[Title 48 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2006 Edition]
[From the U.S. Government Publishing Office]



[[Page i]]

          
          
          48


          Chapter 29 to End

                         Revised as of October 1, 2006


          Federal Acquisition Regulations System
          
          


________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of October 1, 2006
          With Ancillaries
                    Published by
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

[[Page ii]]

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                            Table of Contents



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

  Title 48:
          Chapter 29--Department of Labor                            3
          Chapter 30--Department of Homeland Security, 
          Homeland Security Acquisition Regulation (HSAR)           59
          Chapter 34--Department of Education Acquisition 
          Regulation                                               123
          Chapter 44--Federal Emergency Management Agency          151
          Chapter 51--Department of the Army Acquisition 
          Regulations                                              175
          Chapter 52--Department of the Navy Acquisition 
          Regulations                                              189
          Chapter 53--Department of the Air Force Federal 
          Acquisition Regulation Supplement [Reserved]
          Chapter 54--Defense Logistics Agency, Department of 
          Defense                                                  197
          Chapter 57--African Development Foundation               201
          Chapter 61--General Services Administration Board of 
          Contract Appeals                                         205
          Chapter 63--Department of Transportation Board of 
          Contract Appeals                                         245
          Chapter 99--Cost Accounting Standards Board, Office 
          of Federal Procurement Policy, Office of Management 
          and Budget                                               259
  Finding Aids:
      Table of CFR Titles and Chapters........................     477

[[Page iv]]

      Alphabetical List of Agencies Appearing in the CFR......     495
      List of CFR Sections Affected...........................     505

[[Page v]]





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

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 48 CFR 2901.001 
                       refers to title 48, part 
                       2901, section 001.

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

[[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, 2006), 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 
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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, 2001, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, 1973-1985, or 1986-2000, published in 11 separate 
volumes. For the period beginning January 1, 2001, 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

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appearing in the Code of Federal Regulations.

INQUIRIES

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CFR Sections Affected), The United States Government Manual, the Federal 
Register, Public Laws, Public Papers, Weekly Compilation of Presidential 
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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.archives.gov/federal-
register. The NARA site also contains links to GPO Access.

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

October 1, 2006.

[[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, 2006.

    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.

    For this volume, Robert J. Sheehan was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Frances D. McDonald, assisted by Kenneth R. Payne.

[[Page 1]]



            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM




                 (This book contains chapter 29 to End)

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

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

chapter 30--Department of Homeland Security, Homeland 
  Security Acquisition Regulation (HSAR)....................        3001

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

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..............          12
2903            Improper business practices and personal 
                    conflicts of interest...................          13
2904            Administrative matters......................          16
                   SUBCHAPTER B--ACQUISITION PLANNING
2905            Publicizing contract actions................          17
2906            Competition requirements....................          18
2907            Acquisition planning........................          18
2908            Required sources of supplies and services...          19
2909            Contractor qualifications...................          19
2910            Market research.............................          22
2911            Describing agency needs.....................          23
2912            Acquisition of commercial items.............          23
2913            Simplified acquisition procedures...........          24
          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES
2914            Sealed bidding..............................          26
2915            Contracting by negotiation..................          26
2916            Contract types..............................          28
2917            Special contracting methods.................          28
                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS
2918

[Reserved]

2919            Small business and small disadvantaged 
                    business concerns.......................          31
2920-2921

 [Reserved]

2922            Application of labor laws to government 
                    acquisitions............................          33

[[Page 4]]

2923            Environment, energy and water efficiency, 
                    renewable energy technologies, 
                    occupational safety, and drug-free 
                    workplace...............................          34
2924-2927

 [Reserved]

             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS
2928            Bonds and insurance.........................          36
2929            Taxes.......................................          36
2930            Cost accounting standards administration....          36
2931            Contract cost principles and procedures.....          37
2932            Contract financing..........................          37
2933            Protests, disputes, and appeals.............          37
2934-2935

 [Reserved]

2936            Construction and architect-engineer 
                    contracts...............................          40
2937            Service contracting.........................          42
2938-2941

 [Reserved]

                    SUBCHAPTER G--CONTRACT MANAGEMENT
2942            Contract administration and audit services..          45
2943            Contract modifications......................          46
2944            Subcontracting policies and procedures......          46
2945            Government property.........................          47
2946-2951

 [Reserved]

                     SUBCHAPTER H--CLAUSES AND FORMS
2952            Solicitation provisions and contract clauses          49
2953            Forms.......................................          49

[[Page 5]]

                          SUBCHAPTER A_GENERAL

       PART 2901_DEPARTMENT OF LABOR ACQUISITION REGULATION SYSTEM

                     Subpart 2901.0_Scope of Subpart

Sec.

Sec. 2901.001 Scope of subpart.

               Subpart 2901.1_Purpose, Authority, Issuance


Sec. 2901.101 Purpose.

Sec. 2901.103 Authority.

Sec. 2901.105-2 Arrangement of regulations.

Sec. 2901.105-3 Copies.

                      Subpart 2901.2_Administration


Sec. 2901.201-1 Maintenance of the FAR.

              Subpart 2901.3_Agency Acquisition Regulations


Sec. 2901.302 Limitations.

Sec. 2901.304 Agency control and compliance procedures.

            Subpart 2901.4_Deviations From the FAR and DOLAR


Sec. 2901.403 Individual deviations from the FAR.

Sec. 2901.404 Class deviations.

Sec. 2901.405 Deviations pertaining to treaties and executive 
          agreements.

     Subpart 2901.6_Career Development, Contracting Authority, and 
                            Responsibilities


Sec. 2901.601 General.

Sec. 2901.602 Contracting officers.

Sec. 2901.602-1 Authority.

Sec. 2901.602-3 Ratification of unauthorized commitments.

Sec. 2901.603 Selection, appointment, and termination of Appointment.

Sec. 2901.603-1 General.

Sec. 2901.603-3 Appointment.

Sec. 2901.603-4 Terminations.

Sec. 2901.603-70 Responsibility of other government personnel.

Sec. 2901.603-71 Contracting officer's technical representatives (COTR).

Sec. 2901.603-72 Administrative procurement management reviews.

               Subpart 2901.7_Determinations and Findings


Sec. 2901.707 Signatory authority.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                     Subpart 2901.0_Scope of Subpart



Sec. 2901.001  Scope of part.

    This chapter may be referred to as the Department of Labor 
Acquisition Regulation or the DOLAR. This subpart sets forth 
introductory information about the Department of Labor Acquisition 
Regulation. 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.

               Subpart 2901.1_Purpose, Authority, Issuance



Sec. 2901.101  Purpose.

    (a) Chapter 29, Department of Labor Acquisition Regulation, is 
established within Title 48 of the Federal Acquisition Regulation System 
of the Code of Federal Regulations.
    (b) The purpose of the DOLAR is to implement the FAR, 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.



Sec. 2901.103  Authority.

    The DOLAR is issued pursuant to the authority of the Secretary of 
Labor under 5 U.S.C. 301 and 40 U.S.C. 486(c). This authority has been 
delegated to the Assistant Secretary for Administration and Management 
under Secretary's Order 4-76 in accordance with FAR 1.301(d)(3).



Sec. 2901.105-2  Arrangement of regulations.

    (a) Numbering. Where DOLAR implements the FAR, the implementing 
part, subpart, section or subsection of the DOLAR is numbered and 
captioned, to the extent feasible, the same as the FAR part, subpart, 
section or subsection being implemented, except that

[[Page 6]]

the section or subsection being implemented is 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 l.105-l is shown 
as 290l.105-1 and the DOLAR implementation of FAR subpart 24.1 is shown 
as DOLAR subpart 2924.1. Material which supplements the FAR is assigned 
the subsection numbers 70 and up. For example, the DOL regulation 
governing appointment and termination of contracting officers' technical 
representatives is identified as 2901.603-71.
    (b) References to FAR materials within the DOLAR will include the 
acronym FAR and the identifying number, for example, FAR l.104-2(c)(2). 
References to DOLAR materials within the DOLAR simply cite the 
identifying number, for example, 2901.104-2(c)(2).



Sec. 2901.105-3  Copies.

    Copies of the DOLAR published in the Federal Register, CD-ROM, or 
Code of Federal Regulations may be purchased from the Superintendent of 
Documents, Government Printing Office, Washington, DC 20402, or from the 
Government Printing Office Web Page, http://www.gpo.gov/. 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. Additional information on DOL may be obtained on the Internet at 
www.dol.gov. Other DOL procurement policy documents referenced within 
the DOLAR may be available when appropriate by mail from the Division of 
Acquisition Management Services.

                      Subpart 2901.2_Administration



Sec. 2901.201-1  Maintenance of the FAR.

    A member of the Division of Acquisition Management Services (DAMS), 
an organization within the Office of Acquisition and Management Support 
Services, the Business Operations Center, Office of the Assistant 
Secretary for Administration and Management (OASAM), represents the 
Department of Labor on the Civilian Agency Acquisition Council (CAAC). 
DAMS 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



Sec. 2901.302  Limitations.

    DOLAR System issuances are limited to 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.



Sec. 2901.304  Agency control and compliance procedures.

    (a) The DOLAR is under the direct oversight and control of the 
Department's Senior Procurement Executive. 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 subpart 2901.6.
    (b) DOLAR issuances shall comply with the restrictions in FAR 
1.304(b).
    (c) Heads of Contracting Activity (HCAs) must submit all proposed 
instructions and materials that implement or supplement the DOLAR to the 
Director, DAMS. In conjunction with the Office of the Solicitor, DAMS 
will review all issuances whether or not they will be published in the 
Federal Register as a part of the DOLAR System. In the case of internal 
procurement policy instructions, the purpose of the review is to 
ascertain that such instructions are consistent with the FAR and the 
DOLAR and that they do not contain information which should be issued 
under the DOLAR.

            Subpart 2901.4_Deviations From the FAR and DOLAR



Sec. 2901.403  Individual deviations from the FAR.

    (a) The Senior Procurement Executive is authorized to approve 
deviations from FAR provisions (see FAR 1.403) or DOLAR provisions, 
which affect only one contracting action, unless FAR 1.405(e) is 
applicable. Requests for deviations shall be submitted through the 
Director, DAMS.

[[Page 7]]

    (b) Requests for deviations under paragraph (a) of this section must 
be submitted by the HCA and include justification as to why the 
deviation is required.
    (c) A copy of the approved deviation must be included in the 
contract file.



Sec. 2901.404  Class deviations.

    (a) The Senior Procurement Executive is authorized to approve class 
deviations from FAR or DOLAR provisions which affect more than one 
contracting action, unless FAR 1.405(e) is applicable. The request for 
deviation is submitted through the Director, DAMS.
    (b) Requests for deviations under paragraph (a) of this section must 
be submitted by the HCA and include justification as to why the 
deviation is required and the number of contracting actions which will 
be affected.
    (c) For a FAR class deviation the Director, DAMS will consult with 
the Chair of the CAAC, as required in FAR 1.404(a)(1), before 
authorizing the deviation.
    (d) A copy of the approved class deviation must be included in each 
contract file.
    (e) Recommended revisions to the FAR and a copy of each approved 
class FAR deviation will be transmitted to the FAR Secretariat by the 
Director, DAMS as required in FAR 1.404.



Sec. 2901.405  Deviations pertaining to treaties and executive 
          agreements.

    (a) The Director, DAMS is responsible for transmitting to the FAR 
Secretariat the information required in FAR 1.405(d).
    (b) For deviations not authorized by FAR 1.405(b) or (c), the 
Director, DAMS, will process the request for deviation through the FAR 
Secretariat.

     Subpart 2901.6_Career Development, Contracting Authority, and 
                            Responsibilities



Sec. 2901.601  General.

    (a) This section deals with contracting authority and 
responsibilities of the head of the agency as described in 2902.1, FAR 
subpart 1.6 and this subpart.
    (1) The authority and responsibility vested in the Secretary to 
contract for authorized supplies and services is delegated to the 
Assistant Secretary for Administration and Management.
    (2) The Assistant Secretary for Administration and Management may 
delegate contracting authority to a bureau or agency within the 
Department of Labor as he/she delineates in writing.
    (b) The Assistant Secretary for Administration and Management, 
acting through the Senior Procurement Executive, may delegate additional 
procurement authority subject to the issuance of warrants by the Senior 
Procurement Executive, and reserves the right to rescind any acquisition 
authority, if it is determined that such action is in the best interest 
of the Government.



Sec. 2901.602  Contracting officers.



Sec. 2901.602-1  Authority.

    Contracting warrants, at all levels above the micro-purchase 
threshold, must be requested by the HCA in writing and signed by the 
Senior Procurement Executive. Warrants may be accompanied by letters of 
appointment that may provide requirements for maintaining the warrant 
(e.g., maintaining current documentation for the FAR, DOLAR, and other 
guidance, and recurrent training). Copies of the appointment shall be 
maintained in the Division of Acquisition Management Services. 
Contracting officers must display the original warrant (and its 
limitations) in their workspace. A listing of current contracting 
officers may be available for review on the Internet at http://
www.dol.gov/oasam/grants/prgms.htm. To modify a contracting officer's 
authority, the present appointment must be revoked and a new certificate 
issued.



Sec. 2901.602-3  Ratification of unauthorized commitments.

    (a) If the HCA agrees that the commitment appears to be without 
valid authorization, the Division of Acquisition Management Services 
must be notified by the HCA in accordance with the procedures outlined 
in this section.
    (b) Ratifications--Thresholds. The Department of Labor may only 
ratify acquisitions that were intended to fulfill a bona fide need and 
otherwise could

[[Page 8]]

have been authorized when made. If the action to be ratified is not 
approved, then the employee who authorized the work may be liable for 
the entire cost of the action. Requests received by contracting officers 
for ratification of commitments made by personnel lacking contracting 
authority must be processed as follows:

----------------------------------------------------------------------------------------------------------------
                                           Must be approved by (Ratifying
            Dollar threshold                          official)                     Steps to be followed
----------------------------------------------------------------------------------------------------------------
Below the micro-purchase threshold......  Head of the Contracting Office..  1 through 5 & 7.
Between the micropurchase threshold and   Head of Contracting Activity....  1 through 5 & 7.
 the Simplified Acquisition Threshold.
Above the Simplified Acquisition          Assistant Secretary for           1 through 7.
 Threshold.                                Administration and Management,
                                           after review by the Procurement
                                           Review Board.
----------------------------------------------------------------------------------------------------------------
Note: DOL procurement policies require review by the Procurement Review Board of advisory and assistance
  services acquisitions above $50,000 for competitive acquisitions and at any dollar amount for noncompetitive
  acquisitions, and waivers for contracts with employees and recently separated employees. Therefore, review by
  the PRB is required for unauthorized obligations at these lower thresholds.

                            Step--Instruction

    (1) The individual is placed on notice by the contracting officer, 
in writing, that the purchase may be inappropriate because he did not 
have a purchasing request, funding, or authority to obligate the 
Government to make an expenditure of funds.
    (i) 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 the facts, 
including, but not limited to a statement as to why the acquisition 
office was not used, a description of work to be performed or products 
to be furnished, an estimated or agreed-upon contract price, citation of 
appropriation available, and a statement as to whether the contractor 
has commenced performance.
    (ii) In the absence of such an individual, the head of the 
applicable office will be responsible for providing such information, 
including an explanation of why the individual who made the unauthorized 
commitment is unavailable to provide this information.
    (2) The individual who made the unauthorized commitment or the head 
of the applicable office, as appropriate, shall provide a determination 
and finding (See FAR 1.704) to the contracting officer indicating that:
    (i) Supplies or services have been provided to and accepted by the 
Government, or the Government otherwise has obtained or will obtain a 
benefit resulting from performance of the unauthorized commitment;
    (ii) A procurement request and/or accompanying documentation 
including a statement signed by the individual that explains why normal 
acquisition procedures were not followed, explains why the source was 
selected, lists other sources considered, describes the work, and 
estimates or states the agreed upon price. (If the DOL employee who made 
the unauthorized commitment is no longer available, appropriate program 
personnel must provide the information described in this paragraph); and
    (iii) Funds are available and were available at the time of the 
unauthorized commitment.
    (3) The contracting officer reviewing the unauthorized commitment 
shall determine whether the price is fair and reasonable and if payment 
is recommended to the ratifying official. (The contracting officer may 
rely upon written documentation submitted by managing staff above the 
individual who made the unauthorized commitment, in making his/her 
determination.)
    (4) Legal review is required before ratification by the ratifying 
official.
    (5) The ratifying official shall make an affirmative determination 
and finding that:
    (i) The resulting purchase order or contract would otherwise have 
been proper if made by an appropriate contracting officer.
    (ii) The contracting officer reviewing the unauthorized commitment 
has determined that the price is fair and reasonable and payment is 
recommended.

[[Page 9]]

    (6) For cases over the simplified acquisition threshold, all 
documentation for steps (1) through (5) must be forwarded to the 
Director, Division of Acquisition Management Services, for submission to 
the Procurement Review Board. However, the ratifying official is 
responsible for directing the receipt and acceptance for all products 
and deliverables received by the Government as a result of an 
unauthorized commitment.
    (7) The supervisor of the individual who made the unauthorized 
commitment shall prepare a corrective action plan to preclude further 
unauthorized commitments (e.g., ethics, purchase card, or administrative 
procedures training, or other appropriate action). The ratifying 
official may approve the corrective action plan. The individual shall 
report to the ratifying official in writing when the corrective action 
has been initiated and again after it has been fully implemented.



Sec. 2901.603  Selection, appointment, and termination of appointment.



Sec. 2901.603-1  General.

    (a) The Senior Procurement Executive will develop and manage an 
acquisition career management program for contracting personnel. 
Training requirements must conform to Office of Federal Procurement 
Policy Letters 92-3, 97-01, and the Federal Acquisition Institute's 
curriculum. These references are available at:

http://www.arnet.gov/Library/OFPP/PolicyLetters/Letters/PL97-01.html,
http://www.arnet.gov/Library/OFPP/PolicyLetters/Letters/PL92-3.html, and 
    through the Federal Acquisition Institute (FAI) at:
http://www.faionline.com/fai/campus/index4.htm.

    (b) The program must cover all contracting personnel in the 
following categories:
    (1) General Schedule (GS-1102) Contracting Series (See also FAR 
1.603);
    (2) Contracting officers, regardless of General Schedule Series, 
with contracting authority above the simplified acquisition threshold;
    (3) Purchasing Series (GS-1105), other individuals performing 
purchasing duties and individuals with contracting authority between the 
micro-purchase and simplified acquisition thresholds.
    (4) All Contracting Officer Technical Representatives as identified 
in 2901.603-71.



Sec. 2901.603-3  Appointment.

    General. In accordance with FAR 1.603-3, appointments will be made 
in writing on an SF 1402 for all warrants above the micro-purchase 
threshold. In addition, appointments may be made for specific functions 
unrelated to dollar threshold, such as indirect cost negotiation, debt 
management, and closeout functions.
    (a) Purchase Cards (micro-purchase threshold). Purchase cardholders 
will be appointed in accordance with the DOL Guidelines for Purchase 
Card Use and the Agency/Office procedures approved by the HCA. Agency/
Organization Purchase Card Coordinators requesting issuance of a 
purchase card must be responsible for ensuring that the purchase 
cardholder has taken an orientation course before issuance and/or use of 
the purchase card. A list of purchase cardholders is available at: 
http://www.dol.gov/oasam/foia/hotfoia/citibank-list.htm.
    (b) Simplified Acquisition Threshold (currently $100,000). The HCA 
may request a delegation of procurement authority not to exceed the 
simplified acquisition threshold based on education, training, and 
experience in the acquisition field. Effective July 26, 2004, all new 
appointments must comply with training requirements listed in ``OFPP 
Policy Letter No. 92-3, Procurement Professionalism Program Policy-
Training for Contracting Personnel'', dated June 24, 1992.
    (c) $500,000. The HCA may request a delegation of procurement 
authority not to exceed $500,000 based on the individual's education, 
training and experience in contracting. Although primarily reserved for 
those in the GS-1102 series, the HCA may consider business acumen, 
education, training, and experience. Effective May 27, 2004, all new 
appointments must comply with training requirements listed in ``OFPP 
Policy Letter No. 92-3, Procurement Professionalism Program Policy-
Training for Contracting Personnel'', dated June 24, 1992.

[[Page 10]]

    (d) Unlimited. The HCA may request a delegation of procurement 
authority on an unlimited basis for individuals whose education, 
training, and experience in contracting warrant such authority. Although 
primarily reserved for those in the GS-1102 series, the HCA may consider 
length of service, training, and experience. Effective May 27, 2004, all 
new appointments must comply with training requirements listed in ``OFPP 
Policy Letter No. 92-3, Procurement Professionalism Program Policy-
Training for Contracting Personnel'', dated June 24, 1992.



Sec. 2901.603-4  Terminations.

    Termination of a contracting officer's appointment will be made in 
writing unless the warrant contains the basis for the termination (i.e., 
retirement, reassignment). Terminations may be immediate, but must not 
operate retroactively.



Sec. 2901.603-70  Responsibility of other government personnel.

    (a) Only DOL personnel with contracting authority shall obligate DOL 
to any type of contractual obligation and only to the extent of their 
delegated authority. 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 determining agency needs should 
maintain a close and continuous relationship with their contracting 
officer 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 or insufficient 
contracting authority may not commit the Government, formally or 
informally, to any type of contractual obligation. However, DOL 
personnel who must use the contracting process to accomplish their 
programs must support the contracting officer to ensure that:
    (1) Requirements are clearly defined and specified without being 
overly restrictive in accordance with FAR 11.002;
    (2) Competitive sources are solicited, evaluated, and selected as 
appropriate;
    (3) The FAR and the Competition in Contracting Act requirements for 
full and open competition are satisfied to the maximum extent 
practicable. Sole source purchases may only be permitted in accordance 
with FAR Subpart 6.3 or other applicable provisions of the FAR (e.g. FAR 
Part 8) or federal law;
    (4) Quality standards are prescribed, and met;
    (5) Performance or delivery is timely;
    (6) Files are documented to substantiate the judgments, decisions, 
and actions taken, including compliance with paragraphs (c)(2) and (3) 
of this section;
    (7) Requirements are written so as to encourage competition and to 
comply with regulations and federal policy for meeting acquisition goals 
such as performance-based contracting, HUBZone contractors, etc. The 
contracting officer will identify these programs to the program office.



Sec. 2901.603-71  Contracting Officer's Technical Representatives 
          (COTR).

    (a) At the time a COTR is to become responsible for a contract, task 
order, or delivery order, the contracting officer must issue a written 
letter of delegation informing the individual by name of his or her 
authority, including a delineation of applicable limitations and 
responsibilities. This applies to contracts awarded by the Department of 
Labor and those awarded by other agencies, such as Federal Supply 
Schedule Contracts or Economy Act transactions. Only the contracting 
officer cognizant of the contract action may make a COTR delegation. 
However, a contracting officer at any level above the cognizant 
contracting officer may sign the delegation letter, following his or her 
determination of its accuracy, completeness, and sufficiency.
    (b) The functions of a COTR typically may include such actions as 
inspecting, testing, and accepting contract line items, monitoring the 
contractor's performance, controlling Government-furnished property, 
reviewing and approving and/or recommending to the contracting officer 
approval/disapproval of vouchers/invoices, etc. An individual

[[Page 11]]

COTR may have only the duties specifically identified in a written 
delegation to him or her by name (i.e., COTR duties may not be delegated 
to a position) and has no authority to exceed them.
    (c) Contracting officers may not delegate to the COTR the following 
authorities:
    (1) The authority to issue task or delivery orders against a 
contract or any of the agreements defined under FAR 16.7;
    (2) The authority to change any of the terms and conditions of a 
contract or any of the agreements defined under FAR 16.7;
    (3) The authority to sign contracts or contract modifications;
    (4) The authority to write letters to the contractor that will 
affect the cost or schedule of the contract. The authority to otherwise 
write letters to a contractor must require the COTR to send a copy of 
the letters to the contracting officer for the contract file;
    (5) The authority to approve contractors' final invoices under cost-
reimbursement contracts. However, the COTR must make a final payment 
recommendation to the contracting officer; or
    (6) The authority to commit the Government to any adjustments to the 
price or cost of the contract or order (e.g., the contracting officer 
must sign all pre-negotiation and price negotiation memoranda including 
those which may be combined into one document for those adjustments 
valued at $100,000 or less).
    (d) The contracting officer's delegation must include the admonition 
that the COTR may be personally liable for unauthorized commitments. 
Contracting officer authority to sign or authorize contractual 
instruments must not be delegated through a COTR designation or by any 
means other than a contracting officer warrant.
    (e) The contractor must be notified of the COTR designation in 
writing and a copy of the COTR letter of appointment also must be 
provided to the contractor. The contracting officer must provide the 
COTR with a copy of the COTR designation notification that was sent to 
the contractor.
    (f) The letter delegating COTR authority must include the contract 
number, and must include the following information, at a minimum:
    (1) Contracting officer's and contract specialist's/administrator's 
name and telephone number;
    (2) COTR's specific authority and responsibilities;
    (3) COTR's specific limitations, including the admonition that the 
COTR may be personally liable for unauthorized commitments;
    (4) Detailed description of the types of files and the content of 
the files to be maintained by the COTR;
    (5) Reference to meeting applicable requirements for ethics, 
procurement integrity, no conflict of interest, and proper standards of 
conduct, including a copy of FAR Part 3, and other regulations, 
statutes, or directives governing these topics (e.g., 5 CFR Part 2635 
Standards of Conduct);
    (6) A requirement that the COTR acknowledge receipt and acceptance 
of the letter and return it to the contracting officer;
    (7) A description of the training required and information on 
obtaining such training.
    (g) Applicability. The eligibility requirements of this subpart must 
apply to all individuals who are designated by the contracting officer 
as COTRs.
    (h) Eligibility standards. To be determined eligible for an 
appointment as a DOL COTR, the following standards must be met:
    (1) The candidate must attend and successfully complete a minimum of 
a 16-hour basic COTR course; and
    (2) The candidate must attend a minimum of 1 hour of training 
specifically in procurement ethics, either through courses offered 
periodically by the Department of Labor, another federal agency's 
program, or a commercial vendor.
    (i) Limitations. Effective May 27, 2004, each COTR appointment made 
by the contracting officer must clearly state that the representative is 
not an authorized contracting officer and does not have the authority 
under any circumstances to:
    (1) Award, agree to award, or execute any contract, contract 
modification, notice of intent, or other form of binding agreement;

[[Page 12]]

    (2) Obligate, in any manner, the payment of money by the Government;
    (3) Make a final decision on any contract matter which is subject to 
the clause at FAR 52.233-1, Disputes; or
    (4) Terminate, suspend, or otherwise interfere with the contractor's 
right to proceed, or direct any changes in the contractor's performance 
that are inconsistent with or materially change the contract 
specifications.
    (j) Termination. (1) Termination of the COTR's appointment must be 
made in writing by a contracting officer and must give the effective 
date of the termination. The contracting officer must promptly modify 
the contract once a COTR termination notice has been issued. A 
termination notice is not required when the COTR's appointment 
terminates upon expiration of the contract.
    (2) COTRs may be terminated for reasons (not an exhaustive listing) 
such as exceeding their authorities and limitations, conflicts of 
interest, unethical conduct, failure to perform, reassignment/
resignation/retirement, and upon completion of the contract to which 
assigned.
    (k) Waivers. No individual may serve as a COTR on any contract 
without the requisite training and signed COTR certificate for the file. 
In the rare event that there is an urgent requirement for a specific 
individual to serve as a COTR and the individual has not successfully 
completed the required training, the HCA may waive the training 
requirements and authorize the individual to perform the COTR duties.



Sec. 2901.603-72  Administrative procurement management reviews.

    (a) The Senior Procurement Executive is responsible for performing 
administrative procurement reviews for each procurement office in the 
Department of Labor, except the Office of the Inspector General (OIG). 
The purpose of these reviews is to audit internal controls to ensure 
compliance with established procurement law, regulations, policies, 
procedures and applicable directives. The reviews are to emphasize the 
development and improvement of managerial controls and best practices.
    (b) The administrative procurement review system is a three-pronged 
approach that includes self-assessment, statistical data for validation, 
and flexible quality reviews and assessment techniques. This system is 
required to:
    (1) Evaluate the effectiveness and efficiency of office acquisition 
systems;
    (2) Assess the adequacy of policies, procedures and regulations 
governing the acquisition process; and
    (3) Identify and implement changes necessary to improve the systems.
    (c) The Senior Procurement Executive shall establish procurement 
review procedures, which will focus on:
    (1) Conformance with policies of the FAR, DOLAR and the Department 
of Labor Manual Series 2-800 and 2-900.
    (2) Conformance with federal reporting requirements for the 
Department of Labor.
    (3) Understanding of new department-wide or government-wide 
initiatives (e.g., E-Procurement).
    (4) Government-wide procedures established by the Office of 
Management and Budget.
    (d) HCAs are responsible for ensuring contracting activity 
compliance with law and regulations through the review and oversight 
process.

               Subpart 2901.7_Determinations and Findings



Sec. 2901.707  Signatory authority.

    A class justification for other than full and open competition must 
be approved in writing by the same approval authority as for individual 
justifications in accordance with FAR 6.304(a). The approval level must 
be determined by the estimated total value of the class.

                PART 2902_DEFINITIONS OF WORDS AND TERMS

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

                         Subpart 2.1_Definitions



Sec. 2902.101  Definitions.

    (a) Commonly used words and terms are defined in FAR subpart 2.1. 
This part 2902 gives DOL-specific meanings for some of these words and 
terms and

[[Page 13]]

defines other words and terms commonly used in the DOL acquisition 
process.
    (b) The following words and terms are used as defined in this 
subpart unless the context in which they are used clearly requires a 
different meaning, or a different definition is prescribed for a 
particular part or portion of a part:
    Competition Advocate The Competition Advocate for the Department of 
Labor is appointed by the Assistant Secretary for Administration and 
Management and is defined in FAR 6.5 and 2906.5. If the appointee is 
recused from a procurement action, the Assistant Secretary for 
Administration and Management may designate another official to act in 
that capacity.
    Contracting Activity means an agency or component office within the 
Department of Labor with specific responsibility for managing contract 
functions pursuant to one or more warrants signed by the Senior 
Procurement Executive (or the Office of the Inspector General for its 
contracting activity).
    Contracting Officer's Technical Representative means the individual 
appointed by the contracting officer to represent the Department of 
Labor's programmatic interests on a Department of Labor contract, task 
order, or delivery order. This individual is responsible to the 
contracting officer for overseeing receipt and acceptance of goods/
services by the Government, reporting on the contractor's performance, 
and approving/disapproving payment to the contractor. Authority is 
otherwise limited to giving technical direction to the contractor within 
the framework of the contract (see 2901.603-71). This position may go by 
other titles, such as: a technical point of contact (TPOC) or Contacting 
Officer's Representative (COR).
    Head of Agency (also called agency head), for the FAR and DOLAR 
only, means the Assistant Secretary for Administration and Management; 
except that the Secretary of Labor is the Head of Agency for acquisition 
actions, which by the terms of a statute or delegation must be performed 
specifically by the Secretary of Labor; the Inspector General is the 
Head of Agency in all cases for the Office of the Inspector General. 
Authority to act as the Head of Agency has been delegated to the 
Assistant Secretary for Employment and Training and the Assistant 
Secretary for Mine Safety and Health for their respective agencies. For 
purposes of the Economy Act (determinations and interagency agreements 
under FAR 17.5) only, the Employee Benefits Security Administration, 
Employment Standards Administration, Women's Bureau, Office of the 
Solicitor, Bureau of Labor Statistics, Office of Disability Employment 
Policy, and the Occupational Safety and Health Administration are 
delegated contracting authority.
    Head of Contracting Activity (HCA) means the official who has 
overall responsibility for managing the contracting activity, when the 
contracting activity has more than one person with a warrant issued by 
the Senior Procurement Executive. In the Department of Labor the 
following officials are the HCA for their respective organization:
    (i) For the Mine Safety and Health Administration, the Director, 
Administration and Management, MSHA.
    (ii) For the Employment and Training Administration, the Director, 
Office of Grants and Contract Management, ETA.
    (iii) For the Office of the Inspector General, the Director, 
Division of Finance and Administration, OIG.
    (iv) For the Bureau of Labor Statistics, the Director, Division of 
Administrative Services, BLS.
    (v) For the Office of the Assistant Secretary for Administration and 
Management and all other agencies not listed in this definition, the 
Director, Business Operations Center, OASAM.
    Senior Procurement Executive means the Deputy Assistant Secretary 
for Administration and Management as defined at FAR 2.101.

[69 FR 22991, Apr. 27, 2004]

PART 2903_IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF INTEREST

                        Subpart 2903.1_Safeguards

Sec.

Sec. 2903.101 Standards of conduct.

Sec. 2903.101-1 General.

[[Page 14]]


Sec. 2903.104 Procurement integrity.

Sec. 2903.104-3 Definitions.

Sec. 2903.104-5 Disclosure, protection, and marking of contractor bid or 
          proposal information and source selection information.

Sec. 2903.104-7 Violations or possible violations of standards of 
          conduct.

      Subpart 2903.2_Contractor Gratuities to Government Personnel


Sec. 2903.203 Reporting suspected violations of the Gratuities clause.

Sec. 2903.204 Treatment of violations.

  Subpart 2903.6_Contracts With Government Employees or Organizations 
                       Owned or Controlled by Them


Sec. 2903.601 Policy.

Sec. 2903.602 Exceptions.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                        Subpart 2903.1_Safeguards



Sec. 2903.101  Standards of conduct.



Sec. 2903.101-1  General.

    The statutory prohibitions and their application to DOL personnel 
are discussed in the Standards of Ethical Conduct for Employees of the 
Executive Branch, 5 CFR part 2635 and the supplemental DOL standards of 
conduct, 5 CFR part 5201. All DOL personnel involved in acquisitions 
must become familiar with these statutory prohibitions. Any questions 
concerning them must be referred to an Agency Ethics Official in the 
Office of the Solicitor. In addition to criminal penalties, the statutes 
provide that transactions entered into in violation of these 
prohibitions are voidable (18 U.S.C. 218). Any suspected violations must 
be reported promptly to the Office of the Inspector General.



Sec. 2903.104  Procurement integrity.



Sec. 2903.104-3  Definitions.

    Agency ethics official means the Solicitor or the Associate 
Solicitor for Legislation and Legal Counsel.



Sec. 2903.104-5  Disclosure, protection, and marking of contractor bid 
          or proposal information and source selection information.

    (a) Government employees serving in the following positions are 
authorized access to proprietary or source selection information, but 
only to the extent necessary to perform their official duties:
    (1) Personnel participating in technical evaluation panels (i.e., 
source selection board) or personnel evaluating an offeror's or bidder's 
technical or cost proposal under other competitive procedures, and 
personnel evaluating protests.
    (2) Personnel assigned to the contracting office.
    (3) The initiator of the procurement request (to include the 
official having principal technical cognizance over the requirement).
    (4) Small business specialists.
    (5) Personnel assigned to the Office of the Solicitor.
    (6) Personnel assigned to the Department of Labor's Division of Cost 
Determination and the Defense Contract Audit Agency.
    (7) Personnel assigned to the Division of Acquisition Management 
Services.
    (8) Members of the Procurement Review Board.
    (9) The Office of the Inspector General.
    (10) Other Government employees authorized by the contracting 
officer.
    (11) Supervisors, at any level, of the personnel listed in this 
paragraph (a).
    (b) The originator of information that may be source selection 
information must consult with the contracting officer or the procurement 
officer, who must determine whether the information is source selection 
information. DOL personnel responsible for preparing source selection 
information as defined in FAR 2.101 must assure that the material is 
marked with the legend in FAR 3.104-4 at the time the material is 
prepared.
    (c) Unless marked with the legend ``SOURCE SELECTION INFORMATION--
SEE FAR 3.104-4,'' draft specifications, purchase descriptions, and 
statements of work could erroneously be released during a market survey 
in order to determine the capabilities of

[[Page 15]]

potential competitive sources (see FAR 7.1 and FAR 10).



Sec. 2903.104-7  Violations or possible violations of standards of 
          conduct.

    (a) The Senior Procurement Executive is the individual designated to 
receive the contracting officer's report of violations.
    (b) The HCA or designee must refer all information describing an 
actual or possible violation to the Associate Solicitor for Legislation 
and Legal Counsel, the Senior Procurement Executive, and Inspector 
General staff.

      Subpart 2903.2_Contractor Gratuities to Government Personnel



Sec. 2903.203  Reporting suspected violations of the Gratuities clause.

    Contractor gratuities offered to Government personnel are subject to 
the restriction under the Standards of Ethical Conduct for Employees of 
the Executive Branch, 5 CFR part 2635.



Sec. 2903.204  Treatment of violations.

    Any suspected violations of FAR subpart 3.2 and the clause at FAR 
52.203-3, Gratuities, must be reported to the Office of the Inspector 
General. The authority to determine whether a violation of the 
Gratuities clause by the contractor, its agent, or another 
representative, has occurred and the appropriate remedies are delegated 
to the HCA.

  Subpart 2903.6_Contracts With Government Employees or Organizations 
                       Owned or Controlled by Them



Sec. 2903.601  Policy.

    In addition to restrictions placed on current Federal government 
employees, 18 U.S.C. 207 places some restrictions on contracting with 
former officers, employees, and elected officials of the executive and 
legislative branches. Under these prohibitions, contracts with former 
employees are prohibited for a period of one year from the date of 
severance of duties, unless an exception is granted as set forth in 
2903.602.



Sec. 2903.602  Exceptions.

    (a) In accordance with FAR 3.602, only when there is a most 
compelling reason to do so, is the Assistant Secretary for 
Administration and Management authorized to except a contract from the 
policy in FAR 3.601, after the Procurement Review Board and the agency 
ethics official have reviewed and recommended approval of the exception. 
However, when time does not permit, the Assistant Secretary for 
Administration and Management may unilaterally approve an exception. The 
exception and information supporting the exception must be provided to 
the contracting officer for their official records.
    (b) When an exception under this subpart is requested, it is 
submitted through the director of the cognizant program office to the 
HCA. In the procurement request, the director must describe the basis 
for the exception from the restrictions of FAR 3.601.
    (c) Except as allowed in paragraph (a) of this section, the 
Department of Labor may enter into a negotiated contract or an amendment 
to an existing contract with former employees of DOL within one year of 
separation (or with firms in which former employees are known to have a 
substantial interest) only after review and recommendation for approval 
by the agency ethics official, the Procurement Review Board, and written 
approval by the Assistant Secretary for Administration and Management.
    (d) Approval of a decision to grant an exception as provided in this 
section must be documented by a written findings and determination 
prepared by the requesting official for signature by the Assistant 
Secretary for Administration and Management. The determination and 
findings must document compliance with FAR 3.603, FAR 9.5 and DOLAR 
2909.5; specify the compelling reason(s) for award; and be placed in the 
contract files and the files of the Policy Review Board.

[[Page 16]]

                    PART 2904_ADMINISTRATIVE MATTERS

                Subpart 2904.8_Government Contract Files

Sec.

Sec. 2904.800-70 Contents of contract files.


Sec. Appendix A to Part 2904.

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

                Subpart 2904.8_Government Contract Files



Sec. 2904.800-70  Contents of contract files.

    (a) The reports listed in appendix A to this part are applicable to 
the Department of Labor.
    (b) HCAs must be responsible for establishing standard contract 
files for their contracting activities. The HCA must provide one or more 
representative contract files to the Director, Division of Acquisition 
Management Services, as requested for comment.

                         Appendix A to Part 2904

----------------------------------------------------------------------------------------------------------------
           Title of report                    Reference                 Date due               Submitted to
----------------------------------------------------------------------------------------------------------------
Report of Proposed Federal             29 CFR 1.4.............  Annually; 20-Aug.......  ESA Davis Bacon.
 Construction*.
Contractor Report of Government        FAR Chapter 45;........  Annually; 31-Oct.......  Business Operations
 Property*.                                                                               Center.
Major Preference Program Goals and     DLMS 2 1000............  By the 20th of each      Office of Small
 Achievements Report*.                                           month.                   Business Programs.
A-76 & FAIR Act Inventory............  FAIR ACT & OMB MEMO....  June 30th of each year.  Office of Competitive
                                                                                          Sourcing.
SF 294, Subcontracting Report for      FAR Subpart 19.7;......  Semi-annually;.........  Contracting Officer.
 Individual Contracts.
                                       SF 294.................  April 30; 30-Oct.......  Office of Small
                                                                                          Business Programs.
SF 295, Summary Subcontract Report...  FAR Subpart 19.7;......  Semi-annually March 30;  Contracting Officer.
                                                                 September 30.
Value Engineering Report*............  OMB Circular A-131.....  Annually; 7-Dec........  Office of Acquisition
                                                                                          and Management Support
                                                                                          Services.
Report on Federal Support to           Section 3(a)(7) of the   Annually; O/A 15-May...  Upon request From
 Universities, Colleges, and            National Science                                  National Science
 Nonprofit Institutions.                Foundation (NSF) Act.                             Foundation.
Procurement Forecast Initial and       Pub. L. 100-656;.......  Sept 15 (Init.) and Apr  Division of Acquisition
 Update.                                                         15 (Update).             Management Services.
----------------------------------------------------------------------------------------------------------------
For those reports with an (*), if there was no activity for the period being reported, a negative response for
  the period must be submitted to the requisitioning office.


[69 FR 22991, Apr. 27, 2004]

[[Page 17]]

                    SUBCHAPTER B_ACQUISITION PLANNING

                 PART 2905_PUBLICIZING CONTRACT ACTIONS

               Subpart 2905.1_Dissemination of Information

Sec.

Sec. 2905.101 Methods of disseminating information.

          Subpart 2905.2_Synopsis of Proposed Contract Actions


Sec. 2905.202 Exceptions.

                  Subpart 2905.4_Release of Information


Sec. 2905.402 General public.

Sec. 2905.403 Requests from Members of Congress.

Sec. 2905.404 Release procedures.

                   Subpart 2905.5_Paid Advertisements


Sec. 2905.501 Scope.

Sec. 2905.502 Authority.

Sec. 2905.503 Procedures.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

               Subpart 2905.1_Dissemination of Information



Sec. 2905.101  Methods of disseminating information.

    Contracting officers may only use the Government Point of Entry 
(GPE) for synopsis and dissemination of information concerning 
procurement actions. The Division of Acquisition Management Services 
manages the DOL account.

          Subpart 2905.2_Synopsis of Proposed Contract Actions



Sec. 2905.202  Exceptions.

    The Assistant Secretary for Administration and Management 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 must be submitted by the HCA for appropriate 
action including communication with the officials listed in FAR 
5.202(b).

                  Subpart 2905.4_Release Of Information



Sec. 2905.402  General public.

    (a) Unless the HCA determines that disclosure would be prejudicial 
to the interests of DOL, if a list of interested parties is collected in 
reference to a solicitation, it may be released upon request.
    (b) Any request for release of information is subject to the Freedom 
of Information Act and FAR 24.2.



Sec. 2905.403  Requests from Members of Congress.

    All proposed responses to Congressional inquiries must be prepared 
and forwarded for coordination with the Office of the Solicitor and the 
Office of Congressional and Intergovernmental Affairs to determine 
whether circumstances exist that will allow the release of additional 
information. In such instances, the Congressional requestor must be 
furnished an interim reply providing the information that is releasable. 
The interim reply must describe the problem that precludes release of 
any requested materials and describe generally what steps, if any, are 
being taken to make such information available.



Sec. 2905.404  Release procedures.

    HCAs are authorized to release long-range acquisition estimates 
under the conditions in FAR 5.404-1.

                   Subpart 2905.5_Paid Advertisements



Sec. 2905.501  Scope.

    This subpart provides policies and procedures for the procurement of 
paid advertising as covered by 5 U.S.C. 302, and 44 U.S.C. 3701, 3702, 
and 3703.



Sec. 2905.502  Authority.

    When it is deemed necessary to use paid advertisements in newspapers 
and trade journals, written authority for

[[Page 18]]

such publication may be obtained from the HCA or designee.



Sec. 2905.503  Procedures.

    (a) Prior to obtaining HCA approval, an agency should seek legal 
review to determine whether it has appropriate legal authority for 
advertising. The HCA exercising the authority delegated by 2905.502 must 
do so in accordance with the procedures set forth in FAR 5.503 and those 
in this section.
    (b) Requests for procurement of advertising must be accompanied by 
written authority to advertise or publish which sets forth justification 
and includes the names of newspapers or journals concerned, frequency 
and dates of proposed advertisements, estimated cost, and other 
pertinent information.

                   PART 2906_COMPETITION REQUIREMENTS

           Subpart 2906.3_Other Than Full and Open Competition

Sec.

Sec. 2906.301 Policy.

Sec. 2906.303 Justifications.

                  Subpart 2906.5_Competition Advocates


Sec. 2906.501 Requirement.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

           Subpart 2906.3_Other Than Full and Open Competition



Sec. 2906.301  Policy.

    (a) Department of Labor acquisitions must comply with the Department 
of Labor Manual Series (DLMS) 2, Chapter 830 (available by mail from the 
Director, Division of Acquisition Management Services, 200 Constitution 
Ave., NW., Washington, DC 20210-0001), or electronically from http://
www.dol.gov/oasam/programs/boc/prb.htm. Any proposed noncompetitive 
acquisition in excess of the simplified acquisition threshold must be 
fully justified and, if required by the DLMS, submitted to the DOL 
Procurement Review Board and approved by the Assistant Secretary for 
Administration and Management and, in the case of research and 
development contracts, also by the Assistant Secretary for Policy.
    (b) With the exception of contracts for advisory and assistance 
services or for research and development, the contracting officer has 
the authority below the simplified acquisition threshold to approve sole 
source contracts. The contracting officer is responsible for assuring 
that proposed acquisitions below the simplified acquisition threshold 
are in compliance with FAR and DOLAR requirements regarding competition.



Sec. 2906.303  Justifications.

    The authority of the agency head to determine that only specified 
make and models of technical equipment will satisfy the agency's need 
under FAR 6.302-1 is delegated to the HCA.

                   Subpart 2906.5_Competition Advocate



Sec. 2906.501  Requirement.

    The Assistant Secretary for Administration and Management must 
appoint a Competition Advocate for the Department of Labor. The 
appointment will be predicated on an understanding of the competition 
requirements in the FAR, and particularly small business programs.

                     PART 2907_ACQUISITION PLANNING

                    Subpart 2907.1_Acquisition Plans

Sec.

Sec. 2907.105 Contents of written acquisition plans.

Sec. 2907.107 Additional requirements for acquisitions involving 
          bundling.

         Subpart 2907.3_Contractor Versus Government Performance


Sec. 02907.300 Availability of inventory.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

[[Page 19]]

                    Subpart 2907.1_Acquisition Plans



Sec. 2907.105  Contents of written acquisition plans.

    The Department of Labor has implemented its acquisition planning 
system in compliance with FAR 7.1 and internal procedures provided in 
DLMS 2 section 834. The annual forecast is available for review from: 
http://www.apps.dol.gov/contract--grant/index.htm.



Sec. 2907.107  Additional requirements for acquisitions involving 
          bundling.

    The FAR requirements for justification, review, and approval of 
bundling of contract requirements also apply to an order from a Federal 
Supply Schedule contract, Governmentwide acquisition contracts, or other 
indefinite-delivery contracts if the requirements consolidated under the 
order meet the definition of ``bundling'' at FAR 2.101.

         Subpart 2907.3_Contractor Versus Government Performance



Sec. 2907.300  Availability of inventory.

    The Department of Labor's FAIR Act inventory of commercial 
activities performed by federal employees and inherently governmental 
functions may be accessed on the Internet at: www.dol.gov under ``Doing 
Business with DOL''.

           PART 2908_REQUIRED SOURCES OF SUPPLIES AND SERVICES

                 Subpart 2908.4_Federal Supply Schedules

Sec.

Sec. 2908.404 Using schedules.

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

                 Subpart 2908.4_Federal Supply Schedules



Sec. 2908.404  Using schedules.

    Small business considerations, procedures regarding both prime and 
subcontracting, and clearances specified in DOLAR 2919 apply to GSA 
Federal Supply Schedule Orders above the simplified acquisition 
threshold. Procedures to be followed may be modified by the Office of 
Small Business Program as appropriate in order to comply with GSA 
Federal Supply Schedule procedures (e.g., first tier contracts may be 
required to report their commercial subcontracting goals to the DOL 
Office of Small Business Programs).

[69 FR 22991, Apr. 27, 2004]

                   PART 2909_CONTRACTOR QUALIFICATIONS

           Subpart 2909.1_Responsible Prospective Contractors

Sec.

Sec. 2909.105 Procedures.

         Subpart 2909.4_Debarment, Suspension, And Ineligibility


Sec. 2909.402 Policy.

Sec. 2909.405 Effect of listing.

Sec. 2909.405-1 Continuation of current contracts.

Sec. 2909.406 Debarment.

Sec. 2909.406-1 General.

Sec. 2909.406-3 Procedures.

Sec. 2906.407 Suspension.

Sec. 2909.407-1 General.

   Subpart 2909.5_Organizational and Consultant Conflicts of Interest


Sec. 2909.503 Waiver.

Sec. 2909.506 Procedures.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

           Subpart 2909.1_Responsible Prospective Contractors



Sec. 2909.105  Procedures.

    Before awarding a contract, the contracting officer must make a 
written determination of the otherwise successful bidder's/offeror's 
responsibility in accordance with FAR 9.105. In addition to past 
performance information, the contracting officer must insure that the 
proposed contractor, and any subcontractor representing more than 
$25,000 in goods or services, does not appear in the ``List of Parties 
Excluded from Federal Procurement'' (available on the Internet at 
www.epls.gov). In addition, contracting officers should base

[[Page 20]]

their determination of contractor responsibility on a review of the 
company's ``Summary or Financial Report'' from Dun & Bradstreet 
(available on the Internet for a fee at http://www.dnb.com/).

         Subpart 2909.4_Debarment, Suspension, and Ineligibility



Sec. 2909.402  Policy.

    (a) 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. This subpart does not apply to Department 
of Labor debarments or suspensions issued for Davis-Bacon Act and Davis-
Bacon Related Act violations, Service Contract Act violations, 
Affirmative Action/Equal Employment Opportunity violations, or 
violations under other statutes administered by the Department of Labor.
    (b) Contracting activity officials shall have the following 
responsibilities. (1) Heads of contracting activity (HCA) shall:
    (i) Provide an effective system to ensure that contracting staffs 
consult the ``List of Parties Excluded from Federal Procurement and 
Nonprocurement Programs'' at http://epls.arnet.gov/ before soliciting 
offers, awarding or extending contracts, or consenting to subcontract.
    (ii) Consider debarment or suspension of a contractor when cause, as 
defined under FAR 9.406-2 for debarment and FAR 9.407-2 for suspension, 
is shown. Contracting officers should consult with their appropriate 
legal counsel before making a decision to initiate debarment or 
suspension proceedings. If a determination is made that available facts 
do not justify beginning debarment or suspension proceedings, the file 
should be documented accordingly. This determination is subject to 
reconsideration if warranted by new information.
    (iii) When the decision is made to initiate debarment and/or 
suspension of a contractor, the Senior Procurement Executive must 
prepare a notice in accordance with FAR 9.406-3(c) or FAR 9.407-3(c). 
The draft notice, along with the administrative file containing all 
relevant facts and analysis, must be forwarded to the Senior Procurement 
Executive, as the debarring and suspending official, following review by 
the activity's legal counsel.
    (2) The Senior Procurement Executive shall:
    (i) Review the notice and administrative file for sufficiency and 
provide for review by other DOL officials as considered appropriate;
    (ii) In accordance with FAR 9.406-3(c) or FAR 9.407-3(c), if it is 
determined that action is warranted, give the contractor prompt notice 
of the proposed debarment or suspension;
    (iii) Direct additional fact-finding as necessary when material 
facts are in dispute;
    (iv) Notify the contractor and any affiliates involved of the final 
decision to debar or suspend, including a decision not to debar or 
suspend, in accordance with FAR 9.406-3(c) and FAR 9.407-3(c);
    (v) Be responsible for accomplishing the actions required in FAR 
9.404(c) within five working days after debarring or suspending a 
contractor or modifying or rescinding such an action;
    (vi) Maintain Department-wide records of debarred or suspended 
contractors in accordance with FAR 9.404.



Sec. 2909.405  Effect of listing.

    (a) Contractors debarred, suspended, or proposed for debarment are 
excluded from receiving contracts, and agencies must not solicit offers 
from, award contracts to, or consent to subcontract with these 
organizations, unless the HCA determines in writing that there is a 
compelling reason for such action and the Assistant Secretary for 
Administration and Management approves such determinations.
    (b) Bids received from any listed contractor in response to an 
invitation for bids must be entered on the abstract of bids, and 
rejected unless the HCA determines in writing that there is a compelling 
reason to consider the bid and the Assistant Secretary for 
Administration and Management approves such action.
    (c) Proposals, quotations, or offers received from any listed 
contractor shall not be evaluated for award or included in the 
competitive range, nor

[[Page 21]]

shall discussions be conducted with a listed offeror during a period of 
ineligibility, unless the HCA determines in writing that there is a 
compelling reason to do so and the Assistant Secretary for 
Administration and Management approves such action.



Sec. 2909.405-1  Continuation of current contracts.

    (a) At the time an option is being exercised, contracting officers 
must review the List of Parties Excluded from Federal Procurement and 
Nonprocurement Programs. If a contractor or significant subcontractor is 
identified in the listing, the contracting officer must make a written 
determination either to proceed or to terminate the contract, and must 
explain the rationale for the decision. In accordance with FAR 9.405-1, 
contracting officers may continue contracts or subcontracts in existence 
at the time a contractor is suspended or debarred, unless it is 
determined that termination of the contract is in the best interest of 
the Government. The contracting officer must make such determination in 
writing, after consulting with the contracting officer's technical 
representative and legal counsel. The determination must be approved by 
the HCA.
    (b) Contracting activities must not renew or otherwise extend the 
duration of current contracts, or consent to subcontracts, with 
contractors debarred, suspended, or proposed for debarment, unless the 
HCA states, in writing, the compelling reasons for renewal or extension 
and the Assistant Secretary for Administration and Management approves 
such action.



Sec. 2909.406  Debarment.



Sec. 2909.406-1  General.

    (a) The Senior Procurement Executive 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) The Senior Procurement Executive is authorized to make an 
exception regarding debarment by another agency debarring official in 
accordance with the conditions in FAR 9.406-1(c).



Sec. 2909.406-3  Procedures.

    (a) Investigation and referral. Whenever a DOL employee knows a 
cause for debarment, as listed in FAR 9.406-2, the appropriate HCA 
affected must be notified. The contracting officer must consult with the 
Office of the Solicitor and the Office of the Inspector General, as 
appropriate, and submit a formal recommendation documenting the cause 
for debarment to the Senior Procurement Executive.
    (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 
Senior Procurement Executive must 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) Fact-finding proceedings. For actions listed under FAR 9.406-
3(b)(2), the Senior Procurement Executive must afford the contractor the 
opportunity to appear at an informal fact-finding proceeding as required 
by FAR 9.406-3(b)(2)(i). The proceeding must be conducted by the Office 
of Administrative Law Judges and must be held at a date and location 
reasonably convenient to the parties concerned. Subject to the 
provisions of 29 CFR part 18, entitled ``Rules Of Practice And Procedure 
For Administrative Hearings Before The Office Of Administrative Law 
Judges'', the contractor and any specifically named affiliates, may be 
represented by counsel or any duly authorized representative. Either 
party may call witnesses. The proceedings must 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 must be made 
available to the contractor under the conditions in FAR 9.406-
3(b)(2)(ii).
    (d) Decision and notice. The Senior Procurement Executive 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 must 
be provided to the contractor and any affiliates involved

[[Page 22]]

in accordance with the procedures in FAR 9.406-3(e).



Sec. 2909.407  Suspension.

    (a) The Senior Procurement Executive 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 2909.406-3.
    (b) The Senior Procurement Executive is authorized to make an 
exception, regarding suspension by another agency suspending official 
under the conditions in FAR 9.407-1(d).



Sec. 2909.407-1  General.

    (a) Investigation and referral. Whenever a DOL employee knows of a 
cause for suspension, as listed in FAR 9.407-2, the appropriate HCA 
affected must be notified. The HCA must consult with the Office of the 
Solicitor and the Office of the Inspector General, as appropriate, and 
submit a formal recommendation documenting the cause for suspension, to 
the Senior Procurement Executive.
    (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 Senior Procurement Executive 
will initiate suspension by taking the actions listed in FAR 9.407-3(c) 
and advising the contractor of DOL's rules under this subpart.
    (c) Fact-finding proceedings. For actions listed under FAR 9.407-
3(b)(2), the Senior Procurement Executive must afford the contractor the 
opportunity to appear at informal proceedings, as required by FAR 9.407-
3(b)(2)(i). Either party may call witnesses. The proceedings must 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 suspension.
    (d) Suspension decisions. The Senior Procurement Executive must make 
a final decision on suspension as prescribed in FAR 9.407-3(d). Notice 
of the decision must 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 and Consultant Conflicts of Interest



Sec. 2909.503  Waiver.

    (a) The Senior Procurement Executive is delegated authority by the 
Assistant Secretary for Administration and Management 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 best interest.
    (b) Requests for waivers must be made by the HCA to the PE. Each 
request must 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 9.5 to be waived.
    (c) In making determinations under this subpart the Senior 
Procurement Executive must request the opinion of the Office of the 
Solicitor, Division of Legislation and Legal Counsel.



Sec. 2909.506  Procedures.

    (a) If a prospective contractor disagrees with the decision of a 
contracting officer regarding an organizational conflict of interest and 
requests higher level review as referred to in FAR 9.506, the matter 
must be referred to the Office of the Solicitor, Associate Solicitor for 
Legislation and Legal Counsel, and the Director, Division of Acquisition 
Management Services.
    (b) Referrals must be made by the HCA concerned and include the 
contracting officer's decision and the position of the prospective 
contractor.

                        PART 2910_MARKET RESEARCH

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



Sec. 2910.002  Procedures.

    (a) In accordance with FAR 6.302-1(c), purchase descriptions must 
not specify a product, or specific feature of a product, peculiar to a 
manufacturer unless they are justified to the contracting officer in 
writing by the office initiating

[[Page 23]]

the purchase request. The justification must state that the product, or 
specific product feature, is essential to the Government's requirements 
and other similar products or features will not meet these requirements. 
This determination must be signed by a representative of the office 
originating the request and must accompany the purchase requisition 
submitted to the appropriate contracting office. If such a justification 
is not made, the contracting officer may assume that another make and 
model or a generic product could equally meet the DOL requirement.
    (b) In accordance with FAR 10.002(b), the requisitioning office must 
submit to the contracting officer information demonstrating that a 
variety of products from various commercial sources have been 
considered. This requirement is not necessary for required sources (See 
FAR 8.001). Orders to be placed against non-mandatory sources, such as 
the Federal Supply Schedules, or other Governmentwide Acquisition 
Contracts, should include product information concerning multiple 
sources based on research from www.contractdirectory.gov site or other 
sources. When documented in this manner, the contracting officer may 
rely on this information in developing a procurement strategy, or for 
documenting the comparison of catalogs or pricelists.

[69 FR 22991, Apr. 27, 2004]

                    PART 2911_DESCRIBING AGENCY NEEDS

     Subpart 2911.1_Selecting And Developing Requirements Documents

Sec.

Sec. 2911.103 Market acceptance.

                    Subpart 2911.5_Liquidated Damages


Sec. 2911.501 Policy.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

     Subpart 2911.1_Selecting And Developing Requirements Documents



Sec. 2911.103  Market acceptance.

    The authority of the Head of an Agency under FAR 11.103(a), to 
require offerors to demonstrate that the items offered have either 
achieved commercial market acceptance or been satisfactorily supplied to 
an agency under current or recent contracts for the same or similar 
requirements, and otherwise meet the item description, specifications, 
or other criteria prescribed in the public notice and solicitation, is 
delegated to the HCA.

                    Subpart 2911.5_Liquidated Damages



Sec. 2911.501  Policy.

    In accordance with FAR 11.501(d), the authority of the Head of 
Agency to recommend to the Department of Treasury, Commissioner, 
Financial Management Services, that the amount of a contractor's 
liquidated damages be waived or reduced in whole or in part, is 
delegated to the HCA.

                PART 2912_ACQUISITION OF COMMERCIAL ITEMS

  Subpart 2912.3_Solicitation Provisions and Contract Clauses for the 
                     Acquisition of Commercial Items

Sec.

Sec. 2912.302 Tailoring of provisions and clauses for the acquisition of 
          commercial items.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

  Subpart 2912.3_Solicitation Provisions and Contract Clauses for the 
                     Acquisition of Commercial Items



Sec. 2912.302  Tailoring of provisions and clauses for the acquisition 
          of commercial items.

    In accordance with FAR 12.302(c), a request for waiver to tailor 
terms inconsistent with customary commercial

[[Page 24]]

practice must be documented in a written justification by the 
contracting officer, and may be approved by the HCA on an individual or 
class basis.

               PART 2913_SIMPLIFIED ACQUISITION PROCEDURES

                        Subpart 2913.1_Procedures

Sec.

Sec. 2913.106-3 Soliciting competition, evaluation of quotations or 
          offers, award and documentation.

     Subpart 2913.2_Actions At Or Below The Micro-Purchase Threshold


Sec. 2913.201 General.

              Subpart 2913.3_Simplified Acquisition Methods


Sec. 2913.301 Governmentwide commercial purchase card.

Sec. 2913.307 Forms.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                        Subpart 2913.1_Procedures



Sec. 2913.106-3  Soliciting competition, evaluation of quotations or 
          offers, award and documentation.

    In accordance with FAR 13.106-3(b), simplified acquisition files 
must contain documentation of the factors considered in making an award 
in excess of the micro-purchase threshold. When other than the lowest 
responsive quotation from a responsible supplier is used as the basis 
for a purchase, the contracting officer must identify the basis (i.e., 
best value) of the award and include in the purchase file documentation 
of the reasons for rejecting any lower quotation and the name of the 
individual responsible for making the determination to award to other 
than the lowest priced quotation. The contracting officer has broad 
discretion in determining the award of a purchase order, which may be 
based on the factors listed in FAR 13.106-3. This requirement does not 
necessitate a separate determination if the procurement file contains 
preprinted standardized classifications for award.

     Subpart 2913.2_Actions at or Below the Micro-Purchase Threshold



Sec. 2913.201  General.

    The Government commercial purchase card must be used in preference 
to other methods of procurement for purchases up to the micro-purchase 
threshold. Other small purchase methods (blanket purchase agreements, 
third party drafts, and purchase orders) may be used in lieu of the 
Government purchase card when it is more cost-effective or practicable.

              Subpart 2913.3_Simplified Acquisition Methods



Sec. 2913.301  Governmentwide commercial purchase card.

    (a) The Government purchase card has far fewer requirements for 
documentation than other methods of purchasing. However, the same legal 
restrictions apply to credit card purchases that apply to other 
purchases using appropriated funds. If a purchase cardholder has 
questions about the lawfulness of a particular purchase, he or she must 
initially consult his or her appropriate office purchase card 
administrator, who will consult the Office of the Solicitor as 
necessary.
    (b) GAO decisions surrounding the concept of the ``availability of 
appropriations'' are often stated in terms of whether appropriated funds 
are or are not ``legally available'' for a given expenditure. 
Restrictions on the purposes for which appropriated funds may be used 
come from a variety of sources, including the DOL Appropriations Acts, 
and decisions of the Comptroller General and his predecessor, the 
Comptroller of the Treasury.
    (c) HCAs, administrative officers, and contracting officers are 
encouraged to review the GAO publication entitled Principles of Federal 
Appropriations Law. This document must be consulted when developing 
Office/Agency Purchase/Credit Card Program procedures. A number of the 
more common restrictions which ``accounting officers of the Government'' 
have had frequent occasion to consider and apply include, for example:

[[Page 25]]

    (1) Payment of attorney's fees;
    (2) Purchase of food, entertainment or recreation;
    (3) Payment of personal membership fees; and
    (4) Payment of personal expense items such as gifts for employees, 
and entry fees for contests.



Sec. 2913.307  Forms.

    (a) In accordance with FAR 13.307, contracting officers are 
encouraged to use the Standard Form (SF) SF-1449, when executing 
commercial acquisitions. Agencies may use forms other than the SF-1449 
and may print on those forms the clauses considered to be suitable for 
these purchases. In these instances, alternate forms should conform with 
the Standard Form to the maximum extent practicable.
    (b) The SF-30 is to be used to modify a purchase order.

[[Page 26]]

           SUBCHAPTER C_CONTRACTING METHODS AND CONTRACT TYPES

                        PART 2914_SEALED BIDDING

          Subpart 2914.4_Opening of Bids and Award of Contract

Sec.

Sec. 2914.404-1 Cancellation of invitations after opening.

Sec. 2914.407-3 Other mistakes disclosed before award.

Sec. 2914.408 Award.

Sec. 2914.408-1 General.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

          Subpart 2914.4_Opening of Bids and Award of Contract



Sec. 2914.404-1  Cancellation of invitations after opening.

    The authority of the agency head in FAR 14.404-1(c) and (f) to make 
a written determination to cancel an invitation for bids and reject all 
bids after opening and to authorize completion of the acquisition 
through negotiation is delegated to the HCA.



Sec. 2914.407-3  Other mistakes disclosed before award.

    (a) The authority to make determinations, as conferred by FAR 
14.407-3(e) is delegated to the HCA, without power of redelegation, but 
only after consultation with the Office of the Solicitor. All such 
determinations shall be documented in the contract file.
    (b) The following procedures must be followed when submitting 
doubtful cases of mistakes in bids to the Comptroller General for an 
advance decision, as provided by FAR 14.407-3(i).
    (1) Requests must be made by the HCA after consultation with the 
Office of the Solicitor.
    (2) Requests must be in writing, dated, signed by the requestor, 
addressed to the Comptroller General of the United States, General 
Accounting Office, Washington, DC 20548, and contain the following:
    (i) The name and address of the party requesting the decision; and
    (ii) A statement of the question to be decided, a presentation of 
all relevant facts, a statement of the requesting party's position with 
respect to the question, and copies of all pertinent records and 
supporting documentation.



Sec. 2914.408  Award.



Sec. 2914.408-1  General.

    (a) 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:
    (1) The specifications used in the invitation were not unduly 
restrictive;
    (2) Adequate competition was solicited and it could have been 
reasonably assumed that more than one bid would have been submitted;
    (3) The price is reasonable; and
    (4) The bid is otherwise in accordance with the invitation for bids.
    (b) Such a determination must be placed in the contract file.

                  PART 2915_CONTRACTING BY NEGOTIATION

                     Subpart 2915.4_Contract Pricing

Sec.

Sec. 2915.405-70 Determining fair and reasonable price.

 Subpart 2915.5_Preaward, Award, and Postaward Notifications, Protests, 
                              and Mistakes


Sec. 2915.508 Discovery of mistakes.

                  Subpart 2915.6_Unsolicited Proposals


Sec. 2915.604 Agency points of contact.

Sec. 2915.605 Content of unsolicited proposals.

Sec. 2915.606 Agency procedures.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

[[Page 27]]

                     Subpart 2915.4_Contract Pricing



Sec. 2915.405-70  Determining fair and reasonable price.

    (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 15.402), the contract action must be referred to the HCA 
for final resolution.
    (b) Resolution under paragraph (a) of this section must be 
documented and signed by the HCA and included in the contract file.

 Subpart 2915.5_Preaward, Award, and Postaward Notifications, Protests, 
                              and Mistakes



Sec. 2915.508  Discovery of mistakes.

    (a) The HCA is authorized to make the administrative determinations 
in FAR 15.508 after consultation with the Office of the Solicitor as 
required by FAR 14.407-4. This authority may not be redelegated.
    (b) The contracting officer must process a mistake and prepare a 
case file in accordance with the requirements of FAR 14.407-4(e)(2). The 
file must be submitted to the HCA for final determination.

                  Subpart 2915.6_Unsolicited Proposals



Sec. 2915.604  Agency points of contact.

    (a) HCAs shall be the preliminary contacts for unsolicited 
proposals. This responsibility may be delegated.
    (b) HCAs must establish within their agencies procedures for 
handling unsolicited proposals to ensure that unsolicited proposals are 
controlled, evaluated, safeguarded and disposed of in accordance with 
FAR 15.6.
    (c) The HCA must not forward for consideration an unsolicited 
proposal, if the proposal resembles an upcoming solicitation or a 
procurement identified in the current annual acquisition plan.



Sec. 2915.605  Content of unsolicited proposals.

    In addition to the contents required by FAR 15.605, unsolicited 
proposals for research should contain a commitment by the offeror to 
include cost-sharing or should represent a significant cost savings to 
the Department of Labor.



Sec. 2915.606  Agency procedures.

    When an unsolicited proposal is received by an official of the 
Department of Labor, the recipient of the proposal must forward it to 
the HCA. The HCA must address the requirements of FAR 15.604. The HCA 
must determine if there is an office(s) within the Department of Labor 
whose mission could be impacted by the proposal. If there is, the HCA 
must designate a recipient within that office as an ``assignee'', and 
take the following action:
    (a) Within seven (7) working days of receipt, the HCA must forward 
the proposal to the assignee along with instructions concerning the 
security, review and disposition of the document.
    (1) Inform the offeror of this transfer in writing (preferably by 
facsimile or other electronic means).
    (2) Within one (1) month of receipt of the unsolicited proposal by 
the assignee, the office receiving the proposal must determine the merit 
of the unsolicited proposal.
    (i) If the office finds insufficient merit to consider the 
unsolicited proposal further, then a letter will be sent to inform the 
offeror that their proposal will not be considered further, and is not 
being retained.
    (ii) If, after a comprehensive evaluation as defined by FAR 15.606-
2, the office finds merit in the proposal, it must consult with a 
Department of Labor contracting officer for direction in complying with 
FAR 15.607. If not excluded by a condition of FAR 15.607(a), a 
requisition may be prepared in accordance with FAR 15.607(b). If the 
requirement exceeds the simplified acquisition threshold inclusive of 
options then a request must be prepared for the Procurement Review Board 
in accordance with Department of Labor procedures stated in Department 
of Labor Manual Series 2-830 (available by mail from the Division of 
Acquisition Management Services).

[[Page 28]]

    (b) If within one (1) month of receipt (by the HCA) no assignee can 
be identified, the HCA must notify the offeror that the proposal is not 
being considered further.

                        PART 2916_CONTRACT TYPES

Sec.

Sec. 2916.000 Scope of part.

              Subpart 2916.5_Indefinite-Delivery Contracts


Sec. 2916.505 Ordering.

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


Sec. 2916.603-2 Application.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.



Sec. 2916.000  Scope of part.

    This part describes types of contracts that may be used in 
acquisitions. It further prescribes policies and procedures for 
implementing contracts.

              Subpart 2916.5_Indefinite-Delivery Contracts



Sec. 2916.505  Ordering.

    In accordance with FAR 16.505(b)(5), the Department of Labor Task 
Order and Delivery Order Ombudsman is the DOL Competition Advocate (see 
DOLAR part 2902).

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

    Task orders against DOL contracts and orders against multi-agency or 
Governmentwide contracts for services above the micropurchase threshold 
must comply with the provisions of FAR 16.505.



Sec. 2916.603-2  Application.

    The HCA 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.

                  PART 2917_SPECIAL CONTRACTING METHODS

Sec.

Sec. 2917.000 Scope of part.

                         Subpart 2917.2	Options


Sec. 2917.202 Use of options.

Sec. 2917.207 Exercising options.

      Subpart 2917.5_Interagency Acquisitions Under The Economy Act


Sec. 2917.500 Scope of subpart.

Sec. 2917.501 Definitions.

Sec. 2917.502 General.

Sec. 2917.503 Determinations and findings requirements.

Sec. 2917.504 Ordering procedures.

Sec. 2917.504-70 Signature authority and internal procedures.

    Authority: 5 U.S.C. 301; 31 U.S.C. 1535; 40 U.S.C. 486(c).

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.



Sec. 2917.000  Scope of part.

    This part implements polices and procedures stated in FAR part 17.

                         Subpart 2917.2_Options



Sec. 2917.202  Use of options.

    The HCA may, in unusual circumstances, approve option quantities in 
excess of the 50 percent limit prescribed in FAR 17.203(g)(2). The 
documentation required by FAR 17.205(a) must include a written 
justification to fully support the need for such action.



Sec. 2917.207  Exercising options.

    The contracting officer must use a standardized determination and 
finding before exercising an option in accordance with FAR 17.207(f).

      Subpart 2917.5_Interagency Acquisitions Under The Economy Act



Sec. 2917.500  Scope of subpart.

    This subpart establishes DOL policy and procedures to assure the 
appropriate and consistent use of interagency acquisitions under the 
Economy Act (31 U.S.C. 1535) as prescribed by FAR 17.5.

[[Page 29]]



Sec. 2917.501  Definitions.

    Interagency Acquisition means a procedure by which a DOL agency 
obtains needed supplies or services from, or through, another DOL agency 
or Federal agency, and appropriated funds are obligated.
    Interagency Agreement means the legal instrument used for an 
interagency acquisition to exchange funds or property between two DOL 
organizations or between a DOL agency and another Federal agency. This 
instrument is used when the DOL organization meets the definition of 
either the Requesting Agency or the Servicing Agency. ``Interagency 
Agreement'' and ``Interagency Acquisition'' does not include:
    (1) Agreements involving supplies and services acquired from or 
through mandatory sources, as described in FAR part 8;
    (2) Contracts with the Small Business Administration based upon 
Section 8(a) of the Small Business Act or a HUBZone small business under 
the Historically Underutilized Business Zone (HUBZone) Act of 1997;
    (3) Cooperative agreements and grants; or
    (4) Any agreement or acquisition where a statute authorizes 
exception.
    Military Interdepartmental Procurement Request (MIPR) means a type 
of interagency agreement used to place orders for supplies and non-
personal services with a military department.
    Requesting Agency means the Federal agency that needs the supplies 
or services, and is obligating the funds to provide for the costs of 
performance.
    Servicing Agency means the Federal agency which is providing the 
supplies or performing the services, directly or indirectly, and will be 
receiving the funds to provide for the costs of performance.



Sec. 2917.502  General.

    (a) Policy. It is the policy of DOL to require that interagency 
agreements are written to assure that the obligation of fiscal year 
funds is valid, that statutory authority exists to obtain or perform the 
stated requirements, that the stated requirements are consistent with 
DOL's mission responsibilities, and that each agreement complies with 
applicable laws and regulations.
    (b) Applicability. The provisions of this subpart apply to 
interagency acquisitions and agreements under the Economy Act.
    (c) Appropriations principles. The appropriate use of interagency 
acquisitions embodies several principles of Federal appropriations law.
    (1) In order to record a valid obligation of appropriations, 31 
U.S.C. 1501 imposes the requirements that interagency agreements be:
    (i) A binding written agreement for specific goods or services to 
meet an existing bona fide need;
    (ii) For a purpose authorized by law; and
    (iii) Executed and obligated by the receiving agency before the 
expiration of available funds.
    (2) The Economy Act authorizes interagency acquisitions and provides 
for payment in advance, as well as reimbursement to the appropriation 
account to which the performance costs have been charged. The Economy 
Act further authorizes the servicing agency, as an alternative to 
fulfilling the requirement through internal resources, to obtain the 
needed supplies or services by contract.
    (3) An agreement entered into under the Economy Act is recorded as 
an obligation by the requesting agency the same as a contract. However, 
under the Economy Act, the obligated appropriations must be deobligated 
upon the date of ``expiration'' of the appropriation account to the 
extent that the servicing agency has not incurred obligations through 
charged costs or under a contract.
    (4) Within DOL, the DOL agencies have a number of statutory 
authorities available for entering into interagency agreements. Each DOL 
agency, in consultation with the Office of the Solicitor, must be 
responsible for determining those authorities, as well as constraints 
applicable to the use of advance payments and contractors, and set-up 
procedures.



Sec. 2917.503  Determinations and findings requirements.

    Applicability. Before the execution of an interagency agreement 
under the

[[Page 30]]

Economy Act, the contracting officer, or other authorized official, must 
sign the determination required in FAR 17.503 and 31 U.S.C. 1535.



Sec. 2917.504  Ordering procedures.

    (a) Requests for the processing of interagency agreements must be 
submitted to the procurement office serving the requisitioning office.
    (b) The procurement request must state whether the work is to be 
performed by a DOL organization, a Federal agency other than DOL, or 
through one of these entities by a contractor.
    (c) Where the Economy Act is to be used as the authority for an 
interagency acquisition, the requisitioning office must include the 
facts which support the conclusion that it is more economical to obtain 
the required supplies or services through the proposed interagency 
agreement, rather than by direct contract with a commercial concern. 
Current market prices or recent procurement prices may be used in this 
process.
    (d) Orders placed under interagency agreements may take any form 
that is legally sufficient and reflects the agreement of the parties.
    (e) The contracting officer, or authorized official, must assure 
compliance with the ordering procedures and payment provisions 
prescribed in FAR 17.504 and FAR 17.505, and require inclusion of the 
following provisions in all interagency agreements and/or orders placed 
against them:
    (1) Legislative authority;
    (2) Period of performance;
    (3) Dollar amount of agreement;
    (4) Billing provisions, including the name and address of the 
following offices:
    (i) Designated office to receive the required deliverables; and
    (ii) Designated office to receive billings and process payments;
    (5) Modification and termination provisions; and
    (6) Other provisions, as appropriate.
    (f) The contracting officer must assure that each interagency 
agreement or order placed against it includes a reference number 
assigned by each of the parties. Such numbers must be assigned in 
accordance with the existing procedures established by the respective 
organizations.
    (g) Modifications to existing interagency agreements may be 
accomplished through the use of an SF 30, Amendment of Solicitation/
Modification of Contract, or through any other format acceptable to the 
parties.



Sec. 2917.504-70  Signature authority and internal procedures.

    (a) A DOL contracting officer, HCA, Agency Head, or another official 
designated by the Assistant Secretary for Administration and Management 
in accordance with FAR 17.503(c), must sign interagency agreements and/
or orders placed against them which will result in a procurement action 
by the requesting or servicing agency.
    (b) Internal procedures (DLMS 3-1700) require DOL Agency Heads to 
provide notice to the Director, Executive Secretariat of the signing of 
all new Federal Interagency Agreements and deleting expired agreements.
    (c) Agencies should be aware that, in addition to the requirements 
of this subpart, there are various other internal Departmental 
procedures that apply to various types of agreements. Agencies should 
consult with the Office of the Solicitor and the Office of the Assistant 
Secretary for Administration and Management, as appropriate.

[[Page 31]]

                   SUBCHAPTER D_SOCIOECONOMIC PROGRAMS

                          PART 2918 [RESERVED]

   PART 2919_SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS CONCERNS

Sec.

Sec. 2919.000 Scope of part.

                         Subpart 2919.2_Policies


Sec. 2919.201 General policy.

Sec. 2919.202 Specific policies.

Sec. 2919.202-1 Encouraging small business participation in 
          acquisitions.

Sec. 2919.202-2 Locating small business sources.

              Subpart 2919.5_Set-Asides for Small Business


Sec. 2919.502 Setting aside acquisitions.

Sec. 2919.505 Rejecting Small Business Administration recommendations.

        Subpart 2919.7_The Small Business Subcontracting Program


Sec. 2919.704 Subcontracting plan requirements.

Sec. 2919.705-1 General support for the program.

Sec. 2919.705-5 Awards involving subcontracting plans.

Sec. 2919.705-6 Post-award responsibilities of the contracting officer.

Sec. 2919.706 Responsibilities of the cognizant administrative 
          contracting officer.

 Subpart 2919.8_Contracting with the Small Business Administration (The 
                              8(a) Program)


Sec. 2919.812 Contract administration.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.



Sec. 2919.000  Scope of part.

    This part implements FAR part 19 and small business programs at the 
Department of Labor.

                         Subpart 2919.2_Policies



Sec. 2919.201  General policy.

    (a) It is the policy of the Department of Labor to provide maximum 
practicable opportunities to small businesses in acquisitions.
    (b) Management responsibilities for small and disadvantaged business 
utilization are the responsibility of the Director, Office of Small 
Business Programs. This individual is responsible for performing all 
functions and duties prescribed in FAR 19.2 including appointing, as 
prescribed in FAR 19.201(d)(8), a small business specialist (SBS) for 
each contract office. The Department of Labor Manual Series (DLMS), 
Chapter 2 1000, addresses the implementation of the preference programs 
in procurement including HUBZone, Subcontracting Plans, Standard Form 
294 (Subcontracting Report for Individual Contracts), and the report, 
Standard Form 295 (Summary Subcontracting Report) submission, et al.
    (c) All DOL procurements over the simplified acquisition threshold, 
whether being conducted via open market or by ordering from a pre-
existing contract vehicle such as GSA Schedule, must be reviewed and 
receive a recommendation by the Office of Small Business Programs, the 
Department of Labor's Office of Small Disadvantaged Business 
Utilization, prior to being advertised. The Acquisition Screening and 
Review Form DL-1-2004 shall be used for this purpose and the statement 
of work and market survey documentation shall be submitted to Office of 
Small Business Programs with the request for review.



Sec. 2919.202  Specific policies.

    Contracting officers, administrative officers and program management 
shall ensure that procurements are structured and conducted to afford 
small businesses the maximum practicable opportunity to participate in 
DOL's prime and subcontracts. Administrative officers will review 
requisitions that will result in an award of $2 million or more using 
available information to certify whether the acquisition would 
constitute a ``bundled contract'' under the definition provided in FAR 
2.101 in accordance with procedures established by the Office of Small 
Business Programs. Each certification will be submitted to the Division 
of Acquisition Management Services, and included with the requisition

[[Page 32]]

to the contracting officer. Reports will be provided to the Office of 
Small Business Programs.



Sec. 2919.202-1  Encouraging small business participation in 
          acquisitions.

    During the performance of a contract, the contracting officer will 
consider performance against subcontracting plan goals, objectives and 
planned efforts before exercising an optional period of performance. The 
contracting officer will document the evaluation of the contractor's 
actual performance using SF-294 data compared to their approved 
subcontracting plan goals.



Sec. 2919.202-2  Locating small business sources.

    Any procurement conducted on an unrestricted basis will include 
solicitations to small businesses of each category with legislatively 
established government-wide procurement goals (e.g., small, small 
disadvantaged, women-owned small, HUBZone and service disabled veteran-
owned small businesses) to the extent practicable.

              Subpart 2919.5_Set-Asides for Small Business



Sec. 2919.502  Setting aside acquisitions.

    Contracting officers will conduct market surveys specifically to 
determine whether procurements should be conducted via 8(a) procedures, 
HUBZone procedures or as small business set-asides. If a reasonable 
expectation exists that at least two responsible small businesses may 
submit offers at fair market prices (three responsible small businesses 
in procurements via GSA Federal Supply Schedule), then the procurement 
will be set aside for small business. Market surveys will be documented 
in all procurement actions not reserved for small businesses.



Sec. 2919.505  Rejecting Small Business Administration recommendations.

    When the SBA Procurement Center Representative appeals a ``rejection 
of an SBA recommendation'' as referenced in FAR 19.505(b) and (c), the 
appeal must be referred to the Assistant Secretary for Administration 
and Management who is authorized to make a final decision.

        Subpart 2919.7_The Small Business Subcontracting Program



Sec. 2919.704  Subcontracting plan requirements.

    Contracting Officers will refer subcontracting plans to the Office 
of Small Business Programs for review and recommendation before awarding 
contracts that require subcontracting plans. Contracting officers will 
document the substance of any agreement with the contractor that permits 
performance at less than the stated goals recommended by the Office of 
the Small Business Programs.



Sec. 2919.705-1  General support for the program.

    Contracting officers will make available a significant number of 
award points for quality of the subcontracting plan. High-rated 
subcontract plans will incorporate the highest yield of subcontracting 
to all categories of small businesses when compared to DOL or separately 
negotiated agency subcontracting goals on a dollar and percentage basis. 
Conversely, prime small businesses will be compared favorably to large 
businesses with subcontract goals, but may also be given the maximum 
score for qualifying under multiple small business categories. 
Contracting officers may also make available a significant number of 
award points for performance against previous subcontracting plan goals 
and efforts to achieve those goals.



Sec. 2919.705-5  Awards involving subcontracting plans.

    The Office of Small Business Programs will review subcontracting 
plans and SF 295 submissions for performance against business goals 
negotiated between the Department of Labor and the Small Business 
Administration.



Sec. 2919.705-6  Post-award responsibilities of the contracting officer.

    (a) Even when a subcontracting plan was submitted to and approved by 
the Office of Small Business Programs before award, the contracting 
officer upon award, amendment, or significant

[[Page 33]]

modification of a contract, must forward to the Director, Office of 
Small Business Programs, a copy of the subcontracting plan that was 
incorporated into a contract or contract modification.
    (b) Each contracting activity must maintain a list of active prime 
contracts containing subcontracting plans.



Sec. 2919.706  Responsibilities of the cognizant administrative 
          contracting officer.

    Contracting officers must collect annual and semiannual 
subcontracting reports from contractors with established subcontracting 
plans. Copies of the report, Standard Form 294 (Subcontracting Report 
for Individual Contracts), and the report, Standard Form 295 (Summary 
Subcontracting Report), must be forwarded to the Director, Office of 
Small Business Programs, not later than the 30th day of the month 
following the close of the reporting period. If the contractor has not 
met the goals for the reporting period, the contracting officer will 
provide an acknowledgement to the contractor and request corrective 
action to be taken. If goals are not met in subsequent periods, the 
contracting officer must consider factors that would demonstrate a good 
faith effort, and take appropriate action including assessing liquidated 
damages in accordance with FAR 52.219-16, and/or not exercising 
subsequent option periods.

 Subpart 2919.8_Contracting with the Small Business Administration (The 
                              8(a) Program)



Sec. 2919.812  Contract administration.

    (a) Contracting officers, or designees, must conduct periodic 
evaluations of 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, must be referred to 
the Office of Small Business Programs for subsequent review and 
discussion with the appropriate SBA official.
    (b) The Office of Small Business Programs and the SBA should be 
notified at least 45 days before initiating final action to terminate an 
8(a) contract.

                       PARTS 2920	2921 [RESERVED]

     PART 2922_APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS

                   Subpart 2922.1_Basic Labor Policies

Sec.

Sec. 2922.101-3 Reporting labor disputes.

Sec. 2922.101-4 Removal of items from contractor's facilities affected 
          by work stoppages.

Sec. 2922.103-4 Approvals.

               Subpart 2922.8_Equal Employment Opportunity


Sec. 2922.802 General.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                   Subpart 2922.1_Basic Labor Policies



Sec. 2922.101-3  Reporting labor disputes.

    Potential or actual labor disputes that may interfere with contract 
performance must be reported by the contracting activity to the Office 
of the Solicitor for legal advice or assistance. It may also become 
necessary to seek advice or assistance from the National Office of the 
Federal Mediation and Conciliation Service, 2100 K Street, NW., 
Washington, DC 20006, or other mediation agencies.



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

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



Sec. 2922.103-4  Approvals.

    The ``agency approving official'' as identified in FAR 22.103-4(a) 
and (b) is a manager, supervisor, or executive responsible for the 
contracting officer's technical representative (see 2901.603-71).

[[Page 34]]

               Subpart 2922.8_Equal Employment Opportunity



Sec. 2922.802  General.

    Executive Order 11246, as amended, sets forth the Equal Opportunity 
clause and requires that the Secretary of Labor promote full realization 
of equal opportunity for all persons regardless of race, color, 
religion, sex, or national origin. No DOL contracting officer may 
contract for supplies or services in a manner to avoid applicability of 
the requirements of E.O. 11246.

  PART 2923 ENVIRONMENT, ENERGY AND WATER EFFICIENCY, RENEWABLE ENERGY 
       TECHNOLOGIES, OCCUPATIONAL SAFETY, AND DRUG-FREE WORKPLACE

    Subpart 2923.2_Energy And Water Efficiency and Renewable Energy.

Sec.

Sec. 2923.271 Purchase and use of environmentally sound and energy 
          efficient products and services.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c); 42 U.S.C. 8262(g).

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

     Subpart 2923.2_Energy And Water Efficiency and Renewable Energy



Sec. 2923.271  Purchase and use of environmentally sound and energy 
          efficient products and services.

    The Department will implement policies and procedures that comply 
with the intent and specific goals mandated by the following statutes 
and executive orders and any other issuances as may be mandated to 
maximize cost efficient energy management:
    (a) The GSA Federal Supply Schedule Products Guide identifies the 
recycled and recycled-content items available in the GSA FSS supply 
system. Copies of the guide may be obtained, without cost, from the GSA, 
Centralized Mailing List Service, P.O. Box 6477, Fort Worth, Texas, 
76115, or by calling (817) 334-5215. See also GSA Advantage! at: 
www.gsaadvantage.gov.
    (b) Executive Order 13123, Greening the Government Through Efficient 
Energy Management, dated June 8, 1999, requires agencies to select for 
procurement those energy consuming goods or products which are the most 
life cycle cost-effective (see FAR 7.101). Green purchasing includes the 
acquisition of recycled content products, environmentally preferable 
products and services, biobased products, energy- and water-efficient 
products, alternate fuel vehicles, and products using renewable energy.
    (1) To the extent practicable, each program official must require 
vendors of goods or products to provide appropriate data that can be 
used to assess the life cycle cost of each good or product, including 
building energy system components, lighting systems, office equipment 
and other energy using equipment.
    (2) In preparing solicitations and evaluating and selecting offers 
for award, contracting personnel must consider the life cycle cost data 
along with other relevant evaluation criteria. If life cycle costing is 
not used, the contract file must be documented to reflect the rationale 
for not obtaining and evaluating the data.
    (c) Executive Order 13101, Greening the Government Through Waste 
Prevention, Recycling, and Federal Acquisition, dated September 14, 
1998, requires agencies to comply with executive branch policies for the 
acquisition and use of environmentally preferable products and services 
and implement cost-effective procurement preference programs favoring 
the purchase of these products and services.
    (d) Executive Order 13148, Greening the Government Through 
Leadership in Environmental Management Systems, dated April 21, 2000. 
This Executive Order assists with developing an environmental management 
system. The following sources are provided as references for the subject 
matter indicated:
    (1) The Office of the Federal Environmental Executive provides 
references to all greening the Government executive orders, web links to 
other relevant cites, and information on biobased and bioenergy 
products. http://www.ofee.gov/gp/gp.htm.

[[Page 35]]

    (2) The Comprehensive Procurement Guidelines program is part of the 
Environmental Protection Agency's continued effort to promote the use of 
materials recovered from solid waste. This listing provides information 
on products made from recycled materials, such as the carpeting and 
insulation used in office buildings, or reams of office paper. 
www.epa.gov/cpg.
    (3) ENERGY STAR is a government-backed program helping businesses 
and individuals protect the environment through superior energy 
efficiency. See also http://www.eere.energy.gov/femp/procurement. 
www.energystar.gov.
    (4) The Alternative Fuels Data Center is a one-stop shop for agency 
alternative fuel and vehicle information needs. http://
www.afdc.nrel.gov.
    (5) The Defense Logistics Agency has created an electronic mall for 
buying environmentally preferable products. www.emall.dla.mil.

                       PARTS 2924	2927 [RESERVED]

[[Page 36]]

              SUBCHAPTER E_GENERAL CONTRACTING REQUIREMENTS

                      PART 2928_BONDS AND INSURANCE

          Subpart 2928.2_Sureties and Other Security for Bonds

Sec.

Sec. 2928.204 Alternatives in lieu of corporate or individual sureties.

                        Subpart 2928.3_Insurance


Sec. 2928.305 Overseas workers' compensation and war hazard insurance.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

          Subpart 2928.2_Sureties and Other Security for Bonds



Sec. 2928.204  Alternatives in lieu of corporate or individual sureties.

    Upon receipt of any of the types of securities listed in FAR 28.20l 
or FAR 28.203, the contracting officer must verify the validity of the 
security and coordinate the retention of the security with the Chief 
Financial Officer. Contracting officers may obtain access to Department 
of Treasury Circular 570 through the Internet at http://
www.fms.treas.gov/c570/index.html.

                        Subpart 2928.3_Insurance



Sec. 2928.305  Overseas workers' compensation and war hazard insurance.

    The authority of the Agency Head to recommend to the Secretary of 
Labor waiver of the applicability of the Defense Base Act (42 U.S.C. 
1651, et seq.) to any contract, subcontract, work location, or 
classification of employees, is delegated to the HCA.

                             PART 2929_TAXES

                         Subpart 2929.1_General

Sec.

Sec. 2929.101 Resolving tax problems.

                  Subpart 2929.3_State and Local Taxes


Sec. 2929.303 Application of state and local taxes to Government 
          contractors and subcontractors.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                         Subpart 2929.1_General



Sec. 2929.101  Resolving tax problems.

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

                  Subpart 2929.3_State and Local Taxes



Sec. 2929.303  Applications of state and local taxes to Government 
          contractors and subcontractors.

    (a) Contractors may only be treated as agents of the Government for 
the purposes set forth in FAR 29.303(a) upon the written review and 
approval of the Assistant Secretary for Administration and Management.
    (b) Requests for approval under paragraph (a) of this section must 
be submitted by the HCA through the Office of the Solicitor, to the 
Division of Acquisition Management Services, for further action.

           PART 2930_COST ACCOUNTING STANDARDS ADMINISTRATION

                 Subpart 2930.2_CAS Program Requirements

Sec.

Sec. 2930.201-5 Waiver.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                 Subpart 2930.2_CAS Program Requirements



Sec. 2930.201-5  Waiver.

    (a) The HCA is authorized to waive CAS requirements as provided in 
FAR 30.201-5.

[[Page 37]]

    (b) Requests for waivers under paragraph (a) of this subsection must 
be prepared by the contracting officer as prescribed in FAR 30.201-5(e) 
and submitted to the HCA.

            PART 2931_CONTRACT COST PRINCIPLES AND PROCEDURES

                      Subpart 2931.1_Applicability

Sec.

Sec. 2931.101 Objectives.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                      Subpart 2931.1_Applicability



Sec. 2931.101  Objectives.

    Individual and class deviations from cost principles in FAR part 31 
must be processed as prescribed in DOLAR subpart 2901.4.

[69 FR 22991, Apr. 27, 2004]

                      PART 2932_CONTRACT FINANCING

        Subpart 2932.4_Advance Payments for Non-Commercial Items

Sec.

Sec. 2932.402 General.

Sec. 2932.407 Interest.

                    Subpart 2932.7_Contract Funding.


Sec. 2932.703 Contract funding requirements.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

        Subpart 2932.4_Advance Payments for Non-Commercial Items



Sec. 2932.402  General.

    The HCA is authorized to approve determinations and findings as well 
as contract terms for advance payments. The contracting officer must 
submit a recommendation for approval or disapproval of the contractor's 
request to the HCA.



Sec. 2932.407  Interest.

    The HCA may authorize advance payments without interest pursuant to 
FAR 32.407.

                     Subpart 2932.7_Contract Funding



Sec. 2932.703  Contract funding requirements.

    (a) Except in unusual circumstances, the contracting office may not 
issue solicitations until an approved procurement request (PR), 
containing a certification that funds are available, has been received. 
However, the contracting office may take all necessary actions up to the 
point of contract obligation before receipt of the PR certifying that 
funds are available when:
    (1) The Assistant Secretaries, Inspector General, Bureau Chief, 
Deputy Under Secretary, Solicitor of Labor, Commissioner, or Director of 
the Women's Bureau certifies that such action is necessary to meet 
critical program schedules for their program area;
    (2) The Budget Officer certifies that program authority has been 
issued and funds to cover the acquisition will be available before the 
date set for receipt of proposals;
    (3) The solicitation includes the clause at FAR 52.232-18, 
Availability of Funds.
    (b) The contracting office may not open bids/close solicitations 
until a PR, either planning or final, has been received that contains a 
certification of fund availability. Only the project or program official 
with the authority to commit funds from the agency that initiated the PR 
may make that written certification.
    (c) The project or program office that initiated the PR is 
responsible for obtaining required certifications.

                PART 2933_PROTESTS, DISPUTES, AND APPEALS

                         Subpart 2933.1_Protests

Sec.

Sec. 2933.102 General.

Sec. 2933.103 Protests to the agency.

Sec. 2933.104 Protests to GAO.

                   Subpart 2933.2_Disputes And Appeals


Sec. 2933.203 Applicability.

[[Page 38]]


Sec. 2933.209 Suspected fraudulent claims.

Sec. 2933.211 Contracting officer's decision.

Sec. 2933.212 Contracting officer's duties upon appeal.

Sec. 2933.213 Obligation to continue performance.

Sec. 2933.270 Department of Labor Board of Contract Appeals.

    Authority: 5 U.S.C. 301; 40 U.S.C. 486(c); E.O. 12979, 60 FR 55171, 
3 CFR, 1995 Comp., p. 417.

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                         Subpart 2933.1_Protests



Sec. 2933.102  General.

    (a) The Division of Acquisition Management Services, 200 
Constitution Ave., NW., S-1513 B, Washington, DC 20210-0001, telephone 
(202) 693-7285, facsimile (202) 693-7290 (or the Office acting in that 
capacity), is responsible for coordinating procurement protests filed 
with the General Accounting Office.
    (b) The authority of the Assistant Secretary for Administration and 
Management under FAR 33.102(b) to determine that a solicitation, 
proposed award, or award does not comply with the requirements of law or 
regulation may be delegated to the HCA.



Sec. 2933.103  Protests to the agency.

    (a) In accordance with Executive Order 12979, the following 
procedures apply to agency protests:
    (1) The filing time frames in FAR 33.103(e) apply to agency 
protests. An agency protest is filed when the protest complaint is 
received at the location the solicitation designates for serving 
protests; or if none is designated, when filed with a contracting 
officer or HCA.
    (2) An interested party filing an agency protest may request either 
that the contracting officer or the Agency Protest Official decide the 
protest. The ``Agency Protest Official'' is an individual above the 
level of the contracting officer and designated by the Assistant 
Secretary for Administration and Management, such as the Competition 
Advocate. The deciding official, whether a contracting officer or Agency 
Protest Official, must work in consultation with the Office of the 
Solicitor to resolve the protest.
    (3) In addition to the information required by FAR 33.103(d)(2), the 
protest must:
    (i) Indicate that it is a protest to the agency;
    (ii) Be contemporaneously filed with the contracting officer;
    (iii) State whether the protestor chooses to have the contracting 
officer or the Agency Protest Official decide the protest. If the 
protest is silent on this matter, the contracting officer will decide 
the protest.
    (b) ``Interested Party'' means an actual or prospective offeror 
whose direct economic interest would be affected by the award of a 
contract or by the failure to award a contract.
    (c) If the Agency Protest Official is chosen by the protestor to 
decide the protest, this is an alternative to a decision by the 
contracting officer, not an appeal. The Agency Protest Official will not 
consider appeals from a contracting officer's decision on an agency 
protest.
    (d) The deciding official should consider conducting a scheduling 
conference with the protestor within five (5) days after the protest is 
filed. The scheduling conference will establish deadlines for written 
arguments in support of the agency protest and for agency officials to 
present information in response to the protest issues. Alternative 
Dispute Resolution techniques will be considered if determined 
appropriate by the deciding official.
    (e) Oral conferences may take place either by telephone or in 
person. Other parties may attend at the discretion of the deciding 
official.
    (f) Apart from its protest document, the protestor will be given 
only one opportunity to support or explain in writing the substance of 
its protest. Department of Labor procedures do not provide for any 
discovery. The deciding official has discretion to request additional 
information from either the agency or the protestor. However, the 
deciding official will normally decide protests on the basis of 
information provided by the protestor and the agency.
    (g) The preferred practice is to resolve protests through informal 
oral discussion.

[[Page 39]]

    (h) An interested party may represent itself or be represented by 
legal counsel. The Department of Labor will not reimburse the protester 
for any legal fees or costs related to the agency protest.
    (i) If an agency protest is received before contract award, the 
contracting officer may only make award if the HCA makes a determination 
to proceed under FAR 33.103(f)(1). Similarly, if an agency protest is 
filed within ten (10) days after award, or within five (5) days of the 
offer of a debriefing required by FAR 15.505 or 15.506, whichever is 
later, the contracting officer must suspend performance of the contract 
unless the HCA makes a determination to proceed under FAR 33.103(f)(3). 
Any stay of award or suspension of performance remains in effect until 
the protest is decided, dismissed, or withdrawn.
    (j) The deciding official must make a best effort to issue a 
decision on the protest within twenty (20) days after the filing date. 
The decision may be oral or written, dependent upon advice of legal 
counsel.
    (k) The deciding official must send a confirming letter within three 
(3) days after the decision using a means that provides evidence of 
receipt. The confirming letter must include the following information:
    (1) State whether the protest was denied, sustained or dismissed.
    (2) Indicate the date the decision was provided.
    (3) If the deciding official sustains the protest, relief may 
consist of any of the following:
    (i) Recommendation that the contract be terminated for convenience 
or cause, or that the solicitation be canceled.
    (ii) Recompeting the requirement from the beginning of the 
solicitation or from the last round of negotiations.
    (iii) Amending the solicitation.
    (iv) Refraining from exercising contract options.
    (v) Awarding a contract consistent with statute, regulation, and the 
terms of the solicitation.
    (vi) Other action that the deciding official determines is 
appropriate.
    (l) If the deciding official sustains a protest, then within 30 days 
after receiving the official's recommendations for relief, the 
contracting officer must either:
    (1) Fully implement the recommended relief; or
    (2) Notify the deciding official, if the contracting officer was not 
the deciding official, in writing, if any recommendations have not been 
implemented and explain why.
    (m) If the protest is denied, and contract performance has been 
suspended under paragraph (i) of this section, the contracting officer 
will not lift such suspension until five (5) days after the protest 
decision has been issued, to allow the protester to file a protest with 
the General Accounting Office, unless the HCA makes a new finding under 
FAR 33.103(f)(3). The contracting officer shall consider allowing such 
suspension to remain in effect pending the resolution of any GAO 
proceeding.
    (n) Proceedings on an agency protest may be dismissed or stayed if a 
protest on the same or similar basis is filed with a protest forum 
outside of the Department of Labor.



Sec. 2933.104  Protests to GAO.

    (a) General procedures. The HCA has the responsibility to prepare 
and provide to the General Accounting Office (GAO) the agency report 
with the information required by FAR 33.104(a). The agency report must 
be coordinated with the Office of the Solicitor before the report is 
signed and sent to the GAO.
    (b) Protests before award. The authority of the HCA under FAR 
33.104(b) to authorize a contract award when the agency has received 
notice from the GAO of a protest filed directly with the GAO is 
nondelegable. The HCA has the responsibility to prepare and provide to 
the GAO the written finding with the information required by FAR 
33.104(b)(1). The written finding must be coordinated with Office of the 
Solicitor before the HCA affirms its approval by signing the written 
finding and sending it to the GAO. Copies of the signed written finding 
and the signed written notice to the GAO must be provided to the Senior 
Procurement Executive within two (2) working days after they are sent to 
the GAO.

[[Page 40]]

    (c) Protests after award. The authority of the HCA under FAR 
33.104(c) to authorize contract performance when the agency has received 
notice from the GAO of a protest filed directly with the GAO is 
nondelegable. The HCA has the responsibility to prepare and provide to 
the GAO the written finding with the information required by FAR 
33.104(c)(2). The written finding must be coordinated with the Office of 
the Solicitor before the notice is signed by the HCA and sent to the 
GAO.
    (d) Notice to the GAO. The authority of the HCA under FAR 33.104(g), 
to report to the GAO the failure to fully implement the GAO 
recommendations with respect to a solicitation for a contract or an 
award or a proposed award of a contract within 60 days of receiving the 
GAO recommendations, is nondelegable. The written notice must be 
coordinated with the Office of the Solicitor before the notice is signed 
by the HCA and sent to the GAO. A copy of all notices to the GAO 
submitted in accordance with FAR 33.104(g) must be provided to the 
Senior Procurement Executive within (two) working days after they are 
sent to the GAO.

                   Subpart 2933.2_Disputes and Appeals



Sec. 2933.203  Applicability.

    The authority of the Agency Head to determine that the application 
of the Contract Disputes Act of 1978 to any contract with a foreign 
government or agency of that government, or an international 
organization or a subsidiary body of that organization, would not be in 
the public interest is delegated to the HCA.



Sec. 2933.209  Suspected fraudulent claims.

    The contracting officer must refer all matters relating to suspected 
fraudulent claims by a contractor under the conditions in FAR 33.209 to 
the Office of the Inspector General for further action or investigation.



Sec. 2933.211  Contracting officer's decision.

    The written decision required by FAR 33.211(a)(4) must include, in 
the paragraph listed under FAR 33.211(a)(4)(v), specific reference to 
the Department of Labor Board of Contract Appeals (LBCA), 800 K Street, 
NW, Suite 400 North, Washington, DC 20001-8002.



Sec. 2933.212  Contracting officer's duties upon appeal.

    (a) When a notice of appeal has been received, the contracting 
officer must endorse on the appeal the date of mailing (or the date of 
receipt if the notice was not mailed). The contracting officer must also 
notify the Solicitor of Labor of the appeal.
    (b) The contracting officer should prepare and transmit the 
administrative file for the Office of the Solicitor and assist with the 
appeal.



Sec. 2933.213  Obligation to continue performance.

    The contracting officer must include the clause at FAR 52.233-1, 
Disputes (Alternate I), in contracts where continued performance is 
necessary pending resolution of any claim arising under or relating to 
the contract.



Sec. 2933.270  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 LBCA rules of procedure are contained in 41 CFR part 29-
60.104, appearing in the July 1, 1983, edition of 41 CFR, subtitle A, 
chapters 19-100.

                       PARTS 2934	2935 [RESERVED]

         PART 2936_CONSTRUCTION AND ARCHITECT_ENGINEER CONTRACTS

     Subpart 2936.2_Special Aspects of Contracting for Construction

Sec.

Sec. 2936.201 Evaluation of contractor performance.

Sec. 2936.209 Construction contracts with architect-engineer firms.

[[Page 41]]

                     Subpart 2936.5_Contract Clauses


Sec. 2936.516 Quality surveys.

               Subpart 2936.6_Architect-Engineer Services


Sec. 2936.602 Selection of firms for architect-engineer contracts.

Sec. 2936.602-1 Selection criteria.

Sec. 2936.602-2 Evaluation boards.

Sec. 2936.602-3 Evaluation board functions.

Sec. 2936.602-4 Selection Authority.

Sec. 2936.602-5 Short selection processes for contracts not to exceed 
          $100,000.

Sec. 2936.603 Collecting data on and appraising firms' qualifications.

Sec. 2936.604 Performance evaluation.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

     Subpart 2936.2_Special Aspects of Contracting for Construction



Sec. 2936.201  Evaluation of contractor performance.

    The HCA must establish procedures to evaluate construction 
contractor performance and prepare performance reports as required by 
FAR 36.201.



Sec. 2936.209  Construction contracts with architect-engineer firms.

    As required by FAR 36.209, no contract for construction of a project 
may be awarded to the firm that designed the project, or to its 
subsidiaries or affiliates, without the written approval of the 
Assistant Secretary for Administration and Management. Any request for 
approval must 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



Sec. 2936.516  Quality surveys.

    The HCA 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



Sec. 2936.602  Selection of firms for architect-engineer contracts.



Sec. 2936.602-1  Selection criteria.

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



Sec. 2936.602-2  Evaluation boards.

    HCAs must establish procedures to provide permanent or ad hoc 
architect-engineer evaluation boards as prescribed in FAR 36.602-2. 
Procedures must provide for the appointment of private practitioners of 
architecture, engineering, or related professions when such action is 
determined in writing by the HCA to be essential to meeting the 
Government's minimum needs.



Sec. 2936.602-3  Evaluation board functions.

    The selection report required in FAR 36.602-3(d) must be prepared 
for the approval of the HCA.



Sec. 2936.602-4  Selection Authority.

    The HCA is authorized to serve as the designated Selection Authority 
in accordance with FAR 36.602-1.



Sec. 2936.602-5  Short selection processes for contracts not to exceed 
          $100,000.

    The selection process prescribed in FAR 36.602-5(b) must be used for 
architect-engineer contracts not exceeding the simplified acquisition 
threshold.



Sec. 2936.603  Collecting data on and appraising firms' qualifications.

    (a) HCAs who acquire architect-engineer services must establish 
procedures to comply with the requirements of FAR 36.603.
    (b) Copies of procedures established under paragraph (a) of this 
section must be submitted to the Division of Acquisition Management 
Services, for review and recommendation for approval to the HCA when 
updated. These procedures must include a list of names, addresses, and 
telephone numbers of offices or boards assigned to maintain architect-
engineer qualification data files.

[[Page 42]]



Sec. 2936.604  Performance evaluation.

    (a) The HCA must establish procedures to evaluate architect-engineer 
contractor performance as required in FAR 36.604. Normally, the 
performance report must 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 must prescribe instructions 
for review of the report, before distribution, as prescribed in FAR 
36.604(b).
    (b) Performance reports must 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 and written comments by the 
contractor, must also be attached to the report.

                      PART 2937_SERVICE CONTRACTING

                Subpart 2937.1_Service Contracts-General

Sec.

Sec. 2937.103 Contracting officer responsibility.

Sec. 2937.103-70 Department of Labor checklist to aid analysis and 
          review of requirements for service contracts.

             Subpart 2937.2_Advisory and Assistance Services


Sec. 2937.203 Policy.

    Subpart 2937.6_Preference for Performance-Based Contracting (PBC)


Sec. 2937.602 Elements of performance-based contracting.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                Subpart 2937.1_Service Contracts-General



Sec. 2937.103  Contracting officer responsibility.

    The HCA is responsible for establishing internal review and approval 
procedures for service contracts in accordance with OFPP Policy Letter 
93-1 (Reissued), ``Management Oversight of Service Contracting''. As 
defined by FAR 37.101, contracts for personal services are permitted 
under the circumstances in 5 U.S.C. 3109.



Sec. 2937.103-70  Department of Labor checklist to aid analysis and 
          review of requirements for service contracts.

    Contracting specialists and contracting officers must work in close 
collaboration with the beneficiaries of the services being purchased to 
ensure that contractor performance meets contract requirements and 
performance standards.
    (a) General. Following is a checklist to aid analysis and review of 
requirements for service contracts.
    (1) Is the statement of work complete, with a clear-cut division of 
responsibility between the contracting parties?
    (2) Is the statement of work discussed in terms the market can 
satisfy?
    (3) Does the statement of work encompass all commercially available 
services that can meet the actual functional need (eliminates any 
nonessential preferences that may thwart full and open competition)?
    (4) Is the statement of work performance-based to the maximum extent 
possible (i.e., is the acquisition structured around the purpose of the 
work to be performed, as opposed to either the manner by which the work 
is to be performed or a broad and imprecise statement of work)?
    (b) Cost effectiveness. If the response to any of the following 
questions is negative, the agency may not have a valid requirement or 
not be obtaining the requirement in the most cost effective manner.
    (1) Is the statement of work written so that it supports the need 
for a specific service?
    (2) Is the statement of work written so that it permits adequate 
evaluation of contractor versus in-house cost and performance?
    (3) Are the choices of contract type, quality assurance plan, 
competition strategy, or other related acquisition strategies and 
procedures in the acquisition plan appropriate to ensure good

[[Page 43]]

contractor performance to meet the user's needs?
    (4) If a cost reimbursement contract is contemplated, is the 
acquisition plan adequate to ensure that the contractor will have the 
incentive to control costs under the contract?
    (5) Is the acquisition plan adequate to address the cost 
effectiveness of using contractor support (either long-term or short-
term) versus in-house performance?
    (6) Is the cost estimate or other supporting cost information 
adequate to enable the contracting office to effectively determine 
whether costs are reasonable?
    (7) Is the statement of work adequate to describe the requirement in 
terms of ``what'' is to be performed as opposed to ``how'' the work is 
to be accomplished?
    (8) Is the acquisition plan adequate to ensure that there is proper 
consideration given to ``quality'' and ``best value?''
    (c) Control. If the response to any of the following questions is 
negative, there may be a control problem.
    (1) Are there sufficient resources to evaluate contractor 
performance when the statement of work requires the contractor to 
provide advice, analysis and evaluation, opinions, alternatives, or 
recommendations that could significantly influence agency policy 
development or decision-making?
    (2) Does the quality assurance plan provide for adequate monitoring 
of contractor performance?
    (3) Is the statement of work written so that it specifies a contract 
deliverable or requires progress reporting on contractor performance?
    (4) Is agency expertise adequate to independently evaluate the 
contractor's approach, methodology, results, options, conclusions or 
recommendations?
    (d) Conflicts of interest. If the response to any of the following 
questions is affirmative, there may be a conflict of interest.
    (1) Can the potential offeror perform under the contract to devise 
solutions or make recommendations that would influence the award of 
future contracts to that contractor?
    (2) If the requirement is for support services (such as system 
engineering or technical direction), were any of the potential offerors 
involved in developing the system design specifications or in the 
production of the system?
    (3) Has a potential offeror participated in earlier work involving 
the same program or activity that is the subject of the present 
contract, wherein the offeror had access to source selection or 
proprietary information not available to other offerors competing for 
the contract?
    (4) Will the contractor be evaluating a competitor's work?
    (5) Does the contract allow the contractor to accept its own 
products or activities on behalf of the Government?
    (6) Will the work under this contract put the contractor in a 
position to influence government decision-making, e.g., developing 
regulations that will affect the contractor's current or future 
business?
    (7) Will the work under this contract affect the interests of the 
contractor's other clients?
    (8) Are any of the potential offerors, or their personnel who will 
perform the contract, former agency officials who--while employed by the 
agency--personally and substantially participated in the development of 
the requirement for, or the procurement of, these services within the 
past two years?
    (e) Competition. If the response to any of the following questions 
is negative, competition may be unnecessarily limited.
    (1) Is the statement of work defined so as to avoid overly 
restrictive specifications or performance standards?
    (2) Is the contract formulated in such a way as to avoid creating a 
continuous and dependent arrangement with the same contractor?
    (3) Is the use of an indefinite quantity or term contract 
arrangement appropriate to obtain the required services?
    (4) Will the requirement be obtained through the use of full and 
open competition?

[[Page 44]]

             Subpart 2937.2_Advisory and Assistance Services



Sec. 2937.203  Policy.

    (a) HCAs having a requirement for certain advisory and assistance 
services are required by the Department of Labor Manual Series (See DLMS 
2 836) to prepare a written justification for such services. Written 
justification must be submitted to the Assistant Secretary for 
Administration and Management for review by the Procurement Review 
Board, for Assistant Secretary for Administration and Management 
approval.
    (b) Regardless of the type of action planned, the justification in 
paragraph (a) of this section must 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 need, and the results expected.
    (3) Extent to which in-house staff availability was assessed, and 
the reasons why procurement of outside services is necessary.
    (4) Any additional information or data that support the requirement 
for a contract.
    (5) 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.
    (6) A statement that the Government policy on advisory and 
assistance services has been reviewed and complies with FAR 37.203.

    Subpart 2937.6_Preference for Performance-Based Contracting (PBC)



Sec. 2937.602  Elements of performance-based contracting.

    (a) Performance-based contracting is defined in FAR 37.101 and 
discussed in FAR 37.6. Although FAR Part 37 primarily addresses services 
contracts, PBC is not limited to these contracts. PBC is the preferred 
way of contracting for services. (See exceptions listed in FAR 37.102.) 
Generally, when contract performance risk under a PBC specification can 
be shifted to the contractor to allow for the operation of objective 
incentives, a contract type with objectively measurable incentives 
(e.g., Firm-Fixed-Price, Fixed-Price-Incentive-Fee, or Cost-Plus-
Incentive-Fee) is appropriate. However, when contractor performance 
(e.g., cost control, schedule, or quality/technical) is best evaluated 
subjectively using qualitative measures, a Cost-Plus-Award-Fee contract 
may be used.
    (b) A labor hour level-of-effort contract is not considered a PBC.

                       PARTS 2938	2941 [RESERVED]

[[Page 45]]

                    SUBCHAPTER G_CONTRACT MANAGEMENT

          PART 2942_CONTRACT ADMINISTRATION AND AUDIT SERVICES

                 Subpart 2942.1_Contract Audit Services

Sec.

Sec. 2942.101 Policy.

           Subpart 2942.15_Contractor Performance Information


Sec. 2942.1501 Scope.

Sec. 2942.1502 Policy.

Sec. 2942.1503 Procedures.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                 Subpart 2942.1_Contract Audit Services



Sec. 2942.101  Policy.

    The OASAM Division of Cost Determination is responsible for 
establishing billing rates and indirect cost rates as prescribed in FAR 
42.7 for the Department of Labor.

           Subpart 2942.15_Contractor Performance Information



Sec. 2942.1501  Scope.

    This subpart provides policies and procedures for evaluating, 
maintaining, and releasing contractor performance information under DOL 
contracts.



Sec. 2942.1502  Policy.

    DOL contracting officers are required to use or interface with the 
Past Performance Information Retrieval System (PPIRS), and specifically 
the National Institutes of Health's Contractor Performance System. The 
HCA is responsible for ensuring that a contractor performance evaluation 
system is generated to meet the requirements of FAR subpart 42.15, 
including compliance with subcontracting plans. Contracts, task orders, 
and delivery orders, exceeding the simplified acquisition threshold, 
should be formally evaluated in writing. Interim evaluations should be 
performed on contracts exceeding one year in duration. This will assist 
contractors with improving marginal performance and identifying any 
major deficiencies. It will also facilitate performance evaluations at 
contract completion, as well as determining whether to exercise contract 
options, if any.



Sec. 2942.1503  Procedures.

    (a) In accordance with FAR 42.1502, the contracting officer will 
prepare an interim evaluation of a contractor's performance at least 
annually for submission to the Past Performance Information Retrieval 
System (PPIRS), and specifically the Contractor Performance System 
maintained by the National Institutes of Health.
    (b) The contracting officer, or designee, must determine who will 
evaluate a contractor's performance. The contracting officer's technical 
representative, program manager, contract specialists or administrators, 
and users are candidates likely to be selected to perform the 
evaluation.
    (c) A contractor's performance evaluation should be obtained from a 
person who monitored contractor performance when that individual's 
assignment of duties or employment terminates before physical completion 
of the contract. The areas of performance to be selected for evaluation 
should be tailored to the type of supplies or services normally acquired 
by the contracting activities and the type of contract. HCAs must ensure 
uniformity of the evaluation criteria within their contracting 
activities.
    (d) Release of contractor performance evaluation information.
    (1) Requests for performance evaluation information from the public 
must be processed in accordance with FOIA, as implemented by DOL under 
29 CFR part 70.
    (2) Release of a contractor's performance evaluation information to 
other Federal agencies is subject to FAR 42.1502. When the performance 
evaluation information is released to other federal agencies, it should 
be provided with a written statement that it is nonpublic information 
that must be

[[Page 46]]

processed under FOIA principles if a request for its disclosure is 
received.
    (e) Even though the retention period for past performance evaluation 
information is three years (see FAR 42.1503), the contractor's 
performance evaluation, any contractor rebuttal, and final decision 
become a part of the contract file. Therefore, disposal of the 
contractor's evaluation information must be accomplished in accordance 
with FAR 4.804.

                    PART 2943_CONTRACT MODIFICATIONS

                      Subpart 2943.2_Change Orders

Sec.

Sec. 2943.205 Contract clauses.

                          Subpart 2943.3_Forms


Sec. 2943.301 Use of forms.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                      Subpart 2943.2_Change Orders



Sec. 2943.205  Contract clauses.

    HCAs may establish procedures, or office policies, 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.

                          Subpart 2943.3_Forms



Sec. 2943.301  Use of forms.

    (a) FAR 43.301(a)(1)(vi) requires the use of Standard Form 30 (SF-
30) to execute any obligation or deobligation of contract funds after 
award. FAR 13.307(c)(3) allows, and the Department of Labor prefers, the 
use of the SF-30 for simplified acquisitions. The SF-30 also must be 
used to deobligate funds when effecting contract closeout 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.
    (b) The contracting officer must include, in any unilateral contract 
modification issued for contract closeout, a statement that the 
contractor has signed a release of claims and indicate the date the 
release of claims was signed by the contractor.

            PART 2944_SUBCONTRACTING POLICIES AND PROCEDURES

                         Subpart 2944.1_General

Sec.

Sec. 2944.101 Waiver.

                  Subpart 2944.2_Consent To Subcontract


Sec. 2944.201-1 Consent requirements.

Sec. 2944.202 Contracting officer's evaluation.

Sec. 2944.202-2 Considerations.

Sec. 2944.203 Consent limitations.

         Subpart 2944.3_Contractors' Purchasing Systems Reviews


Sec. 2944.302 Requirements.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                         Subpart 2944.1_General.



Sec. 2944.101  Waiver.

    The waiver of consent must be in writing, signed by the contracting 
officer, and included in the contract file. The waiver must include all 
supporting facts, including the rationale for waiving the consent to 
subcontract requirements.

                  Subpart 2944.2_Consent To Subcontract



Sec. 2944.201-1  Consent requirements.

    In accordance with FAR 44.201-1(b) or FAR 44.201-2, advance 
notification and agreement are required for all cost-reimbursement, 
time-and-materials, or labor-hour subcontracts exceeding the simplified 
acquisition threshold.



Sec. 2944.202  Contracting officer's evaluation.



Sec. 2944.202-2  Considerations.

    The review required by FAR 44.202-2(a) must be documented in writing 
(including supporting facts and rationale), signed by the contracting 
officer, and included in the contract file.

[[Page 47]]



Sec. 2944.203  Consent limitations.

    Any limitations placed on the consent to subcontract must be 
documented in writing (including supporting facts and rationale), signed 
by the contracting officer, and included in the contract file.

         Subpart 2944.3_Contractors' Purchasing Systems Reviews



Sec. 2944.302  Requirements.

    The authority of the Assistant Secretary for Administration and 
Management under FAR 44.302(a), to raise or lower the $25 million review 
level for a contractor's purchasing system, may not be delegated. When a 
contractor's purchasing system review is required by the contracting 
officer, the effort must be coordinated with the OASAM Business 
Operations Center's Division of Acquisition Management Services and the 
Division of Cost Determination.

                      PART 2945_GOVERNMENT PROPERTY

                         Subpart 2945.1_General

Sec.

Sec. 2945.104 Review and correction of contractors' property control 
          systems.

Sec. 2945.105 Records of Government property.

       Subpart 2945.3_Providing Government Property to Contractors


Sec. 2945.302 Providing facilities.

     Subpart 2945.4_Contractor Use and Rental of Government Property


Sec. 2945.403 Rental-use and charges clause.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                         Subpart 2945.1_General



Sec. 2945.104  Review and correction of contractors' property control 
          systems.

    When the Government's property administrator determines that review 
and approval of the contractor's property control system rests with DOL, 
the Government's property administrator must review the system to 
determine whether the contractor will be able to meet the requirements 
of FAR 45.104. The review must be completed, signed by the appointed 
property administrator, and retained in the contract file.



Sec. 2945.105  Records of Government property.

    Contracting officers must maintain a file on any Government-
furnished property (GFP) in the possession of contractors. As a minimum, 
the file must contain the following:
    (a) A copy of the applicable portions of the contract that list the 
GFP;
    (b) Contracting officer's letters assigning the GFP administrator to 
the contract;
    (c) Written evidence that the contractor's property control system 
was reviewed and approved as required by FAR 45.104;
    (d) If applicable, documentation of the request and approval or 
denial of the contractor's requests to acquire or fabricate special test 
equipment in accordance with FAR 45.307 or other property;
    (e) The contractor's written notice of receipt of the GFP and any 
reported discrepancies thereto, as required by FAR 45.502-1 and 45.502-
2, respectively;
    (f) Any other documents pertaining to or affecting the status of the 
GFP in the possession of contractors or subcontractors under the 
contract;
    (g) Documentation of the screening and disposal of all GFP as 
required by FAR 45.6.

       Subpart 2945.3_Providing Government Property to Contractors



Sec. 2945.302  Providing facilities.

    The HCA is authorized to make the determination to provide 
facilities to a contractor as prescribed in FAR 45.302-1(a)(4).

[[Page 48]]

     Subpart 2945.4_Contractor Use and Rental of Government Property



Sec. 2945.403  Rental-use and charges clause.

    The HCA must make the determination to charge rent on the basis of 
use under the clause at FAR 52.245-9 when the contracting officer 
provides access to Government production and research property, as 
prescribed in FAR 45.403(a).

                       PARTS 2946	2951 [RESERVED]

[[Page 49]]

                      SUBCHAPTER H_CLAUSE AND FORMS

         PART 2952_SOLICITATION PROVISIONS AND CONTRACT CLAUSES

               Subpart 52.2_Text of Provisions and Clauses

Sec.

Sec. 2952.201-70 Contracting Officer's Technical Representative (COTR).

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

               Subpart 52.2_Text of Provisions and Clauses



Sec. 2952.201-70  Contracting Officer's Technical Representative (COTR).

    Insert the following clause into contracts requiring COTR 
representation under 2901.603.71:

    Contracting officer's technical representative (COTR) May 2004
    (a) Mr./Ms. (Name) of (Organization) (Room No.), (Building), 
(Address), (Area Code & Telephone No.), is hereby designated to act as 
contracting officer's technical representative (COTR) under this 
contract.
    (b) The COTR is responsible, as applicable, for: receiving all 
deliverables; inspecting and accepting the supplies or services provided 
hereunder in accordance with the terms and conditions of this contract; 
providing direction to the contractor which clarifies the contract 
effort, fills in details or otherwise serves to accomplish the 
contractual scope of work; evaluating performance; and certifying all 
invoices/vouchers for acceptance of the supplies or services furnished 
for payment.
    (c) The COTR does not have the authority to alter the contractor's 
obligations under the contract, and/or modify any of the expressed 
terms, conditions, specifications, or cost of the agreement. If, as a 
result of technical discussions, it is desirable to alter/change 
contractual obligations or the scope of work, the contracting officer 
must issue such changes.

                             PART 2953_FORMS

                         Subpart 2953.1_General

Sec.

Sec. 2953.100 Request for Recommendation by Procurement Review Board DL 
          1-490.

Sec. 2953.101 Simplified Acquisition Documentation Checklist DL 1-2216.

Sec. 2953.102 Quotation for Simplified Acquisitions DL 1-2078.

Sec. 2953.103 Acquisition Screening and Review--over $100,000 DL 1-2004.

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

    Source: 69 FR 22991, Apr. 27, 2004, unless otherwise noted.

                         Subpart 2953.1_General



Sec. 2953.100  Request for Recommendation by Procurement Review Board DL 
          1-490.

    The following form must be used by the requisitioning office to 
submit a request for review by the Procurement Review Board as specified 
in DOLAR 2901 and 2943. This form must be submitted through the 
Assistant Secretary for the program office to the Director, Division of 
Acquisition Management Services, for scheduling before the Procurement 
Review Board.

[[Page 50]]

[GRAPHIC] [TIFF OMITTED] TR27AP04.000


[[Page 51]]


[GRAPHIC] [TIFF OMITTED] TR27AP04.001


[[Page 52]]


[GRAPHIC] [TIFF OMITTED] TR27AP04.002


[[Page 53]]


[GRAPHIC] [TIFF OMITTED] TR27AP04.003


[[Page 54]]





Sec. 2953.101  Simplified Acquisition Documentation Checklist DL 1-2216.

    The following checklist must be used to document all simplified 
acquisitions at or below the simplified acquisition threshold.

[[Page 55]]

[GRAPHIC] [TIFF OMITTED] TR27AP04.004


[[Page 56]]





Sec. 2953.102  Quotation for Simplified Acquisitions DL 1-2078.

    The following form must be used to document all simplified 
acquisitions above the micro-purchase threshold and below the simplified 
acquisition threshold. This form may also be used to document commercial 
acquisitions on a fixed price basis up to $5 million.
[GRAPHIC] [TIFF OMITTED] TR27AP04.005


[[Page 57]]





Sec. 2953.103  Acquisition Screening and Review--over $100,000 DL 1-
          2004.

    The requiring organization must complete the following form for all 
acquisitions above the simplified acquisition threshold. This form will 
then be submitted through the contracting officer to the Office of Small 
Business Programs for review.
[GRAPHIC] [TIFF OMITTED] TR27AP04.006


[[Page 59]]



     CHAPTER 30--DEPARTMENT OF HOMELAND SECURITY, HOMELAND SECURITY 
                      ACQUISITION REGULATION (HSAR)




                          (Parts 3000 to 3099)

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

                          SUBCHAPTER A--GENERAL
Part                                                                Page
3001            Federal Acquisition Regulations System......          61
3002            Definitions of words and terms..............          66
3003            Improper business practices and personal 
                    conflicts Of interest...................          67
3004            Administrative matters......................          69
                   SUBCHAPTER B--ACQUISITION PLANNING
3005            Publicizing contract actions................          71
3006            Competition requirements....................          71
3007

Acquisition planning [Reserved]

3008

Required sources of supplies and services [Reserved]

3009            Contractor qualifications...................          72
3010

Market research [Reserved]

3011            Describing agency needs.....................          75
3012

Acquisition of commercial items [Reserved]

            SUBCHAPTER C--CONTRACT METHODS AND CONTRACT TYPES
3013            Simplified acquisition procedures...........          77
3014

Sealed bidding [Reserved]

3015            Contracting by negotiation..................          78
3016            Types of contracts..........................          79
3017            Special contracting methods.................          80
3018

[Reserved]

                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS
3019            Small business programs.....................          83
3020-3021

 [Reserved]

[[Page 60]]

3022            Application of labor laws to government 
                    acquisitions............................          84
3023            Environment, conservation, occupational 
                    safety, and drug-free workplace.........          85
3024            Protection of privacy and freedom of 
                    information.............................          86
3025

Foreign acquisition [Reserved]

3026

Other socioeconomic programs [Reserved]

3027            Patents, data and copyrights................          86
3028            Bonds and insurance.........................          87
             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS
3029

Taxes [Reserved]

3030            Cost accounting standards administration....          91
3031            Contract cost principles and procedures.....          91
3032            Contract financing..........................          91
3033            Protests, disputes, and appeals.............          92
3034

Major system acquisition [Reserved]

             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING
3035            Research and development contracting........          93
3036            Construction and architect-engineer 
                    contracts...............................          93
3037            Service contracting.........................          94
3038

Federal supply schedule contracting [Reserved]

3039

Acquisition of information technology [Reserved]

3040

[Reserved]

3041

Acquisition of utility services [Reserved]

                    SUBCHAPTER G--CONTRACT MANAGEMENT
3042            Contract administration and audit services..          97
3043

Contract modifications [Reserved]

3044

Subcontracting policies and procedures [Reserved]

3045            Government property.........................          97
3046            Quality assurance...........................          98
3047            Transportation..............................         101
3048

Value engineering [Reserved]

3049

Termination of contracts [Reserved]

3050

Extraordinary contractual actions [Reserved]

3051

Use of government sources by contractors [Reserved]

                     SUBCHAPTER H--CLAUSES AND FORMS
3052            Solicitation provisions and contract clauses         103
3053            Forms.......................................         121

[[Page 61]]

                          SUBCHAPTER A_GENERAL

            PART 3001_FEDERAL ACQUISITION REGULATIONS SYSTEM

               Subpart 3001.1_Purpose, Authority, Issuance

Sec.

Sec. 3001.101 Purpose.

Sec. 3001.102 Statement of Guiding Principles for the Federal 
          Acquisition System.

Sec. 3001.104 Applicability.

Sec. 3001.105 Issuance.

Sec. 3001.105-1 Publication and code arrangement.

Sec. 3001.105-2 Arrangement of regulations.

Sec. 3001.105-3 Copies.

Sec. 3001.106 OMB Approval under the Paperwork Reduction Act.

              Subpart 3001.3_Agency Acquisition Regulations


Sec. 3001.301 Policy.

Sec. 3001.301-70 Amendment of HSAR.

Sec. 3001.301-71 Effective date.

Sec. 3001.301-72 HSAC or HSAR Notice numbering.

Sec. 3001.303 Publication and codification.

Sec. 3001.304 Agency control and compliance procedures.

                 Subpart 3001.4_Deviations from the FAR


Sec. 3001.403 Individual deviations.

Sec. 3001.404 Class deviations.

     Subpart 3001.6_Career Development, Contracting Authority, and 
                            Responsibilities


Sec. 3001.601 General.

Sec. 3001.602 Contracting Officers.

Sec. 3001.602-3 Ratification of unauthorized commitments.

Sec. 3001.603 Selection, appointment, and termination of appointment.

Sec. 3001.603-1 General.

               Subpart 3001.7_Determinations and Findings


Sec. 3001.704 Content.

 Subpart 3001.70_Other Determinations, Waivers, Exceptions, Approvals, 
                        Reviews, and Submittals.


Sec. 3001.7000 Coordination and approval.

Sec. 3001.7001 Content.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

               Subpart 3001.1_Purpose, Authority, Issuance



Sec. 3001.101  Purpose.

    The Department of Homeland Security Acquisition Regulation (HSAR) 
establishes uniform acquisition policies and procedures, which implement 
and supplement the Federal Acquisition Regulation (FAR).



Sec. 3001.102  Statement of Guiding Principles for the Federal 
          Acquisition System.

    (d) The FAR and this supplement are to be interpreted permissively, 
if consistent with statutory and regulatory requirements, policy, and 
sound professional judgment.



Sec. 3001.104  Applicability.

    (a) The following order of precedence applies to resolve any 
acquisition regulation or procedural inconsistency found within HSAR or 
the Homeland Security Acquisition Manual (HSAM):
    (1) Statute;
    (2) FAR or other applicable regulation or Executive Order;
    (3) HSAR;
    (4) Department of Homeland Security (DHS) Directives; and
    (5) HSAM.
    (b) The Transportation Security Administration (TSA) exception to 
this regulation is authorized by the Aviation and Transportation 
Security Act of 2001 (Section 101(a) of Public Law 107-71). However, see 
(HSAR) 48 CFR 3033.211, regarding Board of Contract Appeals (BCA).
    (c) Contracts involving Non-Appropriated Fund Instrumentalities 
(NAFIs) must contain suitable dispute provisions and may provide for 
appellate dispute jurisdiction in the Department of Transportation's 
Board of Contract Appeals (DOTBCA). However, the contract must not 
attempt to confer court jurisdiction that does not otherwise exist.
    (d) The FAR and HSAR may be followed, where feasible, for:
    (1) No-cost contracts;
    (2) Concession contracts; and

[[Page 62]]

    (3) Contracts on behalf of NAFIs entered into by appropriated fund 
contracting officers.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25767, May 2, 2006]



Sec. 3001.105  Issuance.



Sec. 3001.105-1  Publication and code arrangement.

    (a) The HSAR is published in:
    (1) The Federal Register and
    (2) Cumulated form in the Code of Federal Regulations (CFR).



Sec. 3001.105-2  Arrangement of regulations.

    (a) General. The HSAR, which encompasses both Department-wide and 
Component-unique guidance, conforms to the arrangement and numbering 
system prescribed by (FAR) 48 CFR 1.105-2. Guidance that is unique to a 
Component contains the organization's acronym or abbreviation directly 
following the title. The following acronyms apply:
Bureau of Customs and Border Protection (CBP);
Bureau of Immigration and Customs Enforcement (ICE);
DHS Office of Procurement Operations (OPO);
Federal Emergency and Management Agency (FEMA) (includes all elements of 
    the Emergency Preparedness and Response Directorate);
Federal Law Enforcement Training Center (FLETC);
Transportation Security Administration (TSA);
U.S. Coast Guard (USCG); and
U.S. Secret Service (USSS).

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48800, Aug. 22, 2006]



Sec. 3001.105-3  Copies.

    The HSAR is available in the Federal Register and electronically at 
http://www.dhs.gov/dhspublic/.



Sec. 3001.106  OMB Approval under the Paperwork Reduction Act.

    (a) The Office of Management and Budget (OMB) has assigned the 
following control numbers that must appear on the upper right-hand 
corner of the face page of each solicitation, contract, modification, 
and order:

OMB Control No. 1600-002 (Contract related forms)
OMB Control No. 1600-005 (Offeror submissions)
OMB Control No. 1600-003 (Contractor submissions)
OMB Control No. 1600-004 (Protests)

    (b) OMB regulations and OMB's approval and assignment of control 
numbers are conditioned upon not requiring more than three copies 
(including the original) of any document of information. OMB has granted 
a waiver to permit the Department to require up to eight copies of 
proposal packages, including proprietary data, for solicitations, 
provided that contractors who submit only an original and two copies 
will not be placed at a disadvantage.

              Subpart 3001.3_Agency Acquisition Regulations



Sec. 3001.301  Policy.

    (a)(1) The HSAR is issued for Departmental guidance according to the 
policy cited in (FAR) 48 CFR 1.301. The HSAR establishes uniform 
Homeland Security policies and procedures for all acquisition activities 
within the Department of the Homeland Security, except the TSA. 
Component supplemental acquisition regulations to be inserted in the 
HSAR as a HSAR supplement regulation must be reviewed and approved by 
the Chief Procurement Officer (CPO) before the CPO submits the proposed 
coverage for publication in the Federal Register according to (FAR) 48 
CFR 1.501.
    (2)(i) The CPO is authorized to issue internal agency guidance at 
any organizational level. Department-wide procedures are contained in 
the HSAM. The HCA may implement internal procedures or supplement the 
FAR, HSAR, or HSAM as provided in HSAM 3001.3. The HCA may issue 
procedures or delegate this authority to any organizational level deemed 
appropriate. Component procedures may be more restrictive or require 
higher approval levels than those permitted by the HSAM, unless 
otherwise specified.

[[Page 63]]

    (ii) Individuals granted authority in the HSAR may delegate that 
authority, unless the FAR or HSAR specifically state that the authority 
is not delegable.
    (b) The Under Secretary of Management established procedures through 
Management Directive (MD) 0490.1, entitled Federal Register Notice and 
Rules, to ensure that agency acquisition regulations are published for 
comment in the Federal Register in conformance with FAR procedures at 
(FAR) 48 CFR subpart 1.5.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25767, May 2, 2006; 71 
FR 48800, Aug. 22, 2006]



Sec. 3001.301-70  Amendment of HSAR.

    (a) Requests for changes to the regulation may be recommended by DHS 
personnel, other Government agencies, or the public. Change requests are 
to be submitted in the following format to the Department of Homeland 
Security, Attn: Office of the Under Secretary of Management, Chief 
Procurement Officer, Washington, DC 20598.
    (1) Problem: Succinctly state the problem(s) created by current HSAR 
requirements or processes and describe the factual or legal reasons for 
requesting a regulatory change.
    (2) Recommendation: Identify the recommended change by using the 
current language and lining through the words to be deleted and 
inserting proposed language in brackets. If the change is extensive, 
deleted language may be displayed by forming a box with diagonal lines 
connecting the corners.
    (3) Discussion: Explain why the change is necessary and how the 
change will solve the problem. Address any cost or administrative impact 
on Government activities, offerors, and contractors. Provide any other 
helpful information and documents such as statutes, legal decisions, 
regulations, reports, etc.
    (4) Point of Contact: Provide a point of contact for answering 
questions regarding the recommendation, along with a telephone number, 
e-mail or other method of reaching the contact.
    (b) The HSAR is maintained by the CPO through the HSAR/HSAM change 
process (i.e., input from various Components including representatives 
specifically designated to formulate Departmental acquisition policies 
and procedures).
    (1) Homeland Security Acquisition Circular (HSAC). HSAC (see (HSAR) 
48 Chapter 3001.301-72) will be used to amend (HSAR) 48 Chapter 30.
    (2) HSAR Notices will be issued (with a specified expiration date) 
when interim guidance is necessary under any of the following 
circumstances:
    (i) To promulgate, as rapidly as possible, selected material in a 
general or narrative manner, in advance of a HSAC issuance;
    (ii) To disseminate other acquisition related information; or
    (iii) To issue guidance that is expected to be effective for a 
period of 1 year or less.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25767, May 2, 2006; 71 
FR 48800, Aug. 22, 2006]



Sec. 3001.301-71  Effective date.

    Unless otherwise stated:
    (a) HSAR changes apply to solicitations issued on or after the 
effective date of the change;
    (b) Contracting officers may, at their discretion, amend 
solicitations issued before the effective date to include HSAR changes, 
provided award of the resulting contract(s) will occur on or after the 
effective date of the change; and
    (c) Contracting officers, at their discretion, may use the changes 
clause or other suitable authority to modify existing contract to 
include HSAR changes.

[71 FR 25767, May 2, 2006]



Sec. 3001.301-72  HSAC or HSAR Notice numbering.

    HSACs and HSAR Notices will be numbered consecutively on a fiscal 
year basis beginning with number ``01'' prefixed by the last two digits 
of the fiscal year (e.g., HSAR Notices 03-01 and 03-02 indicate the 
first two HSAR Notices issued in fiscal year 2003).



Sec. 3001.303  Publication and codification.

    (a) The HSAR is issued as chapter 30 of Title 48 of the CFR.

[[Page 64]]

    (1) The FAR numbering illustrations at (FAR) 48 CFR 1.105-2 apply to 
the HSAR.
    (2) Coverage within HSAR 48 CFR chapter 30 is identified by the 
prefix ``30'' followed by the complete FAR cite which may extend 
downward to the subparagraph level (e.g., (HSAR) 48 CFR 3001.101).
    (3) Coverage in HSAR Chapter 30 that supplements the FAR will use 
part, subpart, section and subsection numbers ending in ``70'' through 
``89''. A series of numbers beginning with ``70'' is used for provisions 
and clauses (e.g., (HSAR) 48 CFR 3001.301-70).
    (4) Coverage in HSAR 48 CFR chapter 30, other than that identified 
with a ``70'' or higher number, which implements the FAR uses the 
identical number sequence and caption of the FAR segment being 
implemented which may extend downward to the subparagraph level. 
Subparagraph numbers/letters may not be shown as sequential, but may be 
shown by the specific paragraph/subparagraph implemented from the FAR 
(e.g., (HSAR) 48 CFR 3003.301 contains subparagraphs (a) and (b) because 
only these subparagraphs, correlating to FAR, are being supplemented by 
(HSAR) 48 CFR chapter 30).
    (5) Component-unique guidance. Supplementary material for which 
there is no counterpart in the FAR or HSAR shall be identified using 
chapter, part, subpart, section, or subsection numbers of ``90'' and up 
(e.g., the U.S. Coast Guard's acronym is ``USCG''; an USCG-unique clause 
pertaining to ``Inspection and/or Acceptance'' would be designated 
``USCG 3052.246-90'').
    (6) References and citations. Cross references to the FAR in the 
HSAR will be cited by ``FAR'' followed by the FAR numbered cite, and 
cross reference to the HSAM in the HSAR will be cited by ``HSAM'' 
followed by the HSAM numbered cite.
    (7) Department/agency and Component supplements must parallel the 
FAR and HSAR numbering, except department/agency supplemental numbering 
uses subsection numbering of 90 and up, instead of 70 and up.

                                            Table 1-1--HSAR Numbering
----------------------------------------------------------------------------------------------------------------
                               FAR                                   Is implemented as      Is supplemented as
----------------------------------------------------------------------------------------------------------------
19..............................................................              3019                  3019.70
19.5............................................................              3019.5                3019.570
19.501..........................................................              3019.501              3019.501-70
19.501-1........................................................              3019.501-1            3019.501-170
----------------------------------------------------------------------------------------------------------------


[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48800, Aug. 22, 2006]



Sec. 3001.304  Agency control and compliance procedures.

    (a) The HSAR is under the direct oversight and control of the 
Homeland Security, Office of the Chief Procurement Officer (OCPO), which 
is responsible for evaluation, review, and issuance of all Department-
wide acquisition regulations and guidance. Each HCA may supplement the 
HSAR with Component guidance. Supplementation should be kept to a 
minimum. Components proposing to issue regulatory supplements or use 
solicitation or contract clauses on a repetitive basis must obtain legal 
review by the Component's legal counsel and forward supplements to the 
CPO for concurrence prior to publication in the Federal Register.
    (c) The CPO is responsible for evaluating all regulatory coverage in 
agency acquisition regulations to determine if the substance could apply 
to other agencies and to make recommendation for inclusion in the FAR.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48801, Aug. 22, 2006]

             Subpart 3001.4_Deviations from the FAR and HSAR



Sec. 3001.403  Individual deviations.

    Unless precluded by law, executive order, or other regulation, the 
HCA is authorized to approve individual deviation (except with respect 
to (FAR) 48 CFR 30.201-3, 30.201-4; the requirements of the Cost 
Accounting Standards board rules and regulations at 48 CFR chapter 99 
(FAR appendix); and part

[[Page 65]]

50). Submit requests per (HSAR) 48 CFR 3001.7000, including complete 
documentation of the justification for the deviation (See HSAM 
3001.403).

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48801, Aug. 22, 2006]



Sec. 3001.404  Class deviations.

    (a) Unless precluded by law, executive order, or other regulation, 
the CPO is authorized to approve FAR class deviations, except (FAR) 48 
CFR 30.201-3, and 30.201-4 (the requirements of the Cost Accounting 
Standards Board); 48 CFR Chapter 99 (FAR Appendix); and part 50. Prior 
to authorizing a FAR class deviation, the CPO shall consult with the 
chairperson of the Civilian Agency Acquisition Council (CAA Council), 
unless the CPO determines that urgency precludes such consultation. FAR 
class deviation requests shall be submitted to the CPO per (HSAR) 48 CFR 
subpart 3001.70 including complete documentation of the justification 
for the deviation, and the estimated number and type of contract actions 
affected. The CPO will transmit a copy of each approved FAR deviation to 
the FAR Secretariat.

[71 FR 25767, May 2, 2006]

     Subpart 3001.6_Career Development, Contracting Authority, and 
                            Responsibilities



Sec. 3001.601  General.

    DHS Delegation Number 0200.1, Delegation to the Directorate of 
Management, delegates authority from the Secretary to the Under 
Secretary of Management to manage the acquisition function. DHS 
Delegation 0700, Delegation to the Chief Procurement Officer for 
Acquisition and Financial Assistance Management, delegates this 
authority from the Under Secretary of Management to the Chief 
Procurement Officer.



Sec. 3001.602  Contracting officers.



Sec. 3001.602-3  Ratification of unauthorized commitments.

    Department of Homeland Security (DHS) policy requires that 
acquisitions be made only by Government officials having authority to 
enter into such acquisitions. Acquisitions made by other than authorized 
personnel are contrary to Departmental policy and may be considered 
matters of serious misconduct on the part of an employee making an 
unauthorized commitment, and may result in disciplinary action being 
taken against an employee who makes an unauthorized commitment.



Sec. 3001.603  Selection, appointment, and termination of appointment.



Sec. 3001.603-1  General.

    Under DHS Delegations, the Heads of the Contracting Activity (HCA), 
with authority to redelegate no lower than the Chief of the Contracting 
Office (COCO), are authorized to select and appoint contracting officers 
and terminate their appointment.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25767, May 2, 2006]

               Subpart 3001.7_Determinations and Findings



Sec. 3001.704  Content.

    The following format shall be used for all determinations and 
findings (D&Fs), unless otherwise specified in the FAR or the HSAR. The 
contracting officer is responsible for preparing D&Fs, and requirements 
and technical personnel are responsible for the accuracy and adequacy of 
the supporting factual information, which shall be furnished to the 
contracting officer.
    Insert specific information indicated in brackets.

                       Determination and Findings

    Under [insert citation for appropriate statutory and/or regulatory 
basis for D&F], the Department of Homeland Security, [insert contracting 
activity], is granted authority to [insert nature and/or description of 
the action being approved].

                                Findings

    [Findings that detail the particular circumstances, facts, or 
reasoning essential to support the determination.]

                              Determination

    [A determination, based on the findings, that the proposed action is 
justified under the applicable statute or regulation.] [Expiration date 
of the D&F, if required.]

[Signature of authorized official]


[[Page 66]]


Name and Title

[month, day, and year]

Date

 Subpart 3001.70_Other Determinations, Waivers, Exceptions, Approvals, 
                         Reviews, and Submittals



Sec. 3001.7000  Coordination and approval.

    Documents requiring CPO approval. Requests shall be prepared in 
writing by the contracting officer and submitted through the HCA to the 
CPO for approval.



Sec. 3001.7001  Content.

    The general format at (HSAR) 48 CFR 3001.704 shall be used to 
provide a justification to support the requested determination, waiver, 
exception or approval.

                PART 3002_DEFINITIONS OF WORDS AND TERMS

                       Subpart 3002.1_Definitions

Sec.

Sec. 3002.101 Definitions.

                      Subpart 3002.2_Abbreviations


Sec. 3002.270 Abbreviations.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                       Subpart 3002.1_Definitions



Sec. 3002.101  Definitions.

    Chief Information Officer (CIO) means the Director of the Office of 
the CIO.
    Chief of the Contracting Office (COCO) means the individual(s) 
responsible for managing the contracting office(s) within a Component.
    Chief Procurement Officer (CPO) means the Senior Procurement 
Executive (SPE).
    Component means the following entities for purposes of this chapter:
    (1) Bureau of Customs and Border Protection (CBP);
    (2) Bureau of Immigration and Customs Enforcement (ICE);
    (3) DHS Office of Procurement Operations (OPO);
    (4) Federal Emergency Management Agency (FEMA) (Includes all 
elements of the Emergency Preparedness and Response Directorate);
    (5) Federal Law Enforcement Training Center (FLETC);
    (6) Transportation Security Administration (TSA); (TSA is exempt 
from the HSAR and HSAM according to the ``Aviation and Transportation 
Security Act of 2001'');
    (7) U.S. Coast Guard (USCG); and
    (8) U.S. Secret Service (USSS).
    Contracting activity includes all the contracting offices within a 
Component and is the same as the term ``procuring activity.''
    Contracting officer means an individual authorized by virtue of 
position or by appointment to perform the functions assigned by the 
Federal Acquisition Regulation and the Homeland Security Acquisition 
Regulation.
    Head of the Agency means the Secretary of the Department of Homeland 
Security, or, by delegation, the Under Secretary of Management.
    Head of the Contracting Activity (HCA) means the individual 
responsible for direct management of the entire acquisition function 
within a Component.
    Legal counsel means the Department of Homeland Security Office of 
General Counsel or Component office providing legal services to the 
contracting organization.
    Legal review means review by legal counsel.
    Major system means an acquisition as defined in Management Directive 
Number 1400, Investment Review Process.
    Micro-purchase threshold is defined as in (FAR) 48 CFR 2.101, except 
when (HSAR) 48 CFR 3013.7003(a) applies.
    Organizational Element (OE) means the following entities for 
purposes of this chapter:
    (1) Bureau of Customs and Border Protection (CBP);
    (2) Bureau of Immigration and Customs Enforcement (ICE);
    (3) DHS Office of Procurement Operations (OPO);
    (4) Federal Emergency Management Agency (FEMA) (Includes all 
elements of the Emergency Preparedness and Response Directorate);
    (5) Federal Law Enforcement Training Center (FLETC);

[[Page 67]]

    (6) Transportation Security Administration (TSA); (TSA is exempt 
from the HSAR and HSAM according to the ``Aviation and Transportation 
Security Act of 2001'');
    (7) U.S. Coast Guard (USCG); and
    (8) U.S. Secret Service (Secret Service).
    Senior Procurement Executive (SPE) for the Department of Homeland 
Security is the Chief Procurement Officer (CPO).
    Sensitive Information as used in this Chapter, means any 
information, the loss, misuse, disclosure, or unauthorized access to or 
modification of which could adversely affect the national or homeland 
security interest, or the conduct of Federal programs, or the privacy to 
which individuals are entitled under 5 U.S.C. 552a (the Privacy Act), 
but which has not been specifically authorized under criteria 
established by an Executive Order or an Act of Congress to be kept 
secret in the interest of national defense, homeland security or foreign 
policy. This definition includes the following categories of 
information:
    (1) Protected Critical Infrastructure Information (PCII) as set out 
in the Critical Infrastructure Information Act of 2002 (Title II, 
Subtitle B, of the Homeland Security Act, Pub. L. 107-296, 196 Stat. 
2135), as amended, the implementing regulations thereto (6 CFR part 29) 
as amended, the applicable PCII Procedures Manual, as amended, and any 
supplementary guidance officially communicated by an authorized official 
of the Department of Homeland Security (including the PCII Program 
Manager or his/her designee);
    (2) Sensitive Security Information (SSI), as defined in 49 CFR part 
1520, as amended, ``Policies and Procedures of Safeguarding and Control 
of SSI,'' as amended, and any supplementary guidance officially 
communicated by an authorized official of the Department of Homeland 
Security (including the Assistant Secretary for the Transportation 
Security Administration or his/her designee);
    (3) Information designated as ``For Official Use Only,'' which is 
unclassified information of a sensitive nature and the unauthorized 
disclosure of which could adversely impact a person's privacy or 
welfare, the conduct of Federal programs, or other programs or 
operations essential to the national or homeland security interest; and
    (4) Any information that is designated ``sensitive'' or subject to 
other controls, safeguards or protections in accordance with 
subsequently adopted homeland security information handling procedures.
    Simplified acquisition threshold is defined as in (FAR) 48 CFR 
2.101, except when (HSAR) 48 CFR 3013.7004 applies.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25767, May 2, 2006; 71 
FR 48801, Aug. 22, 2006]

                      Subpart 3002.2_Abbreviations



Sec. 3002.270  Abbreviations.


Sec. CFO Chief Financial Officer

Sec. CIO Chief Information Officer

Sec. COCO Chief of the Contracting Office

Sec. COR Contracting Officers Representative

Sec. COTR Contracting Officer's Technical Representative

Sec. CPO Chief Procurement Officer

Sec. D&F Determination and Findings

Sec. DOTBCA Department of Transportation Board of Contract Appeals

Sec. FOIA Freedom of Information Act

Sec. HCA Head of Contracting Activity

Sec. J & A Justification and Approval for Other than Full and Open 
          Competition

Sec. KO Contracting officer

Sec. MD Management Directive

Sec. OCPO Office of the Chief Procurement Officer

Sec. OIG Office of the Inspector General

Sec. OSDBU Office of Small and Disadvantaged Business Utilization

Sec. PCR SBA's Procurement Center Representative

Sec. RFP Request for Proposal

Sec. SBA Small Business Administration

Sec. SBS Small Business Specialist

Sec. SPE Senior Procurement Executive

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48801, Aug. 22, 2006]

PART 3003_IMPROPER BUSINESS PRACTICES AND PERSONAL CONFLICTS OF INTEREST

                        Subpart 3003.1_Safeguards

Sec.

Sec. 3003.101 Standards of conduct.

Sec. 3003.101-3 Agency regulations.

[[Page 68]]

      Subpart 3003.2_Contractor Gratuities to Government Personnel


Sec. 3003.203 Reporting suspected violations of the Gratuities clause.

Sec. 3003.204 Treatment of violations.

        Subpart 3003.3_Reports Of Suspected Antitrust Violations


Sec. 3003.301 General.

                     Subpart 3003.4_Contingent Fees


Sec. 3003.405 Misrepresentations or violations of the Covenant Against 
          Contingent Fees.

            Subpart 3003.5_Other Improper Business Practices


Sec. 3003.502 Subcontractor kickbacks.

Sec. 3003.502-2 Subcontractor kickbacks.

    Subpart 3003.9_Whistleblower Protections for Contractor Employees


Sec. 3003.901 Definitions.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                        Subpart 3003.1_Safeguards



Sec. 3003.101  Standards of conduct.



Sec. 3003.101-3  Agency regulations.

    Government-wide and Department of Homeland Security regulations 
governing the conduct and responsibilities of employees are contained in 
5 CFR part 2635, and MD 0480.1, Ethics/Standards of Conduct, or any 
replacement Management Directive.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25768, May 2, 2006]

      Subpart 3003.2_Contractor Gratuities to Government Personnel



Sec. 3003.203  Reporting suspected violations of the Gratuities clause.

    (a) Suspected violations shall be reported to the contracting 
officer responsible for the acquisition (or the COCO if the contracting 
officer is suspected of the violation). The contracting officer (or the 
COCO) shall obtain from the person reporting the violation, and any 
witnesses to the violation, the following information:
    (1) The date, time, and place of the suspected violation;
    (2) The name and title (if known) of the individual(s) involved in 
the violation; and
    (3) The details of the violation (e.g., the gratuity offered or 
intended) to obtain a contract or favorable treatment under a contract.
    (4) The person reporting the violation and witnesses (if any) shall 
be requested to sign and date the information certifying that the 
information furnished is true and correct.
    (b) The contracting officer shall submit the report to the COCO 
(unless the alleged violation was directly reported to the COCO) and the 
Head of the Contracting Activity (HCA) for further action. The COCO and 
HCA will determine, with the advice of the Component legal counsel, 
whether the case warrants submission to the OIG, or other investigatory 
organization.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25768, May 2, 2006; 71 
FR 48801, Aug. 22, 2006]



Sec. 3003.204  Treatment of violations.

    (a) The HCA is the individual to determine whether a Gratuities 
clause violation has occurred. If the HCA has been personally and 
substantially involved in the specific procurement, the advice of 
Government legal counsel should be sought to determine whether an 
alternate decision maker should be designated.
    (b) The COCO shall ensure that the hearing procedures required by 
(FAR) 48 CFR 3.204(b) are afforded to the contractor. Government legal 
counsel shall be consulted regarding the appropriateness of the hearing 
procedures that are established.
    (c) If the HCA determines that the alleged gratuities violation 
occurred during the ``conduct of an agency procurement'' the COCO shall 
consult with Government legal counsel regarding appropriate action.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25768, May 2, 2006]

[[Page 69]]

        Subpart 3003.3_Reports Of Suspected Antitrust Violations



Sec. 3003.301  General.

    (b) The procedures at (HSAR) 48 CFR 3003.203 shall be followed for 
suspected antitrust violations, except reports of suspected antitrust 
violations shall be coordinated with legal counsel for referral to the 
Department of Justice, if deemed appropriate.

                     Subpart 3003.4_Contingent Fees



Sec. 3003.405  Misrepresentations or violations of the Covenant Against 
          Contingent Fees.

    (a) The procedures at (HSAR) 48 CFR 3003.203 shall be followed for 
misrepresentation or violations of the covenant against contingent fees.
    (b)(4) The procedures at (HSAR) 48 CFR 3003.203 shall be followed 
for misrepresentation or violations of the covenant against contingent 
fees, except reports of misrepresentation or violations of the covenant 
against contingent fees shall be coordinated with legal counsel for 
referral to the Department of Justice, if deemed appropriate.

            Subpart 3003.5_Other Improper Business Practices



Sec. 3003.502  Subcontractor kickbacks.



Sec. 3003.502-2  Subcontractor kickbacks.

    (g) The DHS OIG shall receive the prime contractor or subcontractors 
written report.

    Subpart 3003.9_Whistleblower Protections for Contractor Employees



Sec. 3003.901  Definitions.

    Authorized official of an agency means the Department of Homeland 
Security's CPO.

                    PART 3004_ADMINISTRATIVE MATTERS

                    Subpart 3004.1_Contract Execution

Sec.

Sec. 3004.103 Contract clause.

Subpart 3004.4_Safeguarding Classified and Sensitive Information Within 
                                Industry


Sec. 3004.470 Security requirements for access to unclassified 
          facilities, Information Technology resources, and sensitive 
          information.

Sec. 3004.470-1 Scope.

Sec. 3004.470-2 Policy.

Sec. 3004.470-3 Contract clauses.

                Subpart 3004.8_Government Contract Files


Sec. 3004.804 Closeout of contract files.

Sec. 3004.804-1 Closeout by the office administering the contract.

Sec. 3004.804-5 Procedures for closing out contract files.

Sec. 3004.804-570 Supporting closeout documents.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                    Subpart 3004.1_Contract Execution



Sec. 3004.103  Contract clause.

    Insert the clause at (FAR) 48 CFR 52.204-1, Approval of Contract, in 
each solicitation where approval to award the resulting contract is 
required above the contracting officer level.

Subpart 3004.4_Safeguarding Classified and Sensitive Information Within 
                                Industry

    Source: 71 FR 25768, May 2, 2006, unless otherwise noted.



Sec. 3004.470  Security requirements for access to unclassified 
          facilities, Information Technology resources, and sensitive 
          information.



Sec. 3004.470-1  Scope.

    This section implements DHS's policies for assuring the security of 
unclassified facilities, Information Technology (IT) resources, and 
sensitive information during the acquisition process and contract 
performance.



Sec. 3004.470-2  Policy.

    (a) DHS's policies and procedures on contractor personnel security 
requirements are set forth in various management directives (MDs). MD 
11042.1,

[[Page 70]]

Safeguarding Sensitive But Unclassified (For Official Use only) 
Information describes how contractors must handle sensitive but 
unclassified information. MD 4300.1, entitled Information Technology 
Systems Security, and the DHS Sensitive Systems Handbook, prescribe the 
policies and procedures on security for Information Technology 
resources. Compliance with these policies and procedures, any 
replacement publications, or any other current or future DHS policies 
and procedures covering contractors specifically is required in all 
contracts that require access to facilities, IT resources or sensitive 
information.
    (b) The contractor must not use or redistribute any DHS information 
processed, stored, or transmitted by the contractor except as specified 
in the contract.



Sec. 3004.470-3  Contract clauses.

    (a) Contracting officers shall insert a clause substantially the 
same as the clause at (HSAR) 48 CFR 3052.204-70, Security Requirements 
for Unclassified Information Technology Resources, in solicitations and 
contracts that require submission of an IT Security Plan.
    (b) Contracting officers shall insert the basic clause at (HSAR) 48 
CFR 3052.204-71, Contractor Employee Access, in solicitations and 
contracts when contractor employees require recurring access to 
Government facilities or access to sensitive information. Contracting 
Officers shall insert the basic clause with its Alternate I for 
acquisitions requiring contractor access to IT resources. For 
acquisitions in which the contractor will not have access to IT 
resources, but the Department has determined contractor employee access 
to sensitive information or Government facilities must be limited to 
U.S. citizens and lawful permanent residents, the contracting officer 
shall insert the clause with its Alternate II. Neither the basic clause 
nor its alternates shall be used unless contractor employees will 
require recurring access to Government facilities or access to sensitive 
information. Neither the basic clause nor its alternates should 
ordinarily be used in contracts with educational institutions.

                Subpart 3004.8_Government Contract Files



Sec. 3004.804  Closeout of contract files.



Sec. 3004.804-1  Closeout by the office administering the contract.

    (b) The quick closeout procedures under (FAR) 48 CFR 42.708 may be 
used for the settlement of indirect costs under contracts when the 
estimated amount (excluding any fixed fee) of the contract is $3 million 
or less if determined appropriate by the contracting officer.



Sec. 3004.804-5  Procedures for closing out contract files.



Sec. 3004.804-570  Supporting closeout documents.

    (a) When applicable and prior to contract closure, the contracting 
officer shall obtain the listed DHS and Department of Defense (DOD) 
forms from the contractor for closeout.
    (1) DHS Form 0700-03, Contractor's Release (e.g., see (FAR) 48 CFR 
52.216-7);
    (2) DHS Form 0700-02, Contractor's Assignment of Refunds, Rebates, 
Credits and Other Amounts (e.g., see (FAR) 48 CFR 52.216-7);
    (3) DHS Form 0700-01, Cumulative Claim and Reconciliation Statement 
(e.g., see (FAR) 48 CFR 4.804-5(a)(13); and
    (4) DD Form 882, Report of Inventions and Subcontracts (e.g., see 
(FAR) 48 CFR 52.227-14).
    (b) The forms listed in this section (see (HSAR) 48 CFR part 3053) 
are used primarily for the closeout of cost-reimbursement, time-and-
materials, and labor-hour contracts. The forms may also be used for 
closeout of other contract types to protect the Government's interest.

[[Page 71]]

                    SUBCHAPTER B_ACQUISITION PLANNING

                 PART 3005_PUBLICIZING CONTRACT ACTIONS

                  Subpart 3005.4_Release of Information

Sec.

Sec. 3005.402 General public.

   Subpart 3005.90_Publicizing Contract Actions for Personal Services 
                               Contracting


Sec. 3005.9000 Applicability (USCG).

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                  Subpart 3005.4_Release of Information



Sec. 3005.402  General public.

    Requests for other specific records information shall be processed 
according to the DHS Freedom of Information Act rules and regulations 
(HSAR) 48 CFR 3024.203.

   Subpart 3005.90_Publicizing Contract Actions for Personal Services 
                              Contracting.



Sec. 3005.9000  Applicability (USCG).

    Contracts awarded by the U.S. Coast Guard using the procedures in 
(HSAR) 48 CFR 3037.104-91 are expressly authorized for the Coast Guard 
under 10 U.S.C. 1091, as amended by section 1512(d) of the Homeland 
Security Act, 6 U.S.C. 552(d), and are exempt from (FAR) 48 CFR part 5.

[71 FR 25768, May 2, 2006]

                   PART 3006_COMPETITION REQUIREMENTS

                Subpart 3006.1_Full and Open Competition

Sec.

Sec. 3006.101 Policy.

Sec. 3006.101-70 Definitions.

   Subpart 3006.2_Full and Open Competition After Exclusion of Sources


Sec. 3006.202 Establishing or maintaining alternative sources.

           Subpart 3006.3_Other Than Full and Open Competition


Sec. 3006.302 Circumstances permitting other than full and open 
          competition.

Sec. 3006.302-7 Public interest.

                  Subpart 3006.5_Competition Advocates


Sec. 3006.501 Requirement.

     Subpart 3006.90_Competition Requirements for Personal Services 
                               Contracting


Sec. 3006.9000 Applicability (USCG).

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                Subpart 3006.1_Full and Open Competition



Sec. 3006.101  Policy.



Sec. 3006.101-70  Definitions.

    As used in this part:
    Agency competition advocate means an individual designated by the 
Chief Procurement Officer (CPO) to perform, at a minimum, the functions 
under (FAR) 48 CFR 6.502(b) and is synonymous with ``Departmental 
Competition Advocate'' and ``Senior Competition Advocate (SCA).''
    Competition advocate for the procuring activity means the individual 
who has been designated by the Component to approve Justifications and 
Approvals (J & A) for other than full and open competition as permitted 
by the (FAR) 48 CFR 6.304 and to perform the duties and responsibilities 
assigned under (FAR) 48 CFR 6.502. This term is synonymous with 
``procuring activity competition advocate.''

[71 FR 25769, May 2, 2006, as amended at 71 FR 48801, Aug. 22, 2006]

[[Page 72]]

   Subpart 3006.2_Full and Open Competition After Exclusion of Sources



Sec. 3006.202  Establishing or maintaining alternative sources.

    (b)(1) The HCA is delegated authority to approve a D&F in support of 
a contract action award under the authority of (FAR) 48 CFR 6.202(a). 
Submit D&F in the format per (HSAR) 48 CFR 3001.704.

           Subpart 3006.3_Other Than Full and Open Competition



Sec. 3006.302  Circumstances permitting other than full and open 
          competition.



Sec. 3006.302-7  Public interest.

    (c)(1)(ii) Requests shall be prepared in writing by the contracting 
officer, using the format found in (HSAR) 48 CFR 3001.704, and submitted 
through the HCA to the CPO for review and transmittal to the Secretary 
for approval.

                  Subpart 3006.5_Competition Advocates



Sec. 3006.501  Requirement.

    The DHS Senior Competition Advocate (SCA) is located in the Office 
of the Chief Procurement Officer (OCPO).

     Subpart 3006.90_Competition Requirements For Personal Services 
                               Contracting



Sec. 3006.9000  Applicability (USCG).

    Contracts awarded by the U.S. Coast Guard using the procedures in 
(HSAR) 48 CFR 3037.104-91 are expressly authorized under Section 1091 of 
Title 10 U.S.C. as amended, for the Coast Guard and are exempt from the 
competition requirements of (FAR) 48 CFR part 6.

                PART 3007_ACQUISITION PLANNING [RESERVED]

     PART 3008_REQUIRED SOURCES OF SUPPLIES AND SERVICES [RESERVED]

                   PART 3009_CONTRACTOR QUALIFICATIONS

           Subpart 3009.1_Responsible Prospective Contractors

Sec.

Sec. 3009.104-70 Prohibition on contracts with corporate expatriates.

Sec. 3009.104-71 General.

Sec. 3009.104-72 Definitions.

Sec. 3009.104-73 Special rules.

Sec. 3009.104-74 Waivers.

Sec. 3009.104-75 Clause.

         Subpart 3009.4_Debarment, Suspension, and Ineligibility


Sec. 3009.470 Reserve Officer Training Corps and military recruiting on 
          campus.

Sec. 3009.470-1 Definition.

Sec. 3009.470-2 Policy.

Sec. 3009.470-3 Procedures.

Sec. 3009.470-4 Contract clause.

   Subpart 3009.5_Organizational and Consultant Conflicts of Interest


Sec. 3009.507 Solicitation provision and contract clause.

Sec. 3009.507-1 Solicitation provision.

Sec. 3009.507-2 Contract clause.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

           Subpart 3009.1_Responsible Prospective Contractors



Sec. 3009.104-70  Prohibition on contracts with corporate expatriates.



Sec. 3009.104-71  General.

    Except as provided in (HSAR) 48 CFR 3009.104-74, DHS may not enter 
into any contract with a foreign incorporated entity which is treated as 
an inverted domestic corporation under subsection (b) of section 835 of 
the Homeland Security Act, 6 U.S.C. 395(b), or any subsidiary of such an 
entity.

[71 FR 25769, May 2, 2006]



Sec. 3009.104-72  Definitions.

    As used in this subpart--
    Expanded Affiliated Group means an affiliated group as defined in 
section 1504(a) of the Internal Revenue Code of 1986 (without regard to 
section 1504(b) of such Code), except that section 1504

[[Page 73]]

of such Code shall be applied by substituting `more than 50 percent' for 
`at least 80 percent' each place it appears.
    Foreign Incorporated Entity means any entity which is, or but for 
section 835(b) of the Homeland Security Act, 6 U.S.C. 395(b), would be, 
treated as a foreign corporation for purposes of the Internal Revenue 
Code of 1986.
    Inverted Domestic Corporation. A foreign incorporated entity shall 
be treated as an inverted domestic corporation if, pursuant to a plan 
(or a series of related transactions)--
    (1) The entity completes the direct or indirect acquisition of 
substantially all of the properties held directly or indirectly by a 
domestic corporation or substantially all of the properties constituting 
a trade or business of a domestic partnership;
    (2) After the acquisition at least 80 percent of the stock (by vote 
or value) of the entity is held--
    (i) In the case of an acquisition with respect to a domestic 
corporation, by former shareholders of the domestic corporation by 
reason of holding stock in the domestic corporation; or
    (ii) In the case of an acquisition with respect to a domestic 
partnership, by former partners of the domestic partnership by reason of 
holding a capital or profits interest in the domestic partnership; and
    (3) The expanded affiliated group which after the acquisition 
includes the entity does not have substantial business activities in the 
foreign country in which or under the law of which the entity is created 
or organized when compared to the total business activities of such 
expanded affiliated group.
    Person, domestic, and foreign have the meanings given such terms by 
paragraphs (1), (4), and (5) of section 7701(a) of the Internal Revenue 
Code of 1986, respectively.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25769, May 2, 2006]



Sec. 3009.104-73  Special rules.

    The following special rules shall apply when determining whether a 
foreign incorporated entity should be treated as an inverted domestic 
corporation.
    (a) Certain stock disregarded. For the purpose of treating a foreign 
incorporated entity as an inverted domestic corporation these shall not 
be taken into account in determining ownership:
    (1) Stock held by members of the expanded affiliated group which 
includes the foreign incorporated entity; or
    (2) Stock of such entity which is sold in a public offering related 
to the acquisition described in subsection (b)(1) of section 835 of the 
Homeland Security Act, 6 U.S.C. 395(b)(1).
    (b) Plan deemed in certain cases. If a foreign incorporated entity 
acquires directly or indirectly substantially all of the properties of a 
domestic corporation or partnership during the 4-year period beginning 
on the date which is 2 years before the ownership requirements of 
section 835(b)(2) of the Act are met, such actions shall be treated as 
pursuant to a plan.
    (c) Certain transfers disregarded. The transfer of properties or 
liabilities (including by contribution or distribution) shall be 
disregarded if such transfers are part of a plan a principal purpose of 
which is to avoid the purposes of this section.
    (d) Special rule for related partnerships. For purposes of applying 
subsection (b) to the acquisition of a domestic partnership, except as 
provided in regulations, all domestic partnerships which are under 
common control (within the meaning of section 482 of the Internal 
Revenue Code of 1986) shall be treated as a partnership.
    (e) Treatment of certain rights. (1) Certain rights shall be treated 
as stocks to the extent necessary to reflect the present value of all 
equitable interests incident to the transaction, as follows:
    (i) Warrants;
    (ii) Options;
    (iii) Contracts to acquire stock;
    (iv) Convertible debt instruments;
    (v) Others similar interests.
    (2) Rights labeled as stocks shall not be treated as stocks whenever 
it is deemed appropriate to do so to reflect the present value of the 
transaction or to disregard transactions whose recognition would defeat 
the purpose of section 835 of the Act.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25769, May 2, 2006]

[[Page 74]]



Sec. 3009.104-74  Waivers.

    (a) The Secretary shall waive the provisions of (HSAR) 48 CFR 
3009.104-71 with respect to any specific contract if the Secretary 
determines that the waiver is required in the interest of national 
security.
    (b) Contractors shall submit waiver requests to the CPO. A copy of 
the waiver request or the approved waiver shall be attached with the bid 
or proposal.

[71 FR 25769, May 2, 2006]



Sec. 3009.104-75  Clause.

    Insert the provision (HSAR) 48 CFR 3052.209-70, Prohibition on 
Contracts with Corporate Expatriates, in all solicitations and 
contracts.

         Subpart 3009.4_Debarment, Suspension, and Ineligibility



Sec. 3009.470  Reserve Officer Training Corps and military recruiting on 
          campus.



Sec. 3009.470-1  Definition.

    Institution of higher education as used in this section, means an 
institution that meets the requirements of 20 U.S.C. 1001 and includes 
all subelements of such an institution.



Sec. 3009.470-2  Policy.

    (a) Except as provided in paragraph (b) of this subsection, 10 
U.S.C. 983 prohibits the Department of Homeland Security from providing 
funds by contract or grant to an institution of higher education if the 
Secretary of Defense determines that the institution has a policy or 
practice that prohibits or in effect prevents--
    (1) The Secretary of a military department from maintaining, 
establishing, or operating a unit of the Senior Reserve Officer Training 
Corps (ROTC) at that institution;
    (2) A student at that institution from enrolling in a unit of the 
Senior ROTC at another institution of higher education;
    (3) The Secretary of a military department or the Secretary of 
Homeland Security from gaining entry to campuses, or access to students 
on campuses, for purposes of military recruiting; or
    (4) Military recruiters from accessing certain information 
pertaining to students enrolled at that institution.
    (b) The prohibition in paragraph (a) of this subsection does not 
apply to an institution of higher education if the Secretary of Defense 
determines that--
    (1) The institution (and each subelement of that institution) has 
ceased the policy or practice described in paragraph (a) of this 
subsection; or
    (2) The institution involved has a long-standing policy of pacifism 
based on historical religious affiliation.



Sec. 3009.470-3  Procedures.

    Whenever the Secretary of Defense determines that an institution of 
higher education (including any subelement of such institution) is 
ineligible and the provisions of 10 U.S.C. 983 apply:
    (a) The Secretary of Defense will list the institution on the List 
of Parties Excluded from Federal Procurement and Nonprocurement Programs 
published by the General Services Administration (also see (FAR) 48 CFR 
9.404 and 32 CFR part 216); and
    (b) The Department of Homeland Security--
    (1) Shall not solicit offers from, award contracts to, or consent to 
subcontracts with the institution;
    (2) Shall make no further payments under existing contracts with the 
institution; and
    (3) Shall terminate existing contracts with the institution.



Sec. 3009.470-4  Contract clause.

    Insert the clause at (HSAR) 48 CFR 3052.209-71, Reserve Officer 
Training Corps and Military Recruiting on Campus, in all solicitations 
and contracts with institutions of higher education.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25769, May 2, 2006]

   Subpart 3009.5_Organizational and Consultant Conflicts of Interest



Sec. 3009.507  Solicitation provision and contract clause.

    The contracting officer may insert the provision at (HSAR) 48 CFR

[[Page 75]]

3052.209-72, ``Disclosure of Conflicts of Interest'' in all 
solicitations for negotiated acquisitions, and when simplified 
acquisitions procedures in (FAR) 48 CFR Part 13, are not used. The 
contracting officer shall ensure the conditions enumerated in (FAR) 48 
CFR 9.507-2 warrant inclusion.



Sec. 3009.507-1  Solicitation provision.

    The contracting officer shall insert a provision substantially the 
same as (HSAR) 3052.209-72, Organizational Conflict of Interest, in 
solicitations and contracts where a potential organizational conflict of 
interest exists and mitigation may be possible. The contracting officer 
shall ensure the conditions enumerated in (FAR) 48 CFR subpart 9.5 
warrant inclusion. The contracting officer shall include the information 
required by (FAR) 48 CFR 9.507-1 and (HSAR) 3052.209-72(a).

[71 FR 25769, May 2, 2006]



Sec. 3009.507-2  Contract clause.

    The contracting officer shall insert a clause substantially the same 
as the clause at (HSAR) 48 CFR 3052.209-73, Limitation of Future 
Contracting, in solicitations and contracts when a potential 
organizational conflict of interest exists and mitigation is not 
feasible.

[71 FR 25769, May 2, 2006]

                  PART 3010_MARKET RESEARCH [RESERVED]

                    PART 3011_DESCRIBING AGENCY NEEDS

     Subpart 3011.1_Selecting and Developing Requirements Documents

Sec.

Sec. 3011.103 Market acceptance.

            Subpart 3011.2_Using and Maintaining Requirements


Sec. 3011.204-70 Solicitation provisions and contract clauses.

                    Subpart 3011.5_Liquidated Damages


Sec. 3011.501 Policy.

                Subpart 3011.6_Priorities and Allocations


Sec. 3011.602 General.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

     Subpart 3011.1_Selecting and Developing Requirements Documents



Sec. 3011.103  Market acceptance.

    (a) Contracting officers may act on behalf of the head of the agency 
in this subpart only. Contracting officers may, under appropriate 
circumstances, require offerors to make the required demonstrations.

       Subpart 3011.2_Using and Maintaining Requirements Documents



Sec. 3011.204-70  Solicitation provisions and contract clauses.

    The contracting officer shall insert the clause at (HSAR) 48 CFR 
3052.211-70, Index for Specifications, when an index or table of 
contents may be furnished with the specification.

                    Subpart 3011.5_Liquidated Damages



Sec. 3011.501  Policy.

    (d) The HCA may reduce or waive the amount of liquidated damages 
assessed under a contract, if the Commissioner, Financial Management 
Service, or designee approves.

                Subpart 3011.6_Priorities and Allocations



Sec. 3011.602  General.

    (c) The following DHS Components may assign priority ratings on 
contracts and orders placed with contractors to acquire products, 
materials, and services under the Defense Priorities and Allocations 
System (DPAS) regulations (15 CFR part 700):
    (1) The U.S. Coast Guard in support of certified national defense 
related programs; and

[[Page 76]]

    (2) The Federal Emergency Management Agency in support of emergency 
preparedness activities.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48801, Aug. 22, 2006]

          PART 3012_ACQUISITION OF COMMERCIAL ITEMS [RESERVED]

[[Page 77]]

            SUBCHAPTER C_CONTRACT METHODS AND CONTRACT TYPES

               PART 3013_SIMPLIFIED ACQUSITION PROCEDURES

        Subpart 3013.70_Special Streamlined Acquisition Authority

Sec.

Sec. 3013.7000 General.

Sec. 3013.7001 Delegations.

Sec. 3013.7002 Reporting requirements.

Sec. 3013.7003 Micro-purchase authority.

Sec. 3013.7004 Simplified acquisition authority.

Sec. 3013.7005 Test program for certain commercial items.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

        Subpart 3013.70_Special Streamlined Acquisition Authority



Sec. 3013.7000  General.

    (a) The Secretary may use the special streamlined acquisition 
authorities set forth in the Homeland Security Act, section 833, 6 
U.S.C. 393, with respect to any procurement that takes place during the 
period ending September 30, 2007, if the Secretary determines in writing 
that the mission of the Department (as described in the Homeland 
Security Act, section 101, 6 U.S.C. 111) would be seriously impaired 
without the use of such authorities.
    (b) The Secretary may deem any item or service to be a commercial 
item for the purpose of federal procurement laws for procurements 
described in (HSAR) 48 CFR 3013.7005.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25769, May 2, 2006]



Sec. 3013.7001  Delegations.

    The Secretary may delegate this authority to an officer of the 
Department who is appointed by the President with the advice and consent 
of the Senate. Delegations of this authority are discussed in HSAM 3013.



Sec. 3013.7002  Reporting requirements.

    (a) The Secretary shall submit to the Committee on Government Reform 
of the House of Representatives and the Committee on Governmental 
Affairs of the Senate--
    (1) Notification of such determination; and
    (2) The justification for such determination.
    (b) This report shall be submitted no later than seven days after 
the date of any determination. Reporting requirements and procedures are 
discussed in HSAM 3013.



Sec. 3013.7003  Micro-purchase authority.

    (a) When the streamlined acquisition authority is exercised, the 
micro-purchase threshold is raised to $7,500.
    (b) The authority in this section may be exercised only by 
individuals designated by the Secretary. The number of employees shall 
be--
    (1) Fewer than the number of employees of the Department that are 
authorized to make purchases without obtaining competitive quotations.
    (2) Sufficient to ensure the geographic dispersal of the 
availability of the use of the procurement authority under such 
paragraph at locations reasonably considered to be potential terrorist 
targets; and
    (3) Sufficiently limited to allow for careful monitoring of 
employees designated under each paragraph.
    (c) Procurements made under this authority shall be subject to 
review by a designated supervisor on not less than a monthly basis. The 
supervisor responsible for the review shall be responsible for no more 
than seven employees making procurements under this authority.



Sec. 3013.7004  Simplified acquisition authority.

    When the streamlined acquisition authority is exercised, the 
simplified acquisition threshold shall be:
    (a) $200,000 in the case of a contract to be awarded and performed, 
or purchase to be made, within the United States; and

[[Page 78]]

    (b) $300,000 in the case of a contract to be awarded and performed, 
or purchase to be made, outside of the United States.



Sec. 3013.7005  Test program for certain commercial items.

    When the streamlined authority is exercised, the limitation provided 
in (FAR) 48 CFR subpart 13.5 is increased to $7,500,000.

[71 FR 25769, May 2, 2006]

                   PART 3014_SEALED BIDDING [RESERVED]

                  PART 3015_CONTRACTING BY NEGOTIATION

  Subpart 3015.2_Solicitation and Receipt of Proposals and Information

Sec.

Sec. 3015.204-3 Contract clauses.

Sec. 3015.207-70 Handling proposals and information.

                  Subpart 3015.6_Unsolicited Proposals


Sec. 3015.602 Policy.

Sec. 3015.603 [Reserved]

Sec. 3015.604 Agency points of contact.

Sec. 3015.606 Agency procedures.

Sec. 3015.606-1 Receipt and initial review.

Sec. 3015.606-2 Evaluation.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

  Subpart 3015.2_Solicitation and Receipt of Proposals and Information



Sec. 3015.204-3  Contract clauses.

    The contracting officer shall insert clause (HSAR) 48 CFR 3052.215-
70, Key Personnel or Facilities, in solicitations and contracts when the 
selection for award is substantially based on the offeror's possession 
of special capabilities regarding personnel or facilities.



Sec. 3015.207-70  Handling proposals and information.

    (b) Proposals and information may be released outside the Government 
for evaluation and similar purposes if qualified personnel are not 
available to thoroughly evaluate or analyze proposals or information. 
The contracting officer shall document the file in such cases.

                  Subpart 3015.6_Unsolicited Proposals



Sec. 3015.602  Policy.

    The Department of Homeland Security (DHS) encourages new and 
innovative proposals and ideas that will sustain or enhance the DHS 
mission.

[71 FR 25770, May 2, 2006]



Sec. 3015.603  [Reserved]



Sec. 3015.604  Agency points of contact.

    (a) The DHS does not have a central clearinghouse for distributing 
information or assistance regarding unsolicited proposals. Each HCA is 
responsible for disseminating the information required at (FAR) 48 CFR 
15.604(a). General information concerning DHS's scope of 
responsibilities and functions is available at http://www.dhs.gov/
dhspublic/.



Sec. 3015.606  Agency procedures.

    (a) The agency authority to establish procedures for receiving, 
reviewing and evaluating, and timely disposing of unsolicited proposals, 
consistent with the requirements of (FAR) 48 CFR 15.6 and this subpart, 
is delegated to each HCA.
    (b) The agency authority to establish points of contact (see (FAR) 
48 CFR 15.604) to coordinate the receipt and handling of unsolicited 
proposals is delegated to each HCA. Contracting offices are designated 
as the receiving point for unsolicited proposals. Persons within DHS 
(e.g., technical personnel) who receive proposals shall forward them to 
their cognizant contracting office.



Sec. 3015.606-1  Receipt and initial review.

    (a) The agency contact point shall make an initial review 
determination within seven calendar days after receiving a proposal.
    (b) If the proposal meets the requirements at (FAR) 48 CFR 15.606-
1(a), the agency contact point shall acknowledge receipt within three 
calendar days after making the initial review determination and advise 
the offeror of the

[[Page 79]]

general timeframe for completing the evaluation.
    (c) If the proposal does not meet the requirements of (FAR) 48 CFR 
15.606-1(a), the agency contact point shall return the proposal within 
three calendar days after making the determination. The offeror shall be 
informed, in writing, of the reasons for returning the proposal.



Sec. 3015.606-2  Evaluation.

    (a) Comprehensive evaluations should be completed within sixty 
calendar days after making the initial review determination. If 
additional time is needed, then the agency contact point shall advise 
the offeror accordingly and provide a new evaluation completion date. 
The evaluating office shall neither reproduce nor disseminate the 
proposal to other offices without the consent of the contracting office 
from which the proposal was received for evaluation. If the evaluating 
office requires additional information from the offeror, the evaluator 
shall convey this request to the responsible contracting office. The 
evaluator shall not directly contact the proposal originator.
    (b) If the evaluators recommend accepting the proposal, the 
responsible contracting officer shall ensure compliance with all of the 
requirements of (FAR) 48 CFR 15.607.

                      PART 3016_TYPES OF CONTRACTS

                  Subpart 3016.2_Fixed-Price Contracts

Sec.

Sec. 3016.203 Fixed-price contracts with economic price adjustment.

Sec. 3016.203-4 Contract clauses.

Sec. 3016.203-470 Solicitation provision.

                   Subpart 3016.4_Incentive Contracts


Sec. 3016.406 Contract clauses.

              Subpart 3016.5_Indefinite-Delivery Contracts


Sec. 3016.505 Ordering.

   Subpart 3016.6_Time-and-Materials, Labor-Hour, and Letter Contracts


Sec. 3016.603 Letter contracts.

Sec. 3016.603-4 Contract clauses.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                  Subpart 3016.2_Fixed-Price Contracts



Sec. 3016.203  Fixed price contracts with economic price adjustments.



Sec. 3016.203-4  Contract clauses.

    (d)(2) Any clause using this method shall be prepared and approved 
by the contracting officer.



Sec. 3016.203-470  Solicitation provision.

    The contracting officer shall insert a provision substantially the 
same as (HSAR) 48 CFR 3052.216-70, Evaluation of Offers Subject to an 
Economic Price Adjustment Clause, in solicitations containing an 
economic price adjustment clause.

                   Subpart 3016.4_Incentive Contracts



Sec. 3016.406  Contract clauses.

    (e)(1)(i) The contracting officer shall insert a clause 
substantially the same as (HSAR) 48 CFR 3052.216-71, Determination of 
Award Fee, in solicitations and contracts that include an award fee.
    (ii) The contracting officer shall insert a clause substantially the 
same as (HSAR) 48 CFR 3052.216-72, Performance Evaluation Plan, in all 
solicitations and contracts that include an award fee.
    (iii) The contracting officer shall insert a clause substantially 
the same as (HSAR) 48 CFR 3052.216-73, Distribution of Award Fee, in all 
solicitations and contracts that include an award fee.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25770, May 2, 2006]

              Subpart 3016.5_Indefinite-Delivery Contracts



Sec. 3016.505  Ordering.

    (b)(5) The Component Competition Advocate is designated as the 
Component Task and Delivery Order Ombudsman, unless otherwise provided 
in Component procedures.

[[Page 80]]

    (i) If any corrective action is needed after reviewing complaints 
from contractors on task and delivery order contracts, the Component 
Ombudsman shall provide a written determination of such action to the 
contracting officer.
    (ii) Issues that cannot be resolved within the Component shall be 
forwarded to the DHS Task and Delivery Order Ombudsman, who is also the 
DHS Senior Competition Advocate, for review and resolution.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25770, May 2, 2006; 71 
FR 48801, Aug. 22, 2006]

   Subpart 3016.6_Time-and-Materials, Labor-Hour, and Letter Contracts



Sec. 3016.603  Letter contracts.



Sec. 3016.603-4  Contract clauses.

    The contracting officer shall insert a clause substantially the same 
as (HSAR) 48 CFR 3052.216-74, Settlement of Letter Contract, in all 
definitized letter contracts.

                  PART 3017_SPECIAL CONTRACTING METHODS

                         Subpart 3017.2_Options

Sec.

Sec. 3017.202 Use of options.

Sec. 3017.204 Contracts.

Sec. 3017.204-90 Detention Facilities and Services (ICE).

                Subpart 3017.4_Leader Company Contracting


Sec. 3017.402 Limitations.

 Subpart 3017.90_Fixed Price Contracts for Vessel Repair, Alteration or 
                               Conversion


Sec. 3017.9000 Clauses (USCG).

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                         Subpart 3017.2_Options.



Sec. 3017.202  Use of options.

    (a) Contracting officers shall not use unpriced options.



Sec. 3017.204  Contracts.



Sec. 3017.204-90  Detention Facilities and Services (ICE).

    The ICE Head of the Contracting Activity (HCA), without delegation, 
may enter into contracts of up to fifteen years' duration for detention 
or incarceration space or facilities, including related services.

[71 FR 25770, May 2, 2006]

                Subpart 3017.4_Leader Company Contracting



Sec. 3017.402  Limitations.

    (a)(4) Submit requests per (HSAR) 48 CFR 3001.7000.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48801, Aug. 22, 2006]

 Subpart 3017.90_Fixed Price Contracts for Vessel Repair, Alteration or 
                               Conversion



Sec. 3017.9000  Clauses (USCG).

    For the U.S. Coast Guard, the following clauses are to be used in 
specific solicitations and contracts:
    (a) The clauses in (HSAR) 48 CFR 3052.217-90 through (HSAR) 48 CFR 
3052.217-93 and (HSAR) 48 CFR 3052.217-95 through (HSAR) 48 CFR 
3052.217-99 shall be included and clause (HSAR) 48 CFR 3052.217-94 may 
be included in sealed bid fixed-price solicitations and contracts for 
vessel repair, alteration, or conversion which are to be performed 
within the United States, its possessions, or Puerto Rico. The 
contracting officer may, in whole or in part (such as after incidents), 
increase the dollar amounts in the clause at (HSAR) 48 CFR 3052.217-
95(b)(6) and (c)(1) consistent with contract size, inflation, and other 
circumstances.
    (b) Unless inappropriate, the clauses in (HSAR) 48 CFR 3052.217-90 
through (HSAR) 48 CFR 3052.217-93 and (HSAR) 48 CFR 3052.217-95 through 
(HSAR) 48 CFR 3052.217-99 should be included and (HSAR) 48 CFR 3052.217-
94 may be included in negotiated solicitations and contracts to be 
performed outside the United States. The contracting officer may, in 
whole or in part (such as after incidents), increase the dollar amounts

[[Page 81]]

in the clause at (HSAR) 48 CFR 3052.217-95(b)(6) and (c)(1) consistent 
with contract size, inflation, and other circumstances.
    (c) The clause at (HSAR) 48 CFR 3052.217-100, Guarantee, shall be 
used where general guarantee provisions are deemed desirable by the 
contracting officer.
    (1) When inspection and acceptance tests will afford full protection 
to the Government in ascertaining conformance to specifications and the 
absence of defects and deficiencies, no guarantee clause for that 
purpose shall be included in the contract.
    (2) The customary guarantee period, to be inserted in the first 
sentence of the clause at (HSAR) 48 CFR 3052.217-100, Guarantee, is 60 
days. However, in certain instances, the contracting officer may desire 
to include a clause in a contract for a guarantee period of more than 60 
days. In such instances:
    (i) Where, after full inquiry, it has been determined that such 
longer guarantee period will not involve increased costs, a longer 
guarantee period may be substituted by the contracting officer for the 
usual 60 days; or
    (ii) Where the full inquiry discloses that such longer guarantee 
period will involve, or is reasonably expected to involve, increased 
costs, such facts and the reasons for the need for such longer period 
shall be set forth in letter form to the COCO, requesting approval for 
use of guarantee period in excess of 60 days. Upon approval, the longer 
period may be inserted by the contracting officer in the first sentence 
of the clause at (HSAR) 48 CFR 3052.217-100, Guarantee.

                          PART 3018 [RESERVED]

[[Page 83]]

                   SUBCHAPTER D_SOCIOECONOMIC PROGRAMS

                    PART 3019_SMALL BUSINESS PROGRAMS

                         Subpart 3019.2_Policies

Sec.

Sec. 3019.201 General policy.

        Subpart 3019.7_The Small Business Subcontracting Program


Sec. 3019.705 Responsibilities of the contracting officer under the 
          subcontracting assistance program.

Sec. 3019.705-1 General support for the program.

Sec. 3019.708 Contract clauses.

Sec. 3019.708-70 Solicitation provision and contract clauses.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                         Subpart 3019.2_Policies



Sec. 3019.201  General policy.

    (d) DHS is committed to a unified team approach involving senior 
management, small business specialists, acquisition personnel and 
program staff to support both critical homeland security missions and 
meet public policy objectives concerning small business participation in 
departmental procurements. The Director, Office of Small and 
Disadvantaged Business Utilization, is responsible for the 
implementation and execution of programs to assist small businesses, 
veteran owned small businesses, service-disabled veteran owned small 
businesses, HUBZone small businesses, small disadvantaged businesses, 
and women-owned small business concerns as required by the Small 
Business Act.

[71 FR 25770, May 2, 2006]

        Subpart 3019.7_The Small Business Subcontracting Program



Sec. 3019.705  Responsibilities for the contracting officer under the 
          subcontracting program.



Sec. 3019.705-1  General support for the program.

    In any solicitation where subcontracting plans will be required for 
one or more offerors, contracting officers may include evaluation 
factors that consider the quality of proposed subcontracting plans and 
past performance under previous subcontracting plans. Contracting 
officers must ensure that these factors do not penalize companies not 
required to submit subcontracting plans.

[71 FR 25770, May 2, 2006]



Sec. 3019.708  Contract clauses.



Sec. 3019.708-70  Solicitation provision and contract clauses.

    (a) The contracting officer shall insert the clause at (HSAR) 48 CFR 
3052.219-70, Small Business Subcontracting Plan Reporting, in 
solicitations and contracts containing the clause at (FAR) 48 CFR 
52.219-9.
    (b) The contracting officer shall insert the clause at (HSAR) 48 CFR 
3052.219-71, DHS Mentor-Prot[eacute]g[eacute] Program in all 
solicitations that anticipate the need for a subcontracting plan.
    (c) The contracting officer shall insert the provision at (HSAR) 48 
CFR 3052.219-72, Evaluation of Prime Contractor Participation in the DHS 
Mentor-Prot[eacute]g[eacute] Program, in all solicitations containing 
(HSAR) 48 CFR 3052.219-71, DHS Mentor-Prot[eacute]g[eacute] Program and 
(FAR) 48 CFR 52.219-9, Small Business Subcontracting Plan.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25770, May 2, 2006]

                        PART 3020	3021 [RESERVED]

[[Page 84]]

     PART 3022_APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS

                   Subpart 3022.1_Basic Labor Policies

Sec.

Sec. 3022.101 Labor relations.

Sec. 3022.101-70 Admittance of union representatives to DHS 
          installations.

Sec. 3022.101-71 Contract clauses.

   Subpart 3022.4_Labor Standards for Contracts Involving Construction


Sec. 3022.406 Administration and enforcement.

Sec. 3022.406-9 Withholding from or suspension of contract payments.

                    Subpart 3022.90_Local Hire (USCG)


Sec. 3022.9000 Policy (USCG).

Sec. 3022.9001 Contract clause (USCG).

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                   Subpart 3022.1_Basic Labor Policies



Sec. 3022.101  Labor relations.



Sec. 3022.101-70  Admittance of union representatives to DHS 
          installations.

    (a) Admittance of union representatives to Transportation Security 
Administration or United States Secret Service installations and work 
sites is not governed by this rule, but by laws, rules, regulations, 
Executive Orders and policies applicable to those Components. It is the 
policy of DHS to admit non-employee labor union representatives of 
contractor employees to DHS installations to visit work sites and 
transact labor union business with contractors, their employees, and 
union stewards pursuant to existing union collective bargaining 
agreements. Their presence must not interfere with the contractor's work 
under a DHS contract nor violate safety or security regulations that may 
be applicable to persons visiting the installation. However, if there 
have been incidents of vandalism, illegal work stoppages, or 
interference with work, the non-employee labor union representatives may 
be subject to access limitations. Non-employee labor union 
representatives will not be permitted to conduct meetings, collect union 
dues, or make speeches concerning union matters while visiting a work 
site during working hours.
    (b) Whenever a non-employee labor union representative is denied 
entry to a work site, the person denying entry shall make a written 
report to the DHS labor coordinator and Component labor advisor, if any, 
within two working days after the request for entry is denied. The 
report shall include the reason(s) for the denial, the name of the 
representative denied entry, the union affiliation and number, and the 
name and title of the person that denied the entry.

[71 FR 25770, May 2, 2006, as amended at 71 FR 48801, Aug. 22, 2006]



Sec. 3022.101-71  Contract clauses.

    (a) The contracting officer, may, when applicable, insert the clause 
at (HSAR) 48 CFR 3052.222-70, Strikes or Picketing Affecting Timely 
Completion of the Contract Work, in solicitations and contracts.
    (b) The contracting officer may, when applicable, insert the clause 
at (HSAR) 48 CFR 3052.222-71, Strikes or Picketing Affecting Access to a 
DHS Facility, in solicitations and contracts.

   Subpart 3022.4_Labor Standards for Contracts Involving Construction



Sec. 3022.406  Administration and enforcement.



Sec. 3022.406-9  Withholding from or suspension of contract payments.

    (c) Disposition of contract payments withheld or suspended.
    (1) Forwarding wage underpayments to the Comptroller General. The 
contracting officer shall ensure that a completed DHS Form 0700-04, 
Employee Claim for Wage Restitution, is obtained from each employee 
claiming restitution under the contract. The Comptroller General (Claims 
Division) shall receive this form with a completed SF 1093, Schedule of 
Withholding Under the Davis-Bacon Act and/or the Contract Work Hours and 
Safety Standards Act, before payment can be made to the employee.

[[Page 85]]

                    Subpart 3022.90_Local Hire (USCG)



Sec. 3022.9000  Policy (USCG).

    As required by 14 U.S.C. 666, the U.S. Coast Guard shall include a 
provision for local hire in each contract for construction or services 
to be performed in whole or in part in a State that has an unemployment 
rate in excess of the national average rate of unemployment as 
determined by the Secretary of Labor.



Sec. 3022.9001  Contract clause (USCG).

    For the U.S. Coast Guard, the contracting officer shall insert the 
USCG clause at (HSAR) 48 CFR 3052.222-90, Local Hire (USCG), Local Hire 
Provision, in all solicitations and contracts as stated in (HSAR) 48 CFR 
3022.9000.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25770, May 2, 2006]

PART 3023_ENVIRONMENT, CONSERVATION, OCCUPATIONAL SAFETY, AND DRUG-FREE 
                                WORKPLACE

  Subpart 3023.3_Hazardous Material Identification and Material Safety 
                                  Data

Sec.

Sec. 3023.303 Contract clause.

                   Subpart 3023.5_Drug-Free Workplace


Sec. 3023.501 Applicability.

Sec. 3023.506 Suspension of payments, termination of contract, and 
          debarment and suspension actions.

Subpart 3023.10_Federal Compliance with Right-to-Know Laws and Pollution 
                         Prevention Requirements


Sec. 3023.1002 Applicability.

         Subpart 3023.90_Safety Requirements for USCG Contracts


Sec. 3023.9000 Contract Clause (USCG).

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

  Subpart 3023.3_Hazardous Material Identification and Material Safety 
                                  Data



Sec. 3023.303  Contract clause.

    The contracting officer shall insert the clause at (HSAR) 48 CFR 
3052.223-70, Removal or Disposal of Hazardous Substances--Applicable 
Licenses and Permits, in solicitations and contracts involving the 
removal or disposal of hazardous waste material.

                   Subpart 3023.5_Drug-Free Workplace



Sec. 3023.501  Applicability.

    (d) The head of any Component may issue a determination under (FAR) 
48 CFR 23.501(d) to exclude the Drug-Free Workplace requirements of FAR 
subpart 23.5 in contracts supporting undercover law enforcement 
operations.

[71 FR 25770, May 2, 2006, as amended at 71 FR 48801, Aug. 22, 2006]



Sec. 3023.506  Suspension of payments, termination of contract, and 
          debarment and suspension actions.

    (e) Submit requests per (HSAR) 48 CFR 3001.7000.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48801, Aug. 22, 2006]

Subpart 3023.10_Federal Compliance With Right-to-Know Laws and Pollution 
                              Requirements



Sec. 3023.1002  Applicability.

    DHS MD 5110, Environmental Compliance, provides guidance and 
direction for compliance with environmental laws.

         Subpart 3023.90_Safety Requirements for USCG Contracts



Sec. 3023.9000  Contract clause (USCG).

    For the U.S. Coast Guard, where all or part of a contract will be 
performed on Government-owned or leased property, the contracting 
officer shall insert the clause at (HSAR) 48 CFR 3052.223-90, Accident 
and Fire Reporting.

[[Page 86]]

       PART 3024_PROTECTION OF PRIVACY AND FREEDOM OF INFORMATION

             Subpart 3024.1_Protection of Individual Privacy

Sec.

Sec. 3024.102-70 General.

                Subpart 3024.2_Freedom of Information Act


Sec. 3024.203 Policy.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

             Subpart 3024.1_Protection of Individual Privacy



Sec. 3024.102-70  General.

    Procedures for implementing the Privacy Act of 1974 are contained in 
Departmental regulations under 6 CFR part 5, subpart B, Privacy Act.

                Subpart 3024.2_Freedom of Information Act



Sec. 3024.203  Policy.

    (a) The Department's implementation of the Freedom of Information 
Act is codified in regulations 6 CFR part 5, subpart B, FOIA. 
Information request concerning awards beyond those routinely handled by 
contracting officers (e.g., identification of successful offerors, 
public announcements, debriefings, surety notices under HSAR 3028.106-6) 
shall be submitted to the FOIA Office of the Component making the award. 
The FOIA office for the DHS Office of Operations only, is Departmental 
Disclosure Officer (DDO), DHS, Washington, DC 20528 or [email protected].
    (b) See (FAR) 48 CFR 15.207(b) on safeguarding proposals.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48801, Aug. 22, 2006]

                PART 3025_FOREIGN ACQUISITION [RESERVED]

            PART 3026_OTHER SOCIOECONOMIC PROGRAMS [RESERVED]

                 PART 3027_PATENTS, DATA, AND COPYRIGHTS

                         Subpart 3027.2_Patents

Sec.

Sec. 3027.205 Adjustment of royalties.

Sec. 3027.208 Use of patented technology under the North American Free 
          Trade Agreement.

         Subpart 3027.3_Patent Rights Under Government Contracts


Sec. 3027.304-1 General.

Sec. 3027.304-5 Appeals.

Sec. 3027.305 Administration of Patent Rights Clauses.

Sec. 3027.305-4 Administration of Patent Rights Clause.

Sec. 3027.306 Licensing background patent rights to third parties.

              Subpart 3027.4_Rights in Data and Copyrights


Sec. 3027.404 Basic Rights in Data clause.

Sec. 3027.409 Solicitation provisions and contract clauses.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                         Subpart 3027.2_Patents



Sec. 3027.205  Adjustment of royalties.

    (a) Reports shall be made to Component legal counsel. Contracting 
Officers shall coordinate actions with the COCO and HCA.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48801, Aug. 22, 2006]



Sec. 3027.208  Use of patented technology under the North American Free 
          Trade Agreements.

    (f) Contracting officers shall ensure compliance.

         Subpart 3027.3_Patent Rights under Government Contracts



Sec. 3027.304-1  General.

    Interim and final invention reports and notification of all 
subcontracts for experimental, developmental, or research work (FAR) 48 
CFR 27.304-1(e)(2)(ii) may be submitted on DD Form 882, Report of 
Inventions and Subcontracts.

[[Page 87]]



Sec. 3027.304-5  Appeals.

    (a) Contracting officers are authorized to take the specified 
actions.
    (b) Appeals shall be made to the CPO.



Sec. 3027.305  Administration of Patent Rights Clauses.



Sec. 3027.305-4  Conveyance of invention rights acquired by the 
          Government.

    The contracting officer shall ensure that solicitations and 
contracts which include a patent rights clause include a means for the 
contractor to report inventions made in the course of contract 
performance and at contract completion. This requirement may be 
fulfilled by requiring the contractor to submit a DD Form 882, Report of 
Inventions and Subcontract.



Sec. 3027.306  Licensing background patent rights to third parties.

    (b) The CPO shall make the required determinations and notifications 
under this subpart.

              Subpart 3027.4_Rights in Data and Copyrights



Sec. 3027.404  Basic rights in data clause.

    (f)(1)(iii) The DHS will use Alternate IV of the (FAR) 48 CFR clause 
52.227-14 in all contracts containing the basic clause, unless the HCA 
approves an exclusion. Approval at a level above the contracting officer 
is required for the contract to exclude items or categories of data from 
Alternative IV.



Sec. 3027.409  Solicitation provisions and contract clauses.

    Alternate IV of the (FAR) 48 CFR clause 52.227-14 shall be included 
in solicitations and contracts containing the basic clause unless the 
HCA approves an exclusion. Additional non-conflicting alternates may be 
used.

                      PART 3028_BONDS AND INSURANCE

          Subpart 3028.1_Bonds and Other Financial Protections

Sec.

Sec. 3028.106 Administration.

Sec. 3028.106-6 Furnishing information.

Sec. 3028.106-70 Execution and administration of bonds.

Sec. 3028.106-490 Contract clause (USCG).

                        Subpart 3028.3_Insurance


Sec. 3028.306 Insurance under fixed-price contracts.

Sec. 3028.306-90 Contracts for lease of aircraft (USCG).

Sec. 3028.307 Insurance under cost-reimbursement contracts.

Sec. 3028.307-1 Group insurance plans.

Sec. 3028.310 Contract clause for work on a Government installation.

Sec. 3028.310-70 Contract clause.

Sec. 3028.311 Solicitation provision and contract clause on liability 
          insurance under cost-reimbursement contracts.

Sec. 3028.311-1 Contract clause.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

          Subpart 3028.1_Bonds and Other Financial Protections



Sec. 3028.106  Administration.



Sec. 3028.106-6  Furnishing information.

    (b) The contracting officer shall, upon request, furnish the name 
and address of the prime contractor's surety or sureties to employees, 
suppliers, and subcontractors having a contractual or employment 
relationship with prime contractors, subcontractors or suppliers. When 
furnishing surety information, the inquirer may also be informed that:
    (1) Persons believing that they have legal remedies under the Miller 
Act are cautioned to consult their own legal advisor regarding the 
proper steps to take to obtain remedies.
    (2) On construction contracts exceeding $2,000, if the contracting 
officer is informed (through routine compliance checking, a complaint, 
or a request for information) that a laborer, mechanic, apprentice, 
trainee, watchman, or guard employed by the contractor or subcontractor 
at any tier may have been paid wages less than those required by the 
applicable labor standards provisions of the contract, the contracting 
officer shall promptly initiate an investigation in accordance with 
(FAR) 48 CFR Subpart 22.4, irrespective of the employee's rights under

[[Page 88]]

the Miller Act. When an employee's request for information is involved, 
the contracting officer shall inform the inquirer that such 
investigation will be made. Such investigation is required pursuant to 
the provisions of the Davis-Bacon Act, Contract Work Hours and Safety 
Standards Act, and Copeland (Anti-Kickback) Act for assuring proper 
payment to such employees.
    (c) When furnishing a copy of a payment bond and contract in 
accordance with (FAR) 48 CFR 28.106-6(c), the requirement for a copy of 
the contract may be satisfied by furnishing a machine-duplicate copy of 
the contract's cover page, showing the contract number and date, the 
contractor's name and signature, the contracting officer's signature, 
and the description of the contract work. The contracting officer 
furnishing the copies shall place the statement ``Certified to be a true 
and correct copy'' followed by a signature, title and name of the 
Component. The fee for furnishing the requested certified copies shall 
be determined according to the DHS Freedom of Information Act 
regulation, 6 CFR part 5, subpart B.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25771, May 2, 2006; 71 
FR 48801, Aug. 22, 2006]



Sec. 3028.106-70  Execution and administration of bonds.

    (a) The contracting officer shall notify the surety within 30 days, 
of the contractor's failure to perform in accordance with the terms of 
the contract.
    (b) When a partnership is a principal on a bond, the names of all 
the members of the firm shall be listed in the bond following the name 
of the firm, and the phrase ``a partnership composed of.'' If a 
principal is a corporation, the state of incorporation shall also appear 
on the bond.
    (c) Performance or payment bond(s) other than an annual bond shall 
not predate the contract to which it pertains.
    (d) Bonds may be filed with the original contract to which they 
apply, or all bonds can be separately maintained and reviewed quarterly 
for validity. If separately maintained, each contract file shall cross-
reference the applicable bonds.



Sec. 3028.106-490  Contract clause (USCG).

    For the U.S. Coast Guard, the contracting officer shall insert the 
USCG clause at (HSAR) 48 CFR 3052.228-90, Notification of Miller Act 
Payment Bond Protection (USCG), in solicitations and contracts, and 
shall require its first-tier subcontractors to insert the clause in all 
of their subcontracts, when payment bonds are required.

[71 FR 25771, May 2, 2006]

                        Subpart 3028.3_Insurance



Sec. 3028.306  Insurance under fixed-price contracts.



Sec. 3028.306-90  Contracts for lease of aircraft (USCG).

    (a) For the U.S. Coast Guard, the contracting officer shall insert 
the clauses at (HSAR) 48 CFR 3052.228-91 through 3052.228-93, unless 
otherwise indicated by the specific instructions for their use, in any 
contract for the lease of aircraft (including aircraft used in out-
service flight training).
    (b) For the U.S. Coast Guard, the contracting officer shall insert 
the clause at (HSAR) 48 CFR 3052.228-91, Loss of or Damage to Leased 
Aircraft, in any contract for the lease of aircraft, except in the 
following circumstances:
    (1) When the hourly rental rate does not exceed $250 and the total 
rental cost for any single transaction is not in excess of $2,500:
    (2) When the cost of hull insurance does not exceed 10 percent of 
the contract rate; or
    (3) When the lessor's insurer does not grant a credit for uninsured 
hours, thereby preventing the lessor from granting the same to the 
Government.
    (c) For the U.S. Coast Guard, the contracting officer shall insert 
the clause at (HSAR) 48 CFR 3052.228-92, Fair Market Value of Aircraft, 
when fair market value of the aircraft can be determined.
    (d) 49 U.S.C. 44112, as amended, provides that no lessor of an 
aircraft under a bona fide lease of 30 days or more shall be liable by 
reason of his interest as lessor or title-holder of the

[[Page 89]]

aircraft for any injury to or death of persons, or damage to or loss of 
property, unless such aircraft is in the actual possession or control of 
such person at the time of such injury, death, damage or loss. On short-
term or intermittent-use leases, however, the owner may be liable for 
damage caused by operation of the aircraft. It is usual for the aircraft 
owner to retain insurance covering this liability during the term of 
such lease. Such insurance can, often for little or no increase in 
premium, be made to cover the Government's exposure to liability as 
well. In order to take advantage of this coverage, the Risks and 
Indemnities clause at (HSAR) 48 CFR 3052.228-93 prescribed in paragraph 
(d)(1) of this section shall be used.
    (1) For the U.S. Coast Guard, the contracting officer shall insert 
the clause at (HSAR) 48 CFR 3052.228-93, Risk and Indemnities, in any 
contract for out-service flight training or for the lease of aircraft 
when the Government will have exclusive use of the aircraft for a period 
of less than thirty days.
    (2) For the U.S. Coast Guard, any contract for out-service flight 
training shall include a clause in the contract schedule stating 
substantially that the contractor's personnel shall at all times during 
the course of the training be in command of the aircraft and that at no 
time shall other personnel be permitted to take command of the aircraft.



Sec. 3028.307  Insurance under cost-reimbursement contracts.



Sec. 3028.307-1  Group insurance plans.

    Plans shall be submitted to the contracting officer, who must obtain 
the advice of legal counsel.



Sec. 3028.310  Contract clause for work on a Government installation.



Sec. 3028.310-70  Contract clause.

    Insert a clause substantially similar to (HSAR) 48 CFR 3052.228-70, 
``Insurance,'' in all solicitations and contracts that contain the 
clause at (FAR) 47 CFR 52.228-5.



Sec. 3028.311  Solicitation provision and contract clause on liability 
          insurance under cost-reimbursement contracts.



Sec. 3028.311-1  Contract clause.

    Insert a clause substantially similar to (HSAR) 48 CFR 3052.228-70, 
``Insurance,'' in all solicitations and contracts that contain the 
clause at (FAR) 48 CFR 52.228-7, unless waived by an official one level 
above the contracting officer.

[[Page 91]]

              SUBCHAPTER E_GENERAL CONTRACTING REQUIREMENTS

                       PART 3029_TAXES [RESERVED]

           PART 3030_COST ACCOUNTING STANDARDS ADMINISTRATION

                 Subpart 3030.2_CAS Program Requirements

Sec.

Sec. 3030.201 Contract requirements.

Sec. 3030.201-5 Waiver.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                 Subpart 3030.2_CAS Program Requirements



Sec. 3030.201  Contract requirements.



Sec. 3030.201-5  Waiver.

    (a) The CPO is authorized to waive the applicability of the Cost 
Accounting Standards (CAS) under (FAR) 48 CFR 30.201-5(b). This 
authority may not be redelegated.
    (c) Waiver requests must conform to (HSAR) 48 CFR 3001.70.

[71 FR 25771, May 2, 2006]

            PART 3031_CONTRACT COST PRINCIPLES AND PROCEDURES

         Subpart 3031.2_Contracts with Commercial Organizations

Sec.

Sec. 3031.205 Selected costs.

Sec. 3031.205-32 Precontract costs.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

         Subpart 3031.2_Contracts with Commercial Organizations



Sec. 3031.205  Selected costs.



Sec. 3031.205-32  Precontract costs.

    (a) The decision to incur precontract costs is that of the 
contractor. DHS employees may not authorize, demand, or require a 
contractor to incur precontract costs. The contracting officer must 
advise the prospective contractor that any costs incurred before 
contract award are incurred at the contractor's sole risk and that if 
negotiations fail to result in a binding contract, payment of these 
costs will not be made by the Government. See (HSAR) 48 CFR 3031.205-
32(b) regarding exception due to reconciliation of costs.
    (b) When the contracting officer determines that incurring 
precontract costs was necessary to meet the proposed contract delivery 
schedule of a cost-reimbursement contract, the clause at (HSAR) 48 CFR 
3052.231-70, Precontract Costs, may be inserted in the resultant 
contract.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25771, May 2, 2006; 71 
FR 48801, Aug. 22, 2006]

                      PART 3032_CONTRACT FINANCING

                     Subpart 3032.000_Scope of Part

Sec.

Sec. 3032.003 Simplified acquisition procedures financing.

Sec. 3032.006 Reduction or suspension of contract payments upon finding 
          of fraud.

Sec. 3032.006-2 Definition.

Sec. 3032.006-3 Responsibilities.

                Subpart 3032.11_Electronic Funds Transfer


Sec. 3032.1110 Solicitation provision and contract clauses.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                     Subpart 3032.000_Scope of Part



Sec. 3032.003  Simplified acquisition procedures financing.

    Contract financing may be permitted for purchases made under the 
authority of (FAR) 48 CFR Part 13. This authority is delegated to COCO 
and may not be redelegated.

[[Page 92]]



Sec. 3032.006  Reduction or suspension of contract payments upon finding 
          of fraud.



Sec. 3032.006-2  Definition.

    The CPO is the DHS remedy coordination official (RCO).



Sec. 3032.006-3  Responsibilities.

    (a) The CPO is authorized to establish specific procedures.
    (b) Reports shall be made through the HCA to the CPO.

                Subpart 3032.11_Electronic Funds Transfer



Sec. 3032.1110  Solicitation provision and contract clauses.

    (a)(1) Contracting officer shall insert FAR 48 CFR 52.232-33, 
Payment by Electronic Funds Transfer--Central Contractor Registration, 
in all proposed solicitations and contracts.

                PART 3033_PROTESTS, DISPUTES, AND APPEALS

                   Subpart 3033.2_Disputes and Appeals

Sec.

Sec. 3033.201 Definitions.

Sec. 3033.211 Contracting officer's decision.

Sec. 3033.214 Alternative disputes resolution (ADR).

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                   Subpart 3033.2_Disputes and Appeals



Sec. 3033.201  Definitions.

    Agency Board of Contract Appeals means the Department of 
Transportation Board of Contract Appeals (DOTBCA).



Sec. 3033.211  Contracting officer's decision.

    For DHS contracts, the Board of Contract Appeals (BCA) noted in 
(FAR) 48 CFR 33.211 is the Department of Transportation Board of 
Contract Appeals (DOTBCA) (S-20), 400 7th Street, S.W., Washington, DC, 
20590. The DOTBCA Rules of Procedure are contained in 48 CFR Chapter 63, 
Part 6301. TSA shall use the DOTBCA for only Contract Disputes Act (CDA) 
requirements.



Sec. 3033.214  Alternative dispute resolution (ADR).

    (c) The Administrative Dispute Resolution Act (ADRA) of 1996, as 
amended, 5 U.S.C. 571, et seq., authorizes and encourages agencies to 
use mediation, conciliation, arbitration, and other techniques for the 
prompt and informal resolution of disputes, and for other purposes. The 
DOTBCA ADR procedures are contained in 48 CFR chapter 63, section 
6302.30, ADR Methods (Rule 30), and will be distributed to the parties, 
if ADR procedures are used. These procedures may be obtained from the 
DOTBCA upon request. ADR procedures may be used--
    (1) When there is mutual consent by the parties to participate in 
the ADR process (with consent being obtained either before or after an 
issue in controversy has arisen);
    (2) Prior to the submission of a claim; and
    (3) In resolution of a formal claim.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25771, May 2, 2006]

              PART 3034_MAJOR SYSTEM ACQUISITION [RESERVED]

[[Page 93]]

             SUBCHAPTER F_SPECIAL CATEGORIES OF CONTRACTING

             PART 3035_RESEARCH AND DEVELOPMENT CONTRACTING

                     Subpart 3035.000_Scope of Part

Sec.

Sec. 3035.003 Policy.

Sec. 3035.017 Federally Funded Research and Development Centers.

  Subpart 3035.70_Information Dissemination by Educational Institutions


Sec. 3035.7000 Contract clause.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                     Subpart 3035.000_Scope of Part



Sec. 3035.003  Policy.

    (b) Cost sharing shall be determined on a case by case basis. 
Components may establish procedures for cost sharing.
    (c) Recoupment shall be determined on a case-by-case basis. 
Recoupment not otherwise required by law should be structured to address 
factors such as recovering the Department's fair share of its investment 
in nonrecurring costs related to the items acquired. Advice of legal 
counsel shall be obtained prior to establishing cost sharing policies 
and recoupment mechanisms under (FAR) 48 CFR 35.003(b) and (c).

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48802, Aug. 22, 2006]



Sec. 3035.017  Federally Funded Research and Development Centers.

    (a) In accordance with section 309(b) of the Homeland Security Act, 
6 U.S.C. 189(b), DHS may be a joint sponsor under a multiple agency 
sponsorship arrangement with the Department of Energy (DOE) of one or 
more DOE national laboratories or sites. DOE shall be the primary 
sponsor under any multiple agency sponsorship arrangement with DOE 
laboratories or sites. Work performed by a DOE national laboratory or 
site under a joint sponsorship arrangement with DHS Components shall 
comply with policy on the use of Federally Funded Research and 
Development Centers (FFRDCs) in (FAR) 48 CFR 35.017.

[71 FR 25771, May 2, 2006, as amended at 71 FR 48802, Aug. 22, 2006]

  Subpart 3035.70_Information Dissemination by Educational Institutions



Sec. 3035.7000  Contract clause.

    The contracting officer may use the clause at (HSAR) 48 CFR 
3052.235-70, Dissemination of Information--Educational Institutions, 
except in contracts that require coordination of information release.

[71 FR 25771, May 2, 2006]

         PART 3036_CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS

     Subpart 3036.2_Special Aspects of Contracting for Construction

Sec.

Sec. 3036.201 Evaluation of contractor performance.

                     Subpart 3036.5_Contract Clauses


Sec. 3036-570 Special precautions for work at operating airports.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

     Subpart 3036.2_Special Aspects of Contracting for Construction



Sec. 3036.201  Evaluation of contractor performance.

    (a)(2) Performance reports shall be prepared and entered into the 
Contractor Performance System (CPS) on an annual basis for contracts 
exceeding one year, or as otherwise required by (FAR) 48 CFR 36.201. 
Access to reports is through the CPS or the government-wide system, Past 
Performance Information Retrieval System (PPIRS).

[[Page 94]]

                     Subpart 3036.5_Contract Clauses



Sec. 3036.570  Special precautions for work at operating airports.

    Where any acquisition will require work at an operating airport, 
insert the clause at (HSAR) 48 CFR 3052.236-70, Special Precautions for 
Work at Operating Airports, in solicitations and contracts.

                      PART 3037_SERVICE CONTRACTING

                Subpart 3037.1_Service Contracts_General

Sec.

Sec. 3037.103 [Reserved]

Sec. 3037.104 Personal services contracts.

Sec. 3037.104-70 Personal services contracts.

Sec. 3037.104-90 Personal services contracts (USCG).

Sec. 3037.104-91 Personal services with individuals under the authority 
          of 10 U.S.C. 1091 (USCG).

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                Subpart 3037.1_Service Contracts_General



Sec. 3037.103  [Reserved]



Sec. 3037.104  Personal services contracts.



Sec. 3037.104-70  Personal service contracts.

    (b) Authorization to acquire the personal services of experts and 
consultants is included in section 832 of the Homeland Security Act, 6 
U.S.C. 392. This section includes authority to use personal service 
contracts, including authority to contract without regard to the pay 
limitation of 5 U.S.C. 3109 when the services are necessary due to an 
urgent homeland security need.

[71 FR 25771, May 2, 2006]



Sec. 3037.104-90  Personal services contracts (USCG).

    The U.S. Coast Guard HCA may enter into medical personal services 
contracts in accordance with 10 U.S.C. 1091.

[71 FR 25771, May 2, 2006]



Sec. 3037.104-91  Personal services contracts with individuals under the 
          authority of 10 U.S.C. 1091 (USCG).

    (a) Health care personal services contracts awarded to individuals 
shall be selected through procedures established in this section. 
Selections made using the procedures in this section are exempt by 
statute from (HSAR) 48 CFR part 3006 competition requirements (see 
(HSAR) 48 CFR 3006.9000 (USCG)) and from (FAR) 48 CFR Part 6 competition 
requirements.
    (b) The contracting officer shall provide adequate advance notice of 
contracting opportunities to individuals residing in the area of the 
facility. The notice should include the qualification criteria against 
which individuals responding shall be evaluated. Contracting officers 
shall solicit offerors through the most effective means of seeking 
competition, such as a local publication, which serves the area of the 
facility. Acquisitions of health care services using personal services 
contracts are exempt from posting and synopsis requirements of (FAR) 48 
CFR Part 5.
    (c) The contracting officer shall provide the qualifications of 
individuals responding to the notice to the representative(s) 
responsible for evaluation and ranking according to the evaluation 
procedures. Individuals shall be considered solely on the professional 
qualifications established for the particular health care services being 
acquired and the Government's estimate of reasonable rates, fees, or 
costs. The representative(s) responsible for the evaluation and ranking 
shall provide the contracting officer with rationale for the ranking of 
the individuals consistent with the required qualifications.
    (d) Upon receipt of the ranked listing of offerors, the contracting 
officer shall either:
    (1) Enter into negotiations with the highest ranked offeror. If a 
mutually satisfactory contract cannot be negotiated, the contracting 
officer shall terminate negotiations with the highest ranked offeror and 
enter into negotiations with the next highest, or;
    (2) Enter into negotiations with all qualified offerors and select 
on the

[[Page 95]]

basis of qualifications and rates, fees, or other costs.
    (e) In the event only one individual responds to an advertised 
requirement, the contracting officer is authorized to negotiate the 
contract award. In this case, the individual must still meet the minimum 
qualifications of the requirement and the contracting officer must be 
able to make a determination that the price is fair and reasonable.
    (f) If a fair and reasonable price cannot be obtained from a 
qualified individual, the requirement should be canceled and acquired 
using procedures other than those set forth in this section.
    (g) The total amount paid to an individual in any year for health 
care services under a personal services contract shall not exceed the 
paycap in COMDTINST M4200.19 (series), Coast Guard Acquisition 
Procedures.
    (h) The contract may provide for the same per diem and travel 
expenses authorized for a Government employee, including actual 
transportation and per diem in lieu of subsistence for travel between 
home or place of business and official duty station and only for travel 
outside the local area in support of the statement of work.
    (i) Coordinate benefits, taxes and maintenance of records with the 
appropriate office(s).
    (j) The contracting officer shall insure that contract funds are 
sufficient to cover all contingency items that may be cited in the 
statement of work for health care services.

        PART 3038_FEDERAL SUPPLY SCHEDULE CONTRACTING [RESERVED]

       PART 3039_ACQUISITION OF INFORMATION TECHNOLOGY [RESERVED]

                          PART 3040 [RESERVED]

          PART 3041_ACQUISITION OF UTILITY SERVICES [RESERVED]

[[Page 97]]

                    SUBCHAPTER G_CONTRACT MANAGEMENT

          PART 3042_CONTRACT ADMINISTRATION AND AUDIT SERVICES

             Subpart 3042.2_Contract Administration Services

Sec.

Sec. 3042.202 Assignment of contract administration.

Sec. 3042.202-70 Contract clause.

           Subpart 3042.15_Contractor Performance Information


Sec. 3042.1502 Policy.

     Subpart 3042.70_Contracting Officer's Technical Representative


Sec. 3042.7000 Contract clause.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

             Subpart 3042.2_Contract Administration Services



Sec. 3042.202  Assignment of contract administration.



Sec. 3042.202-70  Contract clause.

    The contracting officer may insert the clause at (HSAR) 48 CFR 
3052.242-71, Dissemination of Contract Information, in DHS contracts. 
For contracts with educational institutions, the contracting officer may 
instead use (HSAR) 48 CFR 3052.235-70, Dissemination of Information--
Educational Institutions, when coordination of information release is 
not required.

[71 FR 25771, May 2, 2006]

           Subpart 3042.15_Contractor Performance Information



Sec. 3042.1502  Policy.

    (a) Components shall use the Contractor Performance System (CPS) for 
evaluating contractor performance in accordance with (FAR) 48 CFR 
42.1502 and part 1503.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48802, Aug. 22, 2006]

     Subpart 3042.70_Contracting Officer's Technical Representative



Sec. 3042.7000  Contract clause.

    The contracting officer shall insert the clause at (HSAR) 48 CFR 
3052.242-72, Contracting Officer's Technical Representative, in 
solicitations and contracts when it is intended that a representative 
will be assigned to the contract to perform functions of a technical 
nature.

               PART 3043_CONTRACT MODIFICATIONS [RESERVED]

       PART 3044_SUBCONTRACTING POLICIES AND PROCEDURES [RESERVED]

                      PART 3045_GOVERNMENT PROPERTY

 Subpart 3045.5_Management of Government Property in the Possession of 
                               Contractors

Sec.

Sec. 3045.505 Records and reports of Government property.

Sec. 3045.505-14 Reports of Government property.

Sec. 3045.505-70 Solicitation provisions and contract clauses.

Sec. 3045.508 Physical inventories.

Sec. 3045.508-2 Reporting results of inventories.

Sec. 3045.508-3 Quantitative and monetary control.

Sec. 3045.511 Audit of property control system.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

 Subpart 3045.5_Management of Government Property in the Possession of 
                               Contractors



Sec. 3045.505  Records and reports of Government property.



Sec. 3045.505-14  Reports of Government property.

    (a) When Government property is furnished to or acquired by the 
contractor to perform the contract, the contract shall require the 
contractor to submit

[[Page 98]]

annual reports (see (FAR) 48 CFR 45.505-14) to the contracting officer 
not later than September 15 of each year. The contractor's report shall 
be submitted on DHS Form 0700-05, Contractor Report of Government 
Property.



Sec. 3045.505-70  Solicitation provisions and contract clauses.

    Contracting officers shall insert the clause at (HSAR) 48 CFR 
3052.245-70 in solicitations and contracts when the contract will 
require Government provided or contractor acquired property.



Sec. 3045.508  Physical inventories.



Sec. 3045.508-2  Reporting results of inventories.

    The inventory report shall also include the following:
    (a) Name and title of the individual(s) that performed the physical 
inventory;
    (b) An itemized, categorized listing of all property capitalized:
    (1) Land and rights therein;
    (2) Other real property;
    (3) Plant equipment;
    (4) Special test equipment; and
    (5) Special tooling;
    (c) An itemized listing of the property lost, damaged, destroyed, or 
stolen, the circumstances surrounding each incident, and the resolution 
of the incident; and
    (d) Any discrepancies between the physical inventory and the 
contractor's record of Government property.



Sec. 3045.508-3  Quantitative and monetary control.

    Contracting officers shall require the contractor to provide the 
quantity and unit cost of each item of Government property reported 
under (HSAR) 48 CFR 3045.508-2(b) and (c).



Sec. 3045.511  Audit of property control system.

    (a) The property administrator (or other Government official 
authorized by the contracting officer) shall audit the contractor's 
property control system whenever there are indications that the 
contractor's property control system may be deficient. Examples of 
deficiencies are:
    (1) Failure of the contractor to acknowledge receipt of GFP;
    (2) Failure of the contractor to submit the annual property reports 
required by (HSAR) 48 CFR 3045.505-14;
    (3) Failure of the contractor to reconcile its physical inventory 
with its property control record; or
    (4) Failure of the contractor to submit a Government property 
listing when requested by the property administrator.
    (b) When it is determined that the contractor's property control 
system is deficient, the property administrator, in coordination with 
the contracting officer, shall discuss the deficiencies with the 
contractor. If the contractor does not take action to correct the 
deficiencies, the contracting officer shall provide the contractor with 
a written notice of the deficiencies and the date all deficiencies shall 
be corrected.

                       PART 3046_QUALITY ASSURANCE

                        Subpart 3046.7_Warranties

Sec.

Sec. 3046.702 [Reserved]

Sec. 3046.790 Use of warranties in major systems acquisitions by the 
          USCG (USCG).

Sec. 3046.790-1 Scope (USCG).

Sec. 3046.790-2 Definitions (USCG).

Sec. 3046.790-3 Policy (USCG).

Sec. 3046.790-4 Waiver (USCG).

Sec. 3046.791-1 Policy (USCG).

Sec. 3046.791-2 Tailoring warranty terms and conditions. (USCG).

Sec. 3046.791-3 Warranties on Government-furnished property (USCG).

Sec. 3046.792 Cost benefit analysis (USCG).

Sec. 3046.793 Waiver and notification procedures (USCG).

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

[[Page 99]]

                        Subpart 3046.7_Warranties



Sec. 3046.702  [Reserved]



Sec. 3046.790  Use of warranties in major systems acquisitions by the 
          USCG (USCG).



Sec. 3046.790-1  Scope (USCG).

    This subpart provides the policy for the USCG to use in obtaining 
warranties from contractors when contracting for the acquisition of a 
major system.

[68 FR 67871, Dec. 4, 2003. Redesignated and amended at 71 FR 25772, May 
2, 2006]



Sec. 3046.790-2  Definitions (USCG).

    As used in this part:
    At no additional cost to the Government means without an increase in 
price for firm-fixed-price contracts, without an increase in target or 
ceiling price for fixed price incentive contracts (see (FAR) 48 CFR 
46.707).
    Defect means any condition or characteristic in any supplies or 
services furnished by the contractor under the contract that is not in 
compliance with the requirements of the contract.
    Design and manufacturing requirement means structural and 
engineering plans and manufacturing particulars, including precise 
measurements, tolerances, materials and finished product tests for the 
major system being produced.
    Performance requirements means the operating capabilities, 
maintenance, and reliability characteristics of a system that are 
determined to be necessary for it to fulfill the requirement for which 
the system is designed.

[71 FR 25772, May 2, 2006]



Sec. 3046.790-3  Policy (USCG).

    (a) Major Systems. The use of warranties by the USCG in the 
procurement of major systems valued at $10,000,000 or higher is 
mandatory, unless waived (see (HSAR) 48 CFR 3046.790-4).
    (b) Any warranty on major system acquisitions shall not apply in the 
case of any system or component thereof which has been furnished by the 
Government to a contractor except as indicated in paragraph (c)(4) of 
this section.
    (c) When drafting warranty provisions/clauses for major systems 
acquisitions, the contracting officer shall ensure that the items listed 
at the Homeland Security Acquisition Manual (HSAM) Chapter 3046 have 
been considered. The warranty shall also meet the following 
requirements:
    (1) For systems or components that are commercially available, such 
warranty as is normally provided by the manufacturer or supplier shall 
be obtained in accordance with (FAR) 48 CFR 46.703(d) and 46.710(b)(2).
    (2) For systems or components provided in accordance with either 
design and manufacturing or performance requirements as specified in the 
contract or any modification to that contract, a warranty of compliance 
with the stated requirements shall be obtained.
    (3) Any warranty obtained shall specifically exclude coverage for 
combat damage.
    (4) A contractor for a major systems acquisition shall not be 
required to provide the warranties specified in this section on any 
property furnished to that contractor by the Government except for 
defects in installation.

[71 FR 25772, May 2, 2006]



Sec. 3046.790-4  Waiver (USCG).

    (a) The Secretary of Homeland Security may waive the requirement for 
a warranty for USCG major system acquisitions when the waiver is in the 
interest of national defense or if the warranty obtained would not be 
cost beneficial. A waiver may be granted provided that the Committees on 
Appropriations of the Senate and the House of Representatives, the 
Committee on Commerce, Science and Transportation of the Senate, and the 
Committee on Merchant Marine and Fisheries of the House of 
Representatives are notified, in writing, of the Secretary's intention 
to waive the warranty requirements and the reasons supporting such a 
determination, prior to granting the waiver.
    The request for Secretarial waiver shall include, as a minimum:
    (1) A brief description of the major system and its stage of 
production (e.g., the number of units delivered and anticipated to be 
delivered during the life of the program);

[[Page 100]]

    (2) The specific waiver requested, the duration of the waiver if it 
is to involve more than one contract, and the rationale for the waiver; 
and
    (3) All documentation supporting the request for waiver, such as a 
cost-benefit analysis.
    (b) The waiver request shall be forwarded to the Secretary, via the 
CPO. The USCG shall maintain a written record of each waiver granted and 
the Congressional notification and report made, together with supporting 
documentation.

[71 FR 25772, May 2, 2006]



Sec. 3046.791-1  Policy (USCG).

    The USCG shall include a warranty in all contracts for major systems 
acquisitions. When drafting warranty provisions/clauses for major 
systems acquisitions, the contracting officer shall ensure that the 
items listed at (HSAR) 48 CFR 3046.706 have been considered. The 
warranty shall also meet the following requirements:
    (a) For systems or components which are commercially available, such 
warranty as is normally provided by the manufacturer or supplier shall 
be obtained in accordance with (FAR) 48 CFR 46.703(d) and (FAR) 48 CFR 
46.710(b)(2).
    (b) For systems or components provided in accordance with either 
design and manufacturing or performance requirements as specified in the 
contract or any modification to that contract, a warranty of compliance 
with the stated requirements shall be obtained.
    (c) The warranty provided under paragraph (b) of this section shall 
provide that in the event the major system or any component thereof 
fails to meet the terms of the warranty provided, the contracting 
officer may:
    (1) Require the contractor to promptly take such corrective action 
as the contracting officer determines to be necessary at no additional 
cost to the Government, including repairing or replacing all parts 
necessary to achieve the requirements set forth in the contract;
    (2) Require the contractor to pay costs reasonably incurred by the 
United States in taking necessary corrective action; or
    (3) Equitably reduce the contract price.
    (d) Any warranty shall specifically exclude coverage of combat 
damage.



Sec. 3046.791-2  Tailoring warranty terms and conditions (USCG).

    (a) As the objectives and circumstances vary considerably among 
major systems acquisition programs, contracting officers shall 
appropriately tailor the warranty on a case-by-case basis, including 
remedies, exclusions, limitations and durations, provided the tailoring 
is consistent with the specific requirements of this subpart and (FAR) 
48 CFR 46.706.
    (b) Contracting officers of major systems acquisitions may exclude 
from the terms of the warranty certain defects for specified supplies 
(exclusions) and may limit the contractor's liability under the terms of 
the warranty (limitations), as appropriate, if necessary to derive a 
cost-effective warranty in light of the technical risk, contractor 
financial risk, or other program uncertainties.
    (c) Contracting officers are encouraged to structure a broader and 
more comprehensive warranty where such is advantageous. Likewise, the 
contracting officer may narrow the scope of a warranty when appropriate 
(e.g., where it would be inequitable to require a warranty of all 
performance requirements because a contractor had not designed the 
system).
    (d) Contracting officers shall not include in a warranty clause any 
terms that require the contractor to incur liability for loss, damage, 
or injury to third parties.



Sec. 3046.791-3  Warranties on Government-furnished property (USCG).

    A contractor for a major systems acquisition shall not be required 
to provide the warranties specified in (HSAR) 48 CFR 3046.790-1 on any 
property furnished to that contractor by the Government except for:
    (a) Defects in installation; and
    (b) Installation or modification in such a manner that invalidates a 
warranty provided by the manufacturer of the property.

[[Page 101]]



Sec. 3046.792  Cost benefit analysis (USCG).

    If a specific warranty is considered not to be cost beneficial by 
the contracting officer, a waiver request shall be initiated in 
accordance with guidance at (HSAR) 48 CFR 3046.793.



Sec. 3046.793  Waiver and notification procedures (USCG).

    (a) The Secretary of Homeland Security, without delegation, may 
waive the requirement for a warranty for USCG major system acquisitions 
when the waiver is in the interest of national defense or if the 
warranty obtained would not be cost beneficial. A waiver may be granted 
provided that the Committees on Appropriations of the Senate and the 
House of Representatives, the Committee on Commerce, Science and 
Transportation of the Senate, and the Committee on Merchant Marine and 
Fisheries of the House of Representatives are notified, in writing, of 
the Secretary's intention to waive the warranty requirements and the 
reasons supporting such a determination prior to granting the waiver. 
The request for Secretarial waiver shall include, as a minimum:
    (1) A brief description of the major system and its stage of 
production (e.g., the number of units delivered and anticipated to be 
delivered during the life of the program);
    (2) The specific waiver requested, the duration of the waiver if it 
is to involve more than one contract, and the rationale for the waiver; 
and
    (3) All documentation supporting the request for waiver, such as a 
cost-benefit analysis.
    (b) The waiver request shall be forwarded to the Secretary, via the 
CPO. The USCG shall maintain a written record of each waiver granted and 
the Congressional notification and report made, together with supporting 
documentation.

                        PART 3047_TRANSPORTATION

            Subpart 3047.3_Transportation in Supply Contracts

Sec.

Sec. 3047.305 Solicitation provisions, contract clauses, and 
          transportation factors.

Sec. 3047.305-70 Solicitation provision.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

            Subpart 3047.3_Transportation in Supply Contracts



Sec. 3047.305  Solicitation provisions, contract clauses, and 
          transportation factors.



Sec. 3047.305-70  Solicitation provisions.

    The contracting officer shall insert the following provisions in 
solicitations, as applicable:
    (a) (HSAR) 48 CFR 3052.247-70, F.o.b. Origin Information, with 
Alternates I or II, as applicable, shall be inserted in accordance with 
(FAR) 48 CFR 47.305-3(b);
    (b) (HSAR) 48 CFR 3052.247-71, F.o.b. Origin Only, shall be inserted 
in accordance with (FAR) 48 CFR 47.305-3(e); and
    (c) (HSAR) 48 CFR 3052.247-72, F.o.b. Destination Only, shall be 
inserted in accordance with (FAR) 48 CFR 47.305-4(b).

                 PART 3048_VALUE ENGINEERING [RESERVED]

              PART 3049_TERMINATION OF CONTRACTS [RESERVED]

         PART 3050_EXTRAORDINARY CONTRACTUAL ACTIONS [RESERVED]

      PART 3051_USE OF GOVERNMENT SOURCES BY CONTRACTORS [RESERVED]

[[Page 103]]

                     SUBCHAPTER H_CLAUSES AND FORMS

         PART 3052_SOLICITATION PROVISIONS AND CONTRACT CLAUSES

      Subpart 3052.1_Instructions for Using Provisions and Clauses

Sec.

Sec. 3052.101 Using part 3052.

             Subpart 3052.2_Texts of Provisions and Clauses


Sec. 3052.204-70 Security requirements for unclassified information 
          technology resources.

Sec. 3052.204-71 Contractor employee access.

Sec. 3052.209-70 Prohibition on contracts with corporate expatriates.

Sec. 3052.209-71 Reserve Officer Training Corps and military recruiting 
          on campus.

Sec. 3052.209-72 Organizational conflict of interest.

Sec. 3052.209-73 Limitation of future contracting.

Sec. 3052.211-70 Index for specifications.

Sec. 3052.215-70 Key personnel or facilities.

Sec. 3052.216-70 Evaluation of offers subject to an economic price 
          adjustment clause.

Sec. 3052.216-71 Determination of award fee.

Sec. 3052.216-72 Performance evaluation plan.

Sec. 3052.216-73 Distribution of award fee.

Sec. 3052.216-74 Settlement of letter contract.

Sec. 3052.217-90 Delivery and shifting of vessel (USCG).

Sec. 3052.217-91 Performance (USCG).

Sec. 3052.217-92 Inspection and manner of doing work (USCG).

Sec. 3052.217-93 Subcontracts (USCG).

Sec. 3052.217-94 Lay days (USCG).

Sec. 3052.217-95 Liability and insurance (USCG).

Sec. 3052.217-96 Title (USCG).

Sec. 3052.217-97 Discharge of liens (USCG).

Sec. 3052.217-98 Delays (USCG).

Sec. 3052.217-99 Department of Labor safety and health regulations for 
          ship repair (USCG).

Sec. 3052.217-100 Guarantee (USCG).

Sec. 3052.219-70 Small business subcontracting program reporting.

Sec. 3052.219-71 DHS mentor-prot[eacute]g[eacute] program.

Sec. 3052.219-72 Evaluation of prime contractor participation in the DHS 
          mentor-prot[eacute]g[eacute] program.

Sec. 3052.222-70 Strikes or picketing affecting timely completion of the 
          contract work.

Sec. 3052.222-71 Strikes or picketing affecting access to a DHS 
          facility.

Sec. 3052.222-90 Local hire (USCG).

Sec. 3052.223-70 Removal or disposal of hazardous substances--applicable 
          licenses and permits.

Sec. 3052.223-90 Accident and fire reporting (USCG).

Sec. 3052.228-70 Insurance.

Sec. 3052.228-90 Notification of Miller Act payment bond protection 
          (USCG).

Sec. 3052.228-91 Loss of or damage to leased aircraft (USCG).

Sec. 3052.228-92 Fair Market value of aircraft (USCG).

Sec. 3052.228-93 Risk and indemnities (USCG).

Sec. 3052.231-70 Precontract costs.

Sec. 3052.235-70 Dissemination of information--educational institutions.

Sec. 3052.236-70 Special provisions for work at operating airports.

Sec. 3052.242.70 [Reserved]

Sec. 3052.242-71 Dissemination of contract information.

Sec. 3052.242-72 Contracting officer's technical representative.

Sec. 3052.245-70 Government property reports.

Sec. 3052.247-70 F.o.b. origin information.

Sec. 3052.247-71 F.o.b. origin only.

Sec. 3052.247-72 F.o.b. destination only.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

      Subpart 3052.1_Instructions for Using Provisions and Clauses



Sec. 3052.101  Using part 3052.

    (b) Numbering.
    (2)(i) Provisions or clauses that supplement the FAR.
    (A) Agency-prescribed provisions and clauses permitted by HSAR and 
used on a standard basis (i.e., normally used in two or more 
solicitations or contracts regardless of contract type) shall be 
prescribed and contained in the HSAR. Component desiring to use a 
provision or a clause on a standard basis shall submit a request 
containing a copy of the clause(s), justification for its use, and 
evidence of legal counsel review to the CPO in accordance with (HSAR) 48 
CFR 3001.304 for possible inclusion in the HSAR.
    (B) Provisions and clauses used on a one-time basis (i.e., non-
standard provisions and clauses) may be approved by the contracting 
officer, unless a higher level is designated by the Component. This 
authority is subject to:
    (1) Evidence of legal counsel review in the contract file;

[[Page 104]]

    (2) Inserting these clauses in the appropriate sections of the 
uniform contract format; and
    (3) Ensuring the provisions and clauses do not deviate from the 
requirements of the FAR and HSAR.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48802, Aug. 22, 2006]

              Subpart 3052.2_Text of Provisions and Clauses



Sec. 3052.204-70  Security requirements for unclassified information 
          technology resources.

    As prescribed in (HSAR) 48 CFR 3004.470-3, insert a clause 
substantially the same as follows:

Security Requirements for Unclassified Information Technology Resources 
                               (JUN 2006)

    (a) The Contractor shall be responsible for Information Technology 
(IT) security for all systems connected to a DHS network or operated by 
the Contractor for DHS, regardless of location. This clause applies to 
all or any part of the contract that includes information technology 
resources or services for which the Contractor must have physical or 
electronic access to sensitive information contained in DHS unclassified 
systems that directly support the agency's mission.
    (b) The Contractor shall provide, implement, and maintain an IT 
Security Plan. This plan shall describe the processes and procedures 
that will be followed to ensure appropriate security of IT resources 
that are developed, processed, or used under this contract.
    (1) Within ---- [``insert number of days''] days after contract 
award, the contractor shall submit for approval its IT Security Plan, 
which shall be consistent with and further detail the approach contained 
in the offeror's proposal. The plan, as approved by the Contracting 
Officer, shall be incorporated into the contract as a compliance 
document.
    (2) The Contractor's IT Security Plan shall comply with Federal laws 
that include, but are not limited to, the Computer Security Act of 1987 
(40 U.S.C. 1441 et seq.); the Government Information Security Reform Act 
of 2000; and the Federal Information Security Management Act of 2002; 
and with Federal policies and procedures that include, but are not 
limited to, OMB Circular A-130.
    (3) The security plan shall specifically include instructions 
regarding handling and protecting sensitive information at the 
Contractor's site (including any information stored, processed, or 
transmitted using the Contractor's computer systems), and the secure 
management, operation, maintenance, programming, and system 
administration of computer systems, networks, and telecommunications 
systems.
    (c) Examples of tasks that require security provisions include--
    (1) Acquisition, transmission or analysis of data owned by DHS with 
significant replacement cost should the contractor's copy be corrupted; 
and
    (2) Access to DHS networks or computers at a level beyond that 
granted the general public (e.g., such as bypassing a firewall).
    (d) At the expiration of the contract, the contractor shall return 
all sensitive DHS information and IT resources provided to the 
contractor during the contract, and certify that all non-public DHS 
information has been purged from any contractor-owned system. Components 
shall conduct reviews to ensure that the security requirements in the 
contract are implemented and enforced.
    (e) Within 6 months after contract award, the contractor shall 
submit written proof of IT Security accreditation to DHS for approval by 
the DHS Contracting Officer. Accreditation will proceed according to the 
criteria of the DHS Sensitive System Policy Publication, 4300A (Version 
2.1, July 26, 2004) or any replacement publication, which the 
Contracting Officer will provide upon request. This accreditation will 
include a final security plan, risk assessment, security test and 
evaluation, and disaster recovery plan/continuity of operations plan. 
This accreditation, when accepted by the Contracting Officer, shall be 
incorporated into the contract as a compliance document. The contractor 
shall comply with the approved accreditation documentation.

                             (End of clause)

[71 FR 25772, May 2, 2006]



Sec. 3052.204-71  Contractor employee access.

    As prescribed in (HSAR) 48 CFR 3004.470-3(b), insert a clause 
substantially the same as follows with appropriate alternates:

                  Contractor Employee Access (JUN 2006)

    (a) ``Sensitive Information,'' as used in this Chapter, means any 
information, the loss, misuse, disclosure, or unauthorized access to or 
modification of which could adversely affect the national or homeland 
security interest, or the conduct of Federal programs, or the privacy to 
which individuals are entitled under section 552a of title 5, United 
States Code (the Privacy Act), but which has not been specifically 
authorized under criteria established by an Executive Order or an Act of 
Congress to be kept secret in the interest of national defense, homeland 
security or

[[Page 105]]

foreign policy. This definition includes the following categories of 
information:
    (1) Protected Critical Infrastructure Information (PCII) as set out 
in the Critical Infrastructure Information Act of 2002 (Title II, 
Subtitle B, of the Homeland Security Act, Pub. L. 107-296, 196 Stat. 
2135), as amended, the implementing regulations thereto (Title 6, Code 
of Federal Regulations, part 29) as amended, the applicable PCII 
Procedures Manual, as amended, and any supplementary guidance officially 
communicated by an authorized official of the Department of Homeland 
Security (including the PCII Program Manager or his/her designee);
    (2) Sensitive Security Information (SSI), as defined in Title 49, 
Code of Federal Regulations, part 1520, as amended, ``Policies and 
Procedures of Safeguarding and Control of SSI,'' as amended, and any 
supplementary guidance officially communicated by an authorized official 
of the Department of Homeland Security (including the Assistant 
Secretary for the Transportation Security Administration or his/her 
designee);
    (3) Information designated as ``For Official Use Only,'' which is 
unclassified information of a sensitive nature and the unauthorized 
disclosure of which could adversely impact a person's privacy or 
welfare, the conduct of Federal programs, or other programs or 
operations essential to the national or homeland security interest; and
    (4) Any information that is designated ``sensitive'' or subject to 
other controls, safeguards or protections in accordance with 
subsequently adopted homeland security information handling procedures.
    (b) ``Information Technology Resources'' include, but are not 
limited to, computer equipment, networking equipment, telecommunications 
equipment, cabling, network drives, computer drives, network software, 
computer software, software programs, intranet sites, and internet 
sites.
    (c) Contractor employees working on this contract must complete such 
forms as may be necessary for security or other reasons, including the 
conduct of background investigations to determine suitability. Completed 
forms shall be submitted as directed by the Contracting Officer. Upon 
the Contracting Officer's request, the Contractor's employees shall be 
fingerprinted, or subject to other investigations as required. All 
contractor employees requiring recurring access to Government facilities 
or access to sensitive information or IT resources are required to have 
a favorably adjudicated background investigation prior to commencing 
work on this contract unless this requirement is waived under 
Departmental procedures.
    (d) The Contracting Officer may require the contractor to prohibit 
individuals from working on the contract if the government deems their 
initial or continued employment contrary to the public interest for any 
reason, including, but not limited to, carelessness, insubordination, 
incompetence, or security concerns.
    (e) Work under this contract may involve access to sensitive 
information. Therefore, the Contractor shall not disclose, orally or in 
writing, any sensitive information to any person unless authorized in 
writing by the Contracting Officer. For those contractor employees 
authorized access to sensitive information, the contractor shall ensure 
that these persons receive training concerning the protection and 
disclosure of sensitive information both during and after contract 
performance.
    (f) The Contractor shall include the substance of this clause in all 
subcontracts at any tier where the subcontractor may have access to 
Government facilities, sensitive information, or resources.

                             (End of clause)

                         Alternate I (JUN 2006)

    When the contract will require contractor employees to have access 
to Information Technology (IT) resources, add the following paragraphs:
    (g) Before receiving access to IT resources under this contract the 
individual must receive a security briefing, which the Contracting 
Officer's Technical Representative (COTR) will arrange, and complete any 
nondisclosure agreement furnished by DHS.
    (h) The contractor shall have access only to those areas of DHS 
information technology resources explicitly stated in this contract or 
approved by the COTR in writing as necessary for performance of the work 
under this contract. Any attempts by contractor personnel to gain access 
to any information technology resources not expressly authorized by the 
statement of work, other terms and conditions in this contract, or as 
approved in writing by the COTR, is strictly prohibited. In the event of 
violation of this provision, DHS will take appropriate actions with 
regard to the contract and the individual(s) involved.
    (i) Contractor access to DHS networks from a remote location is a 
temporary privilege for mutual convenience while the contractor performs 
business for the DHS Component. It is not a right, a guarantee of 
access, a condition of the contract, or Government Furnished Equipment 
(GFE).
    (j) Contractor access will be terminated for unauthorized use. The 
contractor agrees to hold and save DHS harmless from any unauthorized 
use and agrees not to request additional time or money under the 
contract for any delays resulting from unauthorized use or access.
    (k) Non-U.S. citizens shall not be authorized to access or assist in 
the development, operation, management or maintenance of

[[Page 106]]

Department IT systems under the contract, unless a waiver has been 
granted by the Head of the Component or designee, with the concurrence 
of both the Department's Chief Security Officer (CSO) and the Chief 
Information Officer (CIO) or their designees. Within DHS Headquarters, 
the waiver may be granted only with the approval of both the CSO and the 
CIO or their designees. In order for a waiver to be granted:
    (1) The individual must be a legal permanent resident of the U.S. or 
a citizen of Ireland, Israel, the Republic of the Philippines, or any 
nation on the Allied Nations List maintained by the Department of State;
    (2) There must be a compelling reason for using this individual as 
opposed to a U.S. citizen; and
    (3) The waiver must be in the best interest of the Government.
    (l) Contractors shall identify in their proposals the names and 
citizenship of all non-U.S. citizens proposed to work under the 
contract. Any additions or deletions of non-U.S. citizens after contract 
award shall also be reported to the contracting officer.

                             (End of clause)

                         Alternate II (JUN 2006)

    When the Department has determined contract employee access to 
sensitive information or Government facilities must be limited to U.S. 
citizens and lawful permanent residents, but the contract will not 
require access to IT resources, add the following paragraphs:
    (g) Each individual employed under the contract shall be a citizen 
of the United States of America, or an alien who has been lawfully 
admitted for permanent residence as evidenced by a Permanent Resident 
Card (USCIS I-551). Any exceptions must be approved by the Department's 
Chief Security Officer or designee.
    (h) Contractors shall identify in their proposals, the names and 
citizenship of all non-U.S. citizens proposed to work under the 
contract. Any additions or deletions of non-U.S. citizens after contract 
award shall also be reported to the contracting officer.

                             (End of clause)

[71 FR 25773, May 2, 2006, as amended at 71 FR 48802, Aug. 22, 2006]



Sec. 3052.209-70  Prohibition on contracts with corporate expatriates.

    As prescribed at (HSAR) 48 CFR 3009.104-75, insert the following 
clause:

     Prohibition on Contracts With Corporate Expatriates (JUN 2006)

    (a) Prohibitions.
    Section 835 of the Homeland Security Act, 6 U.S.C. 395, prohibits 
the Department of Homeland Security from entering into any contract with 
a foreign incorporated entity which is treated as an inverted domestic 
corporation as defined in this clause, or with any subsidiary of such an 
entity. The Secretary shall waive the prohibition with respect to any 
specific contract if the Secretary determines that the waiver is 
required in the interest of national security.
    (b) Definitions. As used in this clause:
    Expanded Affiliated Group means an affiliated group as defined in 
section 1504(a) of the Internal Revenue Code of 1986 (without regard to 
section 1504(b) of such Code), except that section 1504 of such Code 
shall be applied by substituting `more than 50 percent' for `at least 80 
percent' each place it appears.
    Foreign Incorporated Entity means any entity which is, or but for 
subsection (b) of section 835 of the Homeland Security Act, 6 U.S.C. 
395, would be, treated as a foreign corporation for purposes of the 
Internal Revenue Code of 1986.
    Inverted Domestic Corporation. A foreign incorporated entity shall 
be treated as an inverted domestic corporation if, pursuant to a plan 
(or a series of related transactions)--
    (1) The entity completes the direct or indirect acquisition of 
substantially all of the properties held directly or indirectly by a 
domestic corporation or substantially all of the properties constituting 
a trade or business of a domestic partnership;
    (2) After the acquisition at least 80 percent of the stock (by vote 
or value) of the entity is held--
    (i) In the case of an acquisition with respect to a domestic 
corporation, by former shareholders of the domestic corporation by 
reason of holding stock in the domestic corporation; or
    (ii) In the case of an acquisition with respect to a domestic 
partnership, by former partners of the domestic partnership by reason of 
holding a capital or profits interest in the domestic partnership; and
    (3) The expanded affiliated group which after the acquisition 
includes the entity does not have substantial business activities in the 
foreign country in which or under the law of which the entity is created 
or organized when compared to the total business activities of such 
expanded affiliated group.
    Person, domestic, and foreign have the meanings given such terms by 
paragraphs (1), (4), and (5) of section 7701(a) of the Internal Revenue 
Code of 1986, respectively.
    (c) Special rules. The following definitions and special rules shall 
apply when determining whether a foreign incorporated entity should be 
treated as an inverted domestic corporation.
    (1) Certain stock disregarded. For the purpose of treating a foreign 
incorporated entity as an inverted domestic corporation these

[[Page 107]]

shall not be taken into account in determining ownership:
    (i) stock held by members of the expanded affiliated group which 
includes the foreign incorporated entity; or
    (ii) Stock of such entity which is sold in a public offering related 
to an acquisition described in section 835(b)(1) of the Homeland 
Security Act, 6 U.S.C. 395(b)(1).
    (2) Plan deemed in certain cases. If a foreign incorporated entity 
acquires directly or indirectly substantially all of the properties of a 
domestic corporation or partnership during the 4-year period beginning 
on the date which is 2 years before the ownership requirements of 
subsection (b)(2) are met, such actions shall be treated as pursuant to 
a plan.
    (3) Certain transfers disregarded. The transfer of properties or 
liabilities (including by contribution or distribution) shall be 
disregarded if such transfers are part of a plan a principal purpose of 
which is to avoid the purposes of this section.
    (d) Special rule for related partnerships. For purposes of applying 
section 835(b) of the Homeland Security Act, 6 U.S.C. 395(b) to the 
acquisition of a domestic partnership, except as provided in 
regulations, all domestic partnerships which are under common control 
(within the meaning of section 482 of the Internal Revenue Code of 1986) 
shall be treated as a partnership.
    (e) Treatment of Certain Rights.
    (1) Certain rights shall be treated as stocks to the extent 
necessary to reflect the present value of all equitable interests 
incident to the transaction, as follows:
    (i) Warrants;
    (ii) Options;
    (iii) Contracts to acquire stock;
    (iv) Convertible debt instruments;
    (v) Others similar interests.
    (2) Rights labeled as stocks shall not be treated as stocks whenever 
it is deemed appropriate to do so to reflect the present value of the 
transaction or to disregard transactions whose recognition would defeat 
the purpose of section 835.
    (f) Disclosure. The offeror under this solicitation represents that 
[Check one]:

--it is not a foreign incorporated entity that should be treated as an 
inverted domestic corporation pursuant to the criteria of (HSAR) 48 CFR 
3009.104-70 through 3009.104-73;
--it is a foreign incorporated entity that should be treated as an 
inverted domestic corporation pursuant to the criteria of (HSAR) 48 CFR 
3009.104-70 through 3009.104-73, but it has submitted a request for 
waiver pursuant to 3009.104-74, which has not been denied; or
--it is a foreign incorporated entity that should be treated as an 
inverted domestic corporation pursuant to the criteria of (HSAR) 48 CFR 
3009.104-70 through 3009.104-73, but it plans to submit a request for 
waiver pursuant to 3009.104-74.

    (g) A copy of the approved waiver, if a waiver has already been 
granted, or the waiver request, if a waiver has been applied for, shall 
be attached to the bid or proposal.

                           (End of provision)

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25774, May 2, 2006]



Sec. 3052.209-71  Reserve Officer Training Corps and military recruiting 
          on campus.

    As prescribed in (HSAR) 48 CFR 3009.470-4, use the following clause:

 Reserve Officer Training Corps and Military Recruiting on Campus (DEC 
                                  2003)

    (a) Definitions. Institution of higher education, as used in this 
clause, means an institution that meets the requirements of 20 U.S.C. 
1001 and includes all subelements of such an institution.
    (b) Limitation on contract award. Except as provided in paragraph 
(c) of this clause, an institution of higher education is ineligible for 
contract award if the Secretary of Defense determines that the 
institution has a policy or practice (regardless of when implemented) 
that prohibits or in effect prevents--
    (1) The Secretary of a military department from maintaining, 
establishing, or operating a unit of the Senior Reserve Officer Training 
Corps (ROTC) (in accordance with 10 U.S.C. 654 and other applicable 
Federal laws) at that institution;
    (2) A student at that institution from enrolling in a unit of the 
Senior ROTC at another institution of higher education;
    (3) The Secretary of a military department or the Secretary of 
Homeland Security from gaining entry to campuses, or access to students 
(who are 17 years of age or older) on campuses, for purposes of military 
recruiting; or
    (4) Military recruiters from accessing, for purposes of military 
recruiting, the following information pertaining to students (who are 17 
years of age or older) enrolled at that institution:
    (i) Name.
    (ii) Address.
    (iii) Telephone number.
    (iv) Date and place of birth.
    (v) Educational level.
    (vi) Academic major.
    (vii) Degrees received.
    (viii) Most recent educational institution enrollment.
    (c) Exception. The limitation in paragraph (b) of this clause does 
not apply to an institution of higher education if the Secretary of 
Defense determines that--

[[Page 108]]

    (1) The institution has ceased the policy or practice described in 
paragraph (b) of this clause; or
    (2) The institution has a long-standing policy of pacifism based on 
historical religious affiliation.
    (d) Agreement. The Contractor represents that it does not now have, 
and agrees that during performance of this contract it will not adopt, 
any policy or practice described in paragraph (b) of this clause, unless 
the Secretary of Defense has granted an exception in accordance with 
paragraph (c)(2) of this clause.
    (e) Notwithstanding any other clause of this contract, if the 
Secretary of Defense determines that the Contractor misrepresented its 
policies and practices at the time of contract award or has violated the 
agreement in paragraph (d) of this clause--
    (1) The Contractor will be ineligible for further payments under 
this and any other contracts with the Department of Homeland Security; 
and
    (2) The Government will terminate this contract for default for the 
Contractor's material failure to comply with the terms and conditions of 
award.

                             (End of clause)



Sec. 3052.209-72  Organizational conflict of interest.

    As prescribed in (HSAR) 48 CFR 3009.507-1, insert the following 
provision:

             Organizational Conflict of Interest (JUN 2006)

    (a) Determination. The Government has determined that this effort 
may result in an actual or potential conflict of interest, or may 
provide one or more offerors with the potential to attain an unfair 
competitive advantage. The nature of the conflict of interest and the 
limitation on future contracting ------[''contracting officer shall 
insert description here''].------
    (b) If any such conflict of interest is found to exist, the 
Contracting Officer may (1) disqualify the offeror, or (2) determine 
that it is otherwise in the best interest of the United States to 
contract with the offeror and include the appropriate provisions to 
avoid, neutralize, mitigate, or waive such conflict in the contract 
awarded. After discussion with the offeror, the Contracting Officer may 
determine that the actual conflict cannot be avoided, neutralized, 
mitigated or otherwise resolved to the satisfaction of the Government, 
and the offeror may be found ineligible for award.
    (c) Disclosure: The offeror hereby represents, to the best of its 
knowledge that:
--(1) It is not aware of any facts which create any actual or potential 
organizational conflicts of interest relating to the award of this 
contract, or
--(2) It has included information in its proposal, providing all current 
information bearing on the existence of any actual or potential 
organizational conflicts of interest, and has included a mitigation plan 
in accordance with paragraph (d) of this provision.

    (d) Mitigation. If an offeror with a potential or actual conflict of 
interest or unfair competitive advantage believes the conflict can be 
avoided, neutralized, or mitigated, the offeror shall submit a 
mitigation plan to the Government for review. Award of a contract where 
an actual or potential conflict of interest exists shall not occur 
before Government approval of the mitigation plan. If a mitigation plan 
is approved, the restrictions of this provision do not apply to the 
extent defined in the mitigation plan.
    (e) Other Relevant Information: In addition to the mitigation plan, 
the Contracting Officer may require further relevant information from 
the offeror. The Contracting Officer will use all information submitted 
by the offeror, and any other relevant information known to DHS, to 
determine whether an award to the offeror may take place, and whether 
the mitigation plan adequately neutralizes or mitigates the conflict.
    (f) Corporation Change. The successful offeror shall inform the 
Contracting Officer within thirty (30) calendar days of the effective 
date of any corporate mergers, acquisitions, and/or divestures that may 
affect this provision.
    (g) Flow-down. The contractor shall insert the substance of this 
clause in each first tier subcontract that exceeds the simplified 
acquisition threshold.
    (End of provision)

[71 FR 25774, May 2, 2006]



Sec. 3052.209-73  Limitation of future contracting.

    As prescribed in (HSAR) 48 CFR 3009.507-2, the contracting officer 
may insert a clause substantially as follows in solicitations and 
contracts:

               Limitation of Future Contracting (JUN 2006)

    (a) The Contracting Officer has determined that this acquisition may 
give rise to a potential organizational conflict of interest. 
Accordingly, the attention of prospective offerors is invited to FAR 
Subpart 9.5--Organizational Conflicts of Interest.
    (b) The nature of this conflict is [describe the conflict].
    (c) The restrictions upon future contracting are as follows:
    (1) If the Contractor, under the terms of this contract, or through 
the performance of tasks pursuant to this contract, is required

[[Page 109]]

to develop specifications or statements of work that are to be 
incorporated into a solicitation, the Contractor shall be ineligible to 
perform the work described in that solicitation as a prime or first-tier 
subcontractor under an ensuing DHS contract. This restriction shall 
remain in effect for a reasonable time, as agreed to by the Contracting 
Officer and the Contractor, sufficient to avoid unfair competitive 
advantage or potential bias (this time shall in no case be less than the 
duration of the initial production contract). DHS shall not unilaterally 
require the Contractor to prepare such specifications or statements of 
work under this contract.
    (2) To the extent that the work under this contract requires access 
to proprietary, business confidential, or financial data of other 
companies, and as long as these data remain proprietary or confidential, 
the Contractor shall protect these data from unauthorized use and 
disclosure and agrees not to use them to compete with those other 
companies.

                             (End of clause)

[71 FR 25774, May 2, 2006]



Sec. 3052.211-70  Index for specifications.

    As prescribed in (HSAR) 48 CFR 3011.204-70 insert the following 
clause:

                   Index for Specifications (DEC 2003)

    If an index or table of contents is furnished in connection with 
specifications, it is understood that such index or table of contents is 
for convenience only. Its accuracy and completeness is not guaranteed, 
and it is not to be considered as part of the specifications. In case of 
discrepancy between the index or table of contents and the 
specifications, the specifications shall govern.

                             (End of clause)



Sec. 3052.215-70  Key personnel or facilities.

    As prescribed in (HSAR) 48 CFR 3015.204-3, insert the following 
clause:

                 Key Personnel or Facilities. (DEC 2003)

    (a) The personnel or facilities specified below are considered 
essential to the work being performed under this contract and may, with 
the consent of the contracting parties, be changed from time to time 
during the course of the contract by adding or deleting personnel or 
facilities, as appropriate.
    (b) Before removing or replacing any of the specified individuals or 
facilities, the Contractor shall notify the Contracting Officer, in 
writing, before the change becomes effective. The Contractor shall 
submit sufficient information to support the proposed action and to 
enable the Contracting Officer to evaluate the potential impact of the 
change on this contract. The Contractor shall not remove or replace 
personnel or facilities until the Contracting Officer approves the 
change.
    The Key Personnel or Facilities under this Contract:

(specify key personnel or facilities)

                             (End of clause)



Sec. 3052.216-70  Evaluation of offers subject to an economic price 
          adjustment clause.

    As prescribed in (HSAR) 48 CFR 3016.203-470, insert a provision 
substantially the same as the following:

Evaluation of Offers Subject to an Economic Price Adjustment Clause (JUN 
                                  2006)

    Offers shall be evaluated without adding an amount for an economic 
price adjustment. Offers may be rejected which: (1) Increase the 
stipulated ceiling; (2) limit the downward adjustment; or (3) delete the 
economic price adjustment clause. If the offer stipulates a ceiling 
lower than that included in the solicitation, the lower ceiling will be 
incorporated into any resulting contract.

                           (End of provision)

[71 FR 25775, May 2, 2006]



Sec. 3052.216-71  Determination of award fee.

    As prescribed in (HSAR) 48 CFR 3016.406(e)(1)(i), insert a clause 
substantially the same as the following:

                  Determination of Award Fee (DEC 2003)

    (a) The Government shall evaluate contractor performance at the end 
of each specified evaluation period(s) to determine the amount of award. 
The contractor agrees that the amount of award and the award fee 
methodology are unilateral decisions to be made at the sole discretion 
of the Government.
    (b) Contractor performance shall be evaluated according to a 
Performance Evaluation Plan. The contractor shall be periodically 
informed of the quality of its performance and areas in which 
improvements are expected.
    (c) The contractor shall be promptly advised, in writing, of the 
determination and reasons why the award fee was or was not earned. The 
contractor may submit a performance self-evaluation for each evaluation 
period. The amount of award is at the sole discretion of the Government 
but any self-

[[Page 110]]

evaluation received within ------ (insert number) days after the end of 
the current evaluation period will be given such consideration, as may 
be deemed appropriate by the Government.
    (d) The Government may specify that a fee not earned during a given 
evaluation period may be accumulated and be available for allocation to 
one or more subsequent periods. In that event, the distribution of award 
fee shall be adjusted to reflect such allocations.

                             (End of clause)



Sec. 3052.216-72  Performance evaluation plan.

    As prescribed in (HSAR) 48 CFR 3016.406(e)(i)(ii), insert a clause 
substantially the same as the following:

                 Performance Evaluation Plan (DEC 2003)

    (a) A Performance Evaluation Plan shall be unilaterally established 
by the Government based on the criteria stated in the contract and used 
for the determination of award fee. This plan shall include the criteria 
used to evaluate each area and the percentage of award fee (if any) 
available for each area. A copy of the plan shall be provided to the 
contractor ------ (insert number) calendar days prior to the start of 
the first evaluation period.
    (b) The criteria contained within the Performance Evaluation Plan 
may relate to: (1) Technical (including schedule) requirements if 
appropriate; (2) Management; and (3) Cost.
    (c) The Performance Evaluation Plan may, consistent with the 
contract, be revised unilaterally by the Government at any time during 
the period of performance. Notification of such changes shall be 
provided to the contractor ------ (insert number) calendar days prior to 
the start of the evaluation period to which the change will apply.

                             (End of clause)



Sec. 3052.216-73  Distribution of award fee.

    As prescribed in (HSAR) 48 CFR 3016.406(e)(1)(iii), insert a clause 
substantially the same as the following:

                  Distribution of Award Fee (DEC 2003)

    (a) The total amount of award fee available under this contract is 
assigned according to the following evaluation periods and amounts:

Evaluation Period:
Available Award Fee:
(insert appropriate information)

    (b) Payment of the base fee and award fee shall be made, provided 
that after payment of 85 percent of the base fee and potential award 
fee, the Government may withhold further payment of the base fee and 
award fee until a reserve is set aside in an amount that the Government 
considers necessary to protect its interest. This reserve shall not 
exceed 15 percent of the total base fee and potential award fee or 
$100,000, whichever is less.
    (c) In the event of contract termination, either in whole or in 
part, the amount of award fee available shall represent a pro rata 
distribution associated with evaluation period activities or events as 
determined by the Government.
    (d) The Government will promptly make payment of any award fee upon 
the submission by the contractor to the contracting officer's authorized 
representative, of a public voucher or invoice in the amount of the 
total fee earned for the period evaluated. Payment may be made without 
using a contract modification.

                             (End of clause)



Sec. 3052.216-74  Settlement of letter contract.

    As prescribed in (HSAR) 48 CFR 3016.603-4, insert a clause 
substantially the same as the following:

                Settlement of Letter Contract (DEC 2003)

    (a) This contract constitutes the definitive contract contemplated 
by letter contract ------ (insert number) issued on ------ (insert 
effective date). It supersedes the letter contract and its modification 
numbered ------ (insert number(s)). To the extent there are 
inconsistencies between the definitive contract and the letter contract, 
the former governs.
    (b) The cost(s) and fee(s), or price(s), established in this 
definitive contract represents full and complete settlement of letter 
contract ------ (insert number) and modification numbered ------ (insert 
number(s)). Payment of the fee agreed upon or profit withheld pending 
definitization of the letter contract, may start immediately at the rate 
and times stated within this contract.

                             (End of clause)



Sec. 3052.217-90  Delivery and Shifting of Vessel (USCG).

    As prescribed in the USCG guidance at (HSAR) 48 CFR 3017.9000(a) and 
(b), insert the following clause:

               Delivery and Shifting of Vessel (DEC 2003)

    The Government shall deliver the vessel to the Contractor at his 
place of business. Upon completion of the work, the Government shall 
accept delivery of the vessel at the Contractor's place of business. The 
Contractor shall provide, at no additional charge, upon 24 hours' 
advance notice, a tug

[[Page 111]]

or tugs and docking pilot, acceptable to the Contracting Officer, to 
assist in handling the vessel between (to and from) the Contractor's 
plant and the nearest point in a waterway regularly navigated by vessels 
of equal or greater draft and length. While the vessel is in the hands 
of the Contractor, any necessary towage, cartage, or other 
transportation between ship and shop or elsewhere, which may be incident 
to the work herein specified, shall be furnished by the Contractor 
without additional charge to the Government.

                             (End of clause)



Sec. 3052.217-91  Performance (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3017.9000(a) and 
(b), insert the following clause:

                         Performance (DEC 2003)

    (a) Upon the award of the contract, the Contractor shall promptly 
start the work specified and shall diligently prosecute the work to 
completion. The Contractor shall not start work until the contract has 
been awarded except in the case of emergency work ordered by the 
Contracting Officer in writing.
    (b) The Government shall deliver the vessel described in the 
contract at the time and location specified in the contract. Upon 
completion of the work, the Government shall accept delivery of the 
vessel at the time and location specified in the contract.
    (c) The Contractor shall without charge,--
    (1) Make available to personnel of the vessel while in dry dock or 
on a marine railway, sanitary lavatory and similar facilities at the 
plant acceptable to the Contracting Officer;
    (2) Supply and maintain suitable brows and gangways from the pier, 
dry dock, or marine railway to the vessel;
    (3) Treat salvage, scrap or other ship's material of the Government 
resulting from performance of the work as items of Government-furnished 
property, in accordance with the Government Property (Fixed Price 
Contracts) clause;
    (4) Perform, or pay the cost of, any repair, reconditioning or 
replacement made necessary as the result of the use by the Contractor of 
any of the vessel's machinery, equipment or fittings, including, but not 
limited to, winches, pumps, rigging, or pipe lines; and
    (5) Furnish suitable offices, office equipment and telephones at or 
near the site of the work for the Government's use.
    (d) The contract will state whether dock and sea trials are required 
to determine whether or not the Contractor has satisfactorily performed 
the work.
    (1) If dock and sea trials are required, the vessel shall be under 
the control of the vessel's commander and crew.
    (2) The Contractor shall not conduct dock and sea trials not 
specified in the contract without advance approval of the Contracting 
Officer. Dock and sea trials not specified in the contract shall be at 
the Contractor's expense and risk.
    (3) The Contractor shall provide and install all fittings and 
appliances necessary for dock and sea trials. The Contractor shall be 
responsible for care, installation, and removal of instruments and 
apparatus furnished by the Government for use in the trials.

                             (End of clause)



Sec. 3052.217-92  Inspection and manner of doing work (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3017.9000(a) and 
(b), insert the following clause:

             Inspection and Manner of Doing Work (DEC 2003)

    (a) The Contractor shall perform work in accordance with the 
contract, any drawings and specifications made a part of the job order, 
and any change or modification issued under the Changes clause.
    (b)(1) Except as provided in paragraph (b)(2) of this clause, and 
unless otherwise specifically provided in the contract, all operational 
practices of the Contractor and all workmanship, material, equipment, 
and articles used in the performance of work under this contract shall 
be in accordance with the best commercial marine practices and the rules 
and requirements of all appropriate regulatory bodies including, but not 
limited to the American Bureau of Shipping, the U.S. Coast Guard, and 
the Institute of Electrical and Electronic Engineers, in effect at the 
time of Contractor's submission of offer, and shall be intended and 
approved for marine use.
    (2) When Navy specifications are specified in the contract, the 
Contractor shall follow Navy standards of material and workmanship.
    (c) The Government may inspect and test all material and workmanship 
at any time during the Contractor's performance of the work.
    (1) If, prior to delivery, the Government finds any material or 
workmanship is defective or not in accordance with the contract, in 
addition to its rights under the Guarantee clause, the Government may 
reject the defective or nonconforming material or workmanship and 
require the Contractor to correct or replace it at the Contractor's 
expense.
    (2) If the Contractor fails to proceed promptly with the replacement 
or correction

[[Page 112]]

of the material or workmanship, the Government may replace or correct 
the defective or nonconforming material or workmanship and charge the 
Contractor the excess costs incurred.
    (3) As specified in the contract, the Contractor shall provide and 
maintain an inspection system acceptable to the Government.
    (4) The Contractor shall maintain complete records of all inspection 
work and shall make them available to the Government during performance 
of the contract and for 90 days after the completion of all work 
required.
    (d) The Contractor shall not permit any welder to work on a vessel 
unless the welder is, at the time of the work, qualified to the 
standards established by the U.S. Coast Guard, American Bureau of 
Shipping, or Department of the Navy for the type of welding being 
performed. Qualifications of a welder shall be as specified in the 
contract.
    (e) The Contractor shall--
    (1) Exercise reasonable care to protect the vessel from fire;
    (2) Maintain a reasonable system of inspection over activities 
taking place in the vicinity of the vessel's magazines, fuel oil tanks, 
or storerooms containing flammable materials.
    (3) Maintain a reasonable number of hose lines ready for immediate 
use on the vessel at all times while the vessel is berthed alongside the 
Contractor's pier or in dry dock or on a marine railway;
    (4) Unless otherwise provided in the contract, provide sufficient 
security patrols to reasonably maintain a fire watch for protection of 
the vessel when it is in the Contractor's custody;
    (5) To the extent necessary, clean, wash, and steam out or otherwise 
make safe, all tanks under alteration or repair.
    (6) Furnish the Contracting Officer a ``gas-free'' or ``safe-for-
hotwork'' certificate before any hot work is done on a tank;
    (7) Treat the contents of any tank as Government property in 
accordance with the Government Property (Fixed-Price Contracts) clause; 
and
    (8) Dispose of the contents of any tank only at the direction, or 
with the concurrence, of the Contracting Officer.
    (9) Be responsible for the proper closing of all openings to the 
vessel's underwater structure upon which work has been performed. The 
contractor additionally must advise the COTR of the status of all valves 
closures and openings for which the contractor's workers were 
responsible.
    (f) Except as otherwise provided in the contract, when the vessel is 
in the custody of the Contractor or in dry dock or on a marine railway 
and the temperature is expected to go as low as 35 Fahrenheit, the 
Contractor shall take all necessary steps to--
    (1) Keep all hose pipe lines, fixtures, traps, tanks, and other 
receptacles on the vessel from freezing; and
    (2) Protect the stern tube and propeller hubs from frost damage.
    (g) The Contractor shall, whenever practicable--
    (1) Perform the required work in a manner that will not interfere 
with the berthing and messing of Government personnel attached to the 
vessel; and
    (2) Provide Government personnel attached to the vessel access to 
the vessel at all times.
    (h) Government personnel attached to the vessel shall not interfere 
with the Contractor's work or workers.
    (i)(1) The Government does not guarantee the correctness of the 
dimensions, sizes, and shapes set forth in any contract, sketches, 
drawings, plans, or specifications prepared or furnished by the 
Government, unless the contract requires that the Contractor perform the 
work prior to any opportunity to inspect.
    (2) Except as stated in paragraph (i)(1) of this clause, and other 
than those parts furnished by the Government, and the Contractor shall 
be responsible for the correctness of the dimensions, sizes, and shapes 
of parts furnished under this agreement.
    (j) The Contractor shall at all times keep the site of the work on 
the vessel free from accumulation of waste material or rubbish caused by 
its employees or the work. At the completion of the work, unless the 
contract specifies otherwise, the Contractor shall remove all rubbish 
from the site of the work and leave the immediate vicinity of the work 
area ``broom clean.''

                             (End of clause)



Sec. 3052.217-93  Subcontracts (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3017.9000(a) and 
(b), insert the following clause:

                         Subcontracts (DEC 2003)

    (a) Nothing contained in the contract shall be construed as creating 
any contractual relationship between any subcontractor and the 
Government. The divisions or sections of the specifications are not 
intended to control the Contractor in dividing the work among 
subcontractors or to limit the work performed by any trade.
    (b) The Contractor shall be responsible to the Government for acts 
and omissions of its own employees, and of subcontractors and their 
employees. The Contractor shall also be responsible for the coordination 
of the work of the trades, subcontractors, and material men.
    (c) The Contractor shall, without additional expense to the 
Government, employ

[[Page 113]]

specialty subcontractors where required by the specifications.
    (d) The Government or its representatives will not undertake to 
settle any differences between the Contractor and its subcontractors, or 
between subcontractors.

                             (End of clause)



Sec. 3052.217-94  Lay days (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3017.9000(a) and 
(b), insert the following clause:

                           Lay Days (DEC 2003)

    (a) Lay day time will be paid by the Government at the Contractor's 
stipulated bid price for this item of the contract when the vessel 
remains on the dry dock or marine railway as a result of any change that 
involves work in addition to that required under the basic contract.
    (b) No lay day time shall be paid until all items of the basic 
contract for which a price was established by the Contractor and for 
which docking of the vessel was required have been satisfactorily 
completed and accepted.
    (c) Days of hauling out and floating, whatever the hour, shall not 
be paid as lay day time, and days when no work is performed by the 
Contractor shall not be paid as lay day time.
    (d) Payment of lay day time shall constitute complete compensation 
for all costs, direct and indirect, to reimburse the Contractor for use 
of dry dock or marine railway.

                             (End of clause)



Sec. 3052.217-95  Liability and insurance (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3017.9000(a) and 
(b), insert the following clause:

                   Liability and Insurance (DEC 2003)

    (a) The Contractor shall exercise its best efforts to prevent 
accidents, injury, or damage to all employees, persons, and property, in 
and about the work, and to the vessel or part of the vessel upon which 
work is done.
    (b) Loss or damage to the vessel, materials, or equipment. (1) 
Unless otherwise directed or approved in writing by the Contracting 
Officer, the Contractor shall not carry insurance against any form of 
loss or damage to the vessel(s) or to the materials or equipment to 
which the Government has title or which have been furnished by the 
Government for installation by the Contractor. The Government assumes 
the risks of loss of and damage to that property.
    (2) The Government does not assume any risk with respect to loss or 
damage compensated for by insurance or otherwise or resulting from risks 
with respect to which the Contractor has failed to maintain insurance, 
if available, as required or approved by the Contracting Officer.
    (3) The Government does not assume risk of and will not pay for any 
costs of the following:
    (i) Inspection, repair, replacement, or renewal of any defects in 
the vessel(s) or material and equipment due to--
    (A) Defective workmanship performed by the Contractor or its 
subcontractors;
    (B) Defective materials or equipment furnished by the Contractor or 
its subcontractors; or
    (C) Workmanship, materials, or equipment which do not conform to the 
requirements of the contract, whether or not the defect is latent or 
whether or not the nonconformance is the result of negligence.
    (ii) Loss, damage, liability, or expense caused by, resulting from, 
or incurred as a consequence of any delay or disruption, willful 
misconduct or lack of good faith by the Contractor or any of its 
representatives that have supervision or direction of--
    (A) All or substantially all of the Contractor's business; or
    (B) All or substantially all of the Contractor's operation at any 
one plant.
    (4) As to any risk that is assumed by the Government, the Government 
shall be subrogated to any claim, demand or cause of action against 
third parties that exists in favor of the Contractor. If required by the 
Contracting Officer, the Contractor shall execute a formal assignment or 
transfer of the claim, demand, or cause of action.
    (5) No party other than the Contractor shall have any right to 
proceed directly against the Government or join the Government as a 
codefendant in any action.
    (6) Notwithstanding the foregoing, the Contractor shall bear the 
first $5,000 of loss or damage from each occurrence or incident, the 
risk of which the Government would have assumed under the provision of 
this paragraph (b).
    (c) Indemnification. The Contractor indemnifies the Government and 
the vessel and its owners against all claims, demands, or causes of 
action to which the Government, the vessel or its owner(s) might be 
subject as a result of damage or injury (including death) to the 
property or person of anyone other than the Government or its employees, 
or the vessel or its owner, arising in whole or in part from the 
negligence or other wrongful act of the Contractor, or its agents or 
employees, or any subcontractor, or its agents or employees.
    (1) The Contractor's obligation to indemnify under this paragraph 
shall not exceed the sum of $300,000 as a consequence of any

[[Page 114]]

single occurrence with respect to any one vessel.
    (2) The indemnity includes, without limitation, suits, actions, 
claims, costs, or demands of any kind, resulting from death, personal 
injury, or property damage occurring during the period of performance of 
work on the vessel or within 90 days after redelivery of the vessel. For 
any claim, etc., made after 90 days, the rights of the parties shall be 
as determined by other provisions of this contract and by law. The 
indemnity does apply to death occurring after 90 days where the injury 
was received during the period covered by the indemnity.
    (d) Insurance. (1) The Contractor shall, at its own expense, obtain 
and maintain the following insurance--
    (i) Casualty, accident, and liability insurance, as approved by the 
Contracting Officer, insuring the performance of its obligations under 
paragraph (c) of this clause.
    (ii) Workers Compensation Insurance (or its equivalent) covering the 
employees engaged on the work.
    (2) The Contractor shall ensure that all subcontractors engaged on 
the work obtain and maintain the insurance required in paragraph (d)(1) 
of this clause.
    (3) Upon request of the Contracting Officer, the Contractor shall 
provide evidence of the insurance required by paragraph (d) of this 
clause.
    (e) The Contractor shall not make any allowance in the contract 
price for the inclusion of any premium expense or charge for any reserve 
made on account of self-insurance for coverage against any risk assumed 
by the Government under this clause.
    (f) The Contractor shall give the Contracting Officer written notice 
as soon as practicable after the occurrence of a loss or damage for 
which the Government has assumed the risk.
    (1) The notice shall contain full details of the loss or damage.
    (2) If a claim or suit is later filed against the Contractor as a 
result of the event, the Contractor shall immediately deliver to the 
Government every demand, notice, summons, or other process received by 
the Contractor or its employees or representatives.
    (3) The Contractor shall cooperate with the Government and, upon 
request, shall assist in effecting settlements, securing and giving 
evidence, obtaining the attendance of witnesses, and in the conduct of 
suits. The Government shall reimburse the Contractor for expenses 
incurred in this effort, other than the cost of maintaining the 
Contractor's usual organization.
    (4) The Contractor shall not, except at its own expense, voluntarily 
make any payments, assume any obligation, or incur any expense other 
than what would be imperative for the protection of the vessel(s) at the 
time of the event.
    (g) In the event of loss of or damage to any vessel(s), material, or 
equipment which may result in a claim against the Government under the 
insurance provisions of this contract, the Contractor shall promptly 
notify the Contracting Officer of the loss or damage. The Contracting 
Officer may, without prejudice to any right of the Government, either--
    (1) Order the Contractor to proceed with replacement or repair, in 
which event the Contractor shall effect the replacement or repair;
    (i) The Contractor shall submit to the Contracting Officer a request 
for reimbursement of the cost of the replacement or repair together with 
whatever supporting documentation the Contracting Officer may reasonably 
require, and shall identify the request as being submitted under the 
Insurance clause of this contract.
    (ii) If the Government determines that the risk of the loss or 
damage is within the scope of the risks assumed by the Government under 
this clause, the Government will reimburse the Contractor for the 
reasonable allowable cost of the replacement or repair, plus a 
reasonable profit (if the work or replacement or repair was performed by 
the Contractor) less the deductible amount specified in paragraph (b) of 
this clause.
    (iii) Payments by the Government to the Contractor under this clause 
are outside the scope of and shall not affect the pricing structure of 
the contract, and are additional to the compensation otherwise payable 
to the Contractor under this contract; or
    (2) Decide that the loss or damage shall not be replaced or repaired 
and in that event, the Contracting Officer shall--
    (i) Modify the contract appropriately, consistent with the reduced 
requirements reflected by the unreplaced or unrepaired loss or damage; 
or
    (ii) Terminate the repair of any part or all of the vessel(s) under 
the Termination for Convenience of the Government clause of this 
contract.

                             (End of clause)



Sec. 3052.217-96  Title (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3017.9000(a) and 
(b), insert the following clause:

                            Title (DEC 2003)

    (a) Unless otherwise provided, title to all materials and equipment 
to be incorporated in a vessel in the performance of this contract shall 
vest in the Government upon delivery at the location specified for the 
performance of the work.
    (b) Upon completion of the contract, or with the approval of the 
Contracting Officer

[[Page 115]]

during performance of the contract, all Contractor-furnished materials 
and equipment not incorporated in, or placed on, any vessel, shall 
become the property of the Contractor, unless the Government has 
reimbursed the Contractor for the cost of the materials and equipments.
    (c) The vessel, its equipment, movable stores, cargo, or other 
ship's materials shall not be considered Government-furnished property.

                             (End of clause)



Sec. 3052.217-97  Discharge of liens (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3017.9000(a) and 
(b), insert the following clause:

                      Discharge of Liens (DEC 2003)

    (a) The Contractor shall immediately discharge or cause to be 
discharged, any lien or right in rem of any kind, other than in favor of 
the Government, that exists or arises in connection with work done or 
materials furnished under this contract.
    (b) If any such lien or right in rem is not immediately discharged, 
the Government, at the expense of the Contractor, may discharge, or 
cause to be discharged, the lien or right.

                             (End of clause)



Sec. 3052.217-98  Delays (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3017.9000(a) and 
(b), insert the following clause:

                            Delays (DEC 2003)

    When during the performance of this contract the Contractor is 
required to delay work on a vessel temporarily, due to orders or actions 
of the Government respecting stoppage of work to permit shifting the 
vessel, stoppage of hot work to permit bunkering, stoppage of work due 
to embarking or debarking passengers and loading or discharging cargo, 
and the Contractor is not given sufficient advance notice or is 
otherwise unable to avoid incurring additional costs on account thereof, 
an equitable adjustment shall be made in the price of the contract 
pursuant to the ``Changes'' clause.

                             (End of clause)



Sec. 3052.217-99  Department of Labor safety and health regulations for 
          ship repairing (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3017.9000(a) and 
(b), insert the following clause:

 Department of Labor Safety and Health Regulations for Ship Repair (DEC 
                                  2003)

    Nothing contained in this contract shall relieve the Contractor of 
any obligations it may have to comply with--
    (a) The Occupational Safety and Health Act of 1970 (29 U.S.C. 651, 
et seq.);
    (b) The Safety and Health Regulations for Ship Repairing (29 CFR 
part 1915); or
    (c) Any other applicable Federal, State, and local laws, codes, 
ordinances, and regulations.

                             (End of clause)



Sec. 3052.217-100  Guarantee (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3017.9000(c), insert 
the following clause:

                       Guarantee (USCG) (JUN 2006)

    (a) In the event any work performed or materials furnished by the 
contractor prove defective or deficient within 60 days from the date of 
redelivery of the vessel(s), the Contractor, as directed by the 
Contracting Officer and at its own expense, shall correct and repair the 
deficiency to the satisfaction of the Contracting Officer.
    (b) If the Contractor or any subcontractor has a guarantee for work 
performed or materials furnished that exceeds the 60 day period, the 
Government shall be entitled to rely upon the longer guarantee until its 
expiration.
    (c) With respect to any individual work item identified as 
incomplete at the time of redelivery of the vessel(s), the guarantee 
period shall run from the date the item is completed.
    (d) If practicable, the Government shall give the Contractor an 
opportunity to correct the deficiency.
    (1) If the Contracting Officer determines it is not practicable or 
is otherwise not advisable to return the vessel(s) to the Contractor, or 
the Contractor fails to proceed with the repairs promptly, the 
Contracting Officer may direct that the repairs be performed elsewhere, 
at the Contractor's expense.
    (2) If correction and repairs are performed by other than the 
Contractor, the Contracting Officer may discharge the Contractor's 
liability by making an equitable deduction in the price of the contract.
    (e) The Contractor's liability shall extend for an additional 60-day 
guarantee period on those defects or deficiencies that the Contractor 
corrected.
    (f) At the option of the Contracting officer, defects and 
deficiencies may be left uncorrected. In that event, the Contractor and 
Contracting Officer shall negotiate an equitable reduction in the 
contract price. Failure

[[Page 116]]

to agree upon an equitable reduction shall constitute a dispute under 
the Disputes clause of this contract.

                             (End of clause)

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25775, May 2, 2006]



Sec. 3052.219-70  Small Business subcontracting program reporting.

    As prescribed in (HSAR) 48 CFR 3019.708-70(a), insert the following 
clause:

         Small Business Subcontracting Plan Reporting (JUN 2006)

    (a) The Contractor shall enter the information for the 
Subcontracting Report for Individual Contracts (formally the Standard 
Form 294 (SF 294)) and the Summary Subcontract Report (formally the 
Standard Form 295 (SF-295)) into the Electronic Subcontracting Reporting 
System (eSRS) at http://www.esrs.gov.
    (b) The Contractor shall include this clause in all subcontracts 
that include the clause at (FAR) 48 CFR 52.219-9.

                             (End of clause)

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25775, May 2, 2006]



Sec. 3052.219-71  DHS mentor-prot[eacute]g[eacute] program.

    As prescribed in (HSAR) 48 CFR 3019.708-70(b), insert the following 
clause:

           DHS Mentor-Prot[eacute]g[eacute] Program (JUN 2006)

    (a) Large businesses are encouraged to participate in the DHS 
Mentor-Prot[eacute]g[eacute] program for the purpose of providing 
developmental assistance to eligible small business 
prot[eacute]g[eacute] entities to enhance their capabilities and 
increase their participation in DHS contracts.
    (b) The program consists of:
    (1) Mentor firms, which are large prime contractors capable of 
providing developmental assistance;
    (2) Prot[eacute]g[eacute] firms, which are small businesses, 
veteran-owned small businesses, service-disabled veteran-owned small 
businesses, HUBZone small businesses, small disadvantaged businesses, 
and women-owned small business concerns; and
    (3) Mentor-Prot[eacute]g[eacute] agreements, approved by the DHS 
OSDBU.
    (c) Mentor participation in the program means providing business 
developmental assistance to aid Prot[eacute]g[eacute]s in developing the 
requisite expertise to effectively compete for and successfully perform 
DHS contracts and subcontracts.
    (d) Large business prime contractors serving as mentors in the DHS 
Mentor-Prot[eacute]g[eacute] program are eligible for a post-award 
incentive for subcontracting plan credit. The mentor may receive credit 
for costs it incurs to provide assistance to a prot[eacute]g[eacute] 
firm. The mentor may use this additional credit towards attaining its 
subcontracting plan participation goal under the same or another DHS 
contract. The amount of credit given to a mentor firm for these 
prot[eacute]g[eacute] developmental assistance costs shall be calculated 
on a dollar for dollar basis and reported in the Summary Subcontract 
Report via the Electronic Subcontracting Reporting System (eSRS) at 
http://www.esrs.gov. For example, a mentor/large business prime 
contractor would report a $10,000 subcontract to the 
prot[eacute]g[eacute]/small business subcontractor and $5,000 of 
developmental assistance to the prot[eacute]g[eacute]/small business 
subcontractor as $15,000. The Mentor and Prot[eacute]g[eacute] will 
submit a signed joint statement agreeing on the dollar value of the 
developmental assistance and the Summary Subcontract Report.
    (e) Contractors interested in participating in the program are 
encouraged to contact the DHS OSDBU for more information.

                             (End of clause)

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25775, May 2, 2006]



Sec. 3052.219-72  Evaluation of prime contractor participation in the 
          DHS mentor-prot[eacute]g[eacute] program.

    As prescribed in (HSAR) 48 CFR 3019.708-70(c), insert the following 
provision:

     Evaluation of Prime Contractor Participation in the DHS Mentor-
                Prot[eacute]g[eacute] Program (JUN 2006)

    This solicitation contains a source selection factor or subfactor 
regarding participation in the DHS Mentor-Prot[eacute]g[eacute] Program. 
In order to receive credit under the source selection factor or 
subfactor, the offeror shall provide a signed letter of mentor-
prot[eacute]g[eacute] agreement approval from the DHS Office of Small 
Business and Disadvantaged Business Utilization (OSDBU) before initial 
evaluation of proposals. The contracting officer may, in his or her 
discretion, give credit for approvals that occur after initial 
evaluation of proposals, but before final evaluation.

                           (End of provision)

[71 FR 25775, May 2, 2006]

[[Page 117]]



Sec. 3052.222-70  Strikes or picketing affecting timely completion of 
          the contract work.

    As prescribed in (HSAR) 48 CFR 3022.101-71(a), insert the following 
clause:

 Strikes or Picketing Affecting Timely Completion of the Contract Work 
                               (DEC 2003)

    Notwithstanding any other provision hereof, the Contractor is 
responsible for delays arising out of labor disputes, including but not 
limited to strikes, if such strikes are reasonably avoidable. A delay 
caused by a strike or by picketing which constitutes an unfair labor 
practice is not excusable unless the Contractor takes all reasonable and 
appropriate action to end such a strike or picketing, such as the filing 
of a charge with the National Labor Relations Board, the use of other 
available Government procedures, and the use of private boards or 
organizations for the settlement of disputes.

                             (End of clause)



Sec. 3052.222-71  Strikes or picketing affecting access to a DHS 
          facility.

    As prescribed in (HSAR) 48 CFR 3022.101-71(b), insert the following 
clause:

   Strikes or Picketing Affecting Access to a DHS Facility (DEC 2003)

    If the Contracting Officer notifies the Contractor in writing that a 
strike or picketing: (a) is directed at the Contractor or subcontractor 
or any employee of either; and (b) impedes or threatens to impede access 
by any person to a DHS facility where the site of the work is located, 
the Contractor shall take all appropriate action to end such strike or 
picketing, including, if necessary, the filing of a charge of unfair 
labor practice with the National Labor Relations Board or the use of 
other available judicial or administrative remedies.

                             (End of clause)



Sec. 3052.222-90  Local hire (USCG).

    As prescribed in (HSAR) 48 CFR 3022.9001, insert the following 
clause:

                      Local Hire (USCG) (JUN 2006)

    (a) When performing a contract in whole or in part in a State with 
an unemployment rate in excess of the national average determined by the 
Secretary of Labor, the Contractor shall employ, for the purpose of 
performing the portion of the contract in that State, individuals who 
are local residents and who, in the case of any craft or trade, possess 
or would be able to acquire promptly, the necessary skills.
    (b) Local resident defined. As used in this section, ``local 
resident'' means a resident of, or an individual who commutes daily to, 
a State described in subsection (a).
    (c) The Secretary of Homeland Security may waive the requirements of 
paragraph (a) the interest of national security or economic efficiency.

                             (End of clause)

[71 FR 25775, May 2, 2006]



Sec. 3052.223-70  Removal or disposal of hazardous substances--
          applicable licenses and permits.

    As prescribed in (HSAR) 48 CFR 3023.303, insert the following 
clause:

  Removal or Disposal of Hazardous Substances--Applicable Licenses and 
                           Permits (JUN 2006)

    The Contractor shall have all licenses and permits required by 
Federal, state, and local laws to perform hazardous substance(s) removal 
or disposal services. If the Contractor does not currently possess these 
documents, it shall obtain all requisite licenses and permits within --
[``insert days'']-- days after date of award. The Contractor shall 
provide evidence of said documents to the Contracting Officer or 
designated Government representative prior to commencement of work under 
the contract.

                             (End of clause)

[71 FR 25775, May 2, 2006]



Sec. 3052.223-90  Accident and fire reporting (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3023.9000(a), insert 
the following clause:

                 Accident and Fire Reporting (DEC 2003)

    (a) The Contractor shall report to the Contracting Officer any 
accident or fire occurring at the site of the work that causes:
    (1) A fatality or the loss of at least one lost workday on the part 
of any employee of the Contractor or subcontractor at any tier;
    (2) Damage of $1,000 or more to Federal real or personal property; 
either real or personal;
    (3) Damage of $1,000 or more to Contractor or subcontractor owned or 
leased motor vehicles or mobile equipment; or
    (4) Damage for which a contract time extension may be requested.

[[Page 118]]

    (b) Accident and fire reports required by paragraph (a) above shall 
be accomplished by the following means:
    (1) Accidents or fires resulting in a death, hospitalization of five 
or more persons, or destruction of Federal real or personal property, 
the total value of which is estimated at $100,000 or more, shall be 
reported immediately by telephone to the Contracting Officer or his/her 
authorized representative and shall be confirmed by telegram, facsimile 
or e-mail transmission within 24 hours to the Contracting Officer. Such 
telegram or facsimile transmission shall state all known facts as to 
extent of injury and damage and as to cause of the accident or fire.
    (2) Other accident and fire reports required by paragraph (a) above 
may be reported by the Contractor using a state, private insurance 
carrier, or Contractor accident report form which provides for the 
statement of:
    (i) The extent of injury; and
    (ii) The damage and cause of the accident or fire.
    Such report shall be mailed or otherwise delivered to the 
Contracting Officer within 48 hours of the occurrence of the accident or 
fire.
    (c) The Contractor shall assure compliance by subcontractors at all 
tiers with the requirements of this clause.

                             (End of clause)



Sec. 3052.228-70  Insurance.

    As prescribed in (HSAR) 48 CFR 3028.310-70 and 3028.311-1, insert a 
clause substantially the same as follows. The contracting officer may 
specify additional kinds (e.g., aircraft public and passenger liability, 
vessel liability) or increased amounts of insurance.

                          Insurance (DEC 2003)

    In accordance with the clause entitled ``Insurance--Work on a 
Government Installation'' [or Insurance--Liability to Third Persons] in 
Section I, insurance of the following kinds and minimum amounts shall be 
provided and maintained during the period of performance of this 
contract:
    (a) Worker's compensation and employer's liability. The contractor 
shall, as a minimum, meet the requirements specified at (FAR) 48 CFR 
28.307-2(a).
    (b) General liability. The contractor shall, as a minimum, meet the 
requirements specified at (FAR) 48 CFR 28.307-2(b).
    (c) Automobile liability. The contractor shall, as a minimum, meet 
the requirements specified at (FAR) 48 CFR 28.307-2(c).

                             (End of clause)



Sec. 3052.228-90  Notification of Miller Act payment bond protection 
          (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3028.106-490, insert 
the following clause:

      Notification of Miller Act Payment Bond Protection (DEC 2003)

    This notice clause shall be inserted by first tier subcontractors in 
all their subcontracts and shall contain information pertaining to the 
surety that provided the payment bond under the prime contract.
    (a) The prime contract is subject to the Miller Act (40 U.S.C. 270), 
under which the prime contractor has obtained a payment bond. This 
payment bond may provide certain unpaid employees, suppliers, and 
subcontractors a right to sue the bonding surety under the Miller Act 
for amounts owned for work performed and materials delivery under the 
prime contract.
    (b) Persons believing that they have legal remedies under the Miller 
Act should consult their legal advisor regarding the proper steps to 
take to obtain these remedies. This notice clause does not provide any 
party any rights against the Federal Government, or create any 
relationship, contractual or otherwise, between the Federal Government 
and any private party.
    (c) The surety which has provided the payment bond under the prime 
contract is:
________________________________________________________________________
(Name)
________________________________________________________________________
(Street Address)
________________________________________________________________________
(City, State, Zip Code)
________________________________________________________________________
(Contact & Tel. No.)
________________________________________________________________________

                             (End of clause)



Sec. 3052.228-91  Loss of or damage to leased aircraft (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3028.306-90(a) and 
(b), insert the following clause:

             Loss of or Damage to Leased Aircraft (DEC 2003)

    (a) The Government assumes all risk of loss of, or damage (except 
normal wear and tear) to, the leased aircraft during the term of this 
lease while the aircraft is in the possession of the Government.
    (b) In the event of damage to the aircraft, the Government, at its 
option, shall make the necessary repairs with its own facilities or by 
contract, or pay the Contractor the reasonable cost of repair of the 
aircraft.

[[Page 119]]

    (c) In the event the aircraft is lost or damaged beyond repair, the 
Government shall pay the Contractor a sum equal to the fair market value 
of the aircraft at the time of such loss or damage, which value may be 
specifically agreed to in clause 3052.228-92, ``Fair Market Value of 
Aircraft,'' less the salvage value of the aircraft. However, the 
Government may retain the damaged aircraft or dispose of it as it 
wishes. In that event, the Contractor will be paid the fair market value 
of the aircraft as stated in the clause.
    (d) The Contractor agrees that the contract price does not include 
any cost attributable to hull insurance or to any reserve fund it has 
established to protect its interest in the aircraft. If, in the event of 
loss or damage to the leased aircraft, the Contractor receives 
compensation for such loss or damage in any form from any source, the 
amount of such compensation shall be:
    (1) Credited to the Government in determining the amount of the 
Government's liability; or
    (2) For an increment of value of the aircraft beyond the value for 
which the Government is responsible.
    (e) In the event of loss of or damage to the aircraft, the 
Government shall be subrogated to all rights of recovery by the 
Contractor against third parties for such loss or damage and the 
Contractor shall promptly assign such rights in writing to the 
Government.

                             (End of clause)



Sec. 3052.228-92  Fair market value of aircraft (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3028.306-90(a) and 
(c), insert the following clause:

                Fair Market Value of Aircraft (DEC 2003)

    For purposes of the clause entitled ``Loss of or Damage to Leased 
Aircraft,'' the fair market value of the aircraft to be used in the 
performance of this contract shall be the lesser of the two values set 
out in paragraphs (a) and (b) below:
    (a) $------; or
    (b) If the contractor has insured the same aircraft against loss or 
destruction in connection with other operations, the amount of such 
insurance coverage on the date of the loss or damage for which the 
Government may be responsible under this contract.

                             (End of clause)



Sec. 3052.228-93  Risk and indemnities (USCG).

    As prescribed in USCG guidance at (HSAR) 48 CFR 3028.306-90(a) and 
(d), insert the following clause:

                     Risk and Indemnities (DEC 2003)

    The Contractor hereby agrees to indemnify and hold harmless the 
Government, its officers and employees from and against all claims, 
demands, damages, liabilities, losses, suits and judgments (including 
all costs and expenses incident thereto) which may be suffered by, 
accrue against, be charged to or recoverable from the Government, its 
officers and employees by reason of injury to or death of any person 
other than officers, agents, or employees of the Government or by reason 
of damage to property of others of whatsoever kind (other than the 
property of the Government, its officers, agents or employees) arising 
out of the operation of the aircraft. In the event the Contractor holds 
or obtains insurance in support of this covenant, evidence of insurance 
shall be delivered to the Contracting Officer.

                             (End of clause)



Sec. 3052.231-70  Precontract costs.

    As prescribed in (HSAR) 48 CFR 3031.205-32, insert the following 
clause:

                      Precontract Costs (DEC 2003)

    The Contractor shall be entitled to reimbursement for pre-contract 
costs incurred on or after ------ in an amount not to exceed $------ 
that, if incurred after this contract had been entered into, would have 
been reimbursable under this contract.

                             (End of clause)



Sec. 3052.235-70  Dissemination of information--educational 
          institutions.

    As prescribed in (HSAR) 48 CFR 3035.7000, insert the following 
clause:

    Dissemination of Information--Educational Institutions (DEC 2003)

    (a) The Department of Homeland Security (DHS) desires widespread 
dissemination of the results of funded non-sensitive research. The 
Contractor, therefore, may publish (subject to the provisions of the 
``Data Rights'' and ``Patent Rights'' clauses of the contract) research 
results in professional journals, books, trade publications, or other 
appropriate media (a thesis or collection of theses should not be used 
to distribute results because dissemination will not be sufficiently 
widespread). All costs of publication pursuant to this clause shall be 
borne by the Contractor and shall not be charged to the Government under 
this or any other Federal contract.
    (b) Any copy of material published under this clause shall contain 
acknowledgment of DHS's sponsorship of the research effort and

[[Page 120]]

a disclaimer stating that the published material represents the position 
of the author(s) and not necessarily that of DHS. Articles for 
publication or papers to be presented to professional societies do not 
require the authorization of the Contracting Officer prior to release. 
However, a printed or electronic copy of each article shall be 
transmitted to the Contracting Officer at least two weeks prior to 
release or publication.
    (c) Publication under the terms of this clause does not release the 
Contractor from the obligation of preparing and submitting to the 
Contracting Officer a final report containing the findings and results 
of research, as set forth in the schedule of the contract.

                             (End of clause)

[68 FR 67871, Dec. 4, 2003. Redesignated and amended at 71 FR 25775, May 
2, 2006]



Sec. 3052.236-70  Special precautions for work at operating airports.

    As prescribed in (HSAR) 48 CFR 3036.570, insert the following 
clause:

      Special Precautions for Work at Operating Airports (DEC 2003)

    (a) When work is to be performed at an operating airport, the 
Contractor must arrange its work schedule so as not to interfere with 
flight operations. Such operations will take precedence over 
construction convenience. Any operations of the Contractor which would 
otherwise interfere with or endanger the operations of aircraft shall be 
performed only at times and in the manner directed by the Contracting 
Officer. The Government will make every effort to reduce the disruption 
of the Contractor's operation.
    (b) Unless otherwise specified by local regulations, all areas in 
which construction operations are underway shall be marked by yellow 
flags during daylight hours and by red lights at other times. The red 
lights along the edge of the construction areas within the existing 
aprons shall be the electric type of not less than 100 watts intensity 
placed and supported as required. All other construction markings on 
roads and adjacent parking lots may be either electric or battery type 
lights. These lights and flags shall be placed so as to outline the 
construction areas and the distance between any two flags or lights 
shall not be greater than 25 feet. The Contractor shall provide adequate 
watch to maintain the lights in working condition at all times other 
than daylight hours. The hour of beginning and the hour of ending of 
daylight will be determined by the Contracting Officer.
    (c) All equipment and material in the construction areas or when 
moved outside the construction area shall be marked with airport safety 
flags during the day and when directed by the Contracting Officer, with 
red obstruction lights at nights. All equipment operating on the apron, 
taxiway, runway, and intermediate areas after darkness hours shall have 
clearance lights in conformance with instructions from the Contracting 
Officer. No construction equipment shall operate within 50 feet of 
aircraft undergoing fuel operations. Open flames are not allowed on the 
ramp except at times authorized by the Contracting Officer.
    (d) Trucks and other motorized equipment entering the airport or 
construction area shall do so only over routes determined by the 
Contracting Officer. Use of runways, aprons, taxiways, or parking areas 
as truck or equipment routes will not be permitted unless specifically 
authorized for such use. Flag personnel shall be furnished by the 
Contractor at points on apron and taxiway for safe guidance of its 
equipment over these areas to assure right of way to aircraft. Areas and 
routes used during the contract must be returned to their original 
condition by the Contractor. Airport management shall establish the 
maximum speed allowed at the airport. Vehicles shall be operated so as 
to be under safe control at all times, weather and traffic conditions 
considered. Vehicles must be equipped with head and taillights during 
the hours of darkness.

                             (End of clause)



Sec. 3052.242-70  [Reserved]



Sec. 3052.242-71  Dissemination of contract information.

    As prescribed in (HSAR) 48 CFR 3042.202-70, insert the following 
clause:

            Dissemination of Contract Information (DEC 2003)

    The Contractor shall not publish, permit to be published, or 
distribute for public consumption, any information, oral or written, 
concerning the results or conclusions made pursuant to the performance 
of this contract, without the prior written consent of the Contracting 
Officer. An electronic or printed copy of any material proposed to be 
published or distributed shall be submitted to the Contracting Officer.

                             (End of clause)

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25776, May 2, 2006]



Sec. 3052.242-72  Contracting officer's technical representative.

    As prescribed in (HSAR) 48 CFR 3042.7000, insert the following 
clause:

[[Page 121]]

        Contracting Officer's Technical Representative (DEC 2003)

    (a) The Contracting Officer may designate Government personnel to 
act as the Contracting Officer's Technical Representative (COTR) to 
perform functions under the contract such as review or inspection and 
acceptance of supplies, services, including construction, and other 
functions of a technical nature. The Contracting Officer will provide a 
written notice of such designation to the Contractor within five working 
days after contract award or for construction, not less than five 
working days prior to giving the contractor the notice to proceed. The 
designation letter will set forth the authorities and limitations of the 
COTR under the contract.
    (b) The Contracting Officer cannot authorize the COTR or any other 
representative to sign documents, such as contracts, contract 
modifications, etc., that require the signature of the Contracting 
Officer.

                             (End of clause)



Sec. 3052.245-70  Government property reports.

    As prescribed in (HSAR) 48 CFR 3045.505-70, insert the following 
clause:

                 Government Property Reports (JUN 2006)

    (a) The Contractor shall prepare an annual report of Government 
property in its possession and the possession of its subcontractors.
    (b) The report shall be submitted to the Contracting Officer not 
later than September 15 of each calendar year on DHS Form 0700-5, 
Contractor Report of Government Property.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25776, May 2, 2006]

                             (End of clause)



Sec. 3052.247-70  F.o.b. origin information.

    As prescribed in (HSAR) 48 CFR 3047.305-70(a), insert the following 
provision:

                  F.O.B. Origin Information (DEC 2003)

    The offeror shall furnish information with the offer:
    (a) Location of the offeror's actual shipping point(s) (street 
address, city, state, and zip code) from which supplies will be 
delivered to the Government;
    (b) Whether the offered shipping point has a private railroad 
siding, and the name of the rail carrier serving it;
    (c) When the offered shipping point does not have a private siding, 
the names and addresses of the nearest public rail siding and of the 
carrier serving it; and
    (d) The quantity of supplies to be shipped from each shipping point.

                           (End of provision)

                         Alternate I (DEC 2003)

    If delivery is ``f.o.b. origin, contractor's facility,'' and the 
designated facility is not covered by the line-haul transportation rate, 
add the following paragraph to the basic provision:
    (e) The charges required to deliver the shipment to the point where 
the line-haul rate is applicable.

                         Alternate II (DEC 2003)

    When delivery is ``f.o.b. origin, freight allowed,'' add the 
following paragraph to the basic provision:
    (e) The basis on which transportation charges will be allowed, 
including the origin and destination from and to which transportation 
charges will be allowed.



Sec. 3052.247-71  F.o.b. origin only.

    As prescribed in (HSAR) 48 CFR 3047.305-70(b), insert the following 
provision:

                      F.O.B. Origin Only (DEC 2003)

    Offers are invited on the basis of f.o.b. origin only. Offers 
submitted on any other basis will be rejected as nonresponsive.

                           (End of provision)



Sec. 3052.247-72  F.o.b. destination only.

    As prescribed in (HSAR) 48 CFR 3047.305-70(c), insert the following 
provision:

                   F.O.B. Destination Only (DEC 2003)

    Offers are invited on the basis of f.o.b. destination only. Offers 
submitted on any other basis will be rejected as nonresponsive.

                             PART 3053_FORMS

                         Subpart 3053.1_General

Sec.

Sec. 3053.101 Requirements for use of forms.

Sec. 3053.103 Exceptions.

                  Subpart 3053.2_Prescription of Forms


Sec. 3053.204-70 Administrative matters.

Sec. 3053.222-70 Application of labor laws to Government acquisitions.

[[Page 122]]


Sec. 3053.227-70 Conveyance of invention rights acquired by the 
          Government.

Sec. 3053.245-70 Contractor report of government property.

                  Subpart 3053.3_Illustrations of Forms


Sec. 3053.303 Agency forms.

    Authority: 41 U.S.C. 418b (a) and (b).

    Source: 68 FR 67871, Dec. 4, 2003, unless otherwise note.

                         Subpart 3053.1_General



Sec. 3053.101  Requirements for use of forms.

    Unless excepted, forms prescribed in (FAR) 48 CFR part 53 and (HSAR) 
48 CFR part 3053 are required for use by all Components.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 48802, Aug. 22, 2006]



Sec. 3053.103  Exceptions.

    Requests for exceptions to forms contained in (FAR) 48 CFR part 53 
and to DHS forms in (HSAR) 48 CFR part 3053 shall be submitted, as 
prescribed in (FAR) 48 CFR 53.103, to the CPO.

                  Subpart 3053.2_Prescription of Forms



Sec. 3053.204-70  Administrative matters.

    The following forms are prescribed for use in the closeout of 
applicable contracts, as specified in (HSAR) 48 CFR 3004.804-570:
    (a) DHS Form 0700-01, Cumulative Claim and Reconciliation Statement. 
(See (HSAR) 48 CFR 3004.804-570(a)(1).)
    (b) DHS Form 0700-02, Contractor's Assignment of Refunds, Rebates, 
Credits and Other Amounts. (See (HSAR) 48 CFR 3004.570(a)(2).)
    (c) DHS Form 0700-03, Contractor Release. (See (HSAR) 48 CFR 
3004.804-570(a)(3).)



Sec. 3053.222-70  Application of labor laws to Government acquisitions.

    The following form is prescribed for use in connection with the 
application of labor laws, as specified in (HSAR) 48 CFR 3022.406-9: DHS 
Form 0700-04, Employee's Claim for Wage Restitution.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25776, May 2, 2006]



Sec. 3053.227-70  Conveyance of invention rights acquired by the 
          Government.

    The following form is prescribed for including a means for 
contractors to report inventions made in the course of contract 
performance, as specified in (HSAR) 48 CFR 3027.305-4: DD Form 882, 
Report of Inventions and Subcontracts.



Sec. 3053.245-70  Report of Government property.

    The following form is prescribed for use by contractors to report 
Government property, as specified in (HSAR) 48 CFR 3045.505-14: DHS Form 
0700-05, Contractor's Report of Government Property.

[68 FR 67871, Dec. 4, 2003, as amended at 71 FR 25776, May 2, 2006]

                  Subpart 3053.3_Illustrations of Forms



Sec. 3053.303  Agency forms.

    This section illustrates agency-specified forms. To access these 
forms go to: http://www.dhs.gov (under ``Business, Acquisition 
Information'') or https://dhsonline.dhs.gov/portal/jhtml/general/
forms.jhtml.

------------------------------------------------------------------------
              Form name                             Form No.
------------------------------------------------------------------------
Cumulative Claim and Reconciliation    DHS Form 0700-01.
 Statement.
Contractor's Assignment of Refunds,    DHS Form 0700-02.
 Rebates, Credits and Other Amounts.
Contractor's Release.................  DHS Form 0700-03.
Employee's Claim for Wage Restitution  DHS Form 0700-04.
Contractor Report of Government        DHS Form 0700-05.
 Property.
Report of Inventions and Subcontract.  DD 882.
------------------------------------------------------------------------


[71 FR 25776, May 2, 2006]

[[Page 123]]



       CHAPTER 34--DEPARTMENT OF EDUCATION ACQUISITION REGULATION




                          (Parts 3400 to 3499)

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

                          SUBCHAPTER A--GENERAL
Part                                                                Page
3401            ED Acquisition Regulation System............         125
3402            Definitions of words and terms..............         126
3403            Improper business practices and personal 
                    conflicts of interest...................         126
3404            Administrative matters......................         127
3405            Publicizing contract actions................         127
           SUBCHAPTER B--COMPETITION AND ACQUISITION PLANNING
3408            Required sources of supplies and services...         129
3409            Contractor qualifications...................         129
3410            Specification standards and other purchase 
                    descriptions............................         129
          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES
3413            Small purchase and other simplified purchase 
                    procedures..............................         131
3414            Sealed bidding..............................         131
3415            Contracting by negotiation..................         131
3416            Types of contracts..........................         132
3417            Special contracting methods.................         133
                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS
3419            Small business and small disadvantaged 
                    business concerns.......................         134
3424            Protection of privacy and freedom of 
                    information.............................         135
3425            Foreign acquisition.........................         135
             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS
3427            Patents, data, and copyrights...............         137
3428            Bonds and insurance.........................         137

[[Page 124]]

3432            Contract financing..........................         137
3433            Protests, disputes, and appeals.............         138
             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING
3437            Service contracting.........................         140
                    SUBCHAPTER G--CONTRACT MANAGEMENT
3442            Contract administration.....................         141
3443            Contract modifications......................         141
3445            Government property.........................         141
3447            Transportation..............................         142
                     SUBCHAPTER H--CLAUSES AND FORMS
3452            Solicitation provisions and contract clauses         143

[[Page 125]]

                          SUBCHAPTER A_GENERAL

               PART 3401_ED ACQUISITION REGULATION SYSTEM

Sec.

Sec. 3401.000 Scope of part.

               Subpart 3401.1_Purpose, Authority, Issuance


Sec. 3401.103 Applicability.

Sec. 3401.104 Issuance.

Sec. 3401.104-2 Arrangement of regulations.

Sec. 3401.104-3 Copies.

              Subpart 3401.3_Agency Acquisition Regulations


Sec. 3401.304 Agency control and compliance procedures.

                        Subpart 3401.4_Deviations


Sec. 3401.401 Definition.

Sec. 3401.403 Individual deviations.

Sec. 3401.404 Class deviations.

             Subpart 3401.5_Agency and Public Participation


Sec. 3401.501 Solicitation of agency and public views.

Sec. 3401.501-2 Opportunity for public comments.

        Subpart 3401.6_Contracting Authority and Responsibilities


Sec. 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.



Sec. 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



Sec. 3401.103  Applicability.

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



Sec. 3401.104  Issuance.



Sec. 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)).



Sec. 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



Sec. 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



Sec. 3401.401  Definition.

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



Sec. 3401.403  Individual deviations.

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



Sec. 3401.404  Class deviations.

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

[[Page 126]]

             Subpart 3401.5_Agency and Public Participation



Sec. 3401.501  Solicitation of agency and public views.



Sec. 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



Sec. 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

                       Subpart 3402.1_Definitions

Sec.

Sec. 3402.101 [Reserved]

                    Subpart 3402.2_Definitions Clause


Sec. 3402.201 Contract clause.

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

                       Subpart 3402.1_Definitions



Sec. 3402.101  [Reserved]

                    Subpart 3402.2_Definitions Clause



Sec. 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

                        Subpart 3403.1_Safeguards

Sec.

Sec. 3403.101 Standards of conduct.

Sec. 3403.101-3 Agency regulations.

      Subpart 3403.2_Contractor Gratuities To Government Personnel


Sec. 3403.203 Reporting suspected violations of the Gratuities clause.

        Subpart 3403.3_Reports of Suspected Antitrust Violations


Sec. 3403.301 General.

                     Subpart 3403.4_Contingent Fees


Sec. 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


Sec. 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



Sec. 3403.101  Standards of conduct.



Sec. 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



Sec. 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 127]]

        Subpart 3403.3_Reports of Suspected Antitrust Violations



Sec. 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



Sec. 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



Sec. 3403.602  Exceptions.

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

                    PART 3404_ADMINISTRATIVE MATTERS

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

                    Subpart 3404.1_Contract Execution



Sec. 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

          Subpart 3405.2_Synopses of Proposed Contract Actions

Sec.

Sec. 3405.270 Notices to perform market surveys.

                   Subpart 3405.5_Paid Advertisements


Sec. 3405.502 Authority.

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

          Subpart 3405.2_Synopses of Proposed Contract Actions



Sec. 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 128]]

                   Subpart 3405.5_Paid Advertisements



Sec. 3405.502  Authority.

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

[53 FR 19120, May 26, 1988]

[[Page 129]]

            SUBCHAPTER B_COMPETITION AND ACQUISITION PLANNING

           PART 3408_REQUIRED SOURCES OF SUPPLIES AND SERVICES

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

       Subpart 3408.8_Acquisition of Printing and Related Supplies



Sec. 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

         Subpart 3409.4_Debarment, Suspension, and Ineligibility

Sec.

Sec. 3409.403 [Reserved]

Sec. 3409.406 Debarment.

Sec. 3409.406-3 Procedures.

           Subpart 3409.5_Organizational Conflicts of Interest


Sec. 3409.502 Applicability.

Sec. 3409.503 Waiver.

Sec. 3409.507 Procedures.

Sec. 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



Sec. 3409.403  [Reserved]



Sec. 3409.406  Debarment.



Sec. 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



Sec. 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.



Sec. 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.



Sec. 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).



Sec. 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

                   Subpart 3410.7_Use of Metric System

Sec.

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

Sec. 3410.702 Definitions.

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

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

[[Page 130]]


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

                   Subpart 3410.7_Use of Metric System



Sec. 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.



Sec. 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.''



Sec. 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 131]]

           SUBCHAPTER C_CONTRACTING METHODS AND CONTRACT TYPES

    PART 3413_SMALL PURCHASE AND OTHER SIMPLIFIED PURCHASE PROCEDURES

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

                         Subpart 3413.1_General



Sec. 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

          Subpart 3414.4_Opening of Bids and Award of Contract

Sec.

Sec. 3414.406 Mistakes in bids.

Sec. 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



Sec. 3414.406  Mistakes in bids.



Sec. 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

   Subpart 3415.4_Solicitation and Receipt of Proposals and Quotations

Sec.

Sec. 3415.406-3 Part II--Contract clauses.

Sec. 3415.407 Solicitation provisions.

Sec. 3415.413-2 Alternate II.

                  Subpart 3415.5_Unsolicited Proposals


Sec. 3415.505 Content of unsolicited proposals.

Sec. 3415.506 Agency procedures.

                          Subpart 3415.9_Profit


Sec. 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



Sec. 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.



Sec. 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 132]]

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



Sec. 3415.413-2  Alternate II.

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

                  Subpart 3415.5_Unsolicited Proposals



Sec. 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)



Sec. 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



Sec. 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

               Subpart 3416.3_Cost-Reimbursement Contracts

Sec.

Sec. 3416.303 Cost-sharing contracts.

Sec. 3416.307 Contract clauses.

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


Sec. 3416.603 Letter contracts.

Sec. 3416.603-3 Limitations.

                        Subpart 3416.7_Agreements


Sec. 3416.701 Contract clause.

Sec. 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



Sec. 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.



Sec. 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 133]]

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



Sec. 3416.603  Letter contracts.



Sec. 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



Sec. 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.



Sec. 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

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

                         Subpart 3417.2_Options



Sec. 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 134]]

                   SUBCHAPTER D_SOCIOECONOMIC PROGRAMS

   PART 3419_SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS CONCERNS

      Subpart 3419.7_Subcontracting With Small Business and Small 
                     Disadvantaged Business Concerns

Sec.

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

Sec. 3419.705-2 Determining the need for a subcontracting plan.

Sec. 3419.708 Solicitation provisions and contract clauses.

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


Sec. 3419.801 General.

Sec. 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



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



Sec. 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.



Sec. 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)



Sec. 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).



Sec. 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 135]]

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

             Subpart 3424.1_Protection of Individual Privacy

Sec.

Sec. 3424.103 Procedures.

                Subpart 3424.2_Freedom of Information Act


Sec. 3424.201 Authority.

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

             Subpart 3424.1_Protection of Individual Privacy



Sec. 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



Sec. 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

                Subpart 3425.1_Buy American Act_Supplies

Sec.

Sec. 3425.102 Policy.

               Subpart 3425.3_Balance of Payments Program


Sec. 3425.302 Policy.

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

                Subpart 3425.1_Buy American Act_Supplies



Sec. 3425.102  Policy.

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

[53 FR 19123, May 26, 1988]

[[Page 136]]

               Subpart 3425.3_Balance of Payments Program



Sec. 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 137]]

              SUBCHAPTER E_GENERAL CONTRACTING REQUIREMENTS

                 PART 3427_PATENTS, DATA, AND COPYRIGHTS

              Subpart 3427.4_Rights in Data and Copyrights

Sec.

Sec. 3427.470 Publication and publicity clause.

Sec. 3427.471 Paperwork Reduction Act clause.

Sec. 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



Sec. 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.



Sec. 3427.471  Paperwork Reduction Act clause.

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



Sec. 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

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

                        Subpart 3428.3_Insurance



Sec. 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

                         Subpart 3432.1_General

Sec.

Sec. 3432.170 Method of payment.

                     Subpart 3432.4_Advance Payments


Sec. 3432.402 General.

Sec. 3432.407 Interest.

                     Subpart 3432.7_Contract Funding


Sec. 3432.704 Limitation of cost or funds.

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

Sec. 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



Sec. 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



Sec. 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.



Sec. 3432.407  Interest.

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

                     Subpart 3432.7_Contract Funding



Sec. 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 138]]

    (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.



Sec. 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.



Sec. 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

                         Subpart 3433.1_Protests

Sec.

Sec. 3433.101 Definitions.

Sec. 3433.103 Protests to the agency.

                   Subpart 3433.2_Disputes and Appeals


Sec. 3433.203 Applicability.

Sec. 3433.212 Contracting officer's duties upon appeal.

Sec. 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



Sec. 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).



Sec. 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



Sec. 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 139]]

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



Sec. 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.



Sec. 3433.214  Contract clause.

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

[[Page 140]]

             SUBCHAPTER F_SPECIAL CATEGORIES OF CONTRACTING

                      PART 3437_SERVICE CONTRACTING

                Subpart 3437.1_Service Contracts_General

Sec.

Sec. 3437.102 Policy.

                   Subpart 3437.2_Consulting Services


Sec. 3437.270 Consulting services reporting clause.

Sec. 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



Sec. 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



Sec. 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.



Sec. 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 141]]

                    SUBCHAPTER G_CONTRACT MANAGEMENT

                    PART 3442_CONTRACT ADMINISTRATION

                   Subpart 3442.7_Indirect Cost Rates

Sec.

Sec. 3442.705 Final indirect cost rates.

                   Subpart 3442.70_Contract Monitoring


Sec. 3442.7001 Withholding of contract payments clause.

Sec. 3442.7002 Litigation and claims clause.

Sec. 3442.7003 Delays clause.

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


Sec. 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



Sec. 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



Sec. 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.



Sec. 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.



Sec. 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



Sec. 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

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



Sec. 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

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

[[Page 142]]

     Subpart 3445.4_Contractor Use and Rental of Government Property



Sec. 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

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

                     Subpart 3447.70_Foreign Travel



Sec. 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 143]]

                     SUBCHAPTER H_CLAUSES AND FORMS

         PART 3452_SOLICITATION PROVISIONS AND CONTRACT CLAUSES

             Subpart 3452.2_Texts of Provisions and Clauses

Sec.

Sec. 3452.202-1 Definitions.

Sec. 3452.208-70 Printing.

Sec. 3452.209-70 Organizational conflict of interest.

Sec. 3452.215-33 Order of precedence.

Sec. 3452.215-70 Release of restricted data.

Sec. 3452.216-70 Additional cost principles.

Sec. 3452.216-71 Negotiated overhead rates--fixed.

Sec. 3452.227-70 Publication and publicity.

Sec. 3452.227-71 Paperwork Reduction Act.

Sec. 3452.227-72 Advertising of awards.

Sec. 3452.228-70 Required insurance.

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

Sec. 3452.232-71 Incremental funding.

Sec. 3452.232-72 Method of payment.

Sec. 3452.237-70 Identification of reports under consulting services 
          contracts.

Sec. 3452.237-71 Services of consultants.

Sec. 3452.242-70 Litigation and claims.

Sec. 3452.242-71 Notice to the Government of delays.

Sec. 3452.242-72 Withholding of contract payments.

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

Sec. 3452.243-70 Key personnel.

Sec. 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



Sec. 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)



Sec. 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)



Sec. 3452.209-70  Organizational conflict of interest.

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

[[Page 144]]

             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)



Sec. 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)



Sec. 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)



Sec. 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 145]]

                             (End of clause)



Sec. 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)



Sec. 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 146]]

                             (End of clause)



Sec. 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)



Sec. 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)



Sec. 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)



Sec. 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)



Sec. 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 147]]

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)



Sec. 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)



Sec. 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)



Sec. 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 148]]

    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)



Sec. 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)



Sec. 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)



Sec. 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 149]]

                             (End of clause)



Sec. 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)



Sec. 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)



Sec. 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 151]]



             CHAPTER 44--FEDERAL EMERGENCY MANAGEMENT AGENCY




                          (Parts 4400 to 4499)

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

                          SUBCHAPTER A--GENERAL
Part                                                                Page
4401            Federal Emergency Management Agency (FEMA) 
                    Acquisition Regulation System...........         153
4402            Definition of words and terms...............         156
4403            Improper business practices and personal 
                    conflicts of interest...................         156
           SUBCHAPTER B--COMPETITION AND ACQUISITION PLANNING
4405            Publicizing contract actions................         158
4406            Competition requirements....................         158
4408            Required sources of supplies and services...         158
4409            Contractor qualifications...................         159
4412            Contract delivery or performance............         159
          SUBCHAPTER C--CONTRACTING METHODS AND CONTRACT TYPES
4414            Sealed bidding..............................         161
4415            Contracting by negotiation..................         161
4416            Types of contracts..........................         163
4417            Special contracting methods.................         165
                  SUBCHAPTER D--SOCIOECONOMIC PROGRAMS
4419            Small business and small disadvantaged 
                    business concerns.......................         166
4424            Protection of privacy and freedom of 
                    information.............................         166
4426            Other socioeconomic programs................         166
             SUBCHAPTER E--GENERAL CONTRACTING REQUIREMENTS
4429            Taxes.......................................         167
4432            Contract financing..........................         167

[[Page 152]]

4433            Protests, disputes and appeals..............         167
             SUBCHAPTER F--SPECIAL CATEGORIES OF CONTRACTING
4435            Research and development contracting........         168
4436            Construction and architect-engineer 
                    contracts...............................         168
4450            Extraordinary contractual actions...........         168
                     SUBCHAPTER H--CLAUSES AND FORMS
4452            Solicitation provisions and contract clauses         170

[[Page 153]]

                          SUBCHAPTER A_GENERAL

    PART 4401_FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA) ACQUISITION 
                            REGULATION SYSTEM

Sec.

Sec. 4401.000 Scope of part.

               Subpart 4401.1_Purpose, Authority, Issuance


Sec. 4401.101 Purpose.

Sec. 4401.103 Applicability.

Sec. 4401.104 Issuance.

Sec. 4401.104-1 Publication and code arrangement.

Sec. 4401.104-3 Copies.

              Subpart 4401.3_Agency Acquisition Regulations


Sec. 4401.301 Policy.

Sec. 4401.303 Codification and public participation.

                 Subpart 4401.4_Deviations From the FAR


Sec. 4401.403 Individual deviations.

Sec. 4401.404 Class deviations.

Sec. 4401.405 Deviations pertaining to treaties and executive 
          agreements.

        Subpart 4401.6_Contracting Authority and Responsibilities


Sec. 4401.600-70 Scope of subpart.

Sec. 4401.601 General.

Sec. 4401.603 Selection, appointment, and termination of appointment.

Sec. 4401.603-2 Selection.

Sec. 4401.603-3 Appointment.

               Subpart 4401.7_Determinations and Findings


Sec. 4401.707-70 Signature authority.

   Subpart 4401.70_Procurement Contracts Versus Assistance Instruments


Sec. 4401.7000 Scope of subpart.

Sec. 4401.7001 Procurement contracts.

Sec. 4401.7001-1 Situations for use.

Sec. 4401.7001-2 Examples.

Sec. 4401.7002 Assistance.

Sec. 4401.7002-1 Grants.

Sec. 4401.7002-2 Cooperative agreements.

Sec. 4401.7002-3 Examples of unsubstantial involvement.

Sec. 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.



Sec. 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



Sec. 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.



Sec. 4401.103  Applicability.

    This regulation applies to all acquisitions within FEMA, but not to 
placement or administration of cooperative agreements or grants.



Sec. 4401.104  Issuance.



Sec. 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.



Sec. 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



Sec. 4401.301  Policy.

    Policies, procedures, and guidance of an internal nature may be 
issued

[[Page 154]]

through internal FEMA issuances such as manuals, standard operating 
procedures, directives or instructions.



Sec. 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



Sec. 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.



Sec. 4401.404  Class deviations.

    The Director, Office of Acquisition Management, must authorize class 
deviations in advance.



Sec. 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



Sec. 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.



Sec. 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.



Sec. 4401.603  Selection, appointment, and termination of appointment.



Sec. 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 155]]

the special training requirements shall be given 24 months to meet the 
minimum qualification standards.



Sec. 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



Sec. 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



Sec. 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.



Sec. 4401.7001  Procurement contracts.



Sec. 4401.7001-1  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.



Sec. 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.



Sec. 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.



Sec. 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 156]]



Sec. 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.



Sec. 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.



Sec. 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

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

                       Subpart 4402.1_Definitions



Sec. 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

                        Subpart 4403.1_Safeguards

Sec.

Sec. 4403.101-2 Solicitation and acceptance of gratuities by Government 
          personnel.

[[Page 157]]


Sec. 4403.101-3 Agency regulations.

Sec. 4403.103 Independent pricing.

Sec. 4403.103-2 Evaluating the certification.

      Subpart 4403.2_Contractor Gratuities to Government Personnel


Sec. 4403.203 Reporting suspected violations of the Gratuities clause.

Sec. 4403.204 Treatment of violations.

  Subpart 4403.6_Contracts With Government Employees or Organizations 
                       Owned or Controlled by Them


Sec. 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



Sec. 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.



Sec. 4403.101-3  Agency regulations.

    FEMA ``Standards and Conduct'' are published in 44 CFR part 3. They 
include requirements for financial disclosure.



Sec. 4403.103  Independent pricing.



Sec. 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



Sec. 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.



Sec. 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



Sec. 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 158]]

            SUBCHAPTER B_COMPETITION AND ACQUISITION PLANNING

                 PART 4405_PUBLICIZING CONTRACT ACTIONS

Sec.

Sec. 4405.001 Policy.

              Subpart 4405.2_Synopsis of Proposed Contracts


Sec. 4405.206 Synopsis of subcontract opportunities.

                   Subpart 4405.5_Paid Advertisements


Sec. 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.



Sec. 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



Sec. 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



Sec. 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

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

                   Subpart 4406.5_Competition Advocate



Sec. 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

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

       Subpart 4408.8_Acquisition of Printing and Related Supplies



Sec. 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 159]]

                   PART 4409_CONTRACTOR QUALIFICATIONS

         Subpart 4409.4_Debarment, Suspension, and Ineligibility

Sec.

Sec. 4409.404 Consolidated list of debarred, suspended, and ineligible 
          contractors.

Sec. 4409.406 Debarment.

Sec. 4409.406-1 General.

Sec. 4409.406-3 Procedures.

Sec. 4409.407 Suspension.

Sec. 4409.407-1 General.

Sec. 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



Sec. 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).



Sec. 4409.406  Debarment.



Sec. 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]



Sec. 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]



Sec. 4409.407  Suspension.



Sec. 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]



Sec. 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

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

[[Page 160]]

         Subpart 4412.3_Priorities, Allocations, and Allotments



Sec. 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 161]]

           SUBCHAPTER C_CONTRACTING METHODS AND CONTRACT TYPES

                        PART 4414_SEALED BIDDING

          Subpart 4414.4_Opening of Bids and Award of Contract

Sec.

Sec. 4414.401 Receipt and safeguarding of bids.

Sec. 4414.402 Opening of bids.

Sec. 4414.406 Mistakes in bids.

Sec. 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



Sec. 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.



Sec. 4414.402  Opening of bids.

    The contracting officer, or duly authorized representative, shall be 
designated as the bid opening officer.



Sec. 4414.406  Mistakes in bids.



Sec. 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

   Subpart 4415.4_Solicitation and Receipt of Proposals and Quotations

Sec.

Sec. 4415.413 Disclosure and use of information before award.

Sec. 4415.413-2 Alternate II.

Sec. 4415.413-70 Policy.

Sec. 4415.413-71 Release of information during the solicitation phase.

Sec. 4415.413-72 Disposition of unsuccessful proposals.

                  Subpart 4415.5_Unsolicited Proposals


Sec. 4415.500 Scope of subpart.

Sec. 4415.505-1 Content of unsolicited proposals.

Sec. 4415.505-2 Unsolicited renewal proposals.

Sec. 4415.506 Agency procedures.

Sec. 4415.506-1 Receipt and initial review.

                     Subpart 4415.6_Source Selection


Sec. 4415.612 Formal source selection.

Sec. 4415.612-70 Scope.

Sec. 4415.612-71 Key participants.

                    Subpart 4415.8_Price Negotiation


Sec. 4415.803 General.

 Subpart 4415.10_Preaward, Award and Postaward Notifications, Protests, 
                              and Mistakes


Sec. 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



Sec. 4415.413  Disclosure and use of information before award.



Sec. 4415.413-2  Alternate II.

    These alternate FAR procedures may be used if approved in writing by 
the head of the contracting activity.

[[Page 162]]



Sec. 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.



Sec. 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.



Sec. 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



Sec. 4415.500  Scope of subpart.

    This subpart sets forth procedures for controlling the receipt, 
evaluation, and timely disposition of unsolicited proposals.



Sec. 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]



Sec. 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]



Sec. 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 163]]

    (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]



Sec. 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.



Sec. 4415.612  Formal source selection.



Sec. 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.



Sec. 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



Sec. 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



Sec. 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

               Subpart 4416.3_Cost-Reimbursement Contracts

Sec.

Sec. 4416.303 Cost-sharing contracts.

[[Page 164]]

   Subpart 4416.6_Time-and-Materials, Labor-Hour, and Letter Contracts


Sec. 4416.603 Letter contracts.

Sec. 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



Sec. 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



Sec. 4416.603  Letter contracts.



Sec. 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 165]]

                  PART 4417_SPECIAL CONTRACTING METHODS

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

                         Subpart 4417.70_General



Sec. 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 166]]

                   SUBCHAPTER D_SOCIOECONOMIC PROGRAMS

   PART 4419_SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS CONCERNS

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

                         Subpart 4419.2_Policies



Sec. 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

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

                Subpart 4424.2_Freedom of Information Act



Sec. 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

Sec.

Sec. 4426.101 General policy.

Sec. 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.



Sec. 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]



Sec. 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 167]]

              SUBCHAPTER E_GENERAL CONTRACTING REQUIREMENTS

                             PART 4429_TAXES

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

                         Subpart 4429.1_General



Sec. 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

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

                     Subpart 4432.4_Advance Payments



Sec. 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

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

                 Subpart 4433.103_Protests to the Agency



Sec. 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 168]]

             SUBCHAPTER F_SPECIAL CATEGORIES OF CONTRACTING

             PART 4435_RESEARCH AND DEVELOPMENT CONTRACTING

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.



Sec. 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

               Subpart 4436.6_Architect-Engineer Services

Sec.

Sec. 4436.602-2 Evaluation boards.

Sec. 4436.602-4 Selection authority.

    Authority: 40 U.S.C. 486(c); Reorganization Plan No. 3 of 1978.

               Subpart 4436.6_Architect-Engineer Services



Sec. 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]



Sec. 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

  Subpart 4450.2_Delegation of and Limitations on Exercise of Authority

Sec.

Sec. 4440.201 Delegation of authority.

Sec. 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



Sec. 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]



Sec. 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 169]]

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 170]]

                     SUBCHAPTER H_CLAUSES AND FORMS

         PART 4452_SOLICITATION PROVISIONS AND CONTRACT CLAUSES

             Subpart 4452.2_Texts of Provisions and Clauses

Sec.

Sec. 4452.216-70 Consideration and payment (Cost-Sharing).

Sec. 4452.217-70 Preference for local contractors in Presidentially 
          declared major disasters or emergencies.

Sec. 4452.226-1 Accessibility of meetings, conferences and seminars to 
          persons with disabilities.

Sec. 4452.227-70 Reproduction of reports.

Sec. 4452.227-71 Coordination of Federal reporting requirements.

Sec. 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



Sec. 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]



Sec. 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)



Sec. 4452.226-1  Accessibility of meetings, conferences and seminars to 
          persons with disabilities.

    Include the following clause in contracts under which the contractor 
will

[[Page 171]]

plan meetings, conferences and seminars which may be attended by persons 
with disabilities.

  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[foot] 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[foot]-0 by 43[foot]-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.

[[Page 172]]

    (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 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]



Sec. 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\x11 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)



Sec. 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

[[Page 173]]

U.S.C. chapter 35 (Coordination of Federal Reporting Requirements), 
shall apply to this contract. The contractor shall obtain 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)



Sec. 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

[[Page 174]]

from contractor's reports or publication concerning or based in whole or 
in part on the results of the research and development and 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 175]]



       CHAPTER 51--DEPARTMENT OF THE ARMY ACQUISITION REGULATIONS




                          (Parts 5100 to 5199)

  --------------------------------------------------------------------
Part                                                                Page
5108            Required sources of supplies and services...         177
5119            Small business and small disadvantaged 
                    business concerns.......................         177
5125            Foreign acquisition.........................         179
5145            Government property.........................         180
5152            Solicitations provisions and contract 
                    clauses.................................         181

[[Page 177]]

           PART 5108_REQUIRED SOURCES OF SUPPLIES AND SERVICES

    Authority: 5 U.S.C. 301, 10 U.S.C. 2202, DOD Directive 5000.35 and 
DOD FAR Supplement 201.301.



Sec. 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

  Subpart 5119.10_Small Business Competitiveness Demonstration Program

Sec.

Sec. 5119.1001 General.

Sec. 5119.1002 Definitions.

Sec. 5119.1003 Purpose.

Sec. 5119.1004 Participating agencies.

Sec. 5119.1005 Applicability.

Sec. 5119.1070 Procedures.

Sec. 5119.1070-2 Emerging small business set-aside.

Sec. 5119.1070-3 Identification and reporting.

Sec. 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



Sec. 5119.1001  General.

    This subpart implements Pub. L. 100-656, section 722, ``Expanding 
Small Business Participation in Dredging''

[[Page 178]]

(the Dredging Program). The Program will be conducted through 30 
September 1992.



Sec. 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).



Sec. 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.



Sec. 5119.1004  Participating agencies.

    Participation in this Dredging Program is limited to the Department 
of the Army, Corps of Engineers.



Sec. 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.



Sec. 5119.1070  Procedures.



Sec. 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.



Sec. 5119.1070-3  Identification and reporting.

    (b) Reporting shall be done in accordance with DFARS 204.6 
designated industry group requirements. Block

[[Page 179]]

B12A, DD Form 350, shall contain either the FPDS Code Y216 or Z216, as 
applicable, per 5119.1005 (S-90).



Sec. 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 5125_FOREIGN ACQUISITION

    Authority: 5 U.S.C 301, 10 U.S.C. 2202, DoD Directive 5000.35, FAR 
1.301 and DOD FAR Supplement 201.3.



Sec. 5125.74-9000  Contractors Accompanying the Force--Deployment of 
          Contractor Personnel in Support of Military Operations

                            Scope of Subpart

    (a) General. This subpart applies whenever contractors may be 
required to accompany the force in support of military operations, as 
defined in Joint Publication 1-02, ``DOD Dictionary of Military and 
Associated Terms.''
    (b) Coordination. There are many operational details that will 
affect the scope of work in contracts requiring deployment of contractor 
personnel in support of military operations. The requirements activity, 
in conjunction with the contracting activity, must coordinate with the 
appropriate logistics organization to determine what level of support 
(e.g., billeting, messing, clothing and equipment, access to medical 
facilities, pre-deployment processing) will be available to contractors.
    (i) DFARS 225.802-70 (Contracts for performance outside the United 
States and Canada) prescribes special procedures applicable to contracts 
requiring the performance of work in a foreign country by U.S. personnel 
or a third country contractor, or that will require logistics support 
for contractor employees, and the contracting activity is not under the 
command jurisdiction of a unified or specified command for the country 
involved. This provision generally requires the contracting activity to 
undertake certain coordination with the cognizant contract 
administration office for that country.
    (ii) In situations where no contract administration office has been 
designated, the contracting officer shall ensure, prior to contract 
award, that the responsible combatant command concurs with any contract 
provision that promises logistical support to U.S. or foreign national 
contractor personnel. This requirement may be satisfied through a 
memorandum executed by the requiring activity that documents combatant 
command approval of any logistical support specified in the main body of 
the contract or its statement of work.
    (c) Legal status of contractor personnel. The Status of Forces 
Agreements applicable to the Area of Operations (AO), as well as the 
Geneva Conventions and other international laws govern the legal status 
of contractor personnel. Contractor personnel's legal status will vary 
depending on the location and circumstances surrounding an incident.
    (d) Requirements offices and contracting officers should use the 
Army Contractors Accompanying the Force Guidebook for more detailed 
guidance, including sample contract language, and a listing of Army and 
DoD regulations and other resources. Contracting Officers may tailor 
this language as appropriate, but using the Guidebook will both answer 
many common questions and foster uniform handling of common issues. The 
Guidebook may be found on the Deputy Assistant Secretary of the Army 
(Procurement & Production) Web site at http://dasapp.saalt.army.mil/.
    (e) Solicitation provision and contract clause. The clause at Sec.  
5152.225-74-9000 shall be inserted in all solicitations and contracts 
that may require deployment of contractor personnel in support of 
military operations. It may be tailored to fit the specific 
circumstances of the procurement.

[68 FR 66739, Nov. 28, 2003]

[[Page 180]]

                      PART 5145_GOVERNMENT PROPERTY

Sec.

Sec. 5145.301 Definitions.

Sec. 5145.302-3 Other contracts.

Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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

[[Page 181]]

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

Sec.

Sec. 5152.208-9001 Industrial preparedness planning.

Sec. 5152.225-74-9000 Contractors Accompanying the Force.

Sec. 5152.245-9000 Government property for installation support services 
          (fixed-price contracts).

Sec. 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.



Sec. 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:

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

[[Page 182]]

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]



Sec. 5152.225-74-9000  Contractors Accompanying the Force.

    As prescribed at subpart 5125.74-9000(e) insert the following 
clause:

             Contractors Accompanying the Force (NOV. 2003)

    (a) General. (1) Performance of this contract may require deployment 
of Contractor Personnel in support of military operations. The 
Contractor acknowledges that such operations are inherently dangerous 
and accepts the risks associated with contract performance in this 
environment.
    (2) For purposes of this clause, the term ``Contractor Personnel'' 
refers to the Contractor's officers and employees. Unless otherwise 
specified (e.g., subparagraph (b) of this clause), this term does not 
include personnel who permanently reside in the country where contract 
performance will take place.
    (3) The Contractor shall ensure that Contractor Personnel working in 
an area of operations (AO, as defined in the Joint Publication 1-02, 
``DOD Dictionary of Military and Associated Terms'') are familiar and 
comply with applicable: (i) Military Service and Department of Defense 
regulations, directives, instructions, general orders, policies, and 
procedures, in particular Army Regulation 715-9 and Field Manual 3-
100.21; (ii) U.S., host country, local, and international laws and 
regulations; and (iii) treaties and international agreements (e.g., 
Status of Forces Agreements, Host Nation Support Agreements, and Defense 
Technical Agreements) relating to safety, health, force protection, and 
operations under this contract.
    (4) The Contractor shall ensure that this clause is included in all 
subcontracts.
    (b) Compliance with Combatant Command Orders. The Contractor shall 
ensure that Contractor Personnel, regardless of residency status, 
working in the AO comply with all orders, directives, and instructions 
of the combatant command relating to non-interference in military 
operations, force protection, health, and safety. The Combatant 
Commander or his subordinate commanders, in conjunction with the 
Contracting Officer or the Contracting Officer's Representative, may 
direct the Contractor, at the Contractor's own expense, to replace and, 
where applicable, repatriate any Contractor personnel who fail to comply 
with this provision. Such action may be taken at the Government's 
discretion without prejudice to its rights under any other provision of 
this contract, including the Termination for Default clause.
    (c) Contractor Personnel Administration. (1) In order to maintain 
accountability of all deployed personnel in the AO, the Contractor shall 
follow instructions issued by the Army Materiel Command's Logistics 
Support Element (AMC LSE) or other Contracting Officer's designated 
representative to provide, and keep current, requested data on 
Contractor Personnel for entry into military personnel database systems.
    (2) The Contractor shall coordinate with the AMC LSE or other 
Contracting Officer's designated representative for logistics support, 
as follows: (i) Upon initial entry into the AO; (ii) upon initiation of 
contract performance; (iii) upon relocation of contract operations 
within the AO; and (iv) upon exiting the AO.
    (3) Before deployment, the Contractor shall ensure that:
    (i) All Contractor Personnel complete two DD Forms 93, Record of 
Emergency Data Card. One copy of the completed form shall be returned to 
the Government official specified by the Contracting Officer's 
designated

[[Page 183]]

representative; the other shall be hand-carried by the individual 
employee to the AO.
    (ii) All required security and background checks are completed.
    (iii) All medical screening and requirements are met.
    (4) The Contractor shall ensure that Contractor Personnel have 
completed all pre-deployment requirements specified by the Contracting 
Officer's designated representative (including processing through the 
designated Continental United States (CONUS) Replacement Center unless 
another deployment processing method is specifically authorized), and 
the Contractor shall notify the Contracting Officer's designated 
representative that these actions have been accomplished.
    (5) The Contractor shall have a plan for timely replacement of 
employees who are no longer available for deployment for any reason, 
including mobilization as members of the Reserve, injury, or death.
    (d) Clothing and Equipment Issue. (1) To help distinguish them from 
combatants, Contractor Personnel shall not wear military clothing unless 
specifically authorized by a written Department of Army waiver. 
Contractor Personnel may wear specific items of clothing and equipment 
required for safety and security such as ballistic or NBC (Nuclear, 
Biological, Chemical) protective clothing. The CONUS Replacement Center 
or the combatant command may provide to the Contractor Personnel 
military unique Organizational Clothing and Individual Equipment (OCIE) 
to ensure security and safety.
    (2) All issued OCIE shall be considered Government Furnished 
Property, and will be treated in accordance with Government Furnished 
Property clauses included elsewhere in this contract.
    (e) Weapons and Training. (1) Contractor Personnel may not possess 
privately owned firearms in the AO. The combatant command may issue 
weapons and ammunition to Contractor Personnel, with the employee's 
company's consent as well as the individual employees' consent, and may 
require weapons and other pre-deployment training.
    (2) The Contractor shall ensure that Contractor Personnel follow all 
instructions by the combatant command, as well as applicable Military 
Service and DoD regulations, regarding possession, use, safety, and 
accountability of weapons and ammunition.
    (3) All issued weapons, ammunition, and accessories (e.g., holsters) 
shall be considered Government Furnished Property. Upon redeployment or 
notification by the combatant command, the Contractor shall ensure that 
all Government issued weapons and unused ammunition are returned to the 
point of issue using a method that complies with Military Service 
regulations for issue and turn-in of firearms.
    (f) Vehicle and Equipment Operation. (1) The Contractor shall ensure 
that Contractor Personnel possess the required licenses to operate all 
vehicles or equipment necessary to perform the contract in the AO.
    (2) Contractor-owned or leased motor vehicles or equipment shall 
meet all requirements established by the combatant command and shall be 
maintained in a safe operating condition.
    (g) Passports, Visas and Customs. The Contractor is responsible for 
obtaining all passports, visas, and other documents necessary for 
Contractor Personnel to enter and exit any AO.
    (h) Purchasing Limited Resources. When the Combatant Command 
establishes a Commander-in-Chief Logistics Procurement Support Board 
(CLPSB), Joint Acquisition Review Board, or similar purchase review 
committee, the contractor will be required to coordinate local purchases 
of goods and services designated as limited, in accordance with 
instructions provided by the Administrative Contracting Officer or the 
Contracting Officer's designated representative.

                             (End of clause)

[68 FR 66740, Nov. 28, 2003]

Authority:5 U.S.C. 301, 10 U.S.C. 2202, DOD Directive 5000.35, FAR 1.301 
and DOD FAR Supplement 201.3.



Sec. 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

[[Page 184]]

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]



Sec. 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 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

[[Page 185]]

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 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.

[[Page 186]]

    (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.
    (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

[[Page 187]]

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 189]]



       CHAPTER 52--DEPARTMENT OF THE NAVY ACQUISITION REGULATIONS




                          (Parts 5200 to 5299)

  --------------------------------------------------------------------
Part                                                                Page
5215            Contracting by negotiation..................         191
5231            Contract cost principles and procedures.....         193
5242            Contract administration.....................         194
5243

[Reserved]

5252            Solicitation provisions and contract clauses         195

[[Page 191]]

                  PART 5215_CONTRACTING BY NEGOTIATION

   Subpart 5215.4_Solicitation and Receipt of Proposals and Quotations

Sec.

Sec. 5215.402 General.

Sec. 5215.407 Solicitation provisions.

                     Subpart 5215.6_Source Selection


Sec. 5215.605 Evaluation factors.

Sec. 5215.608 Proposal evaluation.

                    Subpart 5215.8_Price Negotiation


Sec. 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



Sec. 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.



Sec. 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



Sec. 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 192]]

    (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.



Sec. 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



Sec. 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 193]]

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

         Subpart 5231.2_Contracts with Commercial Organizations

Sec.

Sec. 5231.205 Selected costs.

Sec. 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 194]]

    (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

    Authority: 5 U.S.C. 301, 10 U.S.C. 2202, DOD Directive 5000.35

   Subpart 5242.90_Refunds Requirements (Spares and Support Equipment)



Sec. 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 195]]

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

             Subpart 5252.2_Texts of Provisions and Clauses

Sec.

Sec. 5252.215-9000 Submission of cost or pricing data.

Sec. 5252.242-9000 Refunds.

Sec. 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



Sec. 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)



Sec. 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

[[Page 196]]

agrees to enter into good faith negotiations 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)



Sec. 5252.243-9000--5252.243-9001  [Reserved]

 CHAPTER 53_DEPARTMENT OF THE AIR FORCE FEDERAL ACQUISITION REGULATION 
                          SUPPLEMENT [RESERVED]

[[Page 197]]



       CHAPTER 54--DEFENSE LOGISTICS AGENCY, DEPARTMENT OF DEFENSE




                          (Parts 5400 to 5499)

  --------------------------------------------------------------------
Part                                                                Page
5416            Types of contracts..........................         199
5433            Protests, disputes and appeals..............         199
5452            Solicitation provisions and contract clauses         199

[[Page 199]]

                      PART 5416_TYPES OF CONTRACTS

                  Subpart 5416.2_Fixed Price Contracts

Sec.

Sec. 5416.203 Fixed-price contracts with economic price adjustment.

Sec. 5416.203-1 Description.

Sec. 5416.203-3 Limitations.

Sec. 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



Sec.  5416.203  Fixed-price contracts with economic price adjustment.



Sec.  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.



Sec.  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.



Sec.  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

    Authority: 10 U.S.C. Chapter 137.



Sec. 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

             Subpart 5452.2_Texts of Provisions and Clauses

Sec.

Sec. 5452.233-9001 Disputes: Agreement To Use Alternative Dispute 
          Resolution (ADR).

Sec. 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



Sec. 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

[[Page 200]]

an official authorized to bind the contractor (see FAR 52.233-1), or, 
for the Agency, by the 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]



Sec. 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 201]]



               CHAPTER 57--AFRICAN DEVELOPMENT FOUNDATION




                          (Parts 5700 to 5799)

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

                   SUBCHAPTER B--ACQUISITION PLANNING
Part                                                                Page
5706            Competition requirements....................         203

[[Page 203]]

                    SUBCHAPTER B_ACQUISITION PLANNING

                   PART 5706_COMPETITION REQUIREMENTS

    Authority: 40 U.S.C. 474.

           Subpart 5706.3_Other Than Full and Open Competition



Sec. 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 205]]



  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)..................         207
6102            Rules of procedure of the General Services 
                    Administration Board of Contract Appeals 
                    (expedited proceedings).................         236
6103            Rules of procedure for transportation rate 
                    cases...................................         238
6104            Rules of procedure for travel and relocation 
                    expenses cases..........................         240
6105            Rules of procedure for decisions authorized 
                    by 31 U.S.C. 3529.......................         242

[[Page 207]]

  PART 6101_RULES OF PROCEDURE OF THE GENERAL SERVICES ADMINISTRATION 
            BOARD OF CONTRACT APPEALS (STANDARD PROCEEDINGS)

Sec.

Sec. 6101.0 Foreword.

Sec. 6101.1 Scope of rules; definitions; construction; rulings and 
          orders; panels; situs [Rule 101].

Sec. 6101.2 Time: enlargement; computation [Rule 102].

Sec. 6101.3 Service of papers [Rule 103].

Sec. 6101.4 Appeal file [Rule 104].

Sec. 6101.5 Filing cases; time limits for filing; docketing [Rule 105].

Sec. 6101.6 Appearances; notice of appearance [Rule 106].

Sec. 6101.7 Pleadings in appeals [Rule 107].

Sec. 6101.8 Motions [Rule 108].

Sec. 6101.9 Election of hearing or record submission [Rule 109].

Sec. 6101.10 Conferences; conference memorandum; prehearing order; 
          prehearing and presubmission briefs [Rule 110].

Sec. 6101.11 Submission on the record without a hearing [Rule 111].

Sec. 6101.12 Record of Board proceedings [Rule 112].

Sec. 6101.13-6101.14 [Reserved]

Sec. 6101.15 General provisions governing discovery [Rule 115].

Sec. 6101.16 Depositions [Rule 116].

Sec. 6101.17 Interrogatories to parties; requests for admission; 
          requests for production of documents [Rule 117].

Sec. 6101.18 Sanctions and other proceedings [Rule 118].

Sec. 6101.19 Hearings: scheduling; notice; unexcused absences [Rule 
          119].

Sec. 6101.20 Subpoenas [Rule 120].

Sec. 6101.21 Hearing procedures [Rule 121].

Sec. 6101.22 Admissibility and weight of evidence [Rule 122].

Sec. 6101.23 Exhibits [Rule 123].

Sec. 6101.24 Transcripts of proceedings; corrections [Rule 124].

Sec. 6101.25 Briefs and memoranda of law [Rule 125].

Sec. 6101.26 Consolidation; separate hearings; separate determination of 
          liability [Rule 126].

Sec. 6101.27 Stay or suspension of proceedings; dismissals in lieu of 
          stay or suspension [Rule 127].

Sec. 6101.28 Dismissals [Rule 128].

Sec. 6101.29 Decisions: format; procedure [Rule 129].

Sec. 6101.30 Full Board consideration [Rule 130].

Sec. 6101.31 Clerical mistakes [Rule 131].

Sec. 6101.32 Reconsideration; amendment of decisions; new hearings [Rule 
          132].

Sec. 6101.33 Relief from decision or order [Rule 133].

Sec. 6101.34 Harmless error [Rule 134].

Sec. 6101.35 Award of costs [Rule 135].

Sec. 6101.36 Payment of Board awards [Rule 136].

Sec. 6101.37 Record on review of a Board decision [Rule 137].

Sec. 6101.38 Office of the Clerk of the Board [Rule 138].

Sec. 6101.39 Seal of the Board [Rule 139].

Sec. 6101.40 Forms [Rule 140].


Sec. Appendix to Part 6101--Form Nos. 1-5

Sec. Form 1--Notice of Appeal, GSA Form 2465.

Sec. Form 2--Notice of Appearance.

Sec. Form 3--Subpoena, GSA Form 9534.

Sec. Form 4--Government Certificate of Finality.

Sec. Form 5--Appellant/Applicant Certificate of Finality.

    Authority: 41 U.S.C. 601-613.

    Source: 61 FR 52349, Oct. 7, 1996, unless otherwise noted.



Sec. 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 208]]

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 209]]

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.



Sec. 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.



Sec. 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 210]]

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.



Sec. 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 211]]

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.



Sec. 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 212]]

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.



Sec. 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.



Sec. 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 213]]

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.



Sec. 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 214]]

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.



Sec. 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.



Sec. 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 215]]

    (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.



Sec. 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.



Sec. 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 216]]

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 217]]



Sec. 6101.13-6101.14  [Reserved]



Sec. 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 218]]

    (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.



Sec. 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 219]]

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.



Sec. 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 220]]

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.



Sec. 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.



Sec. 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 221]]

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.



Sec. 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 222]]

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.



Sec. 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 223]]

    (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.



Sec. 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.



Sec. 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.



Sec. 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 224]]

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.



Sec. 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.



Sec. 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.



Sec. 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 225]]

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).



Sec. 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.



Sec. 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.



Sec. 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 226]]



Sec. 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.



Sec. 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.



Sec. 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 227]]

finality of a decision or suspend its operation.



Sec. 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.



Sec. 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 228]]

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.



Sec. 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. 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 responsible agency for 
certification and transmission to the United States Department of the 
Treasury 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 responsible 
agency for certification and transmission 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 responsible agency.
    (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.

[61 FR 52349, Oct. 7, 1996, as amended at 70 FR 48883, Aug. 22, 2005]



Sec. 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

[[Page 229]]

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 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.



Sec. 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.



Sec. 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.



Sec. 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



Sec. Form 1--Notice of Appeal, GSA Form 2465


Sec. Form 2--Notice of Appearance


Sec. Form 3--Subpoena, GSA Form 9534


Sec. Form 4--Government Certificate of Finality


Sec. Form 5--Appellant/Applicant Certificate of Finality

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[GRAPHIC] [TIFF OMITTED] TR07OC96.000


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[GRAPHIC] [TIFF OMITTED] TR07OC96.001


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[GRAPHIC] [TIFF OMITTED] TR07OC96.002


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[GRAPHIC] [TIFF OMITTED] TR07OC96.003


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[GRAPHIC] [TIFF OMITTED] TR07OC96.004


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[GRAPHIC] [TIFF OMITTED] TR07OC96.005


[[Page 236]]



  PART 6102_RULES OF PROCEDURE OF THE GENERAL SERVICES ADMINISTRATION 
            BOARD OF CONTRACT APPEALS (EXPEDITED PROCEEDINGS)

Sec.

Sec. 6102.1 Variation from standard proceedings [Rule 201].

Sec. 6102.2 Small claims procedure [Rule 202].

Sec. 6102.3 Accelerated procedure [Rule 203].

Sec. 6102.4 Alternative dispute resolution [Rule 204].

    Authority: 41 U.S.C. 601-613.

    Source: 61 FR 52369, Oct. 7, 1996, unless otherwise noted.



Sec. 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.



Sec. 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 237]]



Sec. 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.



Sec. 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 238]]

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

Sec.

Sec. 6103.1 Scope [Rule 301].

Sec. 6103.2 Filing claims [Rule 302].

Sec. 6103.3 Responses to claims [Rule 303].

Sec. 6103.4 Reply to Audit Division and agency responses [Rule 304].

Sec. 6103.5 Proceedings [Rule 305].

Sec. 6103.6 Decisions [Rule 306].

Sec. 6103.7 Reconsideration of Board decision [Rule 307].

Sec. 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.



Sec. 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 239]]

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]



Sec. 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]



Sec. 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]



Sec. 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 240]]



Sec. 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]



Sec. 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]



Sec. 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]



Sec. 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

Sec.

Sec. 6104.1 Scope [Rule 401].

Sec. 6104.2 Filing claims [Rule 402].

Sec. 6104.3 Response to claim [Rule 403].

Sec. 6104.4 Reply to agency response [Rule 404].

Sec. 6104.5 Proceedings [Rule 405].

Sec. 6104.6 Decisions [Rule 406].

Sec. 6104.7 Reconsideration of Board decision [Rule 407].

Sec. 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.



Sec. 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 241]]

    (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.



Sec. 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.



Sec. 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.



Sec. 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 242]]

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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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

Sec.

Sec. 6105.1 Scope [Rule 501].

Sec. 6105.2 Request for decision [Rule 502].

Sec. 6105.3 Additional submissions [Rule 503].

Sec. 6105.4 Proceedings [Rule 504].

Sec. 6105.5 Decisions [Rule 505].

Sec. 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.



Sec. 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.



Sec. 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 243]]

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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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 244]]

(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 245]]



   CHAPTER 63--DEPARTMENT OF TRANSPORTATION BOARD OF CONTRACT APPEALS




                          (Parts 6300 to 6399)

  --------------------------------------------------------------------
Part                                                                Page
6301            Board of contract appeals...................         247
6302            Rules of procedure..........................         248

[[Page 247]]

                   PART 6301_BOARD OF CONTRACT APPEALS

Sec.

Sec. 6301.0 Foreword.

Sec. 6301.1 Scope of part.

Sec. 6301.2 Qualifications of members.

Sec. 6301.3 Jurisdiction and authority of the Board and its members.

Sec. 6301.4 Ex parte communications.

Sec. 6301.5 Contract appeals procedures (general).

Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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 248]]



Sec. 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.



Sec. 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.



Sec. 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

Sec.

Sec. 6302.1 How to appeal a contracting officer's decision (Rule 1).

Sec. 6302.2 Contents of notice of appeal (Rule 2).

Sec. 6302.3 Docketing of appeals (Rule 3).

Sec. 6302.4 Preparation, contents, organization, forwarding, and status 
          of appeal file (Rule 4).

Sec. 6302.5 Service of documents (Rule 5).

Sec. 6302.6 Computation and extension of time limits (Rule 6).

Sec. 6302.7 Motions (Rule 7).

Sec. 6302.8 Appellant's election of procedures (Rule 8).

Sec. 6302.9 The SMALL CLAIMS (EXPEDITED) procedure (Rule 9).

Sec. 6302.10 The ACCELERATED procedure (Rule 10).

Sec. 6302.11 Submission of appeal without a hearing (Rule 11).

Sec. 6302.12 Regular procedure (Rule 12).

Sec. 6302.13 Pleadings (Rule 13).

Sec. 6302.14 Amendments of pleadings or record (Rule 14).

Sec. 6302.15 Prehearing briefs (Rule 15).

Sec. 6302.16 Prehearing conference (Rule 16).

Sec. 6302.17 The record of the appeal (Rule 17).

Sec. 6302.18 Discovery-depositions (Rule 18).

Sec. 6302.19 Interrogatories to parties, admission of facts, and 
          inspection of documents (Rule 19).

Sec. 6302.20 Time and place of hearing (Rule 20).

Sec. 6302.21 Notice of hearing (Rule 21).

Sec. 6302.22 Unexcused absence of a party (Rule 22).

Sec. 6302.23 Nature of hearings (Rule 23).

Sec. 6302.24 Subpoenas (Rule 24).

Sec. 6302.25 Copies of papers (Rule 25).

Sec. 6302.26 Posthearing briefs (Rule 26).

Sec. 6302.27 Transcript of proceedings (Rule 27).

Sec. 6302.28 Withdrawal of exhibits (Rule 28).

Sec. 6302.29 Representation of the parties (Rule 29).

Sec. 6302.30 Alternative dispute resolution methods (Rule 30).

Sec. 6302.31 Settlement (Rule 31).

Sec. 6302.32 Decisions (Rule 32).

Sec. 6302.33 Motion for reconsideration (Rule 33).

Sec. 6302.34 Dismissal for lack of jurisdiction (Rule 34).

Sec. 6302.35 Dismissal without prejudice (Rule 35).

Sec. 6302.36 Dismissal for failure to prosecute or defend (Rule 36).

Sec. 6302.37 Sanctions (Rule 37).

Sec. 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.



Sec. 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 249]]

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.



Sec. 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.



Sec. 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.



Sec. 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 250]]

    (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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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 251]]

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.



Sec. 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.



Sec. 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 252]]

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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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 253]]

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.



Sec. 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.



Sec. 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.



Sec. 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 254]]

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.



Sec. 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]



Sec. 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 255]]

Rule 18(a) with respect to general policy and protective orders.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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 256]]

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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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 257]]

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.



Sec. 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]



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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 258]]

may issue an order requiring the offending party to show cause why the 
appeal should not be dismissed or granted, as appropriate.



Sec. 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.



Sec. 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 259]]



     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............................         261
                      SUBCHAPTER A--ADMINISTRATION
9901            Rules and procedures........................         263
9902

[Reserved]

    SUBCHAPTER B--PROCUREMENT PRACTICES AND COST ACCOUNTING STANDARDS
9903            Contract coverage...........................         267
9904            Cost accounting standards...................         352
9905            Cost accounting standards for educational 
                    institutions............................         463

[[Page 261]]

                       PART 9900_SCOPE OF CHAPTER

    Authority: Pub. L. 100-679, 102 Stat. 4056, 41 U.S.C. 422.



Sec. 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 263]]

                       SUBCHAPTER A_ADMINISTRATION

                     PART 9901_RULES AND PROCEDURES

Sec.

Sec. 9901.301 Purpose.

Sec. 9901.302 Authority.

Sec. 9901.303 Offices.

Sec. 9901.304 Membership.

Sec. 9901.305 Requirements for standards and interpretive rulings.

Sec. 9901.306 Standards applicability.

Sec. 9901.307 Exemptions and waivers.

Sec. 9901.308 Meetings.

Sec. 9901.309 Quorum.

Sec. 9901.310 Board action.

Sec. 9901.311 Executive sessions.

Sec. 9901.312 Minutes.

Sec. 9901.313 Public hearings.

Sec. 9901.314 Informal actions.

Sec. 9901.315 Executive Secretary.

Sec. 9901.316 Files and records.

Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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 264]]

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.



Sec. 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.



Sec. 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.



Sec. 9901.307  Exemptions and waivers.

    The Board may exempt classes or categories of contractors and 
subcontractors from cost accounting standards requirements, and 
establish

[[Page 265]]

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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 9901.312  Minutes.

    The Executive Secretary of the Board shall be responsible for 
keeping accurate minutes of Board meetings and maintaining Board files.



Sec. 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.



Sec. 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.



Sec. 9901.315  Executive Secretary.

    The Board's staff of professional, technical and supporting 
personnel is directed and supervised by the Executive Secretary.



Sec. 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.



Sec. 9901.317  Amendments.

    This Part 9901, Rules and Procedures, may be amended by the 
Chairman, after consultation with the Board.

[[Page 266]]

                          PART 9902 [RESERVED]

[[Page 267]]

    SUBCHAPTER B_PROCUREMENT PRACTICES AND COST ACCOUNTING STANDARDS

                       PART 9903_CONTRACT COVERAGE

                         Subpart 9903.1_General

Sec.

Sec. 9903.101 Cost Accounting Standards.

Sec. 9903.102 OMB approval under the Paperwork Reduction Act.

                 Subpart 9903.2_CAS Program Requirements


Sec. 9903.201 Contract requirements.

Sec. 9903.201-1 CAS applicability.

Sec. 9903.201-2 Types of CAS coverage.

Sec. 9903.201-3 Solicitation provisions.

Sec. 9903.201-4 Contract clauses.

Sec. 9903.201-5 Waiver.

Sec. 9903.201-6 Findings.

Sec. 9903.201-7 Cognizant Federal agency responsibilities.

Sec. 9903.201-8 Compliant accounting changes due to external 
          restructuring activities.

Sec. 9903.202 Disclosure requirements.

Sec. 9903.202-1 General requirements.

Sec. 9903.202-2 Impracticality of submission.

Sec. 9903.202-3 Amendments and revisions.

Sec. 9903.202-4 Privileged and confidential information.

Sec. 9903.202-5 Filing Disclosure Statements.

Sec. 9903.202-6 Adequacy of Disclosure Statement.

Sec. 9903.202-7 [Reserved]

Sec. 9903.202-8 Subcontractor Disclosure Statements.

Sec. 9903.202-9 Illustration of Disclosure Statement Form, CASB-DS-1

Sec. 9903.202-10 Illustration of Disclosure Statement Form, CASB-DS-2.

                Subpart 9903.3_CAS Rules and Regulations


Sec. 9903.301 Definitions.

Sec. 9903.302 Definitions, explanations, and illustrations of the terms, 
          ``cost accounting practice'' and ``change to a cost accounting 
          practice.''

Sec. 9903.302-1 Cost accounting practice.

Sec. 9903.302-2 Change to a cost accounting practice.

Sec. 9903.302-3 Illustrations of changes which meet the definition of 
          ``change to a cost accounting practice.''

Sec. 9903.302-4 Illustrations of changes which do not meet the 
          definition of ``Change to a cost accounting practice.''

Sec. 9903.303 Effect of filing Disclosure Statement.

Sec. 9903.304 Concurrent full and modified coverage.

Sec. 9903.305 Materiality.

Sec. 9903.306 Interpretations.

Sec. 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



Sec. 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.



Sec. 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



Sec. 9903.201  Contract requirements.



Sec. 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 268]]

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)-(12) [Reserved]
    (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; 70 FR 29458, May 23, 2005]



Sec. 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 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.

[[Page 269]]

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 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]

[[Page 270]]



Sec. 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:
    [squ] (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.
    [squ] (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 proposal are consistent with the cost accounting 
practices disclosed in the applicable Disclosure Statement.
    [squ] (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.
    [squ] (4) Certificate of Interim Exemption.

[[Page 271]]

    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.
    [squ] 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.
    [squ] Yes [squ] No

                           (End of provision)

    Alternate I (OCT 1994). Insert the following subparagraph (5) at the 
end of Part I of the basic clause:

    [squ] (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):
    [squ] (a) A Disclosure Statement filing Due Date of ------------ has 
been established with the cognizant Federal agency.
    [squ] (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]



Sec. 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 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

[[Page 272]]

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) [Reserved]

                             (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

[[Page 273]]

to follow consistently disclosed and established cost accounting 
practices.

   Disclosure and Consistency of Cost Accounting Practices (JUN 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.

                             (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.

[[Page 274]]

                             (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 (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

[[Page 275]]

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; 70 FR 29458, May 23, 
2005]



Sec. 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 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;

[[Page 276]]

    (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]



Sec. 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.
    (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.

[[Page 277]]

    (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]



Sec. 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 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

[[Page 278]]

urged to coordinate on the development of such regulations.

[59 FR 55756, Nov. 8, 1994]



Sec. 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]



Sec. 9903.202  Disclosure requirements.



Sec. 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.
    (3) United Kingdom.
    (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 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

[[Page 279]]

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 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; 70 29458, May 23, 2005]



Sec. 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.



Sec. 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.

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Sec. 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.



Sec. 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]



Sec. 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]



Sec. 9903.202-7  [Reserved]



Sec. 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 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.

[[Page 281]]



Sec. 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:
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[61 FR 7621, Feb. 28, 1996]



Sec. 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:

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[59 FR 55757, Nov. 8, 1994]

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                Subpart 9903.3_CAS Rules and Regulations



Sec. 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 347]]

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]



Sec. 9903.302  Definitions, explanations, and illustrations of the 
          terms, ``cost accounting practice'' and ``change to a cost 
          accounting practice.''



Sec. 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

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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.



Sec. 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.



Sec. 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.

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(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.

------------------------------------------------------------------------
              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.
------------------------------------------------------------------------



Sec. 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.

[[Page 350]]

 
(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.
(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.
------------------------------------------------------------------------



Sec. 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.



Sec. 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.



Sec. 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.

[[Page 351]]

    (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 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.



Sec. 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

[[Page 352]]

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 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.



Sec. 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

Sec.

Sec. 9904.400 [Reserved]

Sec. 9904.401 Cost accounting standard--consistency in estimating, 
          accumulating and reporting costs.

Sec. 9904.401-10 [Reserved]

Sec. 9904.401-20 Purpose.

Sec. 9904.401-30 Definitions.

Sec. 9904.401-40 Fundamental requirement.

Sec. 9904.401-50 Techniques for application.

Sec. 9904.401-60 Illustrations.

Sec. 9904.401-61 Interpretation.

Sec. 9904.401-62 Exemption.

Sec. 9904.401-63 Effective date.

Sec. 9904.402 Cost accounting standard--consistency in allocating costs 
          incurred for the same purpose.

Sec. 9904.402-10 [Reserved]

Sec. 9904.402-20 Purpose.

Sec. 9904.402-30 Definitions.

Sec. 9904.402-40 Fundamental requirement.

Sec. 9904.402-50 Techniques for application.

Sec. 9904.402-60 Illustrations.

Sec. 9904.402-61 Interpretation.

Sec. 9904.402-62 Exemption.

Sec. 9904.402-63 Effective date.

Sec. 9904.403 Allocation of home office expenses to segments.

Sec. 9904.403-10 [Reserved]

Sec. 9904.403-20 Purpose.

Sec. 9904.403-30 Definitions.

Sec. 9904.403-40 Fundamental requirement.

Sec. 9904.403-50 Techniques for application.

Sec. 9904.403-60 Illustrations.

Sec. 9904.403-61 Interpretation.

Sec. 9904.403-62 Exemption. [Reserved]

Sec. 9904.403-63 Effective date.

Sec. 9904.404 Capitalization of tangible assets.

Sec. 9904.404-10 [Reserved]

Sec. 9904.404-20 Purpose.

Sec. 9904.404-30 Definitions.

Sec. 9904.404-40 Fundamental requirement.

Sec. 9904.404-50 Techniques for application.

Sec. 9904.404-60 Illustrations.

Sec. 9904.404-61 Interpretation. [Reserved]

Sec. 9904.404-62 Exemption.

Sec. 9904.404-63 Effective date.

Sec. 9904.405 Accounting for unallowable costs.

Sec. 9904.405-10 [Reserved]

Sec. 9904.405-20 Purpose.

Sec. 9904.405-30 Definitions.

Sec. 9904.405-40 Fundamental requirement.

Sec. 9904.405-50 Techniques for application.

Sec. 9904.405-60 Illustrations.

Sec. 9904.405-61 Interpretation. [Reserved]

Sec. 9904.405-62 Exemption.

Sec. 9904.405-63 Effective date.

Sec. 9904.406 Cost accounting standard--cost accounting period.

Sec. 9904.406-10 [Reserved]

Sec. 9904.406-20 Purpose.

Sec. 9904.406-30 Definitions.

Sec. 9904.406-40 Fundamental requirement.

Sec. 9904.406-50 Techniques for application.

Sec. 9904.406-60 Illustrations.

Sec. 9904.406-61 Interpretation.

Sec. 9904.406-62 Exemption.

Sec. 9904.406-63 Effective date.

Sec. 9904.407 Use of standard costs for direct material and direct 
          labor.

Sec. 9904.407-10 [Reserved]

Sec. 9904.407-20 Purpose.

Sec. 9904.407-30 Definitions.

Sec. 9904.407-40 Fundamental requirement.

Sec. 9904.407-50 Techniques for application.

Sec. 9904.407-60 Illustrations.

Sec. 9904.407-61 Interpretation. [Reserved]

[[Page 353]]


Sec. 9904.407-62 Exemption.

Sec. 9904.407-63 Effective date.

Sec. 9904.408 Accounting for costs of compensated personal absence.

Sec. 9904.408-10 [Reserved]

Sec. 9904.408-20 Purpose.

Sec. 9904.408-30 Definitions.

Sec. 9904.408-40 Fundamental requirement.

Sec. 9904.408-50 Techniques for application.

Sec. 9904.408-60 Illustrations.

Sec. 9904.408-61 Interpretation. [Reserved]

Sec. 9904.408-62 Exemption.

Sec. 9904.408-63 Effective date.

Sec. 9904.409 Cost accounting standard--depreciation of tangible capital 
          assets.

Sec. 9904.409-10 [Reserved]

Sec. 9904.409-20 Purpose.

Sec. 9904.409-30 Definitions.

Sec. 9904.409-40 Fundamental requirement.

Sec. 9904.409-50 Techniques for application.

Sec. 9904.409-60 Illustrations.

Sec. 9904.409-61 Interpretation. [Reserved]

Sec. 9904.409-62 Exemption.

Sec. 9904.409-63 Effective date.

Sec. 9904.410 Allocation of business unit general and administrative 
          expenses to final cost objectives.

Sec. 9904.410-10 [Reserved]

Sec. 9904.410-20 Purpose.

Sec. 9904.410-30 Definitions.

Sec. 9904.410-40 Fundamental requirement.

Sec. 9904.410-50 Techniques for application.

Sec. 9904.410-60 Illustrations.

Sec. 9904.410-61 Interpretation. [Reserved]

Sec. 9904.410-62 Exemption.

Sec. 9904.410-63 Effective date.

Sec. 9904.411 Cost accounting standard--accounting for acquisition costs 
          of material.

Sec. 9904.411-10 [Reserved]

Sec. 9904.411-20 Purpose.

Sec. 9904.411-30 Definitions.

Sec. 9904.411-40 Fundamental requirement.

Sec. 9904.411-50 Techniques for application.

Sec. 9904.411-60 Illustrations.

Sec. 9904.411-61 Interpretation. [Reserved]

Sec. 9904.411-62 Exemption.

Sec. 9904.411-63 Effective date.

Sec. 9904.412 Cost accounting standard for composition and measurement 
          of pension cost.

Sec. 9904.412-10 [Reserved]

Sec. 9904.412-20 Purpose.

Sec. 9904.412-30 Definitions.

Sec. 9904.412-40 Fundamental requirement.

Sec. 9904.412-50 Techniques for application.

Sec. 9904.412-60 Illustrations.

Sec. 9904.412-61 Interpretation. [Reserved]

Sec. 9904.412-62 Exemption.

Sec. 9904.412-63 Effective date.

Sec. 9904.412-64 Transition method.

Sec. 9904.413 Adjustment and allocation of pension cost.

Sec. 9904.413-10 [Reserved]

Sec. 9904.413-20 Purpose.

Sec. 9904.413-30 Definitions.

Sec. 9904.413-40 Fundamental requirement.

Sec. 9904.413-50 Techniques for application.

Sec. 9904.413-60 Illustrations.

Sec. 9904.413-61 Interpretation. [Reserved]

Sec. 9904.413-62 Exemption.

Sec. 9904.413-63 Effective date.

Sec. 9904.413-64 Transition method.

Sec. 9904.414 Cost accounting standard--cost of money as an element of 
          the cost of facilities capital.

Sec. 9904.414-10 [Reserved]

Sec. 9904.414-20 Purpose.

Sec. 9904.414-30 Definitions.

Sec. 9904.414-40 Fundamental requirement.

Sec. 9904.414-50 Techniques for application.

Sec. 9904.414-60 Illustrations.

Sec. 9904.414-61 Interpretation. [Reserved]

Sec. 9904.414-62 Exemption.

Sec. 9904.414-63 Effective date.

Sec. 9904.415 Accounting for the cost of deferred compensation.

Sec. 9904.415-10 [Reserved]

Sec. 9904.415-20 Purpose.

Sec. 9904.415-30 Definitions.

Sec. 9904.415-40 Fundamental requirement.

Sec. 9904.415-50 Techniques for application.

Sec. 9904.415-60 Illustrations.

Sec. 9904.415-61 Interpretation. [Reserved]

Sec. 9904.415-62 Exemption.

Sec. 9904.415-63 Effective date.

Sec. 9904.416 Accounting for insurance costs.

Sec. 9904.416-10 [Reserved]

Sec. 9904.416-20 Purpose.

Sec. 9904.416-30 Definitions.

Sec. 9904.416-40 Fundamental requirement.

Sec. 9904.416-50 Techniques for application.

Sec. 9904.416-60 Illustrations.

Sec. 9904.416-61 Interpretation. [Reserved]

Sec. 9904.416-62 Exemption.

Sec. 9904.416-63 Effective date.

Sec. 9904.417 Cost of money as an element of the cost of capital assets 
          under construction.

Sec. 9904.417-10 [Reserved]

Sec. 9904.417-20 Purpose.

Sec. 9904.417-30 Definitions.

Sec. 9904.417-40 Fundamental requirement.

Sec. 9904.417-50 Techniques for application.

Sec. 9904.417-60 Illustrations.

Sec. 9904.417-61 Interpretation. [Reserved]

Sec. 9904.417-62 Exemption.

Sec. 9904.417-63 Effective date.

Sec. 9904.418 Allocation of direct and indirect costs.

Sec. 9904.418-10 [Reserved]

Sec. 9904.418-20 Purpose.

Sec. 9904.418-30 Definitions.

Sec. 9904.418-40 Fundamental requirements.

Sec. 9904.418-50 Techniques for application.

Sec. 9904.418-60 Illustrations.

Sec. 9904.418-61 Interpretation. [Reserved]

Sec. 9904.418-62 Exemptions.

Sec. 9904.418-63 Effective date.

Sec. 9904.420 Accounting for independent research and development costs 
          and bid and proposal costs.

Sec. 9904.420-10 [Reserved]

Sec. 9904.420-20 Purpose.

Sec. 9904.420-30 Definitions.

Sec. 9904.420-40 Fundamental requirement.

[[Page 354]]


Sec. 9904.420-50 Techniques for application.

Sec. 9904.420-60 Illustrations.

Sec. 9904.420-61 Interpretation. [Reserved]

Sec. 9904.420-62 Exemptions.

Sec. 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.



Sec. 9904.400  [Reserved]



Sec. 9904.401  Cost accounting standard--consistency in estimating, 
          accumulating and reporting costs.



Sec. 9904.401-10  [Reserved]



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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

[[Page 355]]

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;
    (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.



Sec. 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.
------------------------------------------------------------------------



Sec. 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

[[Page 356]]

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 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.



Sec. 9904.401-62  Exemption.

    None for this Standard.



Sec. 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]



Sec. 9904.402  Cost accounting standard--consistency in allocating costs 
          incurred for the same purpose.



Sec. 9904.402-10  [Reserved]



Sec. 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.



Sec. 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.

[[Page 357]]

    (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.
    (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.



Sec. 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.



Sec. 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

[[Page 358]]

which would have been obtained if such cost had been treated as a direct 
cost.



Sec. 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 
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.



Sec. 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

[[Page 359]]

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.



Sec. 9904.402-62  Exemption.

    None for this Standard.



Sec. 9904.402-63  Effective date.

    This Standard is effective as of April 17, 1992.



Sec. 9904.403  Allocation of home office expenses to segments.



Sec. 9904.403-10  [Reserved]



Sec. 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.



Sec. 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

[[Page 360]]

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.



Sec. 9904.403-40  Fundamental requirement.

    (a)(1) Home office expenses shall be allocated on the basis of the 
beneficial 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.

[[Page 361]]

    (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 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.



Sec. 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

[[Page 362]]

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 
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

[[Page 363]]

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 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.



Sec. 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.
------------------------------------------------------------------------



Sec. 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

[[Page 364]]

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. 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.



Sec. 9904.403-62  Exemption. [Reserved]



Sec. 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.



Sec. 9904.404  Capitalization of tangible assets.



Sec. 9904.404-10  [Reserved]



Sec. 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.



Sec. 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

[[Page 365]]

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 99 are applicable to this Standard: None.



Sec. 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]



Sec. 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

[[Page 366]]

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 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]



Sec. 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 $6,000. The contractor's 
policy must be modified to conform to the $5,000 policy limitation

[[Page 367]]

on minimum acquisition cost established by the Standard.
    (i) Contractor acquires a tangible capital asset with a life of 18 
months at a cost of $6,500.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.
    (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.

[57 FR 14153, Apr. 17, 1992, as amended at 70 FR 37706, June 30, 2005]



Sec. 9904.404-61  Interpretation. [Reserved]



Sec. 9904.404-62  Exemption.

    None for this Standard.



Sec. 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]

[[Page 368]]



Sec. 9904.405  Accounting for unallowable costs.



Sec. 9904.405-10  [Reserved]



Sec. 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 of the appropriate procurement or reviewing authority.



Sec. 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.



Sec. 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

[[Page 369]]

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.



Sec. 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.



Sec. 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

[[Page 370]]

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 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

[[Page 371]]

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]



Sec. 9904.405-61  Interpretation. [Reserved]



Sec. 9904.405-62  Exemption.

    None for this Standard.



Sec. 9904.405-63  Effective date.

    This Standard is effective as of April 17, 1992.



Sec. 9904.406  Cost accounting standard--cost accounting period.



Sec. 9904.406-10  [Reserved]



Sec. 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.



Sec. 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.



Sec. 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

[[Page 372]]

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]



Sec. 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.
    (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).



Sec. 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

[[Page 373]]

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 
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).



Sec. 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

[[Page 374]]

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
    (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]



Sec. 9904.406-62  Exemption.

    None for this Standard.



Sec. 9904.406-63  Effective date.

    This Standard is effective as of April 17, 1992. Contractors with 
prior CAS-

[[Page 375]]

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.



Sec. 9904.407  Use of standard costs for direct material and direct 
          labor.



Sec. 9904.407-10  [Reserved]



Sec. 9904.407-20  Purpose.

    (a) The purpose of this Cost Accounting Standard is to provide 
criteria 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.



Sec. 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]



Sec. 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.



Sec. 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

[[Page 376]]

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.
    (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

[[Page 377]]

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 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.



Sec. 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[cent] 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 
([$3.00x4+$3.15x8]/ 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

[[Page 378]]

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 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]



Sec. 9904.407-61  Interpretation. [Reserved]



Sec. 9904.407-62  Exemption.

    None for this Standard.



Sec. 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

[[Page 379]]

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.



Sec. 9904.408  Accounting for costs of compensated personal absence.



Sec. 9904.408-10  [Reserved]



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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

[[Page 380]]

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 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.



Sec. 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

[[Page 381]]

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..................................................
  Full months of service since anniversary, 5:
    Pro-rata entitlement on lay-off=80 hrs.x5/12=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
                                                              ==========

[[Page 382]]

 
1976 ending liability........................................     75,000
Plus: Paid in 1976...........................................     95,000
                                                              ----------
    Subtotal.................................................    170,000
Less: 1976 beginning liability...............................     90,000
                                                              ----------
    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

[[Page 383]]

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 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]



Sec. 9904.408-61  Interpretation. [Reserved]



Sec. 9904.408-62  Exemption.

    This Standard shall not apply to contracts and grants with state, 
local, and Federally recognized Indian Tribal Governments.



Sec. 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.



Sec. 9904.409  Cost accounting standard--depreciation of tangible 
          capital assets.



Sec. 9904.409-10  [Reserved]



Sec. 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.



Sec. 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 
life and is the period over which depreciation cost is to be assigned.
    (3) Tangible capital asset means an asset that has physical 
substance,

[[Page 384]]

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.



Sec. 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.



Sec. 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 cost to be assigned to the beginning and ending cost 
accounting periods of asset use. The policy may provide for

[[Page 385]]

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 depreciation is not 
recorded for financial accounting purposes) shall be used for contract 
costing unless:

[[Page 386]]

    (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 accounting purposes shall be limited to the 
undepreciated cost of the assets and shall be assigned only to the cost

[[Page 387]]

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]



Sec. 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 the provisions of the Standard, Company Y shall use a 
life of 12 years for

[[Page 388]]

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 be available for each year in 
the sampling time period. The company would

[[Page 389]]

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.



Sec. 9904.409-61  Interpretation. [Reserved]



Sec. 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)).



Sec. 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 contract or subcontract to which this revised 
Standard applies.

[61 FR 5523, Feb. 13, 1996]

[[Page 390]]



Sec. 9904.410  Allocation of business unit general and administrative 
          expenses to final cost objectives.



Sec. 9904.410-10  [Reserved]



Sec. 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.



Sec. 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.



Sec. 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 one which 
best represents the total activity of a typical cost accounting period.

[[Page 391]]

    (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.



Sec. 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,
    (ii) Residual expenses, and

[[Page 392]]

    (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.



Sec. 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.
    (c)(1) Business Unit C has a personnel function which is divided 
into two parts: A vice president of personnel

[[Page 393]]

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 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

[[Page 394]]

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 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

[[Page 395]]

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.



Sec. 9904.410-61  Interpretation. [Reserved]



Sec. 9904.410-62  Exemption.

    This Standard shall not apply to contracts and grants with state, 
local, and Federally recognized Indian tribal governments.



Sec. 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.
    (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.

[[Page 396]]

    (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:
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;

[[Page 397]]

    (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................................     600x0.125=75.00      450x0.15=67.50     450x0.115=51.75
        CAS-fixed price work........................     550x0.125=68.75      650x0.15=97.50     800x0.115=92.00
        CAS-cost contracts..........................     700x0.125=87.50     700x0.15=105.00     700x0.115=80.50
    After contracts:
        Non-CAS work................................     500x0.125=62.50     500x0.125=62.50     500x0.125=62.50
        CAS-fixed price work........................     500x0.125=62.50     500x0.125=62.50     500x0.125=62.50
        CAS-cost contracts..........................     300x0.125=37.50     300x0.125=37.50     300x0.125=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)..................      x0.125
                                                             -----------
  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.


[57 FR 14153, Apr. 17, 1992; 57 FR 34081, 34167, Aug. 3, 1992]



Sec. 9904.411  Cost accounting standard--accounting for acquisition 
          costs of material.



Sec. 9904.411-10  [Reserved]



Sec. 9904.411-20  Purpose.

    (a) The purpose of this Cost Accounting Standard is to provide 
criteria for

[[Page 398]]

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]



Sec. 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.



Sec. 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 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.

[[Page 399]]



Sec. 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.



Sec. 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 
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

[[Page 400]]

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.



Sec. 9904.411-61  Interpretation. [Reserved]



Sec. 9904.411-62  Exemption.

    None for this Standard.



Sec. 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.



Sec. 9904.412  Cost accounting standard for composition and measurement 
          of pension cost.



Sec. 9904.412-10  [Reserved]



Sec. 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.



Sec. 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 rate, employee turnover, 
compensation levels, earnings on pension plan assets, changes in values 
of pension plan assets.

[[Page 401]]

    (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 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.

[[Page 402]]

    (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]



Sec. 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 benefits due in current 
and future cost accounting periods.
    (b) Measurement of pension cost. (1) For defined-benefit pension 
plans other

[[Page 403]]

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]



Sec. 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 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.

[[Page 404]]

    (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 of pension cost assignable to cost accounting periods 
shall be measured by an immediate-gain actuarial cost method.

[[Page 405]]

    (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 subsection) 
under the following conditions:

[[Page 406]]

    (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]



Sec. 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 the plan financed 
through a group permanent insurance contract shall be considered to be a 
defined-contribution pension plan; the net premium required

[[Page 407]]

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 
($40,000x3 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 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

[[Page 408]]

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 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).

[[Page 409]]

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 ($200,000x1.08) 
is excluded from the amount considered fully amortized in 1996. The next 
year, 1997, Contractor K must eliminate $233,280 ($216,000x1.08) 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 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

[[Page 410]]

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 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,

[[Page 411]]

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 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

[[Page 412]]

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]



Sec. 9904.412-61  Interpretation. [Reserved]



Sec. 9904.412-62  Exemption.

    None for this Standard.



Sec. 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]



Sec. 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 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

[[Page 413]]

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-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

[[Page 414]]

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 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

[[Page 415]]

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]



Sec. 9904.413  Adjustment and allocation of pension cost.



Sec. 9904.413-10  [Reserved]



Sec. 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.



Sec. 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 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

[[Page 416]]

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 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

[[Page 417]]

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 99 are applicable to this Standard: None.

[57 FR 14153, Apr. 17, 1992, as amended at 60 FR 16549, Mar. 30, 1995]



Sec. 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

[[Page 418]]

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]



Sec. 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 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

[[Page 419]]

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 
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

[[Page 420]]

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.
    (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

[[Page 421]]

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 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

[[Page 422]]

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]



Sec. 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 
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

[[Page 423]]

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; 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

[[Page 424]]

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 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

[[Page 425]]

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).
    (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

[[Page 426]]

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 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

[[Page 427]]

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. 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

[[Page 428]]

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 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

[[Page 429]]

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]



Sec. 9904.413-61  Interpretation. [Reserved]



Sec. 9904.413-62  Exemption.

    None for this Standard.



Sec. 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]



Sec. 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.
    (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

[[Page 430]]

method or adjustment amount for the computation of costs/prices of 
contracts subject to this Standard.

[60 FR 16557, Mar. 30, 1995]



Sec. 9904.414  Cost accounting standard--cost of money as an element of 
          the cost of facilities capital.



Sec. 9904.414-10  [Reserved]



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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.
    (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.

[[Page 431]]

    (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.



Sec. 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.



Sec. 9904.414-61  Interpretation. [Reserved]



Sec. 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)).



Sec. 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 432]]

[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 433]]

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 434]]

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=$1,800,000\1\2=$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 435]]


                 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

[[Page 436]]

 
    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
    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

[[Page 437]]

 
Manufacturing.........................................................       750,000            75     2,250,000
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 438]]

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[[Page 439]]

[GRAPHIC] [TIFF OMITTED] TC02FE91.071


[[Page 440]]


                     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 441]]

[GRAPHIC] [TIFF OMITTED] TC02FE91.072


[[Page 442]]

[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 443]]

 
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]



Sec. 9904.415  Accounting for the cost of deferred compensation.



Sec. 9904.415-10  [Reserved]



Sec. 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.



Sec. 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 444]]

99 are applicable to this Standard: None.



Sec. 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.



Sec. 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 445]]

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 446]]

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.



Sec. 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................................  $2,000x0.6805=$1,361
1982................................  2,000x.6301=1,260
1983................................  2,000x.5834=1,167
1984................................  2,000x.5402=1,080
1985................................  2,000x.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 447]]

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 448]]

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 paymentxDiscount rate present value factor for 2 yr at 
    8 pct=Assignable cost

$2,000x0.8573=$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 costxDiscount rate future value for 1 yr at 8 pct=Forfeiture
$1,714.60x1.08=$1,851.77



Sec. 9904.415-61  Interpretation. [Reserved]



Sec. 9904.415-62  Exemption.

    None for this Standard.



Sec. 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.



Sec. 9904.416  Accounting for insurance costs.



Sec. 9904.416-10  [Reserved]



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 9904.416-50  Techniques for application.

    (a) Measurement of projected average loss. (1) For exposure to risk 
of loss

[[Page 449]]

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 450]]

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 451]]

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]



Sec. 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 452]]

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.



Sec. 9904.416-61  Interpretation. [Reserved]



Sec. 9904.416-62  Exemption.

    None for this Standard.



Sec. 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 453]]



Sec. 9904.417  Cost of money as an element of the cost of capital assets 
          under construction.



Sec. 9904.417-10  [Reserved]



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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.



Sec. 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 454]]

$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]



Sec. 9904.417-61  Interpretation. [Reserved]



Sec. 9904.417-62  Exemption.

    None for this Standard.



Sec. 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 455]]



Sec. 9904.418  Allocation of direct and indirect costs.



Sec. 9904.418-10  [Reserved]



Sec. 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.



Sec. 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.



Sec. 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 456]]



Sec. 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 457]]

    (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 458]]

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.



Sec. 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 459]]

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.



Sec. 9904.418-61  Interpretation. [Reserved]



Sec. 9904.418-62  Exemptions.

    This Standard shall not apply to contracts and grants with state, 
local, and Federally recognized Indian tribal governments.



Sec. 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.



Sec. 9904.420  Accounting for independent research and development costs 
          and bid and proposal costs.



Sec. 9904.420-10  [Reserved]



Sec. 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.



Sec. 9904.420-30  Definitions.

    (a) The following are definitions of terms which are prominent in 
this

[[Page 460]]

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.



Sec. 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 461]]

    (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.



Sec. 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 462]]

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.



Sec. 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 463]]

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).



Sec. 9904.420-61  Interpretation. [Reserved]



Sec. 9904.420-62  Exemptions.

    This Standard shall not apply to contracts and grants with State, 
local, and federally recognized Indian tribal governments.



Sec. 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

Sec.

Sec. 9905.501 Cost accounting standard--consistency in estimating, 
          accumulating and reporting costs by educational institutions.

Sec. 9905.501-10 [Reserved]

Sec. 9905.501-20 Purpose.

Sec. 9905.501-30 Definitions.

Sec. 9905.501-40 Fundamental requirement.

Sec. 9905.501-50 Techniques for application.

Sec. 9905.501-60 Illustration. [Reserved]

Sec. 9905.501-61 Interpretation. [Reserved]

Sec. 9905.501-62 Exemption.

Sec. 9905.501-63 Effective date.

Sec. 9905.502 Cost accounting standard--consistency in allocating costs 
          incurred for the same purpose by educational institutions.

Sec. 9905.502-10 [Reserved]

Sec. 9905.502-20 Purpose.

Sec. 9905.502-30 Definitions.

Sec. 9905.502-40 Fundamental requirement.

Sec. 9905.502-50 Techniques for application.

Sec. 9905.502-60 Illustrations.

Sec. 9905.502-61 Interpretation.

Sec. 9905.502-62 Exemption.

Sec. 9905.502-63 Effective date.

Sec. 9905.505 Accounting for unallowable costs--Educational 
          institutions.

Sec. 9905.505-10 [Reserved]

Sec. 9905.505-20 Purpose.

Sec. 9905.505-30 Definitions.

Sec. 9905.505-40 Fundamental requirement.

Sec. 9905.505-50 Techniques for application.

Sec. 9905.505-60 Illustrations.

Sec. 9905.505-61 Interpretation. [Reserved]

Sec. 9905.505-62 Exemption.

Sec. 9905.505-63 Effective date.

Sec. 9905.506 Cost accounting period--Educational institutions.

Sec. 9905.506-10 [Reserved]

Sec. 9905.506-20 Purpose.

Sec. 9905.506-30 Definitions.

Sec. 9905.506-40 Fundamental requirement.

Sec. 9905.506-50 Techniques for application.

Sec. 9905.506-60 Illustrations.

Sec. 9905.506-61 Interpretation. [Reserved]

Sec. 9905.506-62 Exemption.

Sec. 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.



Sec. 9905.501  Cost accounting standard--consistency in estimating, 
          accumulating and reporting costs by educational institutions.



Sec. 9905.501-10  [Reserved]



Sec. 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

[[Page 464]]

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 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.



Sec. 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.



Sec. 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.



Sec. 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

[[Page 465]]

cost accounting practices during contract performance may be made in 
accordance with part 9903 (48 CFR part 9903).
    (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.



Sec. 9905.501-60  Illustration. [Reserved]



Sec. 9905.501-61  Interpretation. [Reserved]



Sec. 9905.501-62  Exemption.

    None for this Standard.



Sec. 9905.501-63  Effective date.

    This Standard is effective as of January 9, 1995.



Sec. 9905.502  Cost accounting standard--consistency in allocating costs 
          incurred for the same purpose by educational institutions.



Sec. 9905.502-10  [Reserved]



Sec. 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.



Sec. 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.

[[Page 466]]

    (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.
    (b) The following modifications of terms defined elsewhere in this 
Chapter 99 are applicable to this Standard: None.



Sec. 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.



Sec. 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.



Sec. 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

[[Page 467]]

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.
    (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.



Sec. 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,

[[Page 468]]

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 costs, of course, 
must provide an equitable distribution to all final cost objectives.



Sec. 9905.502-62  Exemption.

    None for this Standard.



Sec. 9905.502-63  Effective date.

    This Standard is effective as of January 9, 1995.



Sec. 9905.505  Accounting for unallowable costs--Educational 
          institutions.



Sec. 9905.505-10  [Reserved]



Sec. 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.



Sec. 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.



Sec. 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

[[Page 469]]

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.



Sec. 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.

[[Page 470]]

    (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.



Sec. 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,

[[Page 471]]

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 
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.



Sec. 9905.505-61  Interpretation. [Reserved]



Sec. 9905.505-62  Exemption.

    None for this Standard.



Sec. 9905.505-63  Effective date.

    This Standard is effective as of January 9, 1995.



Sec. 9905.506  Cost accounting period--Educational institutions.



Sec. 9905.506-10  [Reserved]



Sec. 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.



Sec. 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.



Sec. 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).

[[Page 472]]



Sec. 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:
    (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).



Sec. 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

[[Page 473]]

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) 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).



Sec. 9905.506-61  Interpretation. [Reserved]



Sec. 9905.506-62  Exemption.

    None for this Standard.



Sec. 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 475]]



                              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 477]]



                    Table of CFR Titles and Chapters




                     (Revised as of October 1, 2006)

                      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--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  Office of Management and Budget Governmentwide 
                Guidance for Grants and Agreements (Parts 100-199)
        II  Office of Management and Budget Circulars and Guidance 
                (200-299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements [Reserved]


                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability 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)
      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)

[[Page 478]]

        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)
       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)
        LV  National Endowment for the Arts (Part 6501)
       LVI  National Endowment for the Humanities (Part 6601)
      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)
     LXVII  Institute of Museum and Library Services (Part 7701)
      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)

[[Page 479]]

    LXXVII  Office of Management and Budget (Part 8701)
     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Part 
                9701)
      XCIX  Department of Defense Human Resources Management and 
                Labor Relations Systems (Department of Defense--
                Office of Personnel Management) (Part 9901)

                      Title 6--Homeland Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 0--99)

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         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)
       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)

[[Page 480]]

     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  Local Television Loan Guarantee Board (Parts 2200--
                2299)
      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 Policy and New Uses, 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)
    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  Department of Homeland Security (Immigration and 
                Naturalization) (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

                 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)

[[Page 481]]

                           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)
      XIII  Nuclear Waste Technical Review Board (Parts 1303--
                1399)
      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)
        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, Department of 
                Commerce (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board, 
                Department of Commerce (Parts 500--599)

[[Page 482]]

                    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)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 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)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Industry and Security, 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)

[[Page 483]]

             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  Bureau of Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Bureau of Immigration and Customs Enforcement, 
                Department of Homeland Security (Parts 400--599)

                     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)

[[Page 484]]

                      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)

                          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)

[[Page 485]]

        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--1699)
         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)

                           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  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)

[[Page 486]]

        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--699)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       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)
        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  Employee Benefits Security 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)

[[Page 487]]

                      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)
       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)

                      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)

[[Page 488]]

    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (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)
        XI  National Institute for Literacy (Parts 1100--1199)
            Subtitle C--Regulations Relating to Education
       XII  National Council on Disability (Parts 1200--1299)

                          Title 35 [Reserved]

             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)

[[Page 489]]

       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)
       III  Copyright Royalty Board, Library of Congress (Parts 
                301--399)
        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--1099)
        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)
       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 Service, 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)

[[Page 490]]

       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 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (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)

                   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--10010)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

[[Page 491]]

                       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)
     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 Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)

[[Page 492]]

        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  Defense Acquisition Regulations System, 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)
        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)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        35  [Reserved]
        44  Federal Emergency Management Agency (Parts 4400--4499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)

[[Page 493]]

        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 (Parts 
                5400--5499)
        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  Pipeline and Hazardous Materials Safety 
                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 Homeland Security (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)
        XI  Research and Innovative Technology Administration, 
                Department of Transportation - [Reserved]
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

                   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)

[[Page 494]]

        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 495]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of October 1, 2006)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Advanced Research Projects Agency                 32, I
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
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
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

[[Page 496]]

Architectural and Transportation Barriers         36, XI
     Compliance Board
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
Centers for Medicare & Medicaid Services          42, IV
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
  Federal Acquisition Regulation                  48, 13
  Fishery Conservation and Management             50, VI
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  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
Copyright Royalty Board                           37, III
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 and Border Protection Bureau              19, I
Defense Contract Audit Agency                     32, I
Defense Department                                5, XXVI; 32, Subtitle A; 
                                                  40, VII

[[Page 497]]

  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51
  Defense Acquisition Regulations System          48, II
  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  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
Employee Benefits Security Administration         29, XXV
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                5, III, LXXVII; 14, VI; 
                                                  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

[[Page 498]]

  Trade Representative, Office of the United      15, XX
       States
Export-Import Bank of the United States           5, LII; 12, IV
Family Assistance, Office of                      45, II
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 Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102

[[Page 499]]

  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F
  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 Accountability Office                  4, I
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
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Defense Acquisition Regulations System          48, 2
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V; 42, I
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  6, I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection Bureau            19, I
  Federal Emergency Management Agency             44, I
  Immigration and Customs Enforcement Bureau      19, IV
  Immigration and Naturalization                  8, I
  Transportation Security Administration          49, XII
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 Customs Enforcement Bureau        19, IV
Immigration and Naturalization                    8, I
Immigration Review, Executive Office for          8, V
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; 42, I
Industry and Security, Bureau of                  15, VII
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
   Archives and Records Administration
[[Page 500]]

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
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
  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
  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
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  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 Review, Executive Office for        8, V
  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
  Employee Benefits Security Administration       29, XXV
  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
  Public Contracts                                41, 50

[[Page 501]]

  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of 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
  Copyright Royalty Board                         37, III
Local Television Loan Guarantee Board             7, XX
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
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
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

[[Page 502]]

Neighborhood Reinvestment Corporation             24, XXV
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
Patent and Trademark Office, United States        37, I
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 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
Pipeline and Hazardous Materials Safety           49, I
     Administration
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 Innovative Technology                49, XI
     Administration
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

[[Page 503]]

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
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV
  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
  Pipeline and Hazardous Materials Safety         49, I
       Administration
  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 Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury Department                               5, XXI; 12, XV; 17, IV; 
                                                  31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection Bureau            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 Service,        41, 61; 20, IX
     Office of the 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 505]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations that were 
made by documents published in the Federal Register since January 1, 
2001, 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, 2001, see the ``List of CFR Sections 
Affected, 1949-1963, 1964-1972, 1973-1985 and 1986-2000'' published in 
11 separate volumes.

                                  2001

                       (No regulations published)

                                  2002

                       (No regulations published)

                                  2003

48 CFR
                                                                   68 FR
                                                                    Page
Chapter 30
Chapter 30 Established; interim....................................67871
Chapter 51
5125 Added; interim................................................66739
5152.225-74-9000 Added; interim....................................66740

                                  2004

48 CFR
                                                                   69 FR
                                                                    Page
Chapter 29
Chapter 29 Revised.................................................22991
Chapter 35
3501--3599 (Chapter 35) Removed....................................75266

                                  2005

48 CFR
                                                                   70 FR
                                                                    Page
Chapter 61
6101.36 (c) and (d) revised........................................48883
Chapter 99
9903.201-1 (b)(12) removed; interim................................29458
9903.201-4 (d) removed; interim....................................29458
9903.202-1 (e) revised; interim....................................29458
9904.404-60 (a)(1) introductory text and (i) corrected.............37706

                                  2006

  (Regulations published from January 1, 2006, through October 1, 2006)

48 CFR
                                                                   71 FR
                                                                    Page
Chapter 30
Chapter 30 Regulation at 68 FR 67870 confirmed.....................25767
3001.104 (c) revised; (d) added....................................25767
3001.105-2 (a) amended.............................................25767
    (a) revised....................................................48800
3001.301 (a)(1) amended............................................25767
    (a)(1) and (2)(i) amended......................................48800
3001.301-70 (a) amended............................................25767
    (b) introductory text amended..................................48800
3001.301-71 Revised................................................25767
3001.303 (a)(5) and (7) amended....................................48800
3001.304 (a) revised...............................................48801
3001.403 Amended...................................................48801
3001.404 (a) revised...............................................25767
3001.603-1 Amended.................................................25767
3002.101 Amended............................................25767, 48801
3002.270 Amended...................................................48801
3003.101-3 Amended.................................................25768
3003.203 (a) introductory text amended.............................25768
    (b) amended....................................................48801
3003.204 (c) revised...............................................25768
3004.470--3004.470-3 (Subpart 3004.4) Revised......................25768
3005.9000 Revised..................................................25768

[[Page 506]]

3006.101--3006.101-70 (Subpart 3006.1) Added.......................25769
3006.101-70 Amended................................................48801
3006.502 Removed...................................................25769
3009.104-71 Revised................................................25769
3009.104-72 Amended................................................25769
3009.104-73 (a)(2) and (b) revised.................................25769
3009.104-74 Revised................................................25769
3009.470-4 Amended.................................................25769
3009.507 Heading revised...........................................25769
3009.507-1 Added...................................................25769
3009.507-2 Added...................................................25769
3011.204-90 Removed................................................25769
3011.602 (c) introductory text amended.............................48801
3013.106--3013.106-190 (Subpart 3013.1) Removed....................25769
3013.302--3013.302-590 (Subpart 3013.3) Removed....................25769
3013.7000 (a) revised..............................................25769
3013.7005 Revised..................................................25769
3015.404-470 (Subpart 3015.4) Removed..............................25770
3015.602 Revised...................................................25770
3015.603 Removed...................................................25770
3016.406 (e)(1)(i), (ii) and (iii) amended.........................25770
3016.505 (b)(5)(ii) revised........................................25770
    (b)(5), (i) and (ii) amended...................................48801
3017.204 Added.....................................................25770
3017.204-90 Added..................................................25770
3017.402 Amended...................................................48801
3017.7000 (Subpart 3017.70) Removed................................25770
3019.201 Revised...................................................25770
3019.705-1 Revised.................................................25770
3019.708-70 Heading, (a) and (c) revised...........................25770
3022.101-70 Revised................................................25770
    (a) and (b) amended............................................48801
3022.9001 Amended..................................................25770
3023 Heading revised...............................................25770
3023.501 Revised...................................................25770
    (d) amended....................................................48801
3023.506 (e) amended...............................................48801
3024.203 (a) amended...............................................48801
3027.205 (a) amended...............................................48801
3028.106-6 (c) revised.............................................25771
    (c) amended....................................................48801
3028.106-490 Revised...............................................25771
3030.201-5 Revised.................................................25771
3031.205-32 (a) amended.....................................25771, 48801
3033.214 (c) introductory text and (1) revised.....................25771
3035.003 (b) amended...............................................48802
3035.017 Added.....................................................25771
    (a) amended....................................................48802
3035.7000 (Subpart 3035.70) Added..................................25771
3037.103 Removed...................................................25771
3037.103-70 Removed................................................25771
3037.103-71 Removed................................................25771
3037.104-70 Revised................................................25771
3037.104-90 Revised................................................25771
3037.110-70 Removed................................................25771
3042.202-70 Revised................................................25771
3042.1502 (a) amended..............................................48802
3046.702 Removed...................................................25771
3046.702-70 Removed................................................25771
3046.703 Removed...................................................25772
3046.705 Removed...................................................25772
3046.706 Removed...................................................25772
3046.790 Revised...................................................25772
3046.790-1 Redesignated from 3046.791; heading revised.............25772
3046.790-2 Added...................................................25772
3046.790-3 Added...................................................25772
3046.790-4 Added...................................................25772
3046.791 Redesignated as 3046.790-1................................25772
3052.101 (b)(2)(i)(A) and (B) amended..............................48802
3052.204-70 Revised................................................25772
    (d) amended....................................................48802
3052.204-71 Added..................................................25773
    (i) and (k) amended............................................48802
3052.209-70 Clause amended.........................................25774
3052.209-72 Revised................................................25774
3052.209-73 Added..................................................25774
3052.211-90 Removed................................................25775
3052.213-90 Removed................................................25775
3052.216-70 Revised................................................25775
3052.217-100 Clause amended........................................25775
3052.219-70 Clause amended.........................................25775
3052.219-71 Clause amended.........................................25775
3052.219-72 Revised................................................25775
3052.222-90 Revised................................................25775
3052.223-70 Revised................................................25775
3052.235-70 Redesignated from 3052.242-70; clause amended..........25775
3052.237-70 Removed................................................25775
3052.237-71 Removed................................................25775
3052.237-72 Removed................................................25776
3052.242-70 Redesignated as 3052.235-70............................25775
3052.242-71 Introductory text revised..............................25776
3052.245-70 Clause amended.........................................25776
3053.101 Amended...................................................48802
3053.222-70 Amended................................................25776
3053.245-70 Amended................................................25776

[[Page 507]]

3053.303 Revised...................................................25776


                                  [all]