 
involving a payment the

[[Page 259]]

disbursing official or head of agency will make, or a voucher presented 
to a certifying official for certification, which concerns the following 
type of claim made against the United States by a federal civilian 
employee:
    (i) A claim for reimbursement of expenses incurred while on official 
temporary duty travel; and
    (ii) A claim for reimbursement of expenses incurred in connection 
with relocation to a new duty station.
    (2) A request for a Section 3529 decision shall be in writing; no 
particular form is required. The request must refer to a specific 
payment or voucher; it may not seek general legal advice. The request 
should--
    (i) Explain why the official is seeking a Section 3529 decision, 
rather than taking action on his or her own regarding the matter;
    (ii) State the question presented and include citations to 
applicable statutes, regulations, and cases;
    (iii) Include--
    (A) The name, address, telephone number, and facsimile machine 
number (if available) of the official making the request;
    (B) The name, address, telephone number, and facsimile number (if 
available) of the employee affected by the specific payment or voucher; 
and
    (C) Any other information which the official believes the Board 
should consider; and
    (iv) Be sent to the Office of the Clerk of the Board, Room 7022, 
General Services Administration Building, 1800 F Street, NW., 
Washington, DC 20405. The Clerk's telephone number is: (202) 501-0116. 
The Clerk's facsimile machine number is (202) 501-0664. The Board's 
working hours are 8:00 a.m. to 4:30 p.m., Eastern Time, on each day 
other than a Saturday, Sunday, or federal holiday.
    (b) Notice of docketing. A request for a Section 3529 decision will 
be docketed by the Office of the Clerk of the Board. A written notice of 
docketing will be sent promptly to the official and the affected 
employee. The notice of docketing will identify the judge to whom the 
request has been assigned.
    (c) Service of copy. The official submitting a request for a Section 
3529 decision shall send to the affected employee copies of all material 
provided to the Board. All submissions to the Board shall indicate that 
a copy has been provided to the affected employee.



6105.3  Additional submissions [Rule 503].

    If the affected employee wishes to submit any additional information 
to the Board, he or she must submit such information within 30 calendar 
days after receiving the copy of the request for decision and supporting 
material (or within 60 calendar days after receiving the copy, if the 
affected employee is located outside the 50 states and the District of 
Columbia). To expedite proceedings, if the employee does not wish to 
make an additional submission, the employee should so notify the Board 
and the agency.



6105.4  Proceedings [Rule 504].

    (a) Requests for additional time. The agency or the affected 
employee may request additional time to make any filing.
    (b) Conferences. The judge will not engage in ex parte 
communications involving the underlying facts or merits of the request. 
The judge may hold a conference with the agency and the affected 
employee, at any time, for any purpose. The judge may provide the 
participants a memorandum reflecting the results of a conference.
    (c) Additional submissions. The judge may require the submission of 
additional information at any time.



6105.5  Decisions [Rule 505].

    The judge will issue a written decision based upon the record, which 
includes submissions by the agency and the affected employee, and 
information provided during conferences. The agency and the affected 
employee will each be furnished a copy of the decision by the Office of 
the Clerk of the Board. In addition, all Board decisions are posted 
weekly on the Internet. The Board's Internet address is: 
www.gsbca.gsa.gov.



6105.6  Reconsideration of Board decision [Rule 506].

    A request for reconsideration may be made by the agency or the 
affected employee. Such requests must be received by the Board within 30 
calendar days after the date the decision was issued

[[Page 260]]

(or within 60 calendar days after the date the decision was issued, if 
the agency or the affected employee making the request is located 
outside the 50 states and the District of Columbia). The request for 
reconsideration should state the reasons why the Board should consider 
the request. Mere disagreement with a decision or re-argument of points 
already made is not a sufficient ground for seeking reconsideration.

[[Page 261]]



   CHAPTER 63--DEPARTMENT OF TRANSPORTATION BOARD OF CONTRACT APPEALS

                          (Parts 6300 to 6399)

  --------------------------------------------------------------------
Part                                                                Page
6301            Board of contract appeals...................         263
6302            Rules of procedure..........................         264

[[Page 263]]



PART 6301--BOARD OF CONTRACT APPEALS--Table of Contents




Sec.
6301.0  Foreword.
6301.1  Scope of part.
6301.2  Qualifications of members.
6301.3  Jurisdiction and authority of the Board and its members.
6301.4  Ex parte communications.
6301.5  Contract appeals procedures (general).
6301.6  Effective date.

    Authority: Contract Disputes Act of 1978 (41 U.S.C. 600, et seq.).

    Source: 52 FR 48630, Dec. 23, 1987, unless otherwise noted.



6301.0  Foreword.

    A Department of Transportation Board of Contract Appeals has been 
established pursuant to Pub. L. 95-563. The Secretary appoints the 
members of the Board and designates the Chair and Vice-Chair of the 
Board.



6301.1  Scope of part.

    (a) Scope. This part prescribes the functions and procedures of the 
Department of Transportation Board of Contract Appeals and provides for 
the appointment of a Chair, a Vice-Chair, and Members of the Board, and 
sets forth their duties.
    (b) Definitions. For the purposes of this part--
    Administrative Judge means a member of the Board selected and 
appointed to serve pursuant to the Contract Disputes Act of 1978;
    Appellant means the contractor who appeals;
    Board means the Department of Transportation Board of Contract 
Appeals;
    Contracting officer means the Government's contracting officer whose 
decision is appealed, or the successor contracting officer;
    Parties means the appellant and the contracting officer, and
    Secretary means the Secretary of Transportation.



6301.2  Qualifications of members.

    Each member of the Board must be a qualified attorney who is 
admitted to practice before the highest court of a State or the District 
of Columbia. Members of the Board are selected and appointed to serve in 
the same manner as administrative law judges appointed pursuant to 
section 3105 of title 5 of the United States Code, with the additional 
requirement that each member shall have had not fewer than five years 
experience in public contract law.



6301.3  Jurisdiction and authority of the Board and its members.

    (a) The Board hears and decides:
    (1) Appeals from decisions made by contracting officers relating to 
contracts of the Department of Transportation and its constituent 
administrations;
    (2) Appeals from decisions of contracting officers relating to 
contracts of any other executive agency when such agency or the 
Administrator for Federal Procurement Policy has designated the Board to 
decide the appeal;
    (3) Matters within jurisdiction of the Board in accordance with the 
provisions of the Contract Disputes Act, 41 U.S.C. 600 et seq.; and
    (4) Other matters as directed by the Secretary which are not 
inconsistent with statutory duties.

In each case, the Board shall make a final decision which is impartial, 
fair, and just to the parties and is supported by the record of the case 
and the law. The Administrative Judge assigned to hear an appeal has 
authority to act for the Board in all matters with respect to such 
appeal. Included in such authority is the authority to sign subpoenas 
and the power to authorize the Recorder of the Board to issue subpoenas 
pursuant to section 11 of the Contract Disputes Act of 1978. (41 U.S.C. 
610)
    (b) An Administrative Judge may not act for the Board or participate 
in a decision if that Judge has participated directly in any aspect of 
the award or administration of the contract involved.
    (c) Except for appeals considered under the expedited small claims 
or accelerated procedures, appeals are assigned to a panel of three 
Administrative Judges of the Board. The decision of a majority of the 
panel shall constitute the decision of the Board.

[[Page 264]]



6301.4  Ex parte communications.

    Ex parte communications, that is, written or oral communications 
with the Board by or for one party only without notice to the other, are 
not permitted. No member of the Board or of the Board's staff shall 
consider, nor shall any person directly or indirectly involved in an 
appeal submit to the Board or to the Board's staff, off-the-record, any 
evidence, explanation, analysis, or advice, whether written or oral, 
regarding any matter at issue in an appeal. This provision does not 
apply to consultation between Board members nor to ex parte 
communications concerning the Board's administrative functions or 
procedures.



6301.5  Contract appeals procedures (general).

    (a) It is the intent of these rules to provide for the just and 
inexpensive determination of appeals without unnecessary delay. It is 
the objective of the Board's preliminary procedures to encourage full 
disclosure of relevant and material facts, and to discourage surprise. 
Each specified time limitation is a maximum, and should not be fully 
used if the action described can be accomplished in a shorter period. 
The Board may extend any time limitation for good cause and in 
accordance with legal precedent.
    (b) Ordinarily, the appellant has the burden of proof.
    (c) The rules of procedure at 6302 shall govern the procedures in 
all contract disputes appealed to the Board.



6301.6  Effective date.

    This chapter shall apply to all appeals relating to contracts 
entered into on or after March 1, 1979, and upon the contractor's 
election of Contract Disputes Act procedures, to appeals relating to 
earlier contracts with respect to claims pending before the contracting 
officer on March 1, 1979, or initiated thereafter.



PART 6302--RULES OF PROCEDURE--Table of Contents




Sec.
6302.1  How to appeal a contracting officer's decision (Rule 1).
6302.2  Contents of notice of appeal (Rule 2).
6302.3  Docketing of appeals (Rule 3).
6302.4  Preparation, contents, organization, forwarding, and status of 
          appeal file (Rule 4).
6302.5  Service of documents (Rule 5).
6302.6  Computation and extension of time limits (Rule 6).
6302.7  Motions (Rule 7).
6302.8  Appellant's election of procedures (Rule 8).
6302.9  The SMALL CLAIMS (EXPEDITED) procedure (Rule 9).
6302.10  The ACCELERATED procedure (Rule 10).
6302.11  Submission of appeal without a hearing (Rule 11).
6302.12  Regular procedure (Rule 12).
6302.13  Pleadings (Rule 13).
6302.14  Amendments of pleadings or record (Rule 14).
6302.15  Prehearing briefs (Rule 15).
6302.16  Prehearing conference (Rule 16).
6302.17  The record of the appeal (Rule 17).
6302.18  Discovery-depositions (Rule 18).
6302.19  Interrogatories to parties, admission of facts, and inspection 
          of documents (Rule 19).
6302.20  Time and place of hearing (Rule 20).
6302.21  Notice of hearing (Rule 21).
6302.22  Unexcused absence of a party (Rule 22).
6302.23  Nature of hearings (Rule 23).
6302.24  Subpoenas (Rule 24).
6302.25  Copies of papers (Rule 25).
6302.26  Posthearing briefs (Rule 26).
6302.27  Transcript of proceedings (Rule 27).
6302.28  Withdrawal of exhibits (Rule 28).
6302.29  Representation of the parties (Rule 29).
6302.30  Alternative dispute resolution methods (Rule 30).
6302.31  Settlement (Rule 31).
6302.32  Decisions (Rule 32).
6302.33  Motion for reconsideration (Rule 33).
6302.34  Dismissal for lack of jurisdiction (Rule 34).
6302.35  Dismissal without prejudice (Rule 35).
6302.36  Dismissal for failure to prosecute or defend (Rule 36).
6302.37  Sanctions (Rule 37).
6302.38  Remand from court (Rule 38).

    Authority: Contract Disputes Act of 1978 (41 U.S.C. 600, et seq.).

    Source: 52 FR 48631, Dec. 23, 1987, unless otherwise noted.



6302.1  How to appeal a contracting officer's decision (Rule 1).

    (a) Notice of an appeal shall be in writing and mailed or otherwise 
furnished to the Board within 90 days from the date of receipt of a 
contracting officer's decision. A copy of the notice shall be furnished 
to the

[[Page 265]]

contracting officer from whose decision the appeal is taken.
    (b) Where the contractor has submitted a claim of $50,000 or less to 
the contracting officer and has requested a written decision within 60 
days from receipt of the request, and the contracting officer has not 
done so, the contractor may file a notice of appeal as provided in 
paragraph (a) of this section citing the failure of the contracting 
officer to issue a decision.
    (c) Where the contractor has submitted a claim in excess of $50,000 
to the contracting officer and the contracting officer has failed to 
issue a decision within a reasonable time, the contractor may file a 
notice of appeal as provided in paragraph (a) of this section, citing 
the failure to issue a decision.
    (d) Upon docketing of appeals filed pursuant to paragraph (b) or (c) 
of this section, the Board, at its option, may stay further proceedings 
pending issuance of a final decision by the contracting officer within 
the time fixed by the Board or order the appeal to proceed without the 
contracting officer's decision.



6302.2  Contents of notice of appeal (Rule 2).

    A notice of appeal must indicate that an appeal is intended and 
identify the contract number, the administration, bureau, or office 
concerned with the dispute, the decision from which the appeal is taken, 
and the amount in dispute, if known. The notice of appeal shall be 
signed by the appellant, or by an officer of an appellant corporation or 
member of an appellant firm, or by an appellant's authorized 
representative or attorney.



6302.3  Docketing of appeals (Rule 3).

    Following receipt by the Board of the original notice of appeal, the 
appellant and the contracting officer are promptly notified of its 
receipt and docketing by the Board, and the Board furnishes a copy of 
these rules to the appellant.



6302.4  Preparation, contents, organization, forwarding, and status of appeal file (Rule 4).

    (a) Duties of contracting officer. Within 30 days after receipt of 
notice that an appeal has been docketed, the contracting officer shall 
assemble and transmit to the Board, with a copy to the appellant and the 
Government attorney, an appeal file consisting of all documents 
pertinent of the appeal, including:
    (1) The contracting officer's decision and finding of fact from 
which the appeal is taken;
    (2) The contract, including pertinent specifications, modifications, 
plans, and drawings;
    (3) All correspondence between the parties pertinent to the appeal, 
including the letters of claim in response to which the decision was 
issued;
    (4) Transcripts of any testimony taken during the course of 
proceedings, and affidavits or statements of any witnesses on the matter 
in dispute made prior to the filing of the notice of appeal with the 
Board; and
    (5) Any additional information considered pertinent.
    (b) Duties of the appellant. Within 30 days after receipt of a copy 
of the appeal file assembled by the contracting officer, the appellant 
may supplement the file by transmitting to the Board any additional 
documents which it considers pertinent to the appeal and shall furnish 
two copies of such documents to the Government attorney.
    (c) Organization of appeal file. Documents in the appeal file may be 
originals or legible facsimiles or authenticated copies, and shall be 
arranged in chronological order where practicable, numbered 
sequentially, tabbed, and indexed to identify the contents of the file. 
The contracting officer's final decision and the contract shall be 
conveniently placed in the file for ready reference.
    (d) Lengthy documents. The Board may waive the requirement of 
furnishing to the other party copies of bulky, lengthy, or out-of-size 
documents in the appeal file when a party has shown that doing so would 
impose an undue burden. At the time a party files with the Board a 
document as to which such a waiver has been granted, the other party 
shall be notified that the document or a copy is available for 
inspection at the offices of the Board or of the party filing the 
document.

[[Page 266]]

    (e) Status documents in appeal file. Documents contained in the 
appeal file are, without further action by the parties, a part of the 
record upon which the Board renders its decision, unless a party objects 
to the consideration of a particular document at or before the hearing 
or, if there is no hearing on the appeal, before closing the record. If 
objection to a document is made, the Board rules upon its admissibility 
into the record as evidence in accordance with Rules 17 and 23.



6302.5  Service of documents (Rule 5).

    A copy of every written communication submitted to the Board shall 
be sent to every party to the dispute. Such communications shall be sent 
by delivering in person or by mailing, properly addressed with postage 
prepaid, to the opposing party or, where the party is represented by 
counsel, to its counsel. Each communication with the Board shall be 
accompanied by a statement, signed by the originating party, saying 
when, how, and to whom a copy was sent.



6302.6  Computation and extension of time limits (Rule 6).

    (a) Computation. Except as otherwise provided by law, in computing 
any period of time prescribed by these rules, or by any order of the 
Board, the day of the event from which the designated period of time 
begins to run is not included, but the last day of the period is 
included unless it is a Saturday, Sunday, or a legal holiday, in which 
case the period runs to the end of the next business day.
    (b) Extensions. All requests for extensions of time shall be 
submitted to the Board in writing and shall state good cause for the 
request.



6302.7  Motions (Rule 7).

    (a) Motions are made by filing an original and two copies, together 
with any supporting papers, with the Board. Motions may also be made 
upon the record, in the presence of the other party, at a prehearing 
conference or a hearing. The Board considers any timely motion:
    (1) For extensions of time (Rule 6) or to cure defaults;
    (2) To require that a pleading be made more definite and certain, or 
for leave to amend a pleading (Rule 14);
    (3) To dismiss for lack of jurisdiction (Rule 34); to dismiss for 
failure to prosecute (Rule 36); or to grant summary relief because a 
pleading does not raise a justifiable issue;
    (4) For discovery, for interrogatories to a party, or for the taking 
of depositions (Rules 18 and 19);
    (5) To reopen a hearing; or to reconsider a decision (Rule 33), or
    (6) For any other appropriate order.
    (b) The Board may, on its own motion, initiate any such action by 
notice to the parties. Unless a longer time is allowed by the Board, a 
party who receives a motion shall file any answering material within 20 
days after the date of receipt. The Board makes an order on each motion 
that is appropriate and just to the parties, and upon conditions that 
will promote efficiency in disposing of the appeal.
    (c) The Board may permit oral hearing or argument on motions, and 
may require the presentation of briefs.



6302.8  Appellant's election of procedures (Rule 8).

    (a) In every appeal the appellant is required to elect one of the 
following procedures:
    (1) A hearing under the Board's regular procedure (Rule 12);
    (2) A hearing under the SMALL CLAIMS (EXPEDITED) procedure, if 
applicable (Rule 9);
    (3) A hearing under the Board's ACCELERATED procedure, if applicable 
(Rule 10), or
    (4) Submission on the written record or without a hearing (Rule 11). 
Also see Rule 11 with respect to the Government's right to waive a 
hearing.
    (b) The SMALL CLAIMS (EXPEDITED) procedure is available where the 
amount in dispute is $10,000 or less (Rule 9). The ACCELERATED procedure 
is available where the amount in dispute is $50,000 or less (Rule 10). 
In deciding whether the SMALL CLAIMS (EXPEDITED) or ACCELERATED 
procedure is applicable to an appeal, any question regarding the amount 
in dispute shall be determined by the Board.
    (c) The appellant's election of one of the above procedures shall be 
made in

[[Page 267]]

writing within 30 days after receipt of the appeal file unless such 
period is extended by the Board for good cause shown. The election may 
not be withdrawn except with permission of the Board and for good cause 
shown.



6302.9  The SMALL CLAIMS (EXPEDITED) procedure (Rule 9).

    (a) The SMALL CLAIMS (EXPEDITED) procedure provides for simplified 
rules of procedure to facilitate the decision of an appeal, whenever 
possible, within 120 days from the date such procedure is elected.
    (b) Promptly upon receipt of an appellant's election of the SMALL 
CLAIMS (EXPEDITED) procedure, the assigned Administrative Judge shall 
take the following actions, if feasible, in an informal meeting or a 
telephone conference with both parties:
    (1) Identify and simplify the issues in dispute;
    (2) Establish a simplified procedure appropriate to the particular 
appeal;
    (3) Determine whether the appellant desires a hearing and, if so, 
fix a time and place for the hearing, and
    (4) Establish a schedule for the expedited resolution of the appeal.
    (c) The subpoena power set forth in Rule 24 is available for use 
under the SMALL CLAIMS (EXPEDITED) procedure.
    (d) The filing of pleadings, motions, discovery proceedings or 
prehearing procedures will be permitted only to the extent consistent 
with the requirement of conducting the hearing at the scheduled time and 
place or, if no hearing is scheduled, of closing the record at an early 
time so as to permit a decision of the appeal within the 120-day time 
limit. The Board, in its discretion, may impose shortened time periods 
for any actions required or permitted under these rules, necessary to 
enable the Board to decide the appeal within the 120-day time limit, 
allowing whatever time, up to 30 days, that the Board considers 
necessary for the preparation of the decision after closing the record 
and the filing of briefs, if any.
    (e) Decisions in appeals considered under the SMALL CLAIMS 
(EXPEDITED) procedure are rendered by a single Administrative Judge. 
Written decisions of appeals considered under this procedure are short 
and contain only summary findings of fact and conclusions. If there has 
been a hearing on the appeal, the presiding Administrative Judge may, in 
his or her discretion, hear closing oral arguments of the parties and 
then render an oral decision on the appeal. Such decision will include 
summary findings of fact and conclusions. Whenever such an oral decision 
is rendered, the Board subsequently furnishes the parties with a written 
transcript of the oral decision for record and payment purposes and to 
commence the time period for the filing of a motion for reconsideration 
under Rule 33.
    (f) Decisions of the Board under the SMALL CLAIMS (EXPEDITED) 
procedure shall have no value as precedent. Except in cases of fraud, 
decisions rendered under the SMALL CLAIMS (EXPEDITED) procedure may not 
be appealed by either party.



6302.10  The ACCELERATED procedure (Rule 10).

    (a) The ACCELERATED procedure makes available a procedure where the 
appeal is resolved, whenever possible, within 180 days from the date 
such procedure is elected.
    (b) Promptly upon receipt of appellant's election of the ACCELERATED 
procedure, the assigned Administrative Judge shall take the following 
actions, if feasible, in an informal meeting or a telephone conference 
with both parties:
    (1) Identify and simplify the issues in dispute;
    (2) Establish a simplified procedure appropriate to the particular 
appeal;
    (3) Determine whether a hearing is desired and, if so, fix a time 
and place for a hearing; and
    (4) Establish a schedule for the accelerated resolution of the 
appeal.
    (c) The subpoena power set forth in Rule 24 is available for use 
under the ACCELERATED procedure.
    (d) The filing of pleadings, motions, discovery proceedings or 
prehearing procedures will be permitted only to the extent consistent 
with the requirement of conducting the hearing at the scheduled time and 
place or, if no hearing is scheduled, the closing of the record at an 
early time so as to permit decision of the appeal with the 180-day

[[Page 268]]

limit. The Board, in its discretion, may impose shortened time periods 
for any actions required or permitted under these rules, necessary to 
enable the Board to decide the appeal within the 180-day limit, allowing 
whatever time, up to 30 days, that the Board considers necessary for the 
preparation of the decision after closing the record and the filing of 
briefs, if any.
    (e) Decisions in appeals considered under the ACCELERATED procedure 
are rendered by a single Administrative Judge, subject to the 
concurrence of the Vice-Chair or another assigned Administrative Judge. 
In the event of an even division on an appeal, the Chair participates in 
the decision of the appeal. Written decisions of appeals considered 
under this procedure are short and contain only summary findings of fact 
and conclusions. In cases where the amount in dispute is $10,000 or less 
and there has been a hearing under the ACCELERATED procedure the 
presiding Administrative Judge may, in his or her discretion, hear 
closing oral arguments of the parties and then render an oral decision 
on the appeal. Such decision will include summary findings of fact and 
conclusions. Whenever such an oral decision is rendered the Board 
subsequently furnishes the parties with a written transcript of the oral 
decision for record and payment purposes and to commence the time period 
for the filing of a motion for reconsideration under Rule 33.
    (f) Decisions of the Board under the ACCELERATED procedure are 
published and have precedential value. Such decisions may be appealed by 
either party.



6302.11  Submission of appeal without a hearing (Rule 11).

    Either party may elect to waive a hearing and to submit its case 
upon the record before the Board pursuant to Rule 17. Submission of a 
case without hearing does not relieve a party from the necessity of 
proving the facts supporting that party's allegation or defenses. 
Affidavits, depositions, admissions, answers to interrogatories, and 
stipulations may be employed to supplement other documentary evidence in 
the Board record. The Board may permit such submission to be 
supplemented by oral argument (transcribed if requested) and by briefs 
in accordance with Rule 26.



6302.12  Regular procedure (Rule 12).

    Under the regular procedure the parties are required to file 
pleadings with the Board (Rule 13). The regular procedure affords the 
parties an opportunity to make full use of prehearing and discovery 
procedures. Hearings under the regular procedure are conducted in the 
same manner as before courts of the United States in non-jury trials.



6302.13  Pleadings (Rule 13).

    (a) Complaint. Under the regular procedure the appellant, within 30 
days after receipt of the appeal file, shall file with the Board an 
original and two copies of a complaint setting forth simple, concise, 
and direct statements of each of its claims, alleging the basis, with 
appropriate reference to contract provisions, for each claim, and the 
dollar amount claimed. This pleading shall fulfill the generally 
recognized requirements of a complaint, although no particular form is 
required. If the complaint is not filed within 30 days and, in the 
opinion of the Board, the issues before the Board are sufficiently 
defined, the appellant's claim and notice of appeal may be deemed to be 
its complaint, and the parties are so notified.
    (b) Answer. Within 30 days from receipt of said complaint or a Rule 
13(a) notice from the Board, the Government shall file with the Board an 
original and two copies of an answer, setting forth simple, concise, and 
direct statements of the Government's defense to each claim asserted by 
appellant. This pleading shall fulfill the generally recognized 
requirements of an answer and shall set forth any affirmative defenses 
as appropriate. Should the answer not be filed within 30 days, the Board 
may, in its discretion, enter a general denial on behalf of the 
Government, and the parties are so notified.



6302.14  Amendments of pleadings or record (Rule 14).

    (a) Pleadings. The Board upon its own initiative or upon application 
by a party may, in its discretion, order a

[[Page 269]]

party to make a more definite statement of the complaint or answer, or 
to reply to an answer. The application for such an order suspends the 
time for responsive pleading. The Board may, in its discretion and 
within the proper scope of the appeal, permit either party to amend its 
pleadings upon conditions just to both parties.
    (b) Record. When an issue within the proper scope of the appeal, but 
not raised by the pleadings, is tried by consent of the parties or by 
permission of the Board, the issue is treated in all respects as if it 
had been raised. A motion to amend the pleadings to conform to the proof 
may be made but is not required. If evidence is objected to at a hearing 
on the ground that it is not within an issue raised by the pleadings, it 
may be admitted in evidence, but the objecting party may be granted a 
continuance if necessary to enable him to meet such evidence.



6302.15  Prehearing briefs (Rule 15).

    The Board may, in its discretion, require the parties to submit 
prehearing briefs in any case in which a hearing has been elected under 
the regular procedure. (Rule 8(a)(1)). If the Board does not ask for 
briefs, either party may, upon notice to the other party, furnish a 
prehearing brief to the Board. In any case where a prehearing brief is 
submitted, it shall be furnished so as to be received by the Board at 
least 15 days prior to the date set for hearing, and a copy shall be 
furnished simultaneously to the other party.



6302.16  Prehearing conference (Rule 16).

    (a) Whether the case is to be submitted on the written record or be 
heard under any hearing procedure, the Board, upon its own initiative or 
upon the application of any party, may call upon the parties to appear 
before the Board for a conference to consider:
    (1) The simplification, clarification, or severing of the issues;
    (2) The possibility of obtaining stipulations, admissions, 
agreements on documents, understandings on matters already of record, or 
similar agreements which will avoid unnecessary proof;
    (3) The limitation of the number of expert witnesses and the 
avoidance of similar cumulative evidence;
    (4) The possibility of agreement disposing of all or any of the 
issues in dispute, and
    (5) Such other matters as may aid in the disposition of the appeal. 
The result of the conference is set forth in an appropriate memorandum 
or order which becomes part of the record.
    (b) In addition to the procedures provided in paragraph (a) of this 
section, the Board may direct any party whose claim is based in whole or 
in part on books of account or other records to furnish to the other 
party a statement showing the items and figures intended to be proved, 
with adequate reference to the books and records from which such figures 
were taken, and to make all such books and records available for 
examination by the other party. The Board may also direct any party to 
whom such a statement of items and figures has been submitted:
    (1) To make an examination of such books or records or waive 
challenge of the accuracy of the statement submitted as reflecting the 
contents of such books and records; and
    (2) To furnish the submitting party a schedule or schedules showing 
the results of such examination, with specific references to the books 
and records from which such figures were taken, where the examining 
party's results and figures are different from those contained in the 
statement submitted.



6302.17  The record of the appeal (Rule 17).

    (a) Contents. The record upon which the Board's decision is rendered 
consists of the appeal file, (Rule 4) and, if filed, the pleadings, 
prehearing conference memoranda or orders, prehearing briefs, 
depositions and interrogatories and answers to interrogatories received 
in evidence, admissions, stipulations, transcripts of hearings, hearing 
exhibits, post-hearing briefs, and documents which the Board has 
specifically made a part of the record. The record is available for 
inspection at the offices of the Board at all reasonable times.
    (b) Time of closing the record. Except as the Board, in its 
discretion, may

[[Page 270]]

otherwise order, no proof is received in evidence after completion of 
the hearing of the appeal or, in cases submitted on the record, after 
notification by the Board that the case is ready for decision.
    (c) Weight of the evidence. The weight to be attached to any 
evidence of record rests within the sound discretion of the Board. The 
Board may require any party to submit additional evidence on any matter 
relevant to the appeal.



6302.18  Discovery-depositions (Rule 18).

    (a) General policy and protective orders. The parties are encouraged 
to engage in voluntary discovery procedures. In connection with any 
deposition or other discovery procedure, the Board may make any order 
which justice requires to protect a party or person from annoyance, 
embarrassment, oppression, undue burden or expense. Such orders may 
include limitations on the scope, method, time and place for discovery, 
or provisions for protecting the secrecy of confidential information or 
documents.
    (b) Obtaining a deposition. After an appeal has been docketed, the 
parties may voluntarily agree to take, or the Board may, upon 
application of either party and for good cause shown, order the taking 
of, testimony of any person by deposition upon oral examination or 
written interrogatories before any officer authorized to administer 
oaths at the place of examination, for use as evidence or for purposes 
of discovery. The application for such order shall specify whether the 
purpose of the deposition is for discovery or for use as evidence.
    (c) Orders on depositions. The time, place, and manner of taking 
depositions are as mutually agreed upon by the parties, or failing such 
agreement, as ordered by the Board.
    (d) Use of evidence. No testimony taken by deposition is considered 
as part of the evidence in the hearing of an appeal unless and until 
such testimony is offered and received in evidence at the hearing. 
Testimony by deposition is not ordinarily received in evidence if the 
deponent is present and can testify at the hearing. However, any 
deposition may be used to contradict or impeach the testimony of a 
witness at the hearing. In cases submitted on the record, the Board, in 
its discretion, may receive depositions as evidence to supplement the 
record.
    (e) Expenses. Each party bears its own expenses associated with 
discovery, unless, in the discretion of the Board, the expenses are 
apportioned otherwise.
    (f) Subpoenas. Where appropriate, any party may request that a 
subpoena be issued under the provisions of Rule 24.

[52 FR 48631, Dec. 23, 1987, as amended at 53 FR 34106, Sept. 2, 1988]



6302.19  Interrogatories to parties, admission of facts, and inspection of documents (Rule 19).

    (a) Interrogatories to parties. After an appeal has been filed with 
the Board, a party may serve on the other party written interrogatories 
to be answered separately in writing, signed under oath, and returned 
within 30 days of receipt by the answering party. Within 30 days after 
service the answering party may object to any interrogatory and the 
Board determines the extent to which the interrogatory is permitted.
    (b) Admission of facts. After an appeal has been filed with the 
Board, a party may serve upon the other party a written request for the 
admission of specified facts. If the request is to admit the genuineness 
of any document or the truth of any facts stated in a document, a copy 
of such document shall be served with the request. Within 30 days after 
receipt of the request, the party served shall answer each requested 
admission of facts or file objections thereto in writing. The factual 
propositions set out in the request are deemed admitted, if the 
answering party, willfully and without good cause, fails to respond to 
the request for admissions.
    (c) Production and inspection of documents. After an appeal has been 
filed with the Board, a party may serve upon the other party a written 
request to produce and permit the inspection and copying or 
photographing of any designated documents, not privileged, regarding any 
matter which is relevant to the appeal.
    (d) Any discovery under this rule shall be subject to the provisions 
of

[[Page 271]]

Rule 18(a) with respect to general policy and protective orders.



6302.20  Time and place of hearing (Rule 20).

    Hearings will be held at such places determined by the Board to best 
serve the interests of the parties and the Board. Hearings will be 
scheduled at the discretion of the Board with due consideration to the 
regular order of appeals, the requirements for accelerated or expedited 
procedures and other pertinent factors. On request of any party and for 
good cause, the Board, may, in its discretion, change the date of 
hearing.



6302.21  Notice of hearing (Rule 21).

    The parties are given at least 15 days notice of the time and place 
set for hearing. In scheduling hearings, the Board gives due regard to 
the desires of the parties and the requirement for the just and 
inexpensive determination of appeals without unnecessary delay. Notices 
of hearings shall be promptly acknowledged by the parties.



6302.22  Unexcused absence of a party (Rule 22).

    The unexcused absence of a party at the time and place set for 
hearing is not an occasion for delay. In the event of such absence, the 
presiding Administrative Judge may order the hearing to proceed or, in 
his or her discretion, may invoke the provisions of Rule 36.



6302.23  Nature of hearings (Rule 23).

    (a) Hearings are as informal as may be reasonable and appropriate 
under the circumstances. At the hearing the parties may offer such 
relevant evidence as they deem appropriate and as would be admissible 
under the Federal Rules of Evidence, subject, however, to the sound 
discretion of the presiding Administrative Judge in supervising the 
extent and manner of presenting the evidence. In general, admissibility 
is governed by relevancy and materiality. Copies of documents, 
affidavits, or other evidence not ordinarily admissible under judicial 
rules or evidence, may be admitted in the discretion of the presiding 
Administrative Judge. The weight to be attached to evidence presented in 
any particular form is within the discretion of the Board, taking into 
consideration all the circumstances of the particular case. Stipulations 
of fact agreed upon by the parties may be used as evidence at the 
hearing. The parties may stipulate the testimony that would be given by 
a witness if the witness were present. In any case, the Board may 
require evidence in addition to that offered by the parties.
    (b) Witnesses before the Board are examined orally under oath or 
affirmation, unless the facts are stipulated, or the Board otherwise 
orders.



6302.24  Subpoenas (Rule 24).

    (a) General. Every subpoena shall state the name of the Board and 
the title of the appeal and shall command each person to whom it is 
directed to attend and give testimony, and, if appropriate, to produce 
books, papers, documents, or tangible things, at a time and place 
therein specified. Subpoenas (including those calling for the production 
of documentary evidence) are signed by an Administrative Judge or by the 
Recorder of the Board but otherwise left blank when furnished to the 
party requesting the subpoena. The party to whom the subpoena is issued 
shall fill it in before service.
    (b) Subpoenas for attendance at hearing. At the request of any 
party, subpoenas for the attendance of witnesses at a hearing are 
issued. A subpoena requiring the attendance of a witness at a hearing 
may be served at any place within 100 miles of the place of hearing 
specified in the subpoena; but the Board, upon proper application and 
for good cause shown by the requesting party, may authorize the service 
of a subpoena at any other place.
    (c) Subpoenas for production of documentary evidence. A subpoena, in 
addition to requiring attendance to testify, may also command any person 
to whom it is directed to produce books, papers, documents, or tangible 
things designated therein. A subpoena calling for such production shall 
show the general relevance and reasonable scope of the evidence sought.
    (d) Subpoenas for taking depositions. Subpoenas in aid of 
depositions (including those for the production of books, papers, 
documents, or tangible

[[Page 272]]

things) may be issued by the Recorder of the Board upon a showing that 
the parties have agreed to, or the Board has ordered, the taking of 
depositions under Rule 18. The service of subpoenas in aid of 
depositions shall be limited to the city or county wherein the witness 
resides or is employed or transacts business in person. If a subpoena is 
desired at other locations, a specific ruling of the Board is required.
    (e) Request to quash or modify. Upon written request by a person 
under subpoena or by a party, made within 10 days after service but in 
any event not later than the time specified in the subpoena for 
compliance, the Board may (1) quash or modify the subpoena if it is 
unreasonable and oppressive or for other good cause shown, or (2) 
require the person in whose behalf the subpoena was issued to advance 
the reasonable costs of producing subpoenaed books and papers. Where 
circumstances require, the Board may act upon such a request at any time 
after a copy has been served upon the opposing party.
    (f) Foreign country. A subpoena directed to a witness in a foreign 
country shall issue under the circumstances and in the manner, and be 
served as provided in 28 U.S.C. 1781-1784.
    (g) Service. A subpoena may be served by a United States Marshal or 
a deputy, or by any person not a party who is not less than 18 years of 
age. Service of a subpoena upon a person named therein shall be made by 
tendering the subpoena to that person with the fees for one day's 
attendance and the mileage allowed by law (28 U.S.C. 1821). When the 
subpoena is issued on behalf of the United States or an officer or 
agency of the United States, fees and mileage need not be tendered.
    (h) Fees. The party at whose instance a subpoena is issued shall be 
responsible for the payment of witness fees and mileage, as well as the 
fees and mileage of the officer who serves the subpoena. The failure to 
make payment of such charges on demand may be deemed by the Board as a 
sufficient ground for striking the testimony of the witness and the 
books, papers, documents, or tangible things produced.
    (i) Contumacy or refusal to obey a subpoena. In case of contumacy or 
refusal to obey a subpoena by a person who resides, is found, or 
transacts business within the jurisdiction of a United States District 
Court, the Board will apply to the court through the Attorney General of 
the United States for an order requiring the person to appear before the 
Board or a member thereof to give testimony or produce evidence or both. 
Any failure of any such person to obey the order of the court may be 
punished by the court as a contempt thereof.



6302.25  Copies of papers (Rule 25).

    When books, records, papers, or documents have been received in 
evidence, a true copy or any material or relevant part may be 
substituted during or at the conclusion of the hearing.



6302.26  Posthearing briefs (Rule 26).

    Posthearing briefs may be submitted upon such terms as may be agreed 
upon by the parties and the presiding Administrative Judge at the 
conclusion of the hearing.



6302.27  Transcript of proceedings (Rule 27).

    Testimony and argument at hearings are reported verbatim, unless the 
Board otherwise orders. Transcripts or copies of the proceedings are 
supplied to the parties and others at such rates as may be fixed by the 
Board.



6302.28  Withdrawal of exhibits (Rule 28).

    After a decision has become final, the Board, in its discretion, 
upon request and after notice to the other party, may direct or permit 
the withdrawal of all or part of original exhibits. The substitution of 
true copies of exhibits or photographs of physical objects may be 
required by the Board as a condition of withdrawal.



6302.29  Representation of the parties (Rule 29).

    (a) The Appellant. An individual appellant may appear before the 
Board in person, a corporation by an officer, a partnership or joint 
venture by a member, or any of these by an attorney-at-law admitted to 
practice before the highest court of the District of Columbia or any 
state, commonwealth, or

[[Page 273]]

territory of the United States. An attorney representing an appellant 
shall file a written notice of appearance with the Board.
    (b) The Government. Government counsel may, in accordance with their 
authority, represent the interest of the Government before the Board. 
They shall file notices of appearance with the Board.



6302.30  Alternative dispute resolution methods (Rule 30).

    (a) To facilitate settlements in cases which might involve lengthy 
hearings (in excess of one week) of complex factual disputes and settled 
legal principles, the Board has adopted two methods of Alternative 
Dispute Resolution (ADR): Settlement Judges and Mini-Trials. These 
procedures are designed to supplement existing settlement techniques and 
not to replace them. Procedures regarding implementation of these ADR 
methods will be distributed to the parties, in appropriate cases, but 
may be obtained from the Board upon request.
    (b) To employ ADR both parties must initially agree to use an ADR 
method. The parties must communicate that agreement in writing to the 
presiding judge as early as possible, preferably before commencement of 
voluntary discovery. The presiding judge shall promptly decide the 
appropriateness of the ADR method requested and so advise the parties. 
Where, after application of an ADR method, the parties are unable to 
resolve a dispute, the matter shall be restored to the docket of the 
presiding judge for hearing.

[53 FR 34106, Sept. 2, 1988]



6302.31  Settlement (Rule 31).

    A dispute may be settled at any time before the Board renders its 
decision by the appellant filing a written notice withdrawing the appeal 
or by written stipulation of the parties settling the dispute. 
Proceedings may be suspended while the parties are considering 
settlement.



6302.32  Decisions (Rule 32).

    Decisions of the Board are rendered in writing. Copies are forwarded 
simultaneously to both parties. The rules of the Board and all final 
orders and decisions are open for public inspection at the offices of 
the Board in Washington, DC. Decisions of the Board are made solely upon 
the record, as described in Rule 17.



6302.33  Motion for reconsideration (Rule 33).

    A motion for reconsideration shall set forth specifically the 
grounds relied upon to sustain the motion and shall be mailed or 
otherwise furnished within 30 days from the date of receipt of a copy of 
the Board's decision.



6302.34  Dismissal for lack of jurisdiction (Rule 34).

    Any motion addressed to the jurisdiction of the Board shall be 
promptly filed. A hearing on the motion may be afforded on application 
of either party. The Board has the right at any time on its own motion 
to raise the issue of its jurisdiction to proceed with a particular case 
and do so by an appropriate order, affording the parties an opportunity 
to be heard.



6302.35  Dismissal without prejudice (Rule 35).

    When the Board is unable to proceed with disposition of an appeal 
for reasons not within its control, such appeal is placed in a suspense 
status. In any case where such suspension has continued, or it appears 
that it may continue for a period in excess of one year, the Board may 
dismiss the appeal without prejudice to its restoration to the Board's 
docket when the cause of suspension has been eliminated. Unless either 
party or the Board acts to reinstate any appeal so dismissed within 
three years from the date of dismissal, the dismissal is automatically 
converted to a dismissal with prejudice without further action by the 
parties or the Board.



6302.36  Dismissal for failure to prosecute or defend (Rule 36).

    Whenever a record discloses the failure of any party to file 
documents required by these rules, respond to notices or correspondence 
from the Board, comply with orders of the Board, or otherwise indicates 
a party's intention not to continue the prosecution or defense of an 
appeal, the Board

[[Page 274]]

may issue an order requiring the offending party to show cause why the 
appeal should not be dismissed or granted, as appropriate.



6302.37  Sanctions (Rule 37).

    If any party fails or refuses to obey an order issued by the Board, 
the Board may make such order in regard to the failure as it considers 
necessary to the just and expeditious conduct of the appeal, including 
dismissal with prejudice.



6302.38  Remand from court (Rule 38).

    Whenever any court remands a case to the Board for further 
proceedings, each of the parties shall, within 20 days of such remand, 
submit a report to the Board recommending procedures to be followed so 
as to comply with the court's order. The Board considers the reports and 
enters special orders governing the handling of the remanded case. To 
the extent the court's directive and time limitations permit, such 
orders conform to these rules.

[[Page 275]]



     CHAPTER 99--COST ACCOUNTING STANDARDS BOARD, OFFICE OF FEDERAL 
           PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET

                          (Parts 9900 to 9999)

  --------------------------------------------------------------------
Part                                                                Page
9900            Scope of chapter............................         277
                      SUBCHAPTER A--ADMINISTRATION
9901            Rules and procedures........................         278
9902            [Reserved]
    SUBCHAPTER B--PROCUREMENT PRACTICES AND COST ACCOUNTING STANDARDS
9903            Contract coverage...........................         282
9904            Cost accounting standards...................         368
9905            Cost accounting standards for educational 
                    institutions............................         479

[[Page 277]]



PART 9900--SCOPE OF CHAPTER--Table of Contents




    Authority: Pub. L. 100-679, 102 Stat. 4056, 41 U.S.C. 422.



9900.000  Scope of chapter.

    This chapter describes policies and procedures for applying the Cost 
Accounting Standards (CAS) to negotiated contracts and subcontracts. 
This chapter does not apply to sealed bid contracts or to any contract 
with a small business concern (see 9903.201-1(b) for these and other 
exemptions).

[57 FR 14153, Apr. 17, 1992]

[[Page 278]]





                      SUBCHAPTER A--ADMINISTRATION


PART 9901--RULES AND PROCEDURES--Table of Contents




Sec.
9901.301  Purpose.
9901.302  Authority.
9901.303  Offices.
9901.304  Membership.
9901.305  Requirements for standards and interpretive rulings.
9901.306  Standards applicability.
9901.307  Exemptions and waivers.
9901.308  Meetings.
9901.309  Quorum.
9901.310  Board action.
9901.311  Executive sessions.
9901.312  Minutes.
9901.313  Public hearings.
9901.314  Informal actions.
9901.315  Executive Secretary.
9901.316  Files and records.
9901.317  Amendments.

    Authority: Pub. L. 100-679, 102 Stat. 4056, 41 U.S.C. 422.

    Source: 56 FR 19304, Apr. 26, 1991, unless otherwise noted.



9901.301  Purpose.

    This part is published in compliance with Public Law 100-679, 
section 5(f)(3), 41 U.S.C. 422(f)(3), and constitutes the rules and 
procedures governing actions and the administration of the Cost 
Accounting Standards Board.



9901.302  Authority.

    (a) The Cost Accounting Standards Board (hereinafter referred to as 
the ``Board'') is established by and operates in compliance with Public 
Law 100-679.
    (b) The Board has the exclusive authority to make, promulgate, 
amend, and rescind cost accounting standards and regulations, including 
interpretations thereof, designed to achieve uniformity and consistency 
in the cost accounting practices governing measurement, assignment, and 
allocation of costs to contracts with the United States Government.
    (c) All cost accounting standards, waivers, exemptions, 
interpretations, modifications, rules, and regulations promulgated under 
section 719 of the Defense Production Act of 1950 (50 U.S.C. App. 2168) 
shall remain in effect unless and until amended, superseded, or 
rescinded by the Board pursuant to Public Law 100-679.



9901.303  Offices.

    The Cost Accounting Standards Board's offices are located in the New 
Executive Office Building, 725 17th Street, NW., Washington, DC 20503. 
The hours of business for the Board are 9 a.m. to 5:30 p.m., local time, 
Monday through Friday, excluding holidays observed by the Federal 
Government in Washington, DC.



9901.304  Membership.

    The Board consists of five members, including the Administrator of 
the Office of Federal Procurement Policy (hereinafter referred to as the 
``Administrator'') who shall serve as Chairman, and four other members 
with experience in Government contract cost accounting who are to be 
appointed as follows:
    (a) A representative of the Department of Defense appointed by the 
Secretary of Defense.
    (b) An officer or employee of the General Services Administration 
appointed by the Administrator of the General Services Administration or 
his/her designee.
    (c) A representative of industry appointed from the private sector 
by the Administrator.
    (d) An individual who is particularly knowledgeable about cost 
accounting problems and systems appointed from the private sector by the 
Administrator.
    (e) The term of office of each of the members of the Board, other 
than the Administrator, shall be four years, with the exception of the 
initial appointment of members. Of the initial appointments to the 
Board, two members shall hold appointment for a term of two years, one 
shall hold appointment for a term of three years, and one shall hold 
appointment for a term of four years.
    (f) The members from the Department of Defense and the General 
Services Administration shall not be permitted to continue to serve on 
the Board after ceasing to be an officer or

[[Page 279]]

employee of their respective appointing agency. A vacancy on the Board 
shall be filled in the same manner in which the original appointment was 
made. A member may be reappointed for a subsequent term(s). Any member 
appointed to fill an interim vacancy on the Board shall serve for the 
remainder of the term for which his or her predecessor was appointed.
    (g) In the event of the absence or incapacity of the Administrator 
or during a vacancy in the office, the official of the Office of Federal 
Procurement Policy, acting as Administrator, shall serve as the Chairman 
of the Board.
    (h) In the event of the absence of any of the other Board members, a 
representative of that Board member may attend the Board meeting, but 
shall have no vote, and his or her attendance shall not be counted to 
establish a quorum.



9901.305  Requirements for standards and interpretive rulings.

    Prior to the promulgation of cost accounting standards and 
interpretations thereof, the Board shall:
    (a) Take into account, after consultation and discussion with the 
Comptroller General, professional accounting organizations, contractors, 
government agencies and other interested parties:
    (1) The probable costs of implementation, including inflationary 
effects, if any, compared to the probable benefits;
    (2) The advantages, disadvantages, and improvements anticipated in 
the pricing and administration of, and settlement of disputes 
concerning, contacts; and
    (3) The scope of, and alternatives available to, the action proposed 
to be taken.
    (b) Prepare and publish a report in the Federal Register on issues 
reviewed under paragraph (a) of this section.
    (c) Publish an advance notice of proposed rulemaking in the Federal 
Register in order to solicit comments on the report prepared pursuant to 
paragraph (b) of this section, and provide all parties affected a period 
of not less than 60 days after such publication to submit their views 
and comments. During this 60-day period, consult with the Comptroller 
General and consider any recommendation the Comptroller General may 
make.
    (d) Publish a notice of such proposed rulemaking in the Federal 
Register and provide all parties affected a period of not less than 60 
days after such publication to submit their views and comments.
    (e) Rules, regulations, cost accounting standards, and modifications 
thereof promulgated or amended by the Board, shall have the full force 
and effect of law and shall become effective within 120 days after 
publication in the Federal Register in final form, unless the Board 
determines a longer period is necessary. Implementation dates for 
contractors and subcontractors shall be determined by the Board, but in 
no event shall such dates be later than the beginning of the second 
fiscal year of affected contractors or subcontractors after the standard 
becomes effective. Rules, regulations, cost accounting standards, and 
modifications thereof promulgated or amended by the Board shall be 
accompanied by prefatory comments and by illustrations, if necessary.
    (f) The above functions exercised by the Board are excluded from the 
operations of sections 551, 553 through 559, and 701 through 706 of 
title 5, United States Code.



9901.306  Standards applicability.

    Cost Accounting Standards promulgated by the Board shall be 
mandatory for use by all executive agencies and by contractors and 
subcontractors in estimating, accumulating, and reporting costs in 
connection with pricing and administration of, and settlement of 
disputes concerning, all negotiated prime contract and subcontract 
procurements with the United States Government in excess of $500,000, 
other than contracts or subcontracts that have been exempted by the 
Board's regulations.



9901.307  Exemptions and waivers.

    The Board may exempt classes or categories of contractors and 
subcontractors from cost accounting standards requirements, and 
establish

[[Page 280]]

procedures for waiver of the requirements with respect to individual 
contracts and subcontracts. The official records of the Board shall be 
documented with supporting justification for class or category 
exemptions and individual waivers.



9901.308  Meetings.

    The Board shall meet at the call of the Chairman. Agenda for Board 
meetings shall be proposed by the Chairman, but any Board member may 
request any item to be placed on the agenda.



9901.309  Quorum.

    Three Board members, at least one of whom is appointed by the 
Administrator from the private sector, shall constitute a quorum of the 
Board.



9901.310  Board action.

    Board action shall be by majority vote of the members present and 
voting, except that any vote to publish a proposed standard, rule or 
regulation in the Federal Register for comment or any vote to 
promulgate, amend or rescind a standard, rule or regulation, or any 
interpretation thereof, shall require at least three affirmative votes 
for the five Board members. The Chairman may vote on all matters 
presented for a vote, not merely to resolve tie votes. The results of 
final votes shall be reported in the minutes of the meeting, and the 
vote of a Board member may be recorded at his/her request.



9901.311  Executive sessions.

    During the course of a Board meeting, any Board Member may request 
that for any portion of the meeting, the Board meet in executive 
session. The Chairman shall thereupon order such a session.



9901.312  Minutes.

    The Executive Secretary of the Board shall be responsible for 
keeping accurate minutes of Board meetings and maintaining Board files.



9901.313  Public hearings.

    Public hearings to assist the Board in the development and 
explanation of cost accounting standards and interpretive rulings may be 
held to the extent the Board in its sole discretion deems desirable. 
Notice of such hearings shall be given by publication in the Federal 
Register.



9901.314  Informal actions.

    The Chairman may take actions on behalf of the Board on 
administrative issues, as determined by the Chairman, without holding an 
official meeting of the members. However, details of the actions so 
taken shall be provided to all of the members at the next Board meeting 
following such actions. Board members may be polled by telephone on 
other issues that must be processed on a timely basis when such matters 
cannot be deferred until the next formal meeting of the Board.



9901.315  Executive Secretary.

    The Board's staff of professional, technical and supporting 
personnel is directed and supervised by the Executive Secretary.

[[Page 281]]



9901.316  Files and records.

    The files and records of the Board shall be maintained in accordance 
with the Federal Records Creation, Maintenance, and Disposition Manual 
of the Executive Office of The President, Office of Administration. As a 
minimum, the files and records shall include:
    (a) A record of every Board meeting, including the minutes of Board 
proceedings and public hearings.
    (b) Cost accounting standards promulgated, amended, or rescinded and 
interpretations thereof along with the supporting documentation and 
applicable research material.
    (c) Applicable working papers, memoranda, research material, etc. 
related to issues under consideration by the Board and/or previously 
considered by the Board.
    (d) Substantive regulations and statutes of general applicability 
and general policy and interpretations thereof.
    (e) Any other file or record deemed important and relevant to the 
duties and responsibilities of the Board.



9901.317  Amendments.

    This Part 9901, Rules and Procedures, may be amended by the 
Chairman, after consultation with the Board.

                          PART 9902  [RESERVED]

[[Page 282]]



    SUBCHAPTER B--PROCUREMENT PRACTICES AND COST ACCOUNTING STANDARDS


PART 9903--CONTRACT COVERAGE--Table of Contents




                         Subpart 9903.1--General

Sec.
9903.101  Cost Accounting Standards.
9903.102  OMB approval under the Paperwork Reduction Act.

                Subpart 9903.2--CAS Program Requirements

9903.201  Contract requirements.
9903.201-1  CAS applicability.
9903.201-2  Types of CAS coverage.
9903.201-3  Solicitation provisions.
9903.201-4  Contract clauses.
9903.201-5  Waiver.
9903.201-6  Findings.
9903.201-7  Cognizant Federal agency responsibilities.
9903.201-8  Compliant accounting changes due to external restructuring 
          activities.
9903.202  Disclosure requirements.
9903.202-1  General requirements.
9903.202-2  Impracticality of submission.
9903.202-3  Amendments and revisions.
9903.202-4  Privileged and confidential information.
9903.202-5  Filing Disclosure Statements.
9903.202-6  Adequacy of Disclosure Statement.
9903.202-7  [Reserved]
9903.202-8  Subcontractor Disclosure Statements.
9903.202-9  Illustration of Disclosure Statement Form, CASB-DS-1
9903.202-10  Illustration of Disclosure Statement Form, CASB DS-2.

                Subpart 9903.3--CAS Rules and Regulations

9903.301  Definitions.
9903.302  Definitions, explanations, and illustrations of the terms, 
          ``cost accounting practice'' and ``change to a cost accounting 
          practice.''
9903.302-1  Cost accounting practice.
9903.302-2  Change to a cost accounting practice.
9903.302-3  Illustrations of changes which meet the definition of 
          ``change to a cost accounting practice.''
9903.302-4  Illustrations of changes which do not meet the definition of 
          ``Change to a cost accounting practice.''
9903.303  Effect of filing Disclosure Statement.
9903.304  Concurrent full and modified coverage.
9903.305  Materiality.
9903.306  Interpretations.
9903.307  Cost Accounting Standards Preambles.

    Authority: Pub. L. 100-679, 102 Stat. 4056, 41 U.S.C. 422.

    Source: 57 FR 14153, Apr. 17, 1992, unless otherwise noted.



                         Subpart 9903.1--General



9903.101  Cost Accounting Standards.

    Public Law 100-679 (41 U.S.C. 422) requires certain contractors and 
subcontractors to comply with Cost Accounting Standards (CAS) and to 
disclose in writing and follow consistently their cost accounting 
practices.



9903.102  OMB approval under the Paperwork Reduction Act.

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) imposes a 
requirement on Federal agencies to obtain approval from the Office of 
Management and Budget (OMB) before collecting information from ten or 
more members of the public. The information collection and recordkeeping 
requirements contained in this regulation have been approved by OMB. OMB 
has assigned Control Numbers 0348-0051 and 0348-0055 to the paperwork, 
recordkeeping and forms associated with this regulation.

[57 FR 14153, Apr. 17, 1992, as amended at 59 FR 55753, Nov. 8, 1994]



                Subpart 9903.2--CAS Program Requirements



9903.201  Contract requirements.



9903.201-1  CAS applicability.

    (a) This subsection describes the rules for determining whether a 
proposed contract or subcontract is exempt from CAS. (See 9904 or 9905, 
as applicable.) Negotiated contracts not exempt in accordance with 
9903.201-1(b) shall be subject to CAS. A CAS-covered contract may be 
subject to full, modified or other types of CAS coverage.

[[Page 283]]

The rules for determining the applicable type of CAS coverage are in 
9903.201-2.
    (b) The following categories of contracts and subcontracts are 
exempt from all CAS requirements:
    (1) Sealed bid contracts.
    (2) Negotiated contracts and subcontracts not in excess of $500,000. 
For purposes of this paragraph (b)(2) an order issued by one segment to 
another segment shall be treated as a subcontract.
    (3) Contracts and subcontracts with small businesses.
    (4) Contracts and subcontracts with foreign governments or their 
agents or instrumentalities or, insofar as the requirements of CAS other 
than 9904.401 and 9904.402 are concerned, any contract or subcontract 
awarded to a foreign concern.
    (5) Contracts and subcontracts in which the price is set by law or 
regulation.
    (6) Firm fixed-priced and fixed-price with economic price adjustment 
(provided that price adjustment is not based on actual costs incurred) 
contracts and subcontracts for the acquisition of commercial items.
    (7) Contracts or subcontracts of less than $7.5 million, provided 
that, at the time of award, the business unit of the contractor or 
subcontractor is not currently performing any CAS-covered contracts or 
subcontracts valued at $7.5 million or greater.
    (8)-(11) [Reserved]
    (12) Contracts and subcontracts awarded to the United Kingdom 
contractor for performance substantially in the United Kingdom, provided 
that the contractor has filed with the United Kingdom Ministry of 
Defence, for retention by the Ministry, a completed Disclosure Statement 
(Form No. CASB-DS-1) which shall adequately describe its cost accounting 
practices. Whenever that contractor is already required to follow U.K. 
Government Accounting Conventions, the disclosed practices shall be in 
accord with the requirements of those conventions. (See 9903.201-4(d).)
    (13) Subcontractors under the NATO PHM Ship program to be performed 
outside the United States by a foreign concern.
    (14) Contracts and subcontracts to be executed and performed 
entirely outside the United States, its territories, and possessions.
    (15) Firm-fixed-price contracts or subcontracts awarded on the basis 
of adequate price competition without submission of cost or pricing 
data.

[57 FR 14153, Apr. 17, 1992; 57 FR 34167, Aug. 3, 1992, as amended at 58 
FR 58801, Nov. 4, 1993; 59 FR 55753, Nov. 8, 1994; 60 FR 16540, Mar. 30, 
1995; 61 FR 39361, July 29, 1996; 62 FR 31295, June 6, 1997; 65 FR 
36769, June 9, 2000]



9903.201-2  Types of CAS coverage.

    (a) Full coverage. Full coverage requires that the business unit 
comply with all of the CAS specified in part 9904 that are in effect on 
the date of the contract award and with any CAS that become applicable 
because of later award of a CAS-covered contract. Full coverage applies 
to contractor business units that--
    (1) Receive a single CAS-covered contract award of $50 million or 
more; or
    (2) Received $50 million or more in net CAS-covered awards during 
its preceding cost accounting period.
    (b) Modified coverage. (1) Modified CAS coverage requires only that 
the contractor comply with Standard 9904.401, Consistency in Estimating, 
Accumulating, and Reporting Costs, Standard 9904.402, Consistency in 
Allocating Costs Incurred for the Same Purpose, Standard 9904.405, 
Accounting for Unallowable Costs and Standard 9904.406, Cost Accounting 
Standard--Cost Accounting Period. Modified, rather, than full, CAS 
coverage may be applied to a covered contract of less than $50 million 
awarded to a business unit that received less than $50 million in net 
CAS-covered awards in the immediately preceding cost accounting period.
    (2) If any one contract is awarded with modified CAS coverage, all 
CAS-covered contracts awarded to that business unit during that cost 
accounting period must also have modified coverage with the following 
exception: if the business unit receives a single CAS-covered contract 
award of $50 million or more, that contract must be subject to full CAS 
coverage. Thereafter, any covered contract awarded in

[[Page 284]]

the same cost accounting period must also be subject to full CAS 
coverage.
    (3) A contract awarded with modified CAS coverage shall remain 
subject to such coverage throughout its life regardless of changes in 
the business unit's CAS status during subsequent cost accounting 
periods.
    (c) Coverage for educational institutions--(1) Regulatory 
requirements. Parts 9903 and 9905 apply to educational institutions 
except as otherwise provided in this paragraph (c) and at 9903.202-1(f).
    (2) Definitions. (i) The following term is prominent in parts 9903 
and 9905. Other terms defined elsewhere in this chapter 99 shall have 
the meanings ascribed to them in those definitions unless paragraph 
(c)(2)(ii) of this subsection below requires otherwise.
    Educational institution means a public or nonprofit institution of 
higher education, e.g., an accredited college or university, as defined 
in section 1201(a) of Public Law 89-329, November 8, 1965, Higher 
Education Act of 1965; (20 U.S.C. 1141(a)).
    (ii) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to educational institutions:
    Business unit means any segment of an educational institution, or an 
entire educational institution which is not divided into segments.
    Segment means one of two or more divisions, campus locations, or 
other subdivisions of an educational institution that operate as 
independent organizational entities under the auspices of the parent 
educational institution and report directly to an intermediary group 
office or the governing central system office of the parent educational 
institution. Two schools of instruction operating under one division, 
campus location or other subdivision would not be separate segments 
unless they follow different cost accounting practices, for example, the 
School of Engineering should not be treated as a separate segment from 
the School of Humanities if they both are part of the same division's 
cost accounting system and are subject to the same cost accounting 
practices. The term includes Government-owned contractor-operated (GOCO) 
facilities, Federally Funded Research and Developments Centers (FFRDCs), 
and joint ventures and subsidiaries (domestic and foreign) in which the 
institution has a majority ownership. The term also includes those joint 
ventures and subsidiaries (domestic and foreign) in which the 
institution has less than a majority of ownership, but over which it 
exercises control.
    (3) Applicable standards. Coverage for educational institutions 
requires that the business unit comply with all of the CAS specified in 
part 9905 that are in effect on the date of the contract award and with 
any CAS that become applicable because of later award of a CAS-covered 
contract. This coverage applies to business units that receive 
negotiated contracts in excess of $500,000, except for CAS-covered 
contracts awarded to FFRDCs operated by an educational institution.
    (4) FFRDCs. Negotiated contracts awarded to an FFRDC operated by an 
educational institution are subject to the full or modified CAS coverage 
prescribed in paragraphs (a) and (b) of this subsection. CAS-covered 
FFRDC contracts shall be excluded from the institution's universe of 
contracts when determining CAS applicability and disclosure requirements 
for contracts other than those to be performed by the FFRDC.
    (5) Contract clauses. The contract clause at 9903.201-4(e) shall be 
incorporated in each negotiated contract and subcontract awarded to an 
educational institution when the negotiated contract or subcontract 
price exceeds $500,000. For CAS-covered contracts awarded to a FFRDC 
operated by an educational institution, however, the full or modified 
CAS contract clause specified at 9903.201-4 (a) or (c), as applicable, 
shall be incorporated.
    (6) Continuity in fully CAS-covered contracts. Where existing 
contracts awarded to an educational institution incorporate full CAS 
coverage, the contracting officer may continue to apply full CAS 
coverage, as prescribed at 9903.201-2(a), in future awards made to that 
educational institution.
    (d) Subcontracts. Subcontract awards subject to CAS require the same 
type of CAS coverage as would prime contracts awarded to the same 
business

[[Page 285]]

unit. In measuring total net CAS-covered awards for a year, a transfer 
by one segment to another shall be deemed to be a subcontract award by 
the transferor.
    (e) Foreign concerns. Contracts with foreign concerns subject to CAS 
shall only be subject to Standard 9904.401, Consistency in Estimating, 
Accumulating, and Reporting Costs, and Standard 9904.402, Consistency in 
Allocating Costs Incurred for the Same Purpose.

[57 FR 14153, Apr. 17, 1992, as amended at 58 FR 58801, Nov. 4, 1993; 58 
FR 65556, Dec. 15, 1993; 59 FR 48569, Sept. 22, 1994; 59 FR 55753, Nov. 
8, 1994; 65 FR 36769, June 9, 2000]



9903.201-3  Solicitation provisions.

    (a) Cost Accounting Standards Notices and Certification. (1) The 
contracting officer shall insert the provision set forth below, Cost 
Accounting Standards Notices and Certification, in solicitations for 
proposed contracts subject to CAS as specified in 9903.201. The 
provision allows offerors to--
    (i) Certify their Disclosure Statement status;
    (ii) [Reserved];
    (iii) Claim exemption from full CAS coverage and elect modified CAS 
coverage when appropriate; and
    (iv) Certify whether award of the contemplated contract would 
require a change to existing cost accounting practices.
    (2) If an award to an educational institution is contemplated prior 
to July 1, 1997, the contracting officer shall use the basic provision 
set forth below with its Alternate I, unless the contract is to be 
performed by an FFRDC (see 9903.201(c)(5)), or the provision at 
9903.201(c)(6) applies.

    Cost Accounting Standards Notices and Certification (April 2000)

    Note: This notice does not apply to small businesses or foreign 
governments.
    This notice is in three parts, identified by Roman numerals I 
through III.
    Offerors shall examine each part and provide the requested 
information in order to determine Cost Accounting Standards (CAS) 
requirements applicable to any resultant contract.
    If the offeror is an educational institution, Part II does not apply 
unless the contemplated contract will be subject to full or modified 
CAS-coverage pursuant to 9903.201-2(c)(5) or 9903.201-2(c)(6).

  I. Disclosure Statement--Cost Accounting Practices and Certifications

    (a) Any contract in excess of $500,000 resulting from this 
solicitation, except for those contracts which are exempt as specified 
in 9903.201-1.
    (b) Any offeror submitting a proposal which, if accepted, will 
result in a contract subject to the requirements of 48 CFR, chapter 99 
must, as a condition of contracting, submit a Disclosure Statement as 
required by 9903.202. When required, the Disclosure Statement must be 
submitted as a part of the offeror's proposal under this solicitation 
unless the offeror has already submitted a Disclosure Statement 
disclosing the practices used in connection with the pricing of this 
proposal. If an applicable Disclosure Statement has already been 
submitted, the offeror may satisfy the requirement for submission by 
providing the information requested in paragraph (c) of Part I of this 
provision.

    Caution: In the absence of specific regulations or agreement, a 
practice disclosed in a Disclosure Statement shall not, by virtue of 
such disclosure, be deemed to be a proper, approved, or agreed-to-
practice for pricing proposals or accumulating and reporting contract 
performance cost data.

    (c) Check the appropriate box below:
    {time}  (1) Certificate of Concurrent Submission of Disclosure 
Statement.
    The offeror hereby certifies that, as a part of the offer, copies of 
the Disclosure Statement have been submitted as follows: (i) Original 
and one copy to the cognizant Administrative Contracting Officer (ACO) 
or cognizant Federal agency official authorized to act in that capacity, 
as applicable, and (ii) one copy to the cognizant Federal auditor.
    (Disclosure must be on Form No. CASB DS-1 or CASB DS-2, as 
applicable. Forms may be obtained from the cognizant ACO or cognizant 
Federal agency official acting in that capacity and/or from the 
looseleaf version of the Federal Acquisition Regulation.)
Date of Disclosure Statement:___________________________________________
Name and Address of Cognizant ACO or Federal Official where filed:______
    The offeror further certifies that the practices used in estimating 
costs in pricing this proposal are consistent with the cost accounting 
practices disclosed in the Disclosure Statement.
    {time}  (2) Certificate of Previously Submitted Disclosure 
Statement. The offeror hereby certifies that the required Disclosure 
Statement was filed as follows:
Date of Disclosure Statement:___________________________________________
Name and Address of Cognizant ACO or Federal Official where filed:______
    The offeror further certifies that the practices used in estimating 
costs in pricing this

[[Page 286]]

proposal are consistent with the cost accounting practices disclosed in 
the applicable Disclosure Statement.
    {time}  (3) Certificate of Monetary Exemption.
    The offeror hereby certifies that the offeror, together with all 
divisions, subsidiaries, and affiliates under common control, did not 
receive net awards of negotiated prime contracts and subcontracts 
subject to CAS totaling $50 million or more in the cost accounting 
period immediately preceding the period in which this proposal was 
submitted.
    The offeror further certifies that if such status changes before an 
award resulting from this proposal, the offeror will advise the 
Contracting Officer immediately.
    {time}  (4) Certificate of Interim Exemption.
    The offeror hereby certifies that (i) the offeror first exceeded the 
monetary exemption for disclosure, as defined in (3) above, in the cost 
accounting period immediately preceding the period in which this offer 
was submitted and (ii) in accordance with 9903.202-1, the offeror is not 
yet required to submit a Disclosure Statement. The offeror further 
certifies that if an award resulting from this proposal has not been 
made within 90 days after the end of that period, the offeror will 
immediately submit a revised certificate to the Contracting Officer, in 
the form specified under subparagraph (c)(1) or (c)(2) of Part I of this 
provision, as appropriate, to verify submission of a completed 
Disclosure Statement.

    CAUTION: Offerors currently required to disclose because they were 
awarded a CAS-covered prime contract or subcontract of $50 million or 
more in the current cost accounting period may not claim this exemption 
(4). Further, the exemption applies only in connection with proposals 
submitted before expiration of the 90-day period following the cost 
accounting period in which the monetary exemption was exceeded.

II. Cost Accounting Standards--Eligibility for Modified Contact Coverage

    If the offeror is eligible to use the modified provisions of 
9903.201-2(b) and elects to do so, the offeror shall indicate by 
checking the box below. Checking the box below shall mean that the 
resultant contract is subject to the Disclosure and Consistency of Cost 
Accounting Practices clause in lieu of the Cost Accounting Standards 
clause.
    {time}  The offeror hereby claims an exemption from the Cost 
Accounting Standards clause under the provisions of 9903.201-2(b) and 
certifies that the offeror is eligible for use of the Disclosure and 
Consistency of Cost Accounting Practices clause because during the cost 
accounting period immediately preceding the period in which this 
proposal was submitted, the offeror received less than $50 million in 
awards of CAS-covered prime contracts and subcontracts. The offeror 
further certifies that if such status changes before an award resulting 
from this proposal, the offeror will advise the Contracting Officer 
immediately.
    CAUTION: An offeror may not claim the above eligibility for modified 
contract coverage if this proposal is expected to result in the award of 
a CAS-covered contract of $50 million or more or if, during its current 
cost accounting period, the offeror has been awarded a single CAS-
covered prime contract or subcontract of $50 million or more.

    III. Additional Cost Accounting Standards Applicable to Existing 
                                Contracts

    The offeror shall indicate below whether award of the contemplated 
contract would, in accordance with subparagraph (a)(3) of the Cost 
Accounting Standards clause, require a change in established cost 
accounting practices affecting existing contracts and subcontracts.
    {time}  Yes {time}  No

                           (End of provision)

                         Alternate I (Oct 1994)

    Insert the following subparagraph (5) at the end of Part I of the 
basic clause:

    {time}  (5) Certificate of Disclosure Statement Due Date by 
Educational Institution. If the offeror is an educational institution 
that, under the transition provisions of 9903.202-1(f), is or will be 
required to submit a Disclosure Statement after receipt of this award, 
the offeror hereby certifies that (check one and complete):
    {time}  (a) A Disclosure Statement filing Due Date of ____________ 
has been established with the cognizant Federal agency.
    {time}  (b) The Disclosure Statement will be submitted within the 
six month period ending ____________ months after receipt of this award.
Name and Address of Cognizant ACO or Federal Official where Disclosure 
Statement is to be filed:_______________________________________________

_______________________________________________________________________

                          (End of Alternate I)

[57 FR 14153, Apr. 17, 1992; 57 FR 34079, Aug. 3, 1992, as amended at 58 
FR 58802, Nov. 4, 1993; 58 FR 61844, Nov. 23, 1993; 58 FR 65556, Dec. 
15, 1993; 59 FR 55754, Nov. 8, 1994; 61 FR 39361, July 29, 1996; 65 FR 
36769, June 9, 2000]



9903.201-4  Contract clauses.

    (a) Cost Accounting Standards. (1) The contracting officer shall 
insert the clause set forth below, Cost Accounting Standards, in 
negotiated contracts, unless the contract is exempted (see 9903.201-1), 
the contract is subject to

[[Page 287]]

modified coverage (see 9903.201-2), or the clause prescribed in 
paragraph (d) or (e) of this section is used.
    (2) The clause below requires the contractor to comply with all CAS 
specified in part 9904, to disclose actual cost accounting practices 
(applicable to CAS-covered contracts only), and to follow disclosed and 
established cost accounting practices consistently.

                  Cost Accounting Standards (June 2000)

    (a) Unless the contract is exempt under 9903.201-1 and 9903.201-2, 
the provisions of 9903 are incorporated herein by reference and the 
Contractor in connection with this contract, shall--
    (1) (CAS-covered Contracts Only) By submission of a Disclosure 
Statement, disclosed in writing the Contractor's cost accounting 
practices as required by 9903.202-1 through 9903.202-5 including methods 
of distinguishing direct costs from indirect costs and the basis used 
for allocating indirect costs. The practices disclosed for this contract 
shall be the same as the practices currently disclosed and applied on 
all other contracts and subcontracts being performed by the Contractor 
and which contain a Cost Accounting Standards (CAS) clause. If the 
Contractor has notified the Contracting Officer that the Disclosure 
Statement contains trade secrets, and commercial or financial 
information which is privileged and confidential, the Disclosure 
Statement shall be protected and shall not be released outside of the 
Government.
    (2) Follow consistently the Contractor's cost accounting practices 
in accumulating and reporting contract performance cost data concerning 
this contract. If any change in cost accounting practices is made for 
the purposes of any contract or subcontract subject to CAS requirements, 
the change must be applied prospectively to this contract and the 
Disclosure Statement must be amended accordingly. If the contract price 
or cost allowance of this contract is affected by such changes, 
adjustment shall be made in accordance with subparagraph (a)(4) or 
(a)(5) of this clause, as appropriate.
    (3) Comply with all CAS, including any modifications and 
interpretations indicated thereto contained in part 9904, in effect on 
the date of award of this contract or, if the Contractor has submitted 
cost or pricing data, on the date of final agreement on price as shown 
on the Contractor's signed certificate of current cost or pricing data. 
The Contractor shall also comply with any CAS (or modifications to CAS) 
which hereafter become applicable to a contract or subcontract of the 
Contractor. Such compliance shall be required prospectively from the 
date of applicability of such contract or subcontract.
    (4)(i) Agree to an equitable adjustment as provided in the Changes 
clause of this contract if the contract cost is affected by a change 
which, pursuant to subparagraph (a)(3) of this clause, the Contractor is 
required to make to the Contractor's established cost accounting 
practices.
    (ii) Negotiate with the Contracting Officer to determine the terms 
and conditions under which a change may be made to a cost accounting 
practice, other than a change made under other provisions of 
subparagraph (a)(4) of this clause; provided that no agreement may be 
made under this provision that will increase costs paid by the United 
States.
    (iii) When the parties agree to a change to a cost accounting 
practice, other than a change under subdivision (a)(4)(i) of this 
clause, negotiate an equitable adjustment as provided in the Changes 
clause of this contract.
    (5) Agree to an adjustment of the contract price or cost allowance, 
as appropriate, if the Contractor or a subcontractor fails to comply 
with an applicable Cost Accounting Standard, or to follow any cost 
accounting practice consistently and such failure results in any 
increased costs paid by the United States. Such adjustment shall provide 
for recovery of the increased costs to the United States, together with 
interest thereon computed at the annual rate established under section 
6621(a)(2) of the Internal Revenue Code of 1986 (26 U.S.C. 6621(a)(2)) 
for such period, from the time the payment by the United States was made 
to the time the adjustment is effected. In no case shall the Government 
recover costs greater than the increased cost to the Government, in the 
aggregate, on the relevant contracts subject to the price adjustment, 
unless the Contractor made a change in its cost accounting practices of 
which it was aware or should have been aware at the time of price 
negotiations and which it failed to disclose to the Government.
    (b) If the parties fail to agree whether the Contractor or a 
subcontractor has complied with an applicable CAS in part 9904 or a CAS 
rule or regulation in part 9903 and as to any cost adjustment demanded 
by the United States, such failure to agree will constitute a dispute 
under the Contract Disputes Act (41 U.S.C. 601).
    (c) The Contractor shall permit any authorized representatives of 
the Government to examine and make copies of any documents, papers, or 
records relating to compliance with the requirements of this clause.
    (d) The contractor shall include in all negotiated subcontracts 
which the Contractor enters into, the substance of this clause, except 
paragraph (b), and shall require such inclusion in all other 
subcontracts, of any tier, including the obligation to comply with all 
CAS in effect on the subcontractor's award date or if the subcontractor 
has submitted

[[Page 288]]

cost or pricing data, on the date of final agreement on price as shown 
on the subcontractor's signed Certificate of Current Cost or Pricing 
Data. If the subcontract is awarded to a business unit which pursuant to 
9903.201-2 is subject to other types of CAS coverage, the substance of 
the applicable clause set forth in 9903.201-4 shall be inserted. This 
requirement shall apply only to negotiated subcontracts in excess of 
$500,000, except that the requirement shall not apply to negotiated 
subcontracts otherwise exempt from the requirement to include a CAS 
clause as specified in 9903.201-1.

                             (End of clause)

    (b) [Reserved]
    (c) Disclosure and Consistency of Cost Accounting Practices. (1) The 
contracting officer shall insert the clause set forth below, Disclosure 
and Consistency of Cost Accounting Practices, in negotiated contracts 
when the contract amount is over $500,000 but less than $50 million, and 
the offeror certifies it is eligible for and elects to use modified CAS 
coverage (see 9903.201-2, unless the clause prescribed in paragraph (d) 
of this subsection is used).
    (2) The clause below requires the contractor to comply with CAS 
9904.401, 9904.402, 9904.405, and 9904.406, to disclose (if it meets 
certain requirements) actual cost accounting practices, and to follow 
consistently disclosed and established cost accounting practices.

   Disclosure and Consistency of Cost Accounting Practices (June 2000)

    (a) The Contractor, in connection with this contract, shall--
    (1) Comply with the requirements of 9904.401, Consistency in 
Estimating, Accumulating, and Reporting Costs; 9904.402, Consistency in 
Allocating Costs Incurred for the Same Purpose; 9904.405, Accounting for 
Unallowable Costs; and 9904.406, Cost Accounting Standard--Cost 
Accounting Period, in effect on the date of award of this contract, as 
indicated in part 9904.
    (2) (CAS-covered Contracts Only) If it is a business unit of a 
company required to submit a Disclosure Statement, disclose in writing 
its cost accounting practices as required by 9903.202-1 through 
9903.202-5. If the Contractor has notified the Contracting Officer that 
the Disclosure Statement contains trade secrets and commercial or 
financial information which is privileged and confidential, the 
Disclosure Statement shall be protected and shall not be released 
outside of the Government.
    (3)(i) Follow consistently the Contractor's cost accounting 
practices. A change to such practices may be proposed, however, by 
either the Government or the Contractor, and the Contractor agrees to 
negotiate with the Contracting Officer the terms and conditions under 
which a change may be made. After the terms and conditions under which 
the change is to be made have been agreed to, the change must be applied 
prospectively to this contract, and the Disclosure Statement, if 
affected, must be amended accordingly.
    (ii) The Contractor shall, when the parties agree to a change to a 
cost accounting practice and the Contracting Officer has made the 
finding required in 9903.201-6(c) that the change is desirable and not 
detrimental to the interests of the Government, negotiate an equitable 
adjustment as provided in the Changes clause of this contract. In the 
absence of the required finding, no agreement may be made under this 
contract clause that will increase costs paid by the United States.
    (4) Agree to an adjustment of the contract price or cost allowance, 
as appropriate, if the Contractor or a subcontractor fails to comply 
with the applicable CAS or to follow any cost accounting practice, and 
such failure results in any increased costs paid by the United States. 
Such adjustment shall provide for recovery of the increased costs to the 
United States, together with interest thereon computed at the annual 
rate established under section 6621(a)(2) of the Internal Revenue Code 
of 1986 (26 U.S.C. 6621(a)(2)) for such period, from the time the 
payment by the United States was made to the time the adjustment is 
effected.
    (b) If the parties fail to agree whether the Contractor has complied 
with an applicable CAS rule, or regulation as specified in parts 9903 
and 9904 and as to any cost adjustment demanded by the United States, 
such failure to agree will constitute a dispute under the Contract 
Disputes Act (41 U.S.C. 601).
    (c) The Contractor shall permit any authorized representatives of 
the Government to examine and make copies of any documents, papers, and 
records relating to compliance with the requirements of this clause.
    (d) The Contractor shall include in all negotiated subcontracts, 
which the Contractor enters into, the substance of this clause, except 
paragraph (b), and shall require such inclusion in all other 
subcontracts of any tier, except that--
    (1) If the subcontract is awarded to a business unit which pursuant 
to 9903.201-2 is subject to other types of CAS coverage, the substance 
of the applicable clause set forth in 9903.201-4 shall be inserted.
    (2) This requirement shall apply only to negotiated subcontracts in 
excess of $500,000.
    (3) The requirement shall not apply to negotiated subcontracts 
otherwise exempt from the requirement to include a CAS clause as 
specified in 9903.201-1.

[[Page 289]]

                             (End of clause)

    (d) Consistency in Cost Accounting Practices. The contracting 
officer shall insert the clause set forth below, Consistency in Cost 
Accounting Practices, in negotiated defense contracts that are exempt 
from CAS requirements solely on the basis of the fact that the contract 
is to be awarded to a United Kingdom contractor and is to be performed 
substantially in the United Kingdom (see 9903.201-1(b)(12)).

           Consistency in Cost Accounting Practices (Apr 1992)

    The Contractor agrees that it will consistently follow the cost 
accounting practices disclosed on Form CASB DS-1 in estimating, 
accumulating and reporting costs under this contract. In the event the 
Contractor fails to follow such practices, it agrees that the contract 
price shall be adjusted together with interest, if such failure results 
in increased cost paid by the U.S. Government. Interest shall be 
computed at the annual rate of interest established under section 6621 
of the Internal Revenue Code of 1986 (26 U.S.C. 6621) from the time 
payment by the Government was made to the time adjustment is effected. 
The Contractor agrees that the Disclosure Statement filed with the U.K. 
Ministry of Defence shall be available for inspection and use by 
authorized representatives of the United States Government.

                             (End of clause)

    (e) Cost Accounting Standards--Educational Institutions. (1) The 
contracting officer shall insert the clause set forth below, Cost 
Accounting Standards--Educational Institution, in negotiated contracts 
awarded to educational institutions, unless the contract is exempted 
(see 9903.201-1), the contract is to be performed by an FFRDC (see 
9903.201-2(c)(5)), or the provision at 9903.201-2(c)(6) applies.
    (2) The clause below requires the educational institution to comply 
with all CAS specified in part 9905, to disclose actual cost accounting 
practices as required by 9903.202-1(f), and to follow disclosed and 
established cost accounting practices consistently.

     Cost Accounting Standards--Educational Institutions (June 2000)

    (a) Unless the contract is exempt under 9903.201-1 and 9903.201-2, 
the provisions of part 9903 are incorporated herein by reference and the 
Contractor in connection with this contract, shall--
    (1) (CAS-covered Contracts Only) If a business unit of an 
educational institution required to submit a Disclosure Statement, 
disclose in writing the Contractor's cost accounting practices as 
required by 9903.202-1 through 9903.202-5 including methods of 
distinguishing direct costs from indirect costs and the basis used for 
accumulating and allocating indirect costs. The practices disclosed for 
this contract shall be the same as the practices currently disclosed and 
applied on all other contracts and subcontracts being performed by the 
Contractor and which contain a Cost Accounting Standards (CAS) clause. 
If the Contractor has notified the Contracting Officer that the 
Disclosure Statement contains trade secrets, and commercial or financial 
information which is privileged and confidential, the Disclosure 
Statement shall be protected and shall not be released outside of the 
Government.
    (2) Follow consistently the Contractor's cost accounting practices 
in accumulating and reporting contract performance cost data concerning 
this contract. If any change in cost accounting practices is made for 
the purposes of any contract or subcontract subject to CAS requirements, 
the change must be applied prospectively to this contract and the 
Disclosure Statement, if required, must be amended accordingly. If an 
accounting principle change mandated under Office of Management and 
Budget (OMB) Circular A-21, Cost Principles for Educational 
Institutions, requires that a change in the Contractor's cost accounting 
practices be made after the date of this contract award, the change must 
be applied prospectively to this contract and the Disclosure Statement, 
if required, must be amended accordingly. If the contract price or cost 
allowance of this contract is affected by such changes, adjustment shall 
be made in accordance with subparagraph (a)(4) or (a)(5) of this clause, 
as appropriate.
    (3) Comply with all CAS, including any modifications and 
interpretations indicated thereto contained in 48 CFR part 9905, in 
effect on the date of award of this contract or, if the Contractor has 
submitted cost or pricing data, on the date of final agreement on price 
as shown on the Contractor's signed certificate of current cost or 
pricing data. The Contractor shall also comply with any CAS (or 
modifications to CAS) which hereafter become applicable to a contract or 
subcontract of the Contractor. Such compliance shall be required 
prospectively from the date of applicability to such contract or 
subcontract.
    (4)(i) Agree to an equitable adjustment as provided in the Changes 
clause of this contract if the contract cost is affected by a change 
which, pursuant to subparagraph

[[Page 290]]

(a)(3) of this clause, the Contractor is required to make to the 
Contractor's established cost accounting practices.
    (ii) Negotiate with the Contracting Officer to determine the terms 
and conditions under which a change may be made to a cost accounting 
practice, other than a change made under other provisions of 
subparagraph (a)(4) of this clause; provided that no agreement may be 
made under this provision that will increase costs paid by the United 
States.
    (iii) When the parties agree to a change to a cost accounting 
practice, other than a change under subdivision (a)(4)(i) or (a)(4)(iv) 
of this clause, negotiate an equitable adjustment as provided in the 
Changes clause of this contract.
    (iv) Agree to an equitable adjustment as provided in the Changes 
clause of this contract, if the contract cost is materially affected by 
an OMB Circular A-21 accounting principle amendment which, on becoming 
effective after the date of contract award, requires the Contractor to 
make a change to the Contractor's established cost accounting practices.
    (5) Agree to an adjustment of the contract price or cost allowance, 
as appropriate, if the Contractor or a subcontractor fails to comply 
with an applicable Cost Accounting Standard, or to follow any cost 
accounting practice consistently and such failure results in any 
increased costs paid by the United States. Such adjustment shall provide 
for recovery of the increased costs to the United States, together with 
interest thereon computed at the annual rate established under section 
6621(a)(2) of the Internal Revenue Code of 1986 (26 U.S.C. 6621(a)(2)) 
for such period, from the time the payment by the United States was made 
to the time the adjustment is effected. In no case shall the Government 
recover costs greater than the increased cost to the Government, in the 
aggregate, on the relevant contracts subject to the price adjustment, 
unless the Contractor made a change in its cost accounting practices of 
which it was aware or should have been aware at the time of price 
negotiations and which it failed to disclose to the Government.
    (b) If the parties fail to agree whether the Contractor or a 
subcontractor has complied with an applicable CAS or a CAS rule or 
regulation in 9903 and as to any cost adjustment demanded by the United 
States, such failure to agree will constitute a dispute under the 
Contract Disputes Act (41 U.S.C. 601).
    (c) The Contractor shall permit any authorized representatives of 
the Government to examine and make copies of any documents, papers, or 
records relating to compliance with the requirements of this clause.
    (d) The Contractor shall include in all negotiated subcontracts 
which the Contractor enters into, the substance of this clause, except 
paragraph (b), and shall require such inclusion in all other 
subcontracts, of any tier, including the obligation to comply with all 
applicable CAS in effect on the subcontractor's award date or if the 
subcontractor has submitted cost or pricing data, on the date of final 
agreement on price as shown on the subcontractor's signed Certificate of 
Current Cost or Pricing Data, except that--
    (1) If the subcontract is awarded to a business unit which pursuant 
to 9903.201-2 is subject to other types of CAS coverage, the substance 
of the applicable clause set forth in 9903.201-4 shall be inserted; and
    (2) This requirement shall apply only to negotiated subcontracts in 
excess of $500,000.
    (3) The requirement shall not apply to negotiated subcontracts 
otherwise exempt from the requirement to include a CAS clause as 
specified in 9903.201-1.

                             (End of clause)

[57 FR 14153, Apr. 17, 1992; 57 FR 34079, 34167, Aug. 3, 1992; 57 FR 
43776, Sept. 22, 1992, as amended at 58 FR 58802, Nov. 4, 1993; 58 FR 
65556, Dec. 15, 1993; 59 FR 48568, Sept. 22, 1994; 59 FR 55755, Nov. 8, 
1994; 61 FR 39361, July 29, 1996; 62 FR 31295, June 6, 1997; 65 FR 
36770, June 9, 2000; 65 FR 37471, June 14, 2000]



9903.201-5  Waiver

    (a) The head of an executive agency may waive the applicability of 
the Cost Accounting Standards for a contract or subcontract with a value 
of less than $15 million, if that official determines, in writing, that 
the business unit of the contractor or subcontractor that will perform 
the work--
    (1) Is primarily engaged in the sale of commercial items; and
    (2) Would not otherwise be subject to the Cost Accounting Standards 
under this Chapter.
    (b) The head of an executive agency may waive the applicability of 
the Cost Accounting Standards for a contract or subcontract under 
exceptional circumstances when necessary to meet the needs of the 
agency. A determination to waive the applicability of the Cost 
Accounting Standards by the agency head shall be set forth in writing, 
and shall include a statement of the circumstances justifying the 
waiver.
    (c) The head of an executive agency may not delegate the authority 
under paragraphs (a) and (b) of this section, to any official below the 
senior policymaking level in the agency.
    (d) The head of each executive agency shall report the waivers 
granted

[[Page 291]]

under paragraphs (a) and (b) of this section, for that agency, to the 
Cost Accounting Standards Board, on an annual basis, not later than 90 
days after the close of the Government's fiscal year.
    (e) Upon request of an agency head or his designee, the Cost 
Accounting Standards Board may waive all or any part of the requirements 
of 9903.201-4(a), Cost Accounting Standards, or 9903.201-4(c), 
Disclosure and Consistency of Cost Accounting Practices, with respect to 
a contract subject to the Cost Accounting Standards. Any request for a 
waiver shall describe the proposed contract or subcontract for which the 
waiver is sought and shall contain--
    (1) An unequivocal statement that the proposed contractor or 
subcontractor refuses to accept a contract containing all or a specified 
part of a CAS clause and the specific reason for that refusal;
    (2) A statement as to whether the proposed contractor or 
subcontractor has accepted any prime contract or subcontract containing 
a CAS clause;
    (3) The amount of the proposed award and the sum of all awards by 
the agency requesting the waiver to the proposed contractor or 
subcontractor in each of the preceding 3 years;
    (4) A statement that no other source is available to satisfy the 
agency's needs on a timely basis;
    (5) A statement of alternative methods considered for fulfilling the 
need and the agency's reasons for rejecting them;
    (6) A statement of steps being taken by the agency to establish 
other sources of supply for future contracts for the products or 
services for which a waiver is being requested; and
    (7) Any other information that may be useful in evaluating the 
request.
    (f) Except as provided by the Cost Accounting Standards Board, the 
authority in paragraph (e) of this section shall not be delegated.

[65 FR 36770, June 9, 2000]



9903.201-6  Findings.

    (a) Required change--(1) Finding. Prior to making any equitable 
adjustment under the provisions of paragraph (a)(4)(i) of the contract 
clause set forth in 9903.201-4(a) or 9903.201-4(e), or paragraph 
(a)(3)(i) of the contract clause set forth in 9903.201-4(c), the 
Contracting Officer shall make a finding that the practice change was 
required to comply with a CAS, modification or interpretation thereof, 
that subsequently became applicable to the contract; or, for planned 
changes being made in order to remain CAS compliant, that the former 
practice was in compliance with applicable CAS and the planned change is 
necessary for the contractor to remain in compliance.
    (2) Required change means a change in cost accounting practice that 
a contractor is required to make in order to comply with applicable 
Standards, modifications, or interpretations thereto, that subsequently 
become applicable to an existing CAS-covered contract due to the receipt 
of another CAS-covered contract or subcontract. It also includes a 
prospective change to a disclosed or established cost accounting 
practice when the cognizant Federal agency official determines that the 
former practice was in compliance with applicable CAS and the change is 
necessary for the contractor to remain in compliance.
    (b) Unilateral change--(1) Findings. Prior to making any contract 
price or cost adjustment(s) under the change provisions of paragraph 
(a)(4)(ii) of the contract clause set forth in 9903.201-4(a) or 
9903.201-4(e), or paragraph (a)(3)(ii) of the contract clause set forth 
in 9903.201-4(c), the Contracting Officer shall make a finding that the 
contemplated contract price and cost adjustments will protect the United 
States from payment of increased costs, in the aggregate; and that the 
net effect of the adjustments being made does not result in the recovery 
of more than the estimated amount of such increased costs.
    (2) Unilateral change by a contractor means a change in cost 
accounting practice from one compliant practice to another compliant 
practice that a contractor with a CAS-covered contract(s) elects to make 
that has not been deemed desirable by the cognizant Federal agency 
official and for which the Government will pay no aggregate increased 
costs.

[[Page 292]]

    (3) Action to preclude the payment of aggregate increased costs by 
the Government. In the absence of a finding pursuant to paragraph (c) of 
this subsection that a compliant change is desirable, no agreement may 
be made with regard to a change to a cost accounting practice that will 
result in the payment of aggregate increased costs by the United States. 
For these changes, the cognizant Federal agency official shall limit 
upward contract price adjustments to affected contracts to the amount of 
downward contract price adjustments of other affected contracts, i.e., 
no net upward contract price adjustment shall be permitted.
    (c) Desirable change--(1) Finding. Prior to making any equitable 
adjustment under the provisions of paragraph (a)(4)(iii) of the contract 
clause set forth in 9903.201-4(a) or 9903.201-4(e), or paragraph 
(a)(3)(ii) of the contract clause set forth in 9903.201-4(c), the 
cognizant Federal agency official shall make a finding that the change 
to a cost accounting practice is desirable and not detrimental to the 
interests of the Government.
    (2) Desirable change means a compliant change to a contractor's 
established or disclosed cost accounting practices that the cognizant 
Federal agency official finds is desirable and not detrimental to the 
Government and is therefore not subject to the no increased cost 
prohibition provisions of CAS-covered contracts affected by the change. 
The cognizant Federal agency official's finding need not be based solely 
on the cost impact that a proposed practice change will have on a 
contractor's or subcontractor's current CAS-covered contracts. The 
change to a cost accounting practice may be determined to be desirable 
even though existing contract prices and/or cost allowances may 
increase. The determination that the change to a cost accounting 
practice is desirable, should be made on a case-by-case basis.
    (3) Once a determination has been made that a compliant change to a 
cost accounting practice is a desirable change, associated management 
actions that also have an impact on contract costs should be considered 
when negotiating contract price or cost adjustments that may be needed 
to equitably resolve the overall cost impact of the aggregated actions.
    (4) Until the cognizant Federal agency official has determined that 
a change to a cost accounting practice is deemed to be a desirable 
change, the change shall be considered to be a change for which the 
Government will not pay increased costs, in the aggregate.
    (d) Noncompliant cost accounting practices--(1) Findings. Prior to 
making any contract price or cost adjustment(s) under the provisions of 
paragraph (a)(5) of the contract clause set forth in 9903.201-4(a) or 
9903.201-4(e), or paragraph (a)(4) of the contract clause set forth in 
9903.201-4(c), the Contracting Officer shall make a finding that the 
contemplated contract price and cost adjustments will protect the United 
States from payment of increased costs, in the aggregate; and that the 
net effect of the adjustments being made does not result in the recovery 
of more than the estimated amount of such increased costs. While 
individual contract prices, including cost ceilings or target costs, as 
applicable, may be increased as well as decreased to resolve an 
estimating noncompliance, the aggregate value of all contracts affected 
by the estimating noncompliance shall not be increased.

[65 FR 37571, June 14, 2000]



9903.201-7  Cognizant Federal agency responsibilities.

    (a) The requirements of part 9903 shall, to the maximum extent 
practicable, be administered by the cognizant Federal agency responsible 
for a particular contractor organization or location, usually the 
Federal agency responsible for negotiating indirect cost rates on behalf 
of the Government. The cognizant Federal agency should take the lead 
role in administering the requirements of part 9903 and coordinating CAS 
administrative actions with all affected Federal agencies. When multiple 
CAS-covered contracts or more than one Federal agency are involved, 
agencies should discourage Contracting Officers from individually 
administering CAS on a contract-by-contract basis. Coordinated 
administrative actions will provide greater assurances that individual 
contractors

[[Page 293]]

follow their cost accounting practices consistently under all their CAS-
covered contracts and that changes in cost accounting practices or CAS 
noncompliance issues are resolved, equitably, in a uniform overall 
manner.
    (b) Federal agencies shall prescribe regulations and establish 
internal policies and procedures governing how agencies will administer 
the requirements of CAS-covered contracts, with particular emphasis on 
inter-agency coordination activities. Procedures to be followed when an 
agency is and is not the cognizant Federal agency should be clearly 
delineated. Internal agency policies and procedures shall provide for 
the designation of the agency office(s) or officials responsible for 
administering CAS under the agency's CAS-covered contracts at each 
contractor business unit and the delegation of necessary contracting 
authority to agency individuals authorized to administer the terms and 
conditions of CAS-covered contracts, e.g., Administrative Contracting 
Officers (ACOs) or other agency officials authorized to perform in that 
capacity. Agencies are urged to coordinate on the development of such 
regulations.

[59 FR 55756, Nov. 8, 1994]



9903.201-8  Compliant accounting changes due to external restructuring activities.

    The contract price and cost adjustment requirements of this part 
9903 are not applicable to compliant cost accounting practice changes 
directly associated with external restructuring activities that are 
subject to and meet the requirements of 10 U.S.C. 2325.

[65 FR 37472, June 14, 2000]



9903.202  Disclosure requirements.



9903.202-1  General requirements.

    (a) A Disclosure Statement is a written description of a 
contractor's cost accounting practices and procedures. The submission of 
a new or revised Disclosure Statement is not required for any non-CAS-
covered contract or from any small business concern.
    (b) Completed Disclosure Statements are required in the following 
circumstances:
    (1) Any business unit that is selected to receive a CAS-covered 
contract or subcontract of $50 million or more shall submit a Disclosure 
Statement before award.
    (2) Any company which, together with its segments, received net 
awards of negotiated prime contracts and subcontracts subject to CAS 
totaling $50 million or more in its most recent cost accounting period, 
must submit a Disclosure Statement before award of its first CAS-covered 
contract in the immediately following cost accounting period. However, 
if the first CAS-covered contract is received within 90 days of the 
start of the cost accounting period, the contractor is not required to 
file until the end of 90 days.
    (c) When a Disclosure Statement is required, a separate Disclosure 
Statement must be submitted for each segment whose costs included in the 
total price of any CAS-covered contract or subcontract exceed $500,000, 
unless (i) The contract or subcontract is of the type or value exempted 
by 9903.201-1 or (ii) In the most recently completed cost accounting 
period the segment's CAS-covered awards are less than 30 percent of 
total segment sales for the period and less than $10 million.
    (d) Each corporate or other home office that allocates costs to one 
or more disclosing segments performing CAS-covered contracts must submit 
a Part VIII of the Disclosure Statement.
    (e) Foreign contractors and subcontractors who are required to 
submit a Disclosure Statement may, in lieu of filing a Form No. CASB-DS-
1, make disclosure by using a disclosure form prescribed by an agency of 
its Government, provided that the Cost Accounting Standards Board 
determines that the information disclosed by that means will satisfy the 
objectives of Public Law 100-679. The use of alternative forms has been 
approved for the contractors of the following countries:
    (1) Canada.
    (2) Federal Republic of Germany.
    (f) Educational institutions--disclosure requirements. (1) 
Educational institutions receiving contracts subject to the CAS 
specified in part 9905 are subject to the requirements of 9903.202, 
except that completed Disclosure Statements

[[Page 294]]

are required in the following circumstances.
    (2) Basic requirement. For CAS-covered contracts placed on or after 
January 1, 1996, completed Disclosure Statements are required as 
follows:
    (i) Any business unit of an educational institution that is selected 
to receive a CAS-covered contract or subcontract in excess of $500,000 
and is part of a college or university location listed in Exhibit A of 
Office of Management and Budget (OMB) Circular A-21 shall submit a 
Disclosure Statement before award. A Disclosure Statement is not 
required, however, if the listed entity can demonstrate that the net 
amount of Federal contract and financial assistance awards received 
during its immediately preceding cost accounting period was less than 
$25 million.
    (ii) Any business unit that is selected to receive a CAS-covered 
contract or subcontract of $25 million or more shall submit a Disclosure 
Statement before award.
    (iii) Any educational institution which, together with its segments, 
received net awards of negotiated prime contracts and subcontracts 
subject to CAS totaling $25 million or more in its most recent cost 
accounting period, of which, at least one award exceeded $1 million, 
must submit a Disclosure Statement before award of its first CAS-covered 
contract in the immediately following cost accounting period. However, 
if the first CAS-covered contract is received within 90 days of the 
start of the cost accounting period, the institution is not required to 
file until the end of 90 days.
    (3) Transition period requirement. For CAS-covered contracts placed 
on or before December 31, 1995, completed Disclosure Statements are 
required as follows:
    (i) For business units that are selected to receive a CAS-covered 
contract or subcontract in excess of $500,000 and are part of the first 
20 college or university locations (i.e., numbers 1 through 20) listed 
in Exhibit A of OMB Circular A-21, Disclosure Statements shall be 
submitted within six months after the date of contract award.
    (ii) For business units that are selected to receive a CAS-covered 
contract or subcontract in excess of $500,000 and are part of a college 
or university location that is listed as one of the institutions 
numbered 21 through 50, in Exhibit A of OMB Circular A-21, Disclosure 
Statements shall be submitted during the six month period ending twelve 
months after the date of contract award.
    (iii) For business units that are selected to receive a CAS-covered 
contract or subcontract in excess of $500,000 and are part of a college 
or university location that is listed as one of the institutions 
numbered 51 through 99, in Exhibit A of OMB Circular A-21, Disclosure 
Statements shall be submitted during the six month period ending 
eighteen months after the date of contract award.
    (iv) For any other business unit that is selected to receive a CAS-
covered contract or subcontract of $25 million or more, a Disclosure 
Statement shall be submitted within six months after the date of 
contract award.
    (4) Transition period due dates. The educational institution and 
cognizant Federal agency should establish a specific due date within the 
periods prescribed in 9903.202-1(f)(3) when a Disclosure Statement is 
required under a CAS-covered contract placed on or before December 31, 
1995.
    (5) Transition period waiver authority. For a CAS-covered contract 
to be awarded during the period January 1, 1996, through June 30, 1997, 
the awarding agency may waive the preaward Disclosure Statement 
submission requirement specified in 9903.202-1(f)(2) when a due date for 
the submission of a Disclosure Statement has previously been established 
by the cognizant Federal agency and the educational institution under 
the provisions of 9903.202-1(f) (3) and (4).

    Caution: This waiver authority is not available unless the cognizant 
Federal agency and the educational institution have established a 
disclosure statement due date pursuant to a written agreement executed 
prior to January 1, 1996, and award is made

[[Page 295]]

prior to the established disclosure statement due date.

[57 FR 14153, Apr. 17, 1992; 57 FR 34167, Aug. 3, 1992, as amended at 58 
FR 58802, Nov. 4, 1993; 59 FR 55756, Nov. 8, 1994; 65 FR 36770, June 9, 
2000]



9903.202-2  Impracticality of submission.

    The agency head may determine that it is impractical to secure the 
Disclosure Statement, although submission is required, and authorize 
contract award without obtaining the Statement. He shall, within 30 days 
of having done so, submit a report to the Cost Accounting Standards 
Board setting forth all material facts. This authority may not be 
delegated.



9903.202-3  Amendments and revisions.

    Contractors and subcontractors are responsible for maintaining 
accurate Disclosure Statements and complying with disclosed practices. 
Amendments and revisions to Disclosure Statements may be submitted at 
any time and may be proposed by either the contractor or the Government. 
Resubmission of complete, updated, Disclosure Statements is discouraged 
except when extensive changes require it to assist the review process.



9903.202-4  Privileged and confidential information.

    If the offeror or contractor notifies the contracting officer that 
the Disclosure Statement contains trade secrets and commercial or 
financial information, which is privileged and confidential, the 
Disclosure Statement shall be protected and shall not be released 
outside the Government.



9903.202-5  Filing Disclosure Statements.

    (a) Disclosure must be on Form Number CASB DS-1 or CASB DS-2, as 
applicable. Forms may be obtained from the cognizant Federal agency 
(cognizant ACO or cognizant Federal agency official authorized to act in 
that capacity) or from the looseleaf version of the Federal Acquisition 
Regulation. When requested in advance by a contractor, the cognizant 
Federal agency may authorize contractor disclosure based on computer 
generated reproductions of the applicable Disclosure Statement Form.
    (b) Offerors are required to file Disclosure Statements as follows:
    (1) Original and one copy with the cognizant ACO or cognizant 
Federal agency official acting in that capacity, as applicable; and
    (2) One copy with the cognizant Federal auditor.
    (c) Amendments and revisions shall be submitted to the ACO or agency 
official acting in that capacity, as applicable, and the Federal auditor 
of the currently cognizant Federal agency.

[59 FR 55757, Nov. 8, 1994]



9903.202-6  Adequacy of Disclosure Statement.

    Federal agencies shall prescribe regulations and establish internal 
procedures by which each will promptly determine on behalf of the 
Government, when serving as the cognizant Federal agency for a 
particular contractor location, that a Disclosure Statement has 
adequately disclosed the practices required to be disclosed by the Cost 
Accounting Standards Board's rules, regulations and Standards. The 
determination of adequacy shall be distributed to all affected agencies. 
Agencies are urged to coordinate on the development of such regulations.

[59 FR 55757, Nov. 8, 1994]



9903.202-7  [Reserved]



9903.202-8  Subcontractor Disclosure Statements.

    (a) The contractor or higher tier subcontractor is responsible for 
administering the CAS requirements contained in subcontracts.
    (b) If the subcontractor has previously furnished a Disclosure 
Statement to an ACO, the subcontractor may satisfy the submission 
requirement by identifying to the contractor or higher tier 
subcontractor the ACO to whom it was submitted.
    (c)(1) If the subcontractor considers the Disclosure Statement (or 
other similar information) privileged or confidential, the subcontractor 
may submit it directly to the ACO and auditor cognizant of the 
subcontractor, notifying the contractor or higher tier subcontractor. A 
preaward determination

[[Page 296]]

of adequacy is not required in such cases. Instead, the ACO cognizant of 
the subcontractor shall
    (i) Notify the auditor that the adequacy review will be performed 
during the postaward compliance review and, upon completion,
    (ii) Notify the subcontractor, the contractor or higher tier 
subcontractor, and the cognizant ACOs of the findings.
    (2) Even though a Disclosure Statement is not required, a 
subcontractor may
    (i) Claim that CAS-related reviews by contractors or higher tier 
subcontractors would reveal proprietary data or jeopardize the 
subcontractor's competitive position and
    (ii) Request that the Government perform the required reviews.
    (d) When the Government requires determinations of adequacy or 
inadequacy, the ACO cognizant of the subcontractor shall make such 
recommendation to the ACO cognizant of the prime contractor or next 
higher tier subcontractor. ACOs cognizant of higher tier subcontractors 
or prime contractors shall not reverse the determination of the ACO 
cognizant of the subcontractor.



9903.202-9  Illustration of Disclosure Statement Form, CASB-DS-1.

    The data which are required to be disclosed are set forth in detail 
in the Disclosure Statement Form, CASB-DS-1, which is illustrated below:

[[Page 297]]

[GRAPHIC] [TIFF OMITTED] TC02FE91.004


[[Page 298]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.005


[[Page 299]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.006


[[Page 300]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.007


[[Page 301]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.008


[[Page 302]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.009


[[Page 303]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.010


[[Page 304]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.011


[[Page 305]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.012


[[Page 306]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.013


[[Page 307]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.014


[[Page 308]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.015


[[Page 309]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.016


[[Page 310]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.017


[[Page 311]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.018


[[Page 312]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.019


[[Page 313]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.020


[[Page 314]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.021


[[Page 315]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.022


[[Page 316]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.023


[[Page 317]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.024


[[Page 318]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.025


[[Page 319]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.026


[[Page 320]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.027


[[Page 321]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.028


[[Page 322]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.029


[[Page 323]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.030


[[Page 324]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.031


[[Page 325]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.032


[[Page 326]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.033


[[Page 327]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.034


[[Page 328]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.035


[[Page 329]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.036


[[Page 330]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.037


[[Page 331]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.038


[[Page 332]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.039


[[Page 333]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.040


[[Page 334]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.041


[[Page 335]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.042


[[Page 336]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.043


[[Page 337]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.044


[61 FR 7621, Feb. 28, 1996]



9903.202-10  Illustration of Disclosure Statement Form, CASB DS-2.

    The data which are required to be disclosed by educational 
institutions are set forth in detail in the Disclosure Statement Form, 
CASB DS-2, which is illustrated below:

[[Page 338]]

[GRAPHIC] [TIFF OMITTED] TC02FE91.045


[[Page 339]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.046


[[Page 340]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.047


[[Page 341]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.048


[[Page 342]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.049


[[Page 343]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.050


[[Page 344]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.051


[[Page 345]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.052


[[Page 346]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.053


[[Page 347]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.054


[[Page 348]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.055


[[Page 349]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.056


[[Page 350]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.057


[[Page 351]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.058


[[Page 352]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.059


[[Page 353]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.060


[[Page 354]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.061


[[Page 355]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.062


[[Page 356]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.063


[[Page 357]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.064


[[Page 358]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.065


[[Page 359]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.066


[[Page 360]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.067


[[Page 361]]


[GRAPHIC] [TIFF OMITTED] TC02FE91.068


[59 FR 55757, Nov. 8, 1994]

[[Page 362]]



                Subpart 9903.3--CAS Rules and Regulations



9903.301  Definitions.

    (a) The definitions set forth below apply to this chapter 99.
    Accrued benefit cost method. See 9904.412-30.
    Accumulating costs. See 9904.401-30.
    Actual cash value. See 9904.416-30.
    Actual cost. See 9904.401-30 for the broader definition and 
9904.407-30 for a more restricted definition applicable only to the 
standard on the use of standard costs for direct material and direct 
labor.
    Actuarial assumption. See 9904.412-30 or 9904.413-30.
    Actuarial cost method. See 9904.412-30 or 9904.413-30.
    Actuarial gain and loss. See 9904.412-30 or 9904.413-30.
    Actuarial liability. See 9904.412-30 or 9904.413-30.
    Actuarial valuation. See 9904.412-30 or 9904.413-30.
    Allocate. See 9904.402-30, 9904.403-30, 9904.406-30, 9904.410-30, 
9904.411-30, 9904.418-30 or 9904.420-30.
    Asset accountability unit. See 9904.404-30.
    Assignment of cost to cost accounting periods. See 9903.302-1(b).
    Bid and proposal (B&P) cost. See 9904.420-30.
    Business unit. See 9904.410-30, 9904.411-30 or 9904.414-30.
    CAS-covered contract, as used in this part, means any negotiated 
contract or subcontract in which a CAS clause is required to be 
included.
    Category of material. See 9904.411-30.
    Change to a cost accounting practice. See 9903.302-2.
    Compensated personal absence. See 9904.408-30.
    Cost accounting practice. See 9903.302-1.
    Cost input. See 9904.410-30.
    Cost objective. See 9904.402-30, 9904.406-30, 9904.410-30 or 
9904.411-30.
    Cost of capital committed to facilities. See 9904.414-30.
    Currently performing, as used in this part, means that a contractor 
has been awarded a contract, but has not yet received notification of 
final acceptance of all supplies, services, and data deliverable under 
the contract (including options).
    Deferred compensation. See 9904.415-30.
    Defined-benefit pension plan. See 9904.412-30.
    Defined-contribution pension plan. See 9904.412-30.
    Direct cost. See 9904.402-30 or 9904.418-30.
    Directly associated cost. See 9904.405-30.
    Disclosure statement, as used in this part, means the Disclosure 
Statement required by 9903.202-1.
    Entitlement. See 9904.408-30.
    Estimating costs. See 9904.401-30.
    Expressly unallowable cost. See 9904.405-30.
    Facilities capital. See 9904.414-30.
    Final cost objective. See 9904.402-30 or 9904.410-30.
    Fiscal year. See 9904.406-30.
    Funded pension cost. See 9904.412-30.
    Funding agency. See 9904.412-30.
    General and administrative (G&A) expense. See 9904.410-30 or 
9904.420-30.
    Home office. See 9904.403-30 or 9904.420-30.
    Immediate-gain actuarial cost method. See 9904.413-30.
    Independent research and development (IR&D) cost. See 9904.420-30.
    Indirect cost. See 9904.402-30, 9904.405-30, 9904.418-30 or 
9904.420-30.
    Indirect cost pool. See 9904.401-30, 9904.402-30, 9904.406-30 or 
9904.418-30.
    Insurance administration expenses. See 9904.416-30.
    Intangible capital asset. See 9904.414-30 or 9904.417-30.
    Labor cost at standard. See 9904.407-30.
    Labor-rate standard. See 9904.407-30.
    Labor-time standard. See 9904.407-30.
    Material cost at standard. See 9904.407-30.
    Material inventory record. See 9904.411-30.
    Material-price standard. See 9904.407-30.
    Material-quantity standard. See 9904.407-30.
    Measurement of cost. See 9904.302-1(c).
    Moving average cost. See 9904.411-30.
    Multiemployer pension plan. See 9904.412-30.
    Negotiated subcontract, as used in this part, means any subcontract 
except a firm fixed-price subcontract made by a contractor or 
subcontractor after receiving offers from at least two persons

[[Page 363]]

not associated with each other or with such contractor or subcontractor, 
providing
    (1) The solicitation to all competitors is identical,
    (2) Price is the only consideration in selecting the subcontractor 
from among the competitors solicited, and
    (3) The lowest offer received in compliance with the solicitation 
from among those solicited is accepted.
    Net awards, as used in this chapter, means the total value of 
negotiated CAS-covered prime contract and subcontract awards, including 
the potential value of contract options, received during the reporting 
period minus cancellations, terminations, and other related credit 
transactions.
    Normal cost. See 9904.412-30 or 9904.413-30.
    Operating revenue. See 9904.403-30.
    Original complement of low cost equipment. See 9904.404-30.
    Pay-as-you-go cost method. See 9904.412-30.
    Pension plan. See 9904.412-30 or 9904.413-30.
    Pension plan participant. See 9904.413-30.
    Pricing. See 9904.401-30.
    Production unit. See 9904.407-30.
    Projected average loss. See 9904.416-30.
    Projected benefit cost method. See 9904.412-30 or 9904.413-30.
    Proposal. See 9904.401-30.
    Repairs and maintenance. See 9904.404-30.
    Reporting costs. See 9904.401-30.
    Residual value. See 9904.409-30.
    Segment. See 9904.403-30, 9904.410-30, 9904.413-30 or 9904.420-30.
    Self-insurance. See 9904.416-30.
    Self-insurance charge. See 9904.416-30.
    Service life. See 9904.409-30.
    Small business, as used in this part, means any concern, firm, 
person, corporation, partnership, cooperative, or other business 
enterprise which, under 15 U.S.C. 637(b)(6) and the rules and 
regulations of the Small Business Administration in Part 121 of Title 13 
of the Code of Federal Regulations, is determined to be a small business 
concern for the purpose of Government contracting.
    Spread-gain actuarial cost method. See 9904.413-30.
    Standard cost. See 9904.407-30.
    Tangible capital asset. See 9904.403-30, 9904.404-30, 9904.409-30, 
9904.414-30 or 9904.417-30.
    Termination gain or loss. See 9904.413-30.
    Unallowable cost. See 9904.405-30.
    Variance. See 9904.407-30.
    Weighted average cost. See 9904.411-30.
    (b) The definitions set forth below are applicable exclusively to 
educational institutions and apply to this chapter 99.
    Business unit. See 9903.201-2(c)(2)(ii).
    Educational institution. See 9903.201-2(c)(2)(i).
    Intermediate cost objective. See 9905.502-30(a)(7).
    Segment. See 9903.201-2(c)(2)(ii).

[57 FR 14153, Apr. 17, 1992, as amended at 58 FR 58802, Nov. 4, 1993; 59 
FR 55770, Nov. 8, 1994; 61 FR 39361, July 29, 1996]



9903.302  Definitions, explanations, and illustrations of the terms, ``cost accounting practice'' and ``change to a cost accounting practice.''



9903.302-1  Cost accounting practice.

    Cost accounting practice, as used in this part, means any disclosed 
or established accounting method or technique which is used for 
allocation of cost to cost objectives, assignment of cost to cost 
accounting periods, or measurement of cost.
    (a) Measurement of cost, as used in this part, encompasses 
accounting methods and techniques used in defining the components of 
cost, determining the basis for cost measurement, and establishing 
criteria for use of alternative cost measurement techniques. The 
determination of the amount paid or a change in the amount paid for a 
unit of goods and services is not a cost accounting practice. Examples 
of cost accounting practices which involve measurement of costs are--
    (1) The use of either historical cost, market value, or present 
value;
    (2) The use of standard cost or actual cost; or
    (3) The designation of those items of cost which must be included or 
excluded from tangible capital assets or pension cost.
    (b) Assignment of cost to cost accounting periods, as used in this 
part, refers

[[Page 364]]

to a method or technique used in determining the amount of cost to be 
assigned to individual cost accounting periods. Examples of cost 
accounting practices which involve the assignment of cost to cost 
accounting periods are requirements for the use of specified accrual 
basis accounting or cash basis accounting for a cost element.
    (c) Allocation of cost to cost objectives, as used in this part, 
includes both direct and indirect allocation of cost. Examples of cost 
accounting practices involving allocation of cost to cost objectives are 
the accounting methods or techniques used to accumulate cost, to 
determine whether a cost is to be directly or indirectly allocated to 
determine the composition of cost pools, and to determine the selection 
and composition of the appropriate allocation base.



9903.302-2  Change to a cost accounting practice.

    Change to a cost accounting practice, as used in this part, means 
any alteration in a cost accounting practice, as defined in 9903.302-1, 
whether or not such practices are covered by a Disclosure Statement, 
except for the following:
    (a) The initial adoption of a cost accounting practice for the first 
time a cost is incurred, or a function is created, is not a change in 
cost accounting practice. The partial or total elimination of a cost or 
the cost of a function is not a change in cost accounting practice. As 
used here, function is an activity or group of activities that is 
identifiable in scope and has a purpose or end to be accomplished.
    (b) The revision of a cost accounting practice for a cost which 
previously had been immaterial is not a change in cost accounting 
practice.



9903.302-3  Illustrations of changes which meet the definition of ``change to a cost accounting practice.''

    (a) The method or technique used for measuring costs has been 
changed.

------------------------------------------------------------------------
              Description                      Accounting treatment
------------------------------------------------------------------------
(1) Contractor changes its actuarial     (1)(i) Before change: The
 cost method for computing pension        contractor computed pension
 costs..                                  costs using the aggregate cost
                                          method.
                                         (ii) After change: The
                                          contractor computes pension
                                          cost using the unit credit
                                          method.
(2) Contractor uses standard costs to    (2)(i) Before change:
 account for its direct labor. Labor      Contractor's direct labor cost
 cost at standard was computed by         was measured with only one
 multiplying labor-time standard by       component set at standard.
 actual labor rates. The contractor      (ii) After change: Contractor's
 changes the computation by multiplying   direct labor cost is measured
 labor-time standard by labor-rate        with both the time and rate
 standard.                                components set at standard.
------------------------------------------------------------------------

(b) The method or technique used for assignment of cost to cost 
accounting periods has been changed.

------------------------------------------------------------------------
              Description                      Accounting treatment
------------------------------------------------------------------------
(1) Contractor changes his established   (1)(i) Before change: Items
 criteria for capitalizing certain        having acquisition costs of
 classes of tangible capital assets       between $200 and $400 per unit
 whose acquisition costs totaled $1       were capitalized and
 million per cost accounting period.      depreciated over a number of
                                          cost accounting periods.
                                         (ii) After change: The
                                          contractor charges the value
                                          of assets costing between $200
                                          and $400 per unit to an
                                          indirect expense pool which is
                                          allocated to the cost
                                          objectives of the cost
                                          accounting period in which the
                                          cost was incurred.
(2) Contractor changes his methods for   (2)(i) Before change: The
 computing depreciation for a class of    contractor assigned
 assets.                                  depreciation costs to cost
                                          accounting periods using an
                                          accelerated method.
                                         (ii) After change: The
                                          contractor assigns
                                          depreciation costs to cost
                                          accounting periods using the
                                          straight line method.
(3) Contractor changes his general       (3)(i) Before change: The
 method of determining asset lives for    contractor identified the cost
 classes of assets acquired prior to      accounting periods to which
 the effective date of CAS 409.           the cost of tangible capital
                                          assets would be assigned using
                                          guideline class lives provided
                                          in IRS Rev. Pro. 72-10.
                                         (ii) After change: The
                                          contractor changes the method
                                          by which he identifies the
                                          cost accounting periods to
                                          which the costs of tangible
                                          capital assets will be
                                          assigned. He now uses the
                                          expected actual lives based on
                                          past usage.
------------------------------------------------------------------------

(c) The method or technique used for allocating costs has been changed.

[[Page 365]]



------------------------------------------------------------------------
              Description                      Accounting treatment
------------------------------------------------------------------------
(1) Contractor changes his method of     (1)(i) Before change: The
 allocating G&A expenses under the        contractor operating under
 requirements of Cost Accounting          Cost Accounting Standard 410
 Standard 410.                            has been allocating his
                                          general and administrative
                                          expense pool to final cost
                                          objectives on a total cost
                                          input base in compliance with
                                          the Standard. The contractor's
                                          business changes substantially
                                          such that there are
                                          significant new projects which
                                          have only insignificant
                                          quantities of material.
                                         (ii) After change: After the
                                          addition of the new work, an
                                          evaluation of the changed
                                          circumstances reveals that the
                                          continued use of a total cost
                                          input base would result in a
                                          significant distortion in the
                                          allocation of the G&A expense
                                          pool in relation to the
                                          benefits received. To remain
                                          in compliance with Standard
                                          410, the contractor alters his
                                          G&A allocation base from a
                                          total cost input base to a
                                          value added base.
(2) The contractor changes the           (2)(i) Before change: The
 accounting for hardware common to all    contractor allocated the cost
 projects.                                of purchased or requisitioned
                                          hardware directly to projects.
                                         (ii) After change: The
                                          contractor charges the cost of
                                          purchased or requisitioned
                                          hardware to an indirect
                                          expense pool which is
                                          allocated to projects using an
                                          appropriate allocation base.
(3) The contractor merges operating      (3)(i) Before change: In
 segment A and B which use different      segment, A, the costs of the
 cost accounting practices in             manufacturing overhead pool
 accounting for manufacturing overhead    have been allocated to final
 costs.                                   cost objectives using a direct
                                          labor hours base; in segment
                                          B, the costs of the
                                          manufacturing overhead pool
                                          have been allocated to final
                                          cost objectives using a direct
                                          labor dollars base.
                                         (ii) After change: As a result
                                          of the merger of operations,
                                          the combined segment decides
                                          to allocate the cost of the
                                          manufacturing overhead pool to
                                          all final cost objectives,
                                          using a direct labor dollars
                                          base. Thus, for those final
                                          cost objectives referred to in
                                          segment A, the cost of the
                                          manufacturing overhead pool
                                          will be allocated to the final
                                          cost objectives of segment A
                                          using a direct labor dollars
                                          base instead of a direct labor
                                          hours base.
------------------------------------------------------------------------



9903.302-4  Illustrations of changes which do not meet the definition of ``Change to a cost accounting practice.''

------------------------------------------------------------------------
              Description                      Accounting treatment
------------------------------------------------------------------------
(a) Changes in the interest rate levels  (a) Adopting the increase
 in the national economy have             (decrease) in the interest
 invalidated the prior actuarial          rate actuarial assumption is
 assumption with respect to anticipated   not a change in cost
 investment earnings. The pension plan    accounting practice.
 administrators adopted an increased
 (decreased) interest rate actuarial
 assumption. The company allocated the
 resulting pension costs to all final
 cost objectives.
(b) The basic benefit amount for a       (b) The increase in the amount
 company's pension plan is increased      of the benefits is not a
 from $8 to $10 per year of credited      change in cost accounting
 service. The change increases the        practice.
 dollar amount of pension cost
 allocated to all final cost objectives.
(c) A contractor who has never paid      (c) The initial adoption of an
 pensions establishes for the first       accounting practice for the
 time a pension plan. Pension costs for   first time incurrence of a
 the first year amounted to $3.5          cost is not a change in cost
 million.                                 accounting practice.
(d) A contractor maintained a Deferred   (d) There was a termination of
 Incentive Compensation Plan. After       the Deferred Incentive
 several years' experience, the plan      Compensation Plan. Elimination
 was determined not to be attaining its   of a cost is not a change in
 objective, so it was terminated, and     cost accounting practice.
 no future entitlements were paid.
(e) A contractor eliminates a segment    (e) The projects and expenses
 that was operated for the purpose of     related to nuclear energy
 doing research for development of        projects have been terminated.
 products related to nuclear energy.      No transfer of these projects
                                          and no further work in this
                                          area is planned. This is an
                                          elimination of cost and not a
                                          change in cost accounting
                                          practice.

[[Page 366]]

 
(f) For a particular class of assets     (f) The change in estimate (not
 for which technological changes have     in method) is not a change in
 rarely affected asset lives, a           cost accounting practice. The
 contractor starts with a 5-year          contractor has not changed the
 average of historical lives to           method or technique used to
 estimate future lives. He then           determine the estimate. The
 considers technological changes and      methodology applied has
 likely use. For the past several years   indicated a change in the
 the process resulted in an estimated     estimated life, and this is
 future life of 10 years for this class   not a change in cost
 of assets. This year a technological     accounting practice.
 change leads to a prediction of a
 useful life of 7 years for the assets
 acquired this year for the class of
 assets.
(g) The marketing department of a        (g) After the organization
 segment has reported directly to the     change in the company's
 general manager of the segment. The      reporting structure, the
 costs of the marketing department have   parties agree that the
 been combined as part of the segment's   appropriate recognition of the
 G&A expense pool. The company            beneficial or causal
 reorganizes and requires the marketing   relationship between the costs
 department to report directly to a       of the marketing department
 vice president at corporate              and the segment is to continue
 headquarters.                            to combine these costs as part
                                          of the segment's G&A expense
                                          pool. Thus, the organizational
                                          change has not resulted in a
                                          change in cost accounting
                                          practice.
------------------------------------------------------------------------



9903.303  Effect of filing Disclosure Statement.

    (a) A disclosure of a cost accounting practice by a contractor does 
not determine the allowability of particular items of cost. Irrespective 
of the practices disclosed by a contractor, the question of whether or 
not, or the extent to which, a specific element of cost is allowed under 
a contract remains for consideration in each specific instance. 
Contractors are cautioned that the determination of the allowability of 
cost items will remain a responsibility of the contracting officers 
pursuant to the provisions of the applicable procurement regulations.
    (b) The individual Disclosure Statement may be used in audits of 
contracts or in negotiation of prices leading to contracts. The 
authority of the audit agencies and the contracting officers is in no 
way abrogated by the material presented by the contractor in his 
Disclosure Statement. Contractors are cautioned that their disclosures 
must be complete and accurate; the practices disclosed may have a 
significant impact on ways in which contractors will be required to 
comply with Cost Accounting Standards.



9903.304  Concurrent full and modified coverage.

    Contracts subject to full coverage may be performed during a period 
in which a previously awarded contract subject to modified coverage is 
being performed. Compliance with full coverage may compel the use of 
cost accounting practices that are not required under modified coverage. 
Under these circumstances the cost accounting practices applicable to 
contracts subject to modified coverage need not be changed. Any 
resulting differences in practices between contracts subject to full 
coverage and those subject to modified coverage shall not constitute a 
violation of 9904.401 and 9904.402. This principle also applies to 
contracts subject to modified coverage being performed during a period 
in which a previously awarded contract subject to full coverage is being 
performed.



9903.305  Materiality.

    In determining whether amounts of cost are material or immaterial, 
the following criteria shall be considered where appropriate; no one 
criterion is necessarily determinative:
    (a) The absolute dollar amount involved. The larger the dollar 
amount, the more likely that it will be material.
    (b) The amount of contract cost compared with the amount under 
consideration. The larger the proportion of the amount under 
consideration to contract cost, the more likely it is to be material.
    (c) The relationship between a cost item and a cost objective. 
Direct cost items, especially if the amounts are themselves part of a 
base for allocation of indirect costs, will normally have more impact 
than the same amount of indirect costs.
    (d) The impact on Government funding. Changes in accounting 
treatment will have more impact if they influence

[[Page 367]]

the distribution of costs between Government and non-Government cost 
objectives than if all cost objectives have Government financial 
support.
    (e) The cumulative impact of individually immaterial items. It is 
appropriate to consider whether such impacts:
    (1) Tend to offset one another, or
    (2) Tend to be in the same direction and hence to accumulate into a 
material amount.
    (f) The cost of administrative processing of the price adjustment 
modification shall be considered. If the cost to process exceeds the 
amount to be recovered, it is less likely the amount will be material.



9903.306  Interpretations.

    In determining amounts of increased costs in the clauses at 
9903.201-4(a), Cost Accounting Standards, 9903.201-4(c), Disclosure and 
Consistency of Cost Accounting Practices, and 9903.201-4(d), Consistency 
in Cost Accounting, the following considerations apply:
    (a) Increased costs shall be deemed to have resulted whenever the 
cost paid by the Government results from a change in a contractor's cost 
accounting practices or from failure to comply with applicable Cost 
Accounting Standards, and such cost is higher than it would have been 
had the practices not been changed or applicable Cost Accounting 
Standards complied with.
    (b) If the contractor under any fixed-price contract, including a 
firm fixed-price contract, fails during contract performance to follow 
its cost accounting practices or to comply with applicable Cost 
Accounting Standards, increased costs are measured by the difference 
between the contract price agreed to and the contract price that would 
have been agreed to had the contractor proposed in accordance with the 
cost accounting practices used during contract performance. The 
determination of the contract price that would have been agreed to will 
be left to the contracting parties and will depend on the circumstances 
of each case.
    (c) The statutory requirement underlying this interpretation is that 
the United States not pay increased costs, including a profit enlarged 
beyond that in the contemplation of the parties to the contract when the 
contract costs, price, or profit is negotiated, by reason of a 
contractor's failure to use applicable Cost Accounting Standards, or to 
follow consistently its cost accounting practices. In making price 
adjustments under the Cost Accounting Standards clause at 9903.201-4(a) 
in fixed price or cost reimbursement incentive contracts, or contracts 
providing for prospective or retroactive price redetermination, the 
Federal agency shall apply this requirement appropriately in the 
circumstances.
    (d) The contractor and the contracting officer may enter into an 
agreement as contemplated by subdivision (a)(4)(ii) of the Cost 
Accounting Standards clause at 9903.201-4(a), covering a change in 
practice proposed by the Government or the contractor for all of the 
contractor's contracts for which the contracting officer is responsible, 
provided that the agreement does not permit any increase in the cost 
paid by the Government. Such agreement may be made final and binding, 
notwithstanding the fact that experience may subsequently establish that 
the actual impact of the change differed from that agreed to.
    (e) An adjustment to the contract price or of cost allowances 
pursuant to the Cost Accounting Standards clause at 9903.201-4(a) may 
not be required when a change in cost accounting practices or a failure 
to follow Standards or cost accounting practices is estimated to result 
in increased costs being paid under a particular contract by the United 
States. This circumstance may arise when a contractor is performing two 
or more covered contracts, and the change or failure affects all such 
contracts. The change or failure may increase the cost paid under one or 
more of the contracts, while decreasing the cost paid under one or more 
of the contracts. In such case, the Government will not require price 
adjustment for any increased costs paid by the United States, so long as 
the cost decreases under one or more contracts are at least equal to the 
increased cost under the other affected contracts, provided that the 
contractor and the affected contracting officers agree on the method by 
which the price adjustments are

[[Page 368]]

to be made for all affected contracts. In this situation, the 
contracting agencies would, of course, require an adjustment of the 
contract price or cost allowances, as appropriate, to the extent that 
the increases under certain contracts were not offset by the decreases 
under the remaining contracts.
    (f) Whether cost impact is recognized by modifying a single 
contract, several but not all contracts, or all contracts, or any other 
suitable technique, is a contract administration matter. The Cost 
Accounting Standards rules do not in any way restrict the capacity of 
the parties to select the method by which the cost impact attributable 
to a change in cost accounting practice is recognized.



9903.307  Cost Accounting Standards Preambles.

    Preambles to the Cost Accounting Standards published by the original 
Cost Accounting Standards Board, as well as those preambles published by 
the signatories to the Federal Acquisition Regulation respecting changes 
made under their regulatory authorities, are available by writing to 
the: Publications Office, Office of Administration, Executive Office of 
the President, 725 17th Street NW., room 2200, Washington, DC 20500, or 
by calling (202) 395-7332.



PART 9904--COST ACCOUNTING STANDARDS--Table of Contents




Sec.
9904.400  [Reserved]
9904.401  Cost accounting standard--consistency in estimating, 
          accumulating and reporting costs.
9904.401-10  [Reserved]
9904.401-20  Purpose.
9904.401-30  Definitions.
9904.401-40  Fundamental requirement.
9904.401-50  Techniques for application.
9904.401-60  Illustrations.
9904.401-61  Interpretation.
9904.401-62  Exemption.
9904.401-63  Effective date.
9904.402  Cost accounting standard--consistency in allocating costs 
          incurred for the same purpose.
9904.402-10  [Reserved]
9904.402-20  Purpose.
9904.402-30  Definitions.
9904.402-40  Fundamental requirement.
9904.402-50  Techniques for application.
9904.402-60  Illustrations.
9904.402-61  Interpretation.
9904.402-62  Exemption.
9904.402-63  Effective date.
9904.403  Allocation of home office expenses to segments.
9904.403-10  [Reserved]
9904.403-20  Purpose.
9904.403-30  Definitions.
9904.403-40  Fundamental requirement.
9904.403-50  Techniques for application.
9904.403-60  Illustrations.
9904.403-61  Interpretation.
9904.403-62  Exemption. [Reserved]
9904.403-63  Effective date.
9904.404  Capitalization of tangible assets.
9904.404-10  [Reserved]
9904.404-20  Purpose.
9904.404-30  Definitions.
9904.404-40  Fundamental requirement.
9904.404-50  Techniques for application.
9904.404-60  Illustrations.
9904.404-61  Interpretation. [Reserved]
9904.404-62  Exemption.
9904.404-63  Effective date.
9904.405  Accounting for unallowable costs.
9904.405-10  [Reserved]
9904.405-20  Purpose.
9904.405-30  Definitions.
9904.405-40  Fundamental requirement.
9904.405-50  Techniques for application.
9904.405-60  Illustrations.
9904.405-61  Interpretation. [Reserved]
9904.405-62  Exemption.
9904.405-63  Effective date.
9904.406  Cost accounting standard--cost accounting period.
9904.406-10  [Reserved]
9904.406-20  Purpose.
9904.406-30  Definitions.
9904.406-40  Fundamental requirement.
9904.406-50  Techniques for application.
9904.406-60  Illustrations.
9904.406-61  Interpretation.
9904.406-62  Exemption.
9904.406-63  Effective date.
9904.407  Use of standard costs for direct material and direct labor.
9904.407-10  [Reserved]
9904.407-20  Purpose.
9904.407-30  Definitions.
9904.407-40  Fundamental requirement.
9904.407-50  Techniques for application.
9904.407-60  Illustrations.
9904.407-61  Interpretation. [Reserved]
9904.407-62  Exemption.
9904.407-63  Effective date.
9904.408  Accounting for costs of compensated personal absence.
9904.408-10  [Reserved]
9904.408-20  Purpose.
9904.408-30  Definitions.
9904.408-40  Fundamental requirement.
9904.408-50  Techniques for application.
9904.408-60  Illustrations.
9904.408-61  Interpretation. [Reserved]
9904.408-62  Exemption.

[[Page 369]]

9904.408-63  Effective date.
9904.409  Cost accounting standard--depreciation of tangible capital 
          assets.
9904.409-10  [Reserved]
9904.409-20  Purpose.
9904.409-30  Definitions.
9904.409-40  Fundamental requirement.
9904.409-50  Techniques for application.
9904.409-60  Illustrations.
9904.409-61  Interpretation. [Reserved]
9904.409-62  Exemption.
9904.409-63  Effective date.
9904.410  Allocation of business unit general and administrative 
          expenses to final cost objectives.
9904.410-10  [Reserved]
9904.410-20  Purpose.
9904.410-30  Definitions.
9904.410-40  Fundamental requirement.
9904.410-50  Techniques for application.
9904.410-60  Illustrations.
9904.410-61  Interpretation. [Reserved]
9904.410-62  Exemption.
9904.410-63  Effective date.
9904.411  Cost accounting standard--accounting for acquisition costs of 
          material.
9904.411-10  [Reserved]
9904.411-20  Purpose.
9904.411-30  Definitions.
9904.411-40  Fundamental requirement.
9904.411-50  Techniques for application.
9904.411-60  Illustrations.
9904.411-61  Interpretation. [Reserved]
9904.411-62  Exemption.
9904.411-63  Effective date.
9904.412  Cost accounting standard for composition and measurement of 
          pension cost.
9904.412-10  [Reserved]
9904.412-20  Purpose.
9904.412-30  Definitions.
9904.412-40  Fundamental requirement.
9904.412-50  Techniques for application.
9904.412-60  Illustrations.
9904.412-61  Interpretation. [Reserved]
9904.412-62  Exemption.
9904.412-63  Effective date.
9904.412-64  Transition method.
9904.413  Adjustment and allocation of pension cost.
9904.413-10  [Reserved]
9904.413-20  Purpose.
9904.413-30  Definitions.
9904.413-40  Fundamental requirement.
9904.413-50  Techniques for application.
9904.413-60  Illustrations.
9904.413-61  Interpretation. [Reserved]
9904.413-62  Exemption.
9904.413-63  Effective date.
9904.413-64  Transition method.
9904.414  Cost accounting standard--cost of money as an element of the 
          cost of facilities capital.
9904.414-10  [Reserved]
9904.414-20  Purpose.
9904.414-30  Definitions.
9904.414-40  Fundamental requirement.
9904.414-50  Techniques for application.
9904.414-60  Illustrations.
9904.414-61  Interpretation. [Reserved]
9904.414-62  Exemption.
9904.414-63  Effective date.
9904.415  Accounting for the cost of deferred compensation.
9904.415-10  [Reserved]
9904.415-20  Purpose.
9904.415-30  Definitions.
9904.415-40  Fundamental requirement.
9904.415-50  Techniques for application.
9904.415-60  Illustrations.
9904.415-61  Interpretation. [Reserved]
9904.415-62  Exemption.
9904.415-63  Effective date.
9904.416  Accounting for insurance costs.
9904.416-10  [Reserved]
9904.416-20  Purpose.
9904.416-30  Definitions.
9904.416-40  Fundamental requirement.
9904.416-50  Techniques for application.
9904.416-60  Illustrations.
9904.416-61  Interpretation. [Reserved]
9904.416-62  Exemption.
9904.416-63  Effective date.
9904.417  Cost of money as an element of the cost of capital assets 
          under construction.
9904.417-10  [Reserved]
9904.417-20  Purpose.
9904.417-30  Definitions.
9904.417-40  Fundamental requirement.
9904.417-50  Techniques for application.
9904.417-60  Illustrations.
9904.417-61  Interpretation. [Reserved]
9904.417-62  Exemption.
9904.417-63  Effective date.
9904.418  Allocation of direct and indirect costs.
9904.418-10  [Reserved]
9904.418-20  Purpose.
9904.418-30  Definitions.
9904.418-40  Fundamental requirements.
9904.418-50  Techniques for application.
9904.418-60  Illustrations.
9904.418-61  Interpretation. [Reserved]
9904.418-62  Exemptions.
9904.418-63  Effective date.
9904.420  Accounting for independent research and development costs and 
          bid and proposal costs.
9904.420-10  [Reserved]
9904.420-20  Purpose.
9904.420-30  Definitions.
9904.420-40  Fundamental requirement.
9904.420-50  Techniques for application.
9904.420-60  Illustrations.
9904.420-61  Interpretation. [Reserved]
9904.420-62  Exemptions.
9904.420-63  Effective date.

    Authority: Pub. L. 100-679, 102 Stat. 4056, 41 U.S.C. 422.

    Source: 57 FR 14153, Apr. 17, 1992, unless otherwise noted.

[[Page 370]]



9904.400  [Reserved]



9904.401  Cost accounting standard--consistency in estimating, accumulating and reporting costs.



9904.401-10  [Reserved]



9904.401-20  Purpose.

    The purpose of this Cost Accounting Standard is to ensure that each 
contractor's practices used in estimating costs for a proposal are 
consistent with cost accounting practices used by him in accumulating 
and reporting costs. Consistency in the application of cost accounting 
practices is necessary to enhance the likelihood that comparable 
transactions are treated alike. With respect to individual contracts, 
the consistent application of cost accounting practices will facilitate 
the preparation of reliable cost estimates used in pricing a proposal 
and their comparison with the costs of performance of the resulting 
contract. Such comparisons provide one important basis for financial 
control over costs during contract performance and aid in establishing 
accountability for cost in the manner agreed to by both parties at the 
time of contracting. The comparisons also provide an improved basis for 
evaluating estimating capabilities.



9904.401-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection, requires otherwise.
    (1) Accumulating costs means the collecting of cost data in an 
organized manner, such as through a system of accounts.
    (2) Actual cost means an amount determined on the basis of cost 
incurred (as distinguished from forecasted cost), including standard 
cost properly adjusted for applicable variance.
    (3) Estimating costs means the process of forecasting a future 
result in terms of cost, based upon information available at the time.
    (4) Indirect cost pool means a grouping of incurred costs identified 
with two or more objectives but not identified specifically with any 
final cost objective.
    (5) Pricing means the process of establishing the amount or amounts 
to be paid in return for goods or services.
    (6) Proposal means any offer or other submission used as a basis for 
pricing a contract, contract modification or termination settlement or 
for securing payments thereunder.
    (7) Reporting costs means provision of cost information to others.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9904.401-40  Fundamental requirement.

    (a) A contractor's practices used in estimating costs in pricing a 
proposal shall be consistent with his cost accounting practices used in 
accumulating and reporting costs.
    (b) A contractor's cost accounting practices used in accumulating 
and reporting actual costs for a contract shall be consistent with his 
practices used in estimating costs in pricing the related proposal.
    (c) The grouping of homogeneous costs in estimates prepared for 
proposal purposes shall not per se be deemed an inconsistent application 
of cost accounting practices under paragraphs (a) and (b) of this 
section when such costs are accumulated and reported in greater detail 
on an actual cost basis during contract performance.



9904.401-50  Techniques for application.

    (a) The standard allows grouping of homogeneous costs in order to 
cover those cases where it is not practicable to estimate contract costs 
by individual cost element or function. However, costs estimated for 
proposal purposes shall be presented in such a manner and in such detail 
that any significant cost can be compared with the actual cost 
accumulated and reported therefor. In any event the cost accounting 
practices used in estimating costs in pricing a proposal and in 
accumulating and reporting costs on the resulting contract shall be 
consistent with respect to:
    (1) The classification of elements or functions of cost as direct or 
indirect;

[[Page 371]]

    (2) The indirect cost pools to which each element or function of 
cost is charged or proposed to be charged; and
    (3) The methods of allocating indirect costs to the contract.
    (b) Adherence to the requirement of 9904.401-40(a) of this standard 
shall be determined as of the date of award of the contract, unless the 
contractor has submitted cost or pricing data pursuant to 10 U.S.C. 
2306a or 41 U.S.C. 254(d) (Pub. L. 87-653), in which case adherence to 
the requirement of 9904.401-40(a) shall be determined as of the date of 
final agreement on price, as shown on the signed certificate of current 
cost or pricing data. Notwithstanding 9904.401-40(b), changes in 
established cost accounting practices during contract performance may be 
made in accordance with part 99.



9904.401-60  Illustrations.

    (a) The following examples are illustrative of applications of cost 
accounting practices which are deemed to be consistent.

------------------------------------------------------------------------
                                          Practices used in accumulating
 Practices used in estimating costs for  and reporting costs of contract
               proposals                           performance
------------------------------------------------------------------------
1. Contractor estimates an average       1. Contractor records
 direct labor rate for manufacturing      manufacturing direct labor
 direct labor by labor category or        based on actual cost for each
 function.                                individual and collects such
                                          costs by labor category or
                                          function.
2. Contract estimates an average cost    2. Contractor records actual
 for minor standard hardware items,       cost for minor standard
 including nuts, bolts, washers, etc.     hardware items based upon
                                          invoices or material transfer
                                          slips.
3. Contractor uses an estimated rate     3. Contractor accounts for
 for manufacturing overhead to be         manufacturing overhead by
 applied to an estimated direct labor     individual items of cost which
 base. He identifies the items included   are accumulated in a cost pool
 in his estimate of manufacturing         allocated to final cost
 overhead and provides supporting data    objectives on a direct labor
 for the estimated direct labor base.     base.
------------------------------------------------------------------------

(b) The following examples are illustrative of application of cost 
accounting practices which are deemed not to be consistent.

------------------------------------------------------------------------
                                          Practices used in accumulating
Practices used for estimating costs for  and reporting costs of contract
               proposals                           performance
------------------------------------------------------------------------
4. Contractor estimates a total dollar   4. Contractor accounts for
 amount for engineering labor which       engineering labor by cost
 includes disparate and significant       function, i.e. drafting,
 elements or functions of engineering     designing, production,
 labor. Contractor does not provide       engineering, etc.
 supporting data reconciling this
 amount to the estimates for the same
 engineering labor cost functions for
 which he will separately account in
 contract performance.
5. Contractor estimates engineering      5. Contractor accumulates total
 labor by cost function, i.e. drafting,   engineering labor in one
 production engineering, etc.             undifferentiated account.
6. Contractor estimates a single dollar  6. Contractor records
 amount for machining cost to cover       separately the actual costs of
 labor, material and overhead.            machining labor and material
                                          as direct costs, and factory
                                          overhead as indirect costs.
------------------------------------------------------------------------



9904.401-61  Interpretation.

    (a) 9904.401, Cost Accounting Standard--Consistency in Estimating, 
Accumulating and Reporting Costs, requires in 9904.401-40 that a 
contractor's ``practices used in estimating costs in pricing a proposal 
shall be consistent with his cost accounting practices used in 
accumulating and reporting costs.''
    (b) In estimating the cost of direct material requirements for a 
contract, it is a common practice to first estimate the cost of the 
actual quantities to be incorporated in end items. Provisions are then 
made for additional direct material costs to cover expected material 
losses such as those which occur, for example, when items are scrapped, 
fail to meet specifications, are lost, consumed in the manufacturing 
process, or destroyed in testing and qualification processes. The cost 
of some or all of such additional direct material requirements is often 
estimated by the application of one or more percentage factors to the 
total cost of basic direct material requirements or to some other base.
    (c) Questions have arisen as to whether the accumulation of direct 
material costs in an undifferentiated account where a contractor 
estimates a significant part of such costs by means of percentage 
factors is in compliance

[[Page 372]]

with 9904.401. The most serious questions pertain to such percentage 
factors which are not supported by the contractor with accounting, 
statistical, or other relevant data from past experience, nor by a 
program to accumulate actual costs for comparison with such percentage 
estimates. The accumulation of direct costs in an undifferentiated 
account in this circumstance is a cost accounting practice which is not 
consistent with the practice of estimating a significant part of costs 
by means of percentage factors. This situation is virtually identical 
with that described in Illustration 9904.401-60(b)(5), which deals with 
labor.
    (d) 9904.401 does not, however, prescribe the amount of detail 
required in accumulating and reporting costs. The amount of detail 
required may vary considerably depending on the percentage factors used, 
the data presented in justification or lack thereof, and the 
significance of each situation. Accordingly, it is neither appropriate 
nor practical to prescribe a single set of accounting practices which 
would be consistent in all situations with the practices of estimating 
direct material costs by percentage factors. Therefore, the amount of 
accounting and statistical detail to be required and maintained in 
accounting for this portion of direct material costs has been and 
continues to be a matter to be decided by Government procurement 
authorities on the basis of the individual facts and circumstances.



9904.401-62  Exemption.

    None for this Standard.



9904.401-63  Effective date.

    This Standard is effective as of April 17, 1992.

[57 FR 14153, Apr. 17, 1992; 57 FR 34167, Aug. 3, 1992]



9904.402  Cost accounting standard--consistency in allocating costs incurred for the same purpose.



9904.402-10  [Reserved]



9904.402-20  Purpose.

    The purpose of this standard is to require that each type of cost is 
allocated only once and on only one basis to any contract or other cost 
objective. The criteria for determining the allocation of costs to a 
product, contract, or other cost objective should be the same for all 
similar objectives. Adherence to these cost accounting concepts is 
necessary to guard against the overcharging of some cost objectives and 
to prevent double counting. Double counting occurs most commonly when 
cost items are allocated directly to a cost objective without 
eliminating like cost items from indirect cost pools which are allocated 
to that cost objective.



9904.402-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this standard. Other terms defined elsewhere in this part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this section requires otherwise.
    (1) Allocate means to assign an item of cost, or a group of items of 
cost, to one or more cost objectives. This term includes both direct 
assignment of cost and the reassignment of a share from an indirect cost 
pool.
    (2) Cost objective means a function, organizational subdivision, 
contract, or other work unit for which cost data are desired and for 
which provision is made to accumulate and measure the cost to processes, 
products, jobs, capitalized projects, etc.
    (3) Direct cost means any cost which is identified specifically with 
a particular final cost objective. Direct costs are not limited to items 
which are incorporated in the end product as material or labor. Costs 
identified specifically with a contract are direct costs of that 
contract. All costs identified specifically with other final cost 
objectives of the contractor are direct costs of those cost objectives.
    (4) Final cost objective means a cost objective which has allocated 
to it both direct and indirect costs, and in the contractor's 
accumulation system, is one of the final accumulation points.
    (5) Indirect cost means any cost not directly identified with a 
single final cost objective, but identified with two or more final cost 
objectives or with at least one intermediate cost objective.

[[Page 373]]

    (6) Indirect cost pool means a grouping of incurred costs identified 
with two or more cost objectives but not specifically identified with 
any final cost objective.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9904.402-40  Fundamental requirement.

    All costs incurred for the same purpose, in like circumstances, are 
either direct costs only or indirect costs only with respect to final 
cost objectives. No final cost objective shall have allocated to it as 
an indirect cost any cost, if other costs incurred for the same purpose, 
in like circumstances, have been included as a direct cost of that or 
any other final cost objective. Further, no final cost objective shall 
have allocated to it as a direct cost any cost, if other costs incurred 
for the same purpose, in like circumstances, have been included in any 
indirect cost pool to be allocated to that or any other final cost 
objective.



9904.402-50  Techniques for application.

    (a) The Fundamental Requirement is stated in terms of cost incurred 
and is equally applicable to estimates of costs to be incurred as used 
in contract proposals.
    (b) The Disclosure Statement to be submitted by the contractor will 
require that he set forth his cost accounting practices with regard to 
the distinction between direct and indirect costs. In addition, for 
those types of cost which are sometimes accounted for as direct and 
sometimes accounted for as indirect, the contractor will set forth in 
his Disclosure Statement the specific criteria and circumstances for 
making such distinctions. In essence, the Disclosure Statement submitted 
by the contractor, by distinguishing between direct and indirect costs, 
and by describing the criteria and circumstances for allocating those 
items which are sometimes direct and sometimes indirect, will be 
determinative as to whether or not costs are incurred for the same 
purpose. Disclosure Statement as used herein refers to the statement 
required to be submitted by contractors as a condition of contracting as 
set forth in subpart 9903.2.
    (c) In the event that a contractor has not submitted a Disclosure 
Statement, the determination of whether specific costs are directly 
allocable to contracts shall be based upon the contractor's cost 
accounting practices used at the time of contract proposal.
    (d) Whenever costs which serve the same purpose cannot equitably be 
indirectly allocated to one or more final cost objectives in accordance 
with the contractor's disclosed accounting practices, the contractor may 
either:
    (1) Use a method for reassigning all such costs which would provide 
an equitable distribution to all final cost objectives, or
    (2) Directly assign all such costs to final cost objectives with 
which they are specifically identified.

In the event the contractor decides to make a change for either purpose, 
the Disclosure Statement shall be amended to reflect the revised 
accounting practices involved.
    (e) Any direct cost of minor dollar amount may be treated as an 
indirect cost for reasons of practicality where the accounting treatment 
for such cost is consistently applied to all final cost objectives, 
provided that such treatment produces results which are substantially 
the same as the results which would have been obtained if such cost had 
been treated as a direct cost.



9904.402-60  Illustrations.

    (a) Illustrations of costs which are incurred for the same purpose:
    (1) Contractor normally allocates all travel as an indirect cost and 
previously disclosed this accounting practice to the Government. For 
purposes of a new proposal, contractor intends to allocate the travel 
costs of personnel whose time is accounted for as direct labor directly 
to the contract. Since travel costs of personnel whose time is accounted 
for as direct labor working on other contracts are costs which are 
incurred for the same purpose, these costs may no longer be included 
within indirect cost pools for purposes of allocation to any covered 
Government contract. Contractor's Disclosure Statement must be amended

[[Page 374]]

for the proposed changes in accounting practices.
    (2) Contractor normally allocates planning costs indirectly and 
allocates this cost to all contracts on the basis of direct labor. A 
proposal for a new contract requires a disproportionate amount of 
planning costs. The contractor prefers to continue to allocate planning 
costs indirectly. In order to equitably allocate the total planning 
costs, the contractor may use a method for allocating all such costs 
which would provide an equitable distribution to all final cost 
objectives. For example, he may use the number of planning documents 
processed rather than his former allocation base of direct labor. 
Contractor's Disclosure Statement must be amended for the proposed 
changes in accounting practices.
    (b) Illustrations of costs which are not incurred for the same 
purpose:
    (1) Contractor normally allocates special tooling costs directly to 
contracts. The costs of general purpose tooling are normally included in 
the indirect cost pool which is allocated to contracts. Both of these 
accounting practices were previously disclosed to the Government. Since 
both types of costs involved were not incurred for the same purpose in 
accordance with the criteria set forth in the Contractor's Disclosure 
Statement, the allocation of general purpose tooling costs from the 
indirect cost pool to the contract, in addition to the directly 
allocated special tooling costs, is not considered a violation of the 
standard.
    (2) Contractor proposes to perform a contract which will require 
three firemen on 24-hour duty at a fixed-post to provide protection 
against damage to highly inflammable materials used on the contract. 
Contractor presently has a firefighting force of 10 employees for 
general protection of the plant. Contractor's costs for these latter 
firemen are treated as indirect costs and allocated to all contracts; 
however, he wants to allocate the three fixed-post firemen directly to 
the particular contract requiring them and also allocate a portion of 
the cost of the general firefighting force to the same contract. He may 
do so but only on condition that his disclosed practices indicate that 
the costs of the separate classes of firemen serve different purposes 
and that it is his practice to allocate the general firefighting force 
indirectly and to allocate fixed-post firemen directly.



9904.402-61  Interpretation.

    (a) 9904.402, Cost Accounting Standard--Consistency in Allocating 
Costs Incurred for the Same Purpose, provides, in 9904.402-40, that `` * 
* * no final cost objective shall have allocated to it as a direct cost 
any cost, if other costs incurred for the same purpose, in like 
circumstances, have been included in any indirect cost pool to be 
allocated to that or any other final cost objective.''
    (b) This interpretation deals with the way 9904.402 applies to the 
treatment of costs incurred in preparing, submitting, and supporting 
proposals. In essence, it is addressed to whether or not, under the 
Standard, all such costs are incurred for the same purpose, in like 
circumstances.
    (c) Under 9904.402, costs incurred in preparing, submitting, and 
supporting proposals pursuant to a specific requirement of an existing 
contract are considered to have been incurred in different circumstances 
from the circumstances under which costs are incurred in preparing 
proposals which do not result from such specific requirement. The 
circumstances are different because the costs of preparing proposals 
specifically required by the provisions of an existing contract relate 
only to that contract while other proposal costs relate to all work of 
the contractor.
    (d) This interpretation does not preclude the allocation, as 
indirect costs, of costs incurred in preparing all proposals. The cost 
accounting practices used by the contractor, however, must be followed 
consistently and the method used to reallocate such costs, of course, 
must provide an equitable distribution to all final cost objectives.



9904.402-62  Exemption.

    None for this Standard.



9904.402-63  Effective date.

    This Standard is effective as of April 17, 1992.

[[Page 375]]



9904.403  Allocation of home office expenses to segments.



9904.403-10  [Reserved]



9904.403-20  Purpose.

    (a) The purpose of this Cost Accounting Standard is to establish 
criteria for allocation of the expenses of a home office to the segments 
of the organization based on the beneficial or causal relationship 
between such expenses and the receiving segments. It provides for:
    (1) Identification of expenses for direct allocation to segments to 
the maximum extent practical;
    (2) Accumulation of significant nondirectly allocated expenses into 
logical and relatively homogeneous pools to be allocated on bases 
reflecting the relationship of the expenses to the segments concerned; 
and
    (3) Allocation of any remaining or residual home office expenses to 
all segments.

Appropriate implementation of this Standard will limit the amount of 
home office expenses classified as residual to the expenses of managing 
the organization as a whole.
    (b) This Standard does not cover the reallocation of a segment's 
share of home office expenses to contracts and other cost objectives.



9904.403-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection, requires otherwise.
    (1) Allocate means to assign an item of cost, or a group of items of 
cost, to one or more cost objectives. This term includes both direct 
assignments of cost and the reassignment of a share from an indirect 
cost pool.
    (2) Home office means an office responsible for directing or 
managing two or more, but not necessarily all, segments of an 
organization. It typically establishes policy for, and provides guidance 
to the segments in their operations. It usually performs management, 
supervisory, or administrative functions, and may also perform service 
functions in support of the operations of the various segments. An 
organization which has intermediate levels, such as groups, may have 
several home offices which report to a common home office. An 
intermediate organization may be both a segment and a home office.
    (3) Operating revenue means amounts accrued or charge to customers, 
clients, and tenants, for the sale of products manufactured or purchased 
for resale, for services, and for rentals of property held primarily for 
leasing to others. It includes both reimbursable costs and fees under 
cost-type contracts and percentage-of-completion sales accruals except 
that it includes only the fee for management contracts under which the 
contractor acts essentially as an agent of the Government in the 
erection or operation of Government-owned facilities. It excludes 
incidental interest, dividends, royalty, and rental income, and proceeds 
from the sale of assets used in the business.
    (4) Segment means one of two or more divisions, product departments, 
plants, or other subdivisions of an organization reporting directly to a 
home office, usually identified with responsibility for profit and/or 
producing a product or service. The term includes Government-owned 
contractor-operated (GOCO) facilities, and joint ventures and 
subsidiaries (domestic and foreign) in which the organization has a 
majority ownership. The term also includes those joint ventures and 
subsidiaries (domestic and foreign) in which the organization has less 
than a majority of ownership, but over which it exercises control.
    (5) Tangible capital asset means 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 services it yields.
    (b) The following modifications of terms defined elsewhere in this 
Chapter 99 are applicable to this Standard: None.



9904.403-40  Fundamental requirement.

    (a)(1) Home office expenses shall be allocated on the basis of the 
beneficial

[[Page 376]]

or causal relationship between supporting and receiving activities. Such 
expenses shall be allocated directly to segments to the maximum extent 
practical. Expenses not directly allocated, if significant in amount and 
in relation to total home office expenses, shall be grouped in logical 
and homogeneous expense pools and allocated pursuant to paragraph (b) of 
this subsection. Such allocations shall minimize to the extent practical 
the amount of expenses which may be categorized as residual (those of 
managing the organization as a whole). These residual expenses shall be 
allocated pursuant to paragraph (c) of this subsection.
    (2) No segment shall have allocated to it as an indirect cost, 
either through a homogeneous expense pool, or the residual expense pool, 
any cost, if other costs incurred for the same purpose have been 
allocated directly to that or any other segment.
    (b) The following subparagraphs provide criteria for allocation of 
groups of home office expenses.
    (1) Centralized service functions. Expenses of centralized service 
functions performed by a home office for its segments shall be allocated 
to segments on the basis of the service furnished to or received by each 
segment. Centralized service functions performed by a home office for 
its segments are considered to consist of specific functions which, but 
for the existence of a home office, would be performed or acquired by 
some or all of the segments individually. Examples include centrally 
performed personnel administration and centralized data processing.
    (2) Staff management of certain specific activities of segments. The 
expenses incurred by a home office for staff management or policy 
guidance functions which are significant in amount and in relation to 
total home office expenses shall be allocated to segments receiving more 
than a minimal benefit over a base, or bases, representative of the 
total specific activity being managed. Staff management or policy 
guidance to segments is commonly provided in the overall direction or 
support of the performance of discrete segment activities such as 
manufacturing, accounting, and engineering (but see paragraph (b)(6) of 
this subsection).
    (3) Line management of particular segments or groups of segments. 
The expense of line management shall be allocated only to the particular 
segment or group of segments which are being managed or supervised. If 
more than one segment is managed or supervised, the expense shall be 
allocated using a base or bases representative of the total activity of 
such segments. Line management is considered to consist of management or 
supervision of a segment or group of segments as a whole.
    (4) Central payments or accruals. Central payments or accruals which 
are made by a home office on behalf of its segments shall be allocated 
directly to segments to the extent that all such payments or accruals of 
a given type or class can be identified specifically with individual 
segments. Central payments or accruals are those which but for the 
existence of a number of segments would be accrued or paid by the 
individual segments. Common examples include centrally paid or accrued 
pension costs, group insurance costs, State and local income taxes and 
franchise taxes, and payrolls paid by a home office on behalf of its 
segments. Any such types of payments or accruals which cannot be 
identified specifically with individual segments shall be allocated to 
benefitted segments using an allocation base representative of the 
factors on which the total payment is based.
    (5) Independent research and development costs and bid and proposal 
costs. Independent research and development costs and bid and proposal 
costs of a home office shall be allocated in accordance with 9904.420.
    (6) Staff management not identifiable with any certain specific 
activities of segments. The expenses incurred by a home office for staff 
management, supervisory, or policy functions, which are not identifiable 
to specific activities of segments shall be allocated in accordance with 
paragraph (c) of this subsection as residual expenses.
    (c) Residual expenses. (1) All home office expenses which are not 
allocable in accordance with paragraph (a) of this subsection and 
paragraphs (b)(1) through (b)(5) of this subsection shall be deemed 
residual expenses. Typical residual expenses are those for the

[[Page 377]]

chief executive, the chief financial officer, and any staff which are 
not identifiable with specific activities of segments. Residual expenses 
shall be allocated to all segments under a home office by means of a 
base representative of the total activity of such segments, except where 
paragraph (c) (2) or (3) of this subsection applies.
    (2) Residual expenses shall be allocated pursuant to 9904.403-
50(c)(1) if the total amount of such expenses for the contractor's 
previous fiscal year (excluding any unallowable costs and before 
eliminating any amounts to be allocated in accordance with paragraph 
(c)(3) of this subsection) exceeds the amount obtained by applying the 
following percentage(s) to the aggregate operating revenue of all 
segments for such previous year: 3.35 percent of the first $100 million; 
0.95 percent of the next $200 million; 0.30 percent of the next $2.7 
billion; 0.20 percent of all amounts over $3 billion. The determination 
required by this paragraph for the 1st year the contractor is subject to 
this Standard shall be based on the pro forma application of this 
Standard to the home office expenses and aggregate operating revenue for 
the contractor's previous fiscal year.
    (3) Where a particular segment receives significantly more or less 
benefit from residual expenses than would be reflected by the allocation 
of such expenses pursuant to paragraph (c) (1) or (2) of this subsection 
(see 9904.403-50(d)), the Government and the contractor may agree to a 
special allocation of residual expenses to such segment commensurate 
with the benefits received. The amount of a special allocation to any 
segment made pursuant to such an agreement shall be excluded from the 
pool of residual expenses to be allocated pursuant to paragraph (c) (1) 
or (2) of this subsection, and such segment's data shall be excluded 
from the base used to allocate this pool.



9904.403-50  Techniques for application.

    (a)(1) Separate expense groupings will ordinarily be required to 
implement 9904.403-40. The number of groupings will depend primarily on 
the variety and significance of service and management functions 
performed by a particular home office. Ordinarily, each service or 
management function will have to be separately identified for allocation 
by means of an appropriate allocation technique. However, it is not 
necessary to identify and allocate different functions separately, if 
allocation in accordance with the relevant requirements of 9904.403-
40(b) can be made using a common allocation base. For example, if the 
personnel department of a home office provides personnel services for 
some or all of the segments (a centralized service function) and also 
established personnel policies for the same segments (a staff management 
function), the expenses of both functions could be allocated over the 
same base, such as the number of personnel, and the separate functions 
do not have to be identified.
    (2) Where the expense of a given function is to be allocated by 
means of a particular allocation base, all segments shall be included in 
the base unless:
    (i) Any excluded segment did not receive significant benefits from, 
or contribute significantly to the cause of the expense to be allocated 
and,
    (ii) Any included segment did receive significant benefits from or 
contribute significantly to the cause of the expense in question.
    (b)(1) Section 9904.403-60 illustrates various expense pools which 
may be used together with appropriate allocation bases. The allocation 
of centralized service functions shall be governed by a hierarchy of 
preferable allocation techniques which represent beneficial or causal 
relationships. The preferred representation of such relationships is a 
measure of the activity of the organization performing the function. 
Supporting functions are usually labor-oriented, machine-oriented, or 
space-oriented. Measures of the activities of such functions ordinarily 
can be expressed in terms of labor hours, machine hours, or square 
footage. Accordingly, costs of these functions shall be allocated by use 
of a rate, such as a rate per labor hour, rate per machine hour or cost 
per square foot, unless such measures are unavailable or impractical to 
ascertain. In these latter cases the basis for allocation shall be a

[[Page 378]]

measurement of the output of the supporting function. Output is measured 
in terms of units of end product produced by the supporting function, as 
for example, number of printed pages for a print shop, number of 
purchase orders processed by a purchasing department, number of hires by 
an employment office.
    (2) Where neither activity nor output of the supporting function can 
be practically measured, a surrogate for the beneficial, or causal 
relationship must be selected. Surrogates used to represent the 
relationship are generally measures of the activity of the segments 
receiving the service; for example, for personnel services reasonable 
surrogates would be number of personnel, labor hours, or labor dollars 
of the segments receiving the service. Any surrogate used should be a 
reasonable measure of the services received and, logically, should vary 
in proportion to the services received.
    (c)(1) Where residual expenses are required to be allocated pursuant 
to 9904.403-40(c)(2), the three factor formula described below must be 
used. This formula is considered to result in appropriate allocations of 
the residual expenses of home offices. It takes into account three broad 
areas of management concern: The employees of the organization, the 
business volume, and the capital invested in the organization. The 
percentage of the residual expenses to be allocated to any segment 
pursuant to the three factor formula is the arithmetical average of the 
following three percentages for the same period.
    (i) The percentage of the segment's payroll dollars to the total 
payroll dollars of all segments.
    (ii) The percentage of the segment's operating revenue to the total 
operating revenue of all segments. For this purpose, the operating 
revenue of any segment shall include amounts charged to other segments 
and shall be reduced by amounts charged by other segments for purchases.
    (iii) The percentage of the average net book value of the sum of the 
segment's tangible capital assets plus inventories to the total average 
net book value of such assets of all segments. Property held primarily 
for leasing to others shall be excluded from the computation. The 
average net book value shall be the average of the net book value at the 
beginning of the organization's fiscal year and the net book value at 
the end of the year.
    (d) The following paragraphs provide guidance for implementing the 
requirements of 9904.403-40(c)(3).
    (1) An indication that a segment received significantly less benefit 
in relation to other segments can arise if a segment, unlike all or most 
other segments, performs on its own many of the functions included in 
the residual expense. Another indication may be that, in relation to its 
size, comparatively little or no costs are allocable to a segment 
pursuant to 9904.403-40(b) (1) through (5). Evidence of comparatively 
little communication or interpersonal relations between a home office 
and a segment, in relation to its size, may also indicate that the 
segment receives significantly less benefit from residual expenses. 
Conversely, if the opposite conditions prevail at any segment, a greater 
allocation than would result from the application of 9904.403-40(c) (1) 
or (2) may be indicated. This may be the case, for example, if a segment 
relies heavily on the home office for certain residual functions 
normally performed by other segments on their own.
    (2) Segments which may require special allocations of residual 
expenses pursuant to 9904.403-40(c)(3) include, but are not limited to 
foreign subsidiaries, GOCO's, domestic subsidiaries with less than a 
majority ownership, and joint ventures.
    (3) The portion of residual expenses to be allocated to a segment 
pursuant to 9904.403-40(c)(3) shall be the cost of estimated or recorded 
efforts devoted to the segments.
    (e) Home office functions may be performed by an organization which 
for some purposes may not be a part of the legal entity with which the 
Government has contracted. This situation may arise, for example, in 
instances where the Government contracts directly with a corporation 
which is wholly or partly owned by another corporation. In this case, 
the latter corporation serves as a ``home office,'' and

[[Page 379]]

the corporation with which the contract is made is a ``segment'' as 
those terms are defined and used in this Standard. For purposes of 
contracts subject to this Standard, the contracting corporation may only 
accept allocations from the other corporation to the extent that such 
allocations meet the requirements set forth in this Standard for 
allocation of home office expenses to segments.



9904.403-60  Illustrations.

    (a) The following table lists some typical pools, together with 
illustrative allocation bases, which could be used in appropriate 
circumstances:

------------------------------------------------------------------------
    Home office expense or function       Illustrative allocation bases
------------------------------------------------------------------------
Centralized service functions:
    1. Personnel administration........  1. Number of personnel, labor
                                          hours, payroll, number of
                                          hires.
    2. Data processing services........  2. Machine time, number of
                                          reports.
    3. Centralized purchasing and        3. Number of purchase orders,
     subcontracting.                      value of purchases, number of
                                          items.
    4. Centralized warehousing.........  4. Square footage, value of
                                          material, volume.
    5. Company aircraft service........  5. Actual or standard rate per
                                          hour, mile, passenger mile, or
                                          similar unit.
    6. Central telephone service.......  6. Usage costs, number of
                                          instruments.
------------------------------------------------------------------------

    (b) The selection of a base for allocating centralized service 
functions shall be governed by the criteria established in 9904.403-
50(b).
    (c) The listed allocation bases in this section are illustrative. 
Other bases for allocation of home office expenses to segments may be 
used if they are substantially in accordance with the beneficial or 
casual relationships outlined in 9904.403-40.

------------------------------------------------------------------------
    Home office expenses or function      Illustrative allocation bases
------------------------------------------------------------------------
Staff management or specific
 activities:
    1. Personnel management............  1. Number of personnel, labor
                                          hours, payroll, number of
                                          hires.
    2. Manufacturing policies, (quality  2. Manufacturing cost input,
     control, industrial engineering,     manufacturing direct labor.
     production, scheduling, tooling,
     inspection and testing, etc.
    3. Engineering policies............  3. Total engineering costs,
                                          engineering direct labor,
                                          number of drawings.
    4. Material/purchasing policies....  4. Number of purchase orders,
                                          value of purchases.
    5. Marketing policies..............  5. Sales, segment marketing
                                          costs.
Central payments or accruals:
    1. Pension expenses................  1. Payroll or other factor on
                                          which total payment is based.
    2. Group insurance expenses........  2. Payroll or other factor on
                                          which total payment is based.
    3. State and local income taxes and  3. Any base or method which
     franchise taxes.                     results in an allocation that
                                          equals or approximates a
                                          segment's proportionate share
                                          of the tax imposed by the
                                          jurisdiction in which the
                                          segment does business, as
                                          measured by the same factors
                                          used to determine taxable
                                          income for that jurisdiction.
------------------------------------------------------------------------



9904.403-61  Interpretation.

    (a) Questions have arisen as to the requirements of 9904.403, Cost 
Accounting Standard, Allocation of Home Office Expenses to Segments, for 
the purpose of allocating State and local income taxes and franchise 
taxes based on income (hereinafter collectively referred to as income 
taxes) from a home office of an organization to its segments.
    (b) By means of an illustrative allocation base in 9904.403-60, the 
Standard provides that income taxes are to be allocated by ``any base or 
method which results in an allocation that equals or approximates a 
segment's proportionate share of the tax imposed by the jurisdiction in 
which the segment does business, as measured by the same factors used to 
determine taxable income for that jurisdiction.'' This provision 
contains two essential criteria for the allocation of income taxes from 
a home office to segments. First, the taxes of any particular 
jurisdiction are to be allocated only to those segments that do business 
in the taxing jurisdiction.

[[Page 380]]

Second, where there is more than one segment in a taxing jurisdiction, 
the taxes are to be allocated among those segments on the basis of ``the 
same factors used to determine the taxable income for that 
jurisdiction.'' The questions that have arisen relate primarily to 
whether segment book income or loss is a ``factor'' for this purpose.
    (c) Most States tax a fraction of total organization income, rather 
than the book income of segments that do business within the State. The 
fraction is calculated pursuant to a formula prescribed by State 
statute. In these situations the book income or loss of individual 
segments is not a factor used to determine taxable income for that 
jurisdiction. Accordingly, in States that tax a fraction of total 
organization income, rather than the book income of segments within the 
State, such book income is irrelevant for tax allocation purposes. 
Therefore, segment book income is to be used as a factor in allocating 
income tax expense from a home office to segments only where this amount 
is expressly used by the taxing jurisdiction in computing the income 
tax.



9904.403-62  Exemption. [Reserved]



9904.403-63  Effective date.

    This Standard is effective as of April 17, 1992. Contractors with 
prior CAS-covered contracts with full coverage shall continue this 
Standard's applicability upon receipt of a contract to which this 
Standard is applicable. For contractors with no previous contracts 
subject to this Standard, this Standard shall be applied beginning with 
the contractor's next full fiscal year beginning after the receipt of a 
contract to which this Standard is applicable.



9904.404  Capitalization of tangible assets.



9904.404-10  [Reserved]



9904.404.20  Purpose.

    This Standard requires that, for purposes of cost measurement, 
contractors establish and adhere to policies with respect to 
capitalization of tangible assets which satisfy criteria set forth 
herein. Normally, cost measurements are based on the concept of 
enterprise continuity; this concept implies that major asset 
acquisitions will be capitalized, so that the cost applicable to current 
and future accounting periods can be allocated to cost objectives of 
those periods. A capitalization policy in accordance with this Standard 
will facilitate measurement of costs consistently over time.



9904.404-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this standard. Other terms defined elsewhere in this part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection, requires otherwise.
    (1) Asset accountability unit means a tangible capital asset which 
is a component of plant and equipment that is capitalized when acquired 
or whose replacement is capitalized when the unit is removed, 
transferred, sold, abandoned, demolished, or otherwise disposed of.
    (2) Original complement of low cost equipment means a group of items 
acquired for the initial outfitting of a tangible capital asset or an 
operational unit, or a new addition to either. The items in the group 
individually cost less than the minimum amount established by the 
contractor for capitalization for the classes of assets acquired but in 
the aggregate they represent a material investment. The group, as a 
complement, is expected to be held for continued service beyond the 
current period. Initial outfitting of the unit is completed when the 
unit is ready and available for normal operations.
    (3) Repairs and maintenance generally means the total endeavor to 
obtain the expected service during the life of tangible capital assets. 
Maintenance is the regularly recurring activity of keeping assets in 
normal or expected operating condition while repair is the activity of 
putting them back into such condition.
    (4) Tangible capital asset means 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.
    (b) The following modifications of terms defined elsewhere in this 
chapter

[[Page 381]]

99 are applicable to this Standard: None.



9904.404-40  Fundamental requirement.

    (a) The acquisition cost of tangible capital assets shall be 
capitalized. Capitalization shall be based upon a written policy that is 
reasonable and consistently applied.
    (b) The contractor's policy shall designate economic and physical 
characteristics for capitalization of tangible assets.
    (1) The contractor's policy shall designate a minimum service life 
criterion, which shall not exceed 2 years, but which may be a shorter 
period. The policy shall also designate a minimum acquisition cost 
criterion which shall not exceed $5,000, but which may be a smaller 
amount.
    (2) The contractor's policy may designate other specific 
characteristics which are pertinent to his capitalization policy 
decisions (e.g., class of asset, physical size, identifiability and 
controllability, the extent of integration or independence of 
constituent units).
    (3) The contractor's policy shall provide for identification of 
asset accountability units to the maximum extent practical.
    (4) The contractor's policy may designate higher minimum dollar 
limitations for original complement of low cost equipment and for 
betterments and improvements than the limitation established in 
accordance with paragraph (b)(1) of this subsection, provided such 
higher limitations are reasonable in the contractor's circumstances.
    (c) Tangible assets shall be capitalized when both of the criteria 
in the contractor's policy as required in paragraph (b)(1) of this 
subsection are met, except that assets described in subparagraph (b)(4) 
of this subsection shall be capitalized in accordance with the criteria 
established in accordance with that paragraph.
    (d) Costs incurred subsequent to the acquisition of a tangible 
capital asset which result in extending the life or increasing the 
productivity of that asset (e.g., betterments and improvements) and 
which meet the contractor's established criteria for capitalization 
shall be capitalized with appropriate accounting for replaced asset 
accountability units. However, costs incurred for repairs and maintenace 
to a tangible capital asset which either restore the asset to, or 
maintain it at, its normal or expected service life or production 
capacity shall be treated as costs of the current period.

[57 FR 14153, Apr. 17, 1992, as amended at 61 FR 5522, Feb. 13, 1996]



9904.404-50  Techniques for application.

    (a) The cost to acquire a tangible capital asset includes the 
purchase price of the asset and costs necessary to prepare the asset for 
use.
    (1) The purchase price of an asset shall be adjusted to the extent 
practical by premiums and extra charges paid or discounts and credits 
received which properly reflect an adjustment in the purchase price.
    (i) Purchase price is the consideration given in exchange for an 
asset and is determined by cash paid, or to the extent payment is not 
made in cash, in an amount equivalent to what would be the cash price 
basis. Where this amount is not available, the purchase price is 
determined by the current value of the consideration given in exchange 
for the asset. For example, current value for a credit instrument is the 
amount immediately required to settle the obligation or the amount of 
money which might have been raised directly through the use of the same 
instrument employed in making the credit purchase. The current value of 
an equity security is its market value. Market value is the current or 
prevailing price of the security as indicated by recent market 
quotations. If such values are unavailable or not appropriate (thin 
market, volatile price movement, etc.), an acceptable alternative is the 
fair value of the asset acquired.
    (ii) Donated assets which, at the time of receipt, meet the 
contractor's criteria for capitalization shall be capitalized at their 
fair value at that time.
    (2) Costs necessary to prepare the asset for use include the cost of 
placing the asset in location and bringing the asset to a condition 
necessary for normal or expected use. Where material in

[[Page 382]]

amount, such costs, including initial inspection and testing, 
installation and similar expenses, shall be capitalized.
    (b) Tangible capital assets constructed or fabricated by a 
contractor for its own use shall be capitalized at amounts which include 
all indirect costs properly allocable to such assets. This requires the 
capitalization of general and administrative expenses when such expenses 
are identifiable with the constructed asset and are material in amount 
(e.g., when the in-house construction effort requires planning, 
supervisory, or other significant effort by officers or other personnel 
whose salaries are regularly charged to general and administrative 
expenses). When the constructed assets are identical with or similar to 
the contractor's regular product, such assets shall be capitalized at 
amounts which include a full share of indirect costs.
    (c) In circumstances where the acquisition by purchase or donation 
of previously used tangible capital assets is not an arm's length 
transaction, acquisition cost shall be limited to the capitalized cost 
of the asset to the owner who last acquired the asset through an arm's-
length transaction, reduced by depreciation charges from date of that 
acquisition to date of gift or sale.
    (d) The capitalized values of tangible capital assets acquired in a 
business combination, accounted for under the ``purchase method'' of 
accounting, shall be assigned to these assets as follows:
    (1) All the tangible capital assets of the acquired company that 
during the most recent cost accounting period prior to a business 
combination generated either depreciation expense or cost of money 
charges that were allocated to Federal government contracts or 
subcontracts negotiated on the basis of cost, shall be capitalized by 
the buyer at the net book value(s) of the asset(s) as reported by the 
seller at the time of the transaction.
    (2) All the tangible capital asset(s) of the acquired company that 
during the most recent cost accounting period prior to a business 
combination did not generate either depreciation expense or cost of 
money charges that were allocated to Federal government contracts or 
subcontracts negotiated on the basis of cost, shall be assigned a 
portion of the cost of the acquired company not to exceed their fair 
value(s) at the date of acquisition. When the fair value of identifiable 
acquired assets less liabilities assumed exceeds the purchase price of 
the acquired company in an acquisition under the ``purchase method,'' 
the value otherwise assignable to tangible capital assets shall be 
reduced by a proportionate part of the excess.
    (e) Under the ``pooling of interest method'' of accounting for 
business combinations, the values established for tangible captial 
assets for financial accounting shall be the values used for determining 
the cost of such assets.
    (f) Asset accountability units shall be identified and separately 
capitalized at the time the assets are acquired. However, whether or not 
the contractor identifies and separately capitalizes a unit initially, 
the contractor shall remove the unit from the asset accounts when it is 
disposed of and, if replaced, its replacement shall be capitalized.

[57 FR 14153, Apr. 17, 1992, as amended at 61 FR 5523, Feb. 13, 1996]



9904.404-60  Illustrations.

    (a) Illustrations of costs which must be capitalized. (1) Contractor 
has an established policy of capitalizing tangible assets which have a 
service life of more than 1 year and a cost of $2,000. The contractor's 
policy must be modified to conform to the $1,500 policy limitation on 
minimum acquisition cost established by the Standard.
    (i) Contractor acquires a tangible capital asset with a life of 18 
months of a cost of $1,700. The Standard requires that the asset be 
capitalized in compliance with contractor's policy as to service life.
    (ii) Contractor acquires a tangible asset with a life of 18 months 
at a cost of $900. The asset need not be capitalized unless the 
contractor's revised policy establishes a minimum cost criterion below 
$900.
    (2) Contractor has an established policy of capitalizing tangible 
assets which have a service life of more than 1 year and a cost of $250. 
Contractor acquires a tangible asset with a life of 18 months and a cost 
of $300. The Standard requires that, based upon contractor's policy, the 
asset be capitalized.

[[Page 383]]

    (3) Contractor establishes a major new production facility. In the 
process, a number of large and small items of equipment were acquired to 
outfit it. The contractor has an established policy of capitalizing 
individual items of tangible assets which have a service life of over 1 
year and a cost of $500, and all items meeting these requirements were 
capitalized. In addition, the contractor's policy requires 
capitalization of an original complement which has a service life of 
over 1 year and a cost of $5,000. Items of durable equipment acquired 
for the production facility costing less than $500 each aggregated 
$50,000. Based upon the contractor's policy, the durable equipment items 
must be capitalized as the original complement of low cost equipment. 
(The concept of original complement applies to such items as books in a 
new library, impact wrenches in a new factory, work benches and racks in 
a new production facility, or furniture and fixtures in a new office 
building.)
    (4) Contractor has an established policy for treating its heavy 
presses and their power supplies as separate asset accountability units. 
A power supply is replaced during the service life of the related press. 
The Standard requires that, based upon the contractor's policy, the new 
power supply be capitalized with appropriate accounting for the replaced 
unit.
    (b) Illustrations of costs which need not be capitalized. (1) The 
contractor has an established policy of capitalizing tangible assets 
which have a service life of 2 years and a cost of $500. The contractor 
acquires an asset with a useful life of 18 months and a cost of $5,000. 
The tangible asset should be expensed because it does not meet the 2-
year criterion.
    (2) The contractor establishes a new assembly line. In outfitting 
the line, the contractor acquires $5,000 of small tools. On similar 
assembly lines under similar conditions, the original complement of 
small tools was expensed because the complement was replaced annually as 
a result of loss, pilferage, breakage, and physical wear and tear. 
Because the unit of original complement does not meet the contractor's 
service life criterion for capitalization (1 year), the small tools may 
be expensed.



9904.404-61  Interpretation. [Reserved]



9904.404-62  Exemption.

    None for this Standard.



9904.404-63  Effective date.

    (a) This Standard is effective April 15, 1996.
    (b) This Standard shall be applied beginning with the contractor's 
next full cost accounting period beginning after the receipt of a 
contract or subcontract to which this Standard is applicable.
    (c) Contractors with prior CAS-covered contracts with full coverage 
shall continue to follow Standard 9904.404 in effect prior to April 15, 
1996, until this Standard, effective April 15, 1996, becomes applicable 
after the receipt of a contract or subcontract to which this revised 
Standard applies.

[61 FR 5523, Feb. 13, 1996]



9904.405  Accounting for unallowable costs.



9904.405-10  [Reserved]



9904.405-20  Purpose.

    (a) The purpose of this Cost Accounting Standard is to facilitate 
the negotiation, audit, administration and settlement of contracts by 
establishing guidelines covering:
    (1) Identification of costs specifically described as unallowable, 
at the time such costs first become defined or authoritatively 
designated as unallowable, and
    (2) The cost accounting treatment to be accorded such identified 
unallowable costs in order to promote the consistent application of 
sound cost accounting principles covering all incurred costs.

The Standard is predicated on the proposition that costs incurred in 
carrying on the activities of an enterprise--regardless of the 
allowability of such costs under Government contracts--are allocable to 
the cost objectives with which they are identified on the basis of their 
beneficial or causal relationships.
    (b) This Standard does not govern the allowability of costs. This is 
a function

[[Page 384]]

of the appropriate procurement or reviewing authority.



9904.405-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection, requires otherwise.
    (1) Directly associated cost means any cost which is generated 
solely as a result of the incurrence of another cost, and which would 
not have been incurred had the other cost not been incurred.
    (2) Expressly unallowable cost means a particular item or type of 
cost which, under the express provisions of an applicable law, 
regulation, or contract, is specifically named and stated to be 
unallowable.
    (3) Indirect cost means any cost not directly identified with a 
single final cost objective, but identified with two or more final cost 
objectives or with at least one intermediate cost objective.
    (4) Unallowable cost means any cost which, under the provisions of 
any pertinent law, regulation, or contract, cannot be included in 
prices, cost reimbursements, or settlements under a Government contract 
to which it is allocable.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9904.405-40  Fundamental requirement.

    (a) Costs expressly unallowable or mutually agreed to be 
unallowable, including costs mutually agreed to be unallowable directly 
associated costs, shall be identified and excluded from any billing, 
claim, or proposal applicable to a Government contract.
    (b) Costs which specifically become designated as unallowable as a 
result of a written decision furnished by a contracting officer pursuant 
to contract disputes procedures shall be identified if included in or 
used in the computation of any billing, claim, or proposal applicable to 
a Government contract. This identification requirement applies also to 
any costs incurred for the same purpose under like circumstances as the 
costs specifically identified as unallowable under either this paragraph 
or paragraph (a) of this subsection.
    (c) Costs which, in a contracting officer's written decision 
furnished pursuant to contract disputes procedures, are designated as 
unallowable directly associated costs of unallowable costs covered by 
either paragraph (a) or (b) of this subsection shall be accorded the 
identification required by paragraph (b) of this subsection.
    (d) The costs of any work project not contractually authorized, 
whether or not related to performance of a proposed or existing 
contract, shall be accounted for, to the extent appropriate, in a manner 
which permits ready separation from the costs of authorized work 
projects.
    (e) All unallowable costs covered by paragraphs (a) through (d) of 
this subsection shall be subject to the same cost accounting principles 
governing cost allocability as allowable costs. In circumstances where 
these unallowable costs normally would be part of a regular indirect-
cost allocation base or bases, they shall remain in such base or bases. 
Where a directly associated cost is part of a category of costs normally 
included in an indirect-cost pool that will be allocated over a base 
containing the unallowable cost with which it is associated, such a 
directly associated cost shall be retained in the indirect-cost pool and 
be allocated through the regular allocation process.
    (f) Where the total of the allocable and otherwise allowable costs 
exceeds a limitation-of-cost or ceiling-price provision in a contract, 
full direct and indirect cost allocation shall be made to the contract 
cost objective, in accordance with established cost accounting practices 
and Standards which regularly govern a given entity's allocations to 
Government contract cost objectives. In any determination of unallowable 
cost overrun, the amount thereof shall be identified in terms of the 
excess of allowable costs over the ceiling amount, rather than through 
specific identification of particular cost items or cost elements.

[[Page 385]]



9904.405-50  Techniques for application.

    (a) The detail and depth of records required as backup support for 
proposals, billings, or claims shall be that which is adequate to 
establish and maintain visibility of identified unallowable costs 
(including directly associated costs), their accounting status in terms 
of their allocability to contract cost objectives, and the cost 
accounting treatment which has been accorded such costs. Adherence to 
this cost accounting principle does not require that allocation of 
unallowable costs to final cost objectives be made in the detailed cost 
accounting records. It does require that unallowable costs be given 
appropriate consideration in any cost accounting determinations 
governing the content of allocation bases used for distributing indirect 
costs to cost objectives. Unallowable costs involved in the 
determination of rates used for standard costs, or for the indirect-cost 
bidding or billing, need be identified only at the time rates are 
proposed, established, revised or adjusted.
    (b)(1) The visibility requirement of paragraph (a) of this 
subsection, may be satisfied by any form of cost identification which is 
adequate for purposes of contract cost determination and verification. 
The Standard does not require such cost identification for purposes 
which are not relevant to the determination of Government contract cost. 
Thus, to provide visibility for incurred costs, acceptable alternative 
practices would include:
    (i) The segregation of unallowable costs in separate accounts 
maintained for this purpose in the regular books of account,
    (ii) The development and maintenance of separate accounting records 
or workpapers, or
    (iii) The use of any less formal cost accounting techniques which 
establishes and maintains adequate cost identification to permit audit 
verification of the accounting recognition given unallowable costs.
    (2) Contractors may satisfy the visibility requirements for 
estimated costs either:
    (i) By designation and description (in backup data, workpapers, 
etc.) of the amounts and types of any unallowable costs which have 
specifically been identified and recognized in making the estimates, or
    (ii) By description of any other estimating technique employed to 
provide appropriate recognition of any unallowable costs pertinent to 
the estimates.
    (c) Specific identification of unallowable cost is not required in 
circumstances where, based upon considerations of materiality, the 
Government and the contractor reach agreement on an alternate method 
that satisfies the purpose of the Standard.



9904.405-60  Illustrations.

    (a) An auditor recommends disallowance of certain direct labor and 
direct materials costs, for which a billing has been submitted under a 
contract, on the basis that these particular costs were not required for 
performance and were not authorized by the contract. The contracting 
officer issues a written decision which supports the auditor's position 
that the questioned costs are unallowable. Following receipt of the 
contracting officer's decision, the contractor must clearly identify the 
disallowed direct labor and direct material costs in his accounting 
records and reports covering any subsequent submission which includes 
such costs. Also, if the contractor's base for allocation of any 
indirect cost pool relevant to the subject contract consists of direct 
labor, direct material, total prime cost, total cost input, etc., he 
must include the disallowed direct labor and material costs in his 
allocation base for such pool. Had the contracting officer's decision 
been against the auditor, the contractor would not, of course, have been 
required to account separately for the costs questioned by the auditor.
    (b) A contractor incurs, and separately identifies, as a part of his 
manufacturing overhead, certain costs which are expressly unallowable 
under the existing and currently effective regulations. If manufacturing 
overhead is regularly a part of the contractor's base for allocation of 
general and administrative (G&A) or other indirect expenses, the 
contractor must allocate the G&A or other indirect expenses to

[[Page 386]]

contracts and other final cost objectives by means of a base which 
includes the identified unallowable manufacturing overhead costs.
    (c) An auditor recommends disallowance of the total direct indirect 
costs attributable to an organizational planning activity. The 
contractor claims that the total of these activity costs are allowable 
under the Federal Acquisition Regulation (FAR) as ``Economic planning 
costs'' (48 CFR 31.205-12); the auditor contends that they constitute 
``Organization costs'' (48 CFR 31.205-27) and therefore are unallowable. 
The issue is referred to the contracting officer for resolution pursuant 
to the contract disputes clause. The contracting officer issues a 
written decision supporting the auditor's position that the total costs 
questioned are unallowable under the FAR. Following receipt of the 
contracting officer's decision, the contractor must identify the 
disallowed costs and specific other costs incurred for the same purpose 
in like circumstances in any subsequent estimating, cost accumulation or 
reporting for Government contracts, in which such costs are included. If 
the contracting officer's decision had supported the contractor's 
contention, the costs questioned by the auditor would have been 
allowable ``Economic planning costs,'' and the contractor would not have 
been required to provide special identification.
    (d) A defense contractor was engaged in a program of expansion and 
diversification of corporate activities. This involved internal 
corporate reorganization, as well as mergers and acquisitions. All costs 
of this activity were charged by the contractor as corporate or segment 
general and administrative (G&A) expense. In the contractor's proposals 
for final Segment G&A rates (including corporate home office 
allocations) to be applied in determining allowable costs of its defense 
contracts subject to 48 CFR part 31, the contractor identified and 
excluded the expressly unallowable costs (as listed in 48 CFR 31.205-12) 
incurred for incorporation fees and for charges for special services of 
outside attorneys, accountants, promoters, and consultants. In addition, 
during the course of negotiation of interim bidding and billing G&A 
rates, the contractor agreed to classify as unallowable various in-house 
costs incurred for the expansion program, and various directly 
associated costs of the identifiable unallowable costs. On the basis of 
negotiations and agreements between the contractor and the contracting 
officers' authorized representatives, interim G&A rates were 
established, based on the net balance of allowable G&A costs. 
Application of the rates negotiated to proposals, and on an interim 
basis to billings, for covered contracts constitutes compliance with the 
Standard.
    (e) An official of a company, whose salary, travel, and subsistence 
expenses are charged regularly as general and administrative (G&A) 
expenses, takes several business associates on what is clearly a 
business entertainment trip. The entertainment costs of such trips is 
expressly unallowable because it constitutes entertainment expense, and 
is separately identified by the contractor. The contractor does not 
regularly include his G&A expenses in any indirect-expense allocation 
base. In these circumstances, the official's travel and subsistence 
expenses would be directly associated costs for identification with the 
unallowable entertainment expense. However, unless this type of activity 
constituted a significant part of the official's regular duties and 
responsibilities on which his salary was based, no part of the 
official's salary would be required to be identified as a directly 
associated cost of the unallowable entertainment expense.

[57 FR 14153, Apr. 17, 1992; 57 FR 34167, Aug. 3, 1992; 57 FR 43776, 
Sept. 22, 1992]



9904.405-61  Interpretation. [Reserved]



9904.405-62  Exemption.

    None for this Standard.



9904.405-63  Effective date.

    This Standard is effective as of April 17, 1992.

[[Page 387]]



9904.406  Cost accounting standard--cost accounting period.



9904.406-10  [Reserved]



9904.406-20  Purpose.

    The purpose of this Cost Accounting Standard is to provide criteria 
for the selection of the time periods to be used as cost accounting 
periods for contract cost estimating, accumulating, and reporting. This 
Standard will reduce the effects of variations in the flow of costs 
within each cost accounting period. It will also enhance objectivity, 
consistency, and verifiability, and promote uniformity and comparability 
in contract cost measurements.



9904.406-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection, requires otherwise.
    (1) Allocate means to assign an item of cost, or a group of items of 
cost, to one or more cost objectives. This term includes both direct 
assignment of cost and the reassignment of a share from an indirect cost 
pool.
    (2) Cost objective means a function, organizational subdivision, 
contract, or other work unit for which cost data are desired and for 
which provision is made to accumulate and measure the cost of processes, 
products, jobs, capitalized projects, etc.
    (3) Fiscal year means the accounting period for which annual 
financial statements are regularly prepared, generally a period of 12 
months, 52 weeks, or 53 weeks.
    (4) Indirect cost pool means a grouping of incurred costs identified 
with two or more cost objectives but not identified specifically with 
any final cost objective.
    (b) The following modification of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9904.406-40  Fundamental requirement.

    (a) A contractor shall use this fiscal year as his cost accounting 
period, except that:
    (1) Costs of an indirect function which exists for only a part of a 
cost accounting period may be allocated to cost objectives of that same 
part of the period as provided in 9904.406-50(a).
    (2) An annual period other than the fiscal year may, as provided in 
9904.406-50(d), be used as the cost accounting period if its use is an 
established practice of the contractor.
    (3) A transitional cost accounting period other than a year shall be 
used whenever a change of fiscal year occurs.
    (4) Where a contractor's cost accounting period is different from 
the reporting period used for Federal income tax reporting purposes, the 
latter may be used for such reporting.
    (b) A contractor shall follow consistent practices in his selection 
of the cost accounting period or periods in which any types of expense 
and any types of adjustment to expense (including prior-period 
adjustments) are accumulated and allocated.
    (c) The same cost accounting period shall be used for accumulating 
costs in an indirect cost pool as for establishing its allocation base, 
except that the contracting parties may agree to use a different period 
for establishing an allocation base as provided in 9904.406-50(e).

[57 FR 14153, Apr. 17, 1992; 57 FR 34167, Aug. 3, 1992]



9904.406-50  Techniques for application.

    (a) The cost of an indirect function which exists for only a part of 
a cost accounting period may be allocated on the basis of data for that 
part of the cost accounting period if the cost is:
    (1) Material in amount,
    (2) Accumulated in a separate indirect cost pool, and
    (3) Allocated on the basis of an appropriate direct measure of the 
activity or output of the function during that part of the period.

[[Page 388]]

    (b) The practices required by 9904.406-40(b) of this Standard shall 
include appropriate practices for deferrals, accruals, and other 
adjustments to be used in identifying the cost accounting periods among 
which any types of expense and any types of adjustment to expense are 
distributed. If an expense, such as taxes, insurance or employee leave, 
is identified with a fixed, recurring, annual period which is different 
from the contractor's cost accounting period, the Standard permits 
continued use of that different period. Such expenses shall be 
distributed to cost accounting periods in accordance with the 
contractor's established practices for accruals, deferrals, and other 
adjustments.
    (c) Indirect cost allocation rates, based on estimates, which are 
used for the purpose of expediting the closing of contracts which are 
terminated or completed prior to the end of a cost accounting period 
need not be those finally determined or negotiated for that cost 
accounting period. They shall, however, be developed to represent a full 
cost accounting period, except as provided in paragraph (a) of this 
subsection.
    (d) A contractor may, upon mutual agreement with the Government, use 
as his cost accounting period a fixed annual period other than his 
fiscal year, if the use of such a period is an established practice of 
the contractor and is consistently used for managing and controlling the 
business, and appropriate accruals, deferrals or other adjustments are 
made with respect to such annual periods.
    (e) The contracting parties may agree to use an annual period which 
does not coincide precisely with the cost accounting period for 
developing the data used in establishing an allocation base: Provided,
    (1) The practice is necessary to obtain significant administrative 
convenience,
    (2) The practice is consistently followed by the contractor,
    (3) The annual period used is representative of the activity of the 
cost accounting period for which the indirect costs to be allocated are 
accumulated, and
    (4) The practice can reasonably be estimated to provide a 
distribution to cost objectives of the cost accounting period not 
materially different from that which otherwise would be obtained.
    (f) When a transitional cost accounting period is required under the 
provisions of 9904.406-40(a)(3), the contractor may select any one of 
the following:
    (1) The period, less than a year in length, extending from the end 
of his previous cost accounting period to the beginning of his next 
regular cost accounting period,
    (2) A period in excess of a year, but not longer than 15 months, 
obtained by combining the period described in paragraph (f)(1) of this 
subsection with the previous cost accounting period, or
    (3) A period in excess of a year, but not longer than 15 months, 
obtained by combining the period described in paragraph (f)(1) of this 
subsection with the next regular cost accounting period.

A change in the contractor's cost accounting period is a change in 
accounting practices for which an adjustment in the contract price may 
be required in accordance with paragraph (a)(4) (ii) or (iii) of the 
contract clause set out at 9903.201-4(a).



9904.406-60  Illustrations.

    (a) A contractor allocates general management expenses on the basis 
of total cost input. In a proposal for a covered negotiated fixed-price 
contract, he estimates the allocable expenses based solely on the 
estimated amount of the general management expense pool and the amount 
of the total cost input base estimated to be incurred during the 8 
months in which performance is scheduled to be commenced and completed. 
Such a proposal would be in violation of the requirements of this 
Standard that the calculation of the amounts of both the indirect cost 
pools and the allocation bases be based on the contractor's cost 
accounting period.
    (b) A contractor whose cost accounting period is the calendar year, 
installs a computer service center to begin operations on May 1. The 
operating expense related to the new service center is expected to be 
material in amount, will be accumulated in a separate indirect cost 
pool, and will be allocated to the benefiting cost objectives on the

[[Page 389]]

basis of measured usage. The total operating expenses of the computer 
service center for the 8-month part of the cost accounting period may be 
allocated to the benefiting cost objectives of that same 8-month period.
    (c) A contractor changes his fiscal year from a calendar year to the 
12-month period ending May 31. For financial reporting purposes, he has 
a 5-month transitional ``fiscal year.'' The same 5-month period must be 
used as the transitional cost accounting period; it may not be combined 
as provided in 9904.406-50(f), because the transitional period would be 
longer than 15 months. The new fiscal year must be adopted thereafter as 
his regular cost accounting period. The change in his cost accounting 
period is a change in accounting practices; adjustments of the contract 
prices may thereafter be required in accordance with paragraph (a)(4) 
(ii) or (iii) of the contract clause at 9903.201-4(a).
    (d) Financial reports to stockholders are made on a calendar year 
basis for the entire contractor corporation. However, the contracting 
segment does all internal financial planning, budgeting, and internal 
reporting on the basis of a ``model year.'' The contracting parties 
agree to use a ``model year'' and they agree to overhead rates on the 
``model year'' basis. They also agree on a technique for prorating 
fiscal year assignment of corporate home office expenses between model 
years. This practice is permitted by the Standard.
    (e) Most financial accounts and contract cost records are maintained 
on the basis of a fiscal year which ends November 30 each year. However, 
employee vacation allowances are regularly managed on the basis of a 
``vacation year'' which ends September 30 each year. Vacation expenses 
are estimated uniformly during each ``vacation year.'' Adjustments are 
made each October to adjust the accrued liability to actual, and the 
estimating rates are modified to the extent deemed appropriate. This use 
of a separate annual period for determining the amounts of vacation 
expense is permitted under 9904.406-50(b).



9904.406-61  Interpretation.

    (a) Questions have arisen as to the allocation and period cost 
assignment of certain contract costs (primarily under defense contracts 
and subcontracts). This section deals primarily with the assignment of 
restructuring costs to cost accounting periods. In essence, it clarifies 
whether restructuring costs are to be treated as an expense of the 
current period or as a deferred charge that is subsequently amortized 
over future periods.
    (b) Restructuring costs as used in this Interpretation means costs 
that are incurred after an entity decides to make a significant 
nonrecurring change in its business operations or structure in order to 
reduce overall cost levels in future periods through work force 
reductions, the elimination of selected operations, functions or 
activities, and/or the combination of ongoing operations, including 
plant relocations. Restructuring activities do not include ongoing 
routine changes an entity makes in its business operations or 
organizational structure. Restructuring costs are comprised both of 
direct and indirect costs associated with contractor restructuring 
activities taken after a business combination is effected or after a 
decision is made to execute a significant restructuring event not 
related to a business combination. Typical categories of costs that have 
been included in the past and may be considered in the future as 
restructuring charges include severance pay, early retirement 
incentives, retraining, employee relocation, lease cancellation, asset 
disposition and write-offs, and relocation and rearrangement of plant 
and equipment. Restructuring costs do not include the cost of such 
activities when they do not relate either to business combinations or to 
other significant nonrecurring restructuring decisions.
    (c) The costs of betterments or improvements of capital assets that 
result from restructuring activities shall be capitalized and 
depreciated in accordance with the provisions of 9904.404 and 9904.409.
    (d) When a procuring agency imposes a net savings requirement for 
the payment of restructuring costs, the contractor shall submit data 
specifying

[[Page 390]]

    (1) The estimated restructuring costs by period,
    (2) The estimated restructuring savings by period (if applicable), 
and
    (3) The cost accounting practices by which such costs shall be 
allocated to cost objectives.
    (e) Contractor restructuring costs defined pursuant to this section 
may be accumulated as deferred cost, and subsequently amortized, over a 
period during which the benefits of restructuring are expected to 
accrue. However, a contractor proposal to expense restructuring costs 
for a specific event in a current period is also acceptable when the 
Contracting Officer agrees that such treatment will result in a more 
equitable assignment of costs in the circumstances.
    (f) If a contractor incurs restructuring costs but does not have an 
established or disclosed cost accounting practice covering such costs, 
the deferral of such restructuring costs may be treated as the initial 
adoption of a cost accounting practice (see 9903.302-2(a)). If a 
contractor incurs restructuring costs but does have an existing 
established or disclosed cost accounting practice that does not provide 
for deferring such costs, any resulting change in cost accounting 
practice to defer such costs may be presumed to be desirable and not 
detrimental to the interests of the Government (see 9903.201-6). Changes 
in cost accounting practices for restructuring costs shall be subject to 
disclosure statement revision requirements (see 9903.202-3), if 
applicable.
    (g) Business changes giving rise to restructuring costs may result 
in changes in cost accounting practice (see 9903.302). If a contract 
price or cost allowance is affected by such changes in cost accounting 
practice, adjustments shall be made in accordance with subparagraph 
(a)(4) of the CAS clause (see 9903.201-4(a)(2), 9903.201-4(c)(2) and 
9903.201-4(e)(2)).
    (h) The amortization period for deferred restructuring costs shall 
not exceed five years. The straight-line method of amortization should 
normally be used, unless another method results in a more appropriate 
matching of cost to expected benefits.
    (i) Restructuring costs that are deferred shall not be included in 
the computation to determine facilities capital cost of money (see 
9904.414). Specifically, deferred charges are not tangible or intangible 
capital assets and therefore are excluded from the facilities capital 
values for the computation of facilities capital cost of money.
    (j) Restructuring costs incurred at a home office level shall be 
treated in accordance with the provisions of 9904.403. Restructuring 
costs incurred at the segment level that benefit more than one segment 
should be allocated to the home office and treated as home office 
expense pursuant to 9904.403. Restructuring costs incurred at the 
segment level that benefit only that segment shall be treated in 
accordance with the provisions of 9904.418. If one or more indirect cost 
pools do not comply with the homogeneity requirements of 9904.418 due to 
the inclusion of the costs of restructuring activities, then the 
restructuring costs shall be accumulated in indirect cost pools that are 
distinct from the contractor's ongoing indirect cost pools.
    (k) This section is applicable to contractor ``restructuring costs'' 
paid or approved on or after August 15, 1994.

[62 FR 31308, June 6, 1997]



9904.406-62  Exemption.

    None for this Standard.



9904.406-63  Effective date.

    This Standard is effective as of April 17, 1992. Contractors with 
prior CAS-covered contracts with full coverage shall continue this 
Standard's applicability upon receipt of a contract to which this 
Standard is applicable. For contractors with no previous contracts 
subject to this Standard, this Standard shall be applied beginning with 
the contractor's next full fiscal year beginning after the receipt of a 
contract to which this Standard is applicable.



9904.407  Use of standard costs for direct material and direct labor.



9904.407-10  [Reserved]



9904.407-20  Purpose.

    (a) The purpose of this Cost Accounting Standard is to provide 
criteria

[[Page 391]]

under which standard costs may be used for estimating, accumulating, and 
reporting costs of direct material and direct labor; and to provide 
criteria relating to the establishment of standards, accumulation of 
standard costs, and accumulation and disposition of variances from 
standard costs. Consistent application of these criteria where standard 
costs are in use will improve cost measurement and cost assignment.
    (b) This Cost Accounting Standard is not intended to cover the use 
of pre-established measures solely for estimating.



9904.407-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this chapter 99 shall 
have the meanings ascribed to them in those definitions unless paragraph 
(b) of this subsection requires otherwise.
    (1) Labor cost at standard means a pre-established measure of the 
labor element of cost, computed by multiplying labor-rate standard by 
labor-time standard.
    (2) Labor-rate standard means a pre-established measure, expressed 
in monetary terms, of the price of labor.
    (3) Labor-time standard means a pre-established measure, expressed 
in temporal terms, of the quantity of labor.
    (4) Material cost at standard means a pre-established measure of the 
material element of cost, computed by multiplying material-price 
standard by material-quantity standard.
    (5) Material-price standard means a pre-established measure, 
expressed in monetary terms, of the price of material.
    (6) Material-quantity standard means a pre-established measure, 
expressed in physical terms, of the quantity of material.
    (7) Production unit means a grouping of activities which either uses 
homogeneous inputs of direct material and direct labor or yields 
homogeneous outputs such that the costs or statistics related to these 
homogeneous inputs or outputs are appropriate as bases for allocating 
variances.
    (8) Standard cost means any cost computed with the use of pre-
established measures.
    (9) Variance means the difference between a pre-established measure 
and an actual measure.
    (b) The following modifications of terms defined elsewhere in this 
Chapter 99 are applicable to this Standard:
    (1) Actual cost. An amount determined on the basis of cost incurred.
    (2) [Reserved]



9904.407-40  Fundamental requirement.

    Standard costs may be used for estimating, accumulating, and 
reporting costs of direct material and direct labor only when all of the 
following criteria are met:
    (a) Standard costs are entered into the books of account.
    (b) Standard costs and related variances are appropriately accounted 
for at the level of the production unit.
    (c) Practices with respect to the setting and revising of standards, 
use of standard costs, and disposition of variances are stated in 
writing and are consistently followed.



9904.407-50  Techniques for application.

    (a)(1) A contractor's written statement of practices with respect to 
standards shall include the bases and criteria (such as engineering 
studies, experience, or other supporting data) used in setting and 
revising standards; the period during which standards are to remain 
effective; the level (such as ideal or realistic) at which material-
quantity standards and labor-time standards are set; and conditions 
(such as those expected to prevail at the beginning of a period) which 
material-price standards and labor-rate standards are designed to 
reflect.
    (2) Where only either the material price or material quantity is set 
at standard, with the other component stated at actual, the result of 
the multiplication shall be treated as material cost at standard. 
Similarly, where only either the labor rate or labor time is set at 
standard, with the other component stated at actual, the result of the 
multiplication shall be treated as labor cost at standard.

[[Page 392]]

    (3) A labor-rate standard may be set to cover a category of direct 
labor only if the functions performed within that category are not 
materially disparate and the employees involved are interchangeable with 
respect to the functions performed.
    (4) A labor-rate standard may be set to cover a group of direct 
labor workers who perform disparate functions only under either one of 
the following conditions:
    (i) Where that group of workers all work in a single production unit 
yielding homogeneous outputs (in this case, the same labor-rate standard 
shall be applied to each worker in that group).
    (ii) Where that group of workers, in the performance of their 
respective functions, forms an integral team (in this case, a labor-rate 
standard shall be set for each integral team).
    (b)(1) Material-price standards may be used and their related 
variances may be recognized either at the time purchases of material are 
entered into the books of account, or at the time material cost is 
allocated to production units.
    (2) Where material-price standards are used and related variances 
are recognized at the time purchases of material are entered into the 
books of account, they shall be accumulated separately by homogeneous 
groupings of material. Examples of homogeneous groupings of material 
are:
    (i) Where prices of all items in that grouping of material are 
expected to fluctuate in the same direction and at substantially the 
same rate, or
    (ii) Where items in that grouping of material are held for use in a 
single production unit yielding homogeneous outputs.
    (3) Where material-price variances are recognized at the time 
purchases of material are entered into the books of account, variances 
of each homogeneous grouping of material shall be allocated (except as 
provided in paragraph (b)(4) of this subsection), at least annually, to 
items in purchased-items inventory and to production units receiving 
items from that homogeneous grouping of material, in accordance with 
either one of the following practices, which shall be consistently 
followed:
    (i) Items in purchased-items inventory of a homogeneous grouping of 
material are adjusted from standard cost to actual cost; the balance of 
the material-price variance, after reflecting these adjustments, shall 
be allocated to production units on the basis of the total of standard 
cost of material received from that homogeneous grouping of material by 
each of the production units; or
    (ii) Items, at standard cost, in purchased-items inventory of a 
homogeneous grouping of material, are treated, collectively, as a 
production unit; the material-price variance shall be allocated to 
production units on the basis of standard cost of material received from 
that homogeneous grouping of material by each of the production units.
    (4) Where material-price variances are recognized at the time 
purchases of material are entered into the books of account, variances 
of each homogeneous grouping of material which are insignificant may be 
included in appropriate indirect cost pools for allocation to applicable 
cost objectives.
    (5) Where a material-price variance is allocated to a production 
unit in accordance with paragraph (b)(3) of this subsection, it may be 
combined with material-quantity variance into one material-cost variance 
for that production unit. A separate material-cost variance shall be 
accumulated for each production unit.
    (6) Where material-price variances are recognized at the time 
material cost is allocated to production units, these variances and 
material-quantity variances may be combined into one material-cost 
variance account.
    (c) Labor-cost variances shall be recognized at the time labor cost 
is introduced into production units. Labor-rate variances and labor-time 
variances may be combined into one labor-cost variance account. A 
separate labor-cost variance shall be accumulated for each production 
unit.
    (d) A contractor's established practice with respect to the 
disposition of variances accumulated by production unit shall be in 
accordance with one of the following subparagraphs:
    (1) Variances are allocated to cost objectives (including ending in-
process

[[Page 393]]

inventory) at least annually. Where a variance related to material is 
allocated, the allocation shall be on the basis of the material cost at 
standard, or, where outputs are homogeneous, on the basis of units of 
output. Similarly, where a variance related to labor is allocated, the 
allocation shall be on the basis of the labor cost at standard or labor 
hours at standard or, where outputs are homogeneous, on the basis of 
units of output; or
    (2) Variances which are immaterial may be included in appropriate 
indirect cost pools for allocation to applicable cost objectives.
    (e) Where variances applicable to covered contracts are allocated by 
memorandum worksheet adjustments rather than in the books of account, 
the bases used for adjustment shall be in accordance with those stated 
in paragraph (b)(3) and paragraph (d) of this subsection.



9904.407-60  Illustrations.

    (a) Contractor A's written practice is to set his material-price 
standard for an item on the basis of average purchase prices expected to 
prevail during the calendar year. For that item whose usage from month 
to month is stable, a purchase contract is generally signed on May 1 of 
each year for a 1-year commitment. The current purchase contract calls 
for a purchase price of $3 per pound; an increase of 5 percent, or 
15 cents per pound, has been announced by the vendor when the new 
purchase contract comes into effect next May. Contractor A sets his 
material-price standard for this item at $3.10 per pound for the year 
([$3.00 x 4+$3.15 x 8] 12). Since Contractor A sets his 
material-price standard in accordance with his written practice, he 
complies with provisions of 9904.407-40(c) of this Cost Accounting 
Standard.
    (b) Contractor B accumulates, in one account, labor cost at standard 
for a department in which several categories of direct labor of 
disparate functions, in different combinations, are used in the 
manufacture of various dissimilar outputs of the department. Contractor 
B's department is not a production unit as defined in 9904.407-30(a)(7) 
of this Cost Accounting Standard. Modifying his practice so as to comply 
with the definition of production unit in 9904.407-30(a)(7), he could 
accumulate the standard costs and variances separately,
    (1) For each of the several categories of direct labor, or
    (2) For each of several subdepartments, with homogeneous output for 
each of the subdepartments.
    (c) Contractor C allocates variances at the end of each month. 
During the month of March, a production unit has accumulated the 
following data with respect to labor:

------------------------------------------------------------------------
                                                      Labor
                                           Labor     dollars     Labor
                                          hours at      at        cost
                                          standard   standard   variance
------------------------------------------------------------------------
Balance, March 1.......................      5,000    $25,000     $2,000
Additions in March.....................     15,000     75,000      5,000
                                        --------------------------------
    Total..............................     20,000    100,000      7,000
Transfers-out in March.................      8,000     40,000  .........
                                        --------------------------------
Balance, March 31......................     12,000     60,000  .........
------------------------------------------------------------------------


Using labor hours at standard as the base, Contractor C establishes a 
labor-cost variance rate of $.35 per standard labor hour ($7,000 
 20,000), and deducts $2,800 ($.35  x  8,000) from the labor-
cost variance account, leaving a balance of $4,200 ($7,000-$2,800). 
Contractor C's practice complies with provisions of 9904.407-50(d)(1) of 
this Cost Accounting Standard.
    (d) Contractor D, who uses materials the prices of which are 
expected to fluctuate at different rates, recognizes material-price 
variances at the time purchases of material are entered into the books 
of account. He maintains one purchase-price variance account for the 
whole plant. Purchased items are requisitioned by various production 
units in the plant. Since prices of material are expected to fluctuate 
at different rates, this plant-wide grouping does not constitute a 
homogeneous grouping of material. Contractor D's practice does not 
comply with provisions of 9904.407-50(b)(2) of this Cost Accounting 
Standard. However, if he would maintain several purchased-items 
inventory accounts, each representing a homogeneous grouping of 
material, and maintain a material-price variance account for each of 
these homogeneous groupings of material, Contractor D's practice would

[[Page 394]]

comply with 9904.407-50(b)(2) of this Cost Accounting Standard.
    (e)(1) Contractor E recognizes material-price variances at the time 
purchases of material are entered into the books of account and 
allocates variances at the end of each month. During the month of May, a 
homogeneous grouping of material has accumulated the following data:

------------------------------------------------------------------------
                                                  Material     Material
                                                  cost at       price
                                                  standard     variance
------------------------------------------------------------------------
Inventory, May 1..............................     $150,000      $20,000
Additions in May..............................    1,850,000      120,000
                                               -------------------------
    Total.....................................    2,000,000      140,000
Requisitions:
  Production Unit 1...........................      900,000  ...........
  Production Unit 2...........................      450,000  ...........
  Production Unit 3...........................      300,000  ...........
  Production Unit 4...........................      150,000  ...........
                                               -------------------------
    Inventory, May 31.........................      200,000  ...........
------------------------------------------------------------------------

    (2) Contractor E establishes a material-price variance rate of 7% 
($140,000  $2,000,000) and allocates as follows:

------------------------------------------------------------------------
                                                    Material   Material
                                        Material     price       price
                                        cost at     variance   variance
                                        standard    rate (%)  allocation
------------------------------------------------------------------------
Production Unit 1...................     $900,000          7     $63,000
Production Unit 2...................      450,000          7      31,500
Production Unit 3...................      300,000          7      21,000
Production Unit 4...................      150,000          7      10,500
Ending inventory of homogeneous           200,000          7      14,000
 grouping of material...............
                                     -----------------------------------
    Total...........................    2,000,000  .........     140,000
------------------------------------------------------------------------


Contractor E's practice complies with provisions of 9904.407-
50(b)(3)(ii) of this Cost Accounting Standard.
    (f)(1) Contractor F makes year-end adjustments for variances 
attributable to covered contracts. During the year just ended, a covered 
contract was processed in four production units, each with homogeneous 
outputs. Data with respect to output and to labor of each of the four 
production units are as follows:

------------------------------------------------------------------------
                                            Total
                                            units     Total      Total
                                  Total    used by    labor      labor-
        Production unit         units of     the     costs at     cost
                                 output    covered   standard   variance
                                          contract
------------------------------------------------------------------------
1.............................   100,000    10,000   $400,000    $20,000
2.............................    30,000     6,000    900,000     30,000
3.............................    20,000     5,000    600,000     10,000
4.............................    10,000     4,000    500,000     20,000
------------------------------------------------------------------------

    (2) Since the outputs of each production unit are homogeneous, 
Contractor F uses the units of output as the basis of making memorandum 
worksheet adjustments concerning applicable variances, and establishes 
the following figures:

------------------------------------------------------------------------
                                                             Labor-cost
                                        Labor-     Units      variance
                                         cost     used by   attributable
                                       variance     the        to the
                                       per unit   covered      covered
                                        of unit   contract    contract
------------------------------------------------------------------------
Production Unit 1....................     $0.20     10,000       $2,000
Production Unit 2....................      1.00      6.000        6.000
Production Unit 3....................       .50      5,000        2,500
Production Unit 4....................      2.00      4,000        8,000
                                      ----------------------------------
    Total labor-cost variance          ........  .........       18,500
     attributable to the covered
     contract........................
------------------------------------------------------------------------

    (3) Contractor F makes a year-end adjustment of $18,500 as the 
labor-cost variances attributable to the covered contract. Contractor 
F's practice complies with provisions of 9904.407-50(e) of this Cost 
Accounting Standard.

[57 FR 14153, Apr. 17, 1992; 57 FR 34167, Aug. 3, 1992]



9904.407-61  Interpretation. [Reserved]



9904.407-62  Exemption.

    None for this Standard.



9904.407-63  Effective date.

    This Standard is effective as of April 17, 1992. Contractors with 
prior CAS-covered contracts with full coverage shall continue this 
Standard's applicability upon receipt of a contract to which this 
Standard is applicable. For contractors with no previous contracts 
subject to this Standard, this Standard shall be applied beginning with 
the contractor's next full fiscal year beginning after the receipt of a 
contract to which this Standard is applicable.

[[Page 395]]



9904.408  Accounting for costs of compensated personal absence.



9904.408-10  [Reserved]



9904.408-20  Purpose.

    The purpose of this Standard is to improve, and provide uniformity 
in, the measurement of costs of vacation, sick leave, holiday, and other 
compensated personal absence for a cost accounting period, and thereby 
increase the probability that the measured costs are allocated to the 
proper cost objectives.



9904.408-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection, requires otherwise.
    (1) Compensated personal absence means any absence from work for 
reasons such as illness, vacation, holidays, jury duty or military 
training, or personal activities, for which an employer pays 
compensation directly to an employee in accordance with a plan or custom 
of the employer.
    (2) Entitlement means an employee's right, whether conditional or 
unconditional, to receive a determinable amount of compensated personal 
absence, or pay in lieu thereof.
    (b) The following modifications of terms defined elsewhere in this 
Chapter 99 are applicable to this Standard: None.



9904.408-40  Fundamental requirement.

    (a) The costs of compensated personal absence shall be assigned to 
the cost accounting period or periods in which the entitlement was 
earned.
    (b) The costs of compensated personal absence for an entire cost 
accounting period shall be allocated pro-rata on an annual basis among 
the final cost objectives of that period.



9904.408-50  Techniques for application.

    (a) Determinations. Each plan or custom for compensated personal 
absence shall be considered separately in determining when entitlement 
is earned. If a plan or custom is changed or a new plan or custom is 
adopted, then a new determination shall be made beginning with the first 
cost accounting period to which such new or changed plan or custom 
applies.
    (b) Measurement of entitlement. (1) For purposes of compliance with 
9904.408-40(a), compensated personal absence is earned at the same time 
and in the same amount as the employer becomes liable to compensate the 
employee for such absence if the employer terminates the employee's 
employment for lack of work or other reasons not involving disciplinary 
action, in accordance with a plan or custom of the employer. Where a new 
employee must complete a probationary period before the employer becomes 
liable, the employer may nonetheless treat such service as creating 
entitlement in any computations required by this Standard, provided that 
he does so consistently.
    (2) Where a plan or custom provides for entitlement to be determined 
as of the first calendar day or the first business day of a cost 
accounting period based on service in the preceding cost accounting 
period, the entitlement shall be considered to have been earned, and the 
employer's liability to have arisen, as of the close of the preceding 
cost accounting period.
    (3) In the absence of a determinable liability, in accordance with 
paragraph (b)(1) of this subsection, compensated personal absence will 
be considered to be earned only in the cost accounting period in which 
it is paid.
    (c) Determination of employer's liability. In computing the cost of 
compensated personal absence, the computation shall give effect to the 
employer's liability in accordance with the following paragraphs:
    (1) The estimated liability shall include all earned entitlement to 
compensated personal absence which exists at the time the liability is 
determined, in accordance with paragraph (b) of this subsection.
    (2) The estimated liability shall be reduced to allow for 
anticipated nonutilization, if material.
    (3) The liability shall be estimated consistently either in terms of 
current

[[Page 396]]

or of anticipated wage rates. Estimates may be made with respect to 
individual employees, but such individual estimates shall not be 
required if the total cost with respect to all employees in the plan can 
be estimated with reasonable accuracy by the use of sample data, 
experience or other appropriate means.
    (d) Adjustments. (1) The estimate of the employer's liability for 
compensated personal absence at the beginning of the first cost 
accounting period for which a contractor must comply with this standard 
shall be based on the contractor's plan or custom applicable to that 
period, notwithstanding that some part of that liability has not 
previously been recognized for contract costing purposes. Any excess of 
the amount of the liability as determined in accordance with paragraph 
(c) of this subsection over the corresponding amount of the liability as 
determined in accordance with the contractor's previous practice shall 
be held in suspense and accounted for as described in subparagraph 
(d)(3) of this subsection.
    (2) If a plan or custom is changed or a new plan or custom is 
adopted, and the new determination made in accordance with paragraph (a) 
of this subsection results in an increase in the estimate of the 
employer's liability for compensated personal absence at the beginning 
of the first cost accounting period for which the new plan is effective 
over the estimate made in accordance with the contractor's prior 
practice, then the amount of such increase shall be held in suspense and 
accounted for as described in paragraph (d)(3) of this subsection.
    (3) At the close of each cost accounting period, the amount held in 
suspense shall be reduced by the excess of the amount held in suspense 
at the beginning of the cost accounting period over the employer's 
liability (as estimated in accordance with paragraph (c) of this 
subsection) at the end of that cost accounting period. The cost of 
compensated personal absence assigned to that cost accounting period 
shall be increased by the amount of the excess.
    (e) Allocations. Except where the use of a longer or shorter period 
is permitted by the provisions of the Cost Accounting Standard on Cost 
Accounting Period (9904.406), the cost of compensated personal absence 
shall be allocated to cost objectives on a pro-rata basis which reflects 
the total of such costs and the total of the allocation base for the 
entire cost accounting period. However, this provision shall not 
preclude revisions to an allocation rate during a cost accounting period 
based on revised estimates of period totals.



9904.408-60  Illustrations.

    (a) Company A's vacation plan provides that on the anniversary of 
each employee's hiring date, that employee shall become eligible to 
receive a 2-week vacation with pay. Vacation entitlement must be used 
within 2 years or forfeited. An employee who leaves the company 
voluntarily will be paid for any remaining unused vacation entitlement 
which was earned through the employee's last anniversary date. An 
employee who is laid off for lack of work will also be paid a pro-rata 
vacation allowance for service since the employee's last anniversary 
date. Company A accrues vacation costs each month based on an estimate 
of the anniversary years which will be completed in that month. At the 
end of its cost accounting period, Company A adjusts its estimated 
liability to agree with its actual liability for completed years of 
service on an individual employee basis.
    (1) In order to comply with 9904.408-50(c), Company A must increase 
its estimated liability for vacation pay at all times to include the 
estimated additional amount which would be payable to employees in the 
event of layoff. The additional liability may be calculated on an 
individual employee basis or it may be estimated for the employees as a 
group by the use of sample or historical data.
    (2) The following illustrates one method of estimating Company A's 
liability at the end of its cost accounting period, December 31, with 
respect to individual employees, in accordance with 9904.408-50(c).
    John Doe, Anniversary date July 10:

  Unused entitlement resulting from completed service years, 24     $120
   hrs. at $5..................................................

[[Page 397]]

 
  Full months of service since anniversary, 5:
    Pro-rata entitlement on lay-off=80 hrs. x 5/12=33.3 hrs. at      167
     15........................................................
                                                                --------
      Total....................................................      287
    Less estimated allowance for forfeitures, 3\1/2\ percent...       10
                                                                --------
      Net liability............................................      277
                                                                ========
 
 

    (b) Company B has a vacation plan similar to Company A's, but 
Company B does not pay pro-rata vacation pay on lay-off for service 
since the last anniversary date. Company B must include in its estimate 
of its liability at the end of its cost accounting period only that 
unused vacation entitlement which results from completed years of 
service, with allowance for forfeitures if material.
    (c) Company C's sick leave plan provides that an employee will 
accumulate one-half day of sick leave entitlement for each full month of 
service. Sick leave entitlement may be accumulated without limit, but an 
employee is paid for sick leave only during actual illness; the Company 
does not pay for unused sick leave on lay-off. Despite the fact that 
Company C might be able to estimate the amount which will be paid for 
sick leave in a future cost accounting period with a high degree of 
accuracy, it has no liability for payment for unused sick leave 
entitlement in the event of lay-off. Therefore, in accordance with 
9904.408-50(b)(3), it must assign to each cost accounting period only 
the costs of sick leave which it pays in that period.
    (d) Company D's vacation plan provides that on July 1, each employee 
who has been employed by the Company for at least 1 year shall be 
entitled to 2 weeks of vacation. All vacation must be taken between July 
1 and September 30. An employee who terminates after September 30 and 
before July 1 receives no vacation pay. Company D has a cost accounting 
period which ends on December 31; however Company D customarily accrues 
its anticipated liability for vacation pay at July 1 in 12 equal 
installments over the ``vacation year'' starting on July 1 of the 
previous year and ending on June 30 of the current year. Company D has 
no liability for vacation pay at January 1 or at December 31. In 
accordance with 9904.408-50(b)(3), the amount of vacation cost which 
Company D must assign to each cost accounting period is the amount of 
such costs paid in that period. Therefore, Company D may not use the 
``vacation year'' ending June 30 to apportion these costs between cost 
accounting periods.
    (e) Company E's cost accounting period ends on December 31. Its 
vacation plan provides that on January 1, each employee who has been 
employed for at least 1 year shall become entitled to 2 weeks of 
vacation. The Company does not recognize a liability for vacation pay at 
December 31 because an employee must be employed on January 1 to be 
eligible.
    (1) Despite the requirement that the employee also be employed on 
January 1, the necessary service was completed in the preceding cost 
accounting period. If the other terms of the plan are such that in 
accordance with this Standard, Company E must recognize its vacation 
costs on the accrual basis, then in accordance with 9904.408-50(b)(2), 
Company E must estimate its vacation costs as if the liability arose on 
December 31 rather than on the following January 1.
    (2) Assume that Company E must comply with this Standard beginning 
on January 1, 1976. Assume that the employees of Company E earned 
$90,000 in vacation pay in 1975, all of which will be taken in 1976. 
Assume, further, that because of reduced employment levels, the 
employees of Company E will earn only $80,000 in vacation pay in 1976, 
$5,000 of which will be paid in 1976 because of layoffs. The following 
example illustrates the computation of vacation pay costs for Company E 
in 1976:

1976 beginning liability:
  With Standard (9904.408-50(d)(1))..........................    $90,000
  Without Standard...........................................          0
                                                              ----------
    Amount to be held in suspense (9904.408-50(d)(1))........     90,000
                                                              ==========
1976 ending liability........................................     75,000
Plus: Paid in 1976...........................................     95,000
                                                              ----------
    Subtotal.................................................    170,000
Less: 1976 beginning liability...............................     90,000
                                                              ----------

[[Page 398]]

 
    1976 vacation cost, basic amount.........................     80,000
                                                              ==========
Amount in suspense at beginning of 1976......................     90,000
Less: 1976 ending liability..................................     75,000
                                                              ----------
    Suspense to be ritten off in 1976; additional 1976            15,000
     vacation cost (9904.408-50(d)(3)).......................
                                                              ==========
1976 basic vacation cost.....................................     80,000
Plus: 1976 reduction of suspense.............................     15,000
                                                              ----------
    1976 total vacation cost.................................     95,000
                                                              ==========
 
 

    (3) Assume, further, that all of the vacation entitlement which 
remained at December 31, 1976 ($75,000), is taken in 1977. Also, Company 
E hires a substantial number of additional employees in 1977, so that 
the amount of vacation entitlement earned in 1977 is $85,000. The 
following example illustrates the computation of vacation pay costs for 
Company E in 1977:

1977 ending liability........................................    $85,000
Plus: Paid in 1977...........................................     75,000
                                                              ----------
    Subtotal.................................................    160,000
Less: 1977 beginning liability...............................     75,000
                                                              ----------
    1977 vacation cost, basic amount.........................     85,000
Amount in suspense at beginning of 1977 (Note 1).............     75,000
                                                              ==========
1977 ending liability (Note 1)...............................     85,000
                                                              ==========
1977 basic vacation cost.....................................     85,000
Plus: reduction of suspense (Note 1).........................          0
                                                              ----------
    1977 total vacation cost.................................     85,000
 


    Note 1--Because the 1977 ending liability exceeds the amount in 
suspense at the beginning of 1977, there is no reduction of suspense in 
1977.

    (4) Assume further, that Company E goes out of business in 1978. All 
employees are terminated and paid both for the $85,000 vacation 
liability at the end of 1977 and an additional $40,000 earned in 1978. 
The following example illustrates the computation of vacation pay costs 
for Company E in 1978:

1978 ending liability......................................            0
Plus: Paid in 1978.........................................     $125,000
                                                            ------------
    Subtotal...............................................      125,000
Less: 1978 beginning liability.............................       85,000
                                                            ------------
    1978 vacation cost, basic amount.......................       40,000
                                                            ============
Amount in suspense at beginning of 1978....................       75,000
Less: 1978 ending liability................................            0
                                                            ------------
    Suspense to be written off in 1978; additional 1978           75,000
     vacation cost (9904.408-50(d)(3)......................
                                                            ============
1978 basic vacation cost...................................       40,000
Plus: 1978 reduction in suspense...........................       75,000
                                                            ------------
    1978 total vacation cost...............................      115,000
 

    (f) All of the salary costs of Company F's salaried employees are 
charged to service, administrative, or overhead functions. No accounting 
entries are made to segregate costs of compensated personal absence of 
these employees from their other salary costs, although other records 
are maintained to control the total amount of such absences.
    (1) This policy does not violate the requirement of 9904.408-40(b) 
if such salaries are charged to overhead or indirect cost pools for 
subsequent allocation to final cost objectives over annually determined 
allocation bases which are appropriate for those pools.
    (2) If the same policy were followed in the case of engineers whose 
salaries were directly allocated to two or more final cost objectives, 
or to both intermediate and final cost objectives, so that costs of 
compensated personal absence were charged directly to the jobs on which 
the individuals were working when paid, then this would violate the 
requirement of 9904.408-40(b) that these costs be allocated among cost 
objectives on the basis of the costs of the entire cost accounting 
period. Only if all salaries were directly allocated to a single final 
cost objective, as might be the case with personnel assigned to an 
overseas base for the performance of a single contract, would this 
practice be in accord with that requirement.
    (g) Company G determines a ``charging rate'' for each employee. The 
charging rate includes an allowance for compensated personal absence 
based on average experience. As the employee performs services, the 
related cost objectives are charged for the services at the charging 
rate, the employee is paid at his base rate, and the excess is credited 
to the accrued liability for each

[[Page 399]]

benefit. As benefits are paid, the costs are charged against the accrued 
liabilities. The amount of each accrued liability is adjusted at the end 
of the cost accounting period, and any difference is adjusted through 
appropriate overhead accounts in accordance with company policy.
    (1) This method is not a violation of 9904.408-40(b) if it results 
in allocating the estimated annual costs of compensated personal absence 
at a rate which reflects the anticipated costs of the entire cost 
accounting period.
    (2) The computation itself must comply with the criteria of 
9904.408-40(a). For example, if the terms of the Company's sick leave 
plan are such that in accordance with this Standard, the costs should be 
recognized in the cost accounting period when they are paid, then the 
computation should be intended to amortize the expected costs of sick 
leave over the activity of that cost accounting period, leaving no 
accrued liability for sick leave at the end of the cost accounting 
period.

[57 FR 14153, Apr. 17, 1992; 57 FR 34167, Aug. 3, 1992]



9904.408-61  Interpretation. [Reserved]



9904.408-62  Exemption.

    This Standard shall not apply to contracts and grants with state, 
local, and Federally recognized Indian Tribal Governments.



9904.408-63  Effective date.

    This Standard is effective as of April 17, 1992. Contractors with 
prior CAS-covered contracts with full coverage shall continue this 
Standard's applicability upon receipt of a contract to which this 
Standard is applicable. For contractors with no previous contracts 
subject to this Standard, this Standard shall be applied beginning with 
the contractor's next full fiscal year beginning after the receipt of a 
contract to which this Standard is applicable.



9904.409  Cost accounting standard--depreciation of tangible capital assets.



9904.409-10  [Reserved]



9904.409-20  Purpose.

    The purpose of this Standard is to provide criteria and guidance for 
assigning costs of tangible capital assets to cost accounting periods 
and for allocating such costs in cost objectives within such periods in 
an objective and consistent manner. The Standard is based on the concept 
that depreciation costs identified with cost accounting periods and 
benefiting cost objectives within periods should be a reasonable measure 
of the expiration of service potential of the tangible assets subject to 
depreciation. Adherence to this Standard should provide a systematic and 
rational flow of the costs of tangible capital assets to benefitted cost 
objectives over the expected service lives of the assets. This Standard 
does not cover nonwasting assets or natural resources which are subject 
to depletion.



9904.409-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this Chapter 99 shall 
have the meanings ascribed to them in those definitions unless paragraph 
(b) of this subsection, requires otherwise.
    (1) Residual value means the proceeds (less removal and disposal 
costs, if any) realized upon disposition of a tangible capital asset. It 
usually is measured by the net proceeds from the sale or other 
disposition of the asset, or its fair value if the asset is traded in on 
another asset. The estimated residual value is a current forecast of the 
residual value.
    (2) Service life means the period of usefulness of a tangible asset 
(or group of assets) to its current owner. The period may be expressed 
in units of time or output. The estimated service life of a tangible 
capital asset (or group of assets) is a current forecast of its service

[[Page 400]]

life and is the period over which depreciation cost is to be assigned.
    (3) Tangible capital asset means 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 services it yields.
    (b) The following modifications of terms defined elsewhere in this 
Chapter 99 are applicable to this Standard: None.



9904.409-40  Fundamental requirement.

    (a) The depreciable cost of a tangible capital asset (or group of 
assets) shall be assigned to cost accounting periods in accordance with 
the following criteria:
    (1) The depreciable cost of a tangible capital asset shall be its 
capitalized cost less its estimated residual value.
    (2) The estimated service life of a tangible capital asset (or group 
of assets) shall be used to determine the cost accounting periods to 
which the depreciable cost will be assigned.
    (3) The method of depreciation selected for assigning the 
depreciable cost of a tangible capital asset (or group of assets) to the 
cost accounting periods representing its estimated service life shall 
reflect the pattern of consumption of services over the life of the 
asset.
    (4) The gain or loss which is recognized upon disposition of a 
tangible capital asset shall be assigned to the cost accounting period 
in which the disposition occurs.
    (b) The annual depreciation cost of a tangible capital asset (or 
group of assets) shall be allocated to cost objectives for which it 
provides service in accordance with the following criteria:
    (1) Depreciation cost may be charged directly to cost objectives 
only if such charges are made on the basis of usage and only if 
depreciation costs of all like assets used for similar purposes are 
charged in the same manner.
    (2) Where tangible capital assets are part of, or function as, an 
organizational unit whose costs are charged to other cost objectives 
based on measurement of the services provided by the organizational 
unit, the depreciation cost of such assets shall be included as part of 
the cost of the organizational unit.
    (3) Depreciation costs which are not allocated in accordance with 
paragraph (b) (1) or (2) of this subsection, shall be included in 
appropriate indirect cost pools.
    (4) The gain or loss which is recognized upon disposition of a 
tangible capital asset, where material in amount, shall be allocated in 
the same manner as the depreciation cost of the asset has been or would 
have been allocated for the cost accounting period in which the 
disposition occurs. Where such gain or loss is not material, the amount 
may be included in an appropriate indirect cost pool.



9904.409-50  Techniques for application.

    (a) Determination of the appropriate depreciation charges involves 
estimates both of service life and of the likely pattern of consumption 
of services in the cost accounting periods included in such life. In 
selecting service life estimates and in selecting depreciation methods, 
many of the same physical and economic factors should be considered. The 
following are among the factors which may be taken into account: 
Quantity and quality of expected output, and the timing thereof; costs 
of repair and maintenance, and the timing thereof; standby or incidental 
use and the timing thereof; and technical or economic obsolescence of 
the asset (or group of assets), or of the product or service it is 
involved in producing.
    (b) Depreciation of a tangible capital asset shall begin when the 
asset and any others on which its effective use depends are ready for 
use in a normal or acceptable fashion. However, where partial 
utilization of a tangible capital asset is identified with a specific 
operation, depreciation shall commence on any portion of the asset which 
is substantially completed and used for that operation. Depreciable 
spare parts which are required for the operation of such tangible 
capital assets shall be accounted for over the service life of the 
assets.
    (c) A consistent policy shall be followed in determining the 
depreciable

[[Page 401]]

cost to be assigned to the beginning and ending cost accounting periods 
of asset use. The policy may provide for any reasonable starting and 
ending dates in computing the first and last year depreciable cost.
    (d) Tangible capital assets may be accounted for by treating each 
individual asset as an accounting unit, or by combining two or more 
assets as a single accounting unit, provided such treatment is 
consistently applied over the service life of the asset or group of 
assets.
    (e) Estimated service lives initially established for tangible 
capital assets (or groups of assets) shall be reasonable approximations 
of their expected actual periods of usefulness, considering the factors 
mentioned in paragraph (a) of this subsection. The estimate of the 
expected actual periods of usefulness need not include the additional 
period tangible capital assets are retained for standby or incidental 
use where adequate records are maintained which reflect the withdrawal 
from active use.
    (1) The expected actual periods of usefulness shall be those periods 
which are supported by records of either past retirement or, where 
available, withdrawal from active use (and retention for standby or 
incidental use) for like assets (or groups of assets) used in similar 
circumstances appropriately modified for specifically identified factors 
expected to influence future lives. The factors which can be used to 
modify past experience include:
    (i) Changes in expected physical usefulness from that which has been 
experienced such as changes in the quantity and quality of expected 
output.
    (ii) Changes in expected economic usefulness, such as changes in 
expected technical or economic obsolescence of the asset (or group of 
assets), or of the product or service produced.
    (2) Supporting records shall be maintained which are adequate to 
show the age at retirement or, if the contractor so chooses, at 
withdrawal from active use (and retention for standby or incidental use) 
for a sample of assets for each significant category. Whether assets are 
accounted for individually or by groups, the basis for estimating 
service life shall be predicated on supporting records of experienced 
lives for either individual assets or any reasonable grouping of assets 
as long as that basis is consisently used. The burden shall be on the 
contractor to justify estimated service lives which are shorter than 
such experienced lives.
    (3) The records required in subparagraphs (e) (1) and (2) of this 
subsection, if not available on the date when the requirements of this 
Standard must first be followed by a contractor, shall be developed from 
current and historical fixed asset records and be available following 
the second fiscal year after that date. They shall be used as a basis 
for estimates of service lives of tangible capital assets acquired 
thereafter. Estimated service lives used for financial accounting 
purposes (or other accounting purposes where depreciation is not 
recorded for financial accounting purposes for some non-commercial 
organizations), if not unreasonable under the criteria specified in 
paragraph (e) of this subsection, shall be used until adequate 
supporting records are available.
    (4) Estimated service lives for tangible capital assets for which 
the contractor has no available data or no prior experience for similar 
assets shall be established based on a projection of the expected actual 
period of usefulness, but shall not be less than asset guideline periods 
(mid-range) established for asset guideline classes under Internal 
Revenue Procedures which are in effect as of the first day of the cost 
accounting period in which the assets are acquired. Use of this 
alternative procedure shall cease as soon as the contractor is able to 
develop estimates which are appropriately supported by his own 
experience.
    (5) The contracting parties may agree on the estimated service life 
of individual tangible capital assets where the unique purpose for which 
the equipment was acquired or other special circumstances warrant a 
shorter estimated service life than the life determined in accordance 
with the other provisions of this 9904.409-50(e) and where the shorter 
life can be reasonably predicted.
    (f)(1) The method of depreciation used for financial accounting 
purposes (or other accounting purposes where

[[Page 402]]

depreciation is not recorded for financial accounting purposes) shall be 
used for contract costing unless:
    (i) Such method does not reasonably reflect the expected consumption 
of services for the tangible capital asset (or group of assets) to which 
applied, or
    (ii) The method is unacceptable for Federal income tax purposes.

If the contractors' method of depreciation used for financial accounting 
purposes (or other accounting purposes as provided above) does not 
reasonably reflect the expected consumption of services or is 
unacceptable for Federal income tax purposes, he shall establish a 
method of depreciation for contract costing which meets these criteria, 
in accordance with subparagraph (f)(3) of this subsection.
    (2) After the date of initial applicability of this Standard, 
selection of methods of depreciation for newly acquired tangible capital 
assets, which are different from the methods currently being used for 
like assets in similar circumstances, shall be supported by projections 
of the expected consumption of services of those assets (or groups of 
assets) to which the different methods of depreciation shall apply. 
Support in accordance with paragraph (f)(3) of this subsection shall be 
based on the expected consumption of services of either individual 
assets or any reasonable grouping of assets as long as the basis 
selected for grouping assets is consistently used.
    (3) The expected consumption of asset services over the estimated 
service life of a tangible capital asset (or group of assets) is 
influenced by the factors mentioned in paragraph (a) of this subsection 
which affect either potential activity or potential output of the asset 
(or group of assets). These factors may be measured by the expected 
activity or the expected physical output of the assets, as for example: 
Hours of operation, number of operations performed, number of units 
produced, or number of miles traveled. An acceptable surrogate for 
expected activity or output might be a monetary measure of that activity 
or output generated by use of tangible capital assets, such as estimated 
labor dollars, total cost incurred or total revenues, to the extent that 
such monetary measures can reasonably be related to the usage of 
specific tangible capital assets (or groups of assets). In the absence 
of reliable data for the measurement or estimation of the consumption of 
asset services by the techniques mentioned, the expected consumption of 
services may be represented by the passage of time. The appropriate 
method of depreciation should be selected as follows:
    (i) An accelerated method of depreciation is appropriate where the 
expected consumption of asset services is significantly greater in early 
years of asset life.
    (ii) The straight-line method of depreciation is appropriate where 
the expected consumption of asset services is reasonably level over the 
service life of the asset (or group of assets).
    (g) The estimated service life and method of depreciation to be used 
for an original complement of low-cost equipment shall be based on the 
expected consumption of services over the expected useful life of the 
complement as a whole and shall not be based on the individual items 
which form the complement.
    (h) Estimated residual values shall be determined for all tangible 
capital assets (or groups of assets). For tangible personal property, 
only estimated residual values which exceed ten percent of the 
capitalized cost of the asset (or group of assets) need be used in 
establishing depreciable costs. Where either the declining balance 
method of depreciation or the class life asset depreciation range system 
is used consistent with the provisions of this Standard, the residual 
value need not be deducted from capitalized cost to determine 
depreciable costs. No depreciation cost shall be charged which would 
significantly reduce book value of a tangible capital asset (or group of 
assets) below its residual value.
    (i) Estimates of service life, consumption of services, and residual 
value shall be reexamined for tangible capital assets (or groups of 
assets) whenever circumstances change significantly. Where changes are 
made to the estimated service life, residual value, or method of 
depreciation during the life of a tangible capital asset, the remaining 
depreciable costs for cost

[[Page 403]]

accounting purposes shall be limited to the undepreciated cost of the 
assets and shall be assigned only to the cost accounting period in which 
the change is made and to subsequent periods.
    (j)(1) Gains and losses on disposition of tangible capital assets 
shall be considered as adjustments of depreciation costs previously 
recognized and shall be assigned to the cost accounting period in which 
disposition occurs except as provided in subparagraphs (j) (2) and (3) 
of this subsection. The gain or loss for each asset disposed of is the 
difference between the net amount realized, including insurance proceeds 
in the event of involuntary conversion, and its undepreciated balance. 
However, the gain to be recognized for contract costing purposes shall 
be limited to the difference between the original acquisition cost of 
the asset and its undepreciated balance.
    (2) Gains and losses on the disposition of tangible capital assets 
shall not be recognized where:
    (i) Assets are grouped and such gains and losses are processed 
through the accumulated depreciation account, or
    (ii) The asset is given in exchange as part of the purchase price of 
a similar asset and the gain or loss is included in computing the 
depreciable cost of the new asset.

Where the disposition results from an involuntary conversion and the 
asset is replaced by a similar asset, gains and losses may either be 
recognized in the period of disposition or used to adjust the 
depreciable cost base of the new asset.
    (3) The contracting parties may account for gains and losses arising 
from mass or extraordinary dispositions in a manner which will result in 
treatment equitable to all parties.
    (4) Gains and losses on disposition of tangible capital assets 
transferred in other than an arms-length transaction and subsequently 
disposed of within 12 months from the date of transfer shall be assigned 
to the transferor.
    (5) The provisions of this subsection 9904.409-50(j) do not apply to 
business combinations. The carrying values of tangible capital assets 
acquired subsequent to a business combination shall be established in 
accordance with the provisions of subsection 9904.404-50(d).
    (k) Where, in accordance with 9904.409-40(b)(1), the depreciation 
costs of like tangible capital assets used for similar purposes are 
directly charged to cost objectives on the basis of usage, average 
charging rates based on cost shall be established for the use of such 
assets. Any variances between total depreciation cost charged to cost 
objectives and total depreciation cost for the cost accounting period 
shall be accounted for in accordance with the contractor's established 
practice for handling such variances.
    (l) Practices for determining depreciation methods, estimated 
service lives and estimated residual values need not be changed for 
assets acquired prior to compliance with this Standard if otherwise 
acceptable under applicable procurement regulations. However, if changes 
are effected such changes must conform to the criteria established in 
this Standard and may be effected on a prospective basis to cover the 
undepreciated balance of cost by agreement between the contracting 
parties pursuant to negotiation under subdivision (a)(4) (ii) or (iii) 
of the contract clause set out at 9903.201-4(a).

[57 FR 14153, Apr. 17, 1992; 57 FR 34167, Aug. 3, 1992; 61 FR 5523, Feb. 
13, 1996]



9904.409-60  Illustrations.

    The following examples are illustrative of the provisions of this 
Standard.
    (a) Companies X, Y, and Z purchase identical milling machines to be 
used for similar purposes.
    (1) Company X estimates service life for tangible capital assets on 
an individual asset basis. Its experience with similar machines is that 
the average replacement period is 14 years. Under the provisions of the 
Standard, Company X shall use the estimated service life of 14 years for 
the milling machine unless it can demonstrate changed circumstances or 
new circumstances to support a different estimate.
    (2) Company Y estimates service life for tangible capital assets by 
grouping assets of the same general kind and with similar service lives. 
Accordingly, all machine tools are accounted for as a single group. The 
average replacement life for machine tools for Company Y is 12 years. In 
accordance with

[[Page 404]]

the provisions of the Standard, Company Y shall use a life of 12 years 
for the acquisition unless it can support a different estimate for the 
entire group.
    (3) Company Z estimates service life for tangible capital assets by 
grouping assets according to use without regard to service lives. 
Accordingly, all machinery and equipment is accounted for as a single 
group. The average replacement life for machinery and equipment in 
Company Z is 10 years. In accordance with the provisions of the 
Standard, Company Z shall use an estimated service life of ten years for 
the acquisition unless it can support a different estimate for the 
entire group.
    (b) Company X desires to charge depreciation of the milling machine 
described in paragraph (a) of this subsection, directly to final cost 
objectives. Usage of the milling machine can be measured readily based 
on hours of operation. Company X may charge depreciation cost directly 
on a unit of time basis provided he uses one depreciation charging rate 
for all like milling machines in the machine shop and charges 
depreciation for all such milling machines directly to benefiting cost 
objectives.
    (c) A contractor acquires, and capitalizes as an asset 
accountability unit, a new lathe. The estimated service life is 10 years 
for the lathe. He acquires, and capitalizes as an original complement of 
low-cost equipment related to the lathe, a collection of tool holders, 
chucks, indexing heads, wrenches, and the like. Although individual 
items comprising the complement have an average life of 6 years, 
replacements of these items will be made as needed and, therefore, the 
expected useful life of the complement is equal to the life of the 
lathe. An estimated service life of 10 years should be used for the 
original complement.
    (d) A contractor acquires a test facility with an estimated physical 
life of 10 years, to be used on contracts for a new program. The test 
facility was acquired for $5 million. It is expected that the program 
will be completed in 6 years and the test facility acquired is not 
expected to be required for other products of the contractor. Although 
the facility will last 10 years, the contracting parties may agree in 
advance to depreciate the facility over 6 years.
    (e) Contractor acquires a building by donation from its local 
Government. The building had been purchased new by another company and 
subsequently acquired by the local Government. Contractor capitalizes 
the building at its fair value. Under the Standard the depreciable cost 
of the asset based on that value may be accounted for over its estimated 
service life and allocated to cost objectives in accordance with 
contractor's cost allocation practices.
    (f) A major item of equipment which was acquired prior to the 
applicability of this Standard was estimated, at acquisition, to have a 
service life of 12 years and a residual value of no more than 10 percent 
of acquisition cost. After 4 years of service, during which time this 
Standard has become applicable, a change in the production situation 
results in a well-supported determination to shorten the estimated 
service life to a total of 7 years. The revised estimated residual value 
is 15 percent of acquisition cost. The annual depreciation charges based 
on this particular asset will be appropriately increased to amortize the 
remaining cost, less the current estimate of residual value, over the 
remaining 3 years of expected usefulness. This change is not a change of 
cost accounting practice, but a correction of numeric estimates. The 
requirement of 9904.409-50(1) for an adjustment pursuant to subdivision 
(a)(4) (ii) or (iii) of the CAS clause does not apply.
    (g) The support required by 9904.409-50(e) can, in all likelihood, 
be derived by sampling from almost any reasonable fixed asset records. 
Of course, the more complete the data in the records which are 
available, the more confidence there can be in determinations of asset 
service lives. The following descriptions of sampling methods are 
illustrations of techniques which may be useful even with limited fixed 
asset records.
    (1) A company maintains an inventory of assets in use. The company 
should select a sampling time period which, preferably, is significantly 
longer than the anticipated life of the assets for which lives are to be 
established. Of course, the inventory must

[[Page 405]]

be available for each year in the sampling time period. The company 
would then select a randon sample of items in each year except the most 
recent year of the time period. Each item in the sample would be 
compared to the subsequent year's inventory to determine if the asset is 
still in service; if not, then the asset had been retired in the year 
from which the sample was drawn. The item is then traced to prior year 
inventories to determine the year in which acquired.

    Note: Sufficient items must be drawn in each year to ensure an 
adequate sample.

    (2) A company maintains an inventory of assets in use and also has a 
record of retirements. In this case the company does not have to compare 
the sample to subsequent years to determine if disposition has occurred. 
As in Example (g)(1) of this subsection, the sample items are traced to 
prior years to determine the year in which acquired.
    (3) A company maintains retirement records which show acquisition 
dates. The company should select a sampling time period which, 
preferably, is significantly longer than the anticipated life of the 
assets for which lives are to be estimated. The company would then 
select a random sample of items retired in each year of the sampling 
time period and tabulate age at requirement.
    (4) A company maintains only a record of acquisitions for each year. 
The company should select a random sample of items acquired in the most 
recent complete year and determine from current records or observations 
whether each item is currently in service. The acquisitions of each 
prior year should be samples in turn to determine if sample items are 
currently in service. This sampling should be performed for a time 
period significantly longer than the anticipated life of assets for 
which the lives are to be established, but can be discontinued at the 
point at which sample items no longer appear in current use. From the 
data obtained, mortality tables can be constructed to determine average 
asset life.
    (5) A company does not maintain accounting records on fully 
depreciated assets. However, property records are maintained, and such 
records are retained for 3 years after disposition of an asset in groups 
by year of disposition. An analysis of these retirements may be made by 
selecting the larger dollar items for each category of assets for which 
lives are to be determined (for example, at least 75 percent of the 
acquisition values retired each year). The cases cited above are only 
examples and many other examples could have been used. Also, in any 
example, a company's individual circumstances must be considered in 
order to take into account possible biased results because of changes in 
organizations, products, acquisition policies, economic factors, etc. 
The results from example (g)(5) of this subsection, for instance, might 
be substantially distorted if the 3-year period was unusual with respect 
to dispositions. Therefore, the examples are illustrative only and any 
sampling performed in compliance with this Standard should take into 
account all relevant information to ensure that reasonable results are 
obtained.



9904.409-61  Interpretation. [Reserved]



9904.409-62  Exemption.

    This Standard shall not apply where compensation for the use of 
tangible capital assets is based on use rates or allowances provided by 
other appropriate Federal acquisition regulations such as those 
governing:
    (a) Educational institutions,
    (b) State, local, and Federally recognized Indian tribal government, 
or
    (c) Construction equipment rates (See 48 CFR 31.105(d)).



9904.409-63  Effective date.

    (a) This Standard is effective April 15, 1996.
    (b) This Standard shall be applied beginning with the contractor's 
next full cost accounting period beginning after the receipt of a 
contract or subcontract to which this Standard is applicable.
    (c) Contractors with prior CAS-covered contracts with full coverage 
shall continue to follow Standard 9904.409 in effect prior to April 15, 
1996, until this Standard, effective April 15, 1996, becomes applicable 
after the receipt of a

[[Page 406]]

contract or subcontract to which this revised Standard applies.

[61 FR 5523, Feb. 13, 1996]



9904.410  Allocation of business unit general and administrative expenses to final cost objectives.



9904.410-10  [Reserved]



9904.410-20  Purpose.

    The purpose of this Cost Accounting Standard is to provide criteria 
for the allocation of business unit general and administrative (G&A) 
expenses to business unit final cost objectives based on their 
beneficial or causal relationship. These expenses represent the cost of 
the management and administration of the business unit as a whole. The 
Standard also provides criteria for the allocation of home office 
expenses received by a segment to the cost objectives of that segment. 
This Standard will increase the likelihood of achieving objectivity in 
the allocation of expenses to final cost objectives and comparability of 
cost data among contractors in similar circumstances.



9904.410-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this standard. Other terms defined elsewhere in this part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this section, requires otherwise.
    (1) Allocate means to assign an item of cost or a group of items of 
cost, to one or more cost objectives. This term includes both direct 
assignment of cost and the reassignment of a share from an indirect cost 
pool.
    (2) Business unit means any segment of an organization, or an entire 
business organization which is not divided into segments.
    (3) Cost input means the cost, except G&A expenses, which for 
contract costing purposes is allocable to the production of goods and 
services during a cost accounting period.
    (4) Cost objective means a function, organizational subdivision, 
contract or other work unit for which cost data are desired and for 
which provision is made to accumulate and measure the cost of processes, 
products, jobs, capitalized projects, etc.
    (5) Final cost objective means a cost objective which has allocated 
to it both direct and indirect costs, and, in the contractor's 
accumulation systems, is one of the final accumulation points.
    (6) General and administrative (G&A) expense means any management, 
financial, and other expense which is incurred by or allocated to a 
business unit and which is for the general management and administration 
of the business unit as a whole. G&A expense does not include those 
management expenses whose beneficial or causal relationship to cost 
objectives can be more directly measured by a base other than a cost 
input base representing the total activity of a business unit during a 
cost accounting period.
    (7) Segment means one of two or more divisions, product departments, 
plants, or other subdivisions of an organization reporting directly to a 
home office, usually identified with responsibility for profit and/or 
producing a product or service. The terms include Government-owned 
contractor-operated (GOCO) facilities, and joint ventures and 
subsidiaries (domestic and foreign) in which the organization has a 
majority ownership. The term also includes those joint ventures and 
subsidiaries (domestic and foreign) in which the organization has less 
than a majority of ownership, but over which it exercises control.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9904.410-40  Fundamental requirement.

    (a) Business unit G&A expenses shall be grouped in a separate 
indirect cost pool which shall be allocated only to final cost 
objectives.
    (b)(1) The G&A expense pool of a business unit for a cost accounting 
period shall be allocated to final cost objectives of that cost 
accounting period by means of a cost input base representing the total 
activity of the business unit except as provided in subparagraph (b)(2) 
of this subsection. The cost input base selected shall be the

[[Page 407]]

one which best represents the total activity of a typical cost 
accounting period.
    (2) The allocation of the G&A expense pool to any particular final 
cost objectives which receive benefits significantly different from the 
benefits accruing to other final cost objectives shall be determined by 
special allocation (9904.410-50(j)).
    (c) Home office expenses received by a segment shall be allocated to 
segment cost objectives as required by 9904.410-50(g).
    (d) Any costs which do not satisfy the definition of G&A expense but 
which have been classified by a business unit as G&A expenses, can 
remain in the G&A expense pool unless they can be allocated to business 
unit cost objectives on a beneficial or causal relationship which is 
best measured by a base other than a cost input base.



9904.410-50  Techniques for application.

    (a) G&A expenses of a segment incurred by another segment shall be 
removed from the incurring segment's G&A expense pool. They shall be 
allocated to the segment for which the expenses were incurred on the 
basis of the beneficial or causal relationship between the expenses 
incurred and all benefiting or causing segments. If the expenses are 
incurred for two or more segments, they shall be allocated using an 
allocation base common to all such segments.
    (b) The G&A expense pool may be combined with other expenses for 
allocation to final cost objectives provided that--
    (1) The allocation base used for the combined pool is appropriate 
both for the allocation of the G&A expense pool under this Standard and 
for the allocation of the other expenses; and
    (2) Provision is made to identify the components and total of the 
G&A expense pool separately from the other expenses in the combined 
pool.
    (c) Expenses which are not G&A expenses and are insignificant in 
amount may be included in the G&A expense pool for allocation to final 
cost objectives.
    (d) The cost input base used to allocate the G&A expense pool shall 
include all significant elements of that cost input which represent the 
total activity of the business unit. The cost input base selected to 
represent the total activity of a business unit during a cost accounting 
period may be: Total cost input; value-added cost input; or single 
element cost input. The determination of which cost input base best 
represents the total activity of a business unit must be judged on the 
basis of the circumstances of each business unit.
    (1) A total cost input base is generally acceptable as an 
appropriate measure of the total activity of a business unit.
    (2) Value-added cost input shall be used as an allocation base where 
inclusion of material and subcontract costs would significantly distort 
the allocation of the G&A expense pool in relation to the benefits 
received, and where costs other than direct labor are significant 
measures of total activity. A value-added cost input base is total cost 
input less material and subcontract costs.
    (3) A single element cost input base; e.g., direct labor hours or 
direct labor dollars, which represents the total activity of a business 
unit may be used to allocate the G&A expense pool where it produces 
equitable results. A single element base may not produce equitable 
results where other measures of activity are also significant in 
relation to total activity. A single element base is inappropriate where 
it is an insignificant part of the total cost of some of the final cost 
objectives.
    (e) Where, prior to the effective date of this Standard, a business 
unit's disclosed or established cost accounting practice was to use a 
cost of sales or sales base, that business unit may use the transition 
method set out in appendix A hereof.
    (f) Cost input shall include those expenses which by operation of 
this Standard are excluded from the G&A expense pool and are not part of 
a combined pool of G&A expenses and other expenses allocated using the 
same allocation base.
    (g)(1) Allocations of the home office expenses of:
    (i) Line management of particular segments or groups of segments,

[[Page 408]]

    (ii) Residual expenses, and
    (iii) Directly allocated expenses related to the management and 
administration of the receiving segment as a whole, shall be included in 
the receiving segment's G&A expense pool.
    (2) Any separate allocation of the expenses of home office 
centralized service functions, staff management of specific activities 
of segments, and central payments or accruals, which is received by a 
segment, shall be allocated to the segment cost objectives in proportion 
to the beneficial or causal relationship between the cost objectives and 
the expense if such allocation is significant in amount. Where a 
beneficial or causal relationship for the expense is not identifiable 
with segment cost objectives, the expense may be included in the G&A 
expense pool.
    (h) Where a segment performs home office functions and also performs 
as an operating segment having a responsibility for final cost 
objectives, the expense of the home office functions shall be 
segregated. These expenses shall be allocated to all benefiting or 
causing segments, including the segment performing the home office 
functions, pursuant to disclosed or established accounting practices for 
the allocation of home office expenses to segments.
    (i) For purposes of allocating the G&A expense pool, items produced 
or worked on for stock or product inventory shall be accounted for as 
final cost objectives in accordance with the following paragraphs:
    (1) Where items are produced or worked on for stock or product 
inventory in a given cost accounting period, the cost input to such 
items in that period shall be included only once in the computation of 
the G&A expense allocation base and in the computation of the G&A 
expense allocation rate for that period and shall not be included in the 
computation of the base or rate for any other cost accounting period.
    (2) A portion of the G&A expense pool shall be allocated to items 
produced or worked on for stock or product inventory in the cost 
accounting period or periods in which such items are produced at the 
rates determined for such periods except as provided in subparagraph 
(i)(3) of this subsection.
    (3) Where the contractor does not include G&A expense in inventory 
as part of the cost of stock or product inventory items, the G&A rate of 
the cost accounting period in which such items are issued to final cost 
objectives may be used to determine the G&A expenses applicable to 
issues of stock or product inventory items.
    (j) Where a particular final cost objective in relation to other 
final cost objectives receives significantly more or less benefit from 
G&A expense than would be reflected by the allocation of such expenses 
using a base determined pursuant to paragraph (d) of this subsection, 
the business unit shall account for this particular final cost objective 
by a special allocation from the G&A expense pool to the particular 
final cost objective commensurate with the benefits received. The amount 
of a special allocation to any such final cost objective shall be 
excluded from the G&A expense pool required by 9904.410-40(a), and the 
particular final cost objective's cost input data shall be excluded from 
the base used to allocate this pool.



9904.410-60  Illustrations.

    (a) Business Unit A has been including the cost of scientific 
computer operations in its G&A expense pool. The scientific computer is 
used predominantly for research and development, rather than for the 
management and administration of the business unit as a whole. The costs 
of the scientific computer operation do not satisfy the Standard's 
definition of G&A expense; however, they may remain in the G&A expense 
pool unless they can be allocated to business unit cost objectives on a 
beneficial or causal relationship which is best measured by a base other 
than a cost input base representing the total activity of a business 
unit during a cost accounting period.
    (b) Segment B performs a budgeting function, the cost of which is 
included in its G&A expense pool. This function includes the preparation 
of budgets for another segment. The cost of preparing the budgets for 
the other segment should be removed from B's G&A expense pool and 
transferred to the other segment.

[[Page 409]]

    (c)(1) Business Unit C has a personnel function which is divided 
into two parts: A vice president of personnel who establishes personnel 
policy and overall guidance, and a personnel department which handles 
hirings, testing, evaluations, etc. The expense of the vice president is 
included in the G&A expense pool. The expense of the personnel 
department is allocated to the other indirect cost pools based on the 
beneficial or causal relationship between that expense and the indirect 
cost pools. This procedure is in compliance with the requirements of 
this Standard.
    (2) Business Unit C has included selling costs as part of its G&A 
expense pool. Unit C wishes to continue to include selling costs in its 
G&A pool. Under the provisions of this Standard, Unit C may continue to 
include selling costs in its G&A pool, and these costs will be allocated 
over a cost input base selected in accordance with the provisions of 
9904.410-50(d).
    (3) Business Unit C has included IR&D and B&P costs in its G&A 
expense pool. Unit C has used a cost of sales base to allocate its G&A 
expense pool. As of January 1, 1978 (assumed for purposes of this 
illustration), the date on which Unit C must first allocate its G&A 
expense pool in accordance with the requirements of this Standard, Unit 
C has among its final cost objectives several cost reimbursement 
contracts and fixed price contracts subject to the CAS clause (referred 
to as the preexisting contracts). If Unit C chooses to use the 
transition method in 9904.410-50(e):
    (i) Unit C shall allocate IR&D and B&P costs during the transition 
period (from January 1, 1978, to and including the cost accounting 
period during which the preexisting contracts are completed), to the 
preexisting contracts as part of its G&A expense pool using a cost of 
sales base pursuant to 9904.410-50(e) and appendix A to 9904.410.
    (ii) During the transition period such costs, as part of the G&A 
expense pool, shall be allocated to new cost reimbursement contracts and 
new fixed price contracts subject to the CAS clause using a cost input 
base as required by 9904.410-50 (d) and (e) and appendix A to 9904.410.
    (iii) Beginning with the cost accounting period after the transition 
period the IR&D and B&P costs, as part of the G&A expense pool, shall be 
allocated to all final cost objectives using a cost input base as 
required by 9904.410-50(d). If Unit C chooses not to use the transition 
method in 9904.410-50(e), the contractual provision requiring 
appropriate equitable adjustment of the prices of affected prime 
contracts and subcontracts will be implemented.
    (4) Business Unit C has accounted for and allocated IR&D and B&P 
costs in a cost pool separate and apart from the G&A expense pool. Unit 
C may continue to account for these costs in a separate cost pool under 
the provision of this Standard. If Unit C is to use a total cost input 
base, these costs when accounted for and allocated in a cost pool 
separate and apart from the G&A expense pool will become part of the 
total cost input base used by Unit C to allocate the G&A expense pool.
    (5) Business Unit C has included selling costs as part of its G&A 
expense pool. Unit C has used a cost of sales base to allocate the G&A 
expense pool. Unit C desires to continue to allocate selling costs using 
the costs of sales base. Under the provisions of this Standard, Unit C 
would account for selling costs as a cost pool separate and apart from 
the G&A expense pool, and continue to allocate these costs over a cost 
of sales base. If Unit C uses a total cost input base to allocate the 
G&A expense pool, the selling costs will become part of the total cost 
input base.
    (d)(1) Business Unit D has accounted for selling costs in a cost 
pool separate and apart from its G&A expense pool and has allocated 
these costs using a cost of sales base. Under the provisions of this 
Standard, Unit D may continue to account for those costs in a separate 
pool and allocate them using a cost of sales base. Unit D has a total 
cost input base to allocate its G&A expense pool. The selling costs will 
become part of the cost input base used by Unit D to allocate the G&A 
expense pool.
    (2) During a cost accounting period, Business Unit D buys $2,000,000 
of raw

[[Page 410]]

materials. At the end of that cost accounting period, $500,000 of raw 
materials inventory have not been charged out to contracts or other cost 
objectives. The $500,000 of raw materials are not part of the total cost 
input base for the cost accounting period, because they have not been 
charged to the production of goods and services during that period. If 
all of the $2,000,000 worth of raw material had been charged to cost 
objectives during the cost accounting period, the cost input base for 
the allocation of the G&A expense pool would include the entire 
$2,000,000.
    (3) Business Unit D manufactures a variety of testing devices. 
During a cost accounting period, Unit D acquires and uses a small 
building, constructs a small production facility using its own 
resources, and keeps for its own use one unit of a testing device that 
it manufactures and sells to its customers. The acquisition cost of the 
building is not part of the total cost input base; however, the 
depreciation taken on the building would be part of the total cost input 
base. The costs of construction of the small production facility are not 
part of the total cost input base. The requirements of 9904.404 provide 
that those G&A expenses which are identifiable with the constructed 
asset and are material in amount shall be capitalized as part of the 
cost of the production facility. If there are G&A expenses material in 
amount and identified with the constructed asset, these G&A expenses 
would be removed from the G&A expense pool prior to the allocation of 
this pool to final cost objectives. The cost of the testing device shall 
be part of the total cost input base per the requirements of 9904.404 
which provides that the costs of constructed assets identical with the 
contractor's regular product shall include a full share of indirect 
cost.
    (e)(1) Business Unit E produces Item Z for stock or product 
inventory. The business unit does not include G&A expense as part of the 
inventory cost of these items for costing or financial reporting 
purposes. A production run of these items occurred during Cost 
Accounting Period 1. A number of the units produced were not issued 
during Period 1 and are issued in Period 2. However, those units 
produced in Period 1 shall be included in the cost input of that period 
for calculating the G&A expense allocation base and shall not be 
included in the cost input of Period 2.
    (2) Business Unit E should apply the G&A expense rate of Period 1 to 
those units of Item Z issued during Period 1 and may apply the rate of 
Period 2 to the units issued in Period 2.
    (3) If the practice of Business Unit E is to include G&A expense as 
part of the cost of stock or product inventory, the inventory cost of 
all units of Item Z produced in Period 1 and remaining in inventory at 
the end of Period 1, should include G&A expense using the G&A rate of 
Period 1.
    (f)(1) Business Unit F produced Item X for stock or product 
inventory. The business unit does not include G&A expense as part of the 
inventory cost of these items. A production run of these items was 
started, finished, and placed into inventory in a single cost accounting 
period. These items are issued during the next cost accounting period.
    (2) The cost of items produced for stock or product inventory should 
be included in the G&A base in the same year they are produced. The cost 
of such items is not to be included in the G&A base on the basis of when 
they are issued to final cost objectives. Therefore, the time of 
issuance of these items from inventory to a final cost objective is 
irrelevant in computing the G&A base.
    (g) The normal productive activity of Business Unit G includes the 
construction of base operating facilities for others. Unit G uses a 
total cost input base to allocate G&A expense to final cost objectives. 
As part of a contract to construct an operating facility, Unit G agrees 
to acquire a large group of trucks and other mobile equipment to equip 
the base operating facility. Unit G does not usually supply such 
equipment. The cost of the equipment constitutes a significant part of 
the contract cost. A special G&A allocation to this contract shall be 
agreed to by the parties if they agree that in the circumstances the 
contract as a whole receives substantially less benefit from the G&A 
expense pool than that which

[[Page 411]]

would be represented by a cost allocation based on inclusion of the 
contract cost in the total cost input base.
    (h)(1) The home office of Segment H separately allocates to 
benefiting or causing segments significant home office expenses of staff 
management functions relative to manufacturing, staff management 
functions relative to engineering, central payment of health insurance 
costs, and residual expenses. Segment H receives these expenses as 
separate allocations and maintains three indirect cost pools; i.e., G&A 
expense, manufacturing overhead, and engineering overhead; all home 
office expenses allocated to Segment H are included in Segment H's G&A 
expense pool.
    (2) This accounting practice of Segment H does not comply with 
9904.410-50(g)(2). Home office residual expenses should be in the G&A 
expense pool, and the expenses of the staff management functions 
relative to manufacturing and engineering should be included in the 
manufacturing overhead and engineering overhead pools, respectively. The 
health insurance costs should be allocated in proportion to the 
beneficial and causal relationship between these costs and Segment H's 
cost objectives.



9904.410-61  Interpretation. [Reserved]



9904.410-62  Exemption.

    This Standard shall not apply to contracts and grants with state, 
local, and Federally recognized Indian tribal governments.



9904.410-63  Effective date.

    This Standard is effective as of April 17, 1992. Contractors with 
prior CAS-covered contracts with full coverage shall continue this 
Standard's applicability upon receipt of a contract to which this 
Standard is applicable. For contractors with no previous contracts 
subject to this Standard, this Standard shall be applied beginning with 
the contractor's next full fiscal year beginning after the receipt of a 
contract to which this Standard is applicable.

Appendix A to 9904.410--Transition From a Cost of Sales or Sales Base to 
                            a Cost Input Base

    A business unit may use the method described below for transition 
from the use of a cost of sales or sales base to a cost input base.
    (1) Calculate the cost of sales or sales base in accordance with the 
cost accounting practice disclosed or established prior to the date 
established by 9904.410-80(b) of the original Cost Accounting Standard.
    (2) Calculate the G&A expense allocation rate using the base 
determined in subparagraph (1) of this appendix and use that rate to 
allocate from the G&A expense pool to the final cost objectives which 
were in existence prior to the date on which the business unit must 
first allocate costs in accordance with the requirements of this Cost 
Accounting Standard.
    (3) Calculate a cost input base in compliance with 9904.410-50(d).
    (4) Calculate the G&A expense rate using the base determined in 
subparagraph (3) of this appendix and use that rate to allocate from the 
G&A expense pool to those final cost objectives which arise under 
contracts entered into on or after the date on which the business unit 
must first allocate costs in accordance with the requirements of this 
Cost Accounting Standard.
    (5) The calculations set forth in subparagraphs (1)-(4) of this 
appendix shall be performed for each cost accounting period during which 
final cost objectives described in (2) are being performed.
    (6) The business unit shall establish an inventory suspense account. 
The amount of the inventory suspense account shall be equal to the 
beginning inventory of contracts subject to the CAS clause of the cost 
accounting period in which the business unit must first allocate costs 
in accordance with the requirements of this Cost Accounting Standard.
    (7) In any cost accounting period, after the cost accounting periods 
described in subparagraph (5) of this Appendix, if the ending inventory 
of contracts subject to the CAS clause is less than the balance of the 
inventory suspense account, the business unit shall calculate two G&A 
expense allocation rates, one to allocate G&A expenses to contracts 
subject to the CAS clause and one applicable to other work.
    (a) The G&A expense pool shall be divided in the proportion which 
the cost input of the G&A expense allocation base of the contracts 
subject to the CAS clause bears to the total of the cost input 
allocation base, selected in accordance with 9904.410-50(d), for the 
cost accounting period.

[[Page 412]]

    (b) The G&A expenses applicable to contracts subject to the CAS 
clause shall be reduced by an amount determined by multiplying the 
difference between the balance of the inventory suspense account and the 
ending inventory of contracts subject to the CAS clause by the cost of 
sales rate, as determined under subparagraph (1) of this Appendix, of 
the cost accounting period in which a business unit must first allocate 
costs in accordance with the requirements of this Cost Accounting 
Standard.
    (8) In any cost accounting period in which such a reduction is made, 
the balance of the inventory suspense account shall be reduced to be 
equal to the ending inventory of contracts subject to the CAS clause of 
that cost accounting period.
    The following illustrates how a business unit would use this 
transition method.
    1. Business Unit R has been using a cost of sales base to allocate 
its G&A expense pool to final cost objectives. Unit R uses a calendar 
year as its cost accounting period. On October 1, 1976 (assumed for 
purposes of this illustration) Cost Accounting Standard 410 becomes 
effective. On October 2, 1976, Unit R receives a 3-year contract 
containing the Cost Accounting Standards clause. As a result, Unit R 
must comply with the requirements of the Standard in the cost accounting 
period beginning in January 1978. As of January 3, 1978, Business Unit R 
has the following contracts:
    (1) Contract I--A 4-year contract awarded in January 1975.
    (2) Contract II--A 3-year contract which was negotiated in March 
1976, and was awarded on October 2, 1976.
    (3) Contract III--A 4-year contract awarded on January 2, 1978.
    If Business Unit R chooses to use the transition method provided in 
9904.410-50(e), it will allocate the G&A expense pool to these contracts 
as follows:
    (a) Contract I--Since Contract I was in existence prior to January 
1, 1978, the G&A expense pool shall be allocated to it using a cost of 
sales base as provided in 9904.410-50(e).
    (b) Contract II--Since this contract was in existence prior to 
January 1, 1978, the G&A expense pool shall be allocated to it using a 
cost of sales base as provided in 9904.410-50(e).
    (c) Contract III--Since this contract was awarded after January 1, 
1978, the G&A expense pool shall be allocated to this contract using a 
cost input base.
    Having chosen to use 9904.410-50(e), Business Unit R will use the 
transition method of allocating the G&A expense pool to final cost 
objectives until all contracts awarded prior to January 1, 1978, are 
completed (1979 if the contracts are completed on schedule). Beginning 
with the cost accounting period subsequent to that time, 1980, Unit R 
will use a cost input base to allocate the G&A expense pool to all cost 
objectives. Unit R will also carry forward an inventory suspense account 
in accordance with the requirements of this Standard.
    2.A. Business Unit N is first required to allocate its costs in 
accordance with the requirements of 9904.410 during the fiscal year 
beginning January 1, 1978. Unit N has used a cost of sales base to 
allocate its G&A expense pool.
    During the years 1978, 1979, 1980, Business Unit N reported the 
following data:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Contracts prior to Jan. 1, 1978              Contracts prior to Jan. 1, 1978
                                                              ------------------------------------------------------------------------------------------
                                                                              Non-CAS     CAS-fixed     CAS-cost     Non-CAS     CAS-fixed     CAS-cost
                                                                  Total         work      price work    contract       work      price work   contracts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year 1978:
  Beginning inventory........................................         $500          300          200            0            0            0            0
  Cost input.................................................        +3000          400          600          700          500          500          300
                                                              ------------------------------------------------------------------------------------------
    Total....................................................         3500          700          800          700          500          500          300
  Cost of sales..............................................        -3000          600          550          700          450          400          300
                                                              ------------------------------------------------------------------------------------------
  Ending inventory...........................................          500          100          250            0           50          100            0
Year 1979:
  Beginning inventory........................................          500          100          250            0           50          100            0
  Cost input.................................................        +3000          400          600          700          500          500          300
                                                              ------------------------------------------------------------------------------------------
    Total....................................................         3500          500          850          700          550          600          300
  Cost of sales..............................................        -2500          450          650          700          150          250          300
                                                              ------------------------------------------------------------------------------------------
    Ending inventory.........................................         1000           50          200            0          400          350            0
Year 1980:
  Beginning inventory........................................         1000           50          200            0          400          350            0
  Cost input.................................................        +3000          400          600          700          500          500          300
                                                              ------------------------------------------------------------------------------------------
    Total....................................................         4000          450          800          700          900          850          300
  Cost of sales..............................................        -3250          450          800          700          450          550          300
  Ending inventory...........................................          750            0            0            0          450          300            0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:

[[Page 413]]

 
Operating data is in thousands of dollars.
G. & A. expense $375,000 in accordance with the requirements of this standard.

Work existing prior to January 1, 1978, may include--
    (1) Government contracts which contain the CAS clause;
    (2) Government contracts which do not contain the CAS clause;
    (3) Contracts other than Government contracts or customer orders; 
and
    (4) Production not specifically identified with contracts or 
customer orders under production or work orders existing prior to the 
date on which a business unit must first allocate its costs in 
compliance with this Standard and which are limited in time or quantity.
    Production under standing or unlimited work orders, continuous flow 
processes and the like, not identified with contracts or customer orders 
are to be treated as final cost objectives awarded after the date on 
which a business unit must first allocate its costs in compliance with 
the requirements of this Standard.
    Business Unit N may allocate the G&A expense pool as follows:

                                                  [In dollars]
----------------------------------------------------------------------------------------------------------------
                                                           Year 1978           Year 1979           Year 1980
----------------------------------------------------------------------------------------------------------------
1. G.&A. expense pool...............................                 375                 375                 375
    Cost of sales rate..............................      375/3,000=.125      375/2,500=.150      375/3,250=.115
    Cost input......................................      375/3,000=.125      375/3,000=.125      375/3,000=.125
                                                     ===========================================================
2. G.&A. allocations:
    Prior contracts:
        Non-CAS work................................   600 x 0.125=75.00    450 x 0.15=67.50   450 x 0.115=51.75
        CAS-fixed price work........................   550 x 0.125=68.75    650 x 0.15=97.50   800 x 0.115=92.00
        CAS-cost contracts..........................   700 x 0.125=87.50   700 x 0.15=105.00   700 x 0.115=80.50
    After contracts:
        Non-CAS work................................   500 x 0.125=62.50   500 x 0.125=62.50   500 x 0.125=62.50
        CAS-fixed price work........................   500 x 0.125=62.50   500 x 0.125=62.50   500 x 0.125=62.50
        CAS-cost contracts..........................   300 x 0.125=37.50   300 x 0.125=37.50   300 x 0.125=37.55
                                                     -----------------------------------------------------------
                                                                  393.75              432.50              386.80
3. Inventory suspense account \1\...................                 200
    G.&A. rate applicable...........................                .125
----------------------------------------------------------------------------------------------------------------
\1\ Beginning inventory of contracts subject to the CAS clause, January 1978.

    2.B. In cost accounting period 1982, Business Unit N has an ending 
inventory of contracts subject to the CAS clause of $100,000. This is 
the first cost accounting period after the transition in which the 
amount of the ending inventory is less than the amount of the inventory 
suspense account. During this cost accounting period, Business Unit N 
had G&A expenses of $410,000 and cost input of $3,500,000; $1,500,000 
applicable to contracts subject to the CAS clause and $2,000,000 
applicable to other work.
    Business Unit N would compute its G&A expense allocation rate 
applicable to contracts subject to the CAS clause as follows:

(1) Amount of inventory suspense account....................    $200,000
  Amount of ending inventory................................     100,000
                                                             -----------
  Difference................................................     100,000
  G. & A. rate applicable (see 2.A. above)..................     x 0.125
                                                             -----------
  Adjustment to G. & A. expense applicable to contracts           12,500
   subject to the CAS clause................................
                                                             ===========
(2) G. & A. expense pool....................................     410,000
  G. & A. expenses applicable to contracts subject to the        175,890
   CAS clause ($1,500,000/$3,500,000  x  $410,000)..........
                                                             -----------
  G. & A. expenses applicable to other work.................     234,110
                                                             ===========
(3) G. & A. expenses applicable to contracts subject to the      175,890
 CAS clause.................................................
  Adjustment to G. & A. expenses applicable to contracts         -12,500
   subject to the CAS clause................................
                                                             -----------
  G. & A. expenses allocable to contracts subject to the CAS     163,390
   clause...................................................
(4) G. & A. expense allocation rate applicable to contracts
 subject to the CAS clause for cost accounting period 1982-
 $163,390/$1,500,000=0.109.
 
The amount of the inventory suspense account would be reduced to
  $100,000.


[[Page 414]]


[57 FR 14153, Apr. 17, 1992; 57 FR 34081, 34167, Aug. 3, 1992]



9904.411  Cost accounting standard--accounting for acquisition costs of material.



9904.411-10  [Reserved]



9904.411-20  Purpose.

    (a) The purpose of this Cost Accounting Standard is to provide 
criteria for the accounting for acquisition costs of material. The 
Standard includes provisions on the use of inventory costing methods. 
Consistent application of this Standard will improve the measurement and 
assignment of costs to cost objectives.
    (b) This Cost Accounting Standard does not cover accounting for the 
acquisition costs of tangible capital assets nor accountability for 
Government-furnished materials.

[57 FR 14153, Apr. 17, 1992; 57 FR 34167, Aug. 3, 1992]



9904.411-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms elsewhere in this chapter 99 shall have the 
meanings ascribed to them in those definitions unless paragraph (b) of 
this subsection, requires otherwise.
    (1) Allocate means to assign an item of cost, or a group of items of 
cost, to one or more cost objectives. This term includes both direct 
assignment of cost and the reassignment of a share from an indirect cost 
pool.
    (2) Business unit means any segment of an organization, or an entire 
business organization which is not divided into segments.
    (3) Category of material means a particular kind of goods, comprised 
of identical or interchangeable units, acquired or produced by a 
contractor, which are intended to be sold, or consumed or used in the 
performance of either direct or indirect functions.
    (4) Cost objective means a function, organizational subdivision, 
contract or other work unit for which cost data are desired and for 
which provision is made to accumulate and measure the cost of processes, 
products, jobs, capitalized projects, etc.
    (5) Material inventory record means any record used for the 
accumulation of actual or standard costs of a category of material 
recorded as an asset for subsequent cost allocation to one or more cost 
objectives.
    (6) Moving average cost means an inventory costing method under 
which an average unit cost is computed after each acquisition by adding 
the cost of the newly acquired units to the cost of the units of 
inventory on hand and dividing this figure by the new total number of 
units.
    (7) Weighted average cost means an inventory costing method under 
which an average unit cost is computed periodically by dividing the sum 
of the cost of beginning inventory plus the cost of acquisitions by the 
total number of units included in these two categories.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9904.411-40  Fundamental requirement.

    (a) The contractor shall have, and consistently apply, written 
statements of accounting policies and practices for accumulating the 
costs of material and for allocating costs of material to cost 
objectives.
    (b) The cost of units of a category of material may be allocated 
directly to a cost objective provided the cost objective was 
specifically identified at the time of purchase or production of the 
units.
    (c) The cost of material which is used solely in performing indirect 
functions, or is not a significant element of production cost, whether 
or not incorporated in an end product, may be allocated to an indirect 
cost pool. When significant, the cost of such indirect material not 
consumed in a cost accounting period shall be established as an asset at 
the end of the period.
    (d) Except as provided in paragraphs (b) and (c) of this subsection, 
the cost of a category of materials shall be accounted for in material 
inventory records.
    (e) In allocating to cost objectives the costs of a category of 
material issued from company-owned material inventory, the costing 
method used

[[Page 415]]

shall be selected in accordance with the provisions of 9904.411-50, and 
shall be used in a manner which results in systematic and rational 
costing of issues of material to cost objectives. The same costing 
method shall, within the same business unit, be used for similar 
categories of materials.



9904.411-50  Techniques for application.

    (a) Material cost shall be the acquisition cost of a category of 
material, whether or not a material inventory record is used. The 
purchase price of material shall be adjusted by extra charges incurred 
or discounts and credits earned. Such adjustments shall be charged or 
credited to the same cost objective as the purchase price of the 
material, except that where it is not practical to do so, the 
contractor's policy may provide for the consistent inclusion of such 
charges or credits in an appropriate indirect cost pool.
    (b) One of the following inventory costing methods shall be used 
when issuing material from a company-owned inventory:
    (1) The first-in, first-out (FIFO) method.
    (2) The moving average cost method.
    (3) The weighted average cost method.
    (4) The standard cost method.
    (5) The last-in, first-out (LIFO) method.
    (c) The method of computation used for any inventory costing method 
selected pursuant to the provisions of this Standard shall be 
consistently followed.
    (d) Where the excess of the ending inventory over the beginning 
inventory of material of the type described in 9904.411-40(c) is 
estimated to be significant in relation to the total cost included in 
the indirect cost pool, the cost of such unconsumed material shall be 
established as an asset at the end of the period by reducing the 
indirect cost pool by a corresponding amount.



9904.411-60  Illustrations.

    (a) Contractor ``A'' has one contract which requires two custom-
ordered, high-value, airborne cameras. The contractor's established 
policy is to order such special items specifically identified to a 
contract as the need arises and to charge them directly to the contract. 
Another contract is received which requires three more of these cameras, 
which the contractor purchases at a unit cost which differs from the 
unit cost of the first two cameras ordered. When the purchase orders 
were placed, the contractor identified the specific contracts on which 
the cameras being purchased were to be used. Although these cameras are 
identical, the actual cost of each camera is charged to the contract for 
which it was acquired without establishing a material inventory record. 
This practice would not be a violation of this Standard.
    (b)(1) A Government contract requires use of electronic tubes 
identified as ``W.'' The contractor expects to receive other contracts 
requiring the use of tubes of the same type. In accordance with its 
written policy, the contractor establishes a material inventory record 
for electronic tube ``W,'' and allocates the cost of units issued to the 
existing Government contract by the FIFO method. Such a practice would 
conform to the requirements of this Standard.
    (2) The contractor is awarded several additional contracts which 
require an electronic tube which the contractor concludes is similar to 
the one described in paragraph (b)(1) of this subsection and which is 
identified as ``Y.'' At the time a purchase order for these tubes is 
written, the contractor cannot identify the specific number of tubes to 
be used on each contract. Consequently, the contractor establishes an 
inventory record for these tubes and allocates their cost to the 
contracts on an average cost method. Because a FIFO method is used for a 
similar category of material within the same business unit, the use of 
an average cost method for ``Y'' would be a violation of this Standard.
    (c) A contractor complies with the Cost Accounting Standard on 
standard costs (9904.407), and he uses a standard cost method for 
allocating the costs of essentially all categories of material. Also, it 
is the contractor's established practice to charge the cost of purchased 
parts which are incorporated in his end products, and which are not a

[[Page 416]]

significant element of production cost to an indirect cost pool. Such 
practices conform to this Standard.
    (d) A contractor has one established inventory for type ``R'' 
transformers. The contractor allocates by the LIFO method the current 
costs of the individual units issued to Government contracts. Such a 
practice would conform to the requirements of this Standard.
    (e) A contractor has established inventories for various categories 
of material which are used on Government contracts. During the year the 
contractor allocates the costs of the units of the various categories of 
material issued to contracts by the moving average cost method. The 
contractor uses the LIFO method for tax and financial reporting purposes 
and, at year end, applies a pooled LIFO inventory adjustment for all 
categories of material to Government contracts. This application of 
pooled costs to Government contracts would be a violation of this 
Standard because the lump sum adjustment to all of the various 
categories of material is, in effect, a noncurrent repricing of the 
material issues.



9904.411-61  Interpretation. [Reserved]



9904.411-62  Exemption.

    None for this Standard.



9904.411-63  Effective date.

    This Standard is effective as of April 17, 1992. Contracts with 
prior CAS-covered contract with full coverage shall continue this 
Standard's applicability upon receipt of a contract to which this 
Standard is applicable. For contractors with no previous contracts 
subject to this Standard, this Standard shall be applied beginning with 
the contractor's next full fiscal year beginning after the receipt of a 
contract to which this Standard is applicable.



9904.412  Cost accounting standard for composition and measurement of pension cost.



9904.412-10  [Reserved]



9904.412-20  Purpose.

    The purpose of this Standard is to provide guidance for determining 
and measuring the components of pension cost. The Standard establishes 
the basis on which pension costs shall be assigned to cost accounting 
periods. The provisions of this Cost Accounting Standard should enhance 
uniformity and consistency in accounting for pension costs and thereby 
increase the probability that those costs are properly allocated to cost 
objectives.



9904.412-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this chapter 99 shall 
have the meanings ascribed to them in those definitions unless paragraph 
(b) of this subsection requires otherwise.
    (1) Accrued benefit cost method means an actuarial cost method under 
which units of benefits are assigned to each cost accounting period and 
are valued as they accrue; that is, based on the services performed by 
each employee in the period involved. The measure of normal cost under 
this method for each cost accounting period is the present value of the 
units of benefit deemed to be credited to employees for service in that 
period. The measure of the actuarial accrued liability at a plan's 
inception date is the present value of the units of benefit credited to 
employees for service prior to that date. (This method is also known as 
the Unit Credit cost method without salary projection.)
    (2) Actuarial accrued liability means pension cost attributable, 
under the actuarial cost method in use, to years prior to the current 
period considered by a particular actuarial valuation. As of such date, 
the actuarial accrued liability represents the excess of the present 
value of future benefits and administrative expenses over the present 
value of future normal costs for all plan participants and 
beneficiaries. The excess of the actuarial accrued liability over the 
actuarial value of the assets of a pension plan is the Unfunded 
Actuarial Liability. The excess of the actuarial value of the assets of 
a pension plan over the actuarial accrued liability is an actuarial 
surplus and is treated as a negative unfunded actuarial liability.
    (3) Actuarial assumption means an estimate of future conditions 
affecting pension cost; for example, mortality

[[Page 417]]

rate, employee turnover, compensation levels, earnings on pension plan 
assets, changes in values of pension plan assets.
    (4) Actuarial cost method means a technique which uses actuarial 
assumptions to measure the present value of future pension benefits and 
pension plan administrative expenses, and which assigns the cost of such 
benefits and expenses to cost accounting periods. The actuarial cost 
method includes the asset valuation method used to determine the 
actuarial value of the assets of a pension plan.
    (5) Actuarial gain and loss means the effect on pension cost 
resulting from differences between actuarial assumptions and actual 
experience.
    (6) Actuarial valuation means the determination, as of a specified 
date, of the normal cost, actuarial accrued liability, actuarial value 
of the assets of a pension plan, and other relevant values for the 
pension plan.
    (7) Assignable cost credit means the decrease in unfunded actuarial 
liability that results when the pension cost computed for a cost 
accounting period is less than zero.
    (8) Assignable cost deficit means the increase in unfunded actuarial 
liability that results when the pension cost computed for a qualified 
defined-benefit pension plan exceeds the maximum tax-deductible amount 
for the cost accounting period determined in accordance with the 
Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 
et seq., as amended.
    (9) Assignable cost limitation means the excess, if any, of the 
actuarial accrued liability plus the current normal cost over the 
actuarial value of the assets of the pension plan.
    (10) Defined-benefit pension plan means a pension plan in which the 
benefits to be paid or the basis for determining such benefits are 
established in advance and the contributions are intended to provide the 
stated benefits.
    (11) Defined-contribution pension plan means a pension plan in which 
the contributions are established in advance and the benefits are 
determined thereby.
    (12) Funded pension cost means the portion of pension cost for a 
current or prior cost accounting period that has been paid to a funding 
agency.
    (13) Funding agency means an organization or individual which 
provides facilities to receive and accumulate assets to be used either 
for the payment of benefits under a pension plan, or for the purchase of 
such benefits, provided such accumulated assets form a part of a pension 
plan established for the exclusive benefit of the plan participants and 
their beneficiaries. The fair market value of the assets held by the 
funding agency as of a specified date is the Funding Agency Balance as 
of that date.
    (14) Immediate-gain actuarial cost method means any of the several 
cost methods under which actuarial gains and losses are included as part 
of the unfunded actuarial liability of the pension plan, rather than as 
part of the normal cost of the plan.
    (15) Market value of the assets means the sum of the funding agency 
balance plus the accumulated value of any permitted unfunded accruals 
belonging to a pension plan. The Actuarial Value of the Assets means the 
value of cash, investments, permitted unfunded accruals, and other 
property belonging to a pension plan, as used by the actuary for the 
purpose of an actuarial valuation.
    (16) Multiemployer pension plan means a plan to which more than one 
employer contributes and which is maintained pursuant to one or more 
collective bargaining agreements between an employee organization and 
more than one employer.
    (17) Nonforfeitable means a right to a pension benefit, either 
immediate or deferred, which arises from an employee's service, which is 
unconditional, and which is legally enforceable against the pension plan 
or the contractor. Rights to benefits that do not satisfy this 
definition are considered forfeitable. A right to a pension benefit is 
not forfeitable solely because it may be affected by the employee's or 
beneficiary's death, disability, or failure to achieve vesting 
requirements. Nor is a right considered forfeitable because it can be 
affected by the unilateral actions of the employee.
    (18) Normal cost means the annual cost attributable, under the 
actuarial

[[Page 418]]

cost method in use, to current and future years as of a particular 
valuation date, excluding any payment in respect of an unfunded 
actuarial liability.
    (19) Pay-as-you-go cost method means a method of recognizing pension 
cost only when benefits are paid to retired employees or their 
beneficiaries.
    (20) Pension plan means a deferred compensation plan established and 
maintained by one or more employers to provide systematically for the 
payment of benefits to plan participants after their retirement, 
provided that the benefits are paid for life or are payable for life at 
the option of the employees. Additional benefits such as permanent and 
total disability and death payments, and survivorship payments to 
beneficiaries of deceased employees may be an integral part of a pension 
plan.
    (21) Pension plan participant means any employee or former employee 
of an employer, or any member or former member of an employee 
organization, who is or may become eligible to receive a benefit from a 
pension plan which covers employees of such employer or members of such 
organization who have satisfied the plan's participation requirements, 
or whose beneficiaries are receiving or may be eligible to receive any 
such benefit. A participant whose employment status with the employer 
has not been terminated is an active participant of the employer's 
pension plan.
    (22) Permitted unfunded accrual means the amount of pension cost for 
nonqualified defined-benefit pension plans that is not required to be 
funded under 9904.412-50(d)(2). The Accumulated Value of Permitted 
Unfunded Accruals means the value, as of the measurement date, of the 
permitted unfunded accruals adjusted for imputed earnings and for 
benefits paid by the contractor.
    (23) Prepayment credit means the amount funded in excess of the 
pension cost assigned to a cost accounting period that is carried 
forward for future recognition. The Accumulated Value of Prepayment 
Credits means the value, as of the measurement date, of the prepayment 
credits adjusted for interest at the valuation rate and decreased for 
amounts used to fund pension costs or liabilities, whether assignable or 
not.
    (24) Projected benefit cost method means either (i) any of the 
several actuarial cost methods which distribute the estimated total cost 
of all of the employees' prospective benefits over a period of years, 
usually their working careers, or (ii) a modification of the accrued 
benefit cost method that considers projected compensation levels.
    (25) Qualified pension plan means a pension plan comprising a 
definite written program communicated to and for the exclusive benefit 
of employees which meets the criteria deemed essential by the Internal 
Revenue Service as set forth in the Internal Revenue Code for 
preferential tax treatment regarding contributions, investments, and 
distributions. Any other plan is a Nonqualified Pension Plan.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.

[57 FR 14153, Apr. 17, 1992, as amended at 60 FR 16540, Mar. 30, 1995]



9904.412-40  Fundamental requirement.

    (a) Components of pension cost. (1) For defined-benefit pension 
plans, except for plans accounted for under the pay-as-you-go cost 
method, the components of pension cost for a cost accounting period are 
(i) the normal cost of the period, (ii) a part of any unfunded actuarial 
liability, (iii) an interest equivalent on the unamortized portion of 
any unfunded actuarial liability, and (iv) an adjustment for any 
actuarial gains and losses.
    (2) For defined-contribution pension plans, the pension cost for a 
cost accounting period is the net contribution required to be made for 
that period, after taking into account dividends and other credits, 
where applicable.
    (3) For defined-benefit pension plans accounted for under the pay-
as-you-go cost method, the components of pension cost for a cost 
accounting period are:
    (i) The net amount of periodic benefits paid for that period, and
    (ii) An amortization installment, including an interest equivalent 
on the unamortized settlement amount, attributable to amounts paid to 
irrevocably settle an obligation for periodic

[[Page 419]]

benefits due in current and future cost accounting periods.
    (b) Measurement of pension cost. (1) For defined-benefit pension 
plans other than those accounted for under the pay-as-you-go cost 
method, the amount of pension cost of a cost accounting period shall be 
determined by use of an immediate-gain actuarial cost method.
    (2) Each actuarial assumption used to measure pension cost shall be 
separately identified and shall represent the contractor's best 
estimates of anticipated experience under the plan, taking into account 
past experience and reasonable expectations. The validity of each 
assumption used shall be evaluated solely with respect to that 
assumption. Actuarial assumptions used in calculating the amount of an 
unfunded actuarial liability shall be the same as those used for other 
components of pension cost.
    (c) Assignment of pension cost. Except costs assigned to future 
periods by 9904.412-50(c) (2) and (5), the amount of pension cost 
computed for a cost accounting period is assignable only to that period. 
For defined-benefit pension plans other than those accounted for under 
the pay-as-you-go cost method, the pension cost is assignable only if 
the sum of (1) the unamortized portions of assignable unfunded actuarial 
liability developed and amortized pursuant to 9904.412-50(a)(1), and (2) 
the unassignable portions of unfunded actuarial liability separately 
identified and maintained pursuant to 9904.412-50(a)(2) equals the total 
unfunded actuarial liability.
    (d) Allocation of pension cost. Pension costs assigned to a cost 
accounting period are allocable to intermediate and final cost 
objectives only if they meet the requirements for allocation in 
9904.412-50(d). Pension costs not meeting these requirements may not be 
reassigned to any future cost accounting period.

[60 FR 16541, Mar. 30, 1995]



9904.412-50  Techniques for application.

    (a) Components of pension cost. (1) The following portions of 
unfunded actuarial liability shall be included as a separately 
identified part of the pension cost of a cost accounting period and 
shall be included in equal annual installments. Each installment shall 
consist of an amortized portion of the unfunded actuarial liability plus 
an interest equivalent on the unamortized portion of such liability. The 
period of amortization shall be established as follows:
    (i) If amortization of an unfunded actuarial liability has begun 
prior to the date this Standard first becomes applicable to a 
contractor, no change in the amortization period is required by this 
Standard.
    (ii) If amortization of an unfunded actuarial liability has not 
begun prior to the date this Standard first becomes applicable to a 
contractor, the amortization period shall begin with the period in which 
the Standard becomes applicable and shall be no more than 30 years nor 
less than 10 years. However, if the plan was in existence as of January 
1, 1974, the amortization period shall be no more than 40 years nor less 
than 10 years.
    (iii) Each increase or decrease in unfunded actuarial liability 
resulting from the institution of new pension plans, from the adoption 
of improvements, or other changes to pension plans subsequent to the 
date this Standard first becomes applicable to a contractor shall be 
amortized over no more than 30 years nor less than 10 years.
    (iv) If any assumptions are changed during an amortization period, 
the resulting increase or decrease in unfunded actuarial liability shall 
be separately amortized over no more than 30 years nor less than 10 
years.
    (v) Actuarial gains and losses shall be identified separately from 
unfunded actuarial liabilities that are being amortized pursuant to the 
provisions of this Standard. The accounting treatment to be afforded to 
such gains and losses shall be in accordance with Cost Accounting 
Standard 9904.413.
    (vi) Each increase or decrease in unfunded actuarial liability 
resulting from an assignable cost deficit or credit, respectively, shall 
be amortized over a period of 10 years.
    (vii) Each increase or decrease in unfunded actuarial liability 
resulting

[[Page 420]]

from a change in actuarial cost method, including the asset valuation 
method, shall be amortized over a period of 10 to 30 years. This 
provision shall not affect the requirements of 9903.302 to adjust 
previously priced contracts.
    (2) Except as provided in 9904.412-50(d)(2), any portion of unfunded 
actuarial liability attributable to either (i) pension costs applicable 
to prior years that were specifically unallowable in accordance with 
then existing Government contractual provisions or (ii) pension costs 
assigned to a cost accounting period that were not funded in that 
period, shall be separately identified and eliminated from any unfunded 
actuarial liability being amortized pursuant to paragraph (a)(1) of this 
subsection. Such portions of unfunded actuarial liability shall be 
adjusted for interest at the valuation rate of interest. The contractor 
may elect to fund, and thereby reduce, such portions of unfunded 
actuarial liability and future interest adjustments thereon. Such 
funding shall not be recognized for purposes of 9904.412-50(d).
    (3) A contractor shall establish and consistently follow a policy 
for selecting specific amortization periods for unfunded actuarial 
liabilities, if any, that are developed under the actuarial cost method 
in use. Such policy may give consideration to factors such as the size 
and nature of the unfunded actuarial liabilities. Except as provided in 
9904.412-50(c)(2) or 9904.413-50(c)(12), once the amortization period 
for a portion of unfunded actuarial liability is selected, the 
amortization process shall continue to completion.
    (4) Any amount funded in excess of the pension cost assigned to a 
cost accounting period shall be accounted for as a prepayment credit. 
The accumulated value of such prepayment credits shall be adjusted for 
interest at the valuation rate of interest until applied towards pension 
cost in a future accounting period. The accumulated value of prepayment 
credits shall be reduced for portions of the accumulated value of 
prepayment credits used to fund pension costs or to fund portions of 
unfunded actuarial liability separately identified and maintained in 
accordance with 9904.412-50(a)(2). The accumulated value of any 
prepayment credits shall be excluded from the actuarial value of the 
assets used to compute pension costs for purposes of this Standard and 
Cost Accounting Standard 9904.413.
    (5) An excise tax assessed pursuant to a law or regulation because 
of excess, inadequate, or delayed funding of a pension plan is not a 
component of pension cost. Income taxes paid from the funding agency of 
a nonqualified defined-benefit pension plan on earnings or other asset 
appreciation of such funding agency shall be treated as an 
administrative expense of the fund and not as a reduction to the 
earnings assumption.
    (6) For purposes of this Standard, defined-benefit pension plans 
funded exclusively by the purchase of individual or group permanent 
insurance or annuity contracts, and thereby exempted from ERISA's 
minimum funding requirements, shall be treated as defined-contribution 
pension plans. However, all other defined-benefit pension plans 
administered wholly or in part through insurance company contracts shall 
be subject to the provisions of this Standard relative to defined-
benefit pension plans.
    (7) If a pension plan is supplemented by a separately-funded plan 
which provides retirement benefits to all of the participants in the 
basic plan, the two plans shall be considered as a single plan for 
purposes of this Standard. If the effect of the combined plans is to 
provide defined-benefits for the plan participants, the combined plans 
shall be treated as a defined-benefit plan for purposes of this 
Standard.
    (8) A multiemployer pension plan established pursuant to the terms 
of a collective bargaining agreement shall be considered to be a 
defined-contribution pension plan for purposes of this Standard.
    (9) A pension plan applicable to a Federally-funded Research and 
Development Center (FFRDC) that is part of a State pension plan shall be 
considered to be a defined-contribution pension plan for purposes of 
this Standard.
    (b) Measurement of pension cost. (1) For defined-benefit pension 
plans other than those accounted for under the pay-as-you-go cost 
method, the amount

[[Page 421]]

of pension cost assignable to cost accounting periods shall be measured 
by an immediate-gain actuarial cost method.
    (2) Where the pension benefit is a function of salaries and wages, 
the normal cost shall be computed using a projected benefit cost method. 
The normal cost for the projected benefit shall be expressed either as a 
percentage of payroll or as an annual accrual based on the service 
attribution of the benefit formula. Where the pension benefit is not a 
function of salaries and wages, the normal cost shall be based on 
employee service.
    (3) For defined-benefit plans accounted for under the pay-as-you-go 
cost method, the amount of pension cost assignable to a cost accounting 
period shall be measured as the sum of:
    (i) The net amount for any periodic benefits paid for that period, 
and
    (ii) The level annual installment required to amortize over 15 years 
any amounts paid to irrevocably settle an obligation for periodic 
benefits due in current or future cost accounting periods.
    (4) Actuarial assumptions shall reflect long-term trends so as to 
avoid distortions caused by short-term fluctuations.
    (5) Pension cost shall be based on provisions of existing pension 
plans. This shall not preclude contractors from making salary 
projections for plans whose benefits are based on salaries and wages, or 
from considering improved benefits for plans which provide that such 
improved benefits must be made.
    (6) If the evaluation of the validity of actuarial assumptions shows 
that any assumptions were not reasonable, the contractor shall:
    (i) Identify the major causes for the resultant actuarial gains or 
losses, and
    (ii) Provide information as to the basis and rationale used for 
retaining or revising such assumptions for use in the ensuing cost 
accounting period(s).
    (c) Assignment of pension cost. (1) Amounts funded in excess of the 
pension cost computed for a cost accounting period pursuant to the 
provisions of this Standard shall be accounted for as a prepayment 
credit and carried forward to future accounting periods.
    (2) For qualified defined-benefit pension plans, the pension cost 
computed for a cost accounting period is assigned to that period subject 
to the following adjustments, in order of application:
    (i) Any amount of computed pension cost that is less than zero shall 
be assigned to future accounting periods as an assignable cost credit. 
The amount of pension cost assigned to the period shall be zero.
    (ii) When the pension cost equals or exceeds the assignable cost 
limitation:
    (A) The amount of computed pension cost, adjusted pursuant to 
paragraph (c)(2)(i) of this subsection, shall not exceed the assignable 
cost limitation,
    (B) All amounts described in 9904.412-50(a)(1) and 9904.413-50(a), 
which are required to be amortized, shall be considered fully amortized, 
and
    (C) Except for portions of unfunded actuarial liability separately 
identified and maintained in accordance with 9904.413-50(a)(2), any 
portion of unfunded actuarial liability, which occurs in the first cost 
accounting period after the pension cost has been limited by the 
assignable cost limitation, shall be considered an actuarial gain or 
loss for purposes of this Standard. Such actuarial gain or loss shall 
exclude any increase or decrease in unfunded actuarial liability 
resulting from a plan amendment, change in actuarial assumptions, or 
change in actuarial cost method effected after the pension cost has been 
limited by the assignable cost limitation.
    (iii) Any amount of computed pension cost of a qualified pension 
plan, adjusted pursuant to paragraphs (c)(2) (i) and (ii) of this 
subsection that exceeds the sum of (A) the maximum tax-deductible 
amount, determined in accordance with ERISA, and (B) the accumulated 
value of prepayment credits shall be assigned to future accounting 
periods as an assignable cost deficit. The amount of pension cost 
assigned to the current period shall not exceed the sum of the maximum 
tax-deductible amount plus the accumulated value of prepayment credits.
    (3) The cost of nonqualified defined-benefit pension plans shall be 
assigned to cost accounting periods in the same manner as qualified 
plans (with the exception of paragraph (c)(2)(iii) of this

[[Page 422]]

subsection) under the following conditions:
    (i) The contractor, in disclosing or establishing his cost 
accounting practices, elects to have a plan so accounted for;
    (ii) The plan is funded through the use of a funding agency; and,
    (iii) The right to a pension benefit is nonforfeitable and is 
communicated to the participants.
    (4) The costs of nonqualified defined-benefit pension plans that do 
not meet all of the requirements in 9904.412-50(c)(3) shall be assigned 
to cost accounting periods using the pay-as-you-go cost method.
    (5) Any portion of pension cost computed for a cost accounting 
period that exceeds the amount required to be funded pursuant to a 
waiver granted under the provisions of ERISA shall not be assigned to 
the current period. Rather, such excess shall be treated as an 
assignable cost deficit, except that it shall be assigned to future cost 
accounting periods using the same amortization period as used for ERISA 
purposes.
    (d) Allocation of pension costs. The amount of pension cost assigned 
to a cost accounting period allocated to intermediate and final cost 
objectives shall be limited according to the following criteria:
    (1) Except for nonqualified defined-benefit plans, the costs of a 
pension plan assigned to a cost accounting period are allocable to the 
extent that they are funded.
    (2) For nonqualified defined-benefit pension plans that meet the 
criteria set forth at 9904.412-50(c)(3), pension costs assigned to a 
cost accounting period are fully allocable if they are funded at a level 
at least equal to the percentage of the complement (i.e., 100% minus tax 
rate % = percentage of assigned cost to be funded) of the highest 
published Federal corporate income tax rate in effect on the first day 
of the cost accounting period. If the contractor is not subject to 
Federal income tax, the assigned costs are allocable to the extent such 
costs are funded. Funding at other levels and benefit payments of such 
plans are subject to the following:
    (i) Funding at less than the foregoing levels shall result in 
proportional reductions of the amount of assigned cost that can be 
allocated within the cost accounting period.
    (ii)(A) Payments to retirees or beneficiaries shall contain an 
amount drawn from sources other than the funding agency of the pension 
plan that is, at least, proportionately equal to the accumulated value 
of permitted unfunded accruals divided by an amount that is the market 
value of the assets of the pension plan excluding any accumulated value 
of prepayment credits.
    (B) The amount of assigned cost of a cost accounting period that can 
be allocated shall be reduced to the extent that such payments are drawn 
in a higher ratio from the funding agency.
    (iii) The permitted unfunded accruals shall be identified and 
accounted for year to year, adjusted for benefit payments directly paid 
by the contractor and for interest at the actual annual earnings rate on 
the funding agency balance.
    (3) For nonqualified defined-benefit pension plans accounted for 
under the pay-as-you-go method, pension costs assigned to a cost 
accounting period are allocable in that period.
    (4) Funding of pension cost shall be considered to have taken place 
within the cost accounting period if it is accomplished by the corporate 
tax filing date for such period including any permissible extensions 
thereto.

[60 FR 16542, Mar. 30, 1995, as amended at 61 FR 58011, Nov. 12, 1996]



9904.412-60  Illustrations.

    (a) Components of pension cost. (1) Contractor A has insured pension 
plans for each of two small groups of employees. One plan is exclusively 
funded through a group permanent life insurance contract and is exempt 
from the minimum funding requirements of ERISA. The other plan is funded 
through a deposit administration contract, which is a form of group 
deferred annuity contract that is not exempt from ERISA's minimum 
funding requirements. Both plans provide for defined benefits. Pursuant 
to 9904.412-50(a)(6), for purposes of this Standard

[[Page 423]]

the plan financed through a group permanent insurance contract shall be 
considered to be a defined-contribution pension plan; the net premium 
required to be paid for a cost accounting period (after deducting 
dividends and any credits) shall be the pension cost for that period. 
However, the deposit administration contract plan is subject to the 
provisions of this Standard that are applicable to defined-benefit 
plans.
    (2) Contractor B provides pension benefits for certain hourly 
employees through a multiemployer defined-benefit plan. Under the 
collective bargaining agreement, the contractor pays six cents into the 
fund for each hour worked by the covered employees. Pursuant to 
9904.412-50(a)(8), the plan shall be considered to be a defined-
contribution pension plan. The payments required to be made for a cost 
accounting period shall constitute the assignable pension cost for that 
period.
    (3) Contractor C provides pension benefits for certain employees 
through a defined-contribution pension plan. However, the contractor has 
a separate fund that is used to supplement pension benefits for all of 
the participants in the basic plan in order to provide a minimum monthly 
retirement income to each participant. Pursuant to 9904.412-50(a)(7), 
the two plans shall be considered as a single plan for purposes of this 
Standard. Because the effect of the supplemental plan is to provide 
defined-benefits for the plan's participants, the provisions of this 
Standard relative to defined-benefit pension plans shall be applicable 
to the combined plan.
    (4) Contractor D provides supplemental benefits to key management 
employees through a nonqualified defined-benefit pension plan funded by 
a so-called ``Rabbi Trust.'' The trust agreement provides that Federal 
income taxes levied on the earnings of the Rabbi trust may be paid from 
the trust. The contractor's actuarial cost method recognizes the 
administrative expenses of the plan and trust, such as broker and 
attorney fees, by adding the prior year's expenses to the current year's 
normal cost. The income taxes paid by the trust on trust earnings shall 
be accorded the same treatment as any other administrative expense in 
accordance with 9904.412-50(a)(5).
    (5) (i) Contractor E has been using the entry age normal actuarial 
cost method to compute pension costs. The contractor has three years 
remaining under a firm fixed price contract subject to this Standard. 
The contract was priced using the unfunded actuarial liability, normal 
cost, and net amortization installments developed using the entry age 
normal method. The contract was priced as follows:

                         Entry Age Normal Values
------------------------------------------------------------------------
             Cost component                Year 1     Year 2     Year 3
------------------------------------------------------------------------
Normal cost............................   $100,000   $105,000   $110,000
Amortization...........................     50,000     50,000     50,000
                                        --------------------------------
  Pension cost.........................    150,000    155,000    160,000
------------------------------------------------------------------------

    (ii) The contractor, after notifying the cognizant Federal official, 
switches to the projected unit credit actuarial cost method. The 
unfunded actuarial liability and normal cost decreased when redetermined 
under the projected unit credit method. Pursuant to 9904.412-
50(a)(1)(vii), the contractor determines that an annual installment 
credit of $20,000 will amortize the decrease in unfunded actuarial 
liability (UAL) over ten years. The following pension costs are 
determined under the projected unit credit method:

                      Projected Unit Credit Values
------------------------------------------------------------------------
             Cost component                Year 1     Year 2     Year 3
------------------------------------------------------------------------
Normal cost............................    $80,000    $85,000    $90,000
Amortization:
  Prior method.........................     50,000     50,000     50,000
  UAL decrease.........................   (20,000)   (20,000)   (20,000)
                                        --------------------------------
Pension cost...........................    110,000    115,000    120,000
------------------------------------------------------------------------

    (iii) The change in cost method is a change in accounting method 
that decreased previously priced pension costs by $40,000 per year. In 
accordance with 9903.302, Contractor E shall adjust the cost of the firm 
fixed-price contract for the remaining three years by $120,000 
($40,000 x 3 years).
    (6) Contractor F has a defined-benefit pension plan for its 
employees. Prior to being subject to this Standard the contractor's 
policy was to compute and fund as annual pension cost normal cost plus 
only interest on the unfunded actuarial liability. Pursuant to

[[Page 424]]

9904.412-40(a)(1), the components of pension cost for a cost accounting 
period must now include not only the normal cost for the period and 
interest on the unfunded actuarial liability, but also an amortized 
portion of the unfunded actuarial liability. The amortization of the 
liability and the interest equivalent on the unamortized portion of the 
liability must be computed in equal annual installments.
    (b) Measurement of pension cost. (1) Contractor G has a pension plan 
whose costs are assigned to cost accounting periods by use of an 
actuarial cost method that does not separately identify actuarial gains 
and losses or the effect on pension cost resulting from changed 
actuarial assumptions. Contractor G's method is not an immediate-gain 
cost method and does not comply with the provisions of 9904.412-
50(b)(1).
    (2) For several years Contractor H has had an unfunded nonqualified 
pension plan which provides for payments of $200 a month to employees 
after retirement. The contractor is currently making such payments to 
several retired employees and recognizes those payments as its pension 
cost. The contractor paid monthly annuity benefits totaling $24,000 
during the current year. During the prior year, Contractor H made lump 
sum payments to irrevocably settle the benefit liability of several 
participants with small benefits. The annual installment to amortize 
these lump sum payments over fifteen years at the valuation interest 
rate assumption is $5,000. Since the plan does not meet the criteria set 
forth in 9904.412-50(c)(3)(ii), pension cost must be accounted for using 
the pay-as-you-go cost method. Pursuant to 9904.412-50(b)(3), the amount 
of assignable cost allocable to cost objectives of that period is 
$29,000, which is the sum of the amount of benefits actually paid in 
that period ($24,000) plus the second annual installment to amortize the 
prior year's lump sum settlements ($5,000).
    (3) Contractor I has two qualified defined-benefit pension plans 
that provide for fixed dollar payments to hourly employees. Under the 
first plan, the contractor's actuary believes that the contractor will 
be required to increase the level of benefits by specified percentages 
over the next several years. In calculating pension costs, the 
contractor may not assume future benefits greater than that currently 
required by the plan. With regard to the second plan, a collective 
bargaining agreement negotiated with the employees' labor union provides 
that pension benefits will increase by specified percentages over the 
next several years. Because the improved benefits are required to be 
made, the contractor can consider such increased benefits in computing 
pension costs for the current cost accounting period in accordance with 
9904.412-50(b)(5).
    (4) In addition to the facts of 9904.412-60(b)(3), assume that 
Contractor I was required to contribute at a higher level for ERISA 
purposes because the plan was underfunded. To compute pension costs that 
are closer to the funding requirements of ERISA, Contractor I decides to 
``fresh start'' the unfunded actuarial liability being amortized 
pursuant to 9904.412-50(a)(1); i.e., treat the entire amount as a newly 
established portion of unfunded actuarial liability, which is amortized 
over 10 years in accordance with 9904.412-50(a)(1)(ii). Because the 
contractor has changed the periods for amortizing the unfunded actuarial 
liability established pursuant to 9904.412-50(a)(3), the contractor has 
made a change in accounting practice subject to the provisions of Cost 
Accounting Standard 9903.302.
    (c) Assignment of pension cost. (1) Contractor J maintains a 
qualified defined-benefit pension plan. The actuarial value of the 
assets of $18 million is subtracted from the actuarial accrued liability 
of $20 million to determine the total unfunded actuarial liability of $2 
million. Pursuant to 9904.412-50(a)(1), Contractor J has identified and 
is amortizing twelve separate portions of unfunded actuarial 
liabilities. The sum of the unamortized balances for the twelve 
separately maintained portions of unfunded actuarial liability equals 
$1.8 million. In accordance with 9904.412-50(a)(2), the contractor has 
separately identified, and eliminated from the computation of pension 
cost, $200,000 attributable to a pension cost assigned to a prior period 
that was not

[[Page 425]]

funded. The sum of the twelve amortization bases maintained pursuant to 
9904.412-50(a)(1) and the amount separately identified under 9904.412-
50(a)(2) equals $2 million ($1,800,000+200,000). Because the sum of all 
identified portions of unfunded actuarial liability equals the total 
unfunded actuarial liability, the plan is in actuarial balance and 
Contractor J can assign pension cost to the current cost accounting 
period in accordance with 9904.412-40(c).
    (2) Contractor K's pension cost computed for 1996, the current year, 
is $1.5 million. This computed cost is based on the components of 
pension cost described in 9904.412-40(a) and 9904.412-50(a) and is 
measured in accordance with 9904.412-40(b) and 9904.412-50(b). The 
assignable cost limitation, which is defined at 9904.412-30(a)(9), is 
$1.3 million. In accordance with the provisions of 9904.412-
50(c)(2)(ii)(A), Contractor K's assignable pension cost for 1996 is 
limited to $1.3 million. In addition, all amounts that were previously 
being amortized pursuant to 9904.412-50(a)(1) and 9904.413-50(a) are 
considered fully amortized in accordance with 9904.412-50(c)(2)(ii)(B). 
The following year, 1997, Contractor K computes an unfunded actuarial 
liability of $4 million. Contractor K has not changed his actuarial 
assumptions nor amended the provisions of his pension plan. Contractor K 
has not had any pension costs disallowed or unfunded in prior periods. 
Contractor K must treat the entire $4 million of unfunded actuarial 
liability as an actuarial loss to be amortized over fifteen years 
beginning in 1997 in accordance with 9904.412-50(c)(2)(ii)(C).
    (3) Assume the same facts shown in illustration 9904.412-60(c)(2), 
except that in 1995, the prior year, Contractor K's assignable pension 
cost was $800,000, but Contractor K only funded and allocated $600,000. 
Pursuant to 9904.412-50(a)(2), the $200,000 of unfunded assignable 
pension cost was separately identified and eliminated from other 
portions of unfunded actuarial liability. This portion of unfunded 
actuarial liability was adjusted for 8% interest, which is the interest 
assumption for 1995 and 1996, and was brought forward to 1996 in 
accordance with 9904.412-50(a)(2). Therefore, $216,000 ($200,000 x 1.08) 
is excluded from the amount considered fully amortized in 1996. The next 
year, 1997, Contractor K must eliminate $233,280 ($216,000 x 1.08) from 
the $4 million so that only $3,766,720 is treated as an actuarial loss 
in accordance with 9904.412-50(c)(2)(ii)(C).
    (4) Assume, as in 9904.412-60(c)(2), the 1996 pension cost computed 
for Contractor K's qualified defined-benefit pension plan is $1.5 
million and the assignable cost limitation is $1.7 million. However, 
because of the ERISA limitation on tax-deductible contributions, 
Contractor K cannot fund more than $1 million without incurring an 
excise tax, which 9904.412-50(a)(5) does not permit to be a component of 
pension cost. In accordance with the provisions of 9904.412-
50(c)(2)(iii), Contractor K's assignable pension cost for the period is 
limited to $1 million. The $500,000 ($1.5 million-$1 million) of pension 
cost not funded is reassigned to the next ten cost accounting periods 
beginning in 1997 as an assignable cost deficit in accordance with 
9904.412-50(a)(1)(vi).
    (5) Assume the same facts for Contractor K in 9904.412-60(c)(4), 
except that the accumulated value of prepayment credits equals $700,000. 
Therefore, in addition to the $1 million, Contractor K can apply 
$500,000 of the accumulated value of prepayment credits towards the 
pension cost computed for the period. In accordance with the provisions 
of 9904.412-50(c)(2)(iii), Contractor K's assignable pension cost for 
the period is the full $1.5 million ($1 million+$500,000) computed for 
the period. The $200,000 of remaining accumulated value of prepayment 
credits ($700,000-$500,000) is adjusted for interest at the valuation 
rate and carried forward until needed in future accounting periods in 
accordance with 9904.412-50(a)(4).
    (6) Assume the same facts for Contractor K in 9904.412-60(c)(4), 
except that the 1996 assignable cost limitation is $1.3 million. Pension 
cost of $1.5 million is computed for the cost accounting period, but the 
assignable cost is limited to $1.3 million in accordance with 9904.412-
50(c)(2)(ii)(A). Pursuant to

[[Page 426]]

9904.412-50(c)(2)(ii)(B), all existing amortization bases maintained in 
accordance with subparagraph 9904.412-50(a)(1) are considered fully 
amortized. The assignable cost of $1.3 million is then compared to the 
maximum tax-deductible amount of $1 million. Pursuant to 9904.412-
50(c)(2)(iii), Contractor K's assignable pension cost for the period is 
limited to $1 million. The $300,000 ($1.3 million-$1 million) excess of 
the assignable cost limitation over the tax-deductible maximum is 
assigned to future periods as an assignable cost deficit.
    (7) Contractor L is currently amortizing a large decrease in 
unfunded actuarial liability over a period of ten years. A similarly 
large increase in unfunded actuarial liability is being amortized over 
30 years. The absolute value of the resultant net amortization credit is 
greater than the normal cost so that the pension cost computed for the 
period is a negative $200,000. Contractor L first applies the provisions 
of 9904.412-50(c)(2)(i) and determines the assignable pension cost is 
$0. The negative pension cost of $200,000 is assigned to the next ten 
cost accounting periods as an assignable cost credit in accordance with 
9904.412-50(a)(1)(vi). However, when Contractor L applies the provisions 
of 9904.412-50(c)(2)(ii), the assignable cost limitation is also $0. 
Because the assignable cost of $0 determined under 9904.412-50(c)(2)(i) 
is equal to the assignable cost limitation, the assignable cost credit 
of $200,000 is considered fully amortized along with all other portions 
of unfunded actuarial liability being amortized pursuant to 9904.412-
50(a)(1). Conversely, if the assignable cost limitation had been greater 
than zero, the assignable cost credit of $200,000 would have carried-
forward and amortized in future periods.
    (8) Contractor M has a qualified defined-benefit pension plan which 
is funded through a funding agency. It computes $1 million of pension 
cost for a cost accounting period. However, pursuant to a waiver granted 
under the provisions of ERISA, Contractor M is required to fund only 
$800,000. Under the provisions of 9904.412-50(c)(5), the remaining 
$200,000 shall be accounted for as an assignable cost deficit and 
assigned to the next five cost accounting periods in accordance with the 
terms of the waiver.
    (9) Contractor N has a company-wide defined-benefit pension plan, 
wherein benefits are calculated on one consistently applied formula. 
That part of the formula defining benefits within ERISA limits is 
administered and reported as a qualified plan and funded through a 
funding agency. The remainder of the benefits are considered to be a 
supplemental or excess plan which, while it meets the criteria at 
9904.412-50(c)(3)(iii) as to nonforfeitability and communication, is not 
funded. The costs of the qualified portion of the plan shall be 
comprised of those elements of costs delineated at 9904.412-40(a)(1), 
while the supplemental or excess portion of the plan shall be accounted 
for and assigned to cost accounting periods under the pay-as-you-go cost 
method provided at 9904.412-40(a)(3) and 9904.412-50(c)(4).
    (10) Assuming the same facts as in 9904.412-60(c)(9), except that 
Contractor N funds its supplemental or excess plan using a so-called 
``Rabbi Trust'' vehicle. Because the nonqualified plan is funded, the 
plan meets the criteria set forth at 9904.412-50(c)(3)(ii). Contractor N 
may account for the supplemental or excess plan in the same manner as 
its qualified plan, if it elects to do so pursuant to 9904.412-
50(c)(3)(i).
    (11) Assuming the same facts as in 9904.412-60(c)(10), except that 
under the nonqualified portion of the pension plan a former employee 
will forfeit his pension benefit if the employee goes to work for a 
competitor within three years of terminating employment. Since the right 
to a benefit cannot be affected by the unilateral action of the 
contractor, the right to a benefit is considered to be nonforfeitable 
for purposes of 9904.412-30(a)(17). The nonqualified plan still meets 
the criteria set forth at 9904.412-50(c)(3)(iii), and Contractor N may 
account for the supplemental or excess plan in the same manner as its 
qualified plan, if it elects to do so.
    (12) Assume the same facts as in 9904.412-60(c)(11), except that 
Contractor N, while maintaining a ``Rabbi Trust'' funding vehicle elects 
to have the plan accounted for under the pay-as-you-go cost method so as 
to have

[[Page 427]]

greater latitude in annual funding decisions. It may so elect pursuant 
to 9904.412-50(c)(3)(i).
    (13) The assignable pension cost for Contractor O's qualified 
defined-benefit plan is $600,000. For the same period Contractor O 
contributes $700,000, which is the minimum funding requirement under 
ERISA. In addition, there exists $75,000 of unfunded actuarial liability 
that has been separately identified pursuant to 9904.412-50(a)(2). 
Contractor O may use $75,000 of the contribution in excess of the 
assignable pension cost to fund this separately identified unfunded 
actuarial liability, if he so chooses. The effect of the funding is to 
eliminate the unassignable $75,000 portion of unfunded actuarial 
liability that had been separately identified and thereby eliminated 
from the computation of pension costs. Contractor O shall then account 
for the remaining $25,000 of excess contribution as a prepayment credit 
in accordance with 9904.412-50(a)(4).
    (d) Allocation of pension cost. (1) Assume the same set of facts for 
Contractor M in 9904.412-60(c)(8) except there was no ERISA waiver; 
i.e., only $800,000 was funded against $1 million of assigned pension 
cost for the period. Under the provisions of 9904.412-50(d)(1), only 
$800,000 may be allocated to Contractor M's intermediate and final cost 
objectives. The remaining $200,000 of assigned cost, which has not been 
funded, shall be separately identified and maintained in accordance with 
9904.412-50(a)(2) so that it will not be reassigned to any future 
accounting periods.
    (2) Contractor P has a nonqualified defined-benefit pension plan 
which covers benefits in excess of the ERISA limits. Contractor P has 
elected to account for this plan in the same manner as its qualified 
plan and, therefore, has established a ``Rabbi Trust'' as the funding 
agency. For the current cost accounting period, the contractor computes 
and assigns $100,000 as pension cost. The contractor funds $65,000, 
which is equivalent to a funding level equal to the complement of the 
highest published Federal corporate income tax rate of 35%. Under the 
provisions of 9904.412-50(d)(2), the entire $100,000 is allocable to 
cost objectives of the period.
    (3) Assume the set of facts in 9904.412-60(d)(2), except that 
Contractor P's contribution to the Trust is $59,800. In that event, the 
provisions of 9904.412-50(d)(2)(i) would limit the amount of assigned 
cost allocable within the cost accounting period to the percentage of 
cost funded (i.e., $59,800/$65,000 = 92%). This results in allocable 
cost of $92,000 (92% of $100,000) for the cost accounting period. Under 
the provisions of 9904.412-40(c) and 9904.412-50(d)(2)(i), respectively, 
the unallocable $8,000 may not be assigned to any future cost accounting 
period. In addition, in accordance with 9904.412-50(a)(2), the $8,000 
must be separately identified and no amount of interest on such 
separately identified $8,000 shall be a component of pension cost in any 
future cost accounting period.
    (4) Again, assume the set of facts in 9904.412-60(d)(2) except that, 
Contractor P's contribution to the Trust is $105,000 based on a 
valuation interest assumption of 8%. Under the provisions of 9904.412-
50(d)(2) the entire $100,000 is allocable to cost objectives of the 
period. In accordance with the provisions of 9904.412-50(c)(1) 
Contractor P has funded $5,000 ($105,000--$100,000) in excess of the 
assigned pension cost for the period. The $5,000 shall be accounted for 
as a prepayment credit. Pursuant to 9904.412-50(a)(4), the $5,000 shall 
be adjusted for interest at the 8% valuation rate of interest and 
excluded from the actuarial value of assets used to compute the next 
year's pension cost computations. The accumulated value of prepayment 
credits of $5,400 (5,000  x  1.08) may be used to fund the next year's 
assigned pension cost, if needed.
    (5) Contractor Q maintains a nonqualified defined-benefit pension 
plan which satisfies the requirements of 9904.412-50(c)(3). As of the 
valuation date, the reported funding agency balance is $3.4 million 
excluding any accumulated value of prepayment credits. When the adjusted 
funding agency balance is added to the accumulated value of permitted 
unfunded accruals of $1.6 million, the market value of assets equals 
$5.0 million ($3.4 million + $1.6 million) in accordance with 9904.412-
30(a)(13). During the plan year, retirees

[[Page 428]]

receive monthly benefits totalling $350,000. Pursuant to 9904.412-
50(d)(2)(ii)(A), at least 32% ($1.6 million divided by $5 million) of 
these benefit payments shall be made from sources other than the funding 
agency. Contractor Q, therefore, draws $238,000 from the funding agency 
assets and pays the remaining $112,000 using general corporate funds.
    (6) Assume the same facts as 9904.412-60(d)(5), except that by the 
time Contractor Q receives its actuarial valuation it has paid 
retirement benefits equalling $288,000 from funding agency assets. The 
contractor has made deposits to the funding agency equal to the tax 
complement of the $500,000 assignable pension cost for the period. 
Pursuant to 9904.412-50(d)(2)(ii)(B), the assignable $500,000 shall be 
reduced by the $50,000 ($288,000--$238,000) of benefits paid from the 
funding agency in excess of the permitted $238,000, unless the 
contractor makes a deposit to replace the $50,000 inadvertently drawn 
from the funding agency. If this corrective action is not taken within 
the time permitted by 9904.412-50(d)(4), Contractor Q shall allocate 
only $450,000 ($500,000-$50,000) to final cost objectives. Furthermore, 
the $50,000, which was thereby attributed to benefit payments instead of 
funding, must be separately identified and maintained in accordance with 
9904.412-50(a)(2).
    (7) Contractor R has a nonqualified defined-benefit plan that meets 
the criteria of 9904.412-50(c)(3). For 1996, the funding agency balance 
was $1,250,000 and the accumulated value of permitted unfunded accruals 
was $600,000. During 1996 the earnings and appreciation on the assets of 
the funding agency equalled $125,000, benefit payments to participants 
totalled $300,000, and administrative expenses were $60,000. All 
transactions occurred on the first day of the period. In accordance with 
9904.412-50(d)(2)(ii)(A), $200,000 of benefits were paid from the 
funding agency and $100,000 were paid directly from corporate assets. 
Pension cost of $400,000 was assigned to 1996. Based on the current 
corporate tax rate of 35%, $260,000 ($400,000  x  (1-35%)) was deposited 
into the funding agency at the beginning of 1996. For 1997 the funding 
agency balance is $1,375,000 ($1,250,000 + $260,000 + $125,000--
$200,000--$60,000). The actual annual earnings rate of the funding 
agency was 10% for 1996. Pursuant to 9904.412-50(d)(2)(iii), the 
accumulated value of permitted unfunded accruals is updated from 1996 to 
1997 by: (i) adding $140,000 (35%  x  $400,000), which is the unfunded 
portion of the assigned cost; (ii) subtracting the $100,000 of benefits 
paid directly by the contractor; and (iii) increasing the value of the 
assets by $64,000 for imputed earnings at 10% (10%  x  ($600,000 + 
$140,000--$100,000)). The accumulated value of permitted unfunded 
accruals for 1997 is $704,000 ($600,000 + $140,000--$100,000 + $64,000).

[60 FR 16544, Mar. 30, 1995]



9904.412-61  Interpretation. [Reserved]



9904.412-62  Exemption.

    None for this Standard.



9904.412-63  Effective date.

    (a) This Standard is effective as of March 30, 1995.
    (b) This Standard shall be followed by each contractor on or after 
the start of its next cost accounting period beginning after the receipt 
of a contract or subcontract to which this Standard is applicable.
    (c) Contractors with prior CAS-covered contracts with full coverage 
shall continue to follow the Standard in 9904.412 in effect prior to 
March 30, 1995, until this Standard, effective March 30, 1995, becomes 
applicable following receipt of a contract or subcontract to which this 
Standard applies.

[60 FR 16547, Mar. 30, 1995]



9904.412-64  Transition method.

    To be acceptable, any method of transition from compliance with 
Standard 9904.412 in effect prior to March 30, 1995, to compliance with 
the Standard effective March 30, 1995, must follow the equitable 
principle that costs, which have been previously provided for, shall not 
be redundantly provided for under revised methods. Conversely, costs 
that have not previously been provided for must be provided for

[[Page 429]]

under the revised method. This transition subsection is not intended to 
qualify for purposes of assignment or allocation, pension costs which 
have previously been disallowed for reasons other than ERISA tax-
deductibility limitations. The sum of all portions of unfunded actuarial 
liability identified pursuant to Standard 9904.412, effective March 30, 
1995, including such portions of unfunded actuarial liability determined 
for transition purposes, is subject to the provisions of 9904.412-40(c) 
on requirements for assignment. The method, or methods, employed to 
achieve an equitable transition shall be consistent with the provisions 
of Standard 9904.412, effective March 30, 1995, and shall be approved by 
the contracting officer. Examples and illustrations of such transition 
methods include, but are not limited to, the following:
    (a) Reassignment of certain prior unfunded accruals. (1) Any portion 
of pension cost for a qualified defined-benefit pension plan, assigned 
to a cost accounting period prior to March 30, 1995, which was not 
funded because such cost exceeded the maximum tax-deductible amount, 
determined in accordance with ERISA, shall be assigned to subsequent 
accounting periods, including an adjustment for interest, as an 
assignable cost deficit. However, such costs shall be assigned to 
periods on or after March 30, 1995, only to the extent that such costs 
have not previously been allocated as cost or price to contracts subject 
to this Standard.
    (2) Alternatively, the transition method described in paragraph (d) 
of this subsection may be applied separately to costs subject to 
paragraph (a)(1) of this subsection.
    (b) Reassignment of certain prior unallocated credits. (1) Any 
portion of pension cost for a defined-benefit pension plan, assigned to 
a cost accounting period prior to March 30, 1995, which was not 
allocated as a cost or price credit to contracts subject to this 
Standard because such cost was less than zero, shall be assigned to 
subsequent accounting periods, including an adjustment for interest, as 
an assignable cost credit.
    (2) Alternatively, the transition method described in paragraph (d) 
of this subsection may be applied separately to costs subject to 
paragraph (b)(1) of this subsection.
    (c) Accounting for certain prior allocated unfunded accruals. Any 
portion of unfunded pension cost for a nonqualified defined-benefit 
pension plan, assigned to a cost accounting period prior to March 30, 
1995, that was allocated as cost or price to contracts subject to this 
Standard, shall be recognized in subsequent accounting periods, 
including adjustments for imputed interest and benefit payments, as an 
accumulated value of permitted unfunded accruals.
    (d) ``Fresh start'' alternative transition method. The transition 
methods of paragraphs (a)(1), (b)(1), and (c) of this subsection may be 
implemented using the so-called ``fresh start'' method whereby a portion 
of the unfunded actuarial liability of a defined-benefit pension plan, 
which occurs in the first cost accounting period after March 30, 1995, 
shall be treated in the same manner as an actuarial gain or loss. Such 
portion of unfunded actuarial liability shall exclude any portion of 
unfunded actuarial liability that must continue to be separately 
identified and maintained in accordance with 9904.412-50(a)(2), 
including interest adjustments. If the contracting officer already has 
approved a different amortization period for the fresh start 
amortization, then such amortization period shall continue.
    (e) Change to pay-as-you-go method. A change in accounting method 
subject to 9903.302 will have occurred whenever costs of a nonqualified 
defined-benefit pension plan have been accounted for on an accrual basis 
prior to March 30, 1995, and the contractor must change to the pay-as-
you-go cost method because the plan does not meet the requirement of 
9904.412-50(c)(3), either by election or otherwise. In such case, any 
portion of unfunded pension cost, assigned to a cost accounting period 
prior to March 30, 1995 that was allocated as cost or price to contracts 
subject to this Standard, shall be assigned to future accounting 
periods, including adjustments for imputed interest and benefit 
payments, as an accumulated value of permitted unfunded accruals. Costs 
computed under the pay-as-you-

[[Page 430]]

go cost method shall be charged against such accumulated value of 
permitted unfunded accruals before such costs may be allocated to 
contracts.
    (f) Actuarial assumptions. The actuarial assumptions used to 
calculate assignable cost deficits, assignable cost credits, or 
accumulated values of permitted unfunded accruals for transition 
purposes shall be consistent with the long term assumptions used for 
valuation purposes for such prior periods unless the contracting officer 
has previously approved the use of other reasonable assumptions.
    (g) Transition illustrations. Unless otherwise noted, paragraphs (g) 
(1) through (9) of this subsection address pension costs and transition 
amounts determined for the first cost accounting period beginning on or 
after the date this revised Standard becomes applicable to a contractor. 
For purposes of these illustrations an interest assumption of 7% is 
presumed to be in effect for all periods.
    (1) For the cost accounting period immediately preceding the date 
this revised Standard was applicable to a contractor, Contractor S 
computed and assigned pension cost of $1 million for a qualified 
defined-benefit pension plan. The contractor made a contribution equal 
to the maximum tax-deductible amount of $800,000 for the period leaving 
$200,000 of assigned cost unfunded for the period. Except for this 
$200,000, no other assigned pension costs have ever been unfunded or 
otherwise disallowed. Using the transition method of paragraph (a)(1) of 
this subsection, the contractor shall establish an assignable cost 
deficit equal to $214,000 ($200,000  x  1.07), which is the prior 
unfunded assigned cost plus interest. If this assignable cost deficit 
amount, plus all other portions of unfunded actuarial liability 
identified in accordance with 9904.412-50(a) (1) and (2), equal the 
total unfunded actuarial liability, pension cost may be assigned to the 
current period.
    (2) Assume that Contractor S in 9904.412-64(g)(1) priced the entire 
$1 million into firm fixed-price contracts. In this case, no assignable 
cost deficit amount may be established. In addition, the $214,000 
($200,000  x  1.07) shall be separately identified and maintained in 
accordance with 9904.412-50(a)(2). If all portions of unfunded actuarial 
liability identified in accordance with 9904.412-50(a) (1) and (2), 
equal the total unfunded actuarial liability, pension cost may be 
assigned to the period.
    (3) Assume the same facts as in 9904.412-64(g)(1), except Contractor 
S only funded and allocated $500,000. The $300,000 of assigned cost that 
was not funded, but could have been funded without exceeding the tax-
deductible maximum, may not be recognized as an assignable cost deficit. 
Instead, the $300,000 must be separately identified and maintained in 
accordance with 9904.412-50(a)(2). If the $321,000 ($300,000  x  1.07) 
plus the $214,000 already identified as an assignable cost deficit plus 
all other portions of unfunded actuarial liability identified in 
accordance with 9904.412-50(a) (1) and (2), equal the total unfunded 
actuarial liability, pension cost may be assigned to the period.
    (4) Assume that, for Contractor S in 9904.412-64(g)(3), the only 
portion of unfunded actuarial liability that must be identified under 
9904.412-50(a)(2) is the $321,000. If Contractor S chooses to use the 
``fresh start'' transition method, the $321,000 of unfunded assigned 
cost must be subtracted from the total unfunded actuarial liability in 
accordance with 9904.412-63(d). The net amount of unfunded actuarial 
liability shall then be amortized over a period of fifteen years as an 
actuarial loss in accordance with 9904.412-50(a)(1)(v) and Cost 
Accounting Standard 9904.413.
    (5) For the cost accounting period immediately preceding the date 
this revised Standard becomes applicable to a contractor, Contractor T 
computed and assigned pension cost of negative $400,000 for a qualified 
defined-benefit plan. Because the contractor could not withdraw assets 
from the trust fund, the contracting officer agreed that instead of 
allocating a current period credit to contracts, the negative costs 
would be carried forward, with interest, and offset against future 
pension costs allocated to the contract. Using the transition method of 
paragraph (b)(1) of this subsection, the contractor shall establish an 
assignable cost credit equal to $428,000 ($400,000  x  1.07). If

[[Page 431]]

this assignable cost credit amount, plus all other portions of unfunded 
actuarial liability identified in accordance with 9904.412-50(a) (1) and 
(2), equals the total unfunded actuarial liability, pension cost may be 
assigned to the period.
    (6) Assume that in 9904.412-64(g)(5), following guidance issued by 
the contracting agency the contracting officer had deemed the cost for 
the prior period to be $0. In order to satisfy the requirements of 
9904.412-40(c) and assign pension cost to the current period, Contractor 
S must account for the prior period negative accruals that have not been 
specifically identified. Following the transition method of paragraph 
(b)(1) of this subsection, the contractor shall identify $428,000 as an 
assignable cost credit.
    (7) Assume the facts of 9904.412-64(g)(5), except Contractor S uses 
the ``fresh start'' transition method. In addition, for the current 
period the plan is overfunded since the actuarial value of the assets is 
greater than the actuarial accrued liability. In this case, an actuarial 
gain equal to the negative unfunded actuarial liability; i.e., actuarial 
surplus, is recognized since there are no portions of unfunded actuarial 
liability that must be identified under 9904.412-50(a)(2).
    (8) Since March 28, 1989 Contractor U has computed, assigned, and 
allocated pension costs for a nonqualified defined-benefit plan on an 
accrual basis. The value of these past accruals, increased for imputed 
interest at 7% and decreased for benefits paid by the contractor, is 
equal to $2 million as of the beginning of the current period. 
Contractor U elects to establish a ``Rabbi trust'' and the plan meets 
the other criteria at 9904.412-50(c)(3). Using the transition method of 
paragraph (c) of this subsection, Contractor U shall recognize the $2 
million as the accumulated value of permitted unfunded accruals, which 
will then be included in the market value and actuarial value of the 
assets. Because the accumulated value of permitted unfunded accruals is 
exactly equal to the current period market value of the assets, 100% of 
benefits for the current period must be paid from sources other than the 
funding agency in accordance with 9904.412-50(d)(2)(ii).
    (9) Assume that Contractor U in 9904.412-64(g)(8) establishes a 
funding agency, but elects to use the pay-as-you-go method for current 
and future pension costs. Furthermore, plan participants receive 
$500,000 in benefits on the last day of the current period. Using the 
transition method of paragraph (e) of this subsection to ensure prior 
costs are not redundantly provided for, the contractor shall establish 
assets; i.e., an accumulated value of permitted unfunded accruals, of $2 
million. Since these assets are sufficient to provide for the current 
benefit payments, no pension costs can be allocated in this period. 
Furthermore, previously priced contracts subject to this Standard shall 
be adjusted in accordance with 9903.302. The accumulated value of 
permitted unfunded accruals shall be carried forward to the next period 
by adding $140,000 (7% x $2 million) of imputed interest, and 
subtracting the $500,000 of benefit payments made by the contractor. The 
accumulated value of permitted unfunded accruals for the next period 
equals $1,640,000 ($2 million + $140,000--$500,000).

[60 FR 16547, Mar. 30, 1995; 60 FR 20248, Apr. 25, 1995]



9904.413  Adjustment and allocation of pension cost.



9904.413-10  [Reserved]



9904.413-20  Purpose.

    A purpose of this Standard is to provide guidance for adjusting 
pension cost by measuring actuarial gains and losses and assigning such 
gains and losses to cost accounting periods. The Standard also provides 
the bases on which pension cost shall be allocated to segments of an 
organization. The provisions of this Cost Accounting Standard should 
enhance uniformity and consistency in accounting for pension costs.



9904.413-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this chapter 99 shall 
have the meaning ascribed to them in those

[[Page 432]]

definitions unless paragraph (b) of this subsection requires therwise.
    (1) Accrued benefit cost method means an actuarial cost method under 
which units of benefits are assigned to each cost accounting period and 
are valued as they accrue; that is, based on the services performed by 
each employee in the period involved. The measure of normal cost under 
this method for each cost accounting period is the present value of the 
units of benefit deemed to be credited to employees for service in that 
period. The measure of the actuarial accrued liability at a plan's 
inception date is the present value of the units of benefit credited to 
employees for service prior to that date. (This method is also known as 
the Unit Credit cost method without salary projection.)
    (2) Actuarial accrued liability means pension cost attributable, 
under the actuarial cost method in use, to years prior to the current 
period considered by a particular actuarial valuation. As of such date, 
the actuarial accrued liability represents the excess of the present 
value of future benefits and administrative expenses over the present 
value of future normal costs for all plan participants and 
beneficiaries. The excess of the actuarial accrued liability over the 
actuarial value of the assets of a pension plan is the Unfunded 
Actuarial Liability. The excess of the actuarial value of the assets of 
a pension plan over the actuarial accrued liability is an actuarial 
surplus and is treated as a negative unfunded actuarial liability.
    (3) Actuarial assumption means an estimate of future conditions 
affecting pension cost; for example, mortality rate, employee turnover, 
compensation levels, earnings on pension plan assets, changes in values 
of pension plan assets.
    (4) Actuarial cost method means a technique which uses actuarial 
assumptions to measure the present value of future pension benefits and 
pension plan administrative expenses, and which assigns the cost of such 
benefits and expenses to cost accounting periods. The actuarial cost 
method includes the asset valuation method used to determine the 
actuarial value of the assets of a pension plan.
    (5) Actuarial gain and loss means the effect on pension cost 
resulting from differences between actuarial assumptions and actual 
experience.
    (6) Actuarial valuation means the determination, as of a specified 
date, of the normal cost, actuarial accrued liability, actuarial value 
of the assets of a pension plan, and other relevant values for the 
pension plan.
    (7) Curtailment of benefits means an event; e.g., a plan amendment, 
in which the pension plan is frozen and no further material benefits 
accrue. Future service may be the basis for vesting of nonvested 
benefits existing at the time of the curtailment. The plan may hold 
assets, pay benefits already accrued, and receive additional 
contributions for unfunded benefits. Employees may or may not continue 
working for the contractor.
    (8) Funding agency means an organization or individual which 
provides facilities to receive and accumulate assets to be used either 
for the payment of benefits under a pension plan, or for the purchase of 
such benefits, provided such accumulated assets form a part of a pension 
plan established for the exclusive benefit of the plan participants and 
their beneficiaries. The fair market value of the assets held by the 
funding agency as of a specified date is the Funding Agency Balance as 
of that date.
    (9) Immediate-gain actuarial cost method means any of the several 
cost methods under which actuarial gains and losses are included as part 
of the unfunded actuarial liability of the pension plan, rather than as 
part of the normal cost of the plan.
    (10) Market value of the assets means the sum of the funding agency 
balance plus the accumulated value of any permitted unfunded accruals 
belonging to a pension plan. The Actuarial Value of the Assets means the 
value of cash, investments, permitted unfunded accruals, and other 
property belonging to a pension plan, as used by the actuary for the 
purpose of an actuarial valuation.
    (11) Normal cost means the annual cost attributable, under the 
actuarial cost method in use, to current and future years as of a 
particular valuation

[[Page 433]]

date, excluding any payment in respect of an unfunded actuarial 
liability.
    (12) Pension plan means a deferred compensation plan established and 
maintained by one or more employers to provide systematically for the 
payment of benefits to plan participants after their retirement, 
provided that the benefits are paid for life or are payable for life at 
the option of the employees. Additional benefits such as permanent and 
total disability and death payments, and survivorship payments to 
beneficiaries of deceased employees may be an integral part of a pension 
plan.
    (13) Pension plan participant means any employee or former employee 
of an employer, or any member or former member of an employee 
organization, who is or may become eligible to receive a benefit from a 
pension plan which covers employees of such employer or members of such 
organization who have satisfied the plan's participation requirements, 
or whose beneficiaries are receiving or may be eligible to receive any 
such benefit. A participant whose employment status with the employer 
has not been terminated is an active participant of the employer's 
pension plan.
    (14) Pension plan termination means an event; i.e., plan amendment, 
in which either the pension plan ceases to exist and all benefits are 
settled by purchase of annuities or other means, or the trusteeship of 
the plan is assumed by the Pension Benefit Guarantee Corporation or 
other conservator. The plan may or may not be replaced by another plan.
    (15) Permitted unfunded accruals means the amount of pension cost 
for nonqualified defined-benefit pension plans that is not required to 
be funded under 9904.412-50(d)(2). The Accumulated Value of Permitted 
Unfunded Accruals means the value, as of the measurement date, of the 
permitted unfunded accruals adjusted for imputed earnings and for 
benefits paid by the contractor.
    (16) Prepayment credit means the amount funded in excess of the 
pension cost assigned to a cost accounting period that is carried 
forward for future recognition. The Accumulated Value of Prepayment 
Credits means the value, as of the measurement date, of the prepayment 
credits adjusted for interest at the valuation rate and decreased for 
amounts used to fund pension costs or liabilities, whether assignable or 
not.
    (17) Projected benefit cost method means either (i) any of the 
several actuarial cost methods which distribute the estimated total cost 
of all of the employees' prospective benefits over a period of years, 
usually their working careers, or (ii) a modification of the accrued 
benefit cost method that considers projected compensation levels.
    (18) Qualified pension plan means a pension plan comprising a 
definite written program communicated to and for the exclusive benefit 
of employees which meets the criteria deemed essential by the Internal 
Revenue Service as set forth in the Internal Revenue Code for 
preferential tax treatment regarding contributions, investments, and 
distributions. Any other plan is a nonqualified pension plan.
    (19) Segment means one of two or more divisions, product 
departments, plants, or other subdivisions of an organization reporting 
directly to a home office, usually identified with responsibility for 
profit and/or producing a product or service. The term includes 
Government-owned contractor-operated (GOCO) facilities, and joint 
ventures and subsidiaries (domestic and foreign) in which the 
organization has a majority ownership. The term also includes those 
joint ventures and subsidiaries (domestic and foreign) in which the 
organization has less than a majority ownership, but over which it 
exercises control.
    (20) Segment closing means that a segment has (i) been sold or 
ownership has been otherwise transferred, (ii) discontinued operations, 
or (iii) discontinued doing or actively seeking Government business 
under contracts subject to this Standard.
    (21) Termination of employment gain or loss means an actuarial gain 
or loss resulting from the difference between the assumed and actual 
rates at which plan participants separate from employment for reasons 
other than retirement, disability, or death.
    (b) The following modifications of terms defined elsewhere in this 
chapter

[[Page 434]]

99 are applicable to this Standard: None.

[57 FR 14153, Apr. 17, 1992, as amended at 60 FR 16549, Mar. 30, 1995]



9904.413-40  Fundamental requirement.

    (a) Assignment of actuarial gains and losses. Actuarial gains and 
losses shall be calculated annually and shall be assigned to the cost 
accounting period for which the actuarial valuation is made and 
subsequent periods.
    (b) Valuation of the assets of a pension plan. The actuarial value 
of the assets of a pension plan shall be determined under an asset 
valuation method which takes into account unrealized appreciation and 
depreciation of the market value of the assets of the pension plan, 
including the accumulated value of permitted unfunded accruals, and 
shall be used in measuring the components of pension costs.
    (c) Allocation of pension cost to segments. Contractors shall 
allocate pension costs to each segment having participants in a pension 
plan. A separate calculation of pension costs for a segment is required 
when the conditions set forth in 9904.413-50(c)(2) or (3) are present. 
When these conditions are not present, allocations may be made by 
calculating a composite pension cost for two or more segments and 
allocating this cost to these segments by means of an allocation base. 
When pension costs are separately computed for a segment or segments, 
the provisions of Cost Accounting Standard 9904.412 regarding the 
assignable cost limitation shall be based on the assets and liabilities 
for the segment or segments for purposes of such computations. In 
addition, the amount of pension cost assignable to a segment or segments 
shall not exceed the maximum tax-deductible amount computed for the plan 
as a whole and apportioned among the segment(s).

[57 FR 14153, Apr. 17, 1992, as amended at 60 FR 16550, Mar. 30, 1995]



9904.413-50  Techniques for application.

    (a) Assignment of actuarial gains and losses. (1) In accordance with 
the provisions of Cost Accounting Standard 9904.412, actuarial gains and 
losses shall be identified separately from other unfunded actuarial 
liabilities.
    (2) Actuarial gains and losses determined under a pension plan whose 
costs are measured by an immediate-gain actuarial cost method shall be 
amortized over a 15 year period in equal annual installments, beginning 
with the date as of which the actuarial valuation is made. The 
installment for a cost accounting period shall consist of an element for 
amortization of the gain or loss plus an element for interest on the 
unamortized balance at the beginning of the period. If the actuarial 
gain or loss determined for a cost accounting period is not material, 
the entire gain or loss may be included as a component of the current or 
ensuing year's pension cost.
    (3) Pension plan terminations and curtailments of benefits shall be 
subject to adjustment in accordance with 9904.413-50(c)(12).
    (b) Valuation of the assets of a pension plan. (1) The actuarial 
value of the assets of a pension plan shall be used:
    (i) In measuring actuarial gains and losses, and
    (ii) For purposes of measuring other components of pension cost.
    (2) The actuarial value of the assets of a pension plan may be 
determined by the use of any recognized asset valuation method which 
provides equivalent recognition of appreciation and depreciation of the 
market value of the assets of the pension plan. However, the actuarial 
value of the assets produced by the method used shall fall within a 
corridor from 80 to 120 percent of the market value of the assets, 
determined as of the valuation date. If the method produces a value that 
falls outside the corridor, the actuarial value of the assets shall be 
adjusted to equal the nearest boundary of the corridor.
    (3) The method selected for valuing pension plan assets shall be 
consistently applied from year to year within each plan.
    (4) The provisions of paragraphs (b) (1) through (3) of this 
subsection are not applicable to plans that are treated as defined-
contribution plans in accordance with 9904.412-50(a)(6).
    (5) The market and actuarial values of the assets of a pension plan 
shall not

[[Page 435]]

be adjusted for any fee, reserve charge, or other investment charge for 
withdrawals from or termination of an investment contract, trust 
agreement, or other funding arrangement, unless such fee is determined 
in an arm's length transaction, and actually incurred and paid.
    (c) Allocation of pension cost to segments. (1) For contractors who 
compute a composite pension cost covering plan participants in two or 
more segments, the base to be used for allocating such costs shall be 
representative of the factors on which the pension benefits are based. 
For example, a base consisting of salaries and wages shall be used for 
pension costs that are calculated as a percentage of salaries and wages; 
a base consisting of the number of participants shall be used for 
pension costs that are calculated as an amount per participant. If 
pension costs are separately calculated for one or more segments, the 
contractor shall make a distribution among the segments for the maximum 
tax-deductible amount and the contribution to the funding agency as 
follows:
    (i) When apportioning the maximum tax-deductible amount, which is 
determined for a qualified defined-benefit pension plan as a whole 
pursuant to the Employee Retirement Income Security Act of 1974 (ERISA), 
29 U.S.C. 1001 et seq., as amended, to segments, the contractor shall 
use a base that considers the otherwise assignable pension costs or the 
funding levels of the individual segments.
    (ii) When apportioning amounts deposited to a funding agency to 
segments, contractors shall use a base that is representative of the 
assignable pension costs, determined in accordance with 9904.412-50(c) 
for the individual segments. However, for qualified defined-benefit 
pension plans, the contractor may first apportion amounts funded to the 
segment or segments subject to this Standard.
    (2) Separate pension cost for a segment shall be calculated whenever 
any of the following conditions exist for that segment, provided that 
such condition(s) materially affect the amount of pension cost allocated 
to the segment:
    (i) There is a material termination of employment gain or loss 
attributable to the segment,
    (ii) The level of benefits, eligibility for benefits, or age 
distribution is materially different for the segment than for the 
average of all segments, or
    (iii) The appropriate actuarial assumptions are, in the aggregate, 
materially different for the segment than for the average of all 
segments. Calculations of termination of employment gains and losses 
shall give consideration to factors such as unexpected early 
retirements, benefits becoming fully vested, and reinstatements or 
transfers without loss of benefits. An amount may be estimated for 
future reemployments.
    (3) Pension cost shall also be separately calculated for a segment 
under circumstances where--
    (i) The pension plan for that segment becomes merged with that of 
another segment, or the pension plan is divided into two or more pension 
plans, and in either case,
    (ii) The ratios of market value of the assets to actuarial accrued 
liabilities for each of the merged or separated plans are materially 
different from one another after applying the benefits in effect after 
the pension plan merger or pension plan division.
    (4) For a segment whose pension costs are required to be calculated 
separately pursuant to paragraphs (c) (2) or (3) of this subsection, 
such calculations shall be prospective only; pension costs need not be 
redetermined for prior years.
    (5) For a segment whose pension costs are either required to be 
calculated separately pursuant to paragraph (c)(2) or (c)(3) of this 
subsection or calculated separately at the election of the contractor, 
there shall be an initial allocation of a share in the undivided market 
value of the assets of the pension plan to that segment, as follows:
    (i) If the necessary data are readily determinable, the funding 
agency balance to be allocated to the segment shall be the amount 
contributed by, or on behalf of, the segment, increased by income 
received on such assets, and decreased by benefits and expenses paid

[[Page 436]]

from such assets. Likewise, the accumulated value of permitted unfunded 
accruals to be allocated to the segment shall be the amount of permitted 
unfunded accruals assigned to the segment, increased by interest imputed 
to such assets, and decreased by benefits paid from sources other than 
the funding agency; or
    (ii) If the data specified in paragraph (c)(5)(i) of this subsection 
are not readily determinable for certain prior periods, the market value 
of the assets of the pension plan shall be allocated to the segment as 
of the earliest date such data are available. Such allocation shall be 
based on the ratio of the actuarial accrued liability of the segment to 
the plan as a whole, determined in a manner consistent with the 
immediate gain actuarial cost method or methods used to compute pension 
cost. Such assets shall be brought forward as described in paragraph 
(c)(7) of this subsection.
    (iii) The actuarial value of the assets of the pension plan shall be 
allocated to the segment in the same proportion as the market value of 
the assets.
    (6) If, prior to the time a contractor is required to use this 
Standard, it has been calculating pension cost separately for individual 
segments, the amount of assets previously allocated to those segments 
need not be changed.
    (7) After the initial allocation of assets, the contractor shall 
maintain a record of the portion of subsequent contributions, permitted 
unfunded accruals, income, benefit payments, and expenses attributable 
to the segment and paid from the assets of the pension plan: Income and 
expenses shall include a portion of any investment gains and losses 
attributable to the assets of the pension plan. Income and expenses of 
the pension plan assets shall be allocated to the segment in the same 
proportion that the average value of assets allocated to the segment 
bears to the average value of total pension plan assets for the period 
for which income and expenses are being allocated.
    (8) If plan participants transfer among segments, contractors need 
not transfer assets or actuarial accrued liabilities unless a transfer 
is sufficiently large to distort the segment's ratio of pension plan 
assets to actuarial accrued liabilities determined using the accrued 
benefit cost method. If assets and liabilities are transferred, the 
amount of assets transferred shall be equal to the actuarial accrued 
liabilities, determined using the accrued benefit cost method, 
transferred.
    (9) Contractors who separately calculate the pension cost of one or 
more segments may calculate such cost either for all pension plan 
participants assignable to the segment(s) or for only the active 
participants of the segment(s). If costs are calculated only for active 
participants, a separate segment shall be created for all of the 
inactive participants of the pension plan and the cost thereof shall be 
calculated. When a contractor makes such an election, assets shall be 
allocated to the segment for inactive participants in accordance with 
paragraphs (c) (5), (6), and (7) of this subsection. When an employee of 
a segment becomes inactive, assets shall be transferred from that 
segment to the segment established to accumulate the assets and 
actuarial liabilities for the inactive plan participants. The amount of 
assets transferred shall be equal to the actuarial accrued liabilities, 
determined under the accrued benefit cost method, for these inactive 
plan participants. If inactive participants become active, assets and 
liabilities shall similarly be transferred to the segments to which the 
participants are assigned. Such transfers need be made only as of the 
last day of a cost accounting period. The total annual pension cost for 
a segment having active employees shall be the amount calculated for the 
segment plus an allocated portion of the pension cost calculated for the 
inactive participants. Such an allocation shall be on the same basis as 
that set forth in paragraph (c)(1) of this subsection.
    (10) Where pension cost is separately calculated for one or more 
segments, the actuarial cost method used for a plan shall be the same 
for all segments. Unless a separate calculation of pension cost for a 
segment is made because of a condition set forth in paragraph 
(c)(2)(iii) of this subsection, the same actuarial assumptions may be 
used for all segments covered by a plan.

[[Page 437]]

    (11) If a pension plan has participants in the home office of a 
company, the home office shall be treated as a segment for purposes of 
allocating the cost of the pension plan. Pension cost allocated to a 
home office shall be a part of the costs to be allocated in accordance 
with the appropriate requirements of Cost Accounting Standard 9904.403.
    (12) If a segment is closed, if there is a pension plan termination, 
or if there is a curtailment of benefits, the contractor shall determine 
the difference between the actuarial accrued liability for the segment 
and the market value of the assets allocated to the segment, 
irrespective of whether or not the pension plan is terminated. The 
difference between the market value of the assets and the actuarial 
accrued liability for the segment represents an adjustment of 
previously-determined pension costs.
    (i) The determination of the actuarial accrued liability shall be 
made using the accrued benefit cost method. The actuarial assumptions 
employed shall be consistent with the current and prior long term 
assumptions used in the measurement of pension costs. If there is a 
pension plan termination, the actuarial accrued liability shall be 
measured as the amount paid to irrevocably settle all benefit 
obligations or paid to the Pension Benefit Guarantee Corporation.
    (ii) In computing the market value of assets for the segment, if the 
contractor has not already allocated assets to the segment, such an 
allocation shall be made in accordance with the requirements of 
paragraphs (c)(5) (i) and (ii) of this subsection. The market value of 
the assets shall be reduced by the accumulated value of prepayment 
credits, if any. Conversely, the market value of the assets shall be 
increased by the current value of any unfunded actuarial liability 
separately identified and maintained in accordance with 9904.412-
50(a)(2).
    (iii) The calculation of the difference between the market value of 
the assets and the actuarial accrued liability shall be made as of the 
date of the event (e.g., contract termination, plan amendment, plant 
closure) that caused the closing of the segment, pension plan 
termination, or curtailment of benefits. If such a date is not readily 
determinable, or if its use can result in an inequitable calculation, 
the contracting parties shall agree on an appropriate date.
    (iv) Pension plan improvements adopted within 60 months of the date 
of the event which increase the actuarial accrued liability shall be 
recognized on a prorata basis using the number of months the date of 
adoption preceded the event date. Plan improvements mandated by law or 
collective bargaining agreement are not subject to this phase-in.
    (v) If a segment is closed due to a sale or other transfer of 
ownership to a successor in interest in the contracts of the segment and 
all of the pension plan assets and actuarial accrued liabilities 
pertaining to the closed segment are transferred to the successor 
segment, then no adjustment amount pursuant to this paragraph (c)(12) is 
required. If only some of the pension plan assets and actuarial accrued 
liabilities of the closed segment are transferred, then the adjustment 
amount required under this paragraph (c)(12) shall be determined based 
on the pension plan assets and actuarial accrued liabilities remaining 
with the contractor. In either case, the effect of the transferred 
assets and liabilities is carried forward and recognized in the 
accounting for pension cost at the successor contractor.
    (vi) The Government's share of the adjustment amount determined for 
a segment shall be the product of the adjustment amount and a fraction. 
The adjustment amount shall be reduced for any excise tax imposed upon 
assets withdrawn from the funding agency of a qualified pension plan. 
The numerator of such fraction shall be the sum of the pension plan 
costs allocated to all contracts and subcontracts (including Foreign 
Military Sales) subject to this Standard during a period of years 
representative of the Government's participation in the pension plan. 
The denominator of such fraction shall be the total pension costs 
assigned to cost accounting periods during those same years. This amount 
shall represent an adjustment of contract prices or cost allowance as 
appropriate. The adjustment may be recognized by modifying

[[Page 438]]

a single contract, several but not all contracts, or all contracts, or 
by use of any other suitable technique.
    (vii) The full amount of the Government's share of an adjustment is 
allocable, without limit, as a credit or charge during the cost 
accounting period in which the event occurred and contract prices/costs 
will be adjusted accordingly. However, if the contractor continues to 
perform Government contracts, the contracting parties may negotiate an 
amortization schedule, including interest adjustments. Any amortization 
agreement shall consider the magnitude of the adjustment credit or 
charge, and the size and nature of the continuing contracts.

[60 FR 16550, Mar. 30, 1995]



9904.413-60  Illustrations.

    (a) Assignment of actuarial gains and losses. Contractor A has a 
defined-benefit pension plan whose costs are measured under an 
immediate-gain actuarial cost method. The contractor makes actuarial 
valuations every other year. In the past, at each valuation date, the 
contractor has calculated the actuarial gains and losses that have 
occurred since the previous valuation date and has merged such gains and 
losses with the unfunded actuarial liabilities that are being amortized. 
Pursuant to 9904.413-40(a), the contractor must make an actuarial 
valuation annually. Any actuarial gains or losses measured must be 
separately amortized over a 15-year period beginning with the period for 
which the actuarial valuation is made in accordance with 9904.413-50(a) 
(1) and (2).
    (b)(1) Valuation of the assets of a pension plan. Contractor B has a 
qualified defined-benefit pension plan, the assets of which are invested 
in equity securities, debt securities, and real property. The 
contractor, whose cost accounting period is the calendar year, has an 
annual actuarial valuation of the pension plan assets in June of each 
year; the effective date of the valuation is the beginning of that year. 
The contractor's method for valuing the assets of the pension plan is as 
follows: debt securities expected to be held to maturity are valued on 
an amortized basis running from initial cost at purchase to par value at 
maturity; land and buildings are valued at cost less depreciation taken 
to date; all equity securities and debt securities not expected to be 
held to maturity are valued on the basis of a five-year moving average 
of market values. In making an actuarial valuation, the contractor must 
compare the values reached under the asset valuation method used with 
the market value of all the assets as required by 9904.413-40(b). In 
this case, the assets are valued as of January 1 of that year. The 
contractor established the following values as of the valuation date.

------------------------------------------------------------------------
                                                   Asset
                                                 valuation      Market
                                                   method
------------------------------------------------------------------------
Cash..........................................     $100,000      100,000
Equity securities.............................    6,000,000    7,800,000
Debt securities, expected to be held to             550,000      600,000
 maturity.....................................
Other debt securities.........................      600,000      750,000
Land and Buildings, net of depreciation.......      400,000      750,000
                                               -------------------------
      Total...................................    7,650,000   10,000,000
------------------------------------------------------------------------

    (2) Section 9904.413-50(b)(2) requires that the actuarial value of 
the assets of the pension plan fall within a corridor from 80 to 120 
percent of market. The corridor for the plan's assets as of January 1 is 
from $12 million to $8 million. Because the asset value reached by the 
contractor, $7,650,000, falls outside that corridor, the value reached 
must be adjusted to equal the nearest boundary of the corridor: $8 
million. In subsequent years the contractor must continue to use the 
same method for valuing assets in accordance with 9904.413-50(b)(3). If 
the value produced falls inside the corridor, such value shall be used 
in measuring pension costs.
    (c) Allocation of pension costs to segments. (1) Contractor C has a 
defined-benefit pension plan covering employees at five segments. 
Pension cost is computed by use of an immediate-gain actuarial cost 
method. One segment (X) is devoted primarily to performing work for the 
Government. During the current cost accounting period, Segment X had a 
large and unforeseeable reduction of employees because of a contract 
termination at the convenience of the Government and because the 
contractor did not receive an anticipated follow-on contract to one that 
was completed during the period. The segment does continue to perform

[[Page 439]]

work under several other Government contracts. As a consequence of this 
termination of employment gain, a separate calculation of the pension 
cost for Segment X would result in materially different allocation of 
costs to the segment than would a composite calculation and allocation 
by means of a base. Accordingly, pursuant to 9904.413-50(c)(2), the 
contractor must calculate a separate pension cost for Segment X. In 
doing so, the entire termination of employment gain must be assigned to 
Segment X and amortized over fifteen years. If the actuarial assumptions 
for Segment X continue to be substantially the same as for the other 
segments, the termination of employment gain may be separately amortized 
and allocated only to Segment X; all other Segment X computations may be 
included as part of the composite calculation. After the termination of 
employment gain is amortized, the contractor is no longer required to 
separately calculate the costs for Segment X unless subsequent events 
require each separate calculation.
    (2) Contractor D has a defined-benefit pension plan covering 
employees at ten segments, all of which have some contracts subject to 
this Standard. The contractor's calculation of normal cost is based on a 
percentage of payroll for all employees covered by the plan. One of the 
segments (Segment Y) is entirely devoted to Government work. The 
contractor's policy is to place junior employees in this segment. The 
salary scale assumption for employees of the segment is so different 
from that of the other segments that the pension cost for Segment Y 
would be materially different if computed separately. Pursuant to 
9904.413-50(c)(2)(iii), the contractor must compute the pension cost for 
Segment Y as if it were a separate pension plan. Therefore, the 
contractor must allocate a portion of the market value of pension plan's 
assets to Segment Y in accordance with 9904.413-50(c)(5). Memorandum 
records may be used in making the allocation. However, because the 
necessary records only exist for the last five years, 9904.413-
50(c)(5)(ii) permits an initial allocation to be made as of the earliest 
date such records are available. The initial allocation must be made on 
the basis of the immediate gain actuarial cost method or methods used to 
calculate prior years' pension cost for the plan. Once the assets have 
been allocated, they shall be brought forward to the current period as 
described in 9904.413-50(c)(7). A portion of the undivided actuarial 
value of assets shall then be allocated to the segment based on the 
segment's proportion of the market value of assets in accordance with 
9904.413-50(c)(5)(iii). In future cost accounting periods, the 
contractor shall make separate pension cost calculations for Segment Y 
based on the appropriate salary scale assumption. Because the factors 
comprising pension cost for the other nine segments are relatively 
equal, the contractor may compute pension cost for these nine segments 
by using composite factors. As required by 9904.413-50(c)(1), the base 
to be used for allocating such costs shall be representative of the 
factors on which the pension benefits are based.
    (3) Contractor E has a defined-benefit pension plan which covers 
employees at twelve segments. The contractor uses composite actuarial 
assumptions to develop a pension cost for all segments. Three of these 
segments primarily perform Government work; the work at the other nine 
segments is primarily commercial. Employee turnover at the segments 
performing commercial work is relatively stable. However, employment 
experience at the Government segments has been very volatile; there have 
been large fluctuations in employment levels and the contractor assumes 
that this pattern of employment will continue to occur. It is evident 
that separate termination of employment assumptions for the Government 
segments and the commercial segments will result in materially different 
pension costs for the Government segments. Therefore, the cost for these 
segments must be separately calculated, using the appropriate 
termination of employment assumptions for these segments in accordance 
with 9904.413-50(c)(2)(iii).
    (4) Contractor F has a defined-benefit pension plan covering 
employees at 25 segments. Twelve of these segments primarily perform 
Government work;

[[Page 440]]

the remaining segments perform primarily commercial work. The 
contractor's records show that the termination of employment experience 
and projections for the twelve segments are so different from that of 
the average of all of the segments that separate pension cost 
calculations are required for these segments pursuant to 9904.413-
50(c)(2). However, because the termination of employment experience and 
projections are about the same for all twelve segments, Contractor F may 
calculate a composite pension cost for the twelve segments and allocate 
the cost to these segments by use of an appropriate allocation base in 
accordance with 9904.413-50(c)(1).
    (5) After this Standard becomes applicable to Contractor G, it 
acquires Contractor H and makes it Segment H. Prior to the merger, each 
contractor had its own defined-benefit pension plan. Under the terms of 
the merger, Contractor H's pension plan and plan assets were merged with 
those of Contractor G. The actuarial assumptions, current salary scale, 
and other plan characteristics are about the same for Segment H and 
Contractor G's other segments. However, based on the same benefits at 
the time of the merger, the plan of Contractor H had a 
disproportionately larger unfunded actuarial liability than did 
Contractor G's plan. Any combining of the assets and actuarial 
liabilities of both plans would result in materially different pension 
cost allocation to Contractor G's segments than if pension cost were 
computed for Segment H on the basis that it had a separate pension plan. 
Accordingly, pursuant to 9904.413-50(c)(3), Contractor G must allocate 
to Segment H a portion of the assets of the combined plan. The amount to 
be allocated shall be the market value of Segment H's pension plan 
assets at the date of the merger determined in accordance with 9904.413-
50(c)(5), and shall be adjusted for subsequent receipts and expenditures 
applicable to the segment in accordance with 9904.413-50(c)(7). Pursuant 
to 9904.413-40(b)(1) and 9904.413-50(c)(5)(iii), Contractor G must use 
these amounts of assets as the basis for determining the actuarial value 
of assets used for calculating the annual pension cost applicable to 
Segment H.
    (6) Contractor I has a defined-benefit pension plan covering 
employees at seven segments. The contractor has been making a composite 
pension cost calculation for all of the segments. However, the 
contractor determines that, pursuant to this Standard, separate pension 
costs must be calculated for one of the segments. In accordance with 
9904.413-50(c)(9), the contractor elects to allocate pension plan assets 
only for the active participants of that segment. The contractor must 
then create a segment to accumulate the assets and actuarial accrued 
liabilities for the plan's inactive participants. When active 
participants of a segment become inactive, the contractor must transfer 
assets to the segment for inactive participants equal to the actuarial 
accrued liabilities for the participants that become inactive.
    (7) Contractor J has a defined-benefit pension plan covering 
employees at ten segments. The contractor makes a composite pension cost 
calculation for all segments. The contractor's records show that the 
termination of employment experience for one segment, which is 
performing primarily Government work, has been significantly different 
from the average termination of employment experience of the other 
segments. Moreover, the contractor assumes that such different 
experience will continue. Because of this fact, and because the 
application of a different termination of employment assumption would 
result in significantly different costs being charged the Government, 
the contractor must develop separate pension cost for that segment. In 
accordance with 9904.413-50(c)(2)(iii), the amount of pension cost must 
be based on an acceptable termination of employment assumption for that 
segment; however, as provided in 9904.413-50(c)(10), all other 
assumptions for that segment may be the same as those for the remaining 
segments.
    (8) Contractor K has a five-year contract to operate a Government-
owned facility. The employees of that facility are covered by the 
contractor's overall qualified defined-benefit pension plan which covers 
salaried and hourly employees at other locations. At the conclusion of 
the five-year period, the Government decides not to renew the

[[Page 441]]

contract. Although some employees are hired by the successor contractor, 
because Contractor K no longer operates the facility, it meets the 
9904.413-30(a)(20)(iii) definition of a segment closing. Contractor K 
must compute the actuarial accrued liability for the pension plan for 
that facility using the accrued benefit cost method as of the date the 
contract expired in accordance with 9904.413-50(c)(12)(i). Because many 
of Contractor K's employees are terminated from the pension plan, the 
Internal Revenue Service considers it to be a partial plan termination, 
and thus requires that the terminated employees become fully vested in 
their accrued benefits to the extent such benefits are funded. Taking 
this mandated benefit improvement into consideration in accordance with 
9904.413-50(c)(12)(iv), the actuary calculates the actuarial accrued 
liability to be $12.5 million. The contractor must then determine the 
market value of the pension plan assets allocable to the facility, in 
accordance with 9904.413-50(c)(5), as of the date agreed to by the 
contracting parties pursuant to 9904.413-50(c)(12)(iii), the date the 
contract expired. In making this determination, the contractor is able 
to do a full historical reconstruction of the market value of the assets 
allocated to the segment. In this case, the market value of the 
segment's assets amounted to $13.8 million. Thus, for this facility the 
value of pension plan assets exceeded the actuarial accrued liability by 
$1.3 million. Pursuant to 9904.413-50(c)(12)(vi), this amount indicates 
the extent to which the Government over-contributed to the pension plan 
for the segment and, accordingly, is the amount of the adjustment due to 
the Government.
    (9) Contractor L operated a segment over the last five years during 
which 80% of its work was performed under Government CAS-covered 
contracts. The Government work was equally divided each year between 
fixed-price and cost-type contracts. The employees of the facility are 
covered by a funded nonqualified defined-benefit pension plan accounted 
for in accordance with 9904.412-50(c)(3). For each of the last five 
years the highest Federal corporate income tax rate has been 30%. 
Pension costs of $1 million per year were computed using a projected 
benefit cost method. Contractor L funded at the complement of the tax 
rate ($700,000 per year). The pension plan assets held by the funding 
agency earned 8% each year. At the end of the five-year period, the 
funding agency balance; i.e., the market value of invested assets, was 
$4.4 million. As of that date, the accumulated value of permitted 
unfunded accruals; i.e., the current value of the $300,000 not funded 
each year, is $1.9 million. As defined by 9904.413-30(a)(20)(i), a 
segment closing occurs when Contractor L sells the segment at the end of 
the fifth year. Thus, for this segment, the market value of the assets 
of the pension plan determined in accordance with 9904.413-30(a)(10) is 
$6.3 million, which is, the sum of the funding account balance ($4.4 
million) and the accumulated value of permitted unfunded accruals ($1.9 
million). Pursuant to 9904.413-50(c)(12)(i), the contractor uses the 
accrued benefit cost method to calculate an actuarial accrued liability 
of $5 million as of that date. There is no transfer of plan assets or 
liabilities to the buyer. The difference between the market value of the 
assets and the actuarial accrued liability for the segment is $1.3 
million ($6.3 million--$5 million). Pursuant to 9904.413-50(c)(12)(vi), 
the adjustment due the Government for its 80% share of previously-
determined pension costs for CAS-covered contracts is $1.04 million (80% 
times $1.3 million). Because contractor L has no other Government 
contracts the $1.04 million is a credit due to the Government.
    (10) Assume the same facts as in 9904.413-60(c)(9), except that 
Contractor L continues to perform substantial Government contract work 
through other segments. After considering the amount of the adjustment 
and the current level of contracts, the contracting officer and the 
contractor establish an amortization schedule so that the $1.04 million 
is recognized as credits against ongoing contracts in five level annual 
installments, including an interest adjustment based on the interest 
assumption used to compute pension costs for the continuing contracts. 
This amortization schedule satisfies the requirements of 9904.413-
50(c)(12))(vii).

[[Page 442]]

    (11) Assume the same facts as in 9904.413-60(c)(9). As part of the 
transfer of ownership, Contractor L also transfers all pension 
liabilities and assets of the segment to the buyer. Pursuant to 
9904.413-50(c)(12)(v), the segment closing adjustment amount for the 
current period is transferred to the buyer and is subsumed in the future 
pension cost accounting of the buyer. If the transferred liabilities and 
assets of the segment are merged into the buyer's pension plan which has 
a different ratio of market value of pension plan assets to actuarial 
accrued liabilities, then pension costs must be separately computed in 
accordance with 9904.413-50(c)(3).
    (12) Contractor M sells its only government segment. Through a 
contract novation, the buyer assumes responsibility for performance of 
the segment's government contracts. Just prior to the sale, the 
actuarial accrued liability under the actuarial cost method in use is 
$18 million and the market value of assets allocated to the segment of 
$22 million. In accordance with the sales agreement, Contractor M is 
required to transfer $20 million of assets to the new plan. In 
determining the segment closing adjustment under 9904.413-50(c)(12) the 
actuarial accrued liability and the market value of assets are reduced 
by the amounts transferred to the buyer by the sale. The adjustment 
amount, which is the difference between the remaining assets ($2 
million) and the remaining actuarial liability ($0), is $2 million.
    (13) Contractor N has three segments that perform primarily 
government work and has been separately calculating pension costs for 
each segment. As part of a corporate reorganization, the contractor 
closes the production facility for Segment A and transfers all of that 
segment's contracts and employees to Segments B and C, the two remaining 
government segments. The pension assets from Segment A are allocated to 
the remaining segments based on the actuarial accrued liability of the 
transferred employees. Because Segment A has discontinued operations, a 
segment closing has occurred pursuant to 9904.413-30(a)(20)(ii). 
However, because all pension assets and liabilities have been 
transferred to other segments or to successors in interest of the 
contracts of Segment A, an immediate period adjustment is not required 
pursuant to 9904.413-50(c)(12)(v).
    (14) Contractor O does not renew its government contract and decides 
to not seek additional government contracts for the affected segment. 
The contractor reduces the work force of the segment that had been 
dedicated to the government contract and converts the segment's 
operations to purely commercial work. In accordance with 9904.413-
30(a)(20)(iii), the segment has closed. Immediately prior to the end of 
the contract the market value of the segment's assets was $20 million 
and the actuarial accrued liability determined under the actuarial cost 
method in use was $22 million. An actuarial accrued liability of $16 
million is determined using the accrued benefit cost method as required 
by 9904.413-50(c)(12)(i). The segment closing adjustment is $4 million 
($20 million--$16 million).
    (15) Contractor P terminated its underfunded defined-benefit pension 
plan for hourly employees. The market value of the assets for the 
pension plan is $100 million. Although the actuarial accrued liability 
exceeds the $100 million of assets, the termination liability for 
benefits guaranteed by the Pension Benefit Guarantee Corporation (PBGC) 
is only $85 million. Therefore, the $15 million of assets in excess of 
the liability for guaranteed benefits are allocated to plan participants 
in accordance with PBGC regulations. The PBGC does not impose an 
assessment for unfunded guaranteed benefits against the contractor. The 
adjustment amount determined under 9904.413-50(c)(12) is zero.
    (16) Assume the same facts as 9904.413-60(c)(15), except that the 
termination liability for benefits guaranteed by the Pension Benefit 
Guarantee Corporation (PBGC) is $120 million. The PBGC imposes a $20 
million ($120 million--$100 Million) assessment against Contractor P for 
the unfunded guaranteed benefits. The contractor then determines the 
Government's share of the pension plan termination adjustment charge of 
$20 million in accordance with 9904.413-50(c)(12)(vi). In accordance 
with 9904.413-50(c)(12)(vii), the

[[Page 443]]

cognizant Federal official may negotiate an amortization schedule based 
on the contractor's schedule of payments to the PBGC.
    (17) Assume the same facts as in 9904.413-60(c)(16), except that 
pursuant to 9904.412-50(a)(2) Contractor P has an unassignable portion 
of unfunded actuarial liability for prior unfunded pension costs which 
equals $8 million. The $8 million represents the value of assets that 
would have been available had all assignable costs been funded and, 
therefore, must be added to the assets used to determine the pension 
plan termination adjustment in accordance with 9904.413-50(c)(12)(ii). 
In this case, the adjustment charge is determined to be $12 million ($20 
million-$8 million).
    (18) Contractor Q terminates its qualified defined-benefit pension 
plan without establishing a replacement plan. At termination, the market 
value of assets are $85 million. All obligations for benefits are 
irrevocably transferred to an insurance company by the purchase of 
annuity contracts at a cost of $55 million, which thereby determines the 
actuarial liability in accordance with 9904.413-50(c)(12)(i). The 
contractor receives a reversion of $30 million ($85 million-$55 
million). The adjustment is equal to the reversion amount, which is the 
excess of the market value of assets over the actuarial liability. 
However, ERISA imposes a 50% excise tax of $15 million (50% of $30 
million) on the reversion amount. In accordance with 9904.413-
50(c)(12)(vi), the $30 million adjustment amount is reduced by the $15 
million excise tax. Pursuant to 9904.413-50(c)(12)(vi), a share of the 
$15 million net adjustment ($30 million--$15 million) shall be 
allocated, without limitation, as a credit to CAS-covered contracts.
    (19) Assume that, in addition to the facts of 9904.413-60(c)(18), 
Contractor Q has an accumulated value of prepayment credits of $10 
million. Contractor Q has $3 million of unfunded actuarial liability 
separately identified and maintained pursuant to 9904.412-50(a)(2). The 
assets used to determine the adjustment amount equal $78 million. This 
amount is determined as the market value of assets ($85 million) minus 
the accumulated value of prepayment credits ($10 million) plus the 
portion of unfunded actuarial liability maintained pursuant to 9904.412-
50(a)(2) ($3 million). Therefore, the difference between the assets and 
the actuarial liability is $23 million ($78 million-$55 million). In 
accordance with 9904.413-50(c)(12)(vi), the $23 million adjustment is 
reduced by the $15 million excise tax to equal $8 million. The 
contracting officer determines that the pension cost data of the most 
recent eight years reasonably reflects the government's participation in 
the pension plan. The sum of costs allocated to fixed-price and cost-
type contracts subject to this Standard over the eight-year period is 
$21 million. The sum of costs assigned to cost accounting periods during 
the last eight years equals $42 million. Therefore, the government's 
share of the net adjustment is 50% ($21 million divided by $42 million) 
of the $8 million and equals $4 million.
    (20) Contractor R maintains a qualified defined-benefit pension 
plan. Contractor R amends the pension plan to eliminate the earning of 
any future benefits; however the participants do continue to earn 
vesting service. Pursuant to 9904.413-30(a)(7), a curtailment of 
benefits has occurred. An actuarial accrued liability of $78 million is 
determined under the accrued benefit cost method using the interest 
assumption used for the last four actuarial valuations. The market value 
of assets, determined in accordance with 9904.413-50(c)(12)(ii), is $90 
million. Contractor R shall determine the Government's share of the 
adjustment in accordance with 9904.413-50(c)(12)(vi). The contractor 
then shall allocate that share of the $12 million adjustment ($90 
million-$78 million) determined under 9904.413-50(c)(12) to CAS-covered 
contracts. The full amount of adjustment shall be made without 
limitation in the current cost accounting period unless arrangements to 
amortize the adjustment are permitted and negotiated pursuant to 
9904.413-50(c)(12)(vii).
    (21) Contractor S amends its qualified defined-benefit pension plan 
to ``freeze'' all accrued benefits at their current level. Although not 
required by law, the amendment also provides that all accrued benefits 
are fully vested.

[[Page 444]]

Contractor S must determine the adjustment for the curtailment of 
benefits. Fifteen months prior to the date of the plan amendment 
freezing benefits, Contractor S voluntarily amended the plan to increase 
benefits. This voluntary amendment resulted in an overall increase of 
over 10%. All actuarial accrued liabilities are computed using the 
accrued benefit cost method. The actuarial accrued liability for all 
accrued benefits is $1.8 million. The actuarial accrued liability for 
vested benefits immediately prior to the current plan amendment is $1.6 
million. The actuarial accrued liability determined for vested benefits 
based on the plan provisions before the voluntary amendment is $1.4 
million. The $1.4 million actuarial liability is based on benefit 
provisions that have been in effect for six years and is fully 
recognized. However, the $200,000 increase in liability due to the 
voluntary benefit improvement adopted 15 months ago must be phased-in on 
a prorata basis over 60 months. Therefore, only 25% (15 months divided 
by 60 months) of the $200,000 increase, or $50,000, can be included in 
the curtailment liability. The current amendment voluntarily increasing 
vesting was just adopted and, therefore, none of the associated increase 
in actuarial accrued liability can be included. Accordingly, in 
accordance with 9904.413-50(c)(12)(iv), Contractor S determines the 
adjustment for the curtailment of benefits using an actuarial accrued 
liability of $1.45 million ($1.4 million plus $50,000).
    (22) Contractor T has maintained separate qualified defined-benefit 
plans for Segments A and B and has separately computed pension costs for 
each segment. Both segments perform work under contracts subject to this 
Standard. On the first day of the current cost accounting period, 
Contractor T merges the two pension plans so that segments A and B are 
now covered by a single pension plan. Because the ratio of assets to 
liabilities for each plan is materially different from that of the 
merged plan, the contractor continues the separate computation of 
pension costs for each segment pursuant to 9904.413-50(c)(3). After 
considering the assignable cost limitations for each segment, Contractor 
T determines the potentially assignable pension cost is $12,000 for 
Segment A and $24,000 for Segment B. The maximum tax-deductible amount 
for the merged plan is $30,000, which is $6,000 less than the sum of the 
otherwise assignable costs for the segments ($36,000). To determine the 
portion of the total maximum tax-deductible amount applicable to each 
segment on a reasonable basis, the contractor prorates the $30,000 by 
the pension cost determined for each segment after considering the 
assignable cost limitations for each segment. Therefore, in accordance 
with 9904.413-50(c)(1)(i), the assignable pension cost is $10,000 for 
Segment A ($30,000 times $12,000 divided by $36,000) and $20,000 for 
Segment B ($30,000 times $24,000 divided by $36,000). Contractor T funds 
the full $30,000 and allocates the assignable pension cost for each 
segment to final cost objectives.
    (23) Assume the same facts as in 9904.413-60(c)(22), except that the 
tax-deductible maximum is $40,000 and the ERISA minimum funding 
requirement is $18,000. Since funding of the accrued pension cost is not 
constrained by tax-deductibility, Contractor T determines the assignable 
pension cost to be $12,000 for Segment A and $24,000 for Segment B. If 
the contractor funds $36,000, the full assigned pension cost of each 
segment can be allocated to final cost objectives. However, because the 
contractor funds only the ERISA minimum of $18,000, the contractor must 
apportion the $18,000 contribution to each segment on a basis that 
reflects the assignable pension cost of each segment in accordance with 
9904.413-50(c)(1)(ii). To measure the funding level of each segment, 
Contractor T uses an ERISA minimum funding requirement separately 
determined for each segment, as if the segment were a separate plan. On 
this basis, the allocable pension cost is determined to be $8,000 for 
Segment A and $10,000 for Segment B. In accordance with 9904.412-
50(a)(2), Contractor T must separately identify, and eliminate from 
future cost computations, $4,000 ($12,000-$8,000) for Segment A and 
$14,000 ($24,000-$10,000) for Segment B.
    (24) Assume the same facts as in 9904.413-60(c)(23), except that 
Segment B performs only commercial work. As

[[Page 445]]

permitted by 9904.413-50(c)(1)(ii), the contractor first applies $12,000 
of the contribution amount to Segment A, which is performing work under 
Government contracts, for purposes of 9904.412-50(d)(1). The remaining 
$6,000 is applied to Segment B. The full assigned pension cost of 
$12,000 for Segment A is funded and such amount is allocable to CAS-
covered contracts. Pursuant to 9904.412-50(a)(2), the contractor 
separately identifies, and eliminates from future pension costs, the 
$18,000 ($24,000-$6,000) of unfunded assigned cost for Segment B.
    (25) Contractor U has a qualified defined-benefit pension plan 
covering employees at two segments that perform work on contracts 
subject to this Standard. The ratio of the actuarial value of assets to 
actuarial accrued liabilities is significantly different between the two 
segments. Therefore, Contractor U is required to compute pension cost 
separately for each segment. The actuarial value of assets allocated to 
Segment A exceeds the actuarial accrued liability by $50,000. Segment B 
has an unfunded actuarial liability of $20,000. Thus, the pension plan 
as a whole has an actuarial surplus of $30,000. Pension cost of $5,000 
is computed for Segment B and is less than Segment B's assignable cost 
limitation of $9,000. The tax-deductible maximum is $0 for the plan as 
whole and, therefore, $0 for each segment. Contractor U will deem all 
existing amortization bases maintained for Segment A to be fully 
amortized in accordance with 9904.412-50(c)(2)(ii). For Segment B, the 
amortization of existing portions of unfunded actuarial liability 
continues unabated. Furthermore, pursuant to 9904.412-50(c)(2)(iii), the 
contractor establishes an additional amortization base for Segment B for 
the assignable cost deficit of $5,000.

[60 FR 16553, Mar. 30, 1995; 60 FR 20248, Apr. 25, 1995, as amended at 
61 FR 58011, Nov. 12, 1996]



9904.413-61  Interpretation. [Reserved]



9904.413-62  Exemption.

    None for this Standard.



9904.413-63  Effective date.

    (a) This Standard is effective as of March 30, 1995.
    (b) This Standard shall be followed by each contractor on or after 
the start of its next cost accounting period beginning after the receipt 
of a contract or subcontract to which this Standard is applicable.
    (c) Contractors with prior CAS-covered contracts with full coverage 
shall continue to follow Standard 9904.413 in effect prior to March 30, 
1995, until this Standard, effective March 30, 1995, becomes applicable 
following receipt of a contract or subcontract to which this revised 
Standard applies.

[60 FR 16557, Mar. 30, 1995]



9904.413-64  Transition method.

    (a) To be acceptable, any method of transition from compliance with 
Standard 9904.413 in effect prior to March 30, 1995, to compliance with 
Standard 9904.413 in effect as of March 30, 1995, must follow the 
equitable principle that costs, which have been previously provided for, 
shall not be redundantly provided for under revised methods. Conversely, 
costs that have not previously been provided for must be provided for 
under the revised method. This transition subsection is not intended to 
qualify for purposes of assignment or allocation, pension costs which 
have previously been disallowed for reasons other than ERISA funding 
limitations.
    (b) The sum of all portions of unfunded actuarial liability 
identified pursuant to Standard 9904.413, effective March 30, 1995, 
including such portions of unfunded actuarial liability determined for 
transition purposes, is subject to the requirements for assignment of 
9904.412-40(c).
    (c) Furthermore, this Standard, effective March 30, 1995, clarifies, 
but is not intended to create, rights of the contracting parties, and 
specifies techniques for determining adjustments pursuant to 9904.413-
50(c)(12). These rights and techniques should be used to resolve 
outstanding issues that will affect pension costs of contracts subject 
to this Standard.

[[Page 446]]

    (d) The method, or methods, employed to achieve an equitable 
transition shall be consistent with the provisions of this Standard and 
shall be approved by the contracting officer.
    (e) All adjustments shall be prospective only. However, costs/prices 
of prior and existing contracts not subject to price adjustment may be 
considered in determining the appropriate transition method or 
adjustment amount for the computation of costs/prices of contracts 
subject to this Standard.

[60 FR 16557, Mar. 30, 1995]



9904.414  Cost accounting standard--cost of money as an element of the cost of facilities capital.



9904.414-10  [Reserved]



9904.414-20  Purpose.

    The purpose of this Cost Accounting Standard is to establish 
criteria for the measurement and allocation of the cost of capital 
committed to facilities as an element of contract cost. Consistent 
application of these criteria will improve cost measurement by providing 
for allocation of cost of contractor investment in facilities capital to 
negotiated contracts.



9904.414-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this Part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection, requires otherwise.
    (1) Business Unit means any segment of an organization, or an entire 
business organization, which is not divided into segments.
    (2) Cost of capital committed to facilities means an imputed cost 
determined by applying a cost of money rate to facilities capital.
    (3) Facilities capital means the net book value of tangible capital 
assets and of those intangible capital assets that are subject to 
amortization.
    (4) Intangible capital asset means 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 benefits it yields.
    (5) Tangible capital asset means 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 services it yields.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9904.414-40  Fundamental requirement.

    (a) A contractor's facilities capital shall be measured and 
allocated in accordance with the criteria set forth in this Standard. 
The allocated amount shall be used as a base to which a cost of money 
rate is applied.
    (b) The cost of money rate shall be based on rates determined by the 
Secretary of the Treasury, pursuant to Public Law 92-41 (85 stat. 97).
    (c) The cost of capital committed to facilities shall be separately 
computed for each contract using facilities capital cost of money 
factors computed for each cost accounting period.



9904.414-50  Techniques for application.

    (a) The investment base used in computing the cost of money for 
facilities capital shall be computed from accounting data used for 
contract cost purposes. The form and instructions stipulated in this 
Standard shall be used to make the computation.
    (b) The cost of money rate for any cost accounting period shall be 
the arithmetic mean of the interest rates specified by the Secretary of 
the Treasury pursuant to Public Law 92-41 (85 stat. 97). Where the cost 
of money must be determined on a prospective basis, the cost of money 
rate shall be based on the most recent available rate published by the 
Secretary of the Treasury.
    (c)(1) A facilities capital cost of money factor shall be determined 
for each indirect cost pool to which a significant amount of facilities 
capital has been allocated and which is used to allocate indirect costs 
to final cost objectives.

[[Page 447]]

    (2) The facilities capital cost of money factor for an indirect cost 
pool shall be determined in accordance with Form CASB CMF, and its 
instructions which are set forth in appendix A to 9904.414. One form 
will serve for all the indirect cost pools of a business unit.
    (3) For each CAS-covered contract, the applicable cost of capital 
committed to facilities for a given cost accounting period is the sum of 
the products obtained by multiplying the amount of allocation base units 
(such as direct labor hours, or dollars of total cost input) identified 
with the contract for the cost accounting period by the facilities 
capital cost of money factor for the corresponding indirect cost pool. 
In the case of process cost accounting systems, the contracting parties 
may agree to substitute an appropriate statistical measure for the 
allocation base units identified with the contract.



9904.414-60  Illustrations.

    The use of Form CASB CMF and other computations anticipated for this 
Cost Accounting Standard are illustrated in appendix B to 9904.414.



9904.414-61  Interpretation. [Reserved]



9904.414-62  Exemption.

    (a) For contractors who are not subject to full CAS-coverage as of 
the date of publication of this part 99 as a final rule, this Standard 
shall apply only to those fully-covered contracts with subsequent dates 
of award and pricing certification.
    (b) This Standard shall not apply where compensation for the use of 
tangible capital assets is based on use rates or allowances provided for 
by other appropriate Federal procurement regulations such as those 
governing:
    (1) Educational institutions,
    (2) State, local, and federally recognized Indian tribal 
governments, or
    (3) Construction equipment rates (see 48 CFR 31.105(d)).



9904.414-63  Effective date.

    This Standard is effective as of April 17, 1992.

         Appendix A to 9904.414--Instructions for Form CASB CMF

[[Page 448]]

[GRAPHIC] [TIFF OMITTED] TC02FE91.069

                                 Purpose

    The purpose of this form is to (a) accumulate total facilities 
capital net book values allocated to each business unit for the 
contractor cost accounting period, and (b) convert those values to 
facilities capital cost of money factors applicable to each overhead or 
G&A expense allocation base employed within a business unit.

                                  Basis

    All data pertain to the cost accounting period for which the 
contractor prepares overhead and G&A expense allocations. The cost of 
money computations should be compatible with those allocation 
procedures. More specifically, facilities capital values used should be 
the same values that are used to generate depreciation or amortization 
that is allowed for Federal Government contract costing

[[Page 449]]

purposes; land which is integral to the regular operation of the 
business unit shall be included.

                 Applicable Cost of Money Rate (Col. 1)

    Enter here the rate as computed in accordance with 9904.414-50(b).

     Accumulation and Direct Distribution of Net Book Value (Col. 2)

                  Recorded, Leased Property, Corporate.

    The net book value of facilities capital items in this column shall 
represent the average balances outstanding during the cost accounting 
period. This applies both to items that are subject to periodic 
depreciation or amortization and also to such items as land that are not 
subject to periodic write-offs. Unless there is a major fluctuation, it 
will be adequate to ascertain the net book value of these assets at the 
beginning and end of each cost accounting period, and to compute an 
average of those two sets of figures. ``Recorded'' facilities are the 
facilities capital items owned by the contractor, carried on the books 
of the business unit, and used in its regular business activity. 
``Leased property'' is the capitalized value of leases for which 
constructive costs of ownership are allowed in lieu of rental costs 
under Government procurement regulations. Corporate or group facilities 
are the business unit's allocable share of corporate-owned and leased 
facilities. The net book value of items of facilities capital which are 
held or controlled by the home office shall be allocated to the business 
unit on a basis consistent with the home office expense allocation.

                     Distributed and Undistributed.

    All facilities capital items that are identified in the contractor's 
records as solely applicable to an organizational unit corresponding to 
a specific overhead, G&A or other indirect cost pool which is used to 
allocate indirect costs to final cost objectives, are listed against the 
applicable pools and are classified as ``distributed.'' 
``Undistributed'' is the remainder of the business unit's facilities 
capital. The sum of ``distributed'' and ``undistributed'' must also 
correspond to the amount shown on the ``total'' line.

                       Allocation of Distributed.

    List in the narrative column all the overhead and G&A expense pools 
to which ``distributed'' facilities capital items have been allocated. 
Enter the corresponding amounts in (Col. 2). The sum of all the amounts 
shown against specific overhead and G&A expense pools must correspond to 
the amount shown in the ``distributed'' line.

                  Allocation of Undistributed (Col. 3)

    Business unit ``undistributed'' facilities are allocated to overhead 
and the G&A expense pools on any reasonable basis that approximates the 
actual absorption of depreciation or amortization of such facilities. 
For instance, the basis of allocation of undistributed assets in each 
business unit between; e.g., engineering overhead pool and the 
manufacturing overhead pool, should be related to the manner in which 
the expenses generated by these assets are allocated between the two 
overhead pools. Detailed analysis of this allocation is not required 
where essentially the same results can be obtained by other means. Where 
the cost accounting system for purposes of Government contract costing 
uses more than one ``charging rate'' for allocating indirect costs 
accumulated in a single cost pool, one representative base may be 
substituted for the multiplicity of bases used in the allocation 
process. The net book value of service center facilities capital items 
appropriately allocated should be included in this column. The sum of 
the entries in Column 3 is equal to the entry in the undistributed line, 
Column 2.
    A supporting work sheet of this allocation should be prepared if 
there is more than one service center or other similar ``intermediate'' 
cost objective involved in the reallocation process.
    Alternative Allocation Process--As an alternative to the above 
allocation process all the undistributed assets for one or more service 
centers or similar intermediate cost objectives may be allocated to the 
G&A expense pool. Consequently, the cost of money for these 
undistributed assets will be distributed to the final cost objectives on 
the same basis that is used to allocate G&A expense. This procedure may 
be adopted for any cost accounting period only when the contracting 
parties agree (a) that the depreciation or amortization generated by 
these undistributed assets is immaterial, or (b) that the results of 
this alternative procedure are not likely to differ materially from 
those which would be obtained under the ``regular'' allocation process 
described previously.

                      Total Net Book Value (Col. 4)

    The sum of Columns 2 and 3. The total of this column should agree 
with the business unit's total shown in Column 2.

          Cost of Money for the Cost Accounting Period (Col. 5)

    Multiply the amounts in Column 4 by the percentage rate in Column 1.

                 Allocation Base for the Period (Col. 6)

    Show here the total units of measure used to allocate overhead and 
G&A expense pools (e.g., direct labor dollars, machine hours,

[[Page 450]]

total cost input, etc.). Include service centers that make charges to 
final cost objectives. Each base unit-of-measure must be compatible with 
the bases used for applying overhead in the Federal Government contract 
cost computation. The total base unit of measure used for allocation in 
this column refers to all work done in an organizational unit associated 
with the indirect cost pool and not to Government work alone.

            Facilities Capital Cost of Money Factors (Col. 7)

    The quotients of cost of money for the cost accounting period (Col. 
5) separately divided by the corresponding overhead or G&A expense 
allocation bases (Col. 6). Carry each computation to five decimal 
places. This factor represents the cost of money applicable to 
facilities capital allocated to each unit of measure of the overhead or 
G&A expense allocation base.

            Appendix B to 9904.414--Example--ABC Corporation

    ABC Corporation has a home office that controls three operating 
divisions (Business Units A, B & C). The home office includes an 
administrative computer center whose costs are allocated separately to 
the business units. The separate allocation conforms to the requirements 
specified in the Cost Accounting Standard No. 403. Tables I through VI 
deal with home office expense allocations to business units.
    The A Division is a business unit as defined by the CASB, and it 
uses one engineering and one manufacturing overhead pool to accumulate 
costs for charging overhead to final cost objectives. In addition, the 
indirect cost allocation process also uses two ``service centers'' with 
their own indirect cost pools: Occupancy and technical computer center.
    The costs accumulated in the occupancy pool are allocated among 
manufacturing overhead, engineering overhead, and the technical computer 
center on the basis of floor space occupied. The costs accumulated in 
the technical computer center cost pool are allocated to users on the 
basis of a CPU hourly rate. Some of these allocations are made to 
engineering or manufacturing overhead while others are allocated direct 
to final cost objectives.
    At the business unit level, all the indirect expense incurred is 
regarded either as an engineering or manufacturing expense. Thus the 
sole item that enters into the business unit G&A expense pool is the 
allocation received by the A Division from the home office.
    Operating results for the A Division are given in Table VII. 
Facilities capital items for the division are given in Table IX.
    The example is based on a single set of illustrative contract cost 
data given in Table VIII. Since two methods, the ``regular'' and the 
``alternative'' method, are potentially available for computing cost of 
money on facilities capital items two sets of different results can be 
considered.
    In addition, total cost input is used in the example as the 
allocation base for the G&A expense. Two variations of this example have 
been prepared to illustrate the impact of excluding or including cost of 
money from total cost input. Variation I, summarized in Table XIII, 
excludes cost of money from the cost input allocation base. Variation 
II, summarized in Tables XVII and XVIII, includes cost of money in the 
cost input allocation base.
    Throughout the example, where appropriate, cross references have 
been made to the text of the relevant parts of the Standard.

  Variation I--Total Cost Input Allocation Base Excludes Cost of Money
        Table I--Net Book Value of Home Office Facilities Capital
------------------------------------------------------------------------
                                           Dec. 31, 1974   Dec. 31, 1975
------------------------------------------------------------------------
Administrative computer center                  $550,000        $450,000
 facilities capital.....................
Other home office facilities capital....         420,000         380,000
                                         -------------------------------
Total...................................         970,000         830,000
------------------------------------------------------------------------

    The assets in the above table generate allowable depreciation or 
amortization, as explained in Instructions for Form CASB CMF (Basis). 
Thus they should be included in the asset base for cost of money 
computation.

    Table II--Home Office Facilities Capital Annual Average Balances
Administrative computer center facilities capital............   $500,000
Other home office facilities capital.........................    400,000
                                                              ----------
      Total..................................................    900,000
 

    The above averages are based on data in Table I computed in 
accordance with the criteria in Instructions for Form CASB CMF 
(Recorded, Leased Property, Corporate).
    $970,000+$830,000=$1,800,00012=$900,000

      Table III--Home Office Depreciation and Amortization for 1975
Administrative computer center facilities capital............   $100,000
Other home office facilities capital.........................     40,000
                                                              ----------
      Total..................................................    140,000
 


[[Page 451]]


                 Table IV--Allocation of ABC Home Office Expenses to Divisions (Business Units)
----------------------------------------------------------------------------------------------------------------
                                                                              Allocation of business units
                                                              Total    -----------------------------------------
                                                             expense          A             B             C
----------------------------------------------------------------------------------------------------------------
Administrative computer center..........................    $1,800,000      $900,000      $900,000
Other home office.......................................     4,800,000     2,400,000     1,200,000     1,200,000
                                                         -------------------------------------------------------
      Total.............................................     6,600,000     3,300,000     2,100,000     1,200,000
----------------------------------------------------------------------------------------------------------------

    The above allocation is carried out in accordance with CAS 403. The 
expense allocated to individual business units above includes 
depreciation and amortization as reflected in Table V.

                   Table V--Depreciation and Amortization Component of ABC Home Office Expense
----------------------------------------------------------------------------------------------------------------
                                                              Total           Allocation of business units
                                                          depreciation -----------------------------------------
                                                               and
                                                          amortization        A             B             C
                                                             expense
----------------------------------------------------------------------------------------------------------------
Administrative computer center..........................      $100,000       $50,000       $50,000
Other home office.......................................        40,000        20,000        10,000        10,000
                                                         -------------------------------------------------------
      Total.............................................       140,000        70,000        60,000        10,000
----------------------------------------------------------------------------------------------------------------


Table VI--Allocation of Home Office Facilities Capital to Business Units

(a) Depreciation and amortization allocation in Table V converted to 
percentages.

----------------------------------------------------------------------------------------------------------------
                                                              Total         Allocation of business units (in
                                                          depreciation                  percent)
                                                               and     -----------------------------------------
                                                          amoritzation
                                                           expense (in        A             B             C
                                                            percent)
----------------------------------------------------------------------------------------------------------------
Administrative computer center..........................           100            50            50
Other home office.......................................           100            50            25            25
----------------------------------------------------------------------------------------------------------------

    (b) Application of percentages in (a) to average net book values in 
Table II, in accordance with criteria in Instructions for Form CASB CMF 
(Recorded, Leased Property, Corporate).

----------------------------------------------------------------------------------------------------------------
                                                                              Allocation of business units
                                                            Total net  -----------------------------------------
                                                           book value         A             B             C
----------------------------------------------------------------------------------------------------------------
Administrative computer center facilities capital.......      $500,000      $250,000      $250,000
Other home office facilities capital....................       400,000       200,000       100,000      $100,000
                                                         -------------------------------------------------------
      Total.............................................       900,000       450,000       350,000       100,000
----------------------------------------------------------------------------------------------------------------


                                TABLE VII--``A'' Division 1975 Operating Results
----------------------------------------------------------------------------------------------------------------
                                                          Total cost                      Cost
                                                           input and    Fixed-price  reimbursement   Commercial
                                                          other work    CAS-covered   CAS-covered     and other
                                                             G.&A.       contract      contracts        work
----------------------------------------------------------------------------------------------------------------
Direct material:
    Purchased parts....................................    $2,000,000      $100,000       $100,000    $1,800,000
    Subcontract items..................................    21,530,000    11,750,000      7,205,000     2,575,000
                                                        --------------------------------------------------------
      Total............................................    23,530,000    11,850,000      7,305,000     4,375,000
Director labor and overhead:
    Engineering labor..................................     2,000,000     1,500,000        500,000
    Engineering overhead (80 pct of direct engineering      1,600,000     1,200,000        400,000
     labor)............................................
    Manufacturing labor................................     3,000,000     1,200,000        200,000     1,600,000

[[Page 452]]

 
    Manufacturing overhead (200 pct of direct               6,000,000     2,400,000        400,000     3,200,000
     management labor).................................
Other direct charges:
    Technical computer center direct charge 2,280 h at        570,000       200,000        370,000
     $250/h............................................
                                                        --------------------------------------------------------
      Total cost input (excluding cost of money).......    36,700,000    18,350,000      9,175,000     9,175,000
G. & A. (8.99 pct of cost input).......................     3,300,000     1,650,000        825,000       825,000
                                                        --------------------------------------------------------
      Total............................................    40,000,000    20,000,000     10,000,000    10,000,000
----------------------------------------------------------------------------------------------------------------



                 Table VIII--Cost Data for the Contract
 
 
------------------------------------------------------------------------
Purchased parts......................................            $85,000
Subcontract items....................................            990,000
Technical computer time 280 h at $250/h..............             70,000
Engineering labor....................................            330,000
Engineering overhead at 80 pct.......................            264,000
Manufacturing labor..................................          1,210,000
Manufacturing overhead at 200 pct....................          2,420,000
                                                      ------------------
      Total cost input (excluding cost of money).....          5,369,000
                                                      ------------------
G & A. at 8.99 pct...................................            483,000
                                                      ------------------
      Total cost input and G. & A. (excluding cost of          5,852,000
       money)........................................
------------------------------------------------------------------------


                 TABLE IX--Division A Facilities Capital

Average net book values are computed in accordance with Instructions to 
Form CASB CMF. Average figures only are given, the underlying beginning 
and ending balances for 1975 have not been reproduced.

------------------------------------------------------------------------
   Name of indirect cost pool the asset is     Average net     Annual
               associated with                 book value   depreciation
------------------------------------------------------------------------
Engineering overhead........................      $320,000       $40,000
Manufacturing overhead......................     4,500,000       900,000
Technical computer center...................       450,000        90,000
Occupancy...................................     3,000,000       200,000
Facilities capital recorded by division A        8,270,000     1,230,000
 (see Form CASB CMF instructions for
 description of recorded)...................
Allocated from home office, table VI........       450,000
                                             ---------------------------
      Total division A......................     8,720,000
------------------------------------------------------------------------

         TABLE X--Allocation of Undistributed Facilities Capital

(a) Occupancy Pool Assets. Total occupancy pool expenses are assumed to 
be $1,000,000 of which $200,000 is depreciation per Table IX. Allocation 
of the $3,000,000 net book value of assets per Table IX is performed on 
the basis of floor space utilization.

----------------------------------------------------------------------------------------------------------------
                                                                          Occupancy    Percent of
                                                                         expense and   total floor      Asset
                          Indirect cost pool                            depreciation      space      allocation
                                                                         allocation     utilized
----------------------------------------------------------------------------------------------------------------
Engineering...........................................................      $200,000            20      $600,000
Manufacturing.........................................................       750,000            75     2,250,000

[[Page 453]]

 
Technical computer....................................................        50,000             5       150,000
                                                                       -----------------------------------------
      Total...........................................................     1,000,000           100     3,000,000
----------------------------------------------------------------------------------------------------------------

    (b) Technical Computer Center Assets. Total technical computer 
center expenses for the year are assumed to be $770,000 including 
$90,000 depreciation per Table IX and $50,000 charge from the occupancy 
pool per paragraph (a) of this table. A charging rate of $250 per hour 
is computed assuming a total of 3,080 chargeable CPU hours per annum. 
The net book value of assets amounting to $600,000 ($450,000 per Table 
IX plus the $150,000 allocated per (a) above) is allocated on the basis 
of CPU hours utilized.

----------------------------------------------------------------------------------------------------------------
                                                              Hours        Amount                       Asset
             Overhead pool or cost objective                 charged       charged       Percent     allocation
----------------------------------------------------------------------------------------------------------------
Fixed price contracts, table VII........................           800      $200,000            26      $156,000
Cost reimbursement contracts, table VII.................         1,480       370,000            48       288,000
Engineering overhead pool...............................           800       200,000            26       156,000
      Total.............................................         3,080       770,000           100       600,000
----------------------------------------------------------------------------------------------------------------

(c) Summary of Undistributed Facilities Capital Allocation. 
Undistributed (per Table IX).

Technical computer center.................................      $450,000
Occupancy.................................................     3,000,000
                                                           -------------
      Total...............................................     3,450,000
------------------------------------------------------------------------

Distribution per paragraph (a) or (b) of this table of balances to 
overhead pools that result in charges direct to final cost objectives.

------------------------------------------------------------------------
         Overhead pool               (a)           (b)          Total
------------------------------------------------------------------------
Engineering...................      $600,000      $156,000      $756,000
Manufacturing.................     2,250,000  ............     2,250,000
Technical computer center       ............       444,000       444,000
 (direct charge to contracts).
                               -----------------------------------------
      Total...................     2,850,000       600,000     3,450,000
------------------------------------------------------------------------


[[Page 454]]

[GRAPHIC] [TIFF OMITTED] TC02FE91.070


[[Page 455]]

[GRAPHIC] [TIFF OMITTED] TC02FE91.071


[[Page 456]]


                     Table XIII--Summary of Cost of Money Computation on Facilities Capital
                                 [Cost of money excluded from total cost input]
----------------------------------------------------------------------------------------------------------------
                                                                                       Computation
                                                           Computation                    using
                                                              using                    alternative
                                            Allocated to     regular                   facilities
              Allocation base                 contract,    facilities,     Amount       capital,       Amount
                                             table VIII   capital cost                   cost of
                                                            of money                      money
                                                             factor,                     factor,
                                                            table XI                    table XI
----------------------------------------------------------------------------------------------------------------
Engineering labor.........................      $330,000       0.04304       $14,203        0.0128        $4,244
Manufacturing labor.......................     1,210,000           .18       217,800           .12       145,200
Technical computer time...................       \1\ 280      15.57895         4,362  ............  ............
Cost input................................    $5,369,000        .00098         5,261        .00850        45,636
                                           ---------------------------------------------------------------------
      Total cost of money on facilities     ............  ............       241,626  ............       195,060
       capital............................
----------------------------------------------------------------------------------------------------------------
\1\ Hours.


  Variation II--Total Cost Input Allocation Base Includes Cost of Money
 Table XIV--Recomputation of ``A'' Division Total Cost Input To Reflect
                       Inclusion of Cost of Money
(a) Regular method:
    Total cost input per table VII......................     $36,700,000
    Cost of money applicable to facilities capital               661,600
     identified with overhead pools per subtotal in
     column 5, table XV.................................
                                                         ---------------
      Total cost input including cost of money..........      37,361,600
(b) Alternative method:
    Total cost input per table VII......................      36,700,000
    Cost of money applicable to facilities capital               385,600
     identified with overhead pools per subtotal in
     column 5, table XVI................................
                                                         ---------------
      Total cost input including cost of money..........      37,085,900
------------------------------------------------------------------------


[[Page 457]]

[GRAPHIC] [TIFF OMITTED] TC02FE91.072


[[Page 458]]

[GRAPHIC] [TIFF OMITTED] TC02FE91.073


 Table XVII--Summary of Cost of Money Computation on Facilities Capital
      [Cost of money included in total cost input--regular method]
------------------------------------------------------------------------
                                                 Computation
                                                using regular
                                    Allocated    facilities,
         Allocation base                to       capital cost    Amount
                                    contract,      of money
                                    table VIII  factor, table
                                                      XV
------------------------------------------------------------------------
Engineering labor................     $330,000        0.04304    $14,203

[[Page 459]]

 
Manufacturing labor..............    1,210,000         .18       217,800
Technical computer time..........      \1\ 280       15.57895      4,362
Cost of money related to           ...........  .............    236,365
 overheads.......................
Cost of money above to be              236,365  .............  .........
 included in cost input..........
Cost input, table VIII...........    5,369,000  .............  .........
                                  --------------------------------------
Cost input including cost of         5,605,365         .00096      5,381
 money...........................
    Total cost of money on         ...........  .............    241,674
     facilities capital..........
------------------------------------------------------------------------
\1\ Hours.


 Table XVIII--Summary of Cost of Money Computation on Facilities Capital
    [Cost of money included in total cost input--alternative method]
------------------------------------------------------------------------
                                                 Computation
                                                    using
                                    Allocated    alternative
                                        to       facilities,
         Allocation base            contract,    capital cost    Amount
                                    table VIII     of money
                                                factor, table
                                                     XVI
------------------------------------------------------------------------
Engineering labor................     $330,000        0.0128      $4,224
Manufacturing labor..............    1,210,000         .12       145,200
Cost of money related to           ...........  .............    149,424
 overheads.......................
Cost of money above to be              149,424  .............  .........
 included in cost input..........
Cost input, table VIII...........    5,369,000  .............  .........
                                  --------------------------------------
Cost input including cost of         5,518,424         .00841     46,410
 money...........................
    Total cost of money on           5,518,424  .............    195,834
     facilities capital..........
------------------------------------------------------------------------

[57 FR 14153, Apr. 17, 1992; 57 FR 34081, 34167, Aug. 3, 1992]



9904.415  Accounting for the cost of deferred compensation.



9904.415-10  [Reserved]



9904.415-20  Purpose.

    (a) The purpose of this Standard is to provide criteria for the 
measurement of the cost of deferred compensation and the assignment of 
such cost to cost accounting periods. The application of these criteria 
should increase the probability that the cost of deferred compensation 
is allocated to cost objectives in a uniform and consistent manner.
    (b) This Standard is applicable to the cost of all deferred 
compensation except for compensated personal absence and pension plan 
costs which are covered in other Cost Accounting Standards.



9904.415-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection, requires otherwise.
    (1) Deferred compensation means an award made by an employer to 
compensate an employee in a future cost accounting period or periods for 
services rendered in one or more cost accounting periods prior to the 
date of the receipt of compensation by the employee. This definition 
shall not include the amount of year end accruals for salaries, wages, 
or bonuses that are to be paid within a reasonable period of time after 
the end of a cost accounting period.
    (b) The following modifications of terms defined elsewhere in this 
chapter

[[Page 460]]

99 are applicable to this Standard: None.



9904.415-40  Fundamental requirement.

    (a) The cost of deferred compensation shall be assigned to the cost 
accounting period in which the contractor incurs an obligation to 
compensate the employee. In the event no obligation is incurred prior to 
payment, the cost of deferred compensation shall be the amount paid and 
shall be assigned to the cost accounting period in which the payment is 
made.
    (b) The measurement of the amount of the cost of deferred 
compensation shall be the present value of the future benefits to be 
paid by the contractor.
    (c) The cost of each award of deferred compensation shall be 
considered separately for purposes of measurement and assignment of such 
costs to cost accounting periods. However, if the cost of deferred 
compensation for the employees covered by a deferred compensation plan 
can be measured with reasonable accuracy on a group basis, separate 
computations for each employee are not required.



9904.415-50  Techniques for application.

    (a) The contractor shall be deemed to have incurred an obligation 
for the cost of deferred compensation when all of the following 
conditions have been met. However, for awards which require that the 
employee perform future service in order to receive the benefits, the 
obligation is deemed to have been incurred as the future service is 
performed for that part of the award attributable to such future 
service:
    (1) There is a requirement to make the future payment(s) which the 
contractor cannot unilaterally avoid.
    (2) The deferred compensation award is to be satisfied by a future 
payment of money, other assets, or shares of stock of the contractor.
    (3) The amount of the future payment can be measured with reasonable 
accuracy.
    (4) The recipient of the award is known.
    (5) If the terms of the award require that certain events must occur 
before an employee is entitled to receive the benefits, there is a 
reasonable probability that such events will occur.
    (6) For stock options, there must be a reasonable probability that 
the options ultimately will be exercised.
    (b) If any of the conditions in 9904.415-50(a) is not met, the cost 
of deferred compensation shall be assignable only to the cost accounting 
period or periods in which the compensation is paid to the employee.
    (c) If the cost of deferred compensation can be estimated with 
reasonable accuracy on a group basis, including consideration of 
probable forfeitures, such estimate may be used as the basis for 
measuring and assigning the present value of future benefits.
    (d) The following provisions are applicable for plans that meet the 
conditions of 9904.415-50(a) and the compensation is to be paid in 
money.
    (1) If the deferred compensation award provides that the amount to 
be paid shall include the principal of the award plus interest at a rate 
fixed at the date of award, such interest shall be included in the 
computation of the amount of the future benefit. If no interest is 
included in the award, the amount of the future benefit is the amount of 
the award.
    (2) If the deferred compensation award provides for payment of 
principal plus interest at a rate not fixed at the time of award but 
based on a specified index which is determinable in each applicable cost 
accounting period; e.g., a published corporate bond rate, such interest 
shall be included in the computation of the amount of future benefit. 
The interest rate to be used shall be the rate in effect at the close of 
the period in which the cost of deferred compensation is assignable. 
Since that interest rate is likely to vary from the actual rates in 
future periods, adjustments shall be made in any such future period in 
which the variation in rates materially affects the cost of deferred 
compensation.
    (3) If the deferred compensation award provides for payment of 
principal plus interest at a rate not based on a specified index, or not 
determinable in each applicable year, the--
    (i) Cost of deferred compensation for the principal of the award 
shall be measured by the present value of the

[[Page 461]]

future benefits of the principal, and shall be assigned to the cost 
accounting period in which the employer incurs an obligation to 
compensate the employee; and
    (ii) Interest on such awards shall be assigned to the cost 
accounting period(s) in which the payment of the deferred compensation 
is made.
    (4) If the terms of the award require that the employee perform 
future service in order to receive benefits, the cost of the deferred 
compensation shall be appropriately assigned to the periods of current 
and future service based on the facts and circumstances of the award. 
The cost of deferred compensation for each cost accounting period shall 
be the present value of the future benefits of the deferred compensation 
calculated as of the end of each such period to which such cost is 
assigned.
    (5) In computing the present value of the future benefits, the 
discount rate shall be equal to the interest rate as determined by the 
Secretary of the Treasury pursuant to Public Law 92-41, 85 stat. 97 at 
the time the cost is assignable.
    (6) If the award is made under a plan which requires irrevocable 
funding for payment to the employee in a future cost accounting period 
together with all interest earned thereon, the amount assignable to the 
period of award shall be the amount irrevocably funded.
    (7) In computing the assignable cost for a cost accounting period, 
any forfeitures which reduce the employer's obligation for payment of 
deferred compensation shall be a reduction of contract costs in the 
period in which the forfeiture occurred. The amount of the reduction for 
a forfeiture shall be the amount of the award that was assigned to a 
prior period, plus interest compounded annually, using the same Treasury 
rate that was used as the discount rate at the time the cost was 
assigned. For irrevocably funded plans, pursuant to 9904.415-50(d)(6), 
the amount of the reduction for a forfeiture shall be the amount 
initially funded plus or minus a pro-rata share of the gains and losses 
of the fund.
    (8) If the cost of deferred compensation for group plans measured in 
accordance with 9904.415-50(c) is determined to be greater than the 
amounts initially assigned because the forfeiture was overestimated, the 
additional cost shall be assignable to the cost accounting period in 
which such cost is ascertainable.
    (e) The following provisions are applicable for plans that meet the 
conditions of 9904.415-50(a) and the compensation is received by the 
employee in other than money. The measurements set forth herein 
constitute the present value of future benefits for awards made in other 
than money and, therefore, shall be deemed to be a reasonable measure of 
the amount of the future payment:
    (1) If the award is made in the stock of the contractor, the cost of 
deferred compensation for such awards shall be based on the market value 
of the stock on the measurement date; i.e., the first date the number of 
shares awarded is known. Market value is the current or prevailing price 
of the security as indicated by market quotations. If such values are 
unavailable or not appropriate (thin market, volatile price movements, 
etc.) and acceptable alternative is the fair value of the stock.
    (2) If an award is made in the form of options to employees to 
purchase stock of the contractor, the cost of deferred compensation of 
such award shall be the amount by which the market value of the stock 
exceeds the option price multiplied by the number of shares awarded on 
the measurement date; i.e., the first date on which both the option 
price and the number of shares is known. If the option price on the 
measurement date is equal to or greater than the market value of the 
stock, no cost shall be deemed to have been incurred for contract 
costing purposes.
    (3) If the terms of an award of stock or stock option require that 
the employee perform future service in order to receive the stock or to 
exercise the option, the cost of the deferred compensation shall be 
appropriately assigned to the periods of current and future service 
based on the facts and circumstances of the award. The cost to be 
assigned shall be the value of the stock or stock option at the 
measurement date as prescribed in 9904.415-50 (e)(1) or (e)(2).
    (4) If an award is made in the form of an asset other than cash, the 
cost of

[[Page 462]]

deferred compensation for such award shall be based on the market value 
of the asset at the time the award is made. If a market value is not 
available, the fair value of the asset shall be used.
    (5) If the terms of an award, made in the form of an asset other 
than cash, require that the employee perform future service in order to 
receive the asset, the cost of the deferred compensation shall be 
appropriately assigned to the periods of current and future service 
based on the facts and circumstances of the award. The cost to be 
assigned shall be the value of the asset at the time of award as 
prescribed in 9904.415-50(e)(4).
    (6) In computing the assignable cost for a cost accounting period, 
any forfeitures which reduce the employer's obligation for payment of 
deferred compensation shall be a reduction of contract costs in the 
period in which the forfeiture occurred. The amount of the reduction 
shall be equal to the amount of the award that was assigned to a prior 
period, plus interest compounded annually, using the Treasury rate (see 
9904.415-50(d)(5)) that was in effect at the time the cost was assigned. 
If the recipient of the award of stock options voluntarily fails to 
exercise such options, such failure shall not constitute a forfeiture 
under provisions of this Standard.
    (7) Stock option awards or any other form of stock purchase plans 
containing all of the following characteristics shall be considered 
noncompensatory and not covered by this Standard:
    (i) Substantially all full-time employees meeting limited employment 
qualifications may participate.
    (ii) Stock is offered equally to eligible employees or based on a 
uniform percentage of salary or wages.
    (iii) An option or a purchase right must be exercisable within a 
reasonable period.
    (iv) The discount from the market price of the stock is no greater 
than would be reasonable in an offer of stock to stockholders or others.



9904.415-60  Illustrations.

    (a) Contractor A has a deferred compensation plan in which all cash 
awards are increased each year by an interest factor equivalent to the 
long-term borrowing rate of the contractor prevailing during each such 
year. The interest factor based on a variable long-term borrowing rate 
meets the criteria of 9904.415-50(d)(2). Consequently, the cost of 
deferred compensation for Contractor A shall be measured by the present 
value of the future benefits and shall be assigned to the cost 
accounting period in which the contractor initially incurs an obligation 
to compensate the employee. If the long-term borrowing rate for 
Contractor A was 9 percent at the close of the period to which the cost 
of deferred compensation was assignable, then that rate should be used 
to calculate the future benefit. Any adjustment in the cost of deferred 
compensation which results from a material change in the 9 percent rate 
in future applicable periods shall be made in each such future period or 
periods (see 9904.415-50(d)(2)).
    (b) Contractor B made a deferred compensation award of $10,000 to an 
employee on December 31, 1976, for services performed in 1976 to be paid 
in equal annual payments of $2,000 starting at December 31, 1981. The 
terms of the award do not provide for an interest factor to be included 
in the payment; consequently, according to provisions of 9904.415-
50(d)(1), interest may not be included in the computation of the future 
benefits. The assignable cost for 1976 is computed as follows, assuming 
that the interest rate determined by the Secretary of the Treasury 
(pursuant to Public Law 92-41), 85 Stat. 97 at the time of the award is 
8 percent and the conditions set forth in 9904.415-50(a) are met.

------------------------------------------------------------------------
                                          Amount of future payment  x
                Year                    discount rate 8-percent present
                                          value factor=present value
------------------------------------------------------------------------
1981................................  $2,000 x 0.6805=$1,361
1982................................  2,000 x .6301=1,260
1983................................  2,000 x .5834=1,167
1984................................  2,000 x .5402=1,080
1985................................  2,000 x .5002=1,000
                                     -----------------------------------
    Assignable cost for 1976........  5,868
------------------------------------------------------------------------

    (c) Contractor C awarded stock options for 1,000 shares of the 
contractor to key employees on December 31, 1976,

[[Page 463]]

under a deferred compensation plan requiring 2 years of additional 
service before the awards can be exercised. The facts and circumstances 
of the awards indicate that the deferred compensation applies only to 
the periods of future service. The market price of the stock was $26 per 
share, the option price was $22, and the interest rate established by 
the Secretary of the Treasury in effect at the time of award was 8 
percent.
    (1) In accordance with 9904.415-50(e)(2), the cost of the stock 
options is the amount by which the current value of the stock exceeds 
the option price multiplied by the number of shares awarded on the 
measurement date. Thus, the total cost of the stock options is 1,000 
shares multiplied by the difference of the option price and the market 
price ($26-22) or $4,000.
    (2) Under provisions of 9904.415-50(e)(3), the cost for stock 
options is assigned to each future cost accounting period in which 
employee service is required and is computed as follows:

 
                                                              Assignable
                                                               cost \1\
 
Year of required service:
  1977.....................................................       $2,000
  1978.....................................................        2,000
                                                            ------------
    Total amount of award..................................        4,000
 
\1\ Note that this illustration assumes that the facts and circumstances
  of the award indicate that the award relates equally to each period of
  future service. Thus, the assignable cost was allocated on a pro-rata
  basis.

    (d)(1) Contractor D has a deferred compensation plan that specifies 
that an employee receiving a cash award must remain with the company for 
3 calendar years after the award in order to qualify and receive the 
award and the facts and circumstances indicate that the deferred 
compensation applies only to the periods of future service. In 
accordance with 9904.415-50(d)(4), the cost of deferred compensation is 
assignable to the periods of future service. Thus, the amount of cost of 
deferred compensation to be assigned by Contractor D for each of the 3 
years shall be the present value of the future benefits of the deferred 
compensation award calculated as of the end of each such period to which 
such cost is assigned.
    (2) Under this plan, Contractor D made an award to an employee of 
$3,000 to be paid at the end of the third year. The assignable cost for 
each of the 3 years is computed as follows:

----------------------------------------------------------------------------------------------------------------
                                            Amount
                                              of          Present value factor \2\ treasury rate      Assignable
                 Year \1\                   future                         \3\                         cost for
                                            payment                                                    each year
----------------------------------------------------------------------------------------------------------------
1........................................    $1,000   x  0.8573 (8 pct for 2 yr)                   =    $857.30
 
2........................................     1,000   x  0.9302 (7.5 pct for 1 yr)                 =     930.20
 
3........................................     1,000   x  1.000 (8 pct for 0 yr)                    =   1,000.00
 
----------------------------------------------------------------------------------------------------------------
\1\ Note that in accordance with the facts and circumstances of the award no deferred compensation is assignable
  to the period in which the award is made and that the award relates equally to each period of future service.
\2\ Note that since the costs are measured at the end of each year of required service, the present value
  factors are based on the number of years from the year of assignment to the date of payment.
\3\ Note that the prevailing Treasury rate changed from year 1 to year 2.

    (e)(1) Contractor E has a deferred compensation plan that specifies 
that an employee receiving a cash award must remain with the company for 
2 calendar years after the award in order to qualify and receive the 
award. Contractor E made an award of $6,000 at the end of 1976 to an 
employee to be paid at the end of 1978. However, the employee 
voluntarily terminated his employment before the end of 1977. The facts 
and circumstances of the award indicate that $2,000 of the award 
represents compensation for services rendered in the period of award 
(1976). The remaining portion of the award represents compensation for 
services to be rendered in future periods. The assignable cost for 1976, 
which was the only period to which costs were assigned before 
termination, was the present value

[[Page 464]]

of $2,000, the amount of the award attributable to the services of that 
period. Thus, the cost assigned for 1976 was:

Amount of future payment x Discount rate present value factor for 2 yr 
at 8 pct=Assignable cost

$2,000 x 0.8573=$1,714.60

    (2) According to provisions of 9904.415-50(d)(7), the amount of the 
forfeiture shall be the amount of the cost that was assigned to a prior 
period, plus interest compounded annually, from the year the cost was 
assigned to the year of forfeiture, using the same Treasury rate (see 
9904.415-50(d)(5)) that was used as the discount rate at the time the 
cost was assigned. The IRS rate in effect at the date of award was 8 
percent.
    (3) The amount of the forfeiture is computed as follows:

Assignable cost x Discount rate future value for 1 yr at 8 
pct=Forfeiture
$1,714.60 x 1.08=$1,851.77



9904.415-61  Interpretation. [Reserved]



9904.415-62  Exemption.

    None for this Standard.



9904.415-63  Effective date.

    This Standard is effective as of April 17, 1992. Contractors with 
prior CAS-covered contracts with full coverage shall continue this 
Standard's applicability upon receipt of a contract to which this 
Standard is applicable. For contractors with no previous contracts 
subject to this Standard, this Standard shall be applied beginning with 
the contractor's next full fiscal year beginning after the receipt of a 
contract to which this Standard is applicable.



9904.416  Accounting for insurance costs.



9904.416-10  [Reserved]



9904.416-20  Purpose.

    The purpose of this standard is to provide criteria for the 
measurement of insurance costs, the assignment of such costs to cost 
accounting periods, and their allocation to cost objectives. The 
application of these criteria should increase the probability that 
insurance costs are allocated to cost objectives in a uniform and 
consistent manner.



9904.416-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection, requires otherwise.
    (1) Actual cash value means the cost of replacing damaged property 
with other property of like kind and quality in the physical condition 
of the property immediately prior to the damage.
    (2) Insurance administration expenses means the contractor's costs 
of administering an insurance program, e.g., the costs of operating an 
insurance or risk-management department, processing claims, actuarial 
fees, and service fee paid to insurance companies, trustees, or 
technical consultants.
    (3) Projected average loss means the estimated long-term average 
loss per period for periods of comparable exposure to risk of loss.
    (4) Self-insurance means the assumption or retention of the risk or 
loss by the contractor, whether voluntarily or involuntarily. Self-
insurance includes the deductible portion of purchased insurance.
    (5) Self-insurance charge means a cost which represents the 
projected average loss under a self-insurance plan.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9904.416-40  Fundamental requirement.

    (a) The amount of insurance cost to be assigned to a cost accounting 
period is the projected average loss for that period plus insurance 
administration expenses in that period.
    (b) The allocation of insurance costs to cost objectives shall be 
based on the beneficial or casual relationship between the insurance 
costs and the benefiting or causing cost objectives.



9904.416-50  Techniques for application.

    (a) Measurement of projected average loss. (1) For exposure to risk 
of loss

[[Page 465]]

which is covered by the purchase of insurance or by payments to a 
trusteed fund, the premium or payment, adjusted in accordance with the 
following criteria, shall represent the projected average loss:
    (i) The premium cost applicable to a given policy term shall be 
assigned pro rata among the cost accounting periods covered by the 
policy term, except as provided in subdivisions (a)(1) (ii) through (vi) 
of this subsection. A refund, dividend or additional assessment shall 
become an adjustment to the pro rata premium costs for the earliest cost 
accounting period in which the refund or dividend is actually or 
constructively received or in which the additional assessment is 
payable.
    (ii) Where insurance is purchased specifically for, and directly 
allocated to, a single final cost objective, the premium need not be 
prorated among cost accounting periods.
    (iii) Any part of a premium or payment to an insurer or trustee, or 
any part of a dividend or premium refund retained by an insurer or 
trustee which would be includable as a deposit in published financial 
statements prepared in accordance with generally accepted accounting 
principles shall be accounted for as a deposit for the purpose of 
determining insurance costs.
    (iv) Any part of a premium or payment to an insurer or to a trustee, 
or any part of a dividend or premium refund retained by an insurer, for 
inclusion in a reserve or fund established and maintained on behalf of 
the insured or the policyholder or trustor, shall be accounted for as a 
deposit unless the following conditions are met:
    (A) The objectives of the reserve or fund are clearly stated in 
writing.
    (B) Measurement of the amount required for the reserve or fund is 
actuarially determined and is consistent with the objectives of the 
reserve or fund.
    (C) Payments and additions to the reserve or fund are made in a 
systematic and consistent manner.
    (D) If payments to accomplish the stated objectives of the reserve 
or fund are made from a source other than the reserve or fund, the 
payments into the reserve or fund are reduced accordingly.
    (v) If an objective of an insurance program is to prefund insurance 
coverage on retired persons, then, in addition to the requirements 
imposed by subdivision (a)(1)(iv) of this subsection, the:
    (A) Payments must be made to an insurer or trustee to establish and 
maintain a fund or reserve for that purpose;
    (B) Policyholder or trustor must have no right of recapture of the 
reserve or fund so long as any active or retired participant in the 
program remains alive, unless the interests of such remaining 
participants are satisfied through adequate reinsurance or otherwise; 
and
    (C) Amount added to the reserve or fund in any cost accounting 
period must not be greater than an amount which would be required to 
apportion the cost of the insurance coverage fairly over the working 
lives of the active employees in the plan. If a contractor establishes a 
terminal-funded plan for retired persons or converts from a pay-as-you-
go plan to a terminal-funded plan, the actuarial present value of 
benefits applicable to employees already retired shall be amortized over 
a period of 15 years.
    (vi) The contractor may adopt and consistently follow a practice of 
determining insurance costs based on the estimated premium and 
assessments net of estimated refunds and dividends. If this practice is 
adopted, then any difference between an estimated and actual refund, 
dividend, or assessment shall become an adjustment to the pro rata net 
premium costs for the earliest cost accounting period in which the 
refund or dividend is actually or constructively received or in which 
the additional assessment is payable.
    (2) For exposure to risk of loss which is not covered by the 
purchase of insurance or by payments to a trusteed fund, the contractor 
shall follow a program of self-insurance accounting according to the 
following criteria:
    (i) Except as provided in subdivisions (a)(2)(ii) and (iii) of this 
subsection, actual losses shall not become a part of insurance costs. 
Instead, the contractor shall make a self-insurance charge for each 
period for each type of self-insured risk which shall represent

[[Page 466]]

the projected average loss for that period. If insurance could be 
purchased against the self-insured risk, the cost of such insurance may 
be used as an estimate of the projected average loss; if this method is 
used, the self-insurance charge plus insurance administration expenses 
may be equal to, but shall not exceed, the cost of comparable purchased 
insurance plus the associated insurance administration expenses. 
However, the contractor's actual loss experience shall be evaluated 
regularly, and self-insurance charges for subsequent periods shall 
reflect such experience in the same manner as would purchased insurance. 
If insurance could not be purchased against the self-insured risk, the 
amount of the self-insurance charge for each period shall be based on 
the contractor's experience, relevant industry experience, and 
anticipated conditions in accordance with accepted actuarial principles.
    (ii) Where it is probable that the actual amount of losses which 
will occur in a cost accounting period will not differ significantly 
from the projected average loss for that period, the actual amount of 
losses in that period may be considered to represent the projected 
average loss for that period in lieu of a self-insurance charge.
    (iii) Under self-insurance programs for retired persons, only actual 
losses shall be considered to represent the projected average loss 
unless a reserve or fund is established in accordance with 9904.416-
50(a)(1)(v).
    (iv) The self-insurance charge shall be determined in a manner which 
will give appropriate recognition to any indemnification agreement which 
exists between the contracting parties.
    (3) In measuring actual losses under subparagraph (a)(2) of this 
subsection:
    (i) The amount of a loss shall be measured by:
    (A) The actual cash value of property destroyed,
    (B) Amounts paid or accrued to repair damage,
    (C) Amounts paid or accrued to estates and beneficiaries, and
    (D) Amounts paid or accrued to compensate claimants, including 
subrogation.

Where the amount of a loss which is represented by a liability to a 
third party is uncertain, the estimate of the loss shall be the amount 
which would be includable as an accrued liability in financial 
statements prepared in accordance with generally accepted accounting 
principles.
    (ii) If a loss has been incurred and the amount of the liability to 
a claimant is fixed or reasonably certain, but actual payment of the 
liability will not take place for more than 1 year after the loss is 
incurred, the amount of the loss to be recognized currently shall be the 
present value of the future payments, determined by using a discount 
rate equal to the interest rate as determined by the Secretary of the 
Treasury pursuant to Public Law 92-41, 85 stat. 97 in effect at the time 
the loss is recognized. Alternatively, where settlement will consist of 
a series of payments over an indefinite time period, as in workmen's 
compensation, the contractor may follow a consistent policy of 
recognizing only the actual amounts paid in the period of payment.
    (4) The contractor may elect to recognize immaterial amounts of 
self-insured losses or insurance administration expenses as part of 
other expense categories rather than as ``insurance costs.''
    (b) Allocation of insurance costs. (1) Where actual losses are 
recognized as an estimate of the projected average loss, in accordance 
with 9904.416-50(a)(2), or where actual loss experience is determined 
for the purpose of developing self-insurance charges by segment, a loss 
which is incurred in a given segment shall be identified with that 
segment. However, if the contractor's home office is, in effect, a 
reinsurer of its segments against catastrophic losses, a portion of such 
catastrophic losses shall be allocated to, or identified with, the home 
office.
    (2) Insurance costs shall be allocated on the basis of the factors 
used to determine the premium, assessment, refund, dividend, or self-
insurance charge, except that insurance costs incurred by a segment or 
allocated to a segment from a home office may be combined with costs of 
other indirect cost pools if the resultant allocation to

[[Page 467]]

each final cost objective is substantially the same as it would have 
been if separately allocated under this provision.
    (3) Insurance administration expenses which are material in relation 
to total insurance costs shall be allocated on the same basis as the 
related premium costs or self-insurance charge.
    (c) Records. The contractor shall maintain such records as may be 
necessary to substantiate the amounts of premiums, refunds, dividends, 
losses, and self-insurance charges, paid or accrued, and the measurement 
and allocation of insurance costs. Memorandum records may be used to 
reflect any material differences between insurance costs as determined 
in accordance with this standard and as includable in financial 
statements prepared in accordance with generally accepted accounting 
principles.

[57 FR 14153, Apr. 17, 1992; 57 FR 34168, Aug. 3, 1992]



9904.416-60  Illustrations.

    (a) Contractor A pays a company-wide property and casualty insurance 
premium for the policy term July 1, 1980, to July 1, 1983, and includes 
the entire amount as cost in its cost accounting period which ended 
December 31, 1980. This is a violation of 9904.416-50(a)(1)(i) in that 
only one-sixth of the policy term fell within the cost accounting period 
which ended December 31, 1980, and therefore only one-sixth of the 
premium should have been included in cost in that cost accounting 
period.
    (b) Contractor B has a retrospectively rated worker's compensation 
insurance program. The policy term corresponds with the contractor's 
cost accounting period. Premium refunds are normally received and 
applied in the following cost accounting period. The contractor's 
practice is to include the entire gross premium in insurance cost in the 
cost accounting period in which it is paid and to credit the refund 
against insurance cost in the cost accounting period in which it is 
received. This practice conforms with 9904.416-50(a)(1)(i). The 
contractor could also, under the provisions of 9904.416-50(a)(1)(vi), 
have followed a consistent practice of estimating such refunds in 
advance and including the estimated net premium in insurance cost.
    (c) Contractor C establishes a self-insured program of life 
insurance for active and retired persons. The contractor pays death 
benefits directly to the beneficiaries of deceased employees and 
includes such payments in insurance costs at the time of payment. This 
practice complies with 9904.416-50(a)(2)(iii) which requires that only 
the actual losses be recognized unless a trusteed reserve or fund is 
established in accordance with 9904.416-50(a)(1)(v).
    (d) Instead of paying death benefits directly, contractor D 
purchases annual group term life insurance on active and retired persons 
and charges the premiums to insurance costs (with proper recognition for 
refunds and dividends). Contractor D's retired persons wish to be 
protected against possible discontinuance of the program. Contractor D, 
therefore, establishes a trusteed fund. As each employee retires, 
contractor D deposits in the fund an amount which is equal to the 
premium on a paid-up policy for that employee, and he advises the 
trustee that the fund is to be used to continue to pay premiums on 
retired persons in the event the program is discontinued. The contractor 
also continues to purchase group term insurance on both active employees 
and retired persons and charges both the premiums and the deposits to 
insurance costs. This practice does not comply with 9904.416-
50(a)(1)(iv)(D) which requires that if payments to accomplish the stated 
objectives of the reserve or funds are made from a source other than the 
reserve or fund, the payments into the fund shall be reduced 
accordingly.

    Note: In this instance the contractor could comply with the standard 
by paying from the fund that portion of the group term premium which 
represented the retired persons or by reducing the deposits to the fund 
by an equivalent amount in accordance with 9904.416-50(a)(1)(iv)(D). 
This practice would also comply with the requirement of 9904.416-
50(a)(1)(v)(C) that the amount added to the fund not be greater than an 
amount which would be required to fairly allocate the cost over the 
working lives of the active employees in the plan.

    (e) Contractor E wishes to provide assurance of his life insurance 
program continuance to both active and retired

[[Page 468]]

employees. He establishes a trusteed fund in accordance with 9904.416-
50(a)(1) (iv) and (v) and thereafter pays into the fund each year for 
each active employee an actuarially determined amount which will 
accumulate to the equivalent of the premium on a paid-up life insurance 
policy at retirement. He charges the annual payments to insurance costs. 
Benefits are paid directly from the fund (or the fund is used to pay the 
annual premiums on group term life insurance for all employees). This 
practice also complies with the requirement of 9904.416-50(a)(1)(v)(C) 
that the amount added to the fund not be greater than an amount which 
would be required to fairly allocate the cost over the working lives of 
the active employees in the plan.
    (f) Contractor F has a fire insurance policy which provides that the 
first $50,000 of any fire loss will be borne by the contractor. Because 
the risk of loss is dispersed among many physical units of property and 
the average potential loss per unit is relatively low, the actual losses 
in any period may be expected not to differ significantly from the 
projected average loss. Therefore, the contractor intends to let the 
actual losses represent the projected average loss for this exposure to 
risk. Property with an actual cash value of $80,000 is destroyed in a 
fire. The contractor charges the $50,000 of the loss not covered by the 
policy to insurance costs for contract costing purposes. The practice 
complies with the requirement of 9904.416-50(a)(2). However, had the 
contractor's plan been to make a self-insurance charge for such losses, 
then any difference between the self-insurance charge and actual losses 
in that cost accounting period would not have been allocable as an 
insurance cost.
    (g) Contractor G is preparing to enter into a Government contract to 
produce explosive devices. The contractor is unable to purchase adequate 
insurance protection and must act as a self-insurer. There is a 
significant possibility of a major loss, against which the Government 
will not undertake to indemnify the contractor. The contractor, 
therefore, intends to make a self-insurance charge for this exposure to 
risk. The contractor may, in accordance with 9904.416-50(a)(2)(i), use 
data obtained from other contractors or any other reasonable method of 
estimating the projected average loss in order to determine the self-
insurance charge.
    (h) Contractor H purchases liability insurance for all of its motor 
vehicles in a single, company-wide policy which contains a $50,000 
deductible provision. However, the company's management policy provides 
that when a loss is incurred in a segment, only the first $5,000 of the 
loss will be charged to the segment; the balance of the loss will be 
absorbed at the home-office level and reallocated among all segments. 
Because the risk of loss is dispersed among many physical units and the 
maximum potential loss per occurrence is limited, the actual losses in 
any cost accounting period may be expected not to differ significantly 
from the projected average loss. Therefore, the contractor intends to 
let the actual losses represent the projected average loss for this 
exposure to risk. An analysis of the loss experience shows that many 
past losses exceeded $5,000. Contractor H's practice of allocating the 
loss in excess of $5,000 to the home office is a violation of 9904.416-
50(b)(1). The limit of $5,000 cannot realistically be considered a 
measure of a ``catastrophic'' loss when losses frequently exceed this 
amount, and the use of a limit this low would obscure segment loss 
experience.



9904.416-61  Interpretation. [Reserved]



9904.416-62  Exemption.

    None for this Standard.



9904.416-63  Effective date.

    This Standard is effective as of April 17, 1992. Contractors with 
prior CAS-covered contracts with full coverage shall continue this 
Standard's applicability upon receipt of a contract to which this 
Standard is applicable. For contractors with no previous contracts 
subject to this Standard, this Standard shall be applied beginning with 
the contractor's next full fiscal year beginning after the receipt of a 
contract to which this Standard is applicable.

[[Page 469]]



9904.417  Cost of money as an element of the cost of capital assets under construction.



9904.417-10  [Reserved]



9904.417-20  Purpose.

    The purpose of this Cost Accounting Standard is to establish 
criteria for the measurement of the cost of money attributable to 
capital assets under construction, fabrication, or development as an 
element of the cost of those assets. Consistent application of these 
criteria will improve cost measurement by providing for recognition of 
cost of contractor investment in assets under construction, and will 
provide greater uniformity in accounting for asset acquisition costs.



9904.417-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection requires otherwise.
    (1) Intangible capital asset means 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 benefits it yields.
    (2) Tangible capital asset means an asset that has physical 
substance, more than minimal value, and is expected to be held by an 
enterprise for continued use of possession beyond the current accounting 
period for the services it yields.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9904.417-40  Fundamental requirement.

    The cost of money applicable to the investment in tangible and 
intangible capital assets being constructed, fabricated, or developed 
for a contractor's own use shall be included in the capitalized 
acquisition cost of such assets.



9904.417-50  Techniques for application.

    (a) The cost of money for an asset shall be calculated as follows:
    (1) The cost of money rate used shall be based on interest rates 
determined by the Secretary of the Treasury pursuant to Public Law 92-41 
(85 stat. 97).
    (2) A representative investment amount shall be determined each cost 
accounting period for each capital asset being constructed, fabricated, 
or developed giving appropriate consideration to the rate at which costs 
of construction are incurred.
    (3) Other methods for calculating the cost of money to be 
capitalized, such as the method used for financial accounting and 
reporting, may be used, provided the resulting amount does not differ 
materially from the amount calculated by use of paragraphs (a) (1) and 
(2) of this subsection.
    (b) If substantially all the activities necessary to get the asset 
ready for its intended use are discontinued, cost of money shall not be 
capitalized for the period of discontinuance. However, if such 
discontinuance arises out of causes beyond the control and without the 
fault or negligence of the contractor, cessation of cost of money 
capitalization is not required.



9904.417-60  Illustrations.

    (a) A contractor decided to build a major addition to this plant 
using both his own labor and outside subcontractors. It took 13 months 
to complete the building. The first 10 months of the construction period 
were in one cost accounting period. At the end of the cost accounting 
period the total charges, including cost of money computed in accordance 
with 9904.414, accumulated in the construction-in-progress account for 
this project amounted to $750,000. However, most of these construction 
costs were incurred towards the end of the cost accounting period. In 
developing a method for determining a representative investment amount, 
appropriate consideration must be given to the rate at which costs have 
been incurred in accordance with 9904.417-50(a)(2). Therefore, the 
contractor averaged the 10 month-end balances and determined that the 
average investment in the project was

[[Page 470]]

$245,000. Two cost of money rates were in effect during the 10-month 
period; their time-weighted average was determined to be 8.6 percent. 
Application of the 8.6 percent rate for ten-twelfths of a year to the 
representative balance of $245,000 resulted in the determination that 
$17,558 should be added to the construction-in-progress account in 
recognition of the cost of money related to this project in its first 
cost accounting period. The project was completed with the addition of 
$750,000 of additional costs during the first 3 months of the subsequent 
cost accounting period. The contractor considered the 3 month-end 
balances (which included the $17,558 capitalized cost of money described 
in the preceding paragraph) and determined that the representative 
balance was $1,234,000. The cost of money rate in effect during this 3-
month period was 7.75 percent. Applying the rate of 7.75 percent for 
one-fourth of a year to the balance of $1,234,000 resulted in a 
determination that $23,909 should be added to the construction-in-
progress account in recognition of the cost of money while under 
construction in the second cost accounting period. The capitalized 
project was put into service at the recognized cost of acquisition of 
$1,541,467 which consists of the ``regular'' costs of $1,500,000 plus 
$17,558 and $23,909 cost of money. This practice is in accordance with 
9904.417-50(a) and other applicable provisions of the Standard.

    Note: An alternative technique would be to make separate 
calculations, using an appropriate investment amount and cost of money 
rate, for each month. The sum of the monthly cost of money amounts could 
be entered in the construction-in-progress account once each cost 
accounting period.

    (b) A contractor built a major addition with identical basic data to 
those described in 9904.417-60(a) except that the costs were incurred at 
a fairly uniform rate throughout the period. Because of the pattern of 
cost incurrence, the contractor used beginning and ending balances of 
the cost accounting period to find the representative amounts. For the 
first cost accounting period the representative investment amount was 
the average of the beginning and ending balances (zero and $750,000), or 
$375,000. Application of the average interest rate of 8.6 percent for 
ten-twelfths of a year resulted in the determination that $26,875 should 
be added to the construction-in-progress account in recognition of the 
cost of money related to this project in its first cost accounting 
period. During the subsequent 3 months the contractor used the 
representative balance of $1,151,875, derived by averaging the beginning 
balance of $776,875 ($750,000 ``regular'' cost plus the $26,875 imputed 
cost from the prior period) and the balance at the end, $1,526,875. 
Applying the 7.75 percent cost of money rate to this balance for a 3-
month period resulted in a determination that $22,317 should be added to 
the construction-in-progress account in recognition of the cost of money 
while under construction in the second cost accounting period. The 
capitalized project was put into service at the recognized cost of 
acquisition of $1,549,192 which consists of the ``regular'' costs of 
$1,500,000 plus $26,875 and $22,317 imputed cost of money. This practice 
is in accordance with 9904.417-50(a) and other applicable provisions of 
the Standard.

    Note: If this contractor, acting in accordance with established 
Standards for financial accounting, allocated a portion of its paid 
interest expense to this construction project and the resultant 
acquisition cost for financial reporting purposes was not materially 
different from $1,549,192, the contractor could, in accordance with 
9904.417-50(a)(iii), use the same acquisition cost for contract costing 
purposes.

[57 FR 14153, Apr. 17, 1992; 57 FR 34081, Aug. 3, 1992]



9904.417-61  Interpretation. [Reserved]



9904.417-62  Exemption.

    None for this Standard.



9904.417-63  Effective date.

    This Standard is effective as of April 17, 1992. Contractors with 
prior CAS-covered contracts with full coverage shall continue this 
Standard's applicability upon receipt of a contract to which this 
Standard is applicable. For contractors with no previous contracts 
subject to this Standard, this Standard shall be applied beginning with 
the contractor's next full fiscal year beginning after the receipt of a 
contract to which this Standard is applicable.

[[Page 471]]



9904.418  Allocation of direct and indirect costs.



9904.418-10  [Reserved]



9904.418-20  Purpose.

    The purpose of this Cost Accounting Standard is to provide for 
consistent determination of direct and indirect costs; to provide 
criteria for the accumulation of indirect costs, including service 
center and overhead costs, in indirect cost pools; and, to provide 
guidance relating to the selection of allocation measures based on the 
beneficial or causal relationship between an indirect cost pool and cost 
objectives. Consistent application of these criteria and guidance will 
improve classification of costs as direct and indirect and the 
allocation of indirect costs.



9904.418-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this chapter 99 shall 
have the meanings ascribed to them in those definitions unless paragraph 
(b) of this subsection, requires otherwise.
    (1) Allocate means to assign an item of cost, or a group of items of 
cost, to one or more cost objectives. This term includes both direct 
assignment of cost and the reassignment of a share from an indirect cost 
pool.
    (2) Direct cost means any cost which is identified specifically with 
a particular final cost objective. Direct costs are not limited to items 
which are incorporated in the end product as material or labor. Costs 
identified specifically with a contract are direct costs of that 
contract. All costs identified specifically with other final cost 
objectives of the contractor are direct costs of those cost objectives.
    (3) Indirect cost means any cost not directly identified with a 
single final cost objective, but identified with two or more final cost 
objectives or with at least one intermediate cost objective.
    (4) Indirect cost pool means a grouping of incurred costs identified 
with two or more cost objectives but not identified specifically with 
any final cost objective.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9904.418-40  Fundamental requirements.

    (a) A business unit shall have a written statement of accounting 
policies and practices for classifying costs as direct or indirect which 
shall be consistently applied.
    (b) Indirect costs shall be accumulated in indirect cost pools which 
are homogeneous.
    (c) Pooled costs shall be allocated to cost objectives in reasonable 
proportion to the beneficial or causal relationship of the pooled costs 
to cost objectives as follows:
    (1) If a material amount of the costs included in a cost pool are 
costs of management or supervision of activities involving direct labor 
or direct material costs, resource consumption cannot be specifically 
identified with cost objectives. In that circumstance, a base shall be 
used which is representative of the activity being managed or 
supervised.
    (2) If the cost pool does not contain a material amount of the costs 
of management or supervision of activities involving direct labor or 
direct material costs, resource consumption can be specifically 
identified with cost objectives. The pooled cost shall be allocated 
based on the specific identifiability of resource consumption with cost 
objectives by means of one of the following allocation bases:
    (i) A resource consumption measure,
    (ii) An output measure, or
    (iii) A surrogate that is representative of resources consumed.

The base shall be selected in accordance with the criteria set out in 
9904.418-50(e).
    (d) To the extent that any cost allocations are required by the 
provisions of other Cost Accounting Standards, such allocations are not 
subject to the provisions of this Standard.
    (e) This Standard does not cover accounting for the costs of special 
facilities where such costs are accounted for in separate indirect cost 
pools.

[[Page 472]]



9904.418-50  Techniques for application.

    (a) Determination of direct cost and indirect cost. (1) The business 
unit's written policy classifying costs as direct or indirect shall be 
in conformity with the requirements of this Standard.
    (2) In accounting for direct costs a business unit shall use actual 
costs, except that--
    (i) Standard costs for material and labor may be used as provided in 
9904.407; or
    (ii) An average cost or pre-established rate for labor may be used 
provided that:
    (A) The functions performed are not materially disparate and 
employees involved are interchangeable with respect to the functions 
performed, or
    (B) The functions performed are materially disparate but the 
employees involved either all work in a single production unit yielding 
homogeneous outputs, or perform their respective functions as an 
integral team.

Whenever average cost or pre-established rates for labor are used, the 
variances, if material, shall be disposed of at least annually by 
allocation to cost objectives in proportion to the costs previously 
allocated to these cost objectives.
    (3) Labor or material costs identified specifically with one of the 
particular cost objectives listed in paragraph (d)(3) of this subsection 
shall be accounted for as direct labor or direct material costs.
    (b) Homogeneous indirect cost pools. (1) An indirect cost pool is 
homogeneous if each significant activity whose costs are included 
therein has the same or a similar beneficial or causal relationship to 
cost objectives as the other activities whose costs are included in the 
cost pool. It is also homogeneous if the allocation of the costs of the 
activities included in the cost pool result in an allocation to cost 
objectives which is not materially different from the allocation that 
would result if the costs of the activities were allocated separately.
    (2) An indirect cost pool is not homogeneous if the costs of all 
significant activities in the cost pool do not have the same or a 
similar beneficial or causal relationship to cost objectives and, if the 
costs were allocated separately, the resulting allocation would be 
materially different. The determination of materiality shall be made 
using the criteria provided in 9903.305.
    (3) A homogeneous indirect cost pool shall include all indirect 
costs identified with the activity to which the pool relates.
    (c) Change in allocation base. No change in an existing indirect 
cost pool allocation base is required if the allocation resulting from 
the existing base does not differ materially from the allocation that 
results from the use of the base determined to be most appropriate in 
accordance with the criteria set forth in paragraphs (d) and (e) of this 
subsection. The determination of materiality shall be made using the 
criteria provided in Subpart 9903.305.
    (d) Allocation measures for an indirect cost pool which includes a 
material amount of the costs of management or supervision of activities 
involving direct labor or direct material costs. (1) The costs of the 
management or supervision of activities involving direct labor or direct 
material costs do not have a direct and definitive relationship to the 
benefiting cost objectives and cannot be allocated on measures of a 
specific beneficial or causal relationship. In that circumstance, the 
base selected to measure the allocation of the pooled costs to cost 
objectives shall be a base representative of the activity being managed 
or supervised.
    (2) The base used to represent the activity being managed or 
supervised shall be determined by the application of the criteria below. 
All significant elements of the selected base shall be included.
    (i) A direct labor hour base or direct labor cost base shall be 
used, whichever in the aggregate is more likely to vary in proportion to 
the costs included in the cost pool being allocated, except that:
    (ii) A machine-hour base is appropriate if the costs in the cost 
pool are comprised predominantly of facility-related costs, such as 
depreciation, maintenance, and utilities; or
    (iii) A units-of-production base is appropriate if there is common 
production of comparable units; or

[[Page 473]]

    (iv) A material cost base is appropriate if the activity being 
managed or supervised is a material-related activity.
    (3) Indirect cost pools which include material amounts of the costs 
of management or supervision of activities involving direct labor or 
direct material costs shall be allocated to:
    (i) Final cost objectives;
    (ii) Goods produced for stock or product inventory;
    (iii) Independent research and development and bid and proposal 
projects;
    (iv) Cost centers used to accumulate costs identified with a process 
cost system (i.e., process cost centers);
    (v) Goods or services produced or acquired for other segments of the 
contractor and for other cost objectives of a business unit; and
    (vi) Self-construction, fabrication, betterment, improvement, or 
installation of tangible capital assets.
    (e) Allocation measures for indirect cost pools that do not include 
material amounts of the costs of management or supervision of activities 
involving direct labor or direct material costs. Homogeneous indirect 
cost pools of this type have a direct and definitive relationship 
between the activities in the pool and benefiting cost objectives. The 
pooled costs shall be allocated using an appropriate measure of resource 
consumption. This determination shall be made in accordance with the 
following criteria taking into consideration the individual 
circumstances:
    (1) The best representation of the beneficial or causal relationship 
between an indirect cost pool and the benefiting cost objectives is a 
measure of resource consumption of the activities of the indirect cost 
pool.
    (2)(i) If consumption measures are unavailable or impractical to 
ascertain, the next best representation of the beneficial or causal 
relationship for allocation is a measure of the output of the activities 
of the indirect cost pool. Thus, the output is substituted for a direct 
measure of the consumption of resources.
    (ii) The use of the basic unit of output will not reflect the 
proportional consumption of resources in circumstances in which the 
level of resource consumption varies among the units of output produced. 
Where a material difference will result, either the output measure shall 
be modified or more than one output measure shall be used to reflect the 
resources consumed to perform the activity.
    (3) If neither resources consumed nor output of the activities can 
be measured practically, a surrogate that varies in proportion to the 
services received shall be used to measure the resources consumed. 
Generally, such surrogates measure the activity of the cost objectives 
receiving the service.
    (4) Allocation of indirect cost pools which benefit one another may 
be accomplished by use of:
    (i) The cross-allocation (reciprocal) method,
    (ii) The sequential method, or
    (iii) Another method the results of which approximate those achieved 
by either of the methods in subdivisions (e)(4)(i) or (e)(4)(ii) of this 
subsection.
    (5) Where the activities represented by an indirect cost pool 
provide services to two or more cost objectives simultaneously, the cost 
of such services shall be prorated between or among the cost objectives 
in reasonable proportion to the beneficial or causal relationship 
between the services and the cost objectives.
    (f) Special allocation. Where a particular cost objective in 
relation to other cost objectives receives significantly more or less 
benefit from an indirect cost pool than would be reflected by the 
allocation of such costs using a base determined pursuant to paragraphs 
(d) and (e) of this subsection, the Government and contractor may agree 
to a special allocation from that indirect cost pool to the particular 
cost objective commensurate with the benefits received. The amount of a 
special allocation to any such cost objective made pursuant to such an 
agreement shall be excluded from the indirect cost pool and the 
particular cost objective's allocation base data shall be excluded from 
the base used to allocate the pool.
    (g) Use of preestablished rates for indirect costs. (1) 
Preestablished rates, based on either forecasted actual or standard 
cost, may be used in allocating an indirect cost pool.
    (2) Preestablished rates shall reflect the costs and activities 
anticipated for

[[Page 474]]

the cost accounting period except as provided in paragraph (g)(3) of 
this subsection. Such preestablished rates shall be reviewed at least 
annually, and revised as necessary to reflect the anticipated 
conditions.
    (3) The contracting parties may agree on preestablished rates which 
are not based on costs and activities anticipated for a cost accounting 
period. The contractor shall have and consistently apply written 
policies for the establishment of these rates.
    (4) Under paragraphs (g) (2) and (3) of this subsection where 
variances of a cost accounting period are material, these variances 
shall be disposed of by allocating them to cost objectives in proportion 
to the costs previously allocated to these cost objectives by use of the 
preestablished rates.
    (5) If preestablished rates are revised during a cost accounting 
period and if the variances accumulated to the time of the revision are 
significant, the costs allocated to that time shall be adjusted to the 
amounts which would have been allocated using the revised preestablished 
rates.



9904.418-60  Illustrations.

    (a) Business Unit A has various classifications of engineers whose 
time is spent in working directly on the production of the goods or 
services called for by contracts and other final cost objectives. In 
keeping with its written policy, detailed time records are kept of the 
hours worked by these engineers, showing the job/account numbers 
representing various cost objectives. On the basis of these detailed 
time records, Unit A allocates the labor costs of these engineers as 
direct labor costs of final cost objectives. This practice is in 
accordance with the requirements of 9904.418-50(a)(1).
    (b) Business Unit B has a fabrication department, employees of which 
perform various functions on units of the work-in-process of multiple 
final cost objectives. These employees are grouped by labor skills and 
are interchangeable within the skill grouping. The average wage rate for 
each group is multiplied by the hours worked on each cost objective by 
employees in that group. The contractor classifies these costs as direct 
labor costs of each final cost objective. This cost accounting treatment 
is in accordance with the provisions of 9904.418-50(a)(2)(ii)(B).
    (c) Business Unit C accumulates the costs relating to building 
ownership, maintenance, and utility into one indirect cost pool 
designated ``Occupancy Costs'' for allocation to cost objectives. Each 
of these activites has the same or a similar beneficial or causal 
relationship to the cost objectives occupying a space. Unit C's practice 
is in conformance with the provisions of 9904.418-50(b)(1).
    (d) Business Unit D includes the indirect costs of machining and 
assembling activities in a single manufacturing overhead pool. The 
machining activity does not have the same or similar beneficial or 
causal relationship to cost objectives as the assembling activity. Also, 
the allocation of the cost of the machining activity to cost objectives 
would be significantly different if allocated separately from the cost 
of the assembling activity. Unit D's single manufacturing overhead pool 
is not homogeneous in accordance with the provisions of 9904.418-50(b), 
and separate pools must be established in accordance with 9904.418-
40(b).
    (e) In accordance with 9904.418-50(b)(3), Business Unit E includes 
all the cost of occupancy in an indirect cost pool. In selecting an 
allocation measure for this indirect cost pool, the contractor 
establishes that it is impractical to ascertain a measurement of the 
consumption of resources in relation to the use of facilities by 
individual cost objectives. An output base, the number of square feet of 
space provided to users, can be measured practically; however, the cost 
to provide facilities is significantly different for various types of 
facilities such as warehouse, factory, and office and each type of 
facility requires a different level of resource consumption to provide 
the same number of square feet of usable space. Allocation on a basic 
unit measure of square feet of space occupied will not adequately 
reflect the proportional consumption of resources. Unit E establishes a 
weighted square foot measure for allocating occupancy costs, which 
reflects the different levels of resource consumption required to 
provide the different types of facilities.

[[Page 475]]

This practice is in conformance with provisions of 9904.418-
50(e)(2)(ii).
    (f) Business Unit F has an indirect cost pool containing a 
significant amount of material-related costs. The contractor allocates 
these costs between his machining overhead cost pool and his assembly 
overhead cost pool. The business unit finds it impractical to use an 
allocation measure based on either consumption or output. The business 
unit selects a dollars of material-issued base which varies in 
proportion to the services rendered. The dollars of material-issued base 
is a surrogate base which conforms to the provisions of 9904.418-
50(e)(3).
    (g) Business Unit G has a machining activity for which it develops a 
separate overhead rate, using direct labor cost as the allocation base. 
The machining activity occasionally does significant amounts of work for 
other activities of the business unit. The labor used in doing the work 
for other activities is of the same nature as that used for contract 
work. However, the machining labor for other activities is not included 
in the base used to allocate the overhead costs of the machining 
activity. This practice is not in conformance with 9904.418-50(d)(2). 
Unit G must include the cost of labor doing work for the other 
activities in the allocation base for the machining activity indirect 
cost pool.
    (h) Business Unit H accounts for the costs of company aircraft in a 
separate homogeneous indirect cost pool and allocates the cost to 
benefiting cost objectives using flight hours. Unit H prorates the cost 
of a single flight between benefiting cost objectives whenever 
simultaneous services have been rendered. Manager of Contract 2 learns 
of the trip and goes along with Manager of Contract 1. Unit H prorates 
the cost of the trip between Contract 1 and Contract 2. This practice is 
in conformance with the provision of 9904.418-50(e)(5).
    (i) During a cost accounting period, Business Unit I allocates the 
cost of its flight services indirect cost pool to other indirect cost 
pools and final cost objectives using a preestablished rate. The 
preestablished rate is based on an estimate of the actual costs and 
activity for the cost accounting period. For the cost accounting period, 
Unit I establishes a rate of $200 per hour for use of the flight 
services activity. In March, the contractor's operating environment 
changes significantly; the contractor now expects a significant increase 
in the cost of this activity during the remainder of the year. Unit I 
estimates the rate for the entire cost accounting period to be $240 an 
hour. Pursuant to the provisions of 9904.418-50(g)(4), the Business Unit 
may revise its rate to the expected $240 an hour. If the accumulated 
variances are significant, the business unit must also adjust the costs 
previously allocated to reflect the revised rates.



9904.418-61  Interpretation. [Reserved]



9904.418-62  Exemptions.

    This Standard shall not apply to contracts and grants with state, 
local, and Federally recognized Indian tribal governments.



9904.418-63  Effective date.

    This Standard is effective as of April 17, 1992. Contractors with 
prior CAS-covered contracts with full coverage shall continue this 
Standard's applicability upon receipt of a contract to which this 
Standard is applicable. For contractors with no previous contracts 
subject to this Standard, this Standard shall be applied beginning with 
the contractor's second full fiscal year beginning after the receipt of 
a contract to which this Standard is applicable.



9904.420  Accounting for independent research and development costs and bid and proposal costs.



9904.420-10  [Reserved]



9904.420-20  Purpose.

    The purpose of this Cost Accounting Standard is to provide criteria 
for the accumulation of independent research and development costs and 
bid and proposal costs and for the allocation of such costs to cost 
objectives based on the beneficial or causal relationship between such 
costs and cost objectives. Consistent application of these criteria will 
improve cost allocation.



9904.420-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this

[[Page 476]]

Standard. Other terms defined elsewhere in this Chapter 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection, requires otherwise.
    (1) Allocate means to assign an item of cost, or a group of items of 
cost, to one or more cost objectives. This term includes both direct 
assignment of cost and the reassignment of a share from an indirect cost 
pool.
    (2) Bid and proposal (B&P) cost means the cost incurred in 
preparing, submitting, or supporting any bid or proposal which effort is 
neither sponsored by a grant, nor required in the performance of a 
contract.
    (3) Business unit means any segment of an organization, or an entire 
business organization which is not divided into segments.
    (4) General and administrative (G&A) expense means any management, 
financial, and other expenses which is incurred by or allocated to a 
business unit and which is for the general management and administration 
of the business unit as a whole. G&A expense does not include those 
management expenses whose beneficial or causal relationship to cost 
objectives can be more directly measured by a base other than a cost 
input base representing the total activity of a business unit during a 
cost accounting period.
    (5) Home office means an office responsible for directing or 
managing two or more, but not necessarily all, segments of an 
organization. It typically establishes policy for, and provides guidance 
to the segments in their operations. It usually performs management, 
supervisory, or administrative functions, and may also perform service 
functions in support of the operations of the various segments. An 
organization which has intermediate levels, such as groups, may have 
several home offices which report to a common home office. An 
intermediate organization may be both a segment and a home office.
    (6) Independent research and development means the cost of effort 
which is neither sponsored by a grant, nor required in the performance 
of a contract, and which falls within any of the following three areas:
    (i) Basic and applied research,
    (ii) Development, and
    (iii) Systems and other concept formulation studies.
    (7) Indirect cost means any cost not directly identified with a 
single final cost objective, but identified with two or more final cost 
objectives or with at least one intermediate cost objective.
    (8) Segment means one of two or more divisions, product departments, 
plants, or other subdivisions of an organization reporting directly to a 
home office, usually identified with responsibility for profit and/or 
producing a product or service. The term includes Government-owned 
contractor-operated (GOCO) facilities, and joint ventures and 
subsidiaries (domestic and foreign) in which the organization has a 
majority ownership. The term also includes those joint ventures and 
subsidiaries (domestic and foreign) in which the organizations has less 
than a majority of ownership, but over which it exercises control.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9904.420-40  Fundamental requirement.

    (a) The basic unit for the identification and accumulation of 
Independent Research and Development (IR&D) and Bid and Proposal (B&P) 
costs shall be the individual IR&D or B&P project.
    (b) The IR&D and B&P project costs shall consist of all allocable 
costs, except business unit general and administrative expenses.
    (c) The IR&D and B&P cost pools consist of all IR&D and B&P project 
costs and other allocable costs, except business unit general and 
administrative expenses.
    (d) The IR&D and B&P cost pools of a home office shall be allocated 
to segments on the basis of the beneficial or causal relationship 
between the IR&D and B&P costs and the segments reporting to that home 
office.
    (e) The IR&D and B&P cost pools of a business unit shall be 
allocated to the final cost objectives of that business unit on the 
basis of the beneficial or causal relationship between the IR&D and B&P 
costs and the final cost objectives.

[[Page 477]]

    (f)(1) The B&P costs incurred in a cost accounting period shall not 
be assigned to any other cost accounting period.
    (2) The IR&D costs incurred in a cost accounting period shall not be 
assigned to any other cost accounting period, except as may be permitted 
pursuant to provisions of existing laws, regulations, and other 
controlling factors.



9904.420-50  Techniques for application.

    (a) The IR&D and B&P project costs shall include (1) costs, which if 
incurred in like circumstances for a final cost objective, would be 
treated as direct costs of that final cost objective, and (2) the 
overhead costs of productive activities and other indirect costs related 
to the project based on the contractor's cost accounting practice or 
applicable Cost Accounting Standards for allocation of indirect costs.
    (b) The IR&D and B&P cost pools for a segment consist of the project 
costs plus allocable home office IR&D and B&P costs.
    (c) When the costs of individual IR&D or B&P efforts are not 
material in amount, these costs may be accumulated in one or more 
project(s) within each of these two types of effort.
    (d) The costs of any work performed by one segment for another 
segment shall not be treated as IR&D costs or B&P costs of the 
performing segment unless the work is a part of an IR&D or B&P project 
of the performing segment. If such work is part of a performing 
segment's IR&D or B&P project, the project will be transferred to the 
home office to be allocated in accordance with paragraph (e) of this 
subsection.
    (e) The costs of IR&D and B&P projects accumulated at a home office 
shall be allocated to its segments as follows:
    (1) Projects which can be identified with a specific segment(s) 
shall have their costs allocated to such segment(s).
    (2) The costs of all other IR&D and B&P projects shall be allocated 
among all segments by means of the same base used by the company to 
allocate its residual expenses in accordance with 9904.403; provided, 
however, where a particular segment receives significantly more or less 
benefit from the IR&D or B&P costs than would be reflected by the 
allocation of such costs to the segment by the base, the Government and 
the contractor may agree to a special allocation of the IR&D or B&P 
costs to such segment commensurate with the benefits received. The 
amount of a special allocation to any segment made pursuant to such an 
agreement shall be excluded from the IR&D and B&P cost pools to be 
allocated to other segments and the base data of any such segment shall 
be excluded from the base used to allocate these pools.
    (f) The costs of IR&D and B&P projects accumulated at a business 
unit shall be allocated to cost objectives as follows:
    (1) Where costs of any IR&D or B&P project benefit more than one 
segment of the organization, the amounts to be allocated to each segment 
shall be determined in accordance with paragraph (e) of this subsection.
    (2) The IR&D and B&P cost pools which are not allocated under 
subparagraph (f)(1) of this subsection, shall be allocated to all final 
cost objectives of the business unit by means of the same base used by 
the business unit to allocate its general and administrative expenses in 
accordance with 9904.410-50; provided, however, where a particular final 
cost objective receives significantly more or less benefit from IR&D or 
B&P cost than would be reflected by the allocation of such costs the 
Government and the contractor may agree to a special allocation of the 
IR&D or B&P costs to such final cost objective commensurate with the 
benefits received. The amount of special allocation to any such final 
cost objective made pursuant to such an agreement shall be excluded from 
the IR&D and B&P cost pools to be allocated to other final cost 
objectives and the particular final cost objective's base data shall be 
excluded from the base used to allocate these pools.
    (g) Notwithstanding the provisions of paragraph (d), (e) or (f) of 
this subsection, the costs of IR&D and B&P projects allocable to a home 
office pursuant to 9904.420-50(d) may be allocated

[[Page 478]]

directly to the receiving segments, provided that such allocation not be 
substantially different from the allocation that would be made if they 
were first passed through home office accounts.



9904.420-60  Illustrations.

    (a) Business Unit A's engineering department in accordance with its 
established accounting practice, charges administrative effort including 
typing its overhead cost pool. In submitting a proposal, the engineering 
department assigns several typists to the proposal project on a full 
time basis and charges the typists' time directly to the proposal 
project, rather than to its overhead pool. Because the engineering 
department under its established accounting practice does not charge the 
cost of typing directly to final cost objectives, the direct charge does 
not meet with the requirements of 9904.420-50(a).
    (b) Company B has five segments. The company undertakes an IR&D 
project which is part of IR&D plans of segments X, Y, and Z, and will be 
of general benefit to all five segments. The company designates Segment 
Z as the project leader in performing the project. In accumulating the 
costs, each segment allocates overhead to its part of the project but 
does not allocate segment G&A. The IR&D costs are then allocated to the 
home office by each segment. The costs are combined with other IR&D 
costs that benefit the company as a whole. The costs are allocated to 
all five segments by means of the same base by which the company 
allocates its residual home office expense costs of all segments. This 
practice meets the requirements of 9904.420-40(b), 9904.420-50(e)(2), 
and 9904.420-50(f)(1).
    (c) Business Unit C normally accounts for its B&P effort by 
individual project. It accumulates directly allocated costs and 
departmental overhead costs by project. The business unit also submits 
large numbers of bids and proposals whose individual costs of 
preparation are not material in amount. The business unit collects the 
cost of these efforts under a single project. Since the cost of 
preparing each individual bid and proposal is not material, the practice 
of accumulating these costs in a single project meets the requirements 
of 9904.420-50(c).
    (d) Segment D requests that Segment Y provide support for a Segment 
D IR&D project. The work being performed by Segment Y is similar in 
nature to Segment Y's normal product and is not part of its annual IR&D 
plan. Segment Y allocates to the project all costs it allocates to other 
final cost objectives, including G&A expense. Segment Y then directly 
transfers the cost of the project to Segment D in accordance with its 
normal intersegment transfer procedure. The accounting treatment meets 
the requirements of 9904.420-50(d) and 9904.410.
    (e)(1) Contractor E has six operating segments and a research 
segment. The research segment performs work under:
    (i) Research and development contracts,
    (ii) Projects which are not part of its own IR&D plan but are 
specifically in support of other segments' IR&D projects, and
    (iii) IR&D projects for the benefit of the company as a whole.
    (2) The research segment directly allocates the cost of the projects 
in support of another segment's IR&D projects, including an allocation 
of its general and administrative expenses, to the receiving segment. 
This practice meets the requirements of 9904.420-50(d).
    (3) The costs of the IR&D projects which benefit the company as a 
whole exclude any allocation of the research segment's general and 
administrative expenses and are transferred to the home office. The home 
office allocates these costs on the same base it uses to allocate its 
residual expenses to all seven segments. This practice meets the 
requirements of 9904.420-50 (e)(2) and (f)(1).
    (f) Company F accumulates at the home office the costs of IR&D and 
B&P projects which generally benefit all segments of the company except 
Segment X. The company and the contracting officer agree that the nature 
of the business activity of Segment X is such that the home office IR&D 
and B&P effort is neither caused by nor provides any benefit to that 
segment. For the purpose of allocating its home

[[Page 479]]

office residual expenses, the company uses a base as provided in 
9904.403. For the purpose of allocating the home office IR&D and B&P 
costs, the company removes the data of Segment X from the base used for 
the allocation of its residual expenses. This practice meets the 
requirements of 9904.420-50(e)(2).
    (g) Company G has 10 segments. Segment X performs IR&D projects, the 
results of which benefit it and two other segments but none of the other 
seven segments. The cost of those projects performed by Segment X are 
transferred to the home office and allocated to the three segments on 
the basis of the benefits received by the three segments. This practice 
meets the requirements of 9904.420-50(e)(1) and 9904.420-50(f)(1).



9904.420-61  Interpretation. [Reserved]



9904.420-62  Exemptions.

    This Standard shall not apply to contracts and grants with State, 
local, and federally recognized Indian tribal governments.



9904.420-63  Effective date.

    This Standard is effective as of April 17, 1992. Contractors with 
prior CAS-covered contracts with full coverage shall continue this 
Standard's applicability upon receipt of a contract to which this 
Standard is applicable. For contractors with no previous contracts 
subject to this Standard, this Standard shall be applied beginning with 
the contractor's second full fiscal year beginning after the receipt of 
a contract to which this Standard is applicable.



PART 9905--COST ACCOUNTING STANDARDS FOR EDUCATIONAL INSTITUTIONS--Table of Contents




9905.501  Cost accounting standard--consistency in estimating, 
          accumulating and reporting costs by educational institutions.
9905.501-10  [Reserved]
9905.501-20  Purpose.
9905.501-30  Definitions.
9905.501-40  Fundamental requirement.
9905.501-50  Techniques for application.
9905.501-60  Illustration. [Reserved]
9905.501-61  Interpretation. [Reserved]
9905.501-62  Exemption.
9905.501-63  Effective date.
9905.502  Cost accounting standard--consistency in allocating costs 
          incurred for the same purpose by educational institutions.
9905.502-10  [Reserved]
9905.502-20  Purpose.
9905.502-30  Definitions.
9905.502-40  Fundamental requirement.
9905.502-50  Techniques for application.
9905.502-60  Illustrations.
9905.502-61  Interpretation.
9905.502-62  Exemption.
9905.502-63  Effective date.
9905.505  Accounting for unallowable costs--Educational institutions.
9905.505-10  [Reserved]
9905.505-20  Purpose.
9905.505-30  Definitions.
9905.505-40  Fundamental requirement.
9905.505-50  Techniques for application.
9905.505-60  Illustrations.
9905.505-61  Interpretation. [Reserved]
9905.505-62  Exemption.
9905.505-63  Effective date.
9905.506  Cost accounting period--Educational institutions.
9905.506-10  [Reserved]
9905.506-20  Purpose.
9905.506-30  Definitions.
9905.506-40  Fundamental requirement.
9905.506-50  Techniques for application.
9905.506-60  Illustrations.
9905.506-61  Interpretation. [Reserved]
9905.506-62  Exemption.
9905.506-63  Effective date.

    Authority: Pub. L. 100-679, 102 Stat. 4056, 41 U.S.C. 422.

    Source: 59 FR 55770, Nov. 8, 1994, unless otherwise noted.



9905.501  Cost accounting standard--consistency in estimating, accumulating and reporting costs by educational institutions.



9905.501-10  [Reserved]



9905.501-20  Purpose.

    The purpose of this Cost Accounting Standard is to ensure that each 
educational institution's practices used in estimating costs for a 
proposal are consistent with cost accounting practices used by the 
institution in accumulating and reporting costs. Consistency in the 
application of cost accounting practices is necessary to enhance the 
likelihood that comparable transactions are treated alike. With respect 
to individual contracts, the consistent application of cost accounting 
practices will facilitate the preparation of reliable cost estimates 
used in pricing a proposal and their comparison with

[[Page 480]]

the costs of performance of the resulting contract. Such comparisons 
provide one important basis for financial control over costs during 
contract performance and aid in establishing accountability for costs in 
the manner agreed to by both parties at the time of contracting. The 
comparisons also provide an improved basis for evaluating estimating 
capabilities.



9905.501-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this chapter 99 shall 
have the meanings ascribed to them in those definitions unless paragraph 
(b) of this subsection requires otherwise.
    (1) Accumulating costs means the collecting of cost data in an 
organized manner, such as through a system of accounts.
    (2) Actual cost means an amount determined on the basis of cost 
incurred (as distinguished from forecasted cost), including standard 
cost properly adjusted for applicable variance.
    (3) Estimating costs means the process of forecasting a future 
result in terms of cost, based upon information available at the time.
    (4) Indirect cost pool means a grouping of incurred costs identified 
with two or more objectives but not identified specifically with any 
final cost objective.
    (5) Pricing means the process of establishing the amount or amounts 
to be paid in return for goods or services.
    (6) Proposal means any offer or other submission used as a basis for 
pricing a contract, contract modification or termination settlement or 
for securing payments thereunder.
    (7) Reporting costs means the providing of cost information to 
others.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9905.501-40  Fundamental requirement.

    (a) An educational institution's practices used in estimating costs 
in pricing a proposal shall be consistent with the institution's cost 
accounting practices used in accumulating and reporting costs.
    (b) An educational institution's cost accounting practices used in 
accumulating and reporting actual costs for a contract shall be 
consistent with the institution's practices used in estimating costs in 
pricing the related proposal.
    (c) The grouping of homogeneous costs in estimates prepared for 
proposal purposes shall not per se be deemed an inconsistent application 
of cost accounting practices under paragraphs (a) and (b) of this 
subsection when such costs are accumulated and reported in greater 
detail on an actual cost basis during contract performance.



9905.501-50  Techniques for application.

    (a) The standard allows grouping of homogeneous costs in order to 
cover those cases where it is not practicable to estimate contract costs 
by individual cost element. However, costs estimated for proposal 
purposes shall be presented in such a manner and in such detail that any 
significant cost can be compared with the actual cost accumulated and 
reported therefor. In any event, the cost accounting practices used in 
estimating costs in pricing a proposal and in accumulating and reporting 
costs on the resulting contract shall be consistent with respect to:
    (1) The classification of elements of cost as direct or indirect;
    (2) The indirect cost pools to which each element of cost is charged 
or proposed to be charged; and
    (3) The methods of allocating indirect costs to the contract.
    (b) Adherence to the requirement of 9905.501-40(a) of this standard 
shall be determined as of the date of award of the contract, unless the 
contractor has submitted cost or pricing data pursuant to 10 U.S.C. 
2306(a) or 41 U.S.C. 254(d) (Pub. L. 87-653), in which case adherence to 
the requirement of 9905.501-40(a) shall be determined as of the date of 
final agreement on price, as shown on the signed certificate of current 
cost or pricing data. Notwithstanding 9905.501-40(b), changes in 
established cost accounting practices during contract performance may be 
made in accordance with part 9903 (48 CFR part 9903).

[[Page 481]]

    (c) The standard does not prescribe the amount of detail required in 
accumulating and reporting costs. The basic requirement which must be 
met, however, is that for any significant amount of estimated cost, the 
contractor must be able to accumulate and report actual cost at a level 
which permits sufficient and meaningful comparison with its estimates. 
The amount of detail required may vary considerably depending on how the 
proposed costs were estimated, the data presented in justification or 
lack thereof, and the significance of each situation. Accordingly, it is 
neither appropriate nor practical to prescribe a single set of 
accounting practices which would be consistent in all situations with 
the practices of estimating costs. Therefore, the amount of accounting 
and statistical detail to be required and maintained in accounting for 
estimated costs has been and continues to be a matter to be decided by 
Government procurement authorities on the basis of the individual facts 
and circumstances.



9905.501-60  Illustration. [Reserved]



9905.501-61  Interpretation. [Reserved]



9905.501-62  Exemption.

    None for this Standard.



9905.501-63  Effective date.

    This Standard is effective as of January 9, 1995.



9905.502  Cost accounting standard--consistency in allocating costs incurred for the same purpose by educational institutions.



9905.502-10  [Reserved]



9905.502-20  Purpose.

    The purpose of this Standard is to require that each type of cost is 
allocated only once and on only one basis to any contract or other cost 
objective. The criteria for determining the allocation of costs to a 
contract or other cost objective should be the same for all similar 
objectives. Adherence to these cost accounting concepts is necessary to 
guard against the overcharging of some cost objectives and to prevent 
double counting. Double counting occurs most commonly when cost items 
are allocated directly to a cost objective without eliminating like cost 
items from indirect cost pools which are allocated to that cost 
objective.



9905.502-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this chapter 99 shall 
have the meanings ascribed to them in those definitions unless paragraph 
(b) of this subsection requires otherwise.
    (1) Allocate means to assign an item of cost, or a group of items of 
cost, to one or more cost objectives. This term includes both direct 
assignment of cost and the reassignment of a share from an indirect cost 
pool.
    (2) Cost objective means a function, organizational subdivision, 
contract, or other work unit for which cost data are desired and for 
which provision is made to accumulate and measure the cost of processes, 
products, jobs, capitalized projects, etc.
    (3) Direct cost means any cost which is identified specifically with 
a particular final cost objective. Direct costs are not limited to items 
which are incorporated in the end product as material or labor. Costs 
identified specifically with a contract are direct costs of that 
contract. All costs identified specifically with other final cost 
objectives of the educational institution are direct costs of those cost 
objectives.
    (4) Final cost objective means a cost objective which has allocated 
to it both direct and indirect costs, and in the educational 
institution's accumulation system, is one of the final accumulation 
points.
    (5) Indirect cost means any cost not directly identified with a 
single final cost objective, but identified with two or more final cost 
objectives or with at least one intermediate cost objective.
    (6) Indirect cost pool means a grouping of incurred costs identified 
with two or more cost objectives but not identified with any final cost 
objective.
    (7) Intermediate cost objective means a cost objective that is used 
to accumulate indirect costs or service center costs that are 
subsequently allocated to one or more indirect cost pools and/or final 
cost objectives.

[[Page 482]]

    (b) The following modifications of terms defined elsewhere in this 
Chapter 99 are applicable to this Standard: None.



9905.502-40  Fundamental requirement.

    All costs incurred for the same purpose, in like circumstances, are 
either direct costs only or indirect costs only with respect to final 
cost objectives. No final cost objective shall have allocated to it as 
an indirect cost any cost, if other costs incurred for the same purpose, 
in like circumstances, have been included as a direct cost of that or 
any other final cost objective. Further, no final cost objective shall 
have allocated to it as a direct cost any cost, if other costs incurred 
for the same purpose, in like circumstances, have been included in any 
indirect cost pool to be allocated to that or any other final cost 
objective.



9905.502-50  Techniques for application.

    (a) The Fundamental Requirement is stated in terms of cost incurred 
and is equally applicable to estimates of costs to be incurred as used 
in contract proposals.
    (b) The Disclosure Statement to be submitted by the educational 
institution will require that the institution set forth its cost 
accounting practices with regard to the distinction between direct and 
indirect costs. In addition, for those types of cost which are sometimes 
accounted for as direct and sometimes accounted for as indirect, the 
educational institution will set forth in its Disclosure Statement the 
specific criteria and circumstances for making such distinctions. In 
essence, the Disclosure Statement submitted by the educational 
institution, by distinguishing between direct and indirect costs, and by 
describing the criteria and circumstances for allocating those items 
which are sometimes direct and sometimes indirect, will be determinative 
as to whether or not costs are incurred for the same purpose. Disclosure 
Statement as used herein refers to the statement required to be 
submitted by educational institutions as a condition of contracting as 
set forth in subpart 9903.2.
    (c) In the event that an educational institution has not submitted a 
Disclosure Statement, the determination of whether specific costs are 
directly allocable to contracts shall be based upon the educational 
institution's cost accounting practices used at the time of contract 
proposal.
    (d) Whenever costs which serve the same purpose cannot equitably be 
indirectly allocated to one or more final cost objectives in accordance 
with the educational institution's disclosed accounting practices, the 
educational institution may either use a method for reassigning all such 
costs which would provide an equitable distribution to all final cost 
objectives, or directly assign all such costs to final cost objectives 
with which they are specifically identified. In the event the 
educational institution decides to make a change for either purpose, the 
Disclosure Statement shall be amended to reflect the revised accounting 
practices involved.
    (e) Any direct cost of minor dollar amount may be treated as an 
indirect cost for reasons of practicality where the accounting treatment 
for such cost is consistently applied to all final cost objectives, 
provided that such treatment produces results which are substantially 
the same as the results which would have been obtained if such cost had 
been treated as a direct cost.



9905.502-60  Illustrations.

    (a) Illustrations of costs which are incurred for the same purpose:
    (1) An educational institution normally allocates all travel as an 
indirect cost and previously disclosed this accounting practice to the 
Government. For purposes of a new proposal, the educational institution 
intends to allocate the travel costs of personnel whose time is 
accounted for as direct labor directly to the contract. Since travel 
costs of personnel whose time is accounted for as direct labor working 
on other contracts are costs which are incurred for the same purpose, 
these costs may no longer be included within indirect cost pools for 
purposes of allocation to any covered Government contract. The 
educational institution's Disclosure Statement must be amended for the 
proposed changes in accounting practices.

[[Page 483]]

    (2) An educational institution normally allocates purchasing 
activity costs indirectly and allocates this cost to instruction and 
research on the basis of modified total costs. A proposal for a new 
contract requires a disproportionate amount of subcontract 
administration to be performed by the purchasing activity. The 
educational institution prefers to continue to allocate purchasing 
activity costs indirectly. In order to equitably allocate the total 
purchasing activity costs, the educational institution may use a method 
for allocating all such costs which would provide an equitable 
distribution to all applicable indirect cost pools. For example, the 
institution may use the number of transactions processed rather than its 
former allocation base of modified total costs. The educational 
institution's Disclosure Statement must be amended for the proposed 
changes in accounting practices.
    (b) Illustrations of costs which are not incurred for the same 
purpose:
    (1) An educational institution normally allocates special test 
equipment costs directly to contracts. The costs of general purpose test 
equipment are normally included in the indirect cost pool which is 
allocated to contracts. Both of these accounting practices were 
previously disclosed to the Government. Since both types of costs 
involved were not incurred for the same purpose in accordance with the 
criteria set forth in the educational institution's Disclosure 
Statement, the allocation of general purpose test equipment costs from 
the indirect cost pool to the contract, in addition to the directly 
allocated special test equipment costs, is not considered a violation of 
the Standard.
    (2) An educational institution proposes to perform a contract which 
will require three firemen on 24-hour duty at a fixed-post to provide 
protection against damage to highly inflammable materials used on the 
contract. The educational institution presently has a firefighting force 
of 10 employees for general protection of its facilities. The 
educational institution's costs for these latter firemen are treated as 
indirect costs and allocated to all contracts; however, it wants to 
allocate the three fixed-post firemen directly to the particular 
contract requiring them and also allocate a portion of the cost of the 
general firefighting force to the same contract. The institution may do 
so but only on condition that its disclosed practices indicate that the 
costs of the separate classes of firemen serve different purposes and 
that it is the institution's practice to allocate the general 
firefighting force indirectly and to allocate fixed-post firemen 
directly.



9905.502-61  Interpretation.

    (a) 9905.502, Cost Accounting Standard--Consistency in Allocating 
Costs Incurred for the Same Purpose by Educational Institutions, 
provides, in 9905.502-40, that ``* * * no final cost objective shall 
have allocated to it as a direct cost any cost, if other costs incurred 
for the same purpose, in like circumstances, have been included in any 
indirect cost pool to be allocated to that or any other final cost 
objective.''
    (b) This interpretation deals with the way 9905.502 applies to the 
treatment of costs incurred in preparing, submitting, and supporting 
proposals. In essence, it is addressed to whether or not, under the 
Standard, all such costs are incurred for the same purpose, in like 
circumstances.
    (c) Under 9905.502, costs incurred in preparing, submitting, and 
supporting proposals pursuant to a specific requirement of an existing 
contract are considered to have been incurred in different circumstances 
from the circumstances under which costs are incurred in preparing 
proposals which do not result from such a specific requirement. The 
circumstances are different because the costs of preparing proposals 
specifically required by the provisions of an existing contract relate 
only to that contract while other proposal costs relate to all work of 
the educational institution.
    (d) This interpretation does not preclude the allocation, as 
indirect costs, of costs incurred in preparing all proposals. The cost 
accounting practices used by the educational institution, however, must 
be followed consistently and the method used to reallocate such

[[Page 484]]

costs, of course, must provide an equitable distribution to all final 
cost objectives.



9905.502-62  Exemption.

    None for this Standard.



9905.502-63  Effective date.

    This Standard is effective as of January 9, 1995.



9905.505  Accounting for unallowable costs--Educational institutions.



9905.505-10  [Reserved]



9905.505-20  Purpose.

    (a)(1) The purpose of this Cost Accounting Standard is to facilitate 
the negotiation, audit, administration and settlement of contracts by 
establishing guidelines covering:
    (i) Identification of costs specifically described as unallowable, 
at the time such costs first become defined or authoritatively 
designated as unallowable, and
    (ii) The cost accounting treatment to be accorded such identified 
unallowable costs in order to promote the consistent application of 
sound cost accounting principles covering all incurred costs.
    (2) The Standard is predicated on the proposition that costs 
incurred in carrying on the activities of an educational institution--
regardless of the allowability of such costs under Government 
contracts--are allocable to the cost objectives with which they are 
identified on the basis of their beneficial or causal relationships.
    (b) This Standard does not govern the allowability of costs. This is 
a function of the appropriate procurement or reviewing authority.



9905.505-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this chapter 99 shall 
have the meanings ascribed to them in those definitions unless paragraph 
(b) of this subsection requires otherwise.
    (1) Directly associated cost means any cost which is generated 
solely as a result of the incurrence of another cost, and which would 
not have been incurred had the other cost not been incurred.
    (2) Expressly unallowable cost means a particular item or type of 
cost which, under the express provisions of an applicable law, 
regulation, or contract, is specifically named and stated to be 
unallowable.
    (3) Indirect cost means any cost not directly identified with a 
single final cost objective, but identified with two or more final cost 
objectives or with at least one intermediate cost objective.
    (4) Unallowable cost means any cost which, under the provisions of 
any pertinent law, regulation, or contract, cannot be included in 
prices, cost reimbursements, or settlements under a Government contract 
to which it is allocable.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9905.505-40  Fundamental requirement.

    (a) Costs expressly unallowable or mutually agreed to be 
unallowable, including costs mutually agreed to be unallowable directly 
associated costs, shall be identified and excluded from any billing, 
claim, or proposal applicable to a Government contract.
    (b) Costs which specifically become designated as unallowable as a 
result of a written decision furnished by a contracting officer pursuant 
to contract disputes procedures shall be identified if included in or 
used in the computation of any billing, claim, or proposal applicable to 
a Government contract. This identification requirement applies also to 
any costs incurred for the same purpose under like circumstances as the 
costs specifically identified as unallowable under either this paragraph 
or paragraph (a) of this subsection.
    (c) Costs which, in a contracting officer's written decision 
furnished pursuant to contract disputes procedures, are designated as 
unallowable directly associated costs of unallowable costs covered by 
either paragraph (a) or (b) of this subsection shall be accorded the 
identification required by paragraph (b) of this subsection.
    (d) The costs of any work project not contractually authorized, 
whether or

[[Page 485]]

not related to performance of a proposed or existing contract, shall be 
accounted for, to the extent appropriate, in a manner which permits 
ready separation from the costs of authorized work projects.
    (e) All unallowable costs covered by paragraphs (a) through (d) of 
this subsection shall be subject to the same cost accounting principles 
governing cost allocability as allowable costs. In circumstances where 
these unallowable costs normally would be part of a regular indirect-
cost allocation base or bases, they shall remain in such base or bases. 
Where a directly associated cost is part of a category of costs normally 
included in an indirect-cost pool that will be allocated over a base 
containing the unallowable cost with which it is associated, such a 
directly associated cost shall be retained in the indirect-cost pool and 
be allocated through the regular allocation process.
    (f) Where the total of the allocable and otherwise allowable costs 
exceeds a limitation-of-cost or ceiling-price provision in a contract, 
full direct and indirect cost allocation shall be made to the contract 
cost objective, in accordance with established cost accounting practices 
and Standards which regularly govern a given entity's allocations to 
Government contract cost objectives. In any determination of unallowable 
cost overrun, the amount thereof shall be identified in terms of the 
excess of allowable costs over the ceiling amount, rather than through 
specific identification of particular cost items or cost elements.



9905.505-50  Techniques for application.

    (a) The detail and depth of records required as backup support for 
proposals, billings, or claims shall be that which is adequate to 
establish and maintain visibility of identified unallowable costs 
(including directly associated costs), their accounting status in terms 
of their allocability to contract cost objectives, and the cost 
accounting treatment which has been accorded such costs. Adherence to 
this cost accounting principle does not require that allocation of 
unallowable costs to final cost objectives be made in the detailed cost 
accounting records. It does require that unallowable costs be given 
appropriate consideration in any cost accounting determinations 
governing the content of allocation bases used for distributing indirect 
costs to cost objectives. Unallowable costs involved in the 
determination of rates used for standard costs, or for indirect-cost 
bidding or billing, need be identified only at the time rates are 
proposed, established, revised or adjusted.
    (b)(1) The visibility requirement of paragraph (a) of this 
subsection, may be satisfied by any form of cost identification which is 
adequate for purposes of contract cost determination and verification. 
The Standard does not require such cost identification for purposes 
which are not relevant to the determination of Government contract cost. 
Thus, to provide visibility for incurred costs, acceptable alternative 
practices would include:
    (i) The segregation of unallowable costs in separate accounts 
maintained for this purpose in the regular books of account,
    (ii) The development and maintenance of separate accounting records 
or workpapers, or
    (iii) The use of any less formal cost accounting techniques which 
establishes and maintains adequate cost identification to permit audit 
verification of the accounting recognition given unallowable costs.
    (2) Educational institutions may satisfy the visibility requirements 
for estimated costs either:
    (i) By designation and description (in backup data, workpapers, 
etc.) of the amounts and types of any unallowable costs which have 
specifically been identified and recognized in making the estimates, or
    (ii) By description of any other estimating technique employed to 
provide appropriate recognition of any unallowable costs pertinent to 
the estimates.
    (c) Specific identification of unallowable costs is not required in 
circumstances where, based upon considerations of materiality, the 
Government and the educational institution reach agreement on an 
alternate method that satisfies the purpose of the Standard.

[[Page 486]]



9905.505-60  Illustrations.

    (a) An auditor recommends disallowance of certain direct labor and 
direct material costs, for which a billing has been submitted under a 
contract, on the basis that these particular costs were not required for 
performance and were not authorized by the contract. The contracting 
officer issues a written decision which supports the auditor's position 
that the questioned costs are unallowable. Following receipt of the 
contracting officer's decision, the educational institution must clearly 
identify the disallowed direct labor and direct material costs in the 
institution's accounting records and reports covering any subsequent 
submission which includes such costs. Also, if the educational 
institution's base for allocation of any indirect cost pool relevant to 
the subject contract consists of direct labor, direct material, total 
prime cost, total cost input, etc., the institution must include the 
disallowed direct labor and material costs in its allocation base for 
such pool. Had the contracting officer's decision been against the 
auditor, the educational institution would not, of course, have been 
required to account separately for the costs questioned by the auditor.
    (b) An educational institution incurs, and separately identifies, as 
a part of a service center or expense pool, certain costs which are 
expressly unallowable under the existing and currently effective 
regulations. If the costs of the service center or indirect expense pool 
are regularly a part of the educational institution's base for 
allocation of other indirect expenses, the educational institution must 
allocate the other indirect expenses to contracts and other final cost 
objectives by means of a base which includes the identified unallowable 
indirect costs.
    (c) An auditor recommends disallowance of certain indirect costs. 
The educational institution claims that the costs in question are 
allowable under the provisions of Office Of Management and Budget 
Circular A-21, Cost Principles For Educational Institutions; the auditor 
disagrees. The issue is referred to the contracting officer for 
resolution pursuant to the contract disputes clause. The contracting 
officer issues a written decision supporting the auditor's position that 
the total costs questioned are unallowable under the Circular. Following 
receipt of the contracting officer's decision, the educational 
institution must identify the disallowed costs and specific other costs 
incurred for the same purpose in like circumstances in any subsequent 
estimating, cost accumulation or reporting for Government contracts, in 
which such costs are included. If the contracting officer's decision had 
supported the educational institution's contention, the costs questioned 
by the auditor would have been allowable and the educational institution 
would not have been required to provide special identification.
    (d) An educational institution incurred certain unallowable costs 
that were charged indirectly as general administration and general 
expenses (GA&GE). In the educational institution's proposals for final 
indirect cost rates to be applied in determining allowable contract 
costs, the educational institution identified and excluded the expressly 
unallowable GA&GE costs form the applicable indirect cost pools. In 
addition, during the course of negotiation of indirect cost rates to be 
used for bidding and billing purposes, the educational institution 
agreed to classify as unallowable cost, various directly associated 
costs of the identifiable unallowable costs. On the basis of 
negotiations and agreements between the educational institution and the 
contracting officer's authorized representatives, indirect cost rates 
were established, based on the net balance of allowable GA&GE. 
Application of the rates negotiated to proposals, and to billings, for 
covered contracts constitutes compliance with the Standard.
    (e) An employee, whose salary, travel, and subsistence expenses are 
charged regularly to the general administration and general expenses 
(GA&GE), an indirect cost category, takes several business associates on 
what is clearly a business entertainment trip. The entertainment costs 
of such trips is expressly unallowable because it constitutes 
entertainment expense prohibited by OMB Circular A-21, and is separately 
identified by the educational institution. In these circumstances, the 
employee's travel and

[[Page 487]]

subsistence expenses would be directly associated costs for 
identification with the unallowable entertainment expense. However, 
unless this type of activity constituted a significant part of the 
employee's regular duties and responsibilities on which his salary was 
based, no part of the employee's salary would be required to be 
identified as a directly associated cost of the unallowable 
entertainment expense.



9905.505-61  Interpretation. [Reserved]



9905.505-62  Exemption.

    None for this Standard.



9905.505-63  Effective date.

    This Standard is effective as of January 9, 1995.



9905.506  Cost accounting period--Educational institutions.



9905.506-10  [Reserved]



9905.506-20  Purpose.

    The purpose of this Cost Accounting Standard is to provide criteria 
for the selection of the time periods to be used as cost accounting 
periods for contract cost estimating, accumulating, and reporting. This 
Standard will reduce the effects of variations in the flow of costs 
within each cost accounting period. It will also enhance objectivity, 
consistency, and verifiability, and promote uniformity and comparability 
in contract cost measurements.



9905.506-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this Standard. Other terms defined elsewhere in this part 99 shall have 
the meanings ascribed to them in those definitions unless paragraph (b) 
of this subsection requires otherwise.
    (1) Allocate means to assign an item of cost, or a group of items of 
cost, to one or more cost objectives. This term includes both direct 
assignment of cost and the reassignment of a share from an indirect cost 
pool.
    (2) Cost objective means a function, organizational subdivision, 
contract, or other work unit for which cost data are desired and for 
which provision is made to accumulate and measure the cost of processes, 
products, jobs, capitalized projects, etc.
    (3) Fiscal year means the accounting period for which annual 
financial statements are regularly prepared, generally a period of 12 
months, 52 weeks, or 53 weeks.
    (4) Indirect cost pool means a grouping of incurred costs identified 
with two or more cost objectives but not identified specifically with 
any final cost objective.
    (b) The following modifications of terms defined elsewhere in this 
chapter 99 are applicable to this Standard: None.



9905.506-40  Fundamental requirement.

    (a) Educational institutions shall use their fiscal year as their 
cost accounting period, except that:
    (1) Costs of an indirect function which exists for only a part of a 
cost accounting period may be allocated to cost objectives of that same 
part of the period as provided in 9905.506-50(a).
    (2) An annual period other than the fiscal year may, as provided in 
9905.506-50(d), be used as the cost accounting period if its use is an 
established practice of the institution.
    (3) A transitional cost accounting period other than a year shall be 
used whenever a change of fiscal year occurs.
    (b) An institution shall follow consistent practices in the 
selection of the cost accounting period or periods in which any types of 
expense and any types of adjustment to expense (including prior-period 
adjustments) are accumulated and allocated.
    (c) The same cost accounting period shall be used for accumulating 
costs in an indirect cost pool as for establishing its allocation base, 
except that the contracting parties may agree to use a different period 
for establishing an allocation base as provided in 9905.506-50(e).



9905.506-50  Techniques for application.

    (a) The cost of an indirect function which exists for only a part of 
a cost accounting period may be allocated on the basis of data for that 
part of the cost accounting period if the cost is:

[[Page 488]]

    (1) Material in amount,
    (2) Accumulated in a separate indirect cost pool or expense pool, 
and
    (3) Allocated on the basis of an appropriate direct measure of the 
activity or output of the function during that part of the period.
    (b) The practices required by 9905.506-40(b) of this Standard shall 
include appropriate practices for deferrals, accruals, and other 
adjustments to be used in identifying the cost accounting periods among 
which any types of expense and any types of adjustment to expense are 
distributed. If an expense, such as insurance or employee leave, is 
identified with a fixed, recurring, annual period which is different 
from the institution's cost accounting period, the Standard permits 
continued use of that different period. Such expenses shall be 
distributed to cost accounting periods in accordance with the 
institution's established practices for accruals, deferrals, and other 
adjustments.
    (c) Indirect cost allocation rates, based on estimates, which are 
used for the purpose of expediting the closing of contracts which are 
terminated or completed prior to the end of a cost accounting period 
need not be those finally determined or negotiated for that cost 
accounting period. They shall, however, be developed to represent a full 
cost accounting period, except as provided in paragraph (a) of this 
subsection.
    (d) An institution may, upon mutual agreement with the Government, 
use as its cost accounting period a fixed annual period other than its 
fiscal year, if the use of such a period is an established practice of 
the institution and is consistently used for managing and controlling 
revenues and disbursements, and appropriate accruals, deferrals or other 
adjustments are made with respect to such annual periods.
    (e) The contracting parties may agree to use an annual period which 
does not coincide precisely with the cost accounting period for 
developing the data used in establishing an allocation base: Provided,
    (1) The practice is necessary to obtain significant administrative 
convenience,
    (2) The practice is consistently followed by the institution,
    (3) The annual period used is representative of the activity of the 
cost accounting period for which the indirect costs to be allocated are 
accumulated, and
    (4) The practice can reasonably be estimated to provide a 
distribution to cost objectives of the cost accounting period not 
materially different from that which otherwise would be obtained.
    (f)(1) When a transitional cost accounting period is required under 
the provisions of 9905.506-40(a)(3), the institution may select any one 
of the following:
    (i) The period, less than a year in length, extending from the end 
of its previous cost accounting period to the beginning of its next 
regular cost accounting period,
    (ii) A period in excess of a year, but not longer than 15 months, 
obtained by combining the period described in paragraph (f)(1) of this 
subsection with the previous cost accounting period, or
    (iii) A period in excess of a year, but not longer than 15 months, 
obtained by combining the period described in subparagraph (f)(1) of 
this subsection with the next regular cost accounting period.
    (2) A change in the institution's cost accounting period is a change 
in accounting practices for which an adjustment in the contract price 
may be required in accordance with subdivision (a)(4)(ii) or (iii) of 
the contract clause set out at 9903.201-4(e).



9905.506-60  Illustrations.

    (a) An institution allocates indirect expenses for Organized 
Research on the basis of a modified total direct cost base. In a 
proposal for a covered contract, it estimates the allocable expenses 
based solely on the estimated amount of indirect costs allocated to 
Organized Research and the amount of the modified total direct cost base 
estimated to be incurred during the 8 months in which performance is 
scheduled to be commenced and completed. Such a proposal would be in 
violation of the requirements of this Standard that the calculation of 
the amounts of both the indirect cost pools and the allocation bases be 
based on the contractor's cost accounting period.

[[Page 489]]

    (b) An institution whose cost accounting period is the calendar 
year, installs a computer service center to begin operations on May 1. 
The operating expense related to the new service center is expected to 
be material in amount, will be accumulated in an intermediate cost 
objective, and will be allocated to the benefiting cost objectives on 
the basis of measured usage. The total operating expenses of the 
computer service center for the 8-month part of the cost accounting 
period may be allocated to the benefiting cost objectives of that same 
8-month period.
    (c) An institution changes its fiscal year from a calendar year to 
the 12-month period ending May 31. For financial reporting purposes, it 
has a 5-month transitional ``fiscal year.'' The same 5-month period must 
be used as the transitional cost accounting period; it may not be 
combined as provided in 9905.506-50(f), because the transitional period 
would be longer than 15 months. The new fiscal year must be adopted 
thereafter as its regular cost accounting period. The change in its cost 
accounting period is a change in accounting practices; adjustments of 
the contract prices may thereafter be required in accordance with 
subdivision (a)(4) (ii) or (iii) of the contract clause at 9903.201-
4(e).
    (d) Financial reports are prepared on a calendar year basis on a 
university-wide basis. However, the contracting segment does all 
internal financial planning, budgeting, and internal reporting on the 
basis of a twelve month period ended June 30. The contracting parties 
agree to use the period ended June 30 and they agree to overhead rates 
on the June 30 basis. They also agree on a technique for prorating 
fiscal year assignment of the university's central system office 
expenses between such June 30 periods. This practice is permitted by the 
Standard.
    (e) Most financial accounts and contract cost records are maintained 
on the basis of a fiscal year which ends November 30 each year. However, 
employee vacation allowances are regularly managed on the basis of a 
``vacation year'' which ends September 30 each year. Vacation expenses 
are estimated uniformly during each ``vacation year.'' Adjustments are 
made each October to adjust the accrued liability to actual, and the 
estimating rates are modified to the extent deemed appropriate. This use 
of a separate annual period for determining the amounts of vacation 
expense is permitted under 9905.506-50(b).



9905.506-61  Interpretation. [Reserved]



9905.506-62  Exemption.

    None for this Standard.



9905.506-63  Effective date.

    This Standard is effective as of January 9, 1995. For institutions 
with no previous CAS-covered contracts, this Standard shall be applied 
as of the start of its next fiscal year beginning after receipt of a 
contract to which this Standard is applicable.


[[Page 491]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  List of CFR Sections Affected



[[Page 493]]



                    Table of CFR Titles and Chapters




                     (Revised as of October 1, 2001)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
        IV  Miscellaneous Agencies (Parts 400--500)

                          Title 2--[Reserved]

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  General Accounting Office (Parts 1--99)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
       VII  Advisory Commission on Intergovernmental Relations 
                (Parts 1700--1799)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Part 2100)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Part 3201)
     XXIII  Department of Energy (Part 3301)
      XXIV  Federal Energy Regulatory Commission (Part 3401)

[[Page 494]]

       XXV  Department of the Interior (Part 3501)
      XXVI  Department of Defense (Part 3601)
    XXVIII  Department of Justice (Part 3801)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  Overseas Private Investment Corporation (Part 4301)
      XXXV  Office of Personnel Management (Part 4501)
        XL  Interstate Commerce Commission (Part 5001)
       XLI  Commodity Futures Trading Commission (Part 5101)
      XLII  Department of Labor (Part 5201)
     XLIII  National Science Foundation (Part 5301)
       XLV  Department of Health and Human Services (Part 5501)
      XLVI  Postal Rate Commission (Part 5601)
     XLVII  Federal Trade Commission (Part 5701)
    XLVIII  Nuclear Regulatory Commission (Part 5801)
         L  Department of Transportation (Part 6001)
       LII  Export-Import Bank of the United States (Part 6201)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Part 6401)
      LVII  General Services Administration (Part 6701)
     LVIII  Board of Governors of the Federal Reserve System (Part 
                6801)
       LIX  National Aeronautics and Space Administration (Part 
                6901)
        LX  United States Postal Service (Part 7001)
       LXI  National Labor Relations Board (Part 7101)
      LXII  Equal Employment Opportunity Commission (Part 7201)
     LXIII  Inter-American Foundation (Part 7301)
       LXV  Department of Housing and Urban Development (Part 
                7501)
      LXVI  National Archives and Records Administration (Part 
                7601)
      LXIX  Tennessee Valley Authority (Part 7901)
      LXXI  Consumer Product Safety Commission (Part 8101)
    LXXIII  Department of Agriculture (Part 8301)
     LXXIV  Federal Mine Safety and Health Review Commission (Part 
                8401)
     LXXVI  Federal Retirement Thrift Investment Board (Part 8601)
    LXXVII  Office of Management and Budget (Part 8701)

                          Title 6--[Reserved]

              

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture

[[Page 495]]

         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Grain Inspection, Packers and Stockyards 
                Administration (Federal Grain Inspection Service), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
      XIII  Northeast Dairy Compact Commission (Parts 1300--1399)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy, Department of Agriculture (Parts 
                2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)

[[Page 496]]

    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  Cooperative State Research, Education, and Extension 
                Service, Department of Agriculture (Parts 3400--
                3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)

                    Title 8--Aliens and Nationality

         I  Immigration and Naturalization Service, Department of 
                Justice (Parts 1--599)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Part 1800)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)

[[Page 497]]

        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  Office of Thrift Supervision, Department of the 
                Treasury (Parts 500--599)
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  Federal Housing Finance Board (Parts 900--999)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--499)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)

[[Page 498]]

        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Export Administration, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  Technology Administration, Department of Commerce 
                (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399)

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  United States Customs Service, Department of the 
                Treasury (Parts 1--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)

[[Page 499]]

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees' Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Employment Standards Administration, Department of 
                Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training, Department of Labor 
                (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  Broadcasting Board of Governors (Parts 500--599)
       VII  Overseas Private Investment Corporation (Parts 700--
                799)
        IX  Foreign Service Grievance Board Regulations (Parts 
                900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

[[Page 500]]

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--999)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799)
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

[[Page 501]]

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--799)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900)
        VI  Office of the Assistant Secretary-Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Part 1200)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--899)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Bureau of Alcohol, Tobacco and Firearms, Department of 
                the Treasury (Parts 1--299)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--199)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)
      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)
        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)

[[Page 502]]

        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Pension and Welfare Benefits Administration, 
                Department of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Minerals Management Service, Department of the 
                Interior (Parts 200--299)
       III  Board of Surface Mining and Reclamation Appeals, 
                Department of the Interior (Parts 300--399)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
        VI  Bureau of Mines, Department of the Interior (Parts 
                600--699)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of International Investment, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)

[[Page 503]]

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Defense Logistics Agency (Parts 1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Transportation (Parts 1--
                199)
        II  Corps of Engineers, Department of the Army (Parts 
                200--399)
        IV  Saint Lawrence Seaway Development Corporation, 
                Department of Transportation (Parts 400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Vocational and Adult Education, Department 
                of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599)
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799)
        XI  National Institute for Literacy (Parts 1100--1199)
            Subtitle C--Regulations Relating to Education
       XII  National Council on Disability (Parts 1200--1299)

[[Page 504]]

                        Title 35--Panama Canal

         I  Panama Canal Regulations (Parts 1--299)

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Part 1501)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  Copyright Office, Library of Congress (Parts 200--299)
        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--499)
         V  Under Secretary for Technology, Department of Commerce 
                (Parts 500--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--99)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Rate Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--799)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)

[[Page 505]]

       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)

          Title 41--Public Contracts and Property Management

            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans 
                Employment and Training, Department of Labor 
                (Parts 61-1--61-999)
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System
       201  Federal Information Resources Management Regulation 
                (Parts 201-1--201-99) [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-70)
       304  Payment from a Non-Federal Source for Travel Expenses 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--499)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1999)

[[Page 506]]

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 200--499)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10005)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Office of Human Development Services, Department of 
                Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission on Fine Arts (Parts 2100--2199)

[[Page 507]]

     XXIII  Arctic Research Commission (Part 2301)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Transportation (Parts 1--
                199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Transportation (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Department of Defense (Parts 200--299)
         3  Department of Health and Human Services (Parts 300--
                399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  United States Agency for International Development 
                (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)

[[Page 508]]

        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        35  Panama Canal Commission (Parts 3500--3599)
        44  Federal Emergency Management Agency (Parts 4400--4499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399)
        54  Defense Logistics Agency, Department of Defense (Part 
                5452)
        57  African Development Foundation (Parts 5700--5799)
        61  General Services Administration Board of Contract 
                Appeals (Parts 6100--6199)
        63  Department of Transportation Board of Contract Appeals 
                (Parts 6300--6399)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Research and Special Programs Administration, 
                Department of Transportation (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Transportation (Parts 400--
                499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board, Department of 
                Transportation (Parts 1000--1399)

[[Page 509]]

        XI  Bureau of Transportation Statistics, Department of 
                Transportation (Parts 1400--1499)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

                      CFR Index and Finding Aids

            Subject/Agency Index
            List of Agency Prepared Indexes
            Parallel Tables of Statutory Authorities and Rules
            List of CFR Titles, Chapters, Subchapters, and Parts
            Alphabetical List of Agencies Appearing in the CFR



[[Page 511]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of October 1, 2001)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Advanced Research Projects Agency                 32, I
Advisory Commission on Intergovernmental          5, VII
     Relations
Advisory Council on Historic Preservation         36, VIII
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development, United      22, II
     States
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department                            5, LXXIII
  Agricultural Marketing Service                  7, I, IX, X, XI
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Cooperative State Research, Education, and      7, XXXIV
       Extension Service
  Economic Research Service                       7, XXXVII
  Energy, Office of                               7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Grain Inspection, Packers and Stockyards        7, VIII; 9, II
       Administration
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force Department                              32, VII
  Federal Acquisition Regulation Supplement       48, 53
Alcohol, Tobacco and Firearms, Bureau of          27, I
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX
Architectural and Transportation Barriers         36, XI
   Compliance Board
[[Page 512]]

Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI
Army Department                                   32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase From People Who Are
Broadcasting Board of Governors                   22, V
  Federal Acquisition Regulation                  48, 19
Census Bureau                                     15, I
Central Intelligence Agency                       32, XIX
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X
Civil Rights, Commission on                       45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce Department                               44, IV
  Census Bureau                                   15, I
  Economic Affairs, Under Secretary               37, V
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Export Administration, Bureau of                15, VII
  Federal Acquisition Regulation                  48, 13
  Fishery Conservation and Management             50, VI
  Foreign-Trade Zones Board                       15, IV
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II
  National Marine Fisheries Service               50, II, IV, VI
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Productivity, Technology and Innovation,        37, IV
       Assistant Secretary for
  Secretary of Commerce, Office of                15, Subtitle A
  Technology, Under Secretary for                 37, V
  Technology Administration                       15, XI
  Technology Policy, Assistant Secretary for      37, IV
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Product Safety Commission                5, LXXI; 16, II
Cooperative State Research, Education, and        7, XXXIV
     Extension Service
Copyright Office                                  37, II
Corporation for National and Community Service    45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Court Services and Offender Supervision Agency    28, VIII
     for the District of Columbia
Customs Service, United States                    19, I
Defense Contract Audit Agency                     32, I
Defense Department                                5, XXVI; 32, Subtitle A; 
                                                  40, VII
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII

[[Page 513]]

  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51
  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 2
  National Imagery and Mapping Agency             32, I
  Navy Department                                 32, VI; 48, 52
  Secretary of Defense, Office of                 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
District of Columbia, Court Services and          28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Under Secretary                 37, V
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
  Vocational and Adult Education, Office of       34, IV
Educational Research and Improvement, Office of   34, VII
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             5, XXIII; 10, II, III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   5, LIV; 40, I, IV, VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Administration, Office of                       5, XV
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                25, III, LXXVII; 48, 99
  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
       States
Export Administration, Bureau of                  15, VII
Export-Import Bank of the United States           5, LII; 12, IV
Family Assistance, Office of                      45, II

[[Page 514]]

Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       11, I
Federal Emergency Management Agency               44, I
  Federal Acquisition Regulation                  48, 44
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Board                     12, IX
Federal Labor Relations Authority, and General    5, XIV; 22, XIV
     Counsel of the Federal Labor Relations 
     Authority
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Fishery Conservation and Management               50, VI
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Accounting Office                         4, I
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102
  Federal Property Management Regulation          41, 101
  Federal Travel Regulation System                41, Subtitle F

[[Page 515]]

  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          5, XLV; 45, Subtitle A
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Centers for Medicare & Medicaid Services        42, IV
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Centers for Medicare & Medicaid Services          42, IV
Housing and Urban Development, Department of      5, LXV; 24, Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Human Development Services, Office of             45, XIII
Immigration and Naturalization Service            8, I
Independent Counsel, Office of                    28, VII
Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Intergovernmental Relations, Advisory Commission  5, VII
     on
Interior Department
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV

[[Page 516]]

  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  Minerals Management Service                     30, II
  Mines, Bureau of                                30, VI
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            43, Subtitle A
  Surface Mining and Reclamation Appeals, Board   30, III
       of
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Fishing and Related Activities      50, III
International Investment, Office of               31, VIII
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice Department                                5, XXVIII; 28, I, XI; 40, 
                                                  IV
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration and Naturalization Service          8, I
  Offices of Independent Counsel                  28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor Department                                  5, XLII
  Benefits Review Board                           20, VII
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V
  Employment Standards Administration             20, VI
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Pension and Welfare Benefits Administration     29, XXV
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training, Office of    41, 61; 20, IX
       the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Library of Congress                               36, VII
  Copyright Office                                37, II
Management and Budget, Office of                  5, III, LXXVII; 48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II

[[Page 517]]

Merit Systems Protection Board                    5, II
Micronesian Status Negotiations, Office for       32, XXVII
Mine Safety and Health Administration             30, I
Minerals Management Service                       30, II
Mines, Bureau of                                  30, VI
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
National Aeronautics and Space Administration     5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   45, XII, XXV
National Archives and Records Administration      5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Bureau of Standards                      15, II
National Capital Planning Commission              1, IV
National Commission for Employment Policy         1, IV
National Commission on Libraries and Information  45, XVII
     Science
National Council on Disability                    34, XII
National Counterintelligence Center               32, XVIII
National Credit Union Administration              12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           21, III
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute for Literacy                   34, XI
National Institute of Standards and Technology    15, II
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV, VI
National Mediation Board                          29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI
National Security Council and Office of Science   47, II
     and Technology Policy
National Telecommunications and Information       15, XXIII; 47, III
     Administration
National Transportation Safety Board              49, VIII
National Weather Service                          15, IX
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Dairy Compact Commission                7, XIII
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Offices of Independent Counsel                    28, VI
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Overseas Private Investment Corporation           5, XXXIII; 22, VII
Panama Canal Commission                           48, 35
Panama Canal Regulations                          35, I
Patent and Trademark Office, United States        37, I

[[Page 518]]

Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension and Welfare Benefits Administration       29, XXV
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
Postal Rate Commission                            5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Procurement and Property Management, Office of    7, XXXII
Productivity, Technology and Innovation,          37, IV
     Assistant Secretary
Public Contracts, Department of Labor             41, 50
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Regional Action Planning Commissions              13, V
Relocation Allowances                             41, 302
Research and Special Programs Administration      49, I
Rural Business-Cooperative Service                7, XVIII, XLII
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV
Rural Telephone Bank                              7, XVI
Rural Utilities Service                           7, XVII, XVIII, XLII
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of          32, XXIV
Science and Technology Policy, Office of, and     47, II
     National Security Council
Secret Service                                    31, IV
Securities and Exchange Commission                17, II
Selective Service System                          32, XVI
Small Business Administration                     13, I
Smithsonian Institution                           36, V
Social Security Administration                    20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State Department                                  22, I; 28, XI
  Federal Acquisition Regulation                  48, 6
Surface Mining and Reclamation Appeals, Board of  30, III
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
Technology, Under Secretary for                   37, V
Tennessee Valley Authority                        5, LXIX; 18, XIII
Thrift Supervision Office, Department of the      12, V
     Treasury
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     5, L
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV

[[Page 519]]

  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 49, V
  Research and Special Programs Administration    49, I
  Saint Lawrence Seaway Development Corporation   33, IV
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Surface Transportation Board                    49, X
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Statistics Brureau                 49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury Department                               5, XXI; 12, XV; 17, IV; 
                                                  31, IX
  Alcohol, Tobacco and Firearms, Bureau of        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs Service, United States                  19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Law Enforcement Training Center         31, VII
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  International Investment, Office of             31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
  Thrift Supervision, Office of                   12, V
Truman, Harry S. Scholarship Foundation           45, XVIII
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training, Office of the  41, 61; 20, IX
     Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Vocational and Adult Education, Office of         34, IV
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I
World Agricultural Outlook Board                  7, XXXVIII

[[Page 521]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations which were 
made by documents published in the Federal Register since January 1, 
1986, are enumerated in the following list. Entries indicate the nature 
of the changes effected. Page numbers refer to Federal Register pages. 
The user should consult the entries for chapters and parts as well as 
sections for revisions.
For the period before January 1, 1986, see the ``List of CFR Sections 
Affected, 1973-1985,'' published in four separate volumes.

                                  1986

48 CFR
                                                                   51 FR
                                                                    Page
Chapter 29
2901  Heading revised; interim.....................................40372
2901.603-1  (a)(3) and (d)(8)(i) amended; (d)(4)(iii) and (9), 
        (f)(2), and (g)(2) and (3) revised; interim................40372
2901.603-74  Added; interim........................................40373
2902  Authority citation revised...................................40373
2902.101  Amended; interim.........................................40373
2903.204  (a) corrected; interim...................................40373
2905  Subchapter assignment; editorial note.........................6004
2905.202 (Subpart 2905.2)  Added; interim..........................40374
2906  Added; interim...............................................40374
2909.105-1  (b) revised; interim...................................40374
2913.403  Amended; interim.........................................40374
2913.503-70  Corrected; interim....................................40374
2914  Heading revised; interim.....................................40374
2914.404  Added; interim...........................................40374
2914.404-1  Heading added; interim.................................40374
2914.407-8  Revised; interim.......................................40374
2915.105 (Subpart 2915.1)  Removed; interim........................40374
2915.213--2915.270 (Subpart 2915.2)  Removed; interim..............40374
2915.304--2915.307 (Subpart 2915.3)  Removed; interim..............40374
2915.608  Added; interim...........................................40374
2916.306 (Subpart 2916.3)  Added; interim..........................40374
2917.502  Text added; interim......................................40374
2919.202-1  (a), (b), and (c) amended; interim.....................40375
2933  Heading revised; interim.....................................40375
2933.003  Redesignated as 2933.203; interim........................40375
2933.003-70  Redesignated as 2933.203-70; interim..................40375
2933.009  Redesignated as 2933.209; interim........................40375
2933.011  Redesignated as 2933.211; interim........................40375
2933.012  Redesignated as 2933.212; interim........................40375
2933.102--2933.105 (Subpart 2933.1)  Added; interim................40375
2933.203--2933.212 (Subpart 2933.2)  Heading added; interim........40375
2933.203  Redesignated from 2933.003 and (a) amended; interim......40375
2933.203-70  Redesignated from 2933.003-70; interim................40375
2933.209  Redesignated from 2933.009; interim......................40375
2933.211  Redesignated from 2933.011 and amended; interim..........40375
2933.212  Redesignated from 2933.012; interim......................40375
2943  Authority citation revised...................................40376
2943.301 (Subpart 2943.3)  Added; interim..........................40376
2949.106--2949.111-70 (Subpart 2949.1)  Heading revised; interim 
                                                                   40376
Chapter 44
4405  Subchapter assignment; editorial note.........................6004

[[Page 522]]

Chapter 52
Chapter established................................................19843
5242  Added........................................................19843
    Revised........................................................46671
5252  Added........................................................19843
    Revised........................................................46672
Chapter 53
Chapter established................................................40978
5350 (Subchapter G)  Added.........................................40978
5350  Added........................................................40978

                                  1987

48 CFR
                                                                   52 FR
                                                                    Page
Chapter 53
5315  Added........................................................12414
5316  Added.........................................................6332
Chapter 63
Chapter 63  Chapter established....................................48630
6301  Added (regulations transferred from 41 Part 12-60)...........48630
6302  Added (regulations transferred from 41 Part 12-60)...........48631

                                  1988

48 CFR
                                                                   53 FR
                                                                    Page
Chapter 29
2901  Regulations at 51 FR 40372 confirmed..........................3839
2902  Regulations at 51 FR 40373 confirmed..........................3839
2902.101  Amended...................................................3839
2903  Regulations at 51 FR 40373 confirmed..........................3839
2905  Regulations at 51 FR 40374 confirmed..........................3839
2906  Regulations at 51 FR 40374 confirmed..........................3839
2909  Regulations at 51 FR 40374 confirmed..........................3839
2913  Regulations at 51 FR 40374 confirmed..........................3839
2914  Regulations at 51 FR 40374 confirmed..........................3839
2915  Regulations at 51 FR 40374 confirmed..........................3839
2916  Regulations at 51 FR 40374 confirmed..........................3839
2917  Regulations at 51 FR 40374 confirmed..........................3839
2919  Regulations at 51 FR 40375 confirmed..........................3839
2919.202-1  (a) amended.............................................3839
2933  Regulations at 51 FR 40375 confirmed..........................3839
2943  Regulations at 51 FR 40376 confirmed..........................3839
2943.301  Amended...................................................3839
2949  Regulations at 51 FR 40376 confirmed..........................3839
Chapter 34
Chapter 34  Chapter established....................................19118
3401  Added........................................................19119
3402  Added........................................................19119
3403  Added........................................................19120
3404  Added........................................................19120
3405  Added........................................................19120
3408  Added........................................................19120
3409  Added........................................................19120
3413  Added........................................................19121
3414  Added........................................................19121
3415  Added........................................................19121
3416  Added........................................................19121
3417  Added........................................................19122
3419  Added........................................................19122
3424  Added........................................................19123
3425  Added........................................................19123
3427  Added........................................................19123
3428  Added........................................................19123
3432  Added........................................................19123
3433  Added........................................................19124
3437  Added........................................................19124
3442  Added........................................................19124
3443  Added........................................................19125
3445  Added........................................................19125
3447  Added........................................................19125
3452  Added........................................................19125
Chapter 52
5215  Added........................................................16280
5252.215-9000  Added...............................................16282
Chapter 57
Chapter 57  Chapter established.....................................5578
5706  Added.........................................................5578
Chapter 63
6302.18  (b) revised...............................................34106
6302.30  Added.....................................................34106

                                  1989

48 CFR
                                                                   54 FR
                                                                    Page
Chapter 29
2919.202-1  Removed................................................30389
Chapter 51
Chapter established................................................15410
5108  Added........................................................38682

[[Page 523]]

5108.070  Added....................................................38682
5119  Added........................................................15410
5145  Added........................................................39538
5152  Added........................................................38683
5152.208-9001  Added...............................................38683
5152.245-9000  Added...............................................39539
5152.245-9001  Added...............................................39539

                                  1990

48 CFR
                                                                   55 FR
                                                                    Page
Chapter 35
Chapter 35 established..............................................7634
3501--3504 (Subchapter A)  Added....................................7634
3501  Added.........................................................7635
3502  Added.........................................................7638
3503  Added.........................................................7638
3504  Added.........................................................7640
3505--3510 (Subchapter B)  Added....................................7640
3505  Added.........................................................7640
3506  Added.........................................................7640
3507  Added.........................................................7641
3508  Added.........................................................7642
3509  Added.........................................................7642
3509.406-3  (b)(1)(ii) introductory text corrected.................38331
3510  Added.........................................................7644
3513--3517 (Subchapter C)  Added....................................7645
3513  Added.........................................................7645
3513.201  (a)(2) corrected.........................................38331
3514  Added.........................................................7647
3514.201-6  (c) corrected..........................................38331
3515  Added.........................................................7648
3516  Added.........................................................7650
3517  Added.........................................................7651
3519--3525 (Subchapter D)  Added....................................7651
3519  Added.........................................................7651
3520  Added.........................................................7651
3522  Added.........................................................7652
3524  Added.........................................................7653
3525  Added.........................................................7654
3525.102  Corrected................................................38331
3527--3533 (Subchapter E)  Added....................................7656
3527  Added.........................................................7656
3528  Added.........................................................7656
3528.201  (a) corrected............................................38331
3528.202  Correctly removed; new 3528.202 redesignated from 
        3528.202-1; heading revised; (b) amended...................38331
3528.202.1  Correctly redesignated as 3528.202; heading revised; 
        (b) amended................................................38331
3529  Added.........................................................7657
3531  Added.........................................................7658
3532  Added.........................................................7658
3533  Added.........................................................7659
3536--3537 (Subchapter F)  Added....................................7660
3536  Added.........................................................7660
3537  Added.........................................................7662
3537.206  (c) corrected............................................38331
3542--3531 (Subchapter G)  Added....................................7663
3542  Added.........................................................7663
3543  Added.........................................................7664
3547  Added.........................................................7664
3551  Added.........................................................7664
3552--3553 (Subchapter H)  Added....................................7664
3552  Added.........................................................7664
3552.236-76  Amended...............................................38331
3553  Added.........................................................7673
3570 (Subchapter I and Part)  Added.................................7674
Chapter 44
4409.406-1  Nomenclature change....................................28207
4409.406-3  (a), (b), and (c) nomenclature change..................28207
4409.407-1  Nomenclature change....................................28207
4409.407-3  (a) nomenclature change................................28207
4415.502  Removed..................................................28207
4415.502-70  Redesignated as 4415.505-1 and heading revised; text 
        amended....................................................28207
4415.505-2  Added..................................................28207
4415.506  (a) amended; (b) redesignated as (c); new (b) added......28207
4415.506-1  Existing text designated as (a); (b) added.............28207
4415.612--4415.612-71 (Subpart 4415.6)  Added......................28207
4416.303  (b)(3) amended...........................................28208
4419.201  (a) amended..............................................28208
4426  Added........................................................28208
4433  Added........................................................28208
4452.216-70  Added.................................................28208
4452.226-1  Added..................................................28208
4452.239-70  Removed...............................................28209
4452.239-71  Removed...............................................28209
Chapter 99
Chapter 99  Chapter established; interim...........................47056

[[Page 524]]

9900  Added; interim...............................................47056
9901 (Subchapter A)  Added; interim................................47056

                                  1991

48 CFR
                                                                   56 FR
                                                                    Page
Chapter 52
5243  Added; interim...............................................63672
5252  Authority citation revised...................................63675
5252.243-9000  Added; interim......................................63675
5252.243-9001  Added; interim......................................63675
Chapter 99
Chapter 99  Regulation at 55 FR 47056 confirmed....................19304
9901  Revised......................................................19304

                                  1992

48 CFR
                                                                   57 FR
                                                                    Page
Chapter 99
9900  Added........................................................14153
9903--9904 (Subchapter B)  Added...................................14153
9903.201-1  (b)(12) corrected......................................34167
9903.201-3  (d) corrected..........................................34079
9903.201-4  (a), (c) and (d) corrected.............................34079
    Corrected...............................................34167, 43776
9903.202-1  (c) and (e) corrected..................................34167
9903.202-9  Corrected.......................................34079, 43621
9904.401-63  Correctly designated..................................34167
9904.403-62  Correctly removed.....................................34081
9904.405-60  (a), (d) and (e) corrected............................34167
    Corrected......................................................43776
9904.406-40  (b) corrected.........................................34167
9904.407-60  (f)(3) corrected......................................34167
9904.408-60  (a)(2), (b) and (e)(2) corrected......................34167
9904.409-50  (e)(4) corrected......................................34167
9904.410  Appendix A corrected.....................................34081
9904.410-63  Correctly designated..................................34167
9904.411-20  (a) corrected.........................................34167
9904.413-60  (b) and (c)(4) corrected..............................34167
9904.414  Appendix A corrected.....................................43776
    Appendix B corrected....................................34081, 34167
9904.415-50  (e)(7)(ii) corrected..................................34167
9904.416-50  (a)(1) corrected...............................34168, 43776
9904.417-60  (a) corrected.........................................34081

                                  1993

48 CFR
                                                                   58 FR
                                                                    Page
Chapter 34
3402  Authority citation revised...................................32614
3402.101  Removed..................................................32614
3409  Authority citation revised...................................32614
3409.403  Removed..................................................32614
3410  Added (effective date pending)...............................30088
    Regulation at 58 FR 30088 eff. 7-21-93.........................51021
Chapter 61
6101  Revised......................................................69250
Chapter 99
9903.201-1  (b) introductory text and (15) revised.................58801
9903.201-2  (a)(1), (2), (b)(1), (2), and (d) revised; (a)(3) 
        removed....................................................58801
    (a)(2) and (b)(1) corrected....................................65556
9903.201-3  Amended................................................58802
    Corrected...............................................61844, 65556
9903.201-4  (c)(1) revised.........................................58802
    Corrected......................................................65556
9903.202-1  (b)(1), (2), and (c) revised...........................58802
9903.301  Amended..................................................58802

                                  1994

48 CFR
                                                                   59 FR
                                                                    Page
Chapter 99
9903.102  Amended; OMB number......................................55753
9903.201-1  (a) revised; (b)(10) removed...........................55753
9903.201-2  (e) revised............................................48569
    (a) amended; (c) added.........................................55753
9903.201-3  Amended; introductory heading redesignated as (a) 
        heading; introductory text and (a) through (d) 
        redesignated as (a)(1) introductory text and (i) through 
        (iv); (a)(2) added.........................................55754
9903.201-4  (c)(2) corrected.......................................48568
    (a)(1) and (2) revised; (e) added..............................55755
9903.201-6  (a) revised............................................55756
9903.201-7  Added..................................................55756
9903.202-1  (f) added..............................................55756
9903.202-5  Revised................................................55757
9903.202-6  Added..................................................55757
9903.202-10  Added.................................................55757
9903.301  Existing text designated as (a); (b) added...............55770
9905  Added........................................................55770

[[Page 525]]

                                  1995

48 CFR
                                                                   60 FR
                                                                    Page
Chapter 54
Chapter 54  Established............................................21992
Chapter 61
6101.0  Revised....................................................17026
6101.1  (b)(12) through (15) redesignated as (b)(13) through (16); 
        (b)(2) and new (13) through (16) revised; new (b)(12) 
        added......................................................17026
6101.2  (c) revised................................................17026
6101.13  Heading revised; (a)(1) and (2) amended...................17027
6101.14  (a)(1) and (2) amended....................................17027
6101.18  (b) introductory text revised.............................17027
6101.19  (a)(2), (3) and (d) revised...............................17027
6101.28  (a) redesignated as (a)(1); (a)(2) and (d) added..........17027
6101.29  (b) revised...............................................17027
6101.35  (a) and (d)(1) amended; (c)(5) and (6) added..............17028
6101.36  (c) amended...............................................17028
6101  Appendix amended.............................................17028
Chapter 99
Chapter 99  Interpretation.........................................12711
9903.201-1  (b)(11) removed........................................16540
9904.412-30  (a) revised...........................................16540
9904.412-40  Revised...............................................16541
9904.412-50  Revised...............................................16542
9904.412-60  Revised...............................................16544
9904.412-63  Revised...............................................16547
9904.412-64  Added.................................................16547
    (a)(1) corrected...............................................20248
9904.413-30  (a) revised...........................................16549
9904.413-40  (b) and (c) revised...................................16550
9904.413-50  Revised...............................................16550
9904.413-60  Revised...............................................16553
    (c)(16) corrected..............................................20248
9904.413-63  Revised...............................................16557
9904.413-64  Added.................................................16557

                                  1996

48 CFR
                                                                   61 FR
                                                                    Page
Chapter 35
3509.400--3509.471 (Subpart 3509.4)  Revised; interim...............3846
Chapter 61
6101  Revised......................................................52349
6102  Added........................................................52369
6103  Added; interim...............................................39097
6104  Added; interim...............................................39098
    Authority citation revised.....................................67242
6104.9  Added; interim; eff. 12-20-96 through 7-26-97..............67242
Chapter 99
9903.201-1  (b)(6) revised; interim................................39361
9903.201-3  Amended; interim.......................................39361
9903.201-4  Amended; interim.......................................39361
9903.202  Illustration revised......................................7620
9903.301  Amended; interim.........................................39361
9904.404-40  (b)(1) revised.........................................5522
9904.404-50  (d) revised............................................5523
9904.404-63  Revised................................................5523
9904.409-50  (j)(5) added...........................................5523
9904.409-63  Revised................................................5523
9904.412-50  (d)(2) introductory text amended......................58011
9904.413-60  (c)(7), (8), (12), (13) and (24) amended..............58011

                                  1997

48 CFR
                                                                   62 FR
                                                                    Page
Chapter 35
3509.400--3509.471 (Subpart 3509.4)  Regulation at 61 FR 3846 
        confirmed..................................................11770
Chapter 52
5231  Added........................................................66827
Chapter 61
6103  Revised......................................................25867
6104  Revised......................................................25869
6105  Added........................................................25871
    Corrected......................................................32241
Chapter 99
9903.201-1  (b)(6) revised.........................................31295
9903.201-4  Amended................................................31295
9904.406-61  Added.................................................31308

                                  1998

48 CFR
                                                                   63 FR
                                                                    Page
Chapter 52
5243  Removed......................................................24130
5252.243-9000  Removed.............................................24130
5252.243-9001  Removed.............................................24130
Chapter 53
5316  Removed......................................................67600
5350  Removed......................................................71390

[[Page 526]]

                                  1999

48 CFR
                                                                   64 FR
                                                                    Page
Chapter 53
5315  Removed........................................................995
Chapter 54
5416  Added........................................................41835
Chapter 61
6103  Authority citation revised...................................38143
6103.1  (a) and (b) amended........................................38143
6103.2  (a)(5), (c), and (d) amended...............................38143
6103.3  (a) introductory text and (b) amended......................38143
6103.4  Revised....................................................38143
6103.5  (a), (b) and (c) amended...................................38143
6103.6  Amended....................................................38143
6103.7  Amended....................................................38143

                                  2000

48 CFR
                                                                   65 FR
                                                                    Page
Chapter 99
9903.201-1  (b)(7) added; (b)(15) revised; interim..................5991
    (b)(7) and (15) revised........................................36769
9903.201-2  (a)(1), (2), (b)(1) and (2) revised; interim............5991
    (a)(1), (2), (b)(1) and (2) revised............................36769
9903.201-3  Amended; interim........................................5991
    Amended........................................................36769
9903.201-4  (c)(1) revised; interim.................................5991
    (c)(1) revised.................................................36770
    Amended........................................................37471
9903.201-5  Revised; interim........................................5991
    Revised........................................................36770
9903.201-6  Revised................................................37471
9903.201-8  Added..................................................37472
9903.202-1  (b)(1) and (2) revised; interim.........................5992
    (b)(1) and (2) revised.........................................36770

                                  2001

  (Regulations published from January 1, 2001, through October 1, 2001)

48 CFR
                                                                   65 FR
                                                                    Page
Chapter 99
5433  Added........................................................27474
5452.233-9001  Added...............................................27474


                                  
